UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, ~~2008~~2010
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission file number:000-53206

~~GRUBB & ELLIS~~ HEALTHCARE ~~REIT,~~TRUST OF AMERICA, INC.

(Exact name of registrant as specified in its charter)

~~(To be named Healthcare Trust of America, Inc.)~~


Maryland		20-4738467
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



~~1551~~16435 N. ~~Tustin Avenue,~~Scottsdale Road, Suite ~~300, Santa Ana, California~~320, Scottsdale, Arizona (Address of principal executive offices)		~~92705~~85254 (Zip Code)

Registrant’s telephone number, including area code:~~(714) 667-8252~~(480) 998-3478

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered

None		None

Securities registered pursuant to Section 12(g) of the Act:

~~None~~Common Stock, $0.01 par value per share

(Title of Class)


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.		Yes o No þ


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.		Yes o No þ


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.		Yes þ No o


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).		Yes o No o


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.		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”,~~filer,” “accelerated filer”, and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	þ (Do not check if a smaller reporting company)	Smaller reporting company	o


Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Act).		Yes o No þ

While there is no established market for the registrant’s common stock, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, ~~2008,~~2010, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately ~~$393,196,000,~~$1,624,601,000, assuming a market value of $10.00 per share which iswas the price per share in our ~~current~~recently-completed offering.

As of March ~~13, 2009,~~21, 2010, there were ~~91,264,688~~225,235,398 shares of common stock of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
None

PART I


Item 1.	Business.

The use of the words “we,” “us” or “our” refers to ~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc. and its subsidiaries, including ~~Grubb & Ellis~~ Healthcare ~~REIT~~Trust of America Holdings, ~~L.P.,~~LP, except where the context otherwise requires.

~~OUR COMPANY~~BUSINESS OVERVIEW

~~Grubb & Ellis Healthcare REIT, Inc.,~~We are a Maryland corporation, was incorporated on April 20, 2006. Upon or prior to the completion of our transition to self-management, we intend to change our name to Healthcare Trust of America, Inc. We were initially capitalized on April 28, 2006fully integrated, self-administered and therefore we consider that our date of inception. 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. We may also invest in other real estate related assets. We focus primarily on investments that produce recurring income. We have qualified and elected to be taxed as aself-managed real estate investment trust, or ~~REIT, under~~REIT. We acquire, own and operate medical office buildings and healthcare-related facilities. Since January 2007, we have been an active, disciplined buyer of medical office buildings and healthcare-related facilities, acquiring properties with an aggregate purchase price of approximately $2.3 billion over a period of four years. We are one of the ~~Internal Revenue Code~~largest owners of ~~1986,~~medical office buildings in the United States. Our portfolio is primarily concentrated within major U.S. metropolitan areas and located primarily on or adjacent to (within a1/4 mile) the campuses of nationally recognized healthcare systems.

As of December 31, 2010, our portfolio consisted of 238 medical office buildings and other healthcare-related facilities, as ~~amended,~~well as two other real estate-related assets. This includes both our operating properties and those classified as held for sale at December 31, 2010. Our portfolio contains approximately 10.9 million square feet of gross leasable area, or GLA, with an average occupancy rate of approximately 91% (unaudited). Approximately 74% of our portfolio (based on GLA) is located on or adjacent to a healthcare system campus and approximately 40% of our off campus portfolio is anchored by a healthcare system. Our portfolio is diversified geographically, across 24 states, with no state having more than 15% of the ~~Code,~~GLA of our portfolio.

We invest primarily in medical office buildings based on fundamental healthcare and real estate economics. Medical office buildings serve a critical role in the national healthcare delivery system, which itself serves a fundamental need in our society. We believe there are key dynamics within the healthcare industry that work to increase the need for, ~~federal income tax purposes~~ and ~~we intend to~~the value of, medical office buildings. As hospital and other healthcare-related facilities and physicians continue to collaborate, an increasing number of healthcare services will be ~~taxed~~undertaken in medical offices. Further, the performance of office-based services will play a key role in providing quality healthcare while also allowing for the recognition of cost efficiencies. In addition, as ~~a REIT.~~the emphasis within the healthcare industry moves toward preventative care, rather than responsive care, we expect that more of such care will be undertaken at medical offices.

Another key reason that we invest in medical office buildings is the potential for higher returns with lower vacancy risk. Like traditional commercial office property, as we renew leases and lease new space, we expect that the recovering economy will allow us to earn higher rents. Unlike commercial office space, however, medical office tenants, primarily, physicians, hospitals and other healthcare providers, typically do not move or relocate, thus providing for stable tenancies and an ongoing demand for medical office space.

We are ~~conducting~~ a ~~best efforts initial~~Maryland corporation, formed in April 2006. Since then, we have raised equity capital to finance our real estate investment activities through two public ~~offering, or our offering, in which we are offering up to 200,000,000 shares~~offerings of our common ~~stock for $10.00 per share and up to 21,052,632~~stock. Our offerings raised an aggregate of approximately $2.2 billion in gross offering proceeds through March 21, 2011, excluding proceeds associated with shares ~~of our common stock pursuant to~~issued under our distribution reinvestment plan, or ~~the DRIP, for $9.50 per share, aggregating up to $2,200,000,000.~~DRIP. We ~~will sell shares in our offering until the earlier of September 20, 2009, or the date on which the maximum amount has been sold. As of December 31, 2008, we had received~~were initially externally sponsored and ~~accepted subscriptions in our offering for 73,824,809 shares of our common stock, or $737,398,000, excluding shares of our common stock issued under the DRIP.~~

We conduct substantially all of our operations through Grubb & Ellis Healthcare REIT Holdings, L.P., to be named Healthcare Trust of America Holdings, L.P., or our operating partnership. We are currently externally advised by Grubb & Ellis ~~Healthcare REIT Advisor, LLC, or~~Company and its affiliates. We changed our ~~advisor, pursuant to an advisory agreement, as amended~~business model and ~~restated on November 14, 2008 and effective as~~became self-managed in the third quarter of October 24, 2008, or the Advisory Agreement, between us, our advisor and Grubb & Ellis Realty Investors, LLC, or Grubb & Ellis Realty Investors, who is the managing member of our advisor. Our advisor is affiliated with us in that we and our advisor have a common officer, who also owns an indirect equity interest in our advisor. Our advisor engages affiliated entities, including Triple Net Properties Realty, Inc., or Realty, and Grubb & Ellis Management Services, Inc. to provide various services to us, including property management services.

~~The Advisory Agreement expires on September 20,~~ 2009. Our main objectives in amending the Advisory Agreement on November 14, 2008 were to reduce our acquisition and asset management fees and to set the framework for our transition to self-management. Under the Advisory Agreement, as amended November 14, 2008, our advisor agreed to use reasonable efforts to cooperate with us as we pursue a~~self-management~~ ~~program. Upon or prior to completion of our transition to self-managementand/or~~ ~~the termination of the Advisory Agreement we will no longer be advised by our advisor or consider our company to be sponsored by Grubb & Ellis Company, or Grubb & Ellis.~~

The Advisory Agreement, as amended November 14, 2008, also provides that our advisor and Grubb & Ellis Realty Investors agree to coordinate the timing, marketing and other activities for any new healthcare REIT sponsored by Grubb & Ellis Realty Investors or its affiliates so as not to negatively impact our company. In addition, the equity raising for any new healthcare REIT sponsored by Grubb & Ellis Realty Investors or its affiliates shall not begin until after the end of our offering, provided that, consistent with industry practice and standards and without there being any negative impact on our equity raise, such new healthcare REIT may initiate a limited equity raise from a limited broker dealer group, commencing August 1, 2009 or later, to satisfy the escrow requirements applicable to such new healthcare REIT.

At the commencement of our offering we had minimal assets and operations and we did not believe that it was efficient at that time to engage our own internal management team. As of March 26, 2009, we had acquired 43 geographically diverse properties and other real estate related assets for a total purchase price of $1,000,520,000. As a result of our growth and success, our board of directors believes that we now have the critical mass required to support a self-management structure. Our board of directors believes that~~self-management~~ ~~will enable us to better position our company for success in the future for several reasons discussed below:~~

~~Management Team.~~ We believe that our management team, led by Scott D. Peters, our Chief Executive Officer, President and Chairman of the board of directors, has the experience and expertise to efficiently and effectively operate our company. In addition, we have hired a Chief Accounting Officer, Kellie S. Pruitt. We have also hired three other employees and have engaged two independent consultants to assist us with acquisitions, asset management and accounting. We intend to continue to hire additional employees and engage independent consultants to expand our self-management infrastructure, assist in our transition to aself-managed, ~~company~~ self-administered REIT is described more fully under Item 7. Management’s Discussion and ~~fulfill other responsibilities, including acquisitions, accounting, asset management, strategic investing~~Analysis of Financial Condition and ~~corporate and securities compliance. Mr. Peters is leading our transition to aself-management~~ ~~structure. Our internal management team, led by Mr. Peters, will manage ourday-to-day~~ ~~operations and oversee and supervise our employees and third party service providers, who will be retained on an as-needed basis. All key personnel will report directly to Mr. Peters.~~

~~Governance.~~ ~~An integral part~~Results of our self-management program is our experienced board of directors. Our board of directors provides effective ongoing governance for our company and spends a substantial amount of time overseeing our transition to self-management. Our governance and management framework is one of our key strengths.

~~Significantly Reduced Cost.~~ From inception through December 31, 2008, we incurred to our advisor and its affiliates approximately $28,479,000 in acquisition fees; approximately $7,767,000 in asset management fees; approximately $2,963,000 in property management fees; and approximately $1,513,000 in leasing fees. Although we will incur the costs associated with having our own employees and independent consultants and we expect third party property management expenses and third party acquisition expenses, including legal fees, due diligence fees and closing costs, to remain approximately the same as under external management, we believe that the total cost of the self-management program 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 advisor were fair, competitive and commercially reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties, we now believe that by having our own employees and independent consultants manage our operations and retain third party providers, we will significantly reduce the cost structure of our company.

~~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 our self-management program. We believe that by not paying such fees, as well as operating more cost-effectively under our self-management program, 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.

~~Funding of Self-Management.~~ We believe that the cost of the self-management program will be substantially less than the cost of external management. Therefore, although we are incurring additional costs now related to our transition to self-management, we expect the cost of the self-management program to be effectively funded by future cost savings. Pursuant to the Advisory Agreement, as amended November 14, 2008, we have already reduced acquisition fees and asset management fees payable to our advisor, which we believe will result in substantial cost savings. In addition, we anticipate that we will achieve further cost

~~savings in the future as a result of reducedand/or~~ ~~eliminated acquisition fees, asset management fees, internalization fees and other outside fees.~~

~~Dedicated Management and Increased Accountability.~~ Under our self-management program, our officers and employees will only work for our company and will not be associated with any outside advisor or other third party service providers. Our management team, led by Mr. Peters, has direct oversight of employees, independent consultants and third party service providers on an ongoing basis. 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 and efficiency.

~~Conflicts of Interest.~~ We believe that self-management works to remove 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 the~~self-management~~ ~~program.~~

~~Prior to or upon the completion of our transition to self-management, we intend to change our name to “Healthcare Trust of America, Inc.”~~

On December 7, 2007, NNN Realty Advisors, Inc., or NNN Realty Advisors, which previously served as our sponsor, merged with and into a wholly owned subsidiary of Grubb & Ellis. The transaction was structured as a reverse merger whereby stockholders of NNN Realty Advisors received shares of common stock of Grubb & Ellis in exchange for their NNN Realty Advisors shares of common stock and, immediately following the merger, former NNN Realty Advisor stockholders held approximately 59.5% of the common stock of Grubb & Ellis. As a result of the merger, we consider Grubb & Ellis to be our sponsor. Following the merger, NNN Healthcare/Office REIT, Inc., NNN Healthcare/Office REIT Holdings, L.P., NNN Healthcare/Office REIT Advisor, LLC, NNN Healthcare/Office Management, LLC, Triple Net Properties, LLC and NNN Capital Corp. changed their names to Grubb & Ellis Healthcare REIT, Inc., Grubb & Ellis Healthcare REIT Holdings, L.P., Grubb & Ellis Healthcare REIT Advisor, LLC, Grubb & Ellis Healthcare Management, LLC, Grubb & Ellis Realty Investors, LLC and Grubb & Ellis Securities, Inc., respectively.

~~Developments during 2008 and 2009~~


	•	On November 14, 2008, we amended and restated the Advisory Agreement, which reduced our acquisition and asset management fees and set the framework for our transition to self-management. We also hired Mr. Peters, who previously served as a non-employee executive officer, as our full-time employee pursuant to an employment agreement. We began the transition to self-management immediately after the effective date of the amendments to the Advisory Agreement. We have continued to implement our self-management program and continue to rely on our advisor, our board of directors, Mr. Peters and our other employees and consultants to manage our investments and operate our~~day-to-day~~ ~~activities.~~

	•	As of December 31, 2008, we owned 41 geographically diverse properties, 33 of which are medical office buildings, five of which are healthcare related facilities, three of which are quality commercial office properties, all of which comprise 5,156,000 square feet of gross leasable area, or GLA, and one real estate related asset for an aggregate purchase price of $966,416,000, in 17 states.

	•	As of March 26, 2009, we have acquired a medical office condominium and a four-building medical office property comprising 188,000 square feet of GLA for an aggregate purchase price of $34,104,000 in two states.

	•	As of March 13, 2009, we had received and accepted subscriptions in our offering for 89,030,880 shares of our common stock, or $889,301,000, excluding shares of our common stock issued under the DRIP.

	•	On March 13, 2009, Shannon K S Johnson resigned from her position as our Chief Financial Officer. Ms. Johnson will continue to provide non-exclusive services to us in her role as a Financial Reporting Manager of Grubb & Ellis Realty Investors.


	•	~~On March 17, 2009, our board of directors appointed Kellie S. Pruitt, our Chief Accounting Officer and principal accounting officer, to also serve as our principal financial officer.~~

~~Our Structure~~

~~The following is a summary of our and our advisor’s organizational structure as of December 31, 2008:~~

~~The following chart shows our structure upon the completion of our transition to self-management:~~


*		~~Grubb & Ellis Healthcare REIT Advisor, LLC owns less than a 0.01% interest in us and in our operating partnership.~~

Operations. Our principal executive offices are located at ~~1551 N. Tustin Avenue, Suite 300, Santa Ana, CA 92705 and the telephone number is(714) 667-8252.~~ In connection with our transition to self-management, we have established a new corporate office which houses our Chief Executive Officer and our Chief Accounting Officer. The address of our new office is The Promenade, 1642716435 North Scottsdale Road, Suite ~~440,~~320, Scottsdale, AZ 85254 and our telephone number ~~at that address~~ is(480) 998-3478. We ~~anticipate that prior to or upon the completion of our transition toself-management,~~ ~~our new office will serve as our principal executive office. Our sponsor maintains~~maintain a web site at~~www.gbe-reits.com/healthcare~~www.htareit.comat which there is additional information about ~~us and our affiliates.~~us. The contents of that site are not incorporated by reference in, or otherwise a part of, this filing. We make our periodic and current reports available at~~www.gbe-reits.com/healthcare~~www.htareit.comas soon as reasonably practicable after such materials are electronically filed with the ~~United States Securities and Exchange Commission, or the~~ SEC. They are also available for printing byfor any stockholder upon request. ~~We anticipate that prior to or upon our transition to self-management, we will establish a new website.~~

~~CURRENT INVESTMENT OBJECTIVES AND POLICIES~~COMPANY HIGHLIGHTS

~~Our investment objectives are:~~


		rights with respect to a subordinated distribution upon the occurrence of specified liquidity events and other rights that our former advisor held in our operating partnership. In addition, we have resolved all remaining issues with our former advisor. In connection with the execution of the Redemption Agreement, we made a one-time payment to our former advisor of $8,000,000.


	•	On December 20, 2010, our stockholders approved an amendment to our charter to provide for the reclassification and conversion of our common stock in the event our shares are listed on a national securities exchange to implement a phased in liquidity program. We proposed these amendments and submitted them for approval by our stockholders to prepare our company in the event we pursue a Listing. To accomplish a phased in liquidity program, it is necessary to reclassify and convert our common stock into shares of Class A common stock and Class B common stock immediately prior to a Listing. In the event of a Listing, the shares of Class A common stock would be immediately listed on a national securities exchange. The shares of Class B common stock would not be listed. Rather, those shares would convert into shares of Class A common stock and become listed in defined phases, over a defined period of time within 18 months of a Listing. The phased in liquidity program is intended to provide for our stock to be ~~prudent, patient and deliberate, taking~~transitioned into ~~account current real estate markets.~~the public market in a way that minimizes the stock-pricing instability that could result from concentrated sales of our stock.

~~Each property~~HEALTHCARE INDUSTRY

We operate in the healthcare industry because we ~~acquire is carefully and diligently reviewed and analyzed~~believe the demand for healthcare real estate will continue to ~~make sure it is~~increase consistent with health spending in the United States. 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, or GDP, increased 11%, from 5.2% to 16.2% and is projected to comprise 17.9% of GDP in 2011 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.

National Healthcare Expenditures
(2003-2018)

Source: U.S. Department of Health and Human Services. Centers for Medicare & Medicaid Services. Office of the Actuary. National Health Expenditures and Selected Economic Indicators. Levels and Annual Percent Change: Calendar Years 2003-2018* (based on the 2007 version of the National Health Expenditures released in January 2009).

We invest primarily in medical office buildings. We believe that demand for medical office buildings and healthcare-related facilities will increase due to a number of factors, including:


	•	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.

	•	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. The number of persons older than 65 was estimated to comprise 13.0% of the total U.S. population in 2010 and is projected to grow to 20.2% by 2050, as reflected in the below chart.

Projected U.S. Population Aged 65+
(2010-2050)

Source: U.S. Census Bureau, Population Division, August 14, 2008.

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 United States. We believe this will result in a substantial increase in suitable, quality properties meeting our ~~short and long-term investment objectives. Our goal is to at all times maintain a strong balance sheet~~acquisition criteria.


	•	According to the U.S. Department of Labor’s 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 seven of the 20 fastest growing occupations. The Bureau of Labor and Statistics estimates that healthcare will generate three 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 medical office buildings and healthcare-related facilities.

	•	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 ownershipand/or management of their healthcare-related facilities.


	•	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 medical services are provided.

We believe that healthcare-related real estate rents and ~~always have sufficient funds~~valuations are less susceptible to ~~deal with short~~changes in the general economy than general commercial real estate due to demographic trends and ~~long-term operating needs. Macro-economic disruptions have broadly impacted~~ the ~~economy and have caused an imbalance between buyers and sellers~~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 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, we opted not to proceed with certain deals which we determined merited re-pricing. We renegotiated other deals to lower pricing points. We had cash on hand of over $128,000,000 as of December 31, 2008, which we intend to use to acquire assets that are priced at levels consistent with today’s 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.investments.

We ~~cannot assure our stockholders that we will attain~~believe the confluence of 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~~factors over the ~~best interests of our stockholders.~~

~~Decisions relating~~last several years has led to the ~~purchase or sale~~following trends, which encourage third-party ownership of ~~investments will be made by our advisor~~existing and management, subject to the oversight by our board of directors. See Item 10. Directors, Executive Officers and Corporate Governance for a description of the background and experience of our directors and officers as well as the officers of our advisor.

~~Business Strategies~~

~~We seek to invest in a diversified portfolio of real estate, focusing primarily on investments that produce recurring income. Our real estate investments focus on~~newly developed 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 other real estate related assets will generally focus on 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 of 1940, as amended, or the Investment Company Act, we may be required to limit our investments in other real estate related assets.

In addition, when and as determined appropriate by our advisor and management, the portfolio may also include properties in various stages of development other than those producing recurring 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 histories and no recurring income. Our advisor and management team will make 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, our advisor and management team seek to ensure that we invest in properties with the following attributes:~~properties:


	•	~~Quality.~~Decentralization and Specialization. ~~We seek~~There is a continuing evolution toward delivery of medical services through smaller outpatient facilities located near patients and designed to ~~acquire~~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, that are suitable for their intended use with a quality of construction that is capable of sustaining the property’s investment potential for the long-term, assuming funding of budgeted maintenance, repairsincluding an aging population requiring and ~~capital improvements.~~demanding more medical services.

	•	~~Location.~~Hospital Consolidation and Recapitalization. Hospitals continue to consolidate in an effort to secure or expand market share, gain access to capital, and/or to achieve various economies of scale. Historically, these have been in the form of: a) the expansion of investor-owned health systems through acquisitions; or b) the merger of one or more tax-exempt health systems. Recently, new entrants include private equity firms that have either acquired hospital assets or are investing capital into existing tax-exempt organizations. We ~~seek~~believe that accessing capital will continue to be a major area of focus for health care organizations, both in the short and long term.

	•	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.

	•	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.

	•	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 inbricks-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 ~~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.~~


		the medical technology needed to provide more comprehensive services to patients and improve overall patient care.


	•	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, women’s 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.

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.

BUSINESS STRATEGIES

Our primary objective is to provide an attractive total risk-adjusted return for our stockholders by increasing our cash flow from operations, achieving sustainable growth in Funds From Operations, or FFO, and realizing long-term capital appreciation. FFO is a non-GAAP financial measure. For a reconciliation of FFO to net loss, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds from Operations and Modified Funds from Operations. The strategies we intend to execute to achieve this objective include:


	•	Continued Growth through Acquisitions. We intend to grow earnings through the strategic acquisition of high-quality medical office buildings and healthcare-related facilities:


	•	using our demographic-based investment strategy that focuses on the age, essential needs and the geographic regions appealing to each dominant population group (seniors, the 65+ age group, boomers, those who were born between 1946 and 1964, and echo boomers, those born between 1982 and 1994);

	•	that produce recurring income; and

	•	in markets that indicate growing populations and employment base or potential limitations on additions to supply.

Our overall acquisition strategy focuses on acquiring medical office buildings and other healthcare-related facilities located on or adjacent to the campuses of nationally recognized healthcare systems in major U.S. metropolitan areas. We believe we have relationships and a proven track record of acquiring properties off-market at accretive cap rates.


	•	Hands-On Asset Management, Leasing and Property Management Oversight. Our asset management focuses on a defined growth strategy seizing on opportunities to achieve more profitable internal and


		external growth. Our strategy focuses on increasing rental rates and taking full advantage of our properties’ occupancies, including the following:


	•	obtaining post-recession rental rates on our lease rollovers and actively leasing our vacant space at a time when there is limited supply of medical office space in a recovering economy;

	•	leveraging and proactively managing the best property management and leasing companies in each of our geographic areas;

	•	improving the quality of service provided to tenants by being attentive to needs, managing expenses, and strategically investing capital;

	•	maintaining the high quality of our properties and building on our marketing initiative to brand our Company as the landlord of choice;

	•	maintaining satellite offices in markets in which we have a significant presence; and

	•	purchasing in volume and using market expertise to continually reduce our operating costs.


	•	Balance Sheet Flexibility. We plan to continue maintaining a low leverage strategy by maintaining adebt-to-total assets ratio of between 30%-40%. We intend to utilize our unsecured line of credit for acquisition opportunities. To effectively manage our long-term leverage strategy, we will continue to utilize both secured and unsecured debt when we determine it to be cost effective. We may also attempt to access the public equity and debt markets to repay our secured debt maturities or for future acquisition opportunities.

PORTFOLIO OF PROPERTIES

As of December 31, 2010, our portfolio, including both our operating properties and those classified as held for sale as of December 31, 2010, consisted of 214 medical office buildings and 24 other healthcare-related facilities, as well as two other real estate-related assets. Our portfolio consisted of approximately 10.9 million square feet of GLA with an average occupancy rate of 91% as of December 31, 2010.

Our properties are primarily located on or adjacent to the campuses of, nationally and regionally recognized healthcare systems in the United States, including some of the largest in the United States, such as Adventist Health Systems, Ascension Health, Banner Health System, Catholic Healthcare Partners, Catholic Healthcare West, Community Health Systems, HCA, Inc. and Tenet Healthcare Corporation. As of December 31, 2010, approximately 74% of our portfolio, based on GLA, is located on or adjacent to the campuses of such healthcare systems. In addition, approximately 40% of our off-campus portfolio is anchored by a healthcare system.

The following table provides an overview of our portfolio of medical office buildings, other healthcare-related facilities, and other real estate-related assets as of and for the year ended December 31, 2010:


										% of
					% of Total					Aggregate
	# of		Annualized		Annualized Base			Purchase		Purchase			Number of
Portfolio by Type	Buildings		Base Rent		Rent			Price		Price			States

Medical office buildings
Single-tenant, net lease		54	$	36,460,000		18.0	%	$	463,214,000		20.4	%		13
Single-tenant, gross lease		5	$	2,928,000		1.4	%	$	25,304,000		1.1	%		2
Multi-tenant, net lease		68	$	51,469,000		25.4	%	$	610,679,000		26.9	%		17
Multi-tenant, gross lease		87	$	72,008,000		35.5	%	$	671,807,000		29.6	%		16
Other healthcare-related facilities
Hospitals, single-tenant, net lease		10	$	20,333,000		10.0	%	$	241,720,000		10.7	%		4
Seniors housing, single- tenant net lease		9	$	8,045,000		4.0	%	$	91,600,000		4.0	%		3
Healthcare-related offices, multi-tenant, gross lease		5	$	11,506,000		5.7	%	$	109,900,000		4.8	%		3
Other real estate-related assets
Mortgage notes receivable		2		N/A		N/A		$	52,135,000		2.3	%		2

TOTALS			$	202,749,000		100.0	%	$	2,266,359,000		100.0	%

SIGNIFICANT TENANTS

As of December 31, 2010, none of our tenants at our consolidated properties accounted for 10.0% or more of our aggregate annual rental revenue.

GEOGRAPHIC CONCENTRATION

As of December 31, 2010, we had interests in 16 consolidated properties located in Texas (including both operating properties and those buildings classified as held for sale), which accounted for 15.3% of our total annualized rental income, interests in seven consolidated properties in Arizona, which accounted for 11.7% of our total annualized rental income, interests in five consolidated properties located in South Carolina, which accounted for 9.7% of our total annualized rental income, interests in 10 consolidated properties in Florida, which accounted for 8.8% of our total annualized rental income, and interests in seven consolidated properties in Indiana, which accounted for 8.5% of our total annualized rental income. This rental income is based on contractual base rent from leases in effect as of December 31, 2010. In making these investments, we took into account the geographic concentration of our assets and corresponding rental income, which we viewed as a favorable factor based on risk reward analysis. Accordingly, there is a geographic concentration of risk subject to fluctuations in each of these states’ economies.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

ASC 280,Segment Reporting(“ASC 280”) establishes standards for reporting financial and descriptive information about an enterprise’s reportable segment. We have determined that we have one reportable segment, with activities related to investing in medical office buildings, healthcare-related facilities, and other real estate

related assets. Our investments in real estate and other real estate related assets are geographically diversified and our chief operating decision maker evaluates operating performance on an individual asset level. As each of our assets has similar economic characteristics, tenants, and products and services, our assets have been aggregated into one reportable segment.

COMPETITION

We compete with many other real estate investment entities, including financial institutions, institutional pension funds, real estate developers, other REITs, other public and private real estate companies and private real estate investors for the acquisition of medical office buildings and healthcare-related facilities. During the acquisitions process, we compete with others who have a comparative advantage in terms of size, capitalization, depth of experience, local knowledge of the marketplace, and extended contacts throughout the region. Any combination of these factors may result in an increased purchase price for real properties or other real estate related assets which may reduce the number of opportunities available that meet our investment criteria. If the number of opportunities that meet our investment criteria are limited, our ability to increase stockholder value may be adversely impacted.

We face competition in leasing available medical office buildings and healthcare-related facilities to prospective tenants. As a result, we may have to provide rent concessions, incur charges for tenant improvements, offer other inducements, or we may be unable to timely lease vacant space, all of which may have an adverse impact on our results of operations. At the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers.

We believe our focus on medical office buildings and healthcare-related facilities, our experience and expertise, and our ongoing relationships with healthcare providers provide us with a competitive advantage. We have established an asset identification and acquisition network, which provides for the early identification of and access to acquisition opportunities. In addition, this broad network allows for us to effectively lease available medical office space, retain our tenants, and maintain and improve our assets.

GOVERNMENT REGULATIONS

Healthcare-related Regulations

Overview. 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 satisfy their contractual obligations, including making lease payments to us.

Healthcare Legislation. On March 23, 2010, the President signed into law the Patient Protection and Affordable Care Act of 2010, or the Patient Protection and Affordable Care Act, and on March 30, 2010, the President signed into law the Health Care and Education Reconciliation Act of 2010, or the Reconciliation Act, which in part modified the Patient Protection and Affordable Care Act. Together, the two laws serve as the primary vehicle for comprehensive healthcare reform in the U.S. and will become effective through a phased approach, which began in 2010 and will conclude in 2018. The laws are intended to reduce the number of individuals in the U.S. without health insurance and significantly change the means by which healthcare is organized, delivered and reimbursed. The Patient Protection and Affordable Care Act includes program integrity provisions that both create new authorities and expand existing authorities for federal and state governments to address fraud, waste and abuse in federal healthcare programs. In addition, the Patient Protection and Affordable Care Act expands reporting requirements and responsibilities related to facility ownership and management, patient safety and care quality. In the ordinary course of their businesses, our tenants may be regularly subjected to inquiries, investigations and audits by federal and state agencies that oversee these laws and regulations. If they do not comply with the additional reporting requirements and responsibilities, our tenants’ ability to participate in federal healthcare programs may be adversely affected. Moreover, there may be other aspects of the comprehensive healthcare reform legislation for which regulations have not yet been adopted, which, depending on how they are implemented, could materially and adversely affect our tenants and their ability to meet their lease obligations.

Reimbursement Programs. Sources of revenue for our tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers, health maintenance organizations, preferred provider arrangements, self-insured employers and the patients themselves, among others. Medicare and Medicaid programs, as well as numerous private insurance and managed care plans, generally require participating providers to accept government-determined reimbursement levels as payment in full for services rendered, without regard to a facility’s charges. Changes in the reimbursement rate or methods of payment from third-party payors, including Medicare and Medicaid, could result in a substantial reduction in our tenants’ revenues. 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. Further, revenue realizable under third-party payor agreements can change after examination and retroactive adjustment by payors during the claims settlement processes or as a result of post-payment audits. Payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable or because additional documentation is necessary or because certain services were not covered or were not medically necessary. The recently enacted healthcare reform law and regulatory changes could impose further limitations on government and private payments to healthcare providers. In some cases, states have enacted or are considering enacting measures designed to reduce their Medicaid expenditures and to make changes to private healthcare insurance. 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. The financial impact on our tenants could restrict their ability to make rent payments to us.

Fraud and Abuse Laws. 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, but are not limited to:


	•	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 or recommendation for the ordering of any item or service reimbursed by Medicare or Medicaid;

	•	the Federal Physician Self-Referral Prohibition, commonly referred to as the Stark Law, 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;

	•	the False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs;

	•	the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose monetary penalties for certain fraudulent acts; and

	•	the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act of the American Recovery and Reinvestment Act of 2009, which protects the privacy and security of personal health information.

Each of these laws includes criminaland/or civil penalties for violations that range from punitive sanctions, damage assessments, penalties, imprisonment, denial of Medicare and Medicaid paymentsand/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 tenant’s ability to operate or to make rent payments to us.

Healthcare Licensure and Certification. Some 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.

Real Estate Ownership-Related Regulations

Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

Costs of Compliance with the Americans with Disabilities Act. Under the Americans with Disabilities Act of 1990, as amended, or the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. Although we believe that we are in substantial compliance with present requirements of the ADA, none of our properties have been audited and we have only conducted investigations of a few of our properties to determine compliance. We may incur additional costs in connection with compliance with the ADA. Additional federal, state and local laws also may require modifications to our properties or restrict our ability to renovate our properties. We cannot predict the cost of compliance with the ADA or other legislation. We may incur substantial costs to comply with the ADA or any other legislation.

Costs of Government Environmental Regulation and Private Litigation. Environmental laws and regulations hold us liable for the costs of removal or remediation of certain hazardous or toxic substances which may be on our properties. These laws could impose liability without regard to whether we are responsible for the presence or release of the hazardous materials. Government investigations and remediation actions may have substantial costs and the presence of hazardous substances on a property could result in personal injury or similar claims by private plaintiffs. Various laws also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances and such person often must incur the cost of removal or remediation of hazardous substances at the disposal or treatment facility. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. As the owner and operator of our properties, we may be deemed to have arranged for the disposal or treatment of hazardous or toxic substances.

Use of Hazardous Substances by Some of Our Tenants. Some of our tenants routinely handle hazardous substances and wastes on our properties as part of their routine operations. Environmental laws and regulations subject these tenants, and potentially us, to liability resulting from such activities. We require our tenants, in their leases, to comply with these environmental laws and regulations and to indemnify us for any related liabilities. We are unaware of any material noncompliance, liability or claim relating to hazardous or toxic substances or petroleum products in connection with any of our properties.

Other Federal, State and Local Regulations. Our properties are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these various requirements, we may incur governmental fines or private damage awards. While we believe that our properties are currently in material compliance with all of these regulatory requirements, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will adversely affect our ability to make distributions to our stockholders. We believe, based in part on engineering reports which are generally obtained at the time we acquire the properties, that all of our properties comply in all material respects with current regulations. However, if we were required to make significant expenditures under applicable regulations, our financial condition, results of operations, cash flow and ability to satisfy our debt service obligations and to pay distributions could be adversely affected.

EMPLOYEES

As of December 31, 2010, we had approximately 50 employees. We believe that we have a strong relationship with our employees.

TAX STATUS

The following discussion addresses U.S. federal income tax considerations related to our election to be subject to taxation as a REIT and the ownership and disposition of our common stock that may be material to holders of our stock. This discussion does not address any foreign, state, or local tax consequences of holding our stock. The provisions of the Code concerning the U.S. federal income tax treatment of a REIT are highly technical and complex; the following discussion sets forth only certain aspects of those provisions. This discussion is intended to provide you with general information only and is not intended as a substitute for careful tax planning.

This summary is based on provisions of the Code, applicable final and temporary Treasury Regulations, judicial decisions, and administrative rulings and practice, all in effect as of the date of this prospectus, and should not be construed as legal or tax advice. No assurance can be given that future legislative or administrative changes or judicial decisions will not affect the accuracy of the descriptions or conclusions contained in this summary. In addition, any such changes may be retroactive and apply to transactions entered into prior to the date of their enactment, promulgation or release.

Federal Income Taxation of HTA

Subject to the discussion below regarding the closing agreement that we intend to request from the IRS, we believe that we have qualified to be taxed as a REIT beginning with our taxable year ended December 31, 2007 under Sections 856 through 860 of the Code for federal income tax purposes and we intend to continue to be taxed as a REIT. To continue to qualify as a REIT for federal income tax purposes, we must meet certain organizational and operational requirements, including a requirement to pay distributions to our stockholders of at least 90% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). As a REIT, we generally are not subject to federal income tax on net income that we distribute to our stockholders.

If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the IRS grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our results of operations and net cash available for distribution to stockholders.

Notwithstanding the foregoing, even if we qualify for taxation as a REIT, we nonetheless may be subject to tax in certain circumstances, including the following:


	•	We will be required to pay U.S. federal income tax on our undistributed REIT taxable income, including net capital gain;

	•	We may be subject to the “alternative minimum tax;”

	•	We may be subject to tax at the highest corporate rate on certain income from “foreclosure property” (generally, property acquired by reason of default on a lease or indebtedness held by us);

	•	We will be subject to a 100% tax on net income from “prohibited transactions” (generally, certain sales or other dispositions of property, sometimes referred to as “dealer property,” held primarily for sale to customers in the ordinary course of business, other than foreclosure property) unless the gain is realized in a “taxable REIT subsidiary,” or TRS, or such property has been held by us for two years and certain other requirements are satisfied;

	•	If we fail to satisfy the 75% gross income test or the 95% gross income test (discussed below), but nonetheless maintain our qualification as a REIT pursuant to certain relief provisions, we will be subject to a 100% tax on the greater of (i) the amount by which we fail the 75% gross income test or (ii) the amount by which we fail the 95% gross income test, in either case, multiplied by a fraction intended to reflect our profitability;


	•	~~Market;~~If we fail to satisfy any of the asset tests, other than the 5% or the 10% asset tests that qualify under a de minimis exception, and ~~Supply and Demand.~~ ~~We focus on local or regional markets which have potential for stable and growing property level cash flow over~~ the ~~long-term. These determinations will be based in part on an evaluation of local economic, demographic and regulatory factors affecting~~failure qualifies under the ~~property. For instance,~~general exception, as described below under “— Qualification as a REIT — Asset Tests,” then we will ~~favor markets~~have to pay an excise tax equal to the greater of (i) $50,000 and (ii) an amount determined by multiplying the net income generated during a specified period by the assets that ~~indicate a growing population and employment base or markets that exhibit potential limitations on additions~~caused the failure by the highest U.S. federal income tax applicable to supply, such as barriers to new construction. Barriers to new construction include lack of available land and stringent zoning restrictions. In addition, we will generally seek to limit our investments in areas that have limited potential for growth, except where we believe that we have a competitive advantage.corporations;

	•	~~Predictable Capital Needs.~~ ~~We seek~~If we fail to ~~acquire properties where~~satisfy any REIT requirements other than the ~~future expected capital needs can be reasonably projected in~~income test or asset test requirements, described below under “— Qualification as a ~~manner that would allow us~~REIT — Income Tests” and “— Qualification as a REIT — Asset Tests,” respectively, and we qualify for a reasonable cause exception, then we will have to ~~meet our objectives of growth in cash flow and preservation of capital and stability.~~pay a penalty equal to $50,000 for each such failure;

	•	~~Cash Flow.~~We ~~seek~~will be subject to ~~acquire properties where~~a 4% excise tax if certain distribution requirements are not satisfied;

	•	We may be required to pay monetary penalties to the ~~current and projected cash flow,~~IRS in certain circumstances, including ~~the potential for appreciation in value, would allow us~~if we fail to meet record-keeping requirements intended to monitor our ~~overall investment objectives.~~ compliance with rules relating to the composition of a REIT’s stockholders, as described below in “— Recordkeeping Requirements;”

	•	If we dispose of an asset acquired by us from a C corporation in a transaction in which we took the C corporation’s tax basis in the asset, we may be subject to tax at the highest regular corporate rate on the appreciation inherent in such asset as of the date of acquisition by us;

	•	We will ~~evaluate cash flow~~be required to pay a 100% tax on any redetermined rents, redetermined deductions, and excess interest. In general, redetermined rents are rents from real property that are overstated as ~~well~~a result of services furnished to any of our non-TRS tenants by one of our TRSs. Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations; and

	•	Income earned by our TRSs or any other subsidiaries that are taxable as ~~expected growth and the potential for appreciation.~~C corporations will be subject to tax at regular corporate rates.

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, willNo assurance can be ~~considered unimproved or non-income producing property for purposes of this limitation.~~

~~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~~given that we may invest in a single property or investment. The number and mix of properties we acquire will depend 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~~any such taxes will not be substantial. In addition, we ~~raise~~and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on assets and operations. We could also be subject to tax in ~~our offering~~situations and ~~potential future offerings.~~on transactions not presently contemplated.

~~Acquisition Strategies~~Qualification as a REIT

~~Real Property Investments~~In General

~~We seek to invest in a diversified portfolio~~The REIT provisions of ~~properties, focusing primarily on properties that produce recurring income. We generally seek investments in medical office buildings and healthcare related facilities. We have also invested~~the Code apply to a ~~limited extent in quality commercial office properties.~~domestic corporation, trust, or association (i) that is managed by one or more trustees or directors, (ii) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest, (iii) that properly elects to be taxed as a REIT and such election has not been terminated or revoked, (iv) that is neither a financial institution nor an insurance company, (v) that uses a calendar year for U.S. federal income tax purposes and complies with applicable recordkeeping requirements, and (vi) that meets the additional requirements discussed below.

~~We generally seek~~Preferential dividends cannot be used to ~~acquire properties~~satisfy the REIT distribution requirements. In 2007, 2008 and through July 2009, shares of common stock issued pursuant to our DRIP were treated as issued as of the ~~types described above~~first day following the close of the month for which the distributions were declared, and not on the date that ~~will best enable~~the cash distributions were paid to stockholders not participating in our DRIP. Because we declare distributions on a daily basis, including with respect to shares of common stock issued pursuant to our DRIP, the IRS could take the position that distributions paid by 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.during these periods were preferential. In addition, during the six months beginning September 2009 through February 2010, we ~~may acquire properties~~paid certain IRA custodial fees with respect to IRA accounts that ~~vary from~~invested in our shares. The payment of such amounts could also be treated as dividend distributions to the ~~parameters described above for a particular property type.~~

~~The consideration~~IRAs, and therefore could result in our being treated as having made additional preferential dividends to ~~be paid for each real estate investment must be authorized by a majority of~~ our directors or a duly authorized committee of our board of directors, which is 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 will 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, affiliates of our advisor or other persons. See “Joint Venture Investments” below.stockholders.

916

Accordingly, we intend to submit a request to the IRS seeking a closing agreement under which the IRS would grant us relief for preferential dividends that may have been paid. We cannot assure you that the IRS will accept our proposal for a closing agreement. Even if the IRS accepts our proposal, we may be required to pay a penalty if the IRS were to view the prior operation of our DRIP or the payment of such fees as preferential dividends. We cannot predict whether such a penalty would be imposed or, if so, the amount of the penalty.

If the IRS does not agree to our proposal for a closing agreement and treats the foregoing amounts as preferential dividends, we would likely rely on the deficiency dividend provisions of the Code to address our continued qualification as a REIT and to satisfy our distribution requirements.

Ownership Tests

In order to qualify as a REIT, commencing with our second REIT taxable year, (i) the beneficial ownership of our stock must be held by 100 or more persons during at least 335 days of a12-month taxable year (or during a proportionate part of a taxable year of less than 12 months) for each of our taxable years and (ii) during the last half of each taxable year, no more than 50% in value of our stock may be owned, directly or indirectly, by or for five or fewer individuals (the “5/50 Test”). Stock ownership for purposes of the 5/50 Test is determined by applying the constructive ownership provisions of Section 544(a) of the Code, subject to certain modifications. The term “individual” for purposes of the 5/50 Test includes a private foundation, a trust providing for the payment of supplemental unemployment compensation benefits, and a portion of a trust permanently set aside or to be used exclusively for charitable purposes. A “qualified trust” described in Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code generally is not treated as an individual; rather, stock held by it is treated as owned proportionately by its beneficiaries.

We believe that we have satisfied and will continue to satisfy the above ownership requirements. In addition, our charter restricts ownership and transfers of our stock that would violate these requirements, although these restrictions may not be effective in all circumstances to prevent a violation. We will be deemed to have satisfied the 5/50 Test for a particular taxable year if we have complied with all the requirements for ascertaining the ownership of our outstanding stock in that taxable year and have no reason to know that we have violated the 5/50 Test.

Income Tests

In order to maintain qualification as a REIT, we must annually satisfy two gross income requirements:

(1) First, at least 75% of our gross income (excluding gross income from prohibited transactions and certain other income and gains as described below) for each taxable year must be derived, directly or indirectly, from investments relating to real property or mortgages on real property or from certain types of temporary investments (or any combination thereof). Qualifying income for purposes of this 75% gross income test generally includes: (a) rents from real property, (b) interest on obligations secured by mortgages on real property or on interests in real property, (c) dividends or other distributions on, and gain from the sale of, shares in other REITs, (d) gain from the sale of real estate assets (other than gain from prohibited transactions), (e) income and gain derived from foreclosure property, and (f) qualified temporary investment income (see “Qualified Temporary Investment Income” below); and

(2) Second, in general, at least 95% of our gross income (excluding gross income from prohibited transactions and certain other income and gains as described below) for each taxable year must be derived from sources qualifying under the 75% gross income test and from other types of dividends and interest, gain from the sale or disposition of stock or securities that are not dealer property, or any combination of the above.

Rents we receive will qualify as rents from real property only if several conditions are met. First, the amount of rent generally 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 receipts or sales. Second,

rents received from a “related party tenant” will not qualify as rents from real property in satisfying the gross income tests unless the tenant is a TRS and either (i) at least 90% of the property is leased to unrelated tenants and the rent paid by the TRS is substantially comparable to the rent paid by the unrelated tenants for comparable space, or (ii) the property leased is a “qualified lodging facility,” as defined in Section 856(d)(9)(D) of the Code, or a “qualified health care property,” as defined in Section 856(e)(6)(D)(i), and certain other conditions are satisfied. A tenant is a related party tenant if the REIT, or an actual or constructive owner of 10% or more of the REIT, actually or constructively owns 10% or more of the tenant. Third, if rent attributable to personal property, leased in connection with a lease of real property, is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property.

Generally, for rents to qualify as rents from real property, we may ~~purchase properties~~provide directly only an insignificant amount of services, unless those services are “usually or customarily rendered” in connection with the rental of real property and ~~lease them back~~not otherwise considered “rendered to the ~~sellers~~occupant” under the applicable tax rules. Accordingly, we may not provide “impermissible services” to tenants (except through an independent contractor from whom we derive no revenue and that meets other requirements or through a TRS) without giving rise to “impermissible tenant service income.” Impermissible tenant service income is deemed to be at least 150% of the direct cost to us of providing the service. If the impermissible tenant service income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property. If the total amount of impermissible tenant service income from a property does not exceed 1% of our total income from the property, the services will not disqualify any other income from the property that qualifies as rents from real property, but the impermissible tenant service income will not qualify as rents from real property.

We do not intend to charge significant rent that is based in whole or in part on the income or profits of any person, derive significant rents from related party tenants, derive rent attributable to personal property leased in connection with real property that exceeds 15% of the total rents from that property, or derive impermissible tenant service income that exceeds 1% of our total income from any property if the treatment of the rents from such property as nonqualified rents could cause us to fail to qualify as a REIT.

Distributions that we receive from a TRS will be classified as dividend income to the extent of the earnings and profits of the TRS. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not under the 75% gross income test. Any dividends received by us from a REIT will be qualifying income for purposes of both the 95% and 75% gross income tests.

If we fail to satisfy one or both of the 75% or the 95% gross income tests, we may nevertheless qualify as a REIT for a particular year if we are entitled to relief under certain provisions of the Code. Those relief provisions generally will be available if our failure to meet such tests is due to reasonable cause and not due to willful neglect and we file a schedule describing each item of our gross income for such year(s) in accordance with the applicable Treasury Regulations. It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions.

Foreclosure property. Foreclosure property is real property (including interests in real property) and any personal property incident to such real property (1) that is acquired by a REIT as a result of the REIT having bid in the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after there was a default (or default was imminent) on a lease of the property or a mortgage loan held by the REIT and secured by the property, (2) for which the related loan or lease was made, entered into or acquired by the REIT at a time when default was not imminent or anticipated and (3) for which such REIT makes an election to treat the property as foreclosure property. REITs generally are subject to tax at the maximum corporate rate (currently 35%) 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% gross income test. 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 is held primarily for sale to customers in the ordinary course of a trade or business.

Hedging transactions. We may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swaps or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent as may be provided by future Treasury Regulations, any income from a hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated or entered into, including gain from the disposition or termination of such ~~properties. We~~a transaction, will ~~use our best efforts to structure any such sale-leaseback transaction such~~not constitute gross income for purposes of the 95% and 75% gross income tests, provided that the ~~lease will~~hedging transaction is entered into (i) in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to indebtedness incurred or to be ~~characterized as a “true lease” and so~~incurred by us to acquire or carry real estate assets or (ii) primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests (or any property which generates such income or gain). To the extent we ~~will~~enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both the ~~owner~~75% and 95% gross income tests. We intend to structure and monitor our hedging transactions so that such transactions do not jeopardize our ability to qualify as a REIT.

Qualified temporary investment income. Income derived from certain types of temporary stock and debt investments made with the proceeds of this offering, not otherwise treated as qualifying income for the 75% gross income test, generally will nonetheless constitute qualifying income for purposes of the ~~property~~75% gross income test for ~~federal~~the year following this offering. More specifically, qualifying income ~~tax purposes. However,~~for purposes of the 75% gross income test includes “qualified temporary investment income,” which generally means any income that is attributable to stock or a debt instrument, is attributable to the temporary investment of new equity capital and certain debt capital, and is received or accrued during the one-year period beginning on the date on which the REIT receives such new capital. After the one year period following this offering, income from investments of the proceeds of this offering will be qualifying income for purposes of the 75% income test only if derived from one of the other qualifying sources enumerated above.

Asset Tests

At the close of each quarter of each taxable year, we must also satisfy four tests relating to the nature of our assets. First, real estate assets, cash and cash items, and government securities must represent at least 75% of the value of our total assets. Second, not more than 25% of our total assets may be represented by securities other than those in the 75% asset class. Third, of the investments that are not included in the 75% asset class and that are not securities of our TRSs, (i) the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and (ii) we may not own more than 10% by vote or by value of any one issuer’s outstanding securities. For purposes of the 10% value test, debt instruments issued by a partnership are not classified as “securities” to the extent of our interest as a partner in such partnership (based on our proportionate share of the partnership’s equity interests and certain debt securities) or if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test. For purposes of the 10% value test, the term “securities” also does not include debt securities issued by another REIT, certain “straight debt” securities (for example, qualifying debt securities of a corporation of which we own no more than a de minimis amount of equity interest), loans to individuals or estates, and accrued obligations to pay rent. Fourth, securities of our TRSs cannot represent more than 25% of our total assets. Although we intend to meet these asset tests, no assurance can be given that we will be able to do so. For purposes of these asset tests, we are treated as holding our proportionate share of our subsidiary partnerships’ assets. Also, for purposes of these asset tests, the ~~Internal Revenue Service,~~term “real estate assets” includes any property that is not otherwise a real estate asset and that is attributable to the temporary investment of new capital, but only if such property is stock or a debt instrument, and only for the ~~IRS,~~one-year period beginning on the date the REIT receives such capital. “Real estate assets” include our investments in stocks of other REITs but do not include stock of any real estate company, or other company, that does not qualify as a REIT (unless eligible for the special rule for temporary investment of new capital).

We will monitor the status of our assets for purposes of the various asset tests and will endeavor to manage our portfolio in order to comply at all times with such tests. If we fail to satisfy the asset tests at the end of a calendar quarter, we will not ~~challenge such characterization. In~~lose our REIT status if one of 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:following exceptions applies:


	•	~~plans~~We satisfied the asset tests at the end of the preceding calendar quarter, and ~~specifications;~~the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets; or

	•	~~environmental reports (generally a minimum~~We eliminate any discrepancy within 30 days after the close of ~~a Phase I investigation);~~

	•	~~building condition reports;~~

	•	~~surveys;~~

	•	~~evidence of marketable title subject to such liens and encumbrances as are acceptable to our advisor;~~

	•	~~when required to be filed with~~ the ~~SEC and delivered to stockholders, audited financial statements covering recent operations of real properties having operating histories;~~

	•	~~title insurance policies; and~~

	•	~~liability insurance policies.~~calendar quarter in which it arose.

~~In determining whether~~Moreover, if we fail to purchase a particular property, we may, in circumstances in which our advisor and management deem it appropriate, obtain an option on such property, including land suitable for development. The amount paid for an option, if any, is normally surrendered ifsatisfy the ~~property is not purchased, and is normally credited against~~asset tests at the ~~purchase price if the property is purchased. We may also enter into arrangements with the seller or developer~~end of a ~~property whereby the seller or developer agrees that if,~~calendar quarter during a stated period, the property does not generate a specified cash flow, the seller or developer will pay to 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 sponsor, our advisor, 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 intend to 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 intend to obtain insurance unless we are required to do so 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 stockholders’ returns.”

~~Joint Venture Investments~~

We have entered and may continue to enter into joint ventures, general partnerships and other arrangements with one or more entities or individuals, including real estate developers, operators, owners, investors and others, some of whom may be affiliates of our advisor, 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, we will evaluate the real estate that such joint venture will own or is being formed to own under the same criteria used in the selection of our other properties. However,taxable year, we will not ~~participate intenant-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 morelose our REIT status if one of the cash flow, including appreciation, of an investment than we would receive. See “Risk Factors — Risks Associated with 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.”

We may only enter into joint ventures with other programs sponsored by Grubb & Ellis, or Grubb Ellis programs, or affiliates of our advisor or any of our directors for the acquisition of properties if:following additional exceptions applies:


	•	De Minimis Exception: The failure is due to a ~~majority~~violation of the 5% or 10% asset tests referenced above and is “de minimis” (meaning that the failure is one that arises from our ownership of assets the total value of which does not exceed the lesser of 1% of the total value of our ~~directors, including a majority~~assets at the end of the ~~independent directors, approve~~quarter in which the ~~transaction as being fair~~failure occurred and ~~reasonable to us;~~$10 million), and we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred; or

	•	General Exception: All of the ~~investment by us~~following requirements are satisfied: (i) the failure is not due to the above De Minimis Exception, (ii) the failure is due to reasonable cause and ~~such affiliate are on substantially~~not willful neglect, (iii) we file a schedule in accordance with Treasury Regulations providing a description of each asset that caused the ~~same terms~~failure, (iv) we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred, and ~~conditions that are no less favorable than those that would be available to unaffiliated third parties.~~(v) we pay an excise tax as described above in “— Taxation of Our Company.”

~~Our entering into joint ventures with our advisor or any of its affiliates will result in certain conflicts of interest.~~Annual Distribution Requirements

~~Investments~~In order to qualify as a REIT, each taxable year we must distribute dividends (other than capital gain dividends) to our stockholders in ~~Other Real Estate Related Assets~~an amount at least equal to (A) the sum of (i) 90% of our REIT taxable income, determined without regard to the dividends paid deduction and by excluding any net capital gain, and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. We generally must pay such distributions in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year and if paid on or before the first regular dividend payment after such declaration. For these purposes, if we declare a dividend in October, November, or December, payable to stockholders of record on a day in such months, and distribute such dividend in the following January, it will be treated as having been paid on December 31 of the year in which it was declared.

To the extent that we do not distribute all of our net capital gain and taxable income, we will be subject to U.S. federal, state and local tax on the undistributed amount at regular corporate income tax rates. Furthermore, if we should fail to distribute during each calendar year at least the sum of (i) 85% of our REIT taxable income (subject to certain adjustments) for such year, (ii) 95% of our capital gain net income for such year, and (iii) 100% of any corresponding undistributed amounts from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of such required distribution over the sum of amounts actually distributed plus retained income from such taxable year on which we paid corporate income tax.

Under certain circumstances, we may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our stockholders in a later year that may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however, we will be required to pay interest based upon the amount of any deduction taken for deficiency dividends. Amounts paid as deficiency dividends are generally treated as taxable income for U.S. federal income tax purposes.

In order to satisfy the REIT distribution requirements, the dividends we pay must not be “preferential” within the meaning of the Code. A dividend determined to be preferential will not qualify for the dividends

paid deduction. To avoid paying preferential dividends, we must treat every stockholder of a class of stock with respect to which we make a distribution the same as every other stockholder of that class, and we must not treat any class of stock other than according to its dividend rights as a class. Pursuant to an IRS ruling, the prohibition on preferential dividends does not prohibit REITs from offering shares under a dividend reinvestment plan at discounts of up to 5% of fair market value, but a discount in excess of 5% of the fair market value of the shares would be considered a preferential dividend.

We may ~~invest~~retain and pay income tax on net long-term capital gains we received during the tax year. To the extent we so elect, (i) each stockholder must include in its income (as long-term capital gain) its proportionate share of our undistributed long-term capital gains, (ii) each stockholder is deemed to have paid, and receives a credit for, its proportionate share of the tax paid by us on the undistributed long-term capital gains, and (iii) each stockholder’s basis in its stock is increased by the included amount of the undistributed long-term capital gains less their share of the tax paid by us.

To qualify as a REIT, we may not have, at the end of any taxable year, any undistributed earnings and profits accumulated in any non-REIT taxable year. We believe that we have not had any non-REIT earnings and profits at the end of any taxable year and we intend to distribute any non-REIT earnings and profits that we accumulate before the end of any taxable year in which we accumulate such earnings and profits.

Failure to Qualify

If we fail to qualify as a REIT and such failure is not an asset test or income test failure subject to the cure provisions described above, we generally will be eligible for a relief provision if the failure is due to reasonable cause and not willful neglect and we pay a penalty of $50,000 with respect to such failure.

If we fail to qualify for taxation as a REIT in any taxable year and no relief provisions apply, we generally will be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Distributions to our stockholders in any year in which we fail to qualify as a REIT will not be deductible by us nor will they be required to be made. In such event, to the extent of our current or accumulated earnings and profits, all distributions to our stockholders will be taxable as dividend income. Subject to certain limitations in the Code, corporate stockholders may be eligible for the dividends received deduction, and individual, trust and estate stockholders may be eligible to treat the dividends received from us as qualified dividend income taxable as net capital gains, under the provisions of Section 1(h)(11) of the Code, through the end of 2012. Unless entitled to relief under specific statutory provisions, we also will be ineligible to elect to be taxed as a REIT again prior to the fifth taxable year following ~~types~~the first year in which we failed to qualify as a REIT under the Code.

Our qualification as a REIT for U.S. federal income tax purposes will depend on our continuing to meet the various requirements summarized above governing the ownership of our outstanding stock, the nature of our assets, the sources of our income, and the amount of our distributions to our stockholders. Although we intend to operate in a manner that will enable us to comply with such requirements, there can be no certainty that such intention will be realized. In addition, because the relevant laws may change, compliance with one or more of the REIT requirements may become impossible or impracticable for us.

Taxation of U.S. Stockholders

The term “U.S. stockholder” means an investor in our stock that, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation or other ~~real~~entity treated as a corporation that is created or organized in or under the laws of the United States, any of its states or the District of Columbia, (iii) an estate, ~~related assets: (1) equity securities~~the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust (a) if a court within the United States 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 or (b) that has a valid election in effect under the applicable Treasury Regulations to be treated as a U.S. person under the Code. If a partnership, including any entity treated as a partnership for U.S. federal income tax purposes, holds our stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership

holding our stock, you are urged to consult your tax advisor regarding the consequences of the ownership and disposition of shares of our stock by the partnership. This summary assumes that stockholders hold our stock as capital assets for U.S. federal income tax purposes, which generally means property held for investments.

This discussion does not address all aspects of federal income taxation that may apply to persons that are subject to special treatment under the Code, such as (i) insurance companies; (ii) financial institutions or broker-dealers; (iii) persons whomark-to-market our stock; (iv) subchapter S corporations; (v) U.S. stockholders whose functional currency is not the ~~common~~U.S. dollar; (vi) regulated investment companies; (x) holders who receive our stock ~~preferred~~through the exercise of employee stock options or otherwise as compensation; (vii) persons holding shares of our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment; and ~~convertible preferred securities~~(viii) persons subject to the alternative minimum tax provisions of ~~public~~the Code.

Distributions

Distributions by us, other than capital gain dividends, will constitute ordinary dividends to the extent of our current or ~~private real estate companies (including~~accumulated earnings and profits as determined for U.S. federal income tax purposes. In general, these dividends will be taxable as ordinary income and will not be eligible for the dividends-received deduction for corporate stockholders. Our ordinary dividends generally will not qualify as “qualified dividend income” currently taxed as net capital gain for U.S. stockholders that are individuals, trusts, or estates. However, provided we properly designate the distributions, distributions to U.S. stockholders that are individuals, trusts, or estates generally will constitute qualified dividend income to the extent the U.S. stockholder satisfies certain holding period requirements and to the extent the dividends are attributable to (i) qualified dividend income we receive from other ~~REITs, real estate operating companies~~corporations during the taxable year, including from our TRSs, and ~~other real estate companies); (2) debt securities~~(ii) our undistributed earnings or built-in gains taxed at the corporate level during the immediately preceding year. We do not anticipate distributing a significant amount of qualified dividend income. Absent an extension, the favorable rates for qualified dividend income will not apply for taxable years beginning after December 31, 2012.

To the extent that we make a distribution in excess of our current and accumulated earnings and profits (a “return of capital distribution”), the distribution will be treated first as a tax-free return of capital, reducing the tax basis in a U.S. stockholder’s stock. To the extent a return of capital distribution exceeds a U.S. stockholder’s tax basis in its stock, the distribution will be taxable as capital gain realized from the sale of such stock.

Dividends declared by us in October, November or December and payable to a stockholder of record on a specified date in any such month shall be treated both as ~~commercial mortgages, mortgage loan participations~~paid by us and ~~debt securities issued~~as received by ~~other real estate companies; and (3) certain other types~~the stockholder on December 31, provided that the dividend is actually paid by us during January of ~~securities that may help us reach our diversification and other investment objectives. These other securities may include, but are not limited to, mezzanine loans, bridge loans, and certainnon-United~~ ~~States, or U.S., dollar denominated securities.~~the following calendar year.

We will be treated as having sufficient earnings and profits to treat as a dividend any distribution up to the amount required to be distributed in order to avoid imposition of the 4% excise tax generally applicable to REITs if certain distribution requirements are not met. Moreover, any deficiency dividend will be treated as an ordinary or a capital gain dividend, as the case may be, regardless of our earnings and profits at the time the distribution is actually made. As a result, stockholders may be required to treat certain distributions as taxable dividends that would otherwise result in a tax-free return of capital.

Distributions that are properly designated as capital gain dividends will be taxed 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 stockholder has held its stock. However, corporate stockholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. In addition, U.S. stockholders may be required to treat a portion of any capital gain dividend as “unrecaptured Section 1250 gain,” taxable at a maximum rate of 25%, if we incur such gain. Capital gain dividends are not eligible for the dividends-received deduction for corporations.

The REIT provisions of the Code do not require us to distribute our long-term capital gain, and we may elect to retain and pay income tax on our net long-term capital gains received during the taxable year. If we so

elect for a taxable year, our stockholders would include in income as long-term capital gains their proportionate share of designated retained net long-term capital gains for the taxable year. A U.S. stockholder would be deemed to have ~~substantial discretion~~paid its share of the tax paid by us on such undistributed capital gains, which would be credited or refunded to the stockholder. The U.S. stockholder’s basis in its stock would be increased by the amount of undistributed long-term capital gains (less the capital gains tax paid by us) included in the U.S. stockholder’s long-term capital gains.

Passive Activity Loss and Investment Interest Limitations; No Pass Through of Losses

Our distributions and gain from the disposition of our stock will not be treated as passive activity income and, therefore, U.S. stockholders will not be able to apply any “passive losses” against such income. With respect to non-corporate U.S. stockholders, our distributions (to the extent they do not constitute a return of capital) that are taxed at ordinary income rates will generally be treated as investment income for purposes of the investment interest limitation; however, net capital gain from the disposition of our stock (or distributions treated as such), capital gain dividends, and dividends taxed at net capital gains rates generally will be excluded from investment income except to the extent the U.S. stockholder elects to treat such amounts as ordinary income for U.S. federal income tax purposes. U.S. stockholders may not include in their own U.S. federal income tax returns any of our net operating or net capital losses.

Sale or Disposition of Stock

In general, any gain or loss realized upon a taxable disposition of shares of our stock by a stockholder that is not a dealer in securities will be a long-term capital gain or loss if the stock has been held for more than one year and otherwise will be a short-term capital gain or loss. However, any loss upon a sale or exchange of the stock by a stockholder who has held such stock for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss to the extent of our distributions or undistributed capital gains required to be treated by such stockholder as long-term capital gain. All or a portion of any loss realized upon a taxable disposition of shares of our stock may be disallowed if the taxpayer purchases other shares of our common stock within 30 days before or after the disposition.

Medicare Tax on Unearned Income

For taxable years beginning after December 31, 2012, certain U.S. stockholders that are individuals, estates or trusts and have modified adjusted gross income exceeding certain thresholds will be required to pay an additional 3.8% tax (the “Medicare Tax”) on, among other things, certain dividends on and capital gains from the sale or other disposition of stock. U.S. stockholders that are individuals, estates or trusts should consult their tax advisors regarding the effect, if any, of the Medicare Tax on their ownership and disposition of our stock.

Taxation of U.S. Tax-Exempt Stockholders

In General

In general, a U.S. tax-exempt organization is exempt from U.S. federal income tax on its income, except to the extent of its “unrelated business taxable income” or UBTI, which is defined by the Code as the gross income derived from any trade or business which is regularly carried on by a tax-exempt entity and unrelated to its exempt purposes, less any directly connected deductions and subject to certain modifications. For this purpose, the Code generally excludes from UBTI any gain or loss from the sale or other disposition of property (other than stock in trade or property held primarily for sale in the ordinary course of a trade or business), dividends, interest, rents from real property, and certain other items. However, a portion of any such gains, dividends, interest, rents, and other items generally is UBTI to the extent derived from debt-financed property, based on the amount of “acquisition indebtedness” with respect to such debt-financed property.

Distributions we make to a tax-exempt employee pension trust or other domestic tax-exempt stockholder or gains from the ~~selection~~disposition of ~~specific securities investments. Our charter provides~~our stock held as capital assets generally will not constitute UBTI unless the exempt organization’s stock is debt-financed property (e.g., the stockholder has incurred “acquisition

indebtedness” with respect to such stock). However, if we are a “pension-held REIT,” this general rule may not apply to distributions to certain pension trusts that are qualified trusts and that hold more than 10% (by value) of our stock. We will be treated as a “pension-held REIT” if (i) treating qualified trusts as individuals would cause us to fail the 5/50 Test (as defined above) and (ii) we are “predominantly held” by qualified trusts. We will be “predominantly held” by qualified trusts if either (i) a single qualified trust holds more than 25% by value of our stock or (ii) one or more qualified trusts, each owning more than 10% by value of our stock, hold in the aggregate more than 50% by value of our stock. In the event we are a pension-held REIT, the percentage of any dividend received from us treated as UBTI would be equal to the ratio of (a) the gross UBTI (less certain associated expenses) earned by us (treating us as if we were a qualified trust and, therefore, subject to tax on UBTI) to (b) our total gross income (less certain associated expenses). A de minimis exception applies where the ratio set forth in the preceding sentence is less than 5% for any year; in that case, no dividends are treated as UBTI. We cannot assure you that we ~~may~~will not ~~invest in equity securities unless~~be treated as a ~~majority~~pension-held REIT.

Special Issues

Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of Section 501(c) of the ~~directors (including~~Code are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI.

Taxation ofNon-U.S. Stockholders

The rules governing U.S. federal income taxation ofnon-U.S. stockholders, such as nonresident alien individuals, foreign corporations, and foreign trusts and estates(“non-U.S. stockholders”), are complex. This section is only a ~~majority~~partial discussion of such rules. This discussion does not attempt to address the considerations that may be relevant fornon-U.S. stockholders that are partnerships or other pass-through entities, that hold their stock through intermediate entities, that have special statuses (such as sovereigns), or that otherwise are subject to special rules.Prospectivenon-U.S. stockholders are urged to consult their tax advisors to determine the impact of U.S. federal, state, local and foreign income tax laws on their ownership of our stock, including any reporting requirements.

Distributions

Anon-U.S. stockholder that receives a distribution that is not attributable to gain from our sale or exchange of “United States real property interests” (as defined below) and that we do not designate as a capital gain dividend generally will recognize ordinary income to the extent that we pay the distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the ~~independent directors)~~gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or eliminates the tax. Under some treaties, lower withholding rates do not ~~otherwise interested~~apply to dividends from REITs or are available in limited circumstances. However, if a distribution is treated as effectively connected with thenon-U.S. stockholder’s conduct of a U.S. trade or business, thenon-U.S. stockholder generally will be subject to U.S. federal income tax on the distribution at graduated rates (in the same manner as U.S. stockholders are taxed on distributions) and also may be subject to the 30% branch profits tax in the ~~transaction approve~~case of a corporatenon-U.S. stockholder. We plan to withhold U.S. income tax at the rate of 30% on the gross amount of any distribution paid to anon-U.S. stockholder that is neither a capital gain dividend nor a distribution that is attributable to gain from the sale or exchange of “United States real property interests” unless either (i) a lower treaty rate or special provision of the Code (e.g., Section 892) applies and thenon-U.S. stockholder files with us any required IRSForm W-8 (for example, an IRSForm W-8BEN) evidencing eligibility for that reduced rate or (ii) thenon-U.S. stockholder files with us an IRSForm W-8ECI claiming that the distribution is effectively connected income.

Anon-U.S. stockholder generally will not incur tax on a return of capital distribution in excess of our current and accumulated earnings and profits that is not attributable to the gain from our disposition of a “United States real property interest” if the excess portion of the distribution does not exceed the adjusted basis of thenon-U.S. stockholder’s stock. Instead, the excess portion of the distribution will reduce the

adjusted basis of the stock. However, anon-U.S. stockholder will be subject to tax on such ~~investment~~a distribution that exceeds both our current and accumulated earnings and profits and thenon-U.S. stockholder’s adjusted basis in the stock, if thenon-U.S. stockholder otherwise would be subject to tax on gain from the sale or disposition of its stock, as ~~being fair, competitive~~described below. Because we generally cannot determine at the time we make a distribution whether or not the distribution will exceed our current and ~~commercially reasonable. Consistent with such requirements,~~accumulated earnings and profits, we normally will withhold tax on the entire amount of any distribution at the same rate as we would withhold on a dividend. However, anon-U.S. stockholder may file a U.S. federal income tax return and obtain a refund from the IRS of amounts that we withhold if we later determine that a distribution in ~~determining~~fact exceeded our current and accumulated earnings and profits.

We may be required to withhold 10% of any distribution that exceeds our current and accumulated earnings and profits. Consequently, although we intend to withhold at a rate of 30% on the ~~types~~entire amount of any distribution that is neither attributable to the gain from our disposition of a “United States real ~~estate related assets~~property interest” nor designated by us as a capital gain dividend, to ~~make,~~the extent that we do not do so, we will ~~adhere~~withhold at a rate of 10% on any portion of a distribution not subject to withholding at a rate of 30%.

Subject to the exception discussed below for 5% or smaller holders of regularly traded classes of stock, anon-U.S. stockholder will incur tax on distributions that are attributable to gain from our sale or exchange of “United States real property interests” under special provisions of the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, regardless of whether we designate such distributions as capital gain distributions. The term “United States real property interests” includes interests in U.S. real property and stock in U.S. corporations at least 50% of whose assets consist of interests in U.S. real property. Under those rules, anon-U.S. stockholder is taxed on distributions attributable to gain from sales of United States real property interests as if the gain were effectively connected with thenon-U.S. stockholder’s conduct of a U.S. trade or business. Anon-U.S. stockholder thus would be required to file a U.S. federal income tax return to report such income and would be taxed on such a distribution at the normal capital gain rates applicable to U.S. stockholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A corporatenon-U.S. stockholder not entitled to treaty relief or exemption also may be subject to the 30% branch profits tax on such a distribution. We generally must withhold 35% of any distribution subject to these rules (“35% FIRPTA Withholding”). Anon-U.S. stockholder may receive a credit against its tax liability for the amount we withhold.

Anon-U.S. stockholder that owns no more than 5% of our stock at all times during the one-year period ending on the date of a distribution would not be subject to FIRPTA, branch profits tax or 35% FIRPTA Withholding with respect to a ~~board-approved asset allocation framework consisting primarily~~distribution on stock that is attributable to gain from our sale or exchange of ~~components~~United States real property interests, if our stock were regularly traded on an established securities market in the United States. Instead, any such ~~as: (1) target mix~~distributions made to suchnon-U.S. stockholder would be subject to the general withholding rules discussed above, which generally impose a withholding tax equal to 30% of the gross amount of each distribution (unless reduced by treaty). Our shares are not traded on an established securities ~~across~~market.

Distributions that are designated by us as capital gain dividends, other than those attributable to the disposition of a ~~range of risk/reward characteristics, (2) exposure limits~~U.S. real property interest, generally should not be subject to individual securities and (3) exposure limits to securities subclasses (such as common equities and mortgage debt). Within this framework, we will evaluate specific criteria for each prospective investment in real estate related assets including:U.S. federal income taxation unless:


	•	such distribution is effectively connected with the ~~position of the overall portfolio~~non-U.S. stockholder’s U.S. trade or business and, if certain treaties apply, is attributable to ~~achieve an optimal mix of real property and real estate related assets;~~

	•	~~diversification benefits relative~~a U.S. permanent establishment maintained by thenon-U.S. stockholder, in which case thenon-U.S. stockholder will be subject to tax on a net basis in a manner similar to the ~~rest~~taxation of ~~the securities assets within our portfolio;~~

	•	~~fundamental securities analysis;~~

	•	~~quality and sustainability of underlying property cash flows;~~

	•	~~broad assessment of macro economic data and regional property level supply and demand dynamics;~~

	•	~~potential for delivering high recurring income and attractive risk-adjusted total returns; and~~


	•	~~additional factors considered important to meeting our investment objectives.~~

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 our offering that we may invest in a single real estate related asset or pool of 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 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 real estate related assets and the amount of proceeds we raise in our 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.

~~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:


	•	aggressively leasing available space through targeted marketing augmented, where possible, by our advisor and its affiliates’ local asset and property management offices or third party property management companies;

	•	~~controlling operating expenses through the centralization of asset and property management, leasing, marketing, financing, accounting, renovation and data processing activities;~~

	•	~~emphasizing regular maintenance and periodic renovation to meet the needs of tenants and to maximize long-term returns; and~~

	•	~~financing acquisitions and refinancing properties when favorable terms are available to increase cash flow.~~

~~Disposition Strategies~~

We intend to hold each property or other real estate related asset 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 real estate related 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:


	•	~~diversification benefits exist associated with disposing of the investment and rebalancing our investment portfolio;~~

	•	~~an opportunity arises to pursue a more attractive investment;~~

	•	~~in the judgment of our advisor and management team, the value of the investment might decline;~~

	•	U.S. stockholders with respect to ~~properties,~~such gain, except that a ~~major tenant involuntarily liquidates~~holder that is a foreign corporation may also be subject to the additional 30% branch profits tax; or ~~is in default under its lease;~~

	•	the ~~investment was acquired as part of~~non-U.S. stockholder is a ~~portfolio acquisition and does not meet our general acquisition criteria;~~

	•	~~an opportunity exists to enhance overall investment returns by raising capital through sale of the investment; or~~

	•	nonresident alien individual who is present in the ~~judgment of our advisor~~United States for 183 days or more during the taxable year and ~~management team,~~has a “tax home” in the ~~sale of~~United States, in which case such nonresident alien individual generally will be subject to a 30% tax on the ~~investment is in our best interests.~~individual’s net U.S. source capital gain.

The determination of whether a particular property or other real estate related asset should be sold or otherwise disposed of will be made after consideration of relevant factors, including prevailing economic conditions, with a view towards maximizing our investment objectives. We cannot assure our stockholders that this objective will be realized. The sales price of a property which is net leased will be determined in large

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~~part~~

It is not entirely clear to what extent we are required to withhold on distributions tonon-U.S. stockholders that are not treated as ordinary income and are not attributable to the disposition of a United States real property interest. Unless the law is clarified to the contrary, we will generally withhold and remit to the IRS 35% of any distribution to anon-U.S. stockholder that is designated as a capital gain dividend (or, if greater, 35% of a distribution that could have been designated as a capital gain dividend). Distributions can be designated as capital gain dividends to the extent of our net capital gain for the taxable year of the distribution. The amount withheld is creditable against thenon-U.S. stockholder’s U.S. federal income tax liability.

Dispositions

If gain on the sale of the stock were taxed under FIRPTA, anon-U.S. stockholder would be taxed on that gain in the same manner as U.S. stockholders with respect to that gain, subject to applicable alternative minimum tax, and a special alternative minimum tax in the case of nonresident alien individuals. Anon-U.S. stockholder generally will not incur tax under FIRPTA on a sale or other disposition of our stock if we are a “domestically controlled qualified investment entity,” which requires that, during the shorter of the period since our formation and the five-year period ending on the date of the distribution or disposition,non-U.S. stockholders hold, directly or indirectly, less than 50% in value of our stock and we are qualified as a REIT. We cannot assure you that we will be a domestically controlled qualified investment entity. In addition, the gain from a sale of our stock by anon-U.S. stockholder will not be subject to tax under FIRPTA if (i) our stock is considered regularly traded under applicable Treasury Regulations on an established securities market, such as the ~~amount~~New York Stock Exchange, and (ii) thenon-U.S. stockholder owned, actually or constructively, 5% or less of ~~rent payable under~~our stock at all times during a specified testing period. Our shares are not traded on an established securities market.

In addition, even if we are a domestically controlled qualified investment entity, upon a disposition of our stock, anon-U.S. stockholder may be treated as having gain from the ~~lease(s)~~sale or exchange of a United States real property interest if thenon-U.S. stockholder (i) disposes of an interest in our stock during the30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been treated as gain from sale or exchange of a United States real property interest, and (ii) directly or indirectly acquires, enters into a contract or option to acquire, or is deemed to acquire, other shares of our stock within 30 days before or after such ~~property. If~~ex-dividend date. The foregoing rule does not apply if the exception described above for dispositions by 5% or smaller holders of regularly traded classes of stock is satisfied.

Furthermore, a ~~tenant~~non-U.S. stockholder generally will incur tax on gain not subject to FIRPTA if (i) the gain is effectively connected with thenon-U.S. stockholder’s U.S. trade or business and, if certain treaties apply, is attributable to a U.S. permanent establishment maintained by thenon-U.S. stockholder, in which case thenon-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain, or (ii) thenon-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 ~~repurchase option at~~“tax home” in the United States, in which case thenon-U.S. stockholder will generally incur a ~~formula price, we may~~30% tax on his or her net U.S. source capital gains.

Purchasers of our stock from anon-U.S. stockholder generally will be ~~limited in realizing any appreciation. In connection with our sales of properties we may lend~~required to withhold and remit to the ~~purchaser all or a portion~~IRS 10% of the purchase ~~price. In these instances,~~price unless at the time of purchase (i) any class of our ~~taxable income may exceed the cash received~~stock is regularly traded on an established securities market in the ~~sale.~~United States (subject to certain limits if the stock sold are not themselves part of such a regularly traded class) or (ii) we are a domestically controlled qualified investment entity. The ~~terms of payment will be affected by custom in~~non-U.S. stockholder may receive a credit against its tax liability for the ~~area in which the investment being sold is located and the then-prevailing economic conditions.~~amount withheld.

~~FINANCING POLICIES~~Information Reporting Requirements and Backup Withholding Tax

We ~~intend~~will report to ~~use secured and unsecured debt as a means of providing additional funds for the acquisition of properties and other real estate related assets. Our ability to enhance~~ our ~~investment returns~~U.S. stockholders and to ~~increase our diversification by acquiring assets using additional funds provided through borrowing could be adversely effected if banks and other lending institutions reduce~~the IRS the 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’ and other real estate related assets’ combined fair market values, as determined at the end ofdistributions paid during each calendar year, beginning with our first full year of operations. 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 limitand the amount weof tax withheld, if any. Under the backup withholding rules, a U.S. stockholder may ~~borrow~~be subject to backup withholding at the current rate of 28% with respect to ~~any individual investment. As~~distributions paid, unless such stockholder (i) is a corporation or other exempt entity and, when required, proves its status or (ii) certifies under penalties of ~~December 31, 2008, our aggregate borrowings were 47.9% of all of our properties’ and other real estate related assets’ combined fair market values.~~

Our board of directors reviews our secured and unsecured aggregate borrowings at least quarterly to ensure that such borrowings are reasonable in relation to our net assets. Our borrowing policies provideperjury that the maximum amount of such borrowings in relation to our net assets will not exceed 300.0%, unless any excess in such borrowing is approved by a majority of our directors and is disclosed in our next quarterly report along withtaxpayer identification number the justification for such excess. For the purposes of this determination, net assets are our total assets, other than intangibles, calculated at cost before deducting depreciation, amortization, bad debt and other similar non-cash reserves, less total liabilities and computed at least quarterly on a consistently-applied basis. Generally, the preceding calculation is expected to approximate 75.0% of the sum of the aggregate cost of our real estate and real estate related assets before depreciation, amortization, bad debt and other similar non-cash reserves. As of March 27, 2009 and December 31, 2008, our leverage did not exceed 300.0% of the value of our net assets.

By operating on a leveraged basis, we will have more funds available for our investments. This generally allows us to make more investments than would otherwise be possible, potentially resulting in enhanced investment returns and a more diversified portfolio. However, 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 advisor~~stockholder has ~~used its best efforts to obtain financing on the most favorable terms available~~furnished to us and we 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 of 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 or from our advisor or its affiliates 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.correct

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and the stockholder is not subject to backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A U.S. stockholder that does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the IRS.

We will also report annually to the IRS and to eachnon-U.S. stockholder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which thenon-U.S. stockholder resides under the provisions of an applicable income tax treaty. Anon-U.S. stockholder may be subject toback-up withholding unless applicable certification requirements are met.

New reporting requirements generally will apply with respect to dispositions of REIT shares acquired after 2010 (2011 in the case of shares acquired in connection with a distribution reinvestment plan). Brokers that are required to report the gross proceeds from a sale of shares onForm 1099-B will also be required to report the customer’s adjusted basis in the shares and whether any gain or loss with respect to the shares is long-term or short-term. In some caes, there may be alternative methods of determining the basis in shares that are disposed of, in which case your broker will apply a default method of its choosing if you do not indicate which method you choose to have applied. You should consult with your own tax advisor regarding the new reporting requirements and your election options.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against such holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

��

Additional U.S. Federal Income Tax Withholding Rules

Additional U.S. federal income tax withholding rules apply to certain payments made after December 31, 2012 to foreign financial institutions and certain othernon-U.S. entities. A withholding tax of 30% would apply to dividends and the gross proceeds of a disposition of our stock paid to certain foreign entities unless various information reporting requirements are satisfied. For these purposes, a foreign financial institution generally is defined as anynon-U.S. entity that (i) accepts deposits in the ordinary course of a banking or similar business, (ii) as a substantial portion of its business, holds financial assets for the account of others, or (iii) is engaged or holds itself out as being engaged primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest in such assets. Prospective investors are encouraged to consult their tax advisors regarding the implications of these rules with respect to their investment in our stock, as well as the status of any related federal regulations.

Sunset of Reduced Tax Rate Provisions

Several of the tax considerations described herein are subject to a sunset provision. The sunset provisions generally provide that for taxable years beginning after December 31, 2012, certain provisions that are currently in the Code will revert back to a prior version of those provisions. These provisions include provisions related to the reduced maximum U.S. federal income tax rate for long-term capital gains of 15% (rather than 20%) for taxpayers taxed at individual rates, the application of the 15% U.S. federal income tax rate for qualified dividend income, and certain other tax rate provisions described herein. The impact of this reversion generally is not discussed herein. Prospective stockholders are urged to consult their tax advisors regarding the effect of sunset provisions on an investment in our stock.

Legislative or Other Actions Affecting REITs

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to us and our stockholders may be enacted. Changes to the U.S. federal tax laws and interpretations of federal tax laws could adversely affect an investment in our stock.

State, Local and Foreign Tax

We may be subject to state, local and foreign tax in states, localities and foreign countries in which we do business or own property. The tax treatment applicable to us and our stockholders in such jurisdictions may differ from the U.S. federal income tax treatment described above.

~~BOARD REVIEW OF OUR INVESTMENT POLICIES~~SIGNIFICANT TENANTS

~~Our board~~As of ~~directors has established written policies on investments and borrowing. Our board is responsible for monitoring the administrative procedures, investment operations and performance~~December 31, 2010, none of our ~~company and~~tenants at our advisor to ensure such policies are carried out. Our charter requires that our independent directors review our investment policies at least annually to determine that our policies are in the best interestconsolidated properties accounted for 10.0% or more of our stockholders. Each determination and the basis thereof is required to be set forth in the minutes of our applicable meetings of our directors. Implementation of our investment policies also may vary as new investment techniques are developed. Our investment policies may not be altered by our board of directors without the approval of our stockholders.aggregate annual rental revenue.

GEOGRAPHIC CONCENTRATION

As ~~required by our charter, our independent directors have reviewed our policies outlined above~~of December 31, 2010, we had interests in 16 consolidated properties located in Texas (including both operating properties and ~~determined that they are in the best interest~~those buildings classified as held for sale), which accounted for 15.3% of our ~~stockholders because: (1) they increase the likelihood that we will be able to acquire a diversified portfolio of~~total annualized rental income, ~~producing~~interests in seven consolidated properties ~~thereby reducing risk~~ in ~~our portfolio; (2) there are sufficient property acquisition opportunities with the attributes that we seek; (3) our executive officers, directors and affiliates~~Arizona, which accounted for 11.7% of our ~~advisor have expertise with the type~~total annualized rental income, interests in five consolidated properties located in South Carolina, which accounted for 9.7% of ~~real estate~~our total annualized rental income, interests in 10 consolidated properties in Florida, which accounted for 8.8% of our total annualized rental income, and interests in seven consolidated properties in Indiana, which accounted for 8.5% of our total annualized rental income. This rental income is based on contractual base rent from leases in effect as of December 31, 2010. In making these investments, we ~~seek; and (4)~~took into account the geographic concentration of our ~~borrowings have enabled us to purchase~~ assets and ~~earn~~corresponding rental income, ~~more quickly, thereby increasing our likelihood~~which we viewed as a favorable factor based on risk reward analysis. Accordingly, there is a geographic concentration of ~~generating income for our stockholders and preserving stockholder capital.~~risk subject to fluctuations in each of these states’ economies.

~~TAX STATUS~~FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

ASC 280,Segment Reporting(“ASC 280”) establishes standards for reporting financial and descriptive information about an enterprise’s reportable segment. We have qualified and elected to be taxed as a REIT beginning with our taxable year ended December 31, 2007 under Sections 856 through 860 of the Code for federal income tax purposes and we intend to continue to be taxed as a REIT. To continue to qualify as a REIT for federal income tax purposes, we must meet certain organizational and operational requirements, including a requirement to pay distributions to our stockholders of at least 90.0% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gains). As a REIT, we generally are not subject to federal income tax on net incomedetermined that we ~~distribute~~have one reportable segment, with activities related to ~~our stockholders.~~

~~If we fail to qualify as a REIT~~investing in ~~any taxable year, we will then be subject to federal income taxes on our taxable income~~medical office buildings, healthcare-related facilities, and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Services, or the IRS, grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our results of operations and net cash available for distribution to stockholders.

~~DISTRIBUTION POLICY~~

~~In order to continue to qualify as a REIT for federal income tax purposes, among~~ other things, we must distribute at least 90.0% of our annual taxable income to our stockholders. The amount of distributions we pay to our stockholders is determined by our board of directors and is dependent on a number of factors, including funds available for the payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT under the Code. If our investments produce sufficient cash flow, we expect to pay distributions to our stockholders on a monthly basis. However, our board of directors could, at any time, elect to pay distributions quarterly to reduce administrative costs. Because our cash available for distribution in any year may be less than 90.0% of our taxable income for the year, we may obtain the necessary funds by borrowing, issuing new securities or selling assets to pay out enough of our taxable income to satisfy the distribution requirement.

See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions, for a further discussion on distribution rates approved by our board of directors.real estate

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COMPETITION

We compete with many other real estate investment entities, including financial institutions, institutional pension funds, real estate developers, other REITs, other public and private real estate companies and private real estate investors for the acquisition of medical office buildings ~~healthcare related facilities~~ and ~~quality commercial office properties.~~healthcare-related facilities. During the acquisitions process, we compete with others who have a comparative advantage in terms of size, capitalization, depth of experience, local knowledge of the marketplace, and extended contacts throughout the region. Any combination of these factors may result in an increased purchase price for real properties or other real estate related assets which may reduce the number of opportunities available that meet our investment criteria. If the number of opportunities that meet our investment criteria are limited, our ability to increase stockholder value may be adversely impacted.

We face competition in leasing available medical office buildings ~~healthcare related~~and healthcare-related facilities ~~and quality commercial office properties~~ to prospective tenants. As a result, we may have to provide rent concessions, incur charges for tenant improvements, offer other inducements, or we may be unable to timely lease vacant space, all of which may have an adverse impact on our results of operations. At the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers.

~~Conflicts of interest will exist to the extent that we are advised by~~We believe our ~~advisor~~focus on medical office buildings and ~~we acquire properties in the same geographic areas where other Grubb & Ellis programs own the same type of properties. In such~~healthcare-related facilities, our experience and expertise, and our ongoing relationships with healthcare providers provide us with a ~~case, a conflict could arise in the leasing of our properties in the event that we~~competitive advantage. We have established an asset identification and ~~another program managed by Grubb & Ellis or its affiliates were to compete~~acquisition network, which provides for the ~~same tenants in negotiating leases, or a conflict could arise in connection with the resale~~early identification of ~~our properties in the event that we~~ and ~~another program managed by Grubb & Ellis or its affiliates were~~access to ~~attempt to sell similar properties at the same time.~~

acquisition opportunities. In addition, this broad network allows for us to effectively lease available medical office space, retain our ~~advisor will seek to reduce conflicts that may arise with respect to properties available for sale or rent by making prospective purchasers or~~ tenants, ~~aware of all such properties. However, these conflicts cannot be fully avoided in that~~and maintain and improve our ~~advisor may establish differing compensation arrangements for employees at different properties or differing terms for resales or leasing of the various properties.~~assets.

GOVERNMENT REGULATIONS

Healthcare-related Regulations


	•	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 or recommendation for the ordering of any item or service reimbursed by Medicare or Medicaid;

	•	the Federal Physician Self-Referral Prohibition, commonly referred to as the Stark Law, 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;

	•	the False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs;

	•	the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose monetary penalties for certain fraudulent acts; and

	•	the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act of the American Recovery and Reinvestment Act of 2009, which protects the privacy and security of personal health information.

Real Estate Ownership-Related Regulations

Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

EMPLOYEES

As of December 31, 2010, we had approximately 50 employees. We believe that we have a strong relationship with our employees.

TAX STATUS

Federal Income Taxation of HTA

Notwithstanding the foregoing, even if we qualify for taxation as a REIT, we nonetheless may be subject to tax in certain circumstances, including the following:


	•	We will be required to pay U.S. federal income tax on our undistributed REIT taxable income, including net capital gain;

	•	We may be subject to the “alternative minimum tax;”

	•	We may be subject to tax at the highest corporate rate on certain income from “foreclosure property” (generally, property acquired by reason of default on a lease or indebtedness held by us);

	•	We will be subject to a 100% tax on net income from “prohibited transactions” (generally, certain sales or other dispositions of property, sometimes referred to as “dealer property,” held primarily for sale to customers in the ordinary course of business, other than foreclosure property) unless the gain is realized in a “taxable REIT subsidiary,” or TRS, or such property has been held by us for two years and certain other requirements are satisfied;

	•	If we fail to satisfy the 75% gross income test or the 95% gross income test (discussed below), but nonetheless maintain our qualification as a REIT pursuant to certain relief provisions, we will be subject to a 100% tax on the greater of (i) the amount by which we fail the 75% gross income test or (ii) the amount by which we fail the 95% gross income test, in either case, multiplied by a fraction intended to reflect our profitability;


	•	If we fail to satisfy any of the asset tests, other than the 5% or the 10% asset tests that qualify under a de minimis exception, and the failure qualifies under the general exception, as described below under “— Qualification as a REIT — Asset Tests,” then we will have to pay an excise tax equal to the greater of (i) $50,000 and (ii) an amount determined by multiplying the net income generated during a specified period by the assets that caused the failure by the highest U.S. federal income tax applicable to corporations;

	•	If we fail to satisfy any REIT requirements other than the income test or asset test requirements, described below under “— Qualification as a REIT — Income Tests” and “— Qualification as a REIT — Asset Tests,” respectively, and we qualify for a reasonable cause exception, then we will have to pay a penalty equal to $50,000 for each such failure;

	•	We will be subject to a 4% excise tax if certain distribution requirements are not satisfied;

	•	We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “— Recordkeeping Requirements;”

	•	If we dispose of an asset acquired by us from a C corporation in a transaction in which we took the C corporation’s tax basis in the asset, we may be subject to tax at the highest regular corporate rate on the appreciation inherent in such asset as of the date of acquisition by us;

	•	We will be required to pay a 100% tax on any redetermined rents, redetermined deductions, and excess interest. In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our non-TRS tenants by one of our TRSs. Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations; and

	•	Income earned by our TRSs or any other subsidiaries that are taxable as C corporations will be subject to tax at regular corporate rates.

No assurance can be given that the amount of any such taxes will not be substantial. In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local and foreign income, property and other taxes on assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.

Qualification as a REIT

In General

The REIT provisions of the Code apply to a domestic corporation, trust, or association (i) that is managed by one or more trustees or directors, (ii) the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest, (iii) that properly elects to be taxed as a REIT and such election has not been terminated or revoked, (iv) that is neither a financial institution nor an insurance company, (v) that uses a calendar year for U.S. federal income tax purposes and complies with applicable recordkeeping requirements, and (vi) that meets the additional requirements discussed below.

Preferential dividends cannot be used to satisfy the REIT distribution requirements. In 2007, 2008 and through July 2009, shares of common stock issued pursuant to our DRIP were treated as issued as of the first day following the close of the month for which the distributions were declared, and not on the date that the cash distributions were paid to stockholders not participating in our DRIP. Because we declare distributions on a daily basis, including with respect to shares of common stock issued pursuant to our DRIP, the IRS could take the position that distributions paid by us during these periods were preferential. In addition, during the six months beginning September 2009 through February 2010, we paid certain IRA custodial fees with respect to IRA accounts that invested in our shares. The payment of such amounts could also be treated as dividend distributions to the IRAs, and therefore could result in our being treated as having made additional preferential dividends to our stockholders.

Ownership Tests

Income Tests

In order to maintain qualification as a REIT, we must annually satisfy two gross income requirements:

Generally, for rents to qualify as rents from real property, we may provide directly only an insignificant amount of services, unless those services are “usually or customarily rendered” in connection with the rental of real property and not otherwise considered “rendered to the occupant” under the applicable tax rules. Accordingly, we may not provide “impermissible services” to tenants (except through an independent contractor from whom we derive no revenue and that meets other requirements or through a TRS) without giving rise to “impermissible tenant service income.” Impermissible tenant service income is deemed to be at least 150% of the direct cost to us of providing the service. If the impermissible tenant service income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property. If the total amount of impermissible tenant service income from a property does not exceed 1% of our total income from the property, the services will not disqualify any other income from the property that qualifies as rents from real property, but the impermissible tenant service income will not qualify as rents from real property.

Hedging transactions. We may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swaps or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent as may be provided by future Treasury Regulations, any income from a hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated or entered into, including gain from the disposition or termination of such a transaction, will not constitute gross income for purposes of the 95% and 75% gross income tests, provided that the hedging transaction is entered into (i) in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to indebtedness incurred or to be incurred by us to acquire or carry real estate assets or (ii) primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests (or any property which generates such income or gain). To the extent we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both the 75% and 95% gross income tests. We intend to structure and monitor our hedging transactions so that such transactions do not jeopardize our ability to qualify as a REIT.

Qualified temporary investment income. Income derived from certain types of temporary stock and debt investments made with the proceeds of this offering, not otherwise treated as qualifying income for the 75% gross income test, generally will nonetheless constitute qualifying income for purposes of the 75% gross income test for the year following this offering. More specifically, qualifying income for purposes of the 75% gross income test includes “qualified temporary investment income,” which generally means any income that is attributable to stock or a debt instrument, is attributable to the temporary investment of new equity capital and certain debt capital, and is received or accrued during the one-year period beginning on the date on which the REIT receives such new capital. After the one year period following this offering, income from investments of the proceeds of this offering will be qualifying income for purposes of the 75% income test only if derived from one of the other qualifying sources enumerated above.

Asset Tests

At the close of each quarter of each taxable year, we must also satisfy four tests relating to the nature of our assets. First, real estate assets, cash and cash items, and government securities must represent at least 75% of the value of our total assets. Second, not more than 25% of our total assets may be represented by securities other than those in the 75% asset class. Third, of the investments that are not included in the 75% asset class and that are not securities of our TRSs, (i) the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and (ii) we may not own more than 10% by vote or by value of any one issuer’s outstanding securities. For purposes of the 10% value test, debt instruments issued by a partnership are not classified as “securities” to the extent of our interest as a partner in such partnership (based on our proportionate share of the partnership’s equity interests and certain debt securities) or if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test. For purposes of the 10% value test, the term “securities” also does not include debt securities issued by another REIT, certain “straight debt” securities (for example, qualifying debt securities of a corporation of which we own no more than a de minimis amount of equity interest), loans to individuals or estates, and accrued obligations to pay rent. Fourth, securities of our TRSs cannot represent more than 25% of our total assets. Although we intend to meet these asset tests, no assurance can be given that we will be able to do so. For purposes of these asset tests, we are treated as holding our proportionate share of our subsidiary partnerships’ assets. Also, for purposes of these asset tests, the term “real estate assets” includes any property that is not otherwise a real estate asset and that is attributable to the temporary investment of new capital, but only if such property is stock or a debt instrument, and only for the one-year period beginning on the date the REIT receives such capital. “Real estate assets” include our investments in stocks of other REITs but do not include stock of any real estate company, or other company, that does not qualify as a REIT (unless eligible for the special rule for temporary investment of new capital).


	•	We satisfied the asset tests at the end of the preceding calendar quarter, and the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets; or

	•	We eliminate any discrepancy within 30 days after the close of the calendar quarter in which it arose.

Moreover, if we fail to satisfy the asset tests at the end of a calendar quarter during a taxable year, we will not lose our REIT status if one of the following additional exceptions applies:


	•	De Minimis Exception: The failure is due to a violation of the 5% or 10% asset tests referenced above and is “de minimis” (meaning that the failure is one that arises from our ownership of assets the total value of which does not exceed the lesser of 1% of the total value of our assets at the end of the quarter in which the failure occurred and $10 million), and we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred; or

	•	General Exception: All of the following requirements are satisfied: (i) the failure is not due to the above De Minimis Exception, (ii) the failure is due to reasonable cause and not willful neglect, (iii) we file a schedule in accordance with Treasury Regulations providing a description of each asset that caused the failure, (iv) we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred, and (v) we pay an excise tax as described above in “— Taxation of Our Company.”

Annual Distribution Requirements

In order to qualify as a REIT, each taxable year we must distribute dividends (other than capital gain dividends) to our stockholders in an amount at least equal to (A) the sum of (i) 90% of our REIT taxable income, determined without regard to the dividends paid deduction and by excluding any net capital gain, and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. We generally must pay such distributions in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for such year and if paid on or before the first regular dividend payment after such declaration. For these purposes, if we declare a dividend in October, November, or December, payable to stockholders of record on a day in such months, and distribute such dividend in the following January, it will be treated as having been paid on December 31 of the year in which it was declared.

We may retain and pay income tax on net long-term capital gains we received during the tax year. To the extent we so elect, (i) each stockholder must include in its income (as long-term capital gain) its proportionate share of our undistributed long-term capital gains, (ii) each stockholder is deemed to have paid, and receives a credit for, its proportionate share of the tax paid by us on the undistributed long-term capital gains, and (iii) each stockholder’s basis in its stock is increased by the included amount of the undistributed long-term capital gains less their share of the tax paid by us.

Failure to Qualify

If we fail to qualify for taxation as a REIT in any taxable year and no relief provisions apply, we generally will be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Distributions to our stockholders in any year in which we fail to qualify as a REIT will not be deductible by us nor will they be required to be made. In such event, to the extent of our current or accumulated earnings and profits, all distributions to our stockholders will be taxable as dividend income. Subject to certain limitations in the Code, corporate stockholders may be eligible for the dividends received deduction, and individual, trust and estate stockholders may be eligible to treat the dividends received from us as qualified dividend income taxable as net capital gains, under the provisions of Section 1(h)(11) of the Code, through the end of 2012. Unless entitled to relief under specific statutory provisions, we also will be ineligible to elect to be taxed as a REIT again prior to the fifth taxable year following the first year in which we failed to qualify as a REIT under the Code.

Taxation of U.S. Stockholders

The term “U.S. stockholder” means an investor in our stock that, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation or other entity treated as a corporation that is created or organized in or under the laws of the United States, any of its states or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust (a) if a court within the United States 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 or (b) that has a valid election in effect under the applicable Treasury Regulations to be treated as a U.S. person under the Code. If a partnership, including any entity treated as a partnership for U.S. federal income tax purposes, holds our stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership

This discussion does not address all aspects of federal income taxation that may apply to persons that are subject to special treatment under the Code, such as (i) insurance companies; (ii) financial institutions or broker-dealers; (iii) persons whomark-to-market our stock; (iv) subchapter S corporations; (v) U.S. stockholders whose functional currency is not the U.S. dollar; (vi) regulated investment companies; (x) holders who receive our stock through the exercise of employee stock options or otherwise as compensation; (vii) persons holding shares of our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment; and (viii) persons subject to the alternative minimum tax provisions of the Code.

Distributions

Distributions by us, other than capital gain dividends, will constitute ordinary dividends to the extent of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. In general, these dividends will be taxable as ordinary income and will not be eligible for the dividends-received deduction for corporate stockholders. Our ordinary dividends generally will not qualify as “qualified dividend income” currently taxed as net capital gain for U.S. stockholders that are individuals, trusts, or estates. However, provided we properly designate the distributions, distributions to U.S. stockholders that are individuals, trusts, or estates generally will constitute qualified dividend income to the extent the U.S. stockholder satisfies certain holding period requirements and to the extent the dividends are attributable to (i) qualified dividend income we receive from other corporations during the taxable year, including from our TRSs, and (ii) our undistributed earnings or built-in gains taxed at the corporate level during the immediately preceding year. We do not anticipate distributing a significant amount of qualified dividend income. Absent an extension, the favorable rates for qualified dividend income will not apply for taxable years beginning after December 31, 2012.

Dividends declared by us in October, November or December and payable to a stockholder of record on a specified date in any such month shall be treated both as paid by us and as received by the stockholder on December 31, provided that the dividend is actually paid by us during January of the following calendar year.

elect for a taxable year, our stockholders would include in income as long-term capital gains their proportionate share of designated retained net long-term capital gains for the taxable year. A U.S. stockholder would be deemed to have paid its share of the tax paid by us on such undistributed capital gains, which would be credited or refunded to the stockholder. The U.S. stockholder’s basis in its stock would be increased by the amount of undistributed long-term capital gains (less the capital gains tax paid by us) included in the U.S. stockholder’s long-term capital gains.

Passive Activity Loss and Investment Interest Limitations; No Pass Through of Losses

Sale or Disposition of Stock

Medicare Tax on Unearned Income

Taxation of U.S. Tax-Exempt Stockholders

In General

Distributions we make to a tax-exempt employee pension trust or other domestic tax-exempt stockholder or gains from the disposition of our stock held as capital assets generally will not constitute UBTI unless the exempt organization’s stock is debt-financed property (e.g., the stockholder has incurred “acquisition

Special Issues

Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of Section 501(c) of the Code are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI.

Taxation ofNon-U.S. Stockholders

The rules governing U.S. federal income taxation ofnon-U.S. stockholders, such as nonresident alien individuals, foreign corporations, and foreign trusts and estates(“non-U.S. stockholders”), are complex. This section is only a partial discussion of such rules. This discussion does not attempt to address the considerations that may be relevant fornon-U.S. stockholders that are partnerships or other pass-through entities, that hold their stock through intermediate entities, that have special statuses (such as sovereigns), or that otherwise are subject to special rules.Prospectivenon-U.S. stockholders are urged to consult their tax advisors to determine the impact of U.S. federal, state, local and foreign income tax laws on their ownership of our stock, including any reporting requirements.

Distributions

Anon-U.S. stockholder that receives a distribution that is not attributable to gain from our sale or exchange of “United States real property interests” (as defined below) and that we do not designate as a capital gain dividend generally will recognize ordinary income to the extent that we pay the distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or eliminates the tax. Under some treaties, lower withholding rates do not apply to dividends from REITs or are available in limited circumstances. However, if a distribution is treated as effectively connected with thenon-U.S. stockholder’s conduct of a U.S. trade or business, thenon-U.S. stockholder generally will be subject to U.S. federal income tax on the distribution at graduated rates (in the same manner as U.S. stockholders are taxed on distributions) and also may be subject to the 30% branch profits tax in the case of a corporatenon-U.S. stockholder. We plan to withhold U.S. income tax at the rate of 30% on the gross amount of any distribution paid to anon-U.S. stockholder that is neither a capital gain dividend nor a distribution that is attributable to gain from the sale or exchange of “United States real property interests” unless either (i) a lower treaty rate or special provision of the Code (e.g., Section 892) applies and thenon-U.S. stockholder files with us any required IRSForm W-8 (for example, an IRSForm W-8BEN) evidencing eligibility for that reduced rate or (ii) thenon-U.S. stockholder files with us an IRSForm W-8ECI claiming that the distribution is effectively connected income.

adjusted basis of the stock. However, anon-U.S. stockholder will be subject to tax on such a distribution that exceeds both our current and accumulated earnings and profits and thenon-U.S. stockholder’s adjusted basis in the stock, if thenon-U.S. stockholder otherwise would be subject to tax on gain from the sale or disposition of its stock, as described below. Because we generally cannot determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits, we normally will withhold tax on the entire amount of any distribution at the same rate as we would withhold on a dividend. However, anon-U.S. stockholder may file a U.S. federal income tax return and obtain a refund from the IRS of amounts that we withhold if we later determine that a distribution in fact exceeded our current and accumulated earnings and profits.

We may be required to withhold 10% of any distribution that exceeds our current and accumulated earnings and profits. Consequently, although we intend to withhold at a rate of 30% on the entire amount of any distribution that is neither attributable to the gain from our disposition of a “United States real property interest” nor designated by us as a capital gain dividend, to the extent that we do not do so, we will withhold at a rate of 10% on any portion of a distribution not subject to withholding at a rate of 30%.

Anon-U.S. stockholder that owns no more than 5% of our stock at all times during the one-year period ending on the date of a distribution would not be subject to FIRPTA, branch profits tax or 35% FIRPTA Withholding with respect to a distribution on stock that is attributable to gain from our sale or exchange of United States real property interests, if our stock were regularly traded on an established securities market in the United States. Instead, any such distributions made to suchnon-U.S. stockholder would be subject to the general withholding rules discussed above, which generally impose a withholding tax equal to 30% of the gross amount of each distribution (unless reduced by treaty). Our shares are not traded on an established securities market.

Distributions that are designated by us as capital gain dividends, other than those attributable to the disposition of a U.S. real property interest, generally should not be subject to U.S. federal income taxation unless:


	•	such distribution is effectively connected with thenon-U.S. stockholder’s U.S. trade or business and, if certain treaties apply, is attributable to a U.S. permanent establishment maintained by thenon-U.S. stockholder, in which case thenon-U.S. stockholder will be subject to tax on a net basis in a manner similar to the taxation of U.S. stockholders with respect to such gain, except that a holder that is a foreign corporation may also be subject to the additional 30% branch profits tax; or

	•	thenon-U.S. stockholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case such nonresident alien individual generally will be subject to a 30% tax on the individual’s net U.S. source capital gain.

Dispositions

If gain on the sale of the stock were taxed under FIRPTA, anon-U.S. stockholder would be taxed on that gain in the same manner as U.S. stockholders with respect to that gain, subject to applicable alternative minimum tax, and a special alternative minimum tax in the case of nonresident alien individuals. Anon-U.S. stockholder generally will not incur tax under FIRPTA on a sale or other disposition of our stock if we are a “domestically controlled qualified investment entity,” which requires that, during the shorter of the period since our formation and the five-year period ending on the date of the distribution or disposition,non-U.S. stockholders hold, directly or indirectly, less than 50% in value of our stock and we are qualified as a REIT. We cannot assure you that we will be a domestically controlled qualified investment entity. In addition, the gain from a sale of our stock by anon-U.S. stockholder will not be subject to tax under FIRPTA if (i) our stock is considered regularly traded under applicable Treasury Regulations on an established securities market, such as the New York Stock Exchange, and (ii) thenon-U.S. stockholder owned, actually or constructively, 5% or less of our stock at all times during a specified testing period. Our shares are not traded on an established securities market.

In addition, even if we are a domestically controlled qualified investment entity, upon a disposition of our stock, anon-U.S. stockholder may be treated as having gain from the sale or exchange of a United States real property interest if thenon-U.S. stockholder (i) disposes of an interest in our stock during the30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been treated as gain from sale or exchange of a United States real property interest, and (ii) directly or indirectly acquires, enters into a contract or option to acquire, or is deemed to acquire, other shares of our stock within 30 days before or after such ex-dividend date. The foregoing rule does not apply if the exception described above for dispositions by 5% or smaller holders of regularly traded classes of stock is satisfied.

Furthermore, anon-U.S. stockholder generally will incur tax on gain not subject to FIRPTA if (i) the gain is effectively connected with thenon-U.S. stockholder’s U.S. trade or business and, if certain treaties apply, is attributable to a U.S. permanent establishment maintained by thenon-U.S. stockholder, in which case thenon-U.S. stockholder will be subject to the same treatment as U.S. stockholders with respect to such gain, or (ii) thenon-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, in which case thenon-U.S. stockholder will generally incur a 30% tax on his or her net U.S. source capital gains.

Purchasers of our stock from anon-U.S. stockholder generally will be required to withhold and remit to the IRS 10% of the purchase price unless at the time of purchase (i) any class of our stock is regularly traded on an established securities market in the United States (subject to certain limits if the stock sold are not themselves part of such a regularly traded class) or (ii) we are a domestically controlled qualified investment entity. Thenon-U.S. stockholder may receive a credit against its tax liability for the amount withheld.

Information Reporting Requirements and Backup Withholding Tax

We will report to our U.S. stockholders and to the IRS the amount of distributions paid during each calendar year, and the amount of tax withheld, if any. Under the backup withholding rules, a U.S. stockholder may be subject to backup withholding at the current rate of 28% with respect to distributions paid, unless such stockholder (i) is a corporation or other exempt entity and, when required, proves its status or (ii) certifies under penalties of perjury that the taxpayer identification number the stockholder has furnished to us is correct

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Additional U.S. Federal Income Tax Withholding Rules

Sunset of Reduced Tax Rate Provisions

Legislative or Other Actions Affecting REITs

State, Local and Foreign Tax

SIGNIFICANT TENANTS

As of December 31, ~~2008,~~2010, none of our tenants at our consolidated properties accounted for 10.0% or more of our aggregate annual rental revenue.

GEOGRAPHIC CONCENTRATION

As of December 31, ~~2008,~~2010, we had interests in 16 consolidated properties located in Texas (including both operating properties and those buildings classified as held for sale), which accounted for 15.3% of our total annualized rental income, interests in seven consolidated properties ~~located~~ in ~~Texas,~~Arizona, which accounted for ~~17.1%~~11.7% of our total annualized rental income, ~~and~~ interests in five consolidated properties located in South Carolina, which accounted for 9.7% of our total annualized rental income, interests in 10 consolidated properties in Florida, which accounted for 8.8% of our total annualized rental income, and interests in seven consolidated properties in Indiana, which accounted for ~~15.5%~~8.5% of our total ~~rental income. As of December 31, 2008, Medical Portfolio 3, located in Indiana, accounted for 11.3% of our aggregate total~~annualized rental income. This rental income is based on contractual base rent from leases in effect as of December 31, ~~2008.~~2010. In making these investments, we took into account the geographic concentration of our assets and corresponding rental income, which we viewed as a favorable factor based on risk reward analysis. Accordingly, there is a geographic concentration of risk subject to fluctuations in each ~~state’s economy.~~

~~EMPLOYEES~~

As of December 31, 2008, we had one employee, Scott D. Peters, our Chief Executive Officer, President and Chairman of the board of directors. Mr. Peters manages our day-to-day operations and oversees our transition to self-management.

Since December 31, 2008, we have hired four additional employees, including a Chief Accounting Officer. In connection with our transition to self-management, we intend to hire additional employees and independent consultants to serve in key organizational positions and to fulfill other responsibilities, including accounting, strategic investing and corporate and securities compliance.these states’ economies.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

~~The Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, SFAS No. 131,~~ASC 280,~~Disclosures about Segments of an Enterprise and Related Information~~Segment Reporting~~, which~~(“ASC 280”) establishes standards for reporting financial and descriptive information about an enterprise’s reportable ~~segments.~~segment. We have determined that we have one reportable segment, with activities related to investing in medical office buildings, ~~healthcare related~~healthcare-related facilities, ~~quality commercial office properties~~ and other real estate

related assets. Our investments in real estate and other real estate related assets are geographically diversified and ~~management~~our chief operating decision maker evaluates operating performance on an individual ~~portfolio~~asset level. ~~However, as~~As each of our assets has similar economic characteristics, tenants, and products and services, our assets have been aggregated into one reportable segment.

COMPETITION

GOVERNMENT REGULATIONS

Healthcare-related Regulations


	•	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 or recommendation for the ordering of any item or service reimbursed by Medicare or Medicaid;

	•	the Federal Physician Self-Referral Prohibition, commonly referred to as the Stark Law, 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;

	•	the False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs;

	•	the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose monetary penalties for certain fraudulent acts; and

	•	the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act of the American Recovery and Reinvestment Act of 2009, which protects the privacy and security of personal health information.

Real Estate Ownership-Related Regulations

Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently.

EMPLOYEES

As of December 31, 2010, we had approximately 50 employees. We believe that we have a strong relationship with our employees.

TAX STATUS

Federal Income Taxation of HTA

Notwithstanding the foregoing, even if we qualify for taxation as a REIT, we nonetheless may be subject to tax in certain circumstances, including the following:


	•	We will be required to pay U.S. federal income tax on our undistributed REIT taxable income, including net capital gain;

	•	We may be subject to the “alternative minimum tax;”

	•	We may be subject to tax at the highest corporate rate on certain income from “foreclosure property” (generally, property acquired by reason of default on a lease or indebtedness held by us);

	•	We will be subject to a 100% tax on net income from “prohibited transactions” (generally, certain sales or other dispositions of property, sometimes referred to as “dealer property,” held primarily for sale to customers in the ordinary course of business, other than foreclosure property) unless the gain is realized in a “taxable REIT subsidiary,” or TRS, or such property has been held by us for two years and certain other requirements are satisfied;

	•	If we fail to satisfy the 75% gross income test or the 95% gross income test (discussed below), but nonetheless maintain our qualification as a REIT pursuant to certain relief provisions, we will be subject to a 100% tax on the greater of (i) the amount by which we fail the 75% gross income test or (ii) the amount by which we fail the 95% gross income test, in either case, multiplied by a fraction intended to reflect our profitability;


	•	If we fail to satisfy any of the asset tests, other than the 5% or the 10% asset tests that qualify under a de minimis exception, and the failure qualifies under the general exception, as described below under “— Qualification as a REIT — Asset Tests,” then we will have to pay an excise tax equal to the greater of (i) $50,000 and (ii) an amount determined by multiplying the net income generated during a specified period by the assets that caused the failure by the highest U.S. federal income tax applicable to corporations;

	•	If we fail to satisfy any REIT requirements other than the income test or asset test requirements, described below under “— Qualification as a REIT — Income Tests” and “— Qualification as a REIT — Asset Tests,” respectively, and we qualify for a reasonable cause exception, then we will have to pay a penalty equal to $50,000 for each such failure;

	•	We will be subject to a 4% excise tax if certain distribution requirements are not satisfied;

	•	We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s stockholders, as described below in “— Recordkeeping Requirements;”

	•	If we dispose of an asset acquired by us from a C corporation in a transaction in which we took the C corporation’s tax basis in the asset, we may be subject to tax at the highest regular corporate rate on the appreciation inherent in such asset as of the date of acquisition by us;

	•	We will be required to pay a 100% tax on any redetermined rents, redetermined deductions, and excess interest. In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our non-TRS tenants by one of our TRSs. Redetermined deductions and excess interest generally represent amounts that are deducted by a TRS for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations; and

	•	Income earned by our TRSs or any other subsidiaries that are taxable as C corporations will be subject to tax at regular corporate rates.

Qualification as a REIT

In General

~~one reportable segment~~Accordingly, we intend to submit a request to the IRS seeking a closing agreement under which the IRS would grant us relief for preferential dividends that may have been paid. We cannot assure you that the IRS will accept our proposal for a closing agreement. Even if the IRS accepts our proposal, we may be required to pay a penalty if the IRS were to view the prior operation of our DRIP or the payment of such fees as preferential dividends. We cannot predict whether such a penalty would be imposed or, if so, the amount of the penalty.

Ownership Tests

In order to qualify as a REIT, commencing with our second REIT taxable year, (i) the beneficial ownership of our stock must be held by 100 or more persons during at least 335 days of a12-month taxable year (or during a proportionate part of a taxable year of less than 12 months) for each of our taxable years and (ii) during the last half of each taxable year, no more than 50% in value of our stock may be owned, directly or indirectly, by or for five or fewer individuals (the “5/50 Test”). Stock ownership for purposes of the 5/50 Test is determined by applying the constructive ownership provisions of Section 544(a) of the Code, subject to certain modifications. The term “individual” for purposes of the 5/50 Test includes a private foundation, a trust providing for the ~~years ended~~payment of supplemental unemployment compensation benefits, and a portion of a trust permanently set aside or to be used exclusively for charitable purposes. A “qualified trust” described in Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code generally is not treated as an individual; rather, stock held by it is treated as owned proportionately by its beneficiaries.

Income Tests

In order to maintain qualification as a REIT, we must annually satisfy two gross income requirements:

Hedging transactions. We may enter into hedging transactions with respect to one or more of our assets or liabilities. Hedging transactions could take a variety of forms, including interest rate swaps or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. Except to the extent as may be provided by future Treasury Regulations, any income from a hedging transaction which is clearly identified as such before the close of the day on which it was acquired, originated or entered into, including gain from the disposition or termination of such a transaction, will not constitute gross income for purposes of the 95% and 75% gross income tests, provided that the hedging transaction is entered into (i) in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to indebtedness incurred or to be incurred by us to acquire or carry real estate assets or (ii) primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests (or any property which generates such income or gain). To the extent we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both the 75% and 95% gross income tests. We intend to structure and monitor our hedging transactions so that such transactions do not jeopardize our ability to qualify as a REIT.

Qualified temporary investment income. Income derived from certain types of temporary stock and debt investments made with the proceeds of this offering, not otherwise treated as qualifying income for the 75% gross income test, generally will nonetheless constitute qualifying income for purposes of the 75% gross income test for the year following this offering. More specifically, qualifying income for purposes of the 75% gross income test includes “qualified temporary investment income,” which generally means any income that is attributable to stock or a debt instrument, is attributable to the temporary investment of new equity capital and certain debt capital, and is received or accrued during the one-year period beginning on the date on which the REIT receives such new capital. After the one year period following this offering, income from investments of the proceeds of this offering will be qualifying income for purposes of the 75% income test only if derived from one of the other qualifying sources enumerated above.

Asset Tests

At the close of each quarter of each taxable year, we must also satisfy four tests relating to the nature of our assets. First, real estate assets, cash and cash items, and government securities must represent at least 75% of the value of our total assets. Second, not more than 25% of our total assets may be represented by securities other than those in the 75% asset class. Third, of the investments that are not included in the 75% asset class and that are not securities of our TRSs, (i) the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets and (ii) we may not own more than 10% by vote or by value of any one issuer’s outstanding securities. For purposes of the 10% value test, debt instruments issued by a partnership are not classified as “securities” to the extent of our interest as a partner in such partnership (based on our proportionate share of the partnership’s equity interests and certain debt securities) or if at least 75% of the partnership’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test. For purposes of the 10% value test, the term “securities” also does not include debt securities issued by another REIT, certain “straight debt” securities (for example, qualifying debt securities of a corporation of which we own no more than a de minimis amount of equity interest), loans to individuals or estates, and accrued obligations to pay rent. Fourth, securities of our TRSs cannot represent more than 25% of our total assets. Although we intend to meet these asset tests, no assurance can be given that we will be able to do so. For purposes of these asset tests, we are treated as holding our proportionate share of our subsidiary partnerships’ assets. Also, for purposes of these asset tests, the term “real estate assets” includes any property that is not otherwise a real estate asset and that is attributable to the temporary investment of new capital, but only if such property is stock or a debt instrument, and only for the one-year period beginning on the date the REIT receives such capital. “Real estate assets” include our investments in stocks of other REITs but do not include stock of any real estate company, or other company, that does not qualify as a REIT (unless eligible for the special rule for temporary investment of new capital).


	•	We satisfied the asset tests at the end of the preceding calendar quarter, and the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets; or

	•	We eliminate any discrepancy within 30 days after the close of the calendar quarter in which it arose.

Moreover, if we fail to satisfy the asset tests at the end of a calendar quarter during a taxable year, we will not lose our REIT status if one of the following additional exceptions applies:


	•	De Minimis Exception: The failure is due to a violation of the 5% or 10% asset tests referenced above and is “de minimis” (meaning that the failure is one that arises from our ownership of assets the total value of which does not exceed the lesser of 1% of the total value of our assets at the end of the quarter in which the failure occurred and $10 million), and we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred; or

	•	General Exception: All of the following requirements are satisfied: (i) the failure is not due to the above De Minimis Exception, (ii) the failure is due to reasonable cause and not willful neglect, (iii) we file a schedule in accordance with Treasury Regulations providing a description of each asset that caused the failure, (iv) we either dispose of the assets that caused the failure or otherwise satisfy the asset tests within six months after the last day of the quarter in which our identification of the failure occurred, and (v) we pay an excise tax as described above in “— Taxation of Our Company.”

Annual Distribution Requirements

To the extent that we do not distribute all of our net capital gain and ~~2007~~taxable income, we will be subject to U.S. federal, state and local tax on the undistributed amount at regular corporate income tax rates. Furthermore, if we should fail to distribute during each calendar year at least the sum of (i) 85% of our REIT taxable income (subject to certain adjustments) for such year, (ii) 95% of our capital gain net income for such year, and (iii) 100% of any corresponding undistributed amounts from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of such required distribution over the sum of amounts actually distributed plus retained income from such taxable year on which we paid corporate income tax.

Failure to Qualify

If we fail to qualify for taxation as a REIT in any taxable year and no relief provisions apply, we generally will be subject to tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates. Distributions to our stockholders in any year in which we fail to qualify as a REIT will not be deductible by us nor will they be required to be made. In such event, to the extent of our current or accumulated earnings and profits, all distributions to our stockholders will be taxable as dividend income. Subject to certain limitations in the Code, corporate stockholders may be eligible for the dividends received deduction, and individual, trust and estate stockholders may be eligible to treat the dividends received from us as qualified dividend income taxable as net capital gains, under the provisions of Section 1(h)(11) of the Code, through the end of 2012. Unless entitled to relief under specific statutory provisions, we also will be ineligible to elect to be taxed as a REIT again prior to the fifth taxable year following the first year in which we failed to qualify as a REIT under the Code.

Taxation of U.S. Stockholders

The term “U.S. stockholder” means an investor in our stock that, for U.S. federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation or other entity treated as a corporation that is created or organized in or under the laws of the United States, any of its states or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (iv) a trust (a) if a court within the United States 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 or (b) that has a valid election in effect under the applicable Treasury Regulations to be treated as a U.S. person under the Code. If a partnership, including any entity treated as a partnership for U.S. federal income tax purposes, holds our stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership

This discussion does not address all aspects of federal income taxation that may apply to persons that are subject to special treatment under the Code, such as (i) insurance companies; (ii) financial institutions or broker-dealers; (iii) persons whomark-to-market our stock; (iv) subchapter S corporations; (v) U.S. stockholders whose functional currency is not the U.S. dollar; (vi) regulated investment companies; (x) holders who receive our stock through the exercise of employee stock options or otherwise as compensation; (vii) persons holding shares of our stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment; and (viii) persons subject to the alternative minimum tax provisions of the Code.

Distributions

Distributions by us, other than capital gain dividends, will constitute ordinary dividends to the extent of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. In general, these dividends will be taxable as ordinary income and will not be eligible for the dividends-received deduction for corporate stockholders. Our ordinary dividends generally will not qualify as “qualified dividend income” currently taxed as net capital gain for U.S. stockholders that are individuals, trusts, or estates. However, provided we properly designate the distributions, distributions to U.S. stockholders that are individuals, trusts, or estates generally will constitute qualified dividend income to the extent the U.S. stockholder satisfies certain holding period requirements and to the extent the dividends are attributable to (i) qualified dividend income we receive from ~~April 28, 2006 (Date~~other corporations during the taxable year, including from our TRSs, and (ii) our undistributed earnings or built-in gains taxed at the corporate level during the immediately preceding year. We do not anticipate distributing a significant amount of ~~Inception) through~~qualified dividend income. Absent an extension, the favorable rates for qualified dividend income will not apply for taxable years beginning after December 31, ~~2006.~~2012.

elect for a taxable year, our stockholders would include in income as long-term capital gains their proportionate share of designated retained net long-term capital gains for the taxable year. A U.S. stockholder would be deemed to have paid its share of the tax paid by us on such undistributed capital gains, which would be credited or refunded to the stockholder. The U.S. stockholder’s basis in its stock would be increased by the amount of undistributed long-term capital gains (less the capital gains tax paid by us) included in the U.S. stockholder’s long-term capital gains.

Passive Activity Loss and Investment Interest Limitations; No Pass Through of Losses

Sale or Disposition of Stock

Medicare Tax on Unearned Income

Taxation of U.S. Tax-Exempt Stockholders

In General

Special Issues

Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of Section 501(c) of the Code are subject to different UBTI rules, which generally will require them to characterize distributions from us as UBTI.

Taxation ofNon-U.S. Stockholders

The rules governing U.S. federal income taxation ofnon-U.S. stockholders, such as nonresident alien individuals, foreign corporations, and foreign trusts and estates(“non-U.S. stockholders”), are complex. This section is only a partial discussion of such rules. This discussion does not attempt to address the considerations that may be relevant fornon-U.S. stockholders that are partnerships or other pass-through entities, that hold their stock through intermediate entities, that have special statuses (such as sovereigns), or that otherwise are subject to special rules.Prospectivenon-U.S. stockholders are urged to consult their tax advisors to determine the impact of U.S. federal, state, local and foreign income tax laws on their ownership of our stock, including any reporting requirements.

Distributions

Anon-U.S. stockholder that receives a distribution that is not attributable to gain from our sale or exchange of “United States real property interests” (as defined below) and that we do not designate as a capital gain dividend generally will recognize ordinary income to the extent that we pay the distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or eliminates the tax. Under some treaties, lower withholding rates do not apply to dividends from REITs or are available in limited circumstances. However, if a distribution is treated as effectively connected with thenon-U.S. stockholder’s conduct of a U.S. trade or business, thenon-U.S. stockholder generally will be subject to U.S. federal income tax on the distribution at graduated rates (in the same manner as U.S. stockholders are taxed on distributions) and also may be subject to the 30% branch profits tax in the case of a corporatenon-U.S. stockholder. We plan to withhold U.S. income tax at the rate of 30% on the gross amount of any distribution paid to anon-U.S. stockholder that is neither a capital gain dividend nor a distribution that is attributable to gain from the sale or exchange of “United States real property interests” unless either (i) a lower treaty rate or special provision of the Code (e.g., Section 892) applies and thenon-U.S. stockholder files with us any required IRSForm W-8 (for example, an IRSForm W-8BEN) evidencing eligibility for that reduced rate or (ii) thenon-U.S. stockholder files with us an IRSForm W-8ECI claiming that the distribution is effectively connected income.

We may be required to withhold 10% of any distribution that exceeds our current and accumulated earnings and profits. Consequently, although we intend to withhold at a rate of 30% on the entire amount of any distribution that is neither attributable to the gain from our disposition of a “United States real property interest” nor designated by us as a capital gain dividend, to the extent that we do not do so, we will withhold at a rate of 10% on any portion of a distribution not subject to withholding at a rate of 30%.

Anon-U.S. stockholder that owns no more than 5% of our stock at all times during the one-year period ending on the date of a distribution would not be subject to FIRPTA, branch profits tax or 35% FIRPTA Withholding with respect to a distribution on stock that is attributable to gain from our sale or exchange of United States real property interests, if our stock were regularly traded on an established securities market in the United States. Instead, any such distributions made to suchnon-U.S. stockholder would be subject to the general withholding rules discussed above, which generally impose a withholding tax equal to 30% of the gross amount of each distribution (unless reduced by treaty). Our shares are not traded on an established securities market.


	•	such distribution is effectively connected with thenon-U.S. stockholder’s U.S. trade or business and, if certain treaties apply, is attributable to a U.S. permanent establishment maintained by thenon-U.S. stockholder, in which case thenon-U.S. stockholder will be subject to tax on a net basis in a manner similar to the taxation of U.S. stockholders with respect to such gain, except that a holder that is a foreign corporation may also be subject to the additional 30% branch profits tax; or

	•	thenon-U.S. stockholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, in which case such nonresident alien individual generally will be subject to a 30% tax on the individual’s net U.S. source capital gain.

Dispositions

If gain on the sale of the stock were taxed under FIRPTA, anon-U.S. stockholder would be taxed on that gain in the same manner as U.S. stockholders with respect to that gain, subject to applicable alternative minimum tax, and a special alternative minimum tax in the case of nonresident alien individuals. Anon-U.S. stockholder generally will not incur tax under FIRPTA on a sale or other disposition of our stock if we are a “domestically controlled qualified investment entity,” which requires that, during the shorter of the period since our formation and the five-year period ending on the date of the distribution or disposition,non-U.S. stockholders hold, directly or indirectly, less than 50% in value of our stock and we are qualified as a REIT. We cannot assure you that we will be a domestically controlled qualified investment entity. In addition, the gain from a sale of our stock by anon-U.S. stockholder will not be subject to tax under FIRPTA if (i) our stock is considered regularly traded under applicable Treasury Regulations on an established securities market, such as the New York Stock Exchange, and (ii) thenon-U.S. stockholder owned, actually or constructively, 5% or less of our stock at all times during a specified testing period. Our shares are not traded on an established securities market.

Information Reporting Requirements and Backup Withholding Tax

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Additional U.S. Federal Income Tax Withholding Rules

Sunset of Reduced Tax Rate Provisions

Legislative or Other Actions Affecting REITs

State, Local and Foreign Tax

BOARD REVIEW OF OUR INVESTMENT POLICIES

Our board of directors has established written policies on investments and borrowing. Our board is responsible for monitoring the administrative procedures, investment operations and performance of our company and our management to ensure such policies are carried out, and that such policies are updated and adjusted consistent with our charter, our strategic plan and business model, and any changes in law or regulation. Our charter requires that our independent directors review our investment policies at least annually to determine that our policies are in the best interest of our stockholders. Each determination and the basis thereof is required to be set forth in the minutes of our applicable meetings of our directors. Implementation of our investment policies also may vary as new investment techniques are developed.

As required by our charter, our independent directors have reviewed our policies referred to above and determined that they are in the best interest of our stockholders because they provide the basis for and increase the likelihood that we will be able to acquire a diversified portfolio of stable income producing properties, thereby properly managing risk and creating stable yield and long term value in our portfolio, and they define the attributes we seek when evaluating the sufficiency of our acquisition opportunities. Our implementation of and commitment to these policies is further enhanced by the facts that (1) our executive officers, directors and management have across the board expertise with the type of real estate investments we seek to acquire and own, and (2) our liquidity and borrowings have enabled us to purchase assets in both good and challenging economic environments and to timely earn short and rental income, thereby increasing our likelihood of generating income for our stockholders and preserving stockholder capital.

EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding our executive officers included in Part III, Item 10 of this Annual Report onForm 10-K is incorporated herein by reference.


Item 1A.	Risk Factors.

Investment Risks

There is currently no public market for shares of our common stock. Therefore, it will be difficult for ~~our~~ stockholders to sell their shares and, if ~~our stockholders~~they are able to sell their shares, ~~our stockholders~~they 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~~may not ~~expect to~~ occur in the near future ~~and which may not occur~~or at all. Additionally, our charter contains restrictions on the ownership and transfer of our shares, and these restrictions may inhibit our stockholders’ ability to sell their shares. We have adopted a share repurchase plan but it is limited in terms of the amount of shares ~~that~~which may be repurchased ~~annually. Our~~quarterly and annually and may be limited, suspended, terminated or amended at any time by our board of directors, ~~may also limit, suspend, terminate or~~in its sole discretion, upon 30 days’ notice. On November 24, 2010, we, with the approval of our board of directors, elected to amend and restate our share repurchase plan ~~upon 30 days written notice.~~ effective January 1, 2011. Starting in the first calendar quarter of 2011, we will fund a maximum of $10 million of share repurchase requests per quarter, subject to available funding. Funding for our repurchase program each quarter will come exclusively from and will be limited to the sale of shares under our DRIP during such quarter. These limits have prevented us from accommodating all repurchase requests in the past and are likely to do so in the future. In addition, with the termination of our follow-on offering on February 28, 2011, except for the DRIP, we are conducting an

ongoing review of potential alternatives for our share repurchase plan, including the suspension or termination of the plan.

Therefore, it ~~will~~may be difficult for our stockholders to sell their shares promptly or at all. If our stockholders are able to sell their shares, ~~our stockholders~~they may only be able to sell them at a substantial discount from the price ~~our stockholders~~they 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~~has been reduced by ~~up to~~approximately 11.5% of the gross offering proceeds ~~which will be~~that was used to pay selling commissions, the ~~marketing support~~dealer manager fee ~~due diligence expense reimbursements~~ and organizational and offering expenses. We ~~will~~ also beare required to use gross offering proceeds to pay acquisition ~~fees, acquisition expenses and asset management fees.~~expenses. Unless our aggregate investments increase in value to compensate for these ~~up front~~ fees and expenses, which may not occur, it is unlikely that our stockholders will be able to sell their shares ~~whether pursuant to our share repurchase plan or otherwise,~~ without incurring a substantial loss. We cannot assure our stockholders that their shares will ever appreciate in value equal to ~~equal~~ the price they paid for ~~our~~their shares. Thus, stockholders should consider their ~~purchase of shares of~~investment in our common stock as illiquid and a long-term investment, and they must be prepared to hold their shares for an indefinite length of time.

AsThe availability and timing of ~~March 26, 2009,~~cash distributions to our stockholders is uncertain.

In the past we have ~~acquired 43 geographically diverse properties and other real estate related assets and have identified a limited number~~made 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 ~~additional properties~~cash distributions to ~~acquire with~~our stockholders. In the ~~net proceeds~~future, we will ~~receive from~~be restricted by the ~~future equity raise, and stockholders are therefore unable to evaluate the economic merits of most~~terms of our ~~future investments prior~~credit agreement for our unsecured credit facility from paying distributions in excess of our FFO, as adjusted pursuant to ~~purchasing~~the terms of the credit agreement, or a percentage of such adjusted FFO. In addition, our board of directors, in its discretion, may retain any portion of such funds for working capital. We cannot assure our stockholders that sufficient cash will be available to make distributions or that the amount of distributions will increase over time. Should we fail for any reason to distribute at least 90.0% of our ordinary taxable income, we would not qualify for the favorable tax treatment accorded to REITs.

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. However, 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 borrowed funds to make such cash distributions, which may reduce the amount of proceeds available for investment and operations. 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 our stockholders’ tax basis in their 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 borrowed funds.

AsThe amount of ~~March 26, 2009,~~the distributions we make to our stockholders will be determined by our board of directors, at its sole discretion, and is dependent on a number of factors, including funds available for payment of distributions, our financial condition, and capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT, as well as any liquidity event alternatives we may pursue. On February 14, 2007, our board of directors approved a 7.25% per annum, or $0.725 per common share based on a $10.00 share price, distribution to be paid to our stockholders beginning with our February 2007 monthly distribution, and we have ~~acquired 43 geographically diverse properties~~continued to declare distributions at that rate through the first quarter of 2011. However, our board may reduce our distribution rate and other real estate related assets with the net proceeds from our offering. As of March 26, 2009, we have only identified a limited number of additional potential properties to acquire with the net proceeds we will receive from our offering. Other than these 43 geographically diverse properties and other real estate related assets, 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.

~~If we are unable to find suitable investments, we may not be able to achieve our investment objectives.~~

Our stockholders must rely on management and our advisor to evaluate our investment opportunities, and management and our advisor may not be able to achieve our investment objectives or may make unwise decisions or our advisor may make decisions that are not in our best interest because of conflicts of interest. Further, we cannot ~~assure our stockholders that acquisitions~~guarantee the amount and timing of ~~real estate or other real estate related assets made using~~distributions paid in the ~~proceeds of our offering will produce a return on our investment or will generate cash flow to enable us to make distributions to our stockholders.~~future, if any.

1729

~~We face competition~~If our cash flow from operations is less than the distributions our board of directors determines to pay, we would be required to pay our distributions, or a portion thereof, with borrowed funds. As a result, the amount of proceeds available for ~~the acquisition~~investment and operations would be reduced, or we may incur additional interest expense as a result 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.~~borrowed funds.

~~We compete with many other entities engaged~~In the past we have paid a portion of our distributions using offering proceeds or borrowed funds, and we may continue to use borrowed funds 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 facilities or other 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 willingfuture to pay ~~more for~~distributions. For the ~~properties~~year ended December 31, 2010, we paid distributions of $116,727,000 ($60,176,000 in cash and $56,551,000 in shares of our common stock pursuant to the DRIP), as compared to cash flow from operations of $58,503,000. The remaining $58,224,000 of distributions paid in excess of our cash flow from operations, or may have a more compatible operating philosophy. In particular, larger healthcare real estate REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies.50%, was paid using borrowed funds. 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 our stockholdersDRIP may be ~~materially~~terminated at any time by our board of directors and ~~adversely affected.~~may be amended at any time by our board of directors, at its sole discretion, upon 10 days notice.

Our ~~stockholders may be unable~~operations have resulted in net losses to ~~sell their~~date, which makes our future performance and the performance of an investment in our shares ~~because their ability~~difficult to ~~have their shares repurchased pursuant to our share repurchase plan is subject to significant restrictions and limitations.~~predict.

~~Even though~~For the years ended December 31, 2010, 2009, 2008, our ~~share repurchase plan~~operations resulted in a net loss of approximately $7.92 million, $24.77 million and $28.41 million, respectively. We have experienced net losses since our inception and our net losses may ~~provide our stockholders with a limited opportunity to sell their shares to us after they have held them for a period of one year or~~increase in the ~~event of death or disability, our stockholders should be fully aware that our share repurchase plan contains significant restrictions~~future. Our net losses increase the risk and limitations. Further, our board of directors may limit, suspend, terminate or amend any provision of the share repurchase plan upon 30 days written notice. Repurchase 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 of our common stock under the DRIP in the prior 12 months, and (2) 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year. In addition, our stockholders must present at least 25.0% of their shares of our common stock for repurchase, and until you have held your shares of our common stock for at least four years, repurchases will be made for less than they paid for their shares of our common stock. Therefore,uncertainty investors face in making a decision to purchase shares of our common stock, our stockholders should not assume that they will be able to sell any of their shares of our common stock back to us pursuant to our share repurchase plan at any particular time or at all.

We are conducting a “best efforts” offering and if we are unable to continue to raise 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 offering is being made on a “best efforts” basis, whereby Grubb & Ellis Securities, Inc., or Grubb & Ellis Securities, or our dealer manager, and the broker-dealers participating in our offering are only required to use their best efforts to sell our shares of our common stock and have no firm commitment or obligation to purchase any of our shares of our common stock. As a result, if we are unable to continue to raise proceeds under our 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. Our stockholders’an investment in our shares, of our common stock 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.

Our offering 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 our stockholders 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 their purchase.~~

Our offering is a fixed price offering, which means that our 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. Our board of directors arbitrarily determined our 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 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~~including risks related to our ~~advisor related~~ability to ~~its subordinated participation interest in our operating partnership will reduce cash available for distribution to stockholders.~~

Our advisor holds a subordinated participation interest in our operating partnership, pursuant to which it may be entitled to receive a distribution upon the occurrence of certain events, including in connection with dispositions of our assets, the termination or non-renewal of the Advisory Agreement other than for cause, certain mergers of our company with another company or the listing of our common stock on a national securities exchange. The distribution payable to our advisor will equal or approximate 15.0% of the net proceeds from the sales of our properties only after we have made distributions to our stockholders of the total amount raised from our stockholders (less amounts paid to repurchase shares of our common stock through our share repurchase plan) plus an annual 8.0% cumulative, non-compounded return on average invested capital. Any distributions to our advisor by our operating partnership upon dispositions of our assets and such other events will reduce cash available for distribution to our stockholders.pay future distributions.

We presently intend to effect a liquidity event by September 20, 2013; however, ~~there can be no assurance~~we cannot assure our stockholders 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 our stockholders to have liquidity for their investment in shares of our common stock.

On a limited basis, our stockholders may be able to sell ~~their~~ shares ~~of our common stock~~ through our share repurchase plan. ~~However, in the future we~~We may amend or terminate our share repurchase plan with 30 days notice. We may also consider various forms of liquidity events, including but not limited ~~to:~~to (1) ~~the listing of shares of our common stock on~~ a ~~national securities exchange;~~Listing, (2) our sale or merger in a transaction that provides our stockholders with a combination of cashand/or ~~exchange~~ securities of a publicly traded ~~company;~~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 our stockholders 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 our stockholders to have liquidity for their investment in shares of our common ~~stock other than limited liquidity through our share repurchase plan.~~stock.

Because a portion of the offering price from the sale of shares ~~of our common stock will be~~was used to pay expenses and fees, the full offering price paid by ~~our~~ stockholders ~~will~~was not be invested in real estate investments. As a result, ~~our~~ stockholders will only receive a full return of their invested capital if we ~~either:~~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 shares of our common stock on~~ a ~~national securities exchange~~Listing is substantially in excess of the original purchase price of our assets.

~~Our property investments~~In the event our shares of common stock are ~~geographically concentrated in certain states~~listed on a national securities exchange, our common stock will be converted into shares of Class A and ~~subject to economic fluctuations in those states.~~Class B common stock, the shares of Class B common stock would not immediately be listed on such exchange and there would be no public market for the shares of Class B common stock.

~~For~~Our charter provides that in the ~~year ended December 31, 2008,~~event our shares of common stock are listed on a national securities exchange, our common stock will automatically be reclassified and converted into shares of Class A common stock and Class B common stock immediately prior to a Listing. The shares of Class A common stock would be listed on a national securities exchange upon Listing. The shares of Class B common stock would not be listed. Rather, those shares would convert into shares of Class A common stock and become listed in defined phases, over a defined period of time. We believe all shares of Class B common stock would convert into shares of Class A common stock within 18 months of a Listing, with individual classes of Class B common stock converting into Class A common stock and becoming listed every six months. If we had interests in seven consolidated properties located in Texas, which accounted for 17.1% of our total rental income and interests in five consolidated properties located in Indiana, which accounted for 15.5% of our total rental income. As of December 31, 2008, Medical Portfolio 3, located in Indiana, accounted for 11.3% of our aggregate total rental income. This rental income is based on contractual base rent from leases in effect as of December 31, 2008. Accordingly, there ispursue a ~~geographic concentration of risk subject to fluctuations in each state’s economy.~~Listing,

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the ultimate length of the overall phased in liquidity program and the timing of each of the phases will depend on a number of factors, including the timing of the Listing. As a result, there would be no public market for the shares of Class B common stock. Until the shares of Class B common stock convert into Class A shares and become listed, they cannot be traded on a national securities exchange. As a result, after a Listing, our stockholders will have very limited, if any, liquidity with respect to their shares of Class B common stock. Further, the trading price per share of Class A common stock when each class of Class B common stock converts into Class A common stock could be very different than the trading price per share of the Class A common stock on the date of a Listing. As a result, stockholders may receive less consideration for their shares than they may have received if they had been able to sell immediately upon the effectiveness of a Listing.

Risks Related to Our Business

We ~~have limited operating history and~~are dependent on investments in a single industry, making our profitability more vulnerable to a downturn or slowdown in that sector than if we cannot assure you that we will be able to successfully achieve our investment objectives; and the prior performance of other Grubb & Ellis Group programs may not be an accurate predictor of our future results.were investing in multiple industries.

We concentrate our investments in the healthcare property sector. As a result, we are subject to risks inherent to investments in a single industry. A downturn or slowdown in the healthcare property sector would have ~~limited operating history~~a greater adverse impact on our business than if we were investing in multiple industries. Specifically, any industry downturn could negatively impact the ability of our tenants to make loan or lease payments to us as well as their ability to maintain rental and occupancy rates, which could adversely affect our business, financial condition and results of operations as well as our ability to make distributions to our stockholders.

If we are unable to find suitable investments, we may not be able to achieve our investment objectives. We were formed in April 2006, commenced our offering on September 20, 2006, and as of December 31, 2008, we have 41 geographically diverse properties and one other real estate related assets. As a result, an investment in shares of our common stock may entail more risks than the shares of common stock of a REIT with a more substantial operating history. In addition, past performance of other Grubb & Ellis Group programs should not be relied upon to predict our future results.

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 our stockholders.

Domestic and international financial markets currently are experiencing significant dislocations which have been brought about in large part by failures in the U.S. banking system. These dislocations have severely impacted the availability of credit and have contributed to rising costs associated with obtaining credit. If debt financing is not availableOur stockholders must rely on terms and conditions we find acceptable, we may not be able to obtain financing for investments. If this dislocation 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, falling interest rates or other factors could require us to ~~forfeit these fees. All of these events would have a material adverse effect on~~evaluate our ~~results of operations, financial condition~~investment opportunities, 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 their return on their investment.~~

As of March 26, 2009, we have acquired 43 geographically diverse properties and other real estate related assets and have identified a limited number of additional properties to acquire. There may be a substantial period of time before the proceeds of our offering are invested in suitable investments, particularly as a result of current economic environment and capital constraints. Because we are conducting our 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 may make unwise decisions. We cannot assure our stockholders that acquisitions of real estate or other real estate related assets made using the proceeds of our offerings will produce a return on our investment or will generate cash flow to enable us to make distributions to our stockholders.

~~The availability~~We face competition for the acquisition of medical office buildings and ~~timing~~other healthcare-related facilities, which may impede our ability to make future acquisitions or may increase the cost of ~~cash distributions to our stockholders is uncertain.~~these acquisitions.

We ~~expect to make monthly distributions to our stockholders. However, we bear all expenses incurred~~compete with many other entities engaged in ~~our operations, which are deducted from cash funds generated by operations prior to computing the amount~~real estate investment activities for acquisitions of ~~cash distributions to our stockholders. In addition, our board~~medical office buildings and healthcare-related facilities, including national, regional and local operators, acquirers and developers of ~~directors, in its discretion, may retain any portion of such funds~~healthcare real estate properties. The competition for working capital. We cannot assure our stockholders that sufficient cash will be available to make distributions to them 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 not have sufficient cash available from operations to pay distributions, and, therefore, distributions may include a return of capital.~~

Distributions payable to our stockholders may include a return of capital, rather than a return on capital. We expect 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. Our distribution policy is set by our board of directors and is subject to change based on available cash flows. As a result, our distribution rate and payment frequency may vary from time to time. During the early stages of our operations, we may not have sufficient cash available from operations to pay distributions. Therefore, we may need to use proceeds from this offering or borrowed funds to make cash distributions in order to maintain our status as a REIT, which may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. Further, 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.

~~We may not have sufficient cash available from operations to pay distributions, and, therefore, distributions may be paid with offering proceeds or borrowed funds.~~

The amount of the distributions to our stockholders is 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. On February 14, 2007, our board of directors approved a 7.25% per annum distribution to be paid to stockholders beginning with our February 2007 monthly distribution which was paid in March 2007.

For the year ended December 31, 2008, we paid distributions of $28,042,000 ($14,943,000 in cash and $13,099,000 in shares of our common stock pursuant to the DRIP), as compared to cash flows from operations of $20,677,000. The distributions paid in excess of our cash flows from operations were paid using proceeds from our offering. As of December 31, 2008, we had an amount payable of $1,043,000 to our advisor and its affiliates for operating expenses,~~on-site~~ personnel and engineering payroll, lease commissions and asset and property management fees, which will be paid from cash flows from operations in the future as they become due and payable by us in the ordinary course of business consistent with our past practice.

As of December 31, 2008, no amounts due to our advisor or its affiliates have been deferred or forgiven. Our advisor and its affiliates have no obligations to defer or forgive amounts due to them. In the future, if our advisor or its affiliates do not defer or forgive amounts due to them and our cash flows from operations is less than the distributions to be paid, we would be required to pay our distributions, or a portion thereof, with proceeds from our offering or borrowed funds. As a result, the amount of proceeds available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds.

For the year ended December 31, 2008, our funds from operations, or FFO, was $8,745,000. We paid distributions of $28,042,000, of which $8,745,000 was paid from FFO and the remainder from proceeds from

~~our offering. For more information about FFO, see Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions.~~

~~We are uncertain of our sources of debt or equity for funding our future capital needs. If we cannot obtain funding on acceptable terms, our ability to make necessary capital improvements to our~~healthcare real estate properties may ~~be impaired~~significantly increase the price we must pay for medical office buildings and healthcare-related facilities or ~~delayed.~~

~~The gross proceeds of our offering will be used to buy a diversified portfolio of real estate and~~ 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 ~~various fees~~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 ~~expenses.~~enhanced operating efficiencies. In addition, ~~to continue to qualify as a REIT, we generally must distribute to our stockholders at least 90.0%~~the number of ~~our taxable income each year, excluding capital gains.~~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 ~~this distribution requirement, it is not likely that~~an increased interest in single-property acquisitions among tax-motivated individual purchasers, we ~~will be able to fund a significant portion of our future capital needs from retained earnings. We have not identified any sources of debt or equity for future funding, and such sources of funding~~ may ~~not be available to us on favorable terms or at all.~~pay higher prices if we purchase single properties in comparison with portfolio acquisitions. If we ~~do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to~~pay higher prices for medical office buildings and healthcare-related facilities, our ~~properties, pay other expenses or expand~~business, financial condition and results of operations and 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.~~

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 partnership’s 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 of our common stock. We may, however, enter into additional contractual arrangements with contributors of property under which we would agree to repurchase a contributor’s 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~~ to make distributions to our 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 partnership did not provide the contributor with a defined return, then upon redemption of the contributor’s 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 contributor’s units for cash or shares of our common stock. Such an agreement would prevent us from selling those properties, even if market conditions made such a sale favorable to us.

~~Until the termination or expiration of our Advisory Agreement, our success is dependent in part on the performance of our advisor, which is a subsidiary of our sponsor.~~

Until the termination or expiration of our Advisory Agreement our ability to achieve our investment objectives and to pay distributions is dependent in part on the performance of our advisor, which is a subsidiary of our sponsor, in identifying and advising on the acquisition of investments, the determination of any financing arrangements, the asset management of our investments and operation of our day-to-day activities. Our stockholders have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments that are not described in our offering prospectus or other periodic filings made with the SEC. We rely in part on the management ability of our advisor, subject to the oversight of our Chief Executive Officer and our board of directors. If our advisor suffers or is distracted by adverse financial or operational problems in connection with its operations or the operations of our sponsor unrelated to us, our advisor may be ~~unable to allocate timeand/or~~ ~~resources to our operations. If our advisor is unable~~materially and adversely affected.

~~to allocate sufficient resources to oversee and perform our operations for any reason, we may be unable to achieve our investment objectives or to pay distributions to our stockholders.~~

In March 2009, Grubb & Ellis reported that due to the disruptions in the credit markets, the severe and extended general economic recession, and the significant decline in the commercial real estate market in 2008, it anticipates that it will report a significant decline in operating earnings and net income for the fourth quarter of 2008 as compared to the fourth quarter of 2007 and for the year ended December 31 2008 as compared to the year ended December 31, 2007. In addition, Grubb & Ellis anticipates that it will recognize significant impairment charges to goodwill, impairments on the value of real estate assets held as investments, and additional charges related to its activities as a sponsor of investment programs in the quarter ended December 31, 2008. Grubb & Ellis has also reported that it is restating certain of its previously issued financial statements. To the extent that any of the foregoing or any other matters related to our sponsor impact the performance of our advisor, our results of operations, financial condition and ability to pay distributions to our stockholders could also suffer.

After the termination or expiration of our Advisory Agreement and upon the completion of our transition to a self-management program, we will not be able to rely on our advisor to manage our operations, which could adversely impact our ability to achieve our investment objectives and pay distributions to our stockholders.

We are currently transitioning to a self-management program, which means that when our Advisory Agreement expires on September 20, 2009 or is terminated, we do not intend to renew such agreement with our advisor or engage a successor advisor; provided the parties may mutually agree to specified service arrangements. As we continue to implement our self-management program, our advisor will have a more limited role in managing our business and operations. After the termination or expiration of the Advisory Agreement, we will not be able to rely on our advisor to provide services to us, including asset management services, property management services and investor relations services. In addition, the Advisory Agreement provides that after termination or expiration, upon the request of our advisor, we cannot use the name “Grubb & Ellis.” Upon the completion of our transition to self-management, we intend to change our name to “Healthcare Trust of America, Inc.” We will rely on our board of directors, Mr. Peters and our management team, as well as third party service providers, to identify and acquire future investments for us, determine any financing arrangements, manage our investments and operate our day-to-day activities. If we are not successful in hiring additional employees, engaging independent consultants or finding third parties to manage our operations, our ability to achieve our investment objectives and pay distributions to our stockholders could suffer.

~~As we transition to self-management, our success is increasingly dependent on the performance of our board of directors and our Chairman of the Board, Chief Executive Officer and President.~~

As we transition to self-management, 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, our Chairman of the Board, Chief Executive Officer and President, and our 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. Our stockholders 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 Annual Report on~~Form 10-K~~ or other periodic filings with the SEC. We rely primarily on the management ability of our Chief Executive Officer and the governance of our board of directors. We do not have any key man life insurance on Mr. Peters. We have entered into an employment agreement for a term beginning November 1, 2008 to November 1, 2010 with Mr. Peters, but the employment agreement contains various termination rights. If we were to lose the benefit of his 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 director’s 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.

WeFinancial markets are ~~transitioning to be~~still recovering from a ~~self-managed company~~period of disruption and recession, and we ~~may not be successful in hiring additional employees and/or third party service providers, which could impact our ability~~are unable to ~~achieve our investment objectives.~~predict if and when the economy will stabilize.

~~We currently have~~The financial markets are still recovering from a ~~full-time Chief Executive Officer~~recession, which created volatile market conditions, resulted in a decrease in availability of business credit and ~~President, Scott D. Peters,~~led to the insolvency, closure or acquisition of a number of financial institutions. While the markets showed signs of stabilizing in 2010, it remains unclear when the economy will fully recover to pre-recession levels. Continued economic weakness in the U.S. economy generally would likely adversely affect our financial condition and ~~a Chief Accounting Officer, Kellie S. Pruitt,~~that of our tenants and ~~other personnel. We intend~~could impact the ability of our tenants to ~~engage additional employees and independent consultants. We may also outsource certain services, including property management,~~pay rent to third parties. As we continue to implement our self-management program, we will rely less on our advisor and will increasingly rely on our board of directors, Mr. Peters and our other employees and consultants to manage our investments and operate our day-to-day activities. If we are unsuccessful in hiring additional employees or engaging consultants and other third parties to provide services to us, or if our employees and consultants and the additional employees that we hire or consultants and third parties we engage do not perform at the level we expect, our ability to achieve our investment objectives and pay distributions to our stockholders could suffer.us.

Our success may be hampered by the ~~current slow down~~recent slowdown 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~~recent financial disruption and accompanying credit crisis ~~has~~ negatively impacted the value of commercial real estate assets, contributing to a general ~~slow down~~slowdown in our industry, which ~~we anticipate will~~may continue through ~~2009.~~2011. A ~~prolonged and pronounced recession~~slow economic recovery 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~~slowdown 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:


	•	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;

	•	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;

	•	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 ourshort-term investments, increased volatility in market rates for such investment or other factors;

	•	one or more lenders under our ~~lines of~~unsecured credit facility 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;

	•	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;

	•	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;

	•	constricted access to credit may result in tenant defaults or non-renewals under leases;


	•	~~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

	•	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 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.

The length and severity of any economic ~~slow down~~slowdown 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.

~~Through 2009, the~~The Federal Deposit Insurance Corporation, or FDIC, will only insure amounts up to $250,000 per depositor per insured ~~bank and after 2009, the FDIC will only insure up to $100,000 per depositor per bank; the FDIC will insure amounts held in certain transaction-based, non-interest bearing accounts.~~bank. We currently have cash and cash equivalents and restricted cash deposited in certain financial institutions in excess of~~federally-insured~~ 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 ~~advisor~~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 ~~its affiliates have no obligation to defer~~abilities of one or ~~forgive fees or loans or advance any funds to us, which~~more of these individuals, our operating results could ~~reduce our ability to make investments or pay distributions.~~suffer.

In the past, our sponsor, or its affiliates have, in certain circumstances, deferred or forgiven fees and loans payable by programs sponsored or managed by our sponsor. Our advisor and its affiliates, including our sponsor, have no obligation to defer or forgive fees owed by us to our advisor or its affiliates or to advance any funds to us. As a ~~result, we may have less cash available~~self-managed company, our ability to ~~make investments or pay distributions.~~

~~Risks Related to Conflicts of Interest~~

~~We are subject to conflicts of interest arising out of relationships among us,~~achieve our officers, our advisor and its affiliates, including the material conflicts discussed below. The Conflicts of Interest section of our offering prospectus provides a more detailed discussion of these conflicts of interest.

We will compete with our sponsor’s other programs for investment opportunities. As a result, our advisor may not cause us to invest in favorable investment opportunities, which may reduce our returns on our investments.

~~Our sponsor, Grubb & Ellis, or its affiliates have sponsored existing programs with~~ investment objectives and ~~strategies similar~~ to ~~ours, and may sponsor other similar programs in~~pay distributions is increasingly dependent upon the ~~future. As a result, we may be buying properties at the same time as one or more of the other Grubb & Ellis Group programs managed or advised by affiliates~~performance of our ~~advisor. Officers and employees~~board of our advisor may face conflicts of interest in allocating investment opportunities between us and these other programs. For instance, our advisor may select properties for us that provide lower returns to us than properties that its affiliates select to be purchased by another Grubb & Ellis Group program. We cannot be sure that officers and employees acting for or on behalf of our advisor and on behalf of managers of other Grubb & Ellis Group programs will act in our best interests when deciding whether to allocate any particular investment to us. We are subject to the risk thatdirectors, Scott D. Peters as ~~a result of the conflicts of interest between us,~~ our advisor and other entities or programs managed by its affiliates, our advisor may not cause us to invest in favorable investment opportunities that our advisor locates when it would be in our best interest to make such investments. As a result, we may invest in less favorable investments, which may reduce our returns on our investments and ability to pay distributions.

Our sponsor has recently sponsored a REIT focused on acquiring medical office buildings and other healthcare related facilities; such REIT’s offering could negatively impact our current offering as well as any future offerings we may conduct; we share the same dealer manager and several of the same officers with such REIT, which may create conflicts of interest; in addition, we may compete with such REIT with respect to acquiring additional properties.

Our sponsor, Grubb & Ellis, is also the sponsor of Grubb & Ellis Healthcare REIT II, Inc., or REIT II. REIT II intends to acquire medical office buildings and other healthcare related facilities, as well as other real estate related investments using the proceeds from its proposed initial public offering.

REIT II’s offering could negatively impact our current offering as well as any future equity offerings we may conduct if investors decide to purchase shares of the common stock of REIT II rather than our shares of common stock. In addition, the dealer manager for our offering will also serve as the dealer manager for the offering of REIT II, which may adversely affect the services provided by our dealer manager to our company. It may also create conflicts of interest with respect to our dealer manager’s relationships with broker-dealers participating in our current offering. After the termination or expiration of our Dealer Manager Agreement, we will not be able to rely on our current dealer manager to provide services to us, including management of any future equity offerings we may conduct. Any future dealer manager we may engage may be unable to secure relationships with key participating broker-dealers, including broker-dealers participating in our current offering, thus negatively impacting our ability to raise additional capital. Further, any future dealer manager we engage will compete with the dealer manager for REIT II for participating broker-dealer relationships.

Some of our officers and some of the officers of our advisor are also officers of REIT II or the advisor for REIT II. Danny Prosky, our Executive Vice President — Acquisitions, is serving as the President and Chief Operating Officer of REIT II and as the President and Chief Operating Officer of the advisor to REIT II. Andrea R. Biller, our Executive Vice President and Secretary, is serving as the Executive Vice President and Secretary of REIT II and as the Executive Vice President of the advisor to REIT II. Jeffrey T. Hanson, the President of our advisor, is serving as the Chief Executive Officer, President and Chairman of the Board, ~~of REIT II and~~Kellie S. Pruitt as ~~the~~our Chief ~~Executive~~Financial Officer, of the advisor of REIT II. These individuals have legal and fiduciary obligations to REIT II which are similar to and may conflict with those they owe to us and our stockholders. In addition, these individuals may have conflicts of interest in allocating their time and resources between our business and the business of REIT II. Also, our advisor and the advisor of REIT II are affiliated entities and share many key personnel and employees. If such individuals, for any reason, are not able to provide sufficient resources to manage our business, our business will suffer and this may adversely affect our results of operations and the value of our stockholders’ investments.

Finally, over time, REIT II may compete with us with respect to acquiring the real properties and other real estate related assets we intend to acquire. As a result, the price we pay for such properties and assets may increase.

The conflicts of interest faced by our officers may cause us not to be managed solely in the best interests of our stockholders, which may adversely affect our results of operations and the value of their investment.

Some of our officers are also officers or employees of our advisor, Grubb & Ellis Realty Investors, which manages our advisor, our sponsor and other affiliated entities which will receive fees in connection with our offering and operations. Andrea R. Biller is our Executive Vice PresidentTreasurer and Secretary, ~~and also serves~~Mark Engstrom as the Executive Vice President of our advisor, the General Counsel and Executive Vice President of Grubb & Ellis Realty Investors, the General Counsel, Executive Vice President and Secretary of our sponsor and the General Counsel, Executive Vice President, Secretary and a Director of NNN Realty Advisors and the Secretary of Grubb & Ellis Securities. Ms. Biller owns less than 1.0% of our sponsor’s outstanding common stock and owns a de minimis interest in several of our sponsor’s other programs. Danny Prosky is our Executive Vice President — Acquisitions, and ~~also serves as~~our other employees, in the ~~Executive Vice President — Healthcare Real Estate~~identification and acquisition of ~~Grubb & Ellis Realty Investors. Mr. Prosky owns a de minimis equity interest in our sponsor, no equity~~

~~interest in other programs~~investments, the determination of any financing arrangements, the asset management of our ~~sponsor,~~investments and ~~3,000 shares~~operation of ourday-to-day activities. Our stockholders 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 Annual Report onForm 10-K or other periodic filings with the SEC. We rely primarily on the management ability of our ~~common stock.~~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, ~~each of Ms. Biller and Mr. Prosky holds options to purchase a de minimis amount~~if any member of our ~~sponsor’s outstanding common stock. As~~board of ~~December 31, 2008, Ms. Biller own 18.0% membership interests in Grubb & Ellis Healthcare Management, LLC, which owns 25.0%~~directors were to resign, we would lose the benefit of ~~the membership interest of our advisor.~~

~~Some of the other programs of our sponsor in which our officers have invested~~such director’s governance and to which they provide services, have investment objectives similar to our investment objectives. These individuals have legal and fiduciary obligations to these entities which are similar to those they owe to us and our stockholders.experience. As a result ~~they may have conflicts~~ of ~~interest in allocating their time and resources between our business and these other activities. During times of intense activity in other programs,~~ the time they devote to our business may decline and be less than we require. If our officers, for any reason, are not able to provide sufficient resources to manage our business, our business will suffer and this may adversely affect our results of operations and the value of our stockholders’ investments.

~~If we enter into joint ventures with affiliates,~~foregoing, we may ~~face conflicts of interest~~be unable to achieve our investment objectives or ~~disagreements with our joint venture partners that will not be resolved as quickly or on terms as advantageous~~ to ~~us as would be the case if the joint venture had been negotiated at arm’s length with an independent joint venture partner.~~

In the event that we enter into a joint venture with any other program sponsored or advised by our sponsor or one of its affiliates, we may face certain additional risks and potential conflicts of interest. For example, securities issued by the other programs sponsored by Grubb & Ellis may never have an active trading market. Therefore, if we were to become listed on a national securities exchange, we may no longer have similar goals and objectives with respect to the resale of properties in the future. Joint ventures between us and other Grubb & Ellis programs will not have the benefit of arm’s-length negotiation of the type normally conducted between unrelated co-venturers. Under these joint venture agreements, none of the co-venturers may have the power to control the venture, and an impasse could occur regarding matters pertaining to the joint venture, including the timing of a liquidation, which might have a negative impact on the joint venture and decrease returnspay distributions to our stockholders.

~~Our advisor will face conflicts~~We may structure acquisitions of ~~interest relating to its compensation structure, which~~property in exchange for limited partnership units in our operating partnership on terms that could ~~result in actions that are not necessarily in the long-term best interests of~~limit our ~~stockholders.~~liquidity or our flexibility.

~~Under~~Approximately 0.08% of our operating partnership is owned by individual physician investors that elected to exchange their partnership interests in the ~~Advisory Agreement and pursuant~~partnership that owns the 7900 Fannin medical office building for limited partner units of our operating partnership. We acquired the majority interest in the Fannin partnership on June 30, 2010. We may continue to ~~the subordinated participation interest our advisor holds~~acquire properties by issuing limited partnership units in our operating partnership ~~our advisor is entitled to fees and distributions that are structured~~ in exchange for a manner intended to provide incentives to our advisor to perform in our best interest and in the best interest of our stockholders. The fees our advisor is entitled to include acquisition fees, asset management fees, property management fees and disposition fees. The distributions our advisor may become entitled to receive would be payable upon distribution of net sales proceeds to our stockholders, the listing of our shares of our common stock, the termination of the Advisory Agreement, other than for cause, and if our advisor elects to defer payment upon termination, certain other transactions. However, because our advisor does not maintain a significant equity interest in us and is entitled to receive substantial minimum compensation regardless of our performance, our advisor’s interests are not wholly aligned with those of our stockholders. In that regard, our advisor or its affiliates receives an asset management fee with respectowner contributing property to the ongoing operation and management of properties based on the amount of our initial investment and not the performance of those investments, which could result in our advisor not having adequate incentivepartnership. If we continue to ~~manage our portfolio to provide profitable operations during the period we hold our investments. On the other hand, our advisor could be motivated to recommend riskier or more speculative investments~~enter into such transactions, in order to ~~increase~~induce the ~~fees payable~~contributors of such properties to accept units in our ~~advisor or~~operating partnership, rather than cash, in exchange for their properties, it may be necessary for us to ~~generate the specified levels of performance or net sales proceeds that would entitle our advisor to fees or distributions.~~

The distribution payable to our advisor may influence our decisions about listing our shares of our common stock on a national securities exchange, merging our company with another company and acquisition or disposition of our investments.

Our advisor’s entitlement to fees upon the sale of our assets and to participate in net sales proceeds could result in our advisor recommending sales of our investments at the earliest possible time at which sales of investments would produce the level of return to our stockholders which would entitle our advisor to compensation relating to such sales, even if continued ownership of those investments might be in the best long-term interest of our stockholders. The subordinated participation interest may require our operating partnership to make a distribution to our advisor upon the listing of our shares of our common stock on a national securities exchange or the merger of our company with another company in which our stockholders receive shares of our common stock that are traded on a national securities exchange, if our advisor meets the performance thresholds for stockholder returns included inprovide them additional incentives. For instance, our operating partnership’s limited partnership agreement ~~even if our advisor is no longer serving as our advisor. To avoid making this distribution, our independent directors~~provides that any holder of units may ~~decide against listing our~~exchange limited partnership units on aone-for-one basis for shares of our common stock, or, ~~merging~~at our option, cash equal to the value of an equivalent number of our shares. We may, however, enter into additional contractual arrangements with ~~another company even if, but~~contributors of property under which we would agree to repurchase a contributor’s units for shares of our common stock or cash, at the ~~requirement~~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 ~~distribution, such listing or merger~~obligation. Furthermore, we might agree that if distributions the contributor received as a limited partner in our operating partnership did not provide the contributor with a defined return, then upon redemption of the contributor’s units we would ~~be in~~pay the ~~best interest of~~contributor an additional amount necessary to achieve that return. Such a provision could further negatively impact our ~~stockholders. In addition, the requirement to make this distribution could cause our independent directors to make different investment or disposition decisions than they would otherwise make~~liquidity and flexibility. Finally, in order to ~~satisfy~~allow a contributor of a property to defer taxable gain on the contribution of property to our ~~obligation~~operating partnership, we might agree not to sell a contributed property for a defined period of time or until the ~~advisor.~~contributor exchanged the contributor’s 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.

~~We have~~Our ownership of certain medical office building properties are subject to ground lease or other similar agreements which limit our uses of these properties and may ~~continue~~restrict our ability to ~~acquire assets from,~~sell or dispose of assets to, affiliates of our advisor, which could result in us entering into transactions on less favorable terms than we would receive from a third party or that negatively affect the public’s perception of us.otherwise transfer such properties.

We ~~have~~hold interests in certain of our medical office building properties through leasehold interests in the land on which the buildings are located and we may acquire or develop additional medical office building properties in the future that are subject to ground leases or other similar agreements. Many of our ground leases and other similar agreements limit our uses of these properties and may ~~continue~~restrict our ability to ~~acquire assets from affiliates of our advisor. Further, we~~sell or otherwise transfer such properties, which may ~~also dispose of assets to affiliates of our advisor. Affiliates of our advisor may make substantial profits in connection with such transactions and may owe fiduciaryand/or~~ other duties to the selling or purchasing entity in these transactions, and conflicts of interest between us and the selling or purchasing entities could exist in such transactions. Because our independent directors would rely on our advisor in identifying and evaluating any such transaction, these conflicts could result in transactions based on terms that are less favorable to us than we would receive from a third party. Also, the existence of conflicts, regardless of how they are resolved, might negatively affect the public’s perception of us.impair their value.

Except for the current modification to our Advisory Agreement, the fees we pay our advisor under the Advisory Agreement and the distributions payable to our advisor under our operating partnership agreement were not determined on an arm’s-length basis and thereforeCompliance with changing government regulations may ~~not be on the same terms as those we could negotiate with an unrelated party.~~result in additional expenses.

~~Our independent directors relied on information~~During July 2010, the Dodd-Frank Wall Street Reform and ~~recommendations provided by~~Consumer Protection Act, or the Dodd-Frank Act, was signed into federal law. The provisions of the Dodd-Frank Act include new regulations forover-the-counter derivatives and substantially increased regulation and risk of liability for credit rating agencies, all of which could increase our ~~advisor~~cost of capital. The Dodd-Frank Act also includes provisions concerning corporate governance and executive compensation which, among other things, require additional executive compensation disclosures and enhanced independence requirements for board compensation committees and related advisors, as well as provide explicit authority for the SEC to ~~determine~~adopt proxy access, all of which could result in additional expenses in order to maintain compliance. The Dodd-Frank Act is wide-ranging, and the ~~fees and distributions payable to our advisor and its affiliates under the Advisory Agreement and pursuant~~provisions are broad with significant discretion given to the ~~subordinated participation interest in our operating partnership.~~many and varied agencies tasked with adopting and implementing the act. The majority of the provisions of the Dodd-Frank Act did not go into effect immediately and may be adopted and implemented over many months or years. As a result, except for the modifications made to the Advisory Agreement and operating partnership agreement on November 14, 2008, these fees and distributions cannot be viewed as having been determined on an arm’s-length basis andsuch, we cannot ~~assure~~predict the full impact of the Dodd-Frank Act on our ~~stockholders that an unaffiliated party would not be willing and able to provide to us the same services at a lower price.~~financial condition or results of operations.

Risks ~~Associated with~~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 our offering.~~stock.

Our stockholders do not have preemptive rights to any shares ~~of our common stock~~ 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 our ~~stockholder~~stockholders’ 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:


	•	a merger, tender offer or proxy contest;


	•	assumption of control by a holder of large block of our securities; or

	•	removal of the incumbent board of directors and management.

Our stockholders’ 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, our stockholders will have a right to vote only on the following matters:


	•	the election or removal of directors;

	•	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 ofor 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 number of our shares of stock ~~increase~~ or ~~decrease~~ the number of our shares of any class or series that we have the authority to issue, or effect certain reverse stock splits;

	•	our dissolution; and

	•	certain mergers, consolidations and sales or other dispositions of all or substantially all of our assets.

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 ~~their~~our stockholders’ ability to sell their shares of our common stock.

Our charter includes a provision that may discourage a stockholder from launching a tender offer for shares of our common stock.

Our charter requires that any tender offer made by a person, including any “mini-tender” offer, must comply with Regulation 14D of the Securities Exchange Act of 1934, as amended. The offeror must provide us notice of the tender offer at least ten business days before initiating the tender offer. If the offeror does not comply with these requirements, we will have the right to repurchase that person’s shares of our common stock and any shares of our common stock acquired in such tender offer. In addition, the non-complying offeror shall be responsible for all of our expenses in connection with that stockholder’s noncompliance. This provision of our charter does not apply to any shares of our common stock that are listed on a national securities exchange. This provision of our charter may discourage a person from initiating a tender offer for shares of our common stock and prevent you from receiving a premium price for your shares of our common stock in such a transaction.

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 our stockholders’ ~~rights~~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 ~~interest,~~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 ~~our advisor and its affiliates~~ 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~~all 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, prior to Listing, we may not indemnify our directors ~~our advisor and its affiliates~~ for ~~loss or~~any liability suffered by them or hold ~~them~~our directors harmless for ~~loss or~~any liability suffered by us unless (1) they have determined ~~that: (1)~~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 ~~loss or~~ liability was not the result of negligence or misconduct by our non-independent directors, ~~our advisor or its affiliates~~ 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.

Certain provisions of Maryland law could restrict a change in control even if a change in control ~~were~~was in our stockholders’ interests.

Certain provisions of the Maryland General Corporation Law applicable to us prohibit business combinations with:


	•	any person who beneficially owns 10.0% or more of the voting power of our outstanding voting stock ~~which we refer to as an interested stockholder;~~

	•	anor 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 ~~also~~ refer to as an interested stockholder; or

	•	an affiliate of an interested stockholder.

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

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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.

Our stockholders approved amendments to our charter which provide that certain provisions of our charter will not remain in effect in the event our shares of common stock are listed on a national securities exchange.

The provisions of the NASAA Guidelines apply to REITs with shares of common stock that are publicly registered with the SEC but are not listed on a national securities exchange. In the event of a Listing, there are certain provisions of our charter that will no longer be required to be included pursuant to the NASAA Guidelines. At our annual meeting, our stockholder approved amendments to our charter which provided that certain provisions of our charter will not remain in effect in the event of a Listing, including but not limited to provisions which:


	•	limit the voting rights per share of stock sold in a private offering;

	•	prohibit distributions in kind, except for distributions of readily marketable securities, distributions of beneficial interests in a liquidity trust or distributions in which each stockholder is advised of the risks of direct ownership of property and offered the election of receiving such distributions;

	•	place limits on incentive fees;

	•	place limits on our organizational and offering expenses;

	•	place limits on our total operating expenses;

	•	place limits on our acquisition fees and expenses;

	•	relate to the requirement that a special meeting of stockholders be called upon the request of stockholders holding 10% of our shares entitled to vote;

	•	relate to the restrictions on amending our charter in certain circumstances without prior stockholder approval;

	•	relate to inspection of our stockholder list and receipt of reports;

	•	relate to restrictions on exculpation, indemnification and the advancement of expenses to our directors; and

	•	relate to prohibitions onroll-up transactions.

Our stockholders’ 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. 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:


	•	limitations on capital structure;

	•	restrictions on specified investments;

	•	prohibitions on transactions with affiliates; and

	•	compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly change our operations.

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 end of our ~~offering ends.~~follow-on offering. If we are unable to invest a significant portion of the proceeds of our follow-on offering in properties within one year of the termination of ~~our~~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 ~~their~~investor 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 ~~limit~~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, 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~~“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 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 ~~advisor, its affiliates and~~ management, thereby decreasing the time ~~spent~~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 our stockholders’ investment in us to be diluted, which may reduce the overall value of their investment.

Our stockholders’ investment in us could be diluted by a number of factors, including:


	•	future public offerings of our securities, including issuances under our DRIP and up to 200,000,000 shares of any preferred stock that our board of directors may authorize;

	•	private issuances of our securities to other investors, including institutional investors;

	•	issuances of our securities under our amended and restated 2006 Incentive Plan; or

	•	redemptions of units of limited partnership interest in our operating partnership in exchange for shares of our common stock.

To the extent we issue additional equity interests, ~~after you purchase shares of~~ our ~~common stock in this offering, your~~stockholders’ 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~~our stockholders may also experience dilution in the book value and fair market value of ~~your~~their shares.

Our stockholders’ interests may be diluted in various ways, which may reduce their returns.

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issue common stock or other equity or debt securities to persons from whom we purchase properties, as part or all of the purchase price of the property. 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.

~~You~~Our stockholders 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~~our stockholders may experience a delay before receiving ~~your~~their 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~~stockholders may experience a delay in the distribution of the proceeds of a sale until such time.

~~Dilution and our Operating Partnership~~

~~Several potential events could cause our stockholders’ investment in us to be diluted, which may reduce the overall value of their investment.~~

~~The value of our common stock could be diluted by a number of factors, including:~~


	•	~~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;~~

	•	~~private issuances of our securities to other investors, including institutional investors;~~

	•	~~issuances of our securities under our 2006 Incentive Plan;~~

	•	~~redemptions of units of limited partnership interest in our operating partnership in exchange for shares of our common stock; or~~

	•	~~issuance of shares of our common stock to our advisor in connection with its subordinated interest in our operating partnership.~~

To the extent we issue additional equity interests after investors purchase shares of our common stock in our offering, such investors’ 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, investors may also experience dilution in the book value and fair market value of their shares.

~~Our stockholders’ interests may be diluted in various ways, which may reduce their returns.~~

Our board of directors is authorized, without stockholder 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 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 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.

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 their 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 their investment.

~~Some~~Increasing vacancy rates for commercial real estate resulting from a slow economic recovery could result in increased vacancies at 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 their investment.

~~Some~~Recent disruptions in the financial markets and the slow economic recovery have resulted in a trend toward increasing vacancy rates for virtually all classes of commercial real estate, including medical office buildings and healthcare-related facilities, due to generally lower demand for rentable space, as well as potential oversupply of rentable space. Uncertain economic conditions and related levels of unemployment have led to reduced demand for medical services, causing physician groups and hospitals to delay expansion plans, leaving a growing number of vacancies in new buildings. Reduced demand for medical office buildings and healthcare-related facilities could require us to increase concessions, tenant improvement expenditures or reduce rental rates to maintain occupancies beyond those anticipated at the time we acquire the property. In addition, the market value of a particular property could be diminished by prolonged vacancies. In addition to financial market disruptions, 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 our stockholders 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.

If we acquired real estate at a time when the real estate market was experiencing substantial influxes of capital investment and competition for income producing properties, the real estate investments we have made may not appreciate or may decrease in value.

Until recently, the real estate market has experienced a substantial influx of capital from investors. This substantial flow of capital, combined with significant competition for income producing real estate, may have resulted in inflated purchase prices for such assets. To the extent we purchased or in the future purchase real estate in such an environment, we are subject to the risk that the real estate market may cease to attract the same level of capital investment in the future, or if the number of companies seeking to acquire such assets decreases, the value of our investment may not appreciate or may decrease significantly below the amount we paid for such investment.

~~Competition with third parties in acquiring properties and other investments may reduce our profitability and our stockholders may experience a lower return on their investment.~~

We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, pension funds, other REITs, real estate limited partnerships, and foreign investors, many of which have greater resources than we do. Many of these entities 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 investments may increase. As such, competition with third parties would result in increased demand for these assets and therefore increased prices paid for them. If we pay higher prices for properties and other investments, our profitability will be reduced and our stockholders may experience a lower return on their investment.

~~Long-term leases may not result in fair market lease rates over time; therefore, our income and our distributions to our stockholders could be lower than if we did not enter into long-term leases.~~

We may enter into long-term leases with tenants of certain of our properties. Our long-term leases would likely provide for rent to increase over time. However, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that even after contractual rental increases, the rent under our long-term leases is less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our income and distributions to our stockholders could be lower than if we did not enter into long-term leases.

We may incur additional costs in acquiring or re-leasing properties which could adversely affect the cash available for distribution to our stockholders.

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 our stockholders.

~~We may be unable to secure funds for future tenant or other capital improvements, which could limit our ability to attract or replace tenants and decrease stockholders’ return on investment.~~

When tenants do not renew their leases or otherwise vacate their space, it is common that, in order to attract replacement tenants, we will be required to expend substantial funds for tenant improvements and leasing commissions related to the vacated space. Such tenant improvements may require us to incur substantial capital expenditures. If we have not established capital reserves for such tenant or other capital improvements, we will have to obtain financing from other sources and we have not identified any sources for such financing. We may also have future financing needs for other capital improvements to refurbish or renovate our properties. If we need to secure financing sources for tenant improvements or other capital improvements in the future, but are unable to secure such financing or are unable to secure financing on terms we feel are acceptable, we may be unable to make tenant and other capital improvements or we may be required to defer such improvements. If this happens, it may cause one or more of our properties to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased cash flow as a result of fewer potential tenants being attracted to the property or existing tenants not renewing their leases. If we do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to our properties, pay other expenses or pay distributions to our stockholders.

Uninsured losses relating to real estate and lender requirements to obtain insurance may reduce ~~stockholders’~~stockholder 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 our stockholders 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 ~~our~~ 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.~~

~~If one of our insurance carriers does not remain solvent, we may not be able to fully recover on our claims.~~

An insurance subsidiary of American International Group, or AIG, provides coverage under an umbrella insurance policy we have obtained that covers our properties. Recently, AIG has announced that it has suffered from severe liquidity problems. Although the U.S. Treasury and Federal Reserve have announced measures to assist AIG with its liquidity problems, such measures may not be successful. If AIG were to become insolvent, it could have a material adverse impact on AIG’s insurance subsidiaries. In the event that AIG’s insurance subsidiary that provides coverage under our policy is not able to cover our claims, it could have a material adverse impact on the value of our properties and our financial condition.

We may be unable to obtain desirable types of insurance coverage at a reasonable cost, if at all, and we may be unable to comply with insurance requirements contained in mortgage or other agreements due to high insurance costs.

We may not be able either to obtain certain desirable types of insurance coverage, such as terrorism, earthquake, flood, hurricane and pollution or environmental matter insurance, or to obtain such coverage at a reasonable cost in the future, and this risk may limit our ability to finance or refinance debt secured by our properties. Additionally, we could default under debt or other agreements if the cost~~and/or~~ availability of certain types of insurance make it impractical or impossible to comply with covenants relating to the insurance we are required to maintain under such agreements. In such instances, we may be required to self-insure against certain losses or seek other forms of financial assurance.

~~Increases in our insurance rates could adversely affect our cash flow and our ability to make future cash distributions to our stockholders.~~

We cannot assure our stockholders that we will be able to renew our insurance coverage at our current or reasonable rates or that we can estimate the amount of potential increases of policy premiums. As a result, our cash flow could be adversely impacted by increased premiums. In addition, the sales prices of our properties may be affected by these rising costs and adversely affect our ability to make cash distributions 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 our stockholders.

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 toour stockholders.

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 ~~stockholders’~~stockholder returns. Where properties are acquired prior to the start of ~~construction~~constructions or during the early stages of construction, it will typically take several months to complete construction and rent available space. Therefore, stockholders 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 normallease-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 ~~our advisor determines~~we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives. Our ~~advisor, subject to the oversight and approval of our~~ Chief Executive Officer and our board of directors may exercise ~~its~~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 our stockholders that we will be able to sell our properties at a profit in the ~~future.~~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 our stockholders 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 our stockholders.

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 ~~our~~ 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 our stockholders. 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.

Our ~~real estate~~property investments ~~may be~~are geographically concentrated in ~~medical office or other healthcare related facilities, making us more vulnerable economically than if our investments were diversified.~~certain states and subject to economic fluctuations in those states.

As ~~a REIT,~~of December 31, 2010, we ~~invest primarily~~had interests in ~~real estate. Within the real estate industry, we have primarily acquired medical office~~16 consolidated properties located in Texas (including both our operating properties and those buildings ~~and healthcare related facilities and intend to continue to acquire or selectively develop these types~~classified as held for sale), which accounted for 15.3% of our total annualized rental income, interests in seven consolidated properties in ~~the future. We are~~Arizona, which accounted for 11.7% of our total annualized rental income, interests in five consolidated properties located in South Carolina, which accounted for 9.7% of our total annualized rental income, interests in 10 consolidated properties in Florida, which accounted for 8.8% of our total annualized rental income, and interests in seven consolidated properties in Indiana, which accounted for 8.5% of our total annualized rental income. This rental income is based on contractual base rent from leases in effect as of December 31, 2010. Accordingly, there is a geographic concentration of risk subject to ~~risks inherent~~fluctuations in ~~concentrating investments in real estate. These risks resulting from a lack~~each of ~~diversification become even greater as a result of our business strategy to invest to a substantial degree in healthcare related facilities.~~

A downturn in the commercial real estate industry generally could significantly adversely affect the value of our properties. A downturn in the healthcare industry could negatively affect our lessees’ ability to make lease payments to us and our ability to make distributions to our stockholders. These adverse effects could be more pronounced than if we diversified our investments outside of real estate or if our portfolio did not include a substantial concentration in medical office buildings and healthcare related facilities.these states’ economies.

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 ~~will~~ 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~~healthcare-related facilities and tenants may be ~~unable~~subject to ~~compete successfully.~~competition.

Our medical office buildings and ~~healthcare related~~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~~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.

Long-term leases may not result in fair market lease rates over time; therefore, our income and our distributions could be lower than if we did not enter into long-term leases.

We may enter into long-term leases with tenants of certain of our properties. Our long-term leases would likely provide for rent to increase over time. However, if we do not accurately judge the potential for increases in market rental rates, we may set the terms of these long-term leases at levels such that even after contractual rental increases, the rent under our long-term leases is less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our income and distributions could be lower than if we did not enter into long-term leases.

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 ADA’s 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 our stockholders 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 our stockholders.

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 our stockholders.

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.

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 new~~regulated. New laws or regulations, including the recently enacted healthcare reform act, 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~~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.

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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.

Recently enacted comprehensive healthcare reform legislation could materially and adversely affect our business, financial condition and results of operations and our ability to pay distributions to stockholders.

On March 23, 2010, the President signed into law the Patient Protection and Affordable Care Act of 2010, or the Patient Protection and Affordable Care Act, and on March 30, 2010, the President signed into law the Health Care and Education Reconciliation Act of 2010, or the Reconciliation Act, which in part modified the Patient Protection and Affordable Care Act. Together, the two laws serve as the primary vehicle for comprehensive healthcare reform in the U.S. and will become effective through a phased approach, which began in 2010 and will conclude in 2018. The laws are intended to reduce the number of individuals in the U.S. without health insurance and significantly change the means by which healthcare is organized, delivered and reimbursed. The Patient Protection and Affordable Care Act includes program integrity provisions that both create new authorities and expand existing authorities for federal and state governments to address fraud, waste and abuse in federal health programs. In addition, the Patient Protection and Affordable Care Act expands reporting requirements and responsibilities related to facility ownership and management, patient safety and care quality. In the ordinary course of their businesses, our tenants may be regularly subjected to inquiries, investigations and audits by Federal and State agencies that oversee these laws and regulations. If they do not comply with the additional reporting requirements and responsibilities, our tenants’ ability to participate in federal health programs may be adversely affected. Moreover, there may be other aspects of the comprehensive healthcare reform legislation for which regulations have not yet been adopted, which, depending on how they are implemented, could materially and adversely affect our tenants, and therefore our business, financial condition, results of operations and ability to pay distributions to you.

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, health maintenance organizations, preferred provider arrangements, self-insured employers and the patients themselves, among others. Medicare and Medicaid programs, as well as numerous private insurance and managed care plans, generally require participating providers to accept government-determined reimbursement levels as payment in full for services rendered, without regard to a facility’s charges. Changes in the reimbursement rate or methods of payment from third-party payors, including Medicare and Medicaid, could result in a substantial reduction in our tenants’ revenues. 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. Further, revenue realizable under third-party payor agreements can change after examination and retroactive adjustment by payors during the claims settlement processes or as a result of post-payment audits. Payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable or because additional documentation is necessary or because certain services were not covered or were not medically necessary. The recently enacted healthcare reform law and regulatory changes could impose further limitations on government and private payments to healthcare providers. In some cases, states have enacted or are considering enacting measures designed to reduce their Medicaid expenditures and to make changes to private healthcare insurance. 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.

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.

Government budget deficits could lead to a reduction in Medicaid and Medicare reimbursement.

The recent slowdown in the U.S. economy has negatively affected state budgets, which may put pressure on states to decrease reimbursement rates with the goal of decreasing state expenditures under state Medicaid programs. The need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in state Medicaid programs due to unemployment, declines in family incomes and eligibility expansions required by the recently enacted healthcare reform law. These potential reductions could be compounded by the potential for federal cost-cutting efforts that could lead to reductions in reimbursement rates under both the federal Medicare program and state Medicaid programs. Potential reductions in reimbursements under these programs could negatively impact the ability of our tenants and their ability to meet their obligations to us.

Some tenants of our medical office buildings and ~~healthcare related~~healthcare-related facilities are subject to fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s 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:~~include, but are not limited to:


	•	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 or recommendation for the ordering of any item or service reimbursed by Medicare or Medicaid;

	•	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;

	•	the False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment to the federal government, including claims paid by the Medicare and Medicaid programs; and

	•	the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose monetary penalties for certain fraudulent acts.

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:

These factors may adversely affect the economic performance of some or all of our ~~healthcare related~~healthcare-related tenants and, in turn, our lease revenues and our ability to make distributions to our stockholders.

Our ~~healthcare related~~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~~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 claimsand/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~~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~~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 and quality of care, as well as an increase in enforcement actions resulting from these 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 lead to potential termination from government programs, large penalties and fines and otherwise have a material adverse effect on a tenant’s 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 tenant’s 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 slowlease-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, reimbursement 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 operator’s ability to make payment obligations to us or to continue operating its facility. Moreover, advocacy groups that monitor the quality of care at healthcare facilities have sued healthcare facility operators and called upon state and federal legislators to enhance their oversight of trends in healthcare facility ownership and quality of care. In response, the recently enacted healthcare reform law imposes additional reporting requirements and responsibilities for healthcare facility operators. Patients have also sued healthcare facility operators and have, in certain cases, succeeded in winning very large damage awards for alleged abuses. This litigation and potential litigation in the future has materially increased the costs incurred by our operators for monitoring and reporting quality of care compliance. In addition, the cost of medical malpractice and liability insurance has increased and may continue to increase so long as the present litigation environment affecting the operations of healthcare facilities continues. Compliance with the requirements in the healthcare reform law could increase costs as well. Increased costs could limit our healthcare operator’s ability to meet their obligations to us, potentially decreasing our revenue and increasing our collection and litigation costs. To the extent we are required to remove or replace a healthcare operator, our revenue from the affected property could be reduced or eliminated for an extended period of time.

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~~non-healthcare-related uses. The improvements generally required to conform a property to healthcare use, such as upgrading electrical, gas and plumbing infrastructure, are costly and often times operator-specific. A new or replacement tenant may require different features in a property, depending on that tenant’s particular operations. If a current tenant is unable to pay rent and vacates a property, we may incur substantial expenditures to modify a property for a new tenant, or for multiple tenants with varying infrastructure requirements, before we are able to release the space. 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.

Risks Related to Investments in Other Real Estate Related Assets

We do not have substantial experience in acquiring mortgage loans or investing in other real estate related assets, which may result in our other real estate related assets failing to produce returns or incurring losses.

None of our officers or the management personnel of our advisor have any substantial experience in acquiring mortgage loans or investing in other real estate related assets in which we may invest. We may make such investments to the extent that our advisor, in consultation with our board of directors, determines that it is advantageous for us to do so. Our and our advisor’s lack of expertise in making investments in other real estate related assets may result in our real estate related assets failing to produce returns or incurring losses, either of which would reduce our ability to make distributions to our stockholders.

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 issuer’s 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 Annual Report onForm 10-K, including risks relating to rising interest rates.

The mortgage or other real estate-related 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~~“— Risks Related to Investments in Real ~~Estate Related Assets”.~~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.

~~The mezzanine loans in which we may invest would involve greater risks of loss than senior loans secured by income-producing real properties.~~

We may invest in mezzanine loans that take the form of subordinated loans secured by second mortgages on the underlying real property or loans secured by a pledge of the ownership interests of either the entity owning the real property or the entity that owns the interest in the entity owning the real property. These types of investments involve a higher degree of risk than long-term senior mortgage lending secured by income producing real property because the investment may become unsecured as a result of foreclosure by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy our mezzanine loan. If a borrower defaults on our mezzanine loan or debt senior to our loan, or in the event of a borrower bankruptcy, our mezzanine loan will be satisfied only after the senior debt. As a result, we may not recover some or all of our investment. In addition, mezzanine loans may have higher loan to value ratios than conventional mortgage loans, resulting in less equity in the real property and increasing the risk of loss of principal.

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. The mezzanine and bridge loans we may purchase will be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default.

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

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 security’s 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 ~~other~~ 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 our ~~stockholders’ investments.~~company.

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 when comparing debt to total assets will ~~not exceed 60.0% of our properties’ and other real estate related assets’ combined fair market value of our assets.~~fall within approximately 35%-40%. 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~~non-cash reserves, less total liabilities. Generally speaking, the preceding calculation is expected to approximate 75.0% of the sum ~~of (a)~~of: the aggregate cost of our real property investments before non-cash reserves and depreciation and ~~(b)~~ 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~~ordinary 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 our ~~stockholders’ investments.~~company. For tax purposes, a foreclosure on any of our properties will be treated as a sale of the property 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~~utilize financing in our 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 our stockholders 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 our stockholders. 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.

~~To the extent we borrow at fixed rates or enter into fixed interest rate swaps we will not benefit from reduced interest expense if interest rates decrease.~~

We are exposed to the effects of interest rate changes primarily as a result of borrowings used to maintain liquidity and fund expansion and refinancing of our real estate investment portfolio and operations. To limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk, we may borrow at fixed rates or variable rates depending upon prevailing market conditions. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. To the extent we borrow at fixed rates or enter into fixed interest rate swaps we will not benefit from reduced interest expense if interest rates decrease.

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, or replace our advisor.~~coverage. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

In connection with our transition to self-management, we may be required to provide notice or obtain the consent of certain of our lenders, and our failure to obtain any required consents could result in a default under our loan documents.

~~We may be required to provide notice to,and/or~~ obtain consent from, certain of our lenders in connection with our transition to self-management. To the extent that we are required to obtain the consent of a lender and such lender does not provide consent, then in the event that we are otherwise unable to amend, refinance or pay off the applicable loan, we may be in default under the loan documents. Such default would afford the applicable lender the right to exercise the remedies available to it under the loan documents, including the right to accelerate the repayment of the loan. To the extent that any of our loan repayments are accelerated, we may have difficulty, particularly given the current status of the credit markets, obtaining replacement

financing, or alternatively, the replacement financing we may obtain may not be on terms as advantageous as the terms of our current financing arrangements. In addition, any acceleration of any of our debt without replacement financing may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT and could have a significant, negative impact on our stockholders’ investments.

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 our stockholders will be adversely affected.

~~Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to stockholders.~~

We have and may continue to finance our property acquisitions using interest-only mortgage indebtedness. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments will reduce the funds available for distribution to stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

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 ~~our~~ stockholders.

Some of our financing arrangements may require us to make a lump-sum or ~~balloon~~“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 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 ~~our~~ 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 our stockholders’ ~~investments.~~investment.

Risks ~~Associated with~~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, including affiliates of our advisor.~~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:


	•	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;

	•	a venture partner might become bankrupt and such proceedings could have an adverse impact on the operation of the partnership or joint venture;

	•	actions taken by a venture partner might have the result of subjecting the property to liabilities in excess of those contemplated; and

	•	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.

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 our stockholders. 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~~ coventurer receiving more of the cash flow, including appreciation, of an investment than we would receive. If 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.

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 ~~federal~~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 securities, ~~(including our 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) ~~100.0%~~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 our 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~~We intend to ~~maintain its status as~~request a ~~partnership~~closing agreement with the IRS granting us relief for ~~federal income tax purposes, its income would be subject to taxation and our REIT status would be terminated.~~any preferential dividends we may have paid.

WePreferential dividends cannot be used to satisfy the REIT distribution requirements. In 2007, 2008 and through July 2009, shares of common stock issued pursuant to our DRIP were treated as issued as of the first day following the close of the month for which the distributions were declared, and not on the date that the

cash distributions were paid to stockholders not participating in our DRIP. Because we declare distributions on a daily basis, including with respect to shares of common stock issued pursuant to our DRIP, the IRS could take the position that distributions paid by us during these periods were preferential. In addition, during the six months beginning September 2009 through February 2010, we paid certain IRA custodial fees with respect to IRA accounts that invested in our shares. The payment of such amounts could also be treated as dividend distributions to the IRAs, and therefore could result in our being treated as having made additional preferential dividends to our stockholders.

Accordingly, we intend to ~~maintain~~submit a request to the ~~status of~~IRS seeking a closing agreement under which the IRS would grant us relief for preferential dividends that may have been paid. We cannot assure you that the IRS will accept our ~~operating partnership as~~proposal for a ~~partnership for federal income tax purposes. However,~~closing agreement. Even if the IRS accepts our proposal, we may be required to pay a penalty if the IRS were to ~~successfully challenge~~view the ~~status~~prior operation of our ~~operating partnership~~DRIP or the payment of such fees as preferential dividends. We cannot predict whether such a ~~partnership, it~~penalty would be ~~taxable as a corporation. In such event, this would reduce~~imposed or, if so, the amount of ~~distributions that~~the penalty.

If the IRS does not agree to our ~~operating partnership could make to us. This~~proposal for a closing agreement and treats the foregoing amounts as preferential dividends, we would ~~also result in our losing REIT status and becoming subject to a corporate level tax~~likely rely on ~~our own income. This would substantially reduce our cash available to pay distributions and~~ the ~~return on our stockholders’ investment. In addition, if any~~deficiency dividend provisions of the ~~entities through which~~Code to address our ~~operating partnership owns its properties, in whole or in part, loses its characterization~~continued qualification as a ~~partnership for federal income tax purposes, it would be subject~~REIT and to ~~taxation as a corporation, thereby reducing distributions to~~satisfy 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.~~distribution requirements.

~~Our stockholders~~Investors may have a current tax liability on distributions they elect to reinvest in shares of our common stock.

If our stockholders participate in ~~the~~our DRIP, they will be deemed to have received, and for income tax purposes will be taxed on, the ~~amount reinvested in~~value of the shares ~~of our common stock~~received to the extent the amount reinvested was not a tax-free return of capital. As a result, ~~unless~~except in the case of tax-exempt entities, our stockholders ~~are a tax-exempt entity, they~~ may have to use funds from other sources to pay their 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~~The maximum tax rate for ~~qualified dividends~~“qualified dividends” paid by corporations to individuals ~~to 15.0%~~is 15% through ~~2010.~~2012, as extended in recent tax legislation. Dividends paid by REITs, however, generally continue to be taxed at the normal ordinary income rate applicable to the individual recipient (subject to a maximum rate of 35% through 2012), rather than the ~~15.0%~~15% preferential rate. ~~Although this legislation does not adversely affect the taxation of REITs or dividends paid by REITs, the~~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.

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 our stockholders.

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~~“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 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 our stockholders.

Distributions to certain 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:


	•	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 speciallook-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;

	•	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

	•	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.

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 our stockholders 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 ~~our stockholders~~prospective investors to consult with their 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 REIT’s stock, by 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 REIT’s existence. We cannot assure our stockholders that we will continue to qualify as a “domestically controlled” REIT.

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 dividend is attributable to gain from sales or exchanges of U.S. real property interests.

Employee Benefit Plan ~~IRA~~ and ~~Other Tax-Exempt Investor~~IRA Risks

We, and our stockholders that are employee benefit plans or individual retirement accounts, or IRAs, ~~annuities described in Sections 403(a) or (b) of the Code, Archer MSAs, health savings accounts, or Coverdell education savings accounts (referred to generally as Benefit Plans and IRAs)~~ will be subject to risks relating specifically to our having employee benefit plans and IRAs as stockholders, which risks are discussed below.

If ~~our stockholders~~investors fail to meet the fiduciary and other standards under ~~the Employee Retirement Income Security Act of 1974, or~~ ERISA or the Internal Revenue Code as a result of an investment in ~~shares of~~ our common stock, ~~such stockholder~~they could be subject to criminal and civil penalties.

There are special considerations that apply to ~~Benefit Plans~~pension, profit-sharing trusts or IRAs investing in ~~shares of~~ our common stock. ~~Stockholders~~If investors are investing the assets of a pension, profit sharing or 401(k) plan, health or welfare plan, or an IRA in us, they should consider:


	•	whether ~~its~~the 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;

	•	whether ~~its~~the investment is made in accordance with the documents and instruments governing ~~its Benefit Plan~~their plan or IRA, including ~~its Benefit Plan~~their plan’s investment policy;

	•	whether ~~its~~the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA;

	•	whether ~~its~~the investment will impair the liquidity of the ~~Benefit Plan~~plan or IRA;

	•	whether ~~its investment will constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of~~ the ~~Code;~~

	•	~~whether its~~ 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

	•	~~its~~their need to value the assets of the plan annually in accordance with ERISA and the Internal Revenue Code.

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 our stockholders 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 ~~investors~~a plan or IRA, ~~an investor~~investors should not purchase shares unless an administrative or statutory exemption applies to ~~an investor~~the purchase.

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.


Item 1B.	Unresolved Staff Comments.

Not applicable.


Item 2.	Properties.

As of December 31, ~~2008,~~2010, we ~~have not entered into any leases for~~leased our principal executive offices located at 1551 N. Tustin Avenue, Suite 300, Santa Ana, California 92705. We did not have an address separate from our advisor, Grubb & Ellis Realty Investors, or our sponsor, Grubb & Ellis. Since we pay our advisor fees for its services, we do not pay rent for the use of its space. In connection with our self-management program, on February 4, 2009, we entered into a lease for our new principal executive offices located at The Promenade, ~~16427~~16435 North Scottsdale Road, Suite ~~440,~~320, Scottsdale, AZ 85254. ~~We anticipate that upon or prior to the completion of our transition to self-management, this office will serve as our principal executive office.~~

As of December 31, ~~2008,~~2010, including both our operating properties and the four buildings within one of our portfolios classified as held for sale (see Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations) we ~~owned 41~~had made 77 geographically diverse ~~properties, 33~~portfolio acquisitions, 63 of which are medical office properties, ~~five~~12 of which are ~~healthcare related~~healthcare-related facilities (including four quality healthcare-related office properties), and ~~three~~two of which are ~~quality commercial office properties,~~other real estate-related assets, comprising ~~5,156,000~~238 buildings with approximately 10,919,000 square feet of GLA, for an aggregate purchase price of ~~$951,416,000,~~$2,266,359,000, in 1724 states. Each of our properties is 100% owned by our operating partnership, except for the 7900 Fannin medical office building in which we own an approximate 84% interest through our operating partnership.

The following table presents certain additional information about our ~~properties~~property portfolios as of December 31, ~~2008:~~2010:


																																						Annualized
																% Total of						Annual Rent											Annualized					Base Rent
		GLA		% of			Ownership			Date		Purchase		Annual		Annual			Physical			Per Leased					GLA		Date		Purchase		Base		Physical			Per Leased
Property	Property Location	(Sq Ft)		GLA			Percentage			Acquired		Price		Rent(1)		Rent			Occupancy			Sq Ft(2)		State	Property Type(1)		(Sq Ft)		Acquired		Price		Rent(2)		Occupancy(3)			Sq Ft(4)

Southpointe Office Parke and Epler Parke I	Indianapolis, IN		97,000		1.9	%		100	%		01/22/07	$	14,800,000	$	1,176,000		1.4	%		90.4	%	$	12.12	IN		MOB		97,000		1/22/2007	$	14,800,000	$	1,092,000		71.0	%	$	11.26
Crawfordsville Medical Office Park and Athens Surgery Center	Crawfordsville, IN		29,000		0.6			100	%		01/22/07		6,900,000		593,000		0.7			100			20.12	IN		MOB		29,000		1/22/2007		6,900,000		593,000		100.0	%	$	20.45
The Gallery Professional Building	St. Paul, MN		106,000		2.1			100	%		03/09/07		8,800,000		1,164,000		1.3			67.8			11.00	MN		MOB		105,000		3/9/2007		8,800,000		1,180,000		66.1	%	$	11.24
Lenox Office Park, Building G	Memphis, TN		98,000		1.9			100	%		03/23/07		18,500,000		2,176,000		2.5			100			22.24	TN		OFF		98,000		3/23/2007		18,500,000		2,216,000		100.0	%	$	22.61
Commons V Medical Office Building	Naples, FL		55,000		1.1			100	%		04/24/07		14,100,000		1,143,000		1.3			100			20.73	FL		MOB		55,000		4/24/2007		14,100,000		1,190,000		100.0	%	$	21.64
Yorktown Medical Center and Shakerag Medical Center	Fayetteville and Peachtree City, GA		115,000		2.2			100	%		05/02/07		21,500,000		2,385,000		2.7			83.8			20.74	GA		MOB		111,000		5/2/2007		21,500,000		1,796,000		68.8	%	$	16.18
Thunderbird Medical Plaza	Glendale, AZ		110,000		2.1			100	%		05/15/07		25,000,000		1,777,000		2.0			69.1			16.17	AZ		MOB		109,000		5/15/2007		25,000,000		1,915,000		73.3	%	$	17.57
Triumph Hospital Northwest and Triumph Hospital Southwest	Houston and Sugar Land, TX		151,000		2.9			100	%		06/08/07		36,500,000		2,990,000		3.4			100			19.84	TX		HOSP		151,000		6/8/2007		36,500,000		2,990,000		100.0	%	$	19.80
Gwinnett Professional Center	Lawrenceville, GA		60,000		1.2			100	%		07/27/07		9,300,000		928,000		1.1			67.5			15.46	GA		MOB		60,000		7/27/2007		9,300,000		733,000		52.2	%	$	12.22
1 & 4 Market Exchange	Columbus, OH		116,000		2.2			100	%		08/15/07		21,900,000		1,499,000		1.7			92.6			12.95	OH		MOB		116,000		8/15/2007		21,900,000		1,286,000		76.0	%	$	11.09
Kokomo Medical Office Park	Kokomo, IN		87,000		1.7			100	%		08/30/07		13,350,000		1,349,000		1.6			98.2			15.48	IN		MOB		87,000		8/30/2007		13,350,000		1,370,000		100.0	%	$	15.75
St. Mary Physicians Center	Long Beach, CA		67,000		1.3			100	%		09/05/07		13,800,000		1,359,000		1.6			78.6			20.37	CA		MOB		67,000		9/5/2007		13,800,000		1,466,000		68.6	%	$	21.88
2750 Monroe Boulevard	Valley Forge, PA		109,000		2.1			100	%		09/10/07		26,700,000		2,699,000		3.1			100			24.70	PA		OFF		109,000		9/10/2007		26,700,000		2,852,000		100.0	%	$	26.17
East Florida Senior Care Portfolio	Jacksonville, Winter Park and Sunrise, FL		355,000		6.9			100	%		09/28/07		52,000,000		4,197,000		4.8			100			11.84	FL		SEN		355,000		9/28/2007		52,000,000		4,411,000		100.0	%	$	12.42
Northmeadow Medical Center	Roswell, GA		51,000		1.0			100	%		11/15/07		11,850,000		1,239,000		1.4			98.6			24.30	GA		MOB		52,000		11/15/2007		11,850,000		1,276,000		97.5	%	$	24.54
Tucson Medical Office Portfolio	Tucson, AZ		111,000		2.2			100	%		11/20/07		21,050,000		1,641,000		1.9			67.0			14.75	AZ		MOB		110,000		11/20/2007		21,050,000		1,530,000		58.8	%	$	13.91
Lima Medical Office Portfolio																								OH		MOB		203,000		12/7/2007		26,060,000		2,212,000		79.9	%	$	10.90
Highlands Ranch Medical Plaza																								CO		MOB		79,000		12/19/2007		14,500,000		1,590,000		81.0	%	$	20.13
Chesterfield Rehabilitation Center																								SC		HOSP		112,000		12/19/2007		40,340,000		3,144,000		100.0	%	$	28.07
Park Place Office Park																								OH		MOB		132,000		12/20/2007		16,200,000		1,544,000		67.4	%	$	11.70
Medical Portfolio 1																								KS, FL		MOB		163,000		2/1/2008		36,950,000		3,499,000		94.2	%	$	21.47
Fort Road Medical Building																								MN		MOB		50,000		3/6/2008		8,650,000		649,000		78.6	%	$	12.98
Liberty Falls Medical Plaza																								OH		MOB		44,000		3/19/2008		8,150,000		650,000		91.5	%	$	14.77
Epler Parke Building B																								IN		MOB		34,000		3/24/2008		5,850,000		477,000		86.6	%	$	14.03
Cypress Station Medical Office Building																								TX		MOB		52,000		3/25/2008		11,200,000		935,000		100.0	%	$	17.98
Vista Professional Center																								FL		MOB		32,000		3/27/2008		5,250,000		378,000		76.2	%	$	11.81
Senior Care Portfolio 1(5)																								CA, TX		SEN		226,000		Various		39,600,000		3,636,000		100.0	%	$	16.08
Amarillo Hospital																								TX		HOSP		65,000		5/15/2008		20,000,000		1,666,000		100.0	%	$	25.63
5995 Plaza Drive																								CA		OFF		104,000		5/29/2008		25,700,000		2,079,000		100.0	%	$	19.99
Nutfield Professional Center																								NH		MOB		70,000		6/3/2008		14,200,000		1,186,000		100.0	%	$	16.94
SouthCrest Medical Plaza																								GA		MOB		81,000		6/24/2008		21,176,000		1,361,000		70.1	%	$	16.80
Medical Portfolio 3																								IN		MOB		683,000		6/26/2008		90,100,000		9,211,000		75.1	%	$	13.49
Academy Medical Center																								AZ		MOB		41,000		6/26/2008		8,100,000		735,000		84.5	%	$	17.93
Decatur Medical Plaza																								GA		MOB		43,000		6/27/2008		12,000,000		1,077,000		99.5	%	$	25.05
Medical Portfolio 2																								MO, TX		MOB		173,000		Various		44,800,000		3,796,000		96.5	%	$	21.94
Renaissance Medical Center																								UT		MOB		112,000		6/30/2008		30,200,000		2,023,000		74.1	%	$	18.06
Oklahoma City Medical Portfolio																								OK		MOB		186,000		9/16/2008		29,250,000		3,596,000		92.3	%	$	19.33
Medical Portfolio 4																								OH, TX		MOB		227,000		Various		48,000,000		4,243,000		80.3	%	$	18.69
Mountain Empire Portfolio																								TN, VA		MOB		287,000		9/12/2008		27,775,000		4,049,000		90.7	%	$	14.11
Mountain Plains Portfolio																								TX		MOB		170,000		12/18/2008		43,000,000		3,885,000		98.5	%	$	22.85
Marietta Health Park																								GA		MOB		81,000		12/22/2008		15,300,000		1,080,000		88.9	%	$	13.33
Wisconsin Medical Portfolio 1																								WI		MOB		185,000		2/27/2009		33,719,000		2,871,000		100.0	%	$	15.52
Wisconsin Medical Portfolio 2																								WI		MOB		130,000		5/28/2009		40,700,000		3,435,000		100.0	%	$	26.42
Greenville Hospital Portfolio																								SC		MOB		857,000		9/18/2009		162,820,000		14,705,000		100.0	%	$	17.16

5157

% Total of
Annual Rent

GLA
% of
Ownership
Date
Purchase
Annual
Annual
Physical
Per Leased

Property Property Location (Sq Ft) GLA Percentage Acquired Price Rent(1) Rent Occupancy Sq Ft(2)

Lima Medical Office Portfolio Lima, OH 195,000 3.8 100 % 12/07/07 25,250,000 2,042,000 2.3 79.7 10.48
Highlands Ranch Medical Plaza Highlands Ranch, CO 79,000 1.5 100 % 12/19/07 14,500,000 1,607,000 1.8 85.8 20.41
Chesterfield Rehabilitation Center Chesterfield, MO 112,000 2.2 80.0 % 12/19/07 36,440,000 3,022,000 3.5 100 26.98
Park Place Office Park Dayton, OH 133,000 2.6 100 % 12/20/07 16,200,000 2,084,000 2.4 93.0 15.71
Medical Portfolio 1 Overland, KS and Largo,
Brandon and
Lakeland, FL 163,000 3.2 100 % 02/01/08 36,950,000 3,334,000 3.8 96.6 20.47
Fort Road Medical Building St. Paul, MN 50,000 1.0 100 % 03/06/08 8,650,000 647,000 0.7 92.2 12.89
Liberty Falls Medical Plaza Liberty Township, OH 44,000 0.9 100 % 03/19/08 8,150,000 594,000 0.7 91.5 13.60
Epler Parke Building B Indianapolis, IN 34,000 0.7 100 % 03/24/08 5,850,000 513,000 0.6 95.2 15.09
Cypress Station Medical Office Building Houston, TX 52,000 1.0 100 % 03/25/08 11,200,000 936,000 1.1 100 17.99
Vista Professional Center Lakeland, Fl 32,000 0.6 100 % �� 03/27/08 5,250,000 362,000 0.4 89.3 11.30
Senior Care Portfolio 1 Arlington, Galveston,
Port Arthur
and Texas City, TX
and Lomita and El Monte, CA 226,000 4.4 100 % Various 39,600,000 3,394,000 3.9 100 14.99
Amarillo Hospital Amarillo, TX 65,000 1.3 100 % 05/15/08 20,000,000 1,666,000 1.9 100 25.73
5995 Plaza Drive Cypress, CA 104,000 2.0 100 % 05/29/08 25,700,000 1,941,000 2.2 100 18.60
Nutfield Professional Center Derry, NH 70,000 1.4 100 % 06/03/08 14,200,000 1,140,000 1.3 100 16.29
SouthCrest Medical Plaza Stockbridge, GA 81,000 1.6 100 % 06/24/08 21,176,000 1,447,000 1.7 79.1 17.94
Medical Portfolio 3 Indianapolis, IN 689,000 13.4 100 % 06/26/08 90,100,000 9,810,000 11.3 87.6 14.23
Academy Medical Center Tucson, AZ 41,000 0.8 100 % 06/26/08 8,100,000 808,000 0.9 94.3 19.71
Decatur Medical Plaza Decatur, GA 43,000 0.8 100 % 06/27/08 12,000,000 1,046,000 1.2 99.5 24.36
Medical Portfolio 2 O’Fallon and St. Louis, MO
and Keller and
Wichita Falls, TX 173,000 3.4 100 % Various 44,800,000 3,736,000 4.3 97.7 21.64
Renaissance Medical Centre Bountiful, UT 112,000 2.2 100 % 06/30/08 30,200,000 2,188,000 2.5 88.5 19.51
Oklahoma City Medical Portfolio Oklahoma City, OK 186,000 3.6 100 % 09/16/08 29,250,000 3,374,000 3.9 92.8 18.11
Medical Portfolio 4 Phoenix, AZ, Parma
and Jefferson West, OH,
and Waxahachie,
Greenville, and Cedar Hill, TX 227,000 4.4 100 % Various 48,000,000 4,245,000 4.9 84.4 18.73
Mountain Empire Portfolio Kingsport and Bristol,
TN and Pennington Gap
and Norton, VA 277,000 5.4 100 % 09/12/08 25,500,000 3,855,000 4.4 95.5 13.94
Mountain Plains Portfolio San Antonio and Webster, TX 170,000 3.3 100 % 12/18/08 43,000,000 3,780,000 4.3 99.5 22.28
Marietta Health Park Marietta, GA 81,000 1.6 100 % 12/22/08 15,300,000 1,071,000 1.2 88.4 13.21

Total/Weighted Average
5,156,000 100 % $ 951,416,000 $ 86,957,000 100 % 91.3 % $ 16.87

Annualized

Annualized
Base Rent

GLA
Date
Purchase
Base
Physical
Per Leased

Property
State Property Type(1) (Sq Ft) Acquired Price Rent(2) Occupancy(3) Sq Ft(4)

Mary Black Medical Office Building SC MOB 109,000 12/11/2009 16,250,000 1,596,000 72.7 % $ 14.64
Hampden Place Medical Office Building CO MOB 66,000 12/21/2009 18,600,000 1,643,000 100.0 % $ 24.89
Dallas LTAC Hospital TX HOSP 52,000 12/23/2009 27,350,000 2,743,000 100.0 % $ 52.75
Smyth Professional Building MD MOB 62,000 12/30/2009 11,250,000 1,054,000 97.8 % $ 17.00
Atlee Medical Portfolio IN, TX MOB 93,000 12/30/2009 20,501,000 1,811,000 100.0 % $ 19.47
Denton Medical Rehabilitation Hospital TX HOSP 44,000 12/30/2009 15,485,000 1,364,000 100.0 % $ 31.00
Banner Sun City Medical Portfolio AZ MOB 643,000 12/31/2009 107,000,000 12,040,000 88.6 % $ 18.72
Camp Creek GA MOB 80,000 3/9/2010 19,550,000 1,811,000 97.6 % $ 22.64
King Street GA MOB 53,000 3/2/2010 10,775,000 1,293,000 100.0 % $ 24.40
Deaconess Evansville Clinic Portfolio IN MOB 262,000 3/23/2010 45,257,000 3,772,000 100.0 % $ 14.40
Sugar Land II Medical Office Building TX MOB 60,000 3/23/2010 12,400,000 1,689,000 100.0 % $ 28.15
East Cooper Medical Center SC MOB 61,000 3/31/2010 9,925,000 1,508,000 87.5 % $ 24.72
Pearland Medical Portfolio TX MOB 55,000 3/31/2010 10,476,000 1,001,000 98.8 % $ 18.20
Hilton Head Medical Portfolio SC MOB 31,000 3/31/2010 10,710,000 910,000 100.0 % $ 30.33
NIH @ Triad Technology Center MD MOB 101,000 3/31/2010 29,250,000 2,379,000 100.0 % $ 23.55
Federal North Medical Office Building PA MOB 192,000 4/29/2010 40,472,000 4,394,000 99.2 % $ 22.89
Balfour Concord Portfolio TX MOB 56,000 6/25/2010 13,500,000 1,164,000 100.0 % $ 20.79
Cannon Park Place SC MOB 47,000 6/28/2010 10,446,000 962,000 100.0 % $ 20.47
7900 Fannin TX MOB 176,000 6/30/2010 38,100,000 5,033,000 99.5 % $ 28.60
Overlook at Eagle’s Landing GA MOB 35,000 7/15/2010 8,140,000 673,000 88.6 % $ 19.23
Sierra Vista Medical Office Building CA MOB 45,000 8/4/2010 10,950,000 908,000 84.9 % $ 20.18
Orlando Medical Portfolio FL MOB 102,000 9/29/2010 18,300,000 1,437,000 86.1 % $ 14.09
Santa Fe Medical Portfolio NM MOB 54,000 9/30/2010 15,792,000 1,236,000 100.0 % $ 22.89
Rendina Medical Portfolio AZ, FL, MO, NV, NY MOB 306,000 9/30/2010 83,412,000 6,701,000 96.5 % $ 21.90
Allegheny HQ Building PA OFF 229,000 10/29/2010 39,000,000 4,358,000 88.3 % $ 19.03
Raleigh Medical Center NC MOB 89,000 11/12/2010 16,500,000 1,903,000 91.3 % $ 21.38
Columbia Medical Portfolio FL, NY MOB 914,000 11/19/2010 187,464,000 13,590,000 96.9 % $ 14.87
Florida Orthopedic ASC FL MOB 17,000 12/7/2010 5,875,000 500,000 100.0 % $ 29.41
Select Medical LTACH FL, GA, TX HOSP 219,000 12/17/2010 102,045,000 8,425,000 100.0 % $ 38.47
Phoenix MOB Portfolio AZ MOB 181,000 12/22/2010 35,809,000 4,648,000 94.6 % $ 25.68
Medical Park of Cary NC MOB 152,000 12/30/2010 28,000,000 2,595,000 84.9 % $ 17.07

Total/Weighted Average
10,919,000 2,214,224,000 202,749,000 91.1 % $ 18.57

(1) With respect to property type, MOB refers to Medical Office Building, HOSP refers to specialty inpatient facilities including specialty rehabilitation hospitals and long-term acute care hospitals, SEN refers to senior care facilities, and OFF refers to healthcare-related office buildings.
(2) Annualized ~~rental revenue~~base rent is based on contractual base rent from leases in effect as of December 31, ~~2008.~~2010.

~~(2)~~(3) Occupancy includes all leased space of the respective portfolio including master leases, as of December 31, 2010.
(4) Average ~~annual~~annualized base rent per occupied square foot as of December 31, ~~2008.~~2010.
(5) On December 31, 2010, we received notice from the lessee of four of the buildings within our Senior Care Portfolio 1 portfolio that the lessee intended to exercise a purchase option within the lease. This option provides the lessee with the ability to purchase these buildings at the July 6, 2011 expiration of the lease, provided that we were given timely notice and that a specified deposit was made, among other customary closing conditions. The lessee made the necessary deposit to evidence their intention to purchase these buildings, and we have thus classified these buildings as held for sale as of December 31, 2010 within our consolidated financial statements, as further discussed within Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations, to our consolidated financial statements.

~~We own~~Each of the above properties is a medical office building, specialty inpatient facility (long term acute care hospital or rehabilitation hospital), skilled nursing and assisted living facility, or other healthcare-related office building, the principal tenants of which are healthcare providers or healthcare-related service providers.
As of December 31, 2010, we owned fee simple interests in ~~all~~173 of the 238 buildings comprising our portfolio. These 173 buildings represent approximately 68.2% 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 wetotal portfolio’s GLA. We hold along-term 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~~the remaining 65 buildings within ~~each building, and two~~our portfolio, which represent approximately 31.8% 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
5258

~~Medical Office Portfolio is comprised~~our total GLA. As of ~~two properties, one in which we hold a~~December 31, 2010, these leasehold ~~interest, and the other in which we own a fee simple interest.~~interests had an average remaining term of approximately 72 years.

The following information generally applies to our properties:


	•	we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;

	•	our properties are located in markets where we are subject to competition in attracting new tenants and retaining current tenants; and

	•	depreciation is provided on a straight-line basis over the estimated useful lives of the buildings, 39 years, and over the shorter of the lease term or useful lives of the tenant improvements.

Lease Expirations

The following table presents the sensitivity of our ~~annual~~annualized base rent due to lease expirations for the next 10 years at our properties (both operating and those classified as held for sale), by number, square feet, percentage of leased area, ~~annual~~annualized base rent, and percentage of ~~annual~~annualized rent as of December 31, ~~2008.~~2010:


					% of Leased					% of Total							% of Leased			Annualized		% of Total
					Area			Annual		Annual Rent							Area			Base		Annualized
	Number of		Total Sq. Ft.		Represented			Rent Under		Represented by			Number of		Total Sq. Ft.		Represented			Rent Under		Base Rent
	Leases		of Expiring		by Expiring			Expiring		Expiring Leases			Leases		of Expiring		by Expiring			Expiring		Represented by
Year Ending December 31,	Expiring		Leases		Leases			Leases		(1)
Year Ending December 31(2)													Expiring		Leases		Leases			Leases		Expiring Leases(1)

2009		127		285,000		6.3	%	$	5,724,000		6.1	%
2010		115		468,000		10.4			9,204,000		9.8
2011		114		498,000		11.1			9,835,000		10.4			233		684,610		6.9	%	$	14,854,000		7.2	%
2012		117		426,000		9.5			8,380,000		8.9			255		803,245		8.1			15,815,000		7.7
2013		103		612,000		13.6			12,928,000		13.7			221		1,069,843		10.7			22,050,000		10.7
2014		40		516,000		11.5			7,976,000		8.4			153		846,730		8.5			14,952,000		7.2
2015		31		188,000		4.2			4,630,000		4.9			181		804,930		8.1			17,480,000		8.5
2016		38		347,000		7.7			7,531,000		8.0			102		827,561		8.3			15,424,000		7.5
2017		40		323,000		7.2			6,829,000		7.2			121		676,755		6.8			14,357,000		7.0
2018		46		364,000		8.1			7,384,000		7.8			77		580,918		5.8			10,974,000		5.3
2019		16		97,000		2.1			2,920,000		3.1			63		525,082		5.3			11,615,000		5.6
2020														77		368,204		3.7			7,740,000		3.8
Thereafter		35		375,000		8.3			11,094,000		11.7			130		2,769,032		27.8			60,978,000		29.6

Total		822		4,499,000		100	%	$	94,435,000		100	%		1,613		9,956,910		100	%	$	206,239,000		100	%


(1)		The ~~annual~~annualized rent percentage is based on the total annual contractual base rent as of December 31, ~~2008.~~2010.

(2)		Leases scheduled to expire on December 31 of a given year are included within that year in the table.

5359

Geographic Diversification/Concentration Table

The following table lists the states in which our properties (both operating and those classified as held for sale) are located and provides certain information regarding our portfolio’s geographic diversification/concentration as of December 31, ~~2008.~~2010:


	Number of		GLA					2008 Annual		% of 2008			Number of			GLA					2010 Annualized		% of 2010
State	Properties(1)		(Square Feet)		% of GLA			Base Rent(2)		Annual Base Rent			Buildings(1)			(Square Feet)		% of GLA			Base Rent(2)		Annualized Base Rent

Arizona		4		343,000		6.7	%	$	6,010,000		6.9	%		36	(3)		1,225,000		11.2	%	$	23,857,000		11.7	%
California		3		242,000		4.7			4,041,000		4.6			5			287,000		2.6			5,327,000		2.6
Colorado		1		79,000		1.5			1,607,000		1.8			3			145,000		1.3			3,233,000		1.6
Florida		4		542,000		10.5			7,626,000		8.8			20	(3)		940,000		8.6			17,844,000		8.8
Georgia		6		431,000		8.4			8,115,000		9.3			12			615,000		5.7			12,145,000		6.0
Indiana		5		937,000		18.2			13,441,000		15.5			44	(3)		1,220,000		11.2			17,235,000		8.5
Kansas		1		63,000		1.2			1,410,000		1.6			1			63,000		0.6			1,552,000		0.8
Maryland														2			164,000		1.5			3,433,000		1.7
Minnesota		2		156,000		3.0			1,811,000		2.1			2			155,000		1.4			1,829,000		0.9
Missouri		2		249,000		4.8			5,917,000		6.8			5			297,000		2.7			7,074,000		3.5
North Carolina														10			241,000		2.2			4,498,000		2.2
New Hampshire		1		70,000		1.4			1,140,000		1.3			1			70,000		0.6			1,186,000		0.6
New Mexico														2			54,000		0.5			1,236,000		0.6
Nevada														1			73,000		0.7			1,584,000		0.8
New York														8			909,000		8.3			14,140,000		7.0
Ohio		5		518,000		10.0			6,684,000		7.7			13			525,000		4.8			6,132,000		3.0
Oklahoma		1		186,000		3.6			3,374,000		3.9			2			186,000		1.7			3,596,000		1.8
Pennsylvania		1		109,000		2.1			2,699,000		3.1			4			530,000		4.9			11,604,000		5.7
South Carolina														22	(3)		1,104,000		10.1			19,681,000		9.7
Tennessee		2		308,000		6.0			5,443,000		6.3			9			321,000		2.9			5,669,000		2.8
Texas		7		745,000		14.4			14,862,000		17.1			26	(3)		1,304,000		12.0			30,969,000		15.3
Utah		1		112,000		2.2			2,188,000		2.5			1			112,000		1.0			2,023,000		1.0
Virginia		1		66,000		1.3			589,000		0.7			3			64,000		0.6			596,000		0.3
Wisconsin														6			315,000		2.9			6,306,000		3.1

Total				5,156,000		100	%	$	86,957,000		100	%		238			10,919,000		100	%	$	202,749,000		100	%


(1)		Medical Portfolio 1 includes properties located in Florida and Kansas, Medical Portfolio 2 includes properties located in Missouri and Texas, Medical Portfolio 4 includes properties located in Arizona, Ohio and Texas, Mountain Empire includes properties located in Tennessee and Virginia and Senior Care Portfolio 1 includes properties located in Texas and California. As a result,Represents the number of buildings acquired within each ~~portfolio is included in the property totals for each~~particular state as of ~~the states in which the properties are located.~~December 31, 2010.

(2)		Annualized ~~rental revenue~~base rent is based on contractual base rent from leases in effect as of December 31, ~~2008.~~2010.

(3)		As further discussed in Note 19, Concentration of Credit Risk, we had the greatest geographic concentration as of December 31, 2010 within the following states: Texas (16 consolidated properties consisting of 26 total buildings, including 4 buildings classified as held for sale), Arizona (seven consolidated properties consisting of 36 total buildings), South Carolina (five consolidated properties consisting of 22 total buildings), Florida (10 consolidated properties consisting of 20 total buildings), and Indiana (seven consolidated properties consisting of 44 total buildings).

Indebtedness

See Note 7, Mortgage ~~Loan Payables,~~Loans Payable, Net, ~~and Unsecured Note Payables to Affiliate, to the Consolidated Financial Statements,~~ Note 8, Derivative Financial Instruments, ~~to the Consolidated Financial Statements,~~Note 9, Revolving Credit Facility, and Note ~~9, Line of Credit,~~22, Subsequent Events, to ~~the Consolidated Financial Statements~~our accompanying consolidated financial statements for a further ~~discussion~~discussions of our indebtedness.


Item 3.	Legal Proceedings.

None.


Item 4.	~~Submission of Matters to a Vote of Security Holders.~~Reserved.

~~No matters were submitted to a vote of security holders during the fourth quarter of 2008.~~

5460

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

There is no established public trading market for shares of our common stock.

In order for members of the Financial Industry Regulatory Authority, or FINRA, and their associated persons to participate in ~~the offering and sale~~our offerings of shares of our common stock, we are required to disclose in each annual report distributed to stockholders a per share estimated value of the shares, the method by which it was developed, and the date of the data used to develop the estimated value. In addition, we will prepare annual statements of estimated share values to assist fiduciaries of retirement plans subject to the annual reporting requirements of ERISA in the preparation of their reports relating to an investment in shares of our common stock. For these purposes, ~~our advisor’s~~management’s estimated value of the shares is $10.00 per share as of December 31, ~~2008.~~2010. The basis for this valuation is the fact that the ~~current~~ public offering price for shares of our common stock isin our recently completed follow-on public offering was $10.00 per share (ignoring purchase price discounts for certain categories of purchasers). However, there is no public trading market for the shares of our common stock at this time, and there can be no assurance that stockholders could receive $10.00 per share if such a market did exist and they sold their shares of our common stock or that they will be able to receive such amount for their shares of our common stock in the future. Until 18August 28, 2012 (18 months after the ~~later of the~~ completion of ~~this or any subsequent~~our follow-on offering of shares of our common ~~stock,~~stock), or upon the occurrence of our shares being listed on a national securities exchange, we intend to continue to use the offering price of shares of our common stock in our most recent offering as the estimated per share value reported in our Annual Reports onForm 10-K distributed to stockholders. Beginning 18 months after the last offering of shares of our common stock, the value of the properties and our other assets will be determined in a manner deemed appropriate by our board of directors, and we will disclose the resulting estimated per share value in a Current Report on Form 8-K and in our subsequent Annual Reports onForm 10-K distributed to stockholders.

Stockholders

As of March ~~13, 2009,~~21, 2011, we had ~~23,999~~55,728 stockholders of record.

Distributions

In order to continue to qualify as a REIT for federal income tax purposes, among other things, we must distribute at least 90.0% of our annual taxable income to our stockholders. The amount of ~~the~~ distributions we pay to our stockholders is determined by our board of directors, at its sole discretion, and is dependent on a number of factors, including funds available for the payment of distributions, our financial condition, capital expenditure requirements and annual distribution requirements needed to maintain our status as a REIT under the ~~Internal Revenue~~ Code, ~~of 1986,~~ as ~~amended.~~
~~Our board of directors approved a 6.50% per annum, or $0.65 per common share, distribution to be~~well as any liquidity alternative we may pursue. We have paid to our stockholders beginning on January 8, 2007, the date we reached our minimum offering of $2,000,000. The first distribution was paid on February 15, 2007 for the period ended January 31, 2007. Thereafter, distributions were paid on or about the 15th day of each month in respect of the distributions declared for the prior month. 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 ourmonthly since February 2007 ~~monthly distribution. Distributions are paid~~and if our investments produce sufficient cash flow, we expect to continue to pay distributions to our stockholders on a monthly basis. However, our board of directors could, at any time, elect to pay distributions quarterly to reduce administrative costs. Because our cash available for distribution in any year may be less than 90.0% of our taxable income for the year, we may obtain the necessary funds by borrowing, issuing new securities or selling assets to pay out enough of our taxable income to satisfy the distribution requirement. Our organizational documents do not establish a limit on the amount of any offering proceeds we may use to fund distributions.

For the years ended December 31, 2010 and 2009, our board of directors authorized, and we declared and paid, monthly distributions to our stockholders, based on daily record dates, at a rate that would equal a 7.25% annualized rate, or $0.725 per common share based on a $10.00 per share price. It is our intent to continue to pay distributions. However, our board may reduce our distribution rate and we cannot guarantee the timing and amount of distributions paid in the future, if any.

61

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 ~~have~~has historically resulted in a return of capital to our stockholders.

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, 2010 and 2009:

Three Months Ended
December 31,
September 30,
June 30,
March 31,

2010 2010 2010 2010

Distributions paid in cash $ 17,306,000 $ 15,666,000 $ 14,366,000 $ 12,838,000
Distributions reinvested 15,995,000 14,490,000 13,544,000 12,522,000

Total distributions $ 33,301,000 $ 30,156,000 $ 27,910,000 $ 25,360,000

Source of distributions:
Cash flow from operations $ 8,880,000 $ 17,847,000 $ 19,230,000 $ 12,546,000
Debt financing 24,421,000 12,309,000 8,680,000 12,814,000
Offering proceeds — — — —

Total sources $ 33,301,000 $ 30,156,000 $ 27,910,000 $ 25,360,000

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

For the year ended December 31, ~~2008,~~2010, we paid distributions of ~~$28,042,000~~$116,727,000 ($~~14,943,000~~60,176,000 in cash and ~~$13,099,000~~$56,551,000 in shares of our common stock pursuant to ~~our distribution reinvestment plan, or~~ the DRIP), as compared to cash flows from operations of ~~$20,677,000.~~$58,503,000. From inception through December 31, ~~2008,~~2010, we paid cumulative distributions of ~~$34,038,000~~$228,824,000 ($~~18,266,000~~117,941,000 in cash and ~~$15,772,000~~$110,883,000 in shares of our common stock

55

pursuant to the DRIP), as compared to cumulative cash flows from operations of ~~$27,682,000.~~$107,813,000. The difference between our cumulative distributions paid and our cumulative cash flows from operations is indicative of our high volume of acquisitions completed since our date of inception. The distributions paid in excess of our cash flows from operations in 2010 were paid using proceeds from ~~our offering.~~

~~As of December 31, 2008, we had an amount payable of $1,043,000 to our advisor and its affiliates for operating expenses,on-site~~ personnel and engineering payroll, lease commissions and asset and property management fees, which will be paid from cash flows from operations in the future as they become due and payable by us in the ordinary course of business consistent with our past practice.

As of December 31, 2008, no amounts due to our advisor or its affiliates have been deferred or forgiven. Our advisor and its affiliates have no obligations to defer or forgive amounts due to them. In the future, if our advisor or its affiliates do not defer or forgive amounts due to them, this would negatively affect our cash flows from operations, which could result in us paying distributions, or a portion thereof, with proceeds from our offering or borrowed funds. As a result, the amount of proceeds available for investment and operations would be reduced, or we may incur additional interest expense as a result of borrowed funds.debt financing.

For the years ended December 31, ~~2008~~2010 and ~~2007,~~2009, our FFO was ~~$8,745,000~~$69,449,000 and ~~$2,124,000,~~$28,314,000, respectively. FFO was reduced by ~~noncash losses caused by the reduced fair market value of interest rate swaps of $12,821,000~~$19,717,000 and ~~$1,377,000~~$19,715,000 for the years ended December 31, ~~2008~~2010 and ~~2007, respectively. For~~2009, respectively, for certain transition charges, one-time charges, and acquisition-related expenses. Acquisition-related expenses were previously capitalized as part of the ~~years ended~~purchase price allocations and have historically been added back to FFO over time through depreciation. Excluding one-time charges, transition charges, and acquisition-related expenses, FFO at December 31, ~~2008~~2010 and 2007, we paid distributions of $28,042,000 and $5,996,000, respectively. Such amounts were covered by FFO of $8,745,000 in 2008 and $2,124,000 in 2007, which is net of the noncash losses described below. The distributions paid in excess of our FFO were paid using proceeds from our offering. Excluding such noncash losses, FFO2009 would have been ~~$21,566,000~~$89,166,000 and ~~$3,501,000,~~$48,029,000, respectively. From inception through December 31, 2008, our FFO was $10,627,000, which was reduced by noncash losses caused by the reduced fair market value of interest rate swaps of $14,198,000, as described below. From inception through December 31, 2008, we paid cumulative distributions of $34,038,000. Of this amount, $10,627,000, was covered by our FFO which is net of the noncash losses described below. The distributions paid in excess of our FFO were paid using proceeds from our offering. Excluding such noncash losses, FFO would have been $24,825,000.

In order to manage interest rate risk, we enter into interest rate swaps to fix interest rates, which are derivative financial instruments. These interest rate swaps are required to be recorded at fair market value, even if we have no intention of terminating these instruments prior to their respective maturity dates. Our FFO reflects cumulative noncash losses on derivative financial instruments related to our interest rate swaps from inception through December 31, 2008 in the amount of $14,198,000 resulting from fluctuations in variable interest rates. This change in fair value is ~~an adjustment to reconcile net loss to net cash provided by operating activities. This is shown in our accompanying consolidated statements of cash flows as~~ a noncash adjustment. See Note 8, Derivative Financial Instruments, to the Consolidated Financial Statements, for a further discussion of our derivative financial instruments. All interest rate swaps are marked-to-market with changes in value included in net income (loss) each period until the instrument matures. We have no intentions of terminating these instruments prior to their respective maturity dates. The value of our interest rate swaps will fluctuate until the instrument matures and will be zero upon maturity of the instruments. Therefore, any gains or losses on derivative financial instruments will ultimately be reversed.

non-GAAP measure. See our disclosure regarding FFO in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds ~~From~~from Operations and Modified Funds from Operations.

Recent Sales of Unregistered Securities ~~Authorized for Issuance under Equity Compensation Plans~~

~~See Item 12. Security Ownership~~On May 20, 2010, our board of ~~Certain Beneficial Owners~~directors approved the adoption of an employee retention program pursuant to which we will grant our executive officers and ~~Management and Related Stockholder Matters — Equity Compensation Plan Information, for a discussion~~employees restricted shares of our ~~equity compensation plan information.~~common stock. In accordance with this program, on May 24, 2010, Mr. Peters, Ms. Pruitt and Mr. Engstrom, were entitled to receive grants of 100,000, 50,000 and 50,000 shares of restricted stock, respectively. Mr. Peters elected to receive a restricted cash award in lieu of 50,000 shares. The restricted shares and the restricted cash award granted to Mr. Peters will vest in thirds on each anniversary of the grant date, provided that the grantee is employed by us on such date. The shares granted to Ms. Pruitt and Mr. Engstrom will vest 100% on the third anniversary of the grant date, provided that the grantee is employed by us on such date. All shares have been granted pursuant to our 2006 Incentive Plan, as amended, or the 2006 Plan. The restricted shares will become immediately vested upon the earlier occurrence of (1) the executive’s termination of employment by reason of his or her death or disability, (2) a change in control of the company (as defined in the 2006 Plan) or (3) the executive’s termination of employment by us without cause or by the executive for good reason (as such terms are defined in the executive officers’ respective employment agreements). The shares were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act for transactions not involving a public offering.

Pursuant to the terms of his employment agreement, on July 1, 2010, Mr. Peters was entitled to receive a grant of 120,000 fully-vested shares. Pursuant to the terms of his employment agreement, Mr. Peters elected to receive a $600,000 cash payment, in lieu of one-half of such shares, and 60,000 fully-vested shares. The shares were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act for transactions not involving a public offering.

Use of Public Offering Proceeds

On September 20, 2006, we commenced a best efforts public offering, or our initial ~~public~~ offering, in which we ~~are offering a minimum of 200,000 shares of our common stock aggregating at least $2,000,000, and a maximum of~~

offered up to 200,000,000 shares of our common stock for $10.00 per share and up to 21,052,632 shares of our common stock pursuant to our ~~distribution reinvestment plan,~~DRIP, at $9.50 per share, aggregating up to $2,200,000,000. The initial offering expired on March 19, 2010. As of March 19, 2010, we had received and accepted subscriptions in our initial offering for 147,562,354 shares of our common stock, or $1,474,062,00, excluding shares of our common stock issued under the DRIP.

On March 19, 2010, we commenced a best efforts public offering, or our follow-on offering, in which we offered up to 200,000,000 shares of our common stock for $10.00 per share in our primary offering and up to 21,052,632 shares of our common stock pursuant to the DRIP at $9.50 per share, aggregating up to $2,200,000,000. ~~The shares offered have been registered with the SEC on a Registration Statement onForm S-11~~ ~~(FileNo. 333-133652)~~ ~~under the Securities Act of 1933, as amended, which was declared effective by the SEC on September 20, 2006. Our offering will terminate no later than September 20, 2009.~~

As of December 31, ~~2008,~~2010, we received and accepted subscriptions in our follow-on offering for 50,604,239 shares of our common stock, or $505,534,000, excluding shares of our common stock issued under the DRIP. The primary offering terminated on February 28, 2011. For noncustodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by the end of business March 15, 2011 were accepted. For custodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by the end of business March 31, 2011 will be accepted. As of March 21, 2011, we had received and accepted subscriptions in our follow-on offering for ~~73,824,809~~71,659,602 shares of our common stock, or ~~$737,398,000. As of December 31, 2008, a total of $15,772,000 in distributions were reinvested and 1,660,176~~$715,591,000, excluding shares of our common stock ~~were~~ issued under the DRIP.

AsThe ratio of the costs we incurred in connection with our offerings as of December 31, ~~2008,~~2010 to the total amount of capital we ~~have incurred marketing support fees~~raised in the offerings as of $18,410,000, selling commissions of $50,875,000 and due diligence expense reimbursements of $181,000. We have also incurred organizational and offering expenses of $8,800,000. Such fees and reimbursements are charged to stockholders’ equity (deficit) as such amounts are reimbursed from the gross proceeds of our offering. The cost of raising funds in our offering as a percentage of funds raised will not exceed 11.5%December 31, 2010 was approximately 10.1%.

As of December 31, ~~2008,~~2010, we have used ~~$524,756,000~~$1,632,795,000 in offering proceeds to ~~purchase~~make our 4277 geographically diverse ~~properties and other real estate related assets~~portfolio acquisitions and repay debt incurred in connection with such acquisitions.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Our share repurchase plan allows for share repurchases by us when certain criteria are met by our stockholders. Share repurchases will be made at the sole discretion of our board of directors. ~~Funds for the repurchase of shares of our common stock will come exclusively from the proceeds we receive from the sale of shares under the DRIP.~~

During the three months ended December 31, ~~2008,~~2010, we repurchased shares of our common stock as follows:


Item 6.	Selected Financial Data.

The following should be read with Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the notes thereto. 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 reflecting the results of our operating properties, and statement of cash flows data in a format consistent with our consolidated financial statements under Item 15. Exhibits, Financial Statement ~~Schedules of this Annual Report onForm 10-K.~~Schedules.

December 31, April 28, 2006

Selected Financial Data 2008 2007 2006 (Date of Inception)

BALANCE SHEET DATA:
Total assets $ 1,113,923,000 $ 431,612,000 $ 385,000 $ 202,000
Mortgage loan payables, net $ 460,762,000 $ 185,801,000 $ — $ —
Stockholders’ equity (deficit) $ 599,320,000 $ 175,590,000 $ (189,000 ) $ 2,000

Period from

April 28, 2006

(Date of Inception)

Years Ended December 31, through

2008 2007 December 31, 2006

STATEMENT OF OPERATIONS DATA:
Total revenues $ 80,418,000 $ 17,626,000 $ —
Loss from continuing operations $ (28,448,000 ) $ (7,666,000 ) $ (242,000 )
Net loss $ (28,448,000 ) $ (7,666,000 ) $ (242,000 )
Loss per share — basic and diluted(1):
Loss from continuing operations $ (0.66 ) $ (0.77 ) $ (149.03 )
Net loss $ (0.66 ) $ (0.77 ) $ (149.03 )
STATEMENT OF CASH FLOWS DATA:
Cash flows provided by operating activities $ 20,677,000 $ 7,005,000 $ —
Cash flows used in investing activities $ (526,475,000 ) $ (385,440,000 ) $ —
Cash flows provided by financing activities $ 628,662,000 $ 383,700,000 $ 202,000
OTHER DATA:
Distributions declared $ 31,180,000 $ 7,250,000 $ —
Distributions declared per share $ 0.73 $ 0.70 $ —
Funds from operations(2) $ 8,745,000 $ 2,124,000 $ (242,000 )
Net operating income(3) $ 52,244,000 $ 11,589,000 $ —


	December 31,											April 28, 2006
	2010		2009		2008		2007		2006			(Date of Inception)

BALANCE SHEET DATA:
Total assets	$	2,271,795,000	$	1,673,535,000	$	1,113,923,000	$	431,612,000	$	385,000		$	202,000
Mortgage loans payable, net	$	699,526,000	$	540,028,000	$	460,762,000	$	185,801,000	$	—		$	—
Stockholders’ equity (deficit)	$	1,487,246,000	$	1,071,317,000	$	599,320,000	$	175,590,000	$	(189,000	)	$	2,000


													Period from
													April 28, 2006
													(Date of Inception)
	Years Ended December 31,												through
	2010			2009			2008			2007			December 31, 2006

STATEMENT OF OPERATIONS DATA:
Total revenues (operating properties)	$	199,879,000		$	126,286,000		$	78,010,000		$	17,626,000		$	—
Net loss	$	(7,919,000	)	$	(24,773,000	)	$	(28,409,000	)	$	(7,674,000	)	$	(242,000	)
Net loss attributable to controlling interest	$	(7,903,000	)	$	(25,077,000	)	$	(28,448,000	)	$	(7,666,000	)	$	(242,000	)
Loss per share — basic and diluted(1):
Net loss	$	(0.05	)	$	(0.22	)	$	(0.66	)	$	(0.77	)	$	(149.03	)
Net loss attributable to controlling interest	$	(0.05	)	$	(0.22	)	$	(0.66	)	$	(0.77	)	$	(149.03	)
STATEMENT OF CASH FLOWS DATA:
Cash flows provided by operating activities	$	58,503,000		$	21,628,000		$	20,677,000		$	7,005,000		$	—
Cash flows used in investing activities	$	626,849,000		$	455,105,000		$	526,475,000		$	385,440,000		$	—
Cash flows provided by financing activities	$	378,615,000		$	524,147,000		$	628,662,000		$	383,700,000		$	202,000
OTHER DATA:
Distributions declared	$	120,507,000		$	82,221,000		$	31,180,000		$	7,250,000		$	—
Distributions declared per share	$	0.73		$	0.73		$	0.73		$	0.70		$	—
Distributions paid in cash	$	60,176,000		$	39,499,000		$	14,943,000		$	3,323,000		$	—
Distributions reinvested	$	56,551,000		$	38,559,000		$	13,099,000		$	2,673,000		$	—
Funds from operations(2)	$	69,449,000		$	28,314,000		$	8,745,000		$	2,124,000		$	(242,000	)
Modified funds from operations(2)	$	89,166,000		$	48,029,000		$	8,757,000		$	2,124,000		$	(242,000	)
Net operating income(3)	$	137,419,000		$	84,462,000		$	52,244,000		$	11,589,000		$	—


(1)		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 stockholder’s basis in the shares of our common stock 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 stockholder’s common stock.


(2)		For additional information on FFO and modified funds from operations, or MFFO, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Funds from Operations and Modified Funds From Operations, which includes a reconciliation of our GAAP net ~~income(loss)~~loss to FFO and MFFO for the years ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the period~~2008. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from ~~April 28, 2006 (Date~~operating activities or other measurements under GAAP as indicators of ~~Inception) through December 31, 2006.~~our liquidity.

(3)		For additional information on net operating income, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Net Operating Income, which includes a reconciliation of our GAAP net income(loss) to net operating income for the years ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006.~~2008.

5965


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our consolidated financial statements and notes appearing elsewhere in this Annual Report onForm 10-K. Such consolidated financial statements and information have been prepared to reflect our financial position as of December 31, ~~2008~~2010 and ~~2007,~~2009, together with our results of operations and cash flows for the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006.~~2008.

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Actual results may differ materially from those included in the forward-looking statements. We intend those forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the terms such as “expect,” “project,” “may,” “will,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or ~~REITs;~~REITs and changes to laws governing the healthcare industry; the success of our assessment of strategic alternatives, including potential liquidity alternatives; the availability of capital; changes in interest rates; competition in the real estate industry; the supply and demand for operating properties in our proposed market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the availability of properties to acquire; and the availability of ~~financing and our ongoing relationship with Grubb & Ellis Company, or Grubb & Ellis, or our sponsor, and its affiliates.~~financing. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, including but not limited to the risks described under Part I, Item 1A. Risk Factors, is included herein and in our other filings with the ~~United States Securities and Exchange Commission, or the~~ SEC.

Overview and Background

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc., a Maryland corporation, was incorporated on April 20, 2006. ~~Upon or prior to the completion of our transition to self-management, we intend to change our name to Healthcare Trust of America, Inc.~~ We were initially capitalized on April 28, 2006, and ~~therefore we~~ consider that our date of inception. We ~~provide stockholders the potential for income~~are a fully integrated, self-administered, and ~~growth through investment in a diversified~~self-managed REIT. Accordingly, our internal management team manages ourday-to-day operations and oversees and supervises our employees and outside service providers. Acquisitions and asset management services are performed in-house by our employees, with certain monitored services provided by third parties at market rates. We do not pay acquisition, disposition or asset management fees to an external advisor and we have not and will not pay any internalization fees.

Our primary business consists of acquiring, owning and operating our portfolio of ~~real estate properties, focusing primarily on~~ medical office buildings and ~~healthcare related~~other healthcare-related facilities. We ~~may also invest~~have been an active, disciplined buyer of medical office buildings since January 2007 acquiring approximately $2.3 billion over a period of four years and we are one of the largest owners of medical office buildings in the United States. Our portfolio is concentrated within major U.S. metropolitan areas and is located primarily on the campuses of nationally recognized healthcare systems. As of December 31, 2010, including both our operating properties and four buildings classified as held for sale, we had made 77 geographically diverse portfolio acquisitions, 63 of which are medical office properties, 12 of which are healthcare-related facilities (including four quality healthcare-related office

properties), and two of which are other real ~~estate related assets. We focus primarily on investments that produce recurring income. We have qualified and elected to be taxed as a REIT under the Internal Revenue Code~~estate-related assets, comprising 238 buildings with approximately 10,919,000 square feet of ~~1986, as amended, or the Code,~~GLA, for ~~federal income tax purposes and we intend to continue to be taxed as a REIT.~~an aggregate purchase price of $2,266,359,000, in 24 states.

Our business strategy consists of the following: (1) achieve continued growth through acquisitions, (2) maximize internal growth through hands-on asset management, leasing and property management oversight, and (3) maintain balance sheet flexibility with low leverage. We believe that these strategies allow us to proactively identify and undertake actions that drive growth and enhance stockholder value. We believe our mission is to maintain a strong balance sheet and to buy, own and operate assets in an optimal manner. Our overall philosophy is to undertake actions which are ~~conducting~~in the best interests of our stockholders. In moving to our self-management model, we put our stockholders first and put the focus on performance-based behavior, which has saved costs and increased productivity at all levels of our company.

On November 14, 2008, we amended and restated the advisory agreement with our former advisor in order to reduce and ultimately eliminate fees and to transition our company to a self-managed, self-administered REIT. We completed our transition to self-management during the third quarter of 2009 at cost, which was minimal, and the advisory agreement with our former advisor expired without renewal on September 20, 2009. We did not have to pay an internalization fee to our former advisor upon or after our transition. On October 18, 2010, we purchased the limited partner interest of our former advisor, including its rights under our operating partnership agreement, which included a subordinated distribution upon the occurrence of specified liquidity events and other rights.

On September 20, 2006, we commenced a best efforts ~~initial~~ public offering, or our initial offering, in which we ~~are offering~~offered up to 200,000,000 shares of our common stock for $10.00 per share and up to 21,052,632 shares of our common stock pursuant to our distribution reinvestment plan, or the DRIP, ~~for~~at $9.50 per share, aggregating up to

~~$2,200,000,000. We will sell shares~~ $2,200,000,000. As of ~~our common stock in our offering until the earlier of September 20, 2009, or~~March 19, 2010, the date onupon which ~~the maximum amount has been sold. As of December 31, 2008,~~our initial offering terminated, we had received and accepted subscriptions in our initial offering for ~~73,824,809~~147,562,354 shares of our common stock, or ~~$737,398,000,~~$1,474,062,000, excluding shares of our common stock issued under the DRIP.

~~We conduct substantially all~~On March 19, 2010, we commenced a best efforts public offering, or our follow-on offering, in which we offered up to 200,000,000 shares of our ~~operations through Grubb & Ellis Healthcare REIT Holdings, L.P.,~~common stock for $10.00 per share in our primary offering and up to ~~be renamed Healthcare Trust~~21,052,632 shares of ~~America Holdings, L.P., or~~ our ~~operating partnership. We are currently externally advised by Grubb & Ellis Healthcare REIT Advisor, LLC, or our advisor,~~common stock pursuant to ~~an advisory agreement, as amended and restated on November 14, 2008 and effective as of October 24, 2008, or~~ the Advisory Agreement, between us, our advisor and Grubb & Ellis Realty Investors, LLC or Grubb & Ellis Realty Investors, who is the managing member of our advisor. Our advisor is affiliated with us in that we and our advisor have a common officer, who also owns an indirect equity interest in our advisor. Our advisor engages affiliated entities, including Triple Net Properties Realty, Inc., or Realty, and Grubb & Ellis Management Services, Inc.DRIP at $9.50 per share, aggregating up to ~~provide various services to us, including property management services.~~

The Advisory Agreement expires on September 20, 2009. Our main objectives in amending the Advisory Agreement on November 14, 2008 were to reduce acquisition and asset management fees and to set the framework for our transition to self-management. Under the Advisory Agreement, as amended November 14, 2008, our advisor agreed to use reasonable efforts to cooperate with us as we pursue a self-management program. Upon or prior to completion of our transition to self-management and/or termination of the Advisory Agreement, we will no longer be advised by our advisor or consider our company to be sponsored by Grubb & Ellis.

At the commencement of our offering we had minimal assets and operations and we did not believe that it was efficient at that time to engage our own internal management team. As of March 26, 2009, we have acquired 43 geographically diverse properties and other real estate related assets for a total purchase price of $1,000,520,000. As a result of our growth and success, our board of directors believes that we now have the critical mass required to support a self-management structure. Our board of directors believes that self-management will enable us to better position our company for success in the future for several reasons discussed below:

~~Management Team.~~ We believe that our management team, led by Scott D. Peters, has the experience and expertise to efficiently and effectively operate our company. In addition, we have hired a Chief Accounting Officer, Kellie S. Pruitt. We have also hired three other employees and have engaged two independent consultants to assist us with acquisitions, asset management and accounting. We intend to continue to hire additional employees and engage independent consultants to expand our self-management infrastructure, assist in our transition to a self-managed company and fulfill other responsibilities, including acquisitions, accounting, asset management, strategic investing and corporate and securities compliance. Mr. Peters is leading our transition to a self-management structure. Our internal management team, led by Mr. Peters, will manage our day-to-day operations and oversee and supervise our employees and third party service providers, who will be retained on an as-needed basis. All key personnel will report directly to Mr. Peters.

~~Governance.~~ An integral part of our self-management program is our experienced board of directors. Our board of directors provides effective ongoing governance for our company and spends a substantial amount of time overseeing our transition to self-management. Our governance and management framework is one of our key strengths.

previously determined that the fees to our advisor were fair, competitive and commercially reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties, we believe that by having our own employees and independent consultants manage our operations and retain third party providers, we will significantly reduce the cost structure of our company.

~~Dedicated Management and Increased Accountability.~~ Under our self-management program, our officers and employees will only work for our company and will not be associated with any outside advisor. Our management team, led by Mr. Peters, has direct oversight of employees, independent consultants and third party service providers on an ongoing basis. 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 and efficiency.

~~Prior to or upon the completion of our transition to self-management, we intend to change our name to “Healthcare Trust of America, Inc.”~~

$2,200,000,000. As of December 31, ~~2008,~~2010, we ~~owned 41 geographically diverse properties comprising 5,156,000 square feet~~received and accepted subscriptions in our follow-on offering for 50,604,239 shares of ~~gross leasable area,~~our common stock, or ~~GLA,~~$505,534,000, excluding shares of our common stock issued under the DRIP. We stopped offering shares in the primary offering on February 28, 2011. For noncustodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and ~~one other real estate related asset,~~funds received by the end of business March 15, 2011 were accepted. For custodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by the end of business March 31, 2011 will be accepted. As of March 21, 2011, we had received and accepted subscriptions in our follow-on offering for ~~an aggregate purchase price~~71,659,602 shares of ~~$966,416,000.~~our common stock, or $715,591,000, excluding shares of our common stock issued under the DRIP. We will continue to offer shares pursuant to the DRIP; however, we may terminate the DRIP at any time.

~~Business Strategies~~Company Highlights

~~We seek to invest in a diversified portfolio of real estate, focusing primarily on investments that produce recurring income. Our real estate investments focus on medical office buildings~~Acquisitions 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 other real estate related assets will generally focus on 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 of 1940, as amended, or the Investment Company Act, we may be required to limit our investments in other real estate related assets.

In addition, when and as determined appropriate by our advisor and management, the portfolio may also include properties in various stages of development other than those producing recurring 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~~Portfolio Performance or other stabilization, all of which will have limited or no relevant operating histories and no recurring income. Our advisor and management will make 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, our advisor and management seek to ensure that we invest in properties with the following attributes:


	•	~~Quality.~~ ~~We seek to acquire properties that are suitable~~During the year ended December 31, 2010, we completed 24 new portfolio acquisitions, expanded six of our existing portfolios through the purchase of additional medical office buildings within each, and purchased the remaining 20% interest we previously did not own in HTA-Duke Chesterfield Rehab, LLC, which owns the Chesterfield Rehabilitation Center for ~~their intended use~~an aggregate purchase price of $806,048,000. These purchases consist of 58 buildings comprised of 3,514,000 GLA with ~~a quality~~an average occupancy of ~~construction that is capable~~96% as of ~~sustaining the property’s investment potential for the long-term, assuming funding of budgeted maintenance, repairs and capital improvements.~~December 31, 2010.

	•	~~Location.~~ ~~We seek~~Our asset management performance and acquisition performance has allowed us to ~~acquire~~realize an approximately 63% increase in our net operating income, or NOI, for the year ended December 31, 2010 as compared to the year ended December 31, 2009 and an approximately 163% increase in NOI


		as compared to the year ended December 31, 2008. NOI is a non-GAAP financial measure. For a reconciliation of NOI to net loss, see “Net Operating Income”.


	•	Our total portfolio of properties ~~that are located~~maintained an average occupancy rate of approximately 91% (unaudited) as of December 31, 2010.

FFO and MFFO Performance


	•	For the year ended December 31, 2010, our funds from operations, or FFO, has increased by 145% to $69,449,000 from $28,314,000 for the year ended December 31, 2009, primarily as a result of our 24 portfolio acquisitions in ~~established or otherwise appropriate markets for comparable properties, with access~~2010. FFO is a non-GAAP financial measure. For a reconciliation of FFO to net income (loss), see “Funds from Operations and ~~visibility suitable to meet the needs of its occupants.~~Modified Funds from Operations.”

	•	~~Market;~~For the year ended December 31, 2010, our modified funds from operations, or MFFO, was $89,166,000. MFFO is a non-GAAP financial measure. For a reconciliation of MFFO to net income (loss), see “Funds from Operations and ~~Supply and Demand.~~Modified Funds from Operations” below.

Financing & Liquidity


	•	We ~~focus~~increased our financial flexibility by closing on ~~local or regional markets~~our $275,000,000 unsecured credit facility, which have potential for stable and growing property level cash flow over the long-term. These determinations will be based in part on an evaluation of local economic, demographic and regulatory factors affecting the property. For instance, we will favor markets that indicate a growing population and employment base or markets that exhibit potential limitations on additionsis expandable to ~~supply, such as barriers~~$500,000,000, subject to new construction. Barriers to new construction include lack of available land and stringent zoning restrictions. In addition, we will generally seek to limit our investments in areas that have limited potential for growth, except where wesyndication. We believe that, ~~we have a competitive advantage.~~going forward, this greater flexibility will allow for enhanced ability to structure deals under beneficial terms to us, which in turn will allow for reductions to our overall cost of capital.

	•	~~Predictable Capital Needs.~~We ~~seek~~closed a senior secured real estate term loan in the amount of $125,500,000 on February 1, 2011. The primary purposes of this debt included paying off one of our 2010 maturities totaling $10,943,000 and refinancing a total of $89,969,000 of our 2010 and 2011 debt maturities. The interest rate associated with this loan, excluding the impact of interest rate swap instruments, is one-month LIBOR plus 2.35%, which currently equates to ~~acquire properties where~~2.61%. Including the ~~future expected capital needs can be reasonably projected~~impact of the interest rate swap discussed in ~~a manner that would allow us~~Note 22, Subsequent Events, to ~~meet~~ our ~~objectives~~consolidated financial statements, the weighted average rate associated with this term loan is approximately 3.10%. This is lower than the weighted average rate of ~~growth in cash flow and preservation~~4.18% (including the impact of ~~capital and stability.~~interest rate swaps) we were previously paying on the refinanced debt.

	•	~~Cash Flow.~~We ~~seek~~secured approximately $79,125,000 in new long term financing on certain of our 2009 and 2010 acquisitions.

	•	We maintained a leverage ratio of our mortgage loans payable debt 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 will evaluate cash flow as well as expected growth and the potential for appreciation.total assets of 30.8%.

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.Self-Management Impact


	•	For the year ended December 31, 2010, we would have been required to pay acquisition, asset management and above market property management fees of approximately $44,351,000, to our former advisor if we were still subject to the advisory agreement under its original terms prior to the commencement of our transition to self-management.

	•	The cost of self-management, which includes costs related to management and employee salaries and share-based compensation and corporate office overhead, during the year ended December 31, 2010 was approximately $10,630,000. Therefore, we achieved a net cost savings of approximately $33,721,000 ($44,351,000 fees saved minus $10,630,000) for the year ended December 31, 2010 resulting from our self-management cost structure. In addition and just as importantly, we eliminated internalization fees, established a management and employee team dedicated to our stockholders, and we put ourselves in a position to move our company forward to the next stage of our lifecycle.

	•	Consistent with our self-management model, we have implemented another upgrade to our asset management capabilities by implementing Resolve Technology’s business intelligence solution. The new information technology integrates and consolidates our existing technology platforms and provides management with reports that enable real-time visibility into asset and portfolio performance.

6368

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 will depend 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 our offering and potential future offerings.

Stockholder Value Enhancement


	•	During the year ended December 31, 2010, we engaged J.P. Morgan Securities, LLC, or JP Morgan, to act as our lead strategic advisor. JP Morgan is assisting our board and management team in exploring various actions to maximize stockholder value, including the assessment of various liquidity alternatives. As we have previously disclosed, we intend to effect a liquidity event by September 2013.

	•	On October 18, 2010 we entered into a Redemption, Termination, and Release Agreement, or the Redemption Agreement, with our former advisor to purchase the advisor’s limited partner interest, including all rights with respect to a subordinated distribution upon the occurrence of specified liquidity events and other rights that our former advisor held in our operating partnership. In addition, we have resolved all remaining issues with our former advisor. In connection with the execution of the Redemption Agreement, we made a one-time payment to our former advisor of $8,000,000.

	•	On December 20, 2010, our stockholders approved an amendment to our charter to provide for the reclassification and conversion of our common stock in the event our shares are listed on a national securities exchange to implement a phased-in liquidity program. We proposed these amendments and submitted them for approval by our stockholders to prepare our company in the event we pursue a Listing. To accomplish a phased-in liquidity program, it is necessary to reclassify and convert our common stock into shares of Class A common stock and Class B common stock immediately prior to a Listing. The shares of Class A common stock would immediately be listed on a national securities exchange. The shares of Class B common stock would not be listed. Rather, we believe those shares would convert into shares of Class A common stock and become listed in defined phases, over a defined period of time within 18 months of a Listing. The phased in liquidity program is intended to provide for our stock to be transitioned into the public market in a way that minimizes the stock-pricing instability that could result from concentrated sales of our stock.

Critical Accounting Policies

We believe that our critical accounting policies are those that require significant judgments and estimates such as those related to revenue recognition, allowance for uncollectible accounts, capitalization of expenditures, depreciation of assets, impairment of real estate, properties held for sale, purchase price allocation, and qualification as a REIT. These estimates are made and evaluated on an on-going basis using information that is currently available as well as recent various other assumptions believed to be reasonable under the circumstances.

Use of Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.

Revenue Recognition, Tenant Receivables and Allowance for Uncollectible Accounts

In accordance with ~~Statement of Financial Accounting Standards, or SFAS, No. 13,~~ASC 840,~~Accounting for~~ Leases(“ASC 840”), ~~or SFAS No. 13, as amended and interpreted,~~ minimum annual rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). Differences between rental income recognized and amounts contractually due under the lease agreements are credited or charged, as applicable, to rent receivable. Tenant reimbursement revenue, which is comprised of additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, is recognized as revenue in the period in which the related expenses are incurred. Tenant reimbursements are recognized and presented in accordance with ~~Emerging Issues Task Force, or EITF, IssueNo. 99-19,~~ASC 605-45,~~Reporting~~ Revenue ~~Gross as a~~— Principal ~~versus Net as an~~ Agent Considerations~~, or IssueNo. 99-19.~~ ~~IssueNo. 99-19~~. This guidance requires that these reimbursements be recorded on a gross basis, as we are generally the primary obligor with respect to purchasing goods and services from third-party suppliers, have discretion in selecting the supplier and have credit risk. We

recognize lease termination fees if there is a signed termination letter agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property.

Capitalization of Expenditures and Depreciation of Assets

The cost of operating properties includes the cost of land and completed buildings and related improvements. Expenditures that increase the service life of properties are capitalized and the cost of maintenance and repairs is charged to expense as incurred. The cost of building and improvements is depreciated on a straight-line basis over the estimated useful lives of 39 years and the shorter of the lease term

or useful life, ranging from one month to ~~241~~240 months, respectively. Furniture, fixtures and equipment is depreciated over five years. When depreciable property is retired, replaced or disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss reflected in operations.

~~Impairment~~Investments in Real Estate and Real Estate Related Assets

Our properties are carried at the lower of historical cost less accumulated depreciation or fair value less costs to sell. We assess the impairment of a real estate asset when events or changes in circumstances indicate its carrying amount may not be recoverable. Indicators we consider important and that we believe could trigger an impairment review include the following:


	•	significant negative industry or economic trends;

	•	a significant underperformance relative to historical or projected future operating results; and

	•	a significant change in the manner in which the asset is used.

In the event that the carrying amount of a property exceeds the sum of the undiscounted cash flows (excluding interest) that would be expected to result from the use and eventual disposition of the property, we would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. The fair value of the property is based on discounted cash flow analyses, which involve management’s best estimate of market participants’ holding periods, market comparables, future occupancy levels, rental rates, capitalization rates,lease-up periods, and capital requirements. The estimation of expected future net cash flows is inherently uncertain and relies on subjective assumptions dependent upon future and current market conditions and events that affect the ultimate value of the property. It will require us to make assumptions related to future rental rates, tenant allowances, operating expenditures, property taxes, capital improvements, occupancy levels, and the estimated proceeds generated from the future sale of the property.

Also, we evaluate the carrying values of mortgage loans receivable on an individual basis. Management periodically evaluates the realizability of future cash flows from the mortgage loan receivable when events or circumstances, such as the non-receipt of principal and interest paymentsand/or significant deterioration of the financial condition of the borrower, indicate that the carrying amount of the mortgage loan receivable may not be recoverable. An impairment charge is recognized in current period earnings and is calculated as the difference between the carrying amount of the mortgage loan receivable and the discounted cash flows expected to be received, or if foreclosure is probable, the fair value of the collateral securing the mortgage.

~~Properties Held for Sale~~Investment in Real EstateHeld-for-Sale

We ~~account for~~evaluate theheld-for-sale classification of our ~~properties held for sale in accordance with SFAS No. 144,~~~~Accounting for the Impairment or Disposal of Long Lived~~owned real estate each quarter. Assets~~, or SFAS No. 144, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and requires~~ that ~~in a period in which a component of an entity either has been disposed of or is~~are classified as ~~held for~~held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. The fair value is based on discounted cash flow analyses, which involve management’s best estimate of market participants’ holding period, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods, and capital requirements. Assets are generally classified asheld-for-sale once management commits to a plan to sell the properties and has determined that the sale of the ~~income statements for current~~asset is probable and ~~prior periods shall report~~transfer of the asset is expected to occur within one year. The results of operations of ~~the component~~these real estate properties are reflected as discontinued ~~operations.~~

~~In accordance with SFAS No. 144, at such time as a property is held for sale, such property is carried~~operations in all periods reported, and the properties are presented separately on our balance sheet at the lower ~~of: (1) its~~of their carrying ~~amount~~value or ~~(2)~~their fair value less costs to sell. ~~In addition, a property being~~As of December 31, 2010, we determined that four buildings within one of our portfolios should be classified as held for sale. See Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations, for further discussion of our assets classified as held for sale ~~ceases to be depreciated. We classify operating properties~~ as ~~property held for sale in the period in which all~~ of ~~the following criteria are met:~~December 31, 2010.


	•	~~management, having the authority to approve the action, commits to a plan to sell the asset;~~

	•	~~the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;~~

	•	~~an active program to locate a buyer and other actions required to complete the plan to sell the asset has been initiated;~~

	•	~~the sale of the asset is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within one year;~~

	•	~~the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and~~

	•	~~given the actions required to complete the plan to sell the asset, it is unlikely that significant changes to the plan would be made or that the plan would be withdrawn.~~

Purchase Price Allocation

In accordance with ~~SFAS No. 141,~~ASC 805,Business Combinations(“ASC 805”), we, with assistance from independent valuation specialists, allocate the purchase price of acquired properties to tangible and identified intangible

assets and liabilities based on their respective fair values. The allocation to tangible assets (building and land) is based upon our determination of the value of the property as if it were to be replaced and vacant using discounted cash flow models similar to those used by independent appraisers. Factors considered by us include an estimate of carrying costs during the expectedlease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price of the applicable property is allocated to the above or below market value of in place leases, the value of in place leases, tenant relationships and above or below market debt assumed.

The value allocable to the above or below market component of the acquired in place leases is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between: (1) the contractual amounts to be paid pursuant to the lease over its remaining term and (2) management’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease including any bargain renewal periods, with respect to a below market lease. The amounts allocated to above market leases are included in identified intangible assets, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining non-cancelable lease term of the acquired leases with each property. The amounts allocated to below market lease values are included in identified intangible liabilities, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining non-cancelable lease term plus any below market renewal options of the acquired leases with each property.

The total amount of other intangible assets acquired is further allocated to in place lease costs and the value of tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by us in allocating these values include the nature and extent of the credit quality and expectations of lease renewals, among other factors. The amounts allocated to in place lease costs are included in identified intangible assets, net in our accompanying consolidated balance sheets and will be amortized over the average remaining non-cancelable lease term of the acquired leases with each property. The amounts allocated to the value of tenant relationships are included in identified intangible assets, net in our accompanying consolidated balance sheets and are amortized over the average remaining non-cancelable lease term of the acquired leases plus a market lease term.

The value allocable to above or below market debt is determined based upon the present value of the difference between the cash flow stream of the assumed mortgage and the cash flow stream of a market rate mortgage. The amounts allocated to above or below market debt are included in mortgage ~~loan payables,~~loans payable, net on our accompanying consolidated balance sheets and amortized to interest expense over the remaining term of the assumed mortgage.

These allocations are subject to change based on information received within one year of the purchase related to one or more events identified at the time of purchase which confirm the value of an asset or liability received in an acquisition of property.

Qualification as a REIT

WeSubject to the discussion in Item 1. Business — Tax Status regarding the closing agreement that we intend to request from the IRS, we believe that we have qualified ~~and elected~~ to be taxed as a REIT under Sections 856 through 860 of the Code for federal income tax purposes beginning with our tax year ended December 31, 2007 and we intend to continue to be taxed as a REIT. To continue to qualify as a REIT for federal income tax purposes, we must meet certain organizational and operational requirements, including a requirement to pay distributions to our stockholders of at least 90.0% of our annual taxable income. As a REIT, we generally are not subject to federal income tax on net income that we distribute to our stockholders.

As part of the process of preparing our consolidated financial statements, significant management judgment is required to evaluate our compliance with REIT requirements. Our determinations are based on interpretation of tax laws, and our conclusions may have an impact on income tax expense recognized. Adjustments to income tax expense recognized may be required as a result of, among other things, changes in tax laws or our ability to qualify as a REIT. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our results of operations and net cash available for distribution to our stockholders.

Recently Issued Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to ~~the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a discussion of recently issued accounting pronouncements.

Acquisitions ~~in 2009, 2008 and 2007~~

See Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations and Note ~~23,~~22, Subsequent Events, to ~~the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a discussion of our acquisitions.

Factors Which May Influence Results of Operations

We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally and those risks listed in Part I, Item 1A. Risk Factors, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, management and operation of properties.

Rental Income

The amount of rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space available from unscheduled lease terminations at the existing rental rates. Negative trends in one or more of these factors could adversely affect our rental income in future periods.

Offering Proceeds

~~If we fail to continue to raise proceeds from~~With the ~~sale of shares~~termination of our ~~common stock,~~follow-on offering as of February 28, 2011, except for the DRIP, we will be limited in our ability to ~~invest in a diversified~~acquire new real estate assets. To the extent our portfolio ~~which~~is not sufficiently diversified, we could ~~result in~~have increased exposure to local and regional economic downturns and the poor performance of one or more of our properties and, therefore, expose our stockholders to increased risk. In

addition, some of our general and administrative expenses are fixed regardless of the size of our real estate portfolio. Therefore, ~~depending on the amount of offering proceeds~~ we ~~raise, we would expend~~could spend a larger portion of our income on operating expenses. This would reduce our profitability and, in turn, the amount of net income available for distribution to our stockholders.

Scheduled Lease Expirations

As of December 31, ~~2008,~~2010, our consolidated properties were ~~91.3%~~91% occupied. ~~During the remainder of 2009, 6.3% of the occupied GLA will expire.~~ Our leasing strategy for ~~2009~~2011 focuses on negotiating renewals for leases scheduled to expire during the remainder of the year. If we are unable to negotiate such renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. Of the leases expiring in ~~2009,~~2011, we anticipate, but cannot assure, that a majority of the tenants will renew for another term.

Sarbanes-Oxley Act and Dodd-Frank Act

The Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and related laws, regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, have increased the costs of compliance with corporate governance, reporting and disclosure ~~practices which are now required of us.~~practices. These costs may have a material adverse effect on our results of operations and could impact our ability to continue to pay distributions at current rates to our stockholders. Furthermore, we expect that these costs will increase in the future due to our continuing implementation of compliance programs mandated by these requirements. Any increased costs may affect our ability to distribute funds to our stockholders. ~~As part of our on-going compliance with the Sarbanes-Oxley Act, we are providing management’s assessment of our internal control over financial reporting as of December 31, 2008.~~

In addition, these laws, rules and regulations create new legal bases for potential administrative enforcement, civil and criminal proceedings against us in the event of non-compliance, thereby increasing the

risks of liability and potential sanctions against us. We expect that our efforts to comply with these laws and regulations will continue to involve significant and potentially increasing costs, and that our failure to comply with these laws could result in fees, fines, penalties or administrative remedies against us.

As part of our compliance with the Sarbanes-Oxley Act, we provided management’s assessment of our internal control over financial reporting as of December 31, 2010 and continue to comply with such regulations.

Results of Operations

Comparison of the Years Ended December 31, ~~2008, 2007~~2010, 2009, and ~~the Period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008

Our operating results, as presented below, are primarily comprised of income derived from our portfolio of our operating properties. For results of the four buildings within one of our portfolios that were classified as held for sale as of December 31, 2010, see Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations, to our consolidated financial statements.

We had limited results of operations for the period from April 28, 2006 (Date of Inception) through December 31, 2006 and therefore our results of operations for the years ended December 31, 2008 and 2007 are not comparable. Except where otherwise noted, the change in our results of operations is primarily due to ~~owning~~our 77 geographically diverse portfolio acquisitions, 53 geographically diverse portfolio acquisitions and 42 geographically diverse ~~properties and other real estate related assets, 20 geographically diverse properties and zero properties~~portfolio acquisitions as of December 31, ~~2008, 2007~~2010, 2009, and ~~2006,~~2008, respectively.

Rental Income

For the years ended December 31, 2010, 2009, and 2008, rental income attributable to our operating properties was $192,294,000, $123,133,000, and ~~2007 and for~~$78,007,000, respectively. For the ~~period from April 28, 2006 (Date of Inception) through~~year ended December 31, ~~2006,~~2010, rental income was ~~$80,415,000, $17,626,000~~primarily comprised of base rent of $144,285,000 and ~~$0, respectively.~~expense recoveries of $37,946,000. For the year ended December 31, 2009, rental income was primarily comprised of base rent of $93,269,000 and expense recoveries of $23,779,000. For the year ended December 31, 2008, rental income was primarily comprised of base rent of ~~$60,996,000~~$59,011,000 and expense recoveries of ~~$15,367,000. For the year ended December 31, 2007, rental income was primarily comprised of base rent of $13,785,000 and expense recoveries of $3,075,000.~~$15,147,000. The increase in rental income is due to the increase in the number of properties in our portfolio discussed above.

The aggregate occupancy for our operating properties was ~~91.3%~~approximately 91% as of December 31, ~~2008 as compared to 88.6% as of December 31, 2007.~~2010, 2009, and 2008.

Rental Expenses

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, rental expenses attributable to our operating properties were ~~$28,174,000, $6,037,000~~$65,338,000, $44,667,000, and ~~$0,~~$27,912,000, respectively. Rental expenses consisted of the following for the periods then ended:


					Period from
					April 28, 2006
					(Date of Inception)
	Years Ended December 31,				through		Years Ended December 31,
	2008		2007		December 31, 2006		2010		2009		2008

Real estate taxes	$	9,632,000	$	1,689,000	$	—	$	19,547,000	$	14,277,000	$	9,411,000
Utilities		5,774,000		1,534,000		—		14,679,000		9,771,000		5,774,000
Building maintenance		5,395,000		1,321,000		—		15,461,000		9,099,000		5,395,000
Property Management fees		2,372,000		591,000		—
Property management fees								2,786,000		3,026,000		2,350,000
Administration		1,988,000		160,000		—		4,186,000		3,273,000		1,988,000
Grounds maintenance		1,320,000		348,000		—		3,530,000		2,058,000		1,320,000
Non-recoverable operating expenses		877,000		113,000		—		3,370,000		2,036,000		861,000
Insurance		679,000		210,000		—		1,278,000		960,000		676,000
Other		137,000		71,000		—		501,000		167,000		137,000

Total rental expenses	$	28,174,000	$	6,037,000	$	—	$	65,338,000	$	44,667,000	$	27,912,000

The increase in rental expenses is primarily due to owning 41 geographically diverse properties and one real estate related asset, 20 geographically diverse properties and zero properties as of December 31, 2008, 2007 and 2006, respectively.

General and Administrative Expenses

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, general and administrative ~~was $9,560,000, $3,297,000~~expenses attributable to our operating properties were $18,753,000, $12,285,000, and ~~$242,000,~~$3,261,000, respectively. General and administrative ~~consisted of the following for the periods then ended:~~

Period from

April 28, 2006

(Date of Inception)

Years Ended December 31, through

2008 2007 December 31, 2006

Asset management fees $ 6,177,000 (a) $ 1,590,000 (a) $ —
Professional and legal fees 1,398,000 (b) 620,000 (b) 68,000
Bad debt expense 442,000 11,000 —
Directors’ and officers’ insurance premiums 279,000 (c) 242,000 (c) 68,000
Directors’ fees 264,000 (d) 249,000 (d) 55,000
Postage 138,000 (e) 24,000 (e) —
Restricted stock compensation 130,000 (f) 96,000 (f) 51,000
Investor services 130,000 (g) 33,000 (g) —
Acquisition related audit fees 122,000 (h) 372,000 (h) —
Bank charges 114,000 (i) 4,000 (i) —
Other 366,000 56,000 —

Total general and administrative $ 9,560,000 $ 3,297,000 $ 242,000

expenses include such costs as professional and legal fees, salaries, share-based compensation expense, investor services expense, and corporate office overhead, among others.

~~The increase in general and administrative of $6,263,000 for~~For the year ended December 31, ~~2008,~~2010 as compared to the year ended December 31, ~~2007, and~~2009, the increase in total general and administrative expenses of ~~$3,055,000~~$6,468,000, or 53%, is primarily due to the following factors:


	•	An increase in the number of employees hired during the year ended December 31, 2010, commensurate with the completion of our successful transition to self-management and the increased size of our portfolio. As of December 31, 2010, we had approximately 50 employees, as compared to 29 employees as of December 31, 2009. The associated increases in salaries expense, restricted stock compensation expense, and corporate office overhead in order to accommodate our growing workforce and increased level of activity accounted for $5,184,000 of the overallyear-over-year general and administrative fluctuation.

	•	A net increase in investor services expense of $577,000 for the year ended December 31, 2010 as compared to the year ended December 1, 2009, which is the result of an increase in the number of our stockholders as well as our implementation of the latest state of the art investor services platform provided by DST Systems, Inc. in 2009. This upgrade was done in conjunction with our transition to self-management and provides our stockholders and their financial advisors with direct access to real-time information.

For the year ended December 31, 2009 as compared to the year ended December 31, 2008, the increase in total general and administrative expenses of $9,024,000, or 277%, was primarily due to the following factors:


	•	An increase in the number of employees hired for the transition to self-management during the year ended December 31, 2009. As of December 31, 2009, we had approximately 29 employees, as compared to just one employee as of December 31, 2008. The related increases in salaries expense and


		restricted stock compensation expense accounted for $4,525,000 of the overallyear-over-year general and administrative fluctuation.


	•	An increase in professional and legal expenses of $1,174,000 due to higher outside consulting and legal costs incurred in conjunction with, among other things, our transition to self-management.

	•	An increase in investor services expense of $544,000 due to the increase in the number of our stockholders as well as one-time costs associated with the transition to DST Systems, Inc. as our transfer agent.

	•	An increase in corporate office overhead of $887,000 due primarily to the establishment of our corporate offices in Scottsdale, Arizona following our transition to self-management.

Asset Management Fees

For the years ended December 31, 2010, 2009, and 2008, asset management fees attributable to our operating properties were $0, $3,783,000, and $6,177,000, respectively. The decrease in asset management fees of $3,783,000 for the year ended December 31, ~~2007,~~2010, as compared to the ~~period from April 28, 2006 (Date of Inception) through~~year ended December 31, ~~2006, was~~2009, is due to ~~the following:~~

~~(a) Asset~~our transition to a self-managed cost structure. We no longer pay asset management fees to our former advisor pursuant to the advisory agreement, which expired on September 20, 2009. For the year ended December 31, 2010, we would have been required to pay asset management fees of approximately $16,993,000 to our former advisor if we were still subject to the advisory agreement (under its original terms).

The ~~increase~~decrease in asset management fees ~~was due~~of $2,394,000 for the year ended December 31, 2009, as compared to the year ended December 31, 2008, is primarily a result of the reduction in this fee from 1.0% to 0.5% paid to our former advisor pursuant to the amended advisory agreement and the expiration of such agreement on September 20, 2009, which is partially offset by an increase of $1,531,000 resulting from the increase in the number of properties and other real estate related assets discussed above. After September 20, 2009, we no longer pay asset management fees to our former advisor.

~~(b) Professional and legal fees~~Acquisition-Related Expenses

~~The increase~~For the years ended December 31, 2010, 2009, and 2008, acquisition-related expenses attributable to our operating properties were $11,317,000, $15,997,000 and $122,000, respectively. Acquisition-related expenses were expensed as incurred for acquisitions for the years ended December 31, 2010 and 2009 in ~~professional and legal fees of $778,000~~accordance with ASC 805. Acquisition-related expenses for the year ended December 31, 2008 were capitalized and recorded as ~~compared to~~part of the year ended December 31, 2007 was primarily due to increased professional and legal fees of approximately $403,000 in connection with outside consulting in pursuit of, among other things, our self-management program, increased audit fees of $254,000 related to our~~Form 10-Q~~ ~~andForm 10-K~~ SEC filings due to our increase in size and consulting fees of approximately $90,000 paid to Mr. Peters for the period from August 1, 2008 through October 31, 2008, in accordance with the consulting agreement dated August 28, 2008. The increase in professional and legal fees of $552,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was primarily due to the increase of $306,000 in audit fees and the increase of $83,000 in professional fees in connection with our~~Form 10-Q~~ ~~andForm 10-K~~ ~~SEC filings due to our increase in size.~~purchase price allocations.

~~(c) Directors’ and officers’ insurance premiums~~

The increase in directors’ and officers’ insurance premiums of $37,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 was due to increased insurance premiums in the fourth quarter of 2008 due to an increase in coverage. The increase in directors’ and officers’ insurance premiums of $174,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was due to a full year of insurance coverage expensed in 2007 as compared to less than four months of insurance coverage expensed in 2006.

~~(d) Directors’ fees~~

The increase in directors’ fees of $15,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 was due to a full year of directors’ fees expensed in 2008 for five directors as compared to four directors for four months and five directors for eight months in 2007. The increase in directors’ fees of $194,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was due to a full year of directors’ fees expensed in 2007 as compared to less than four months of directors’ fees expensed in 2006.

~~(e) Postage~~

The increase in postage of $114,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 and the increase in postage of $24,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was primarily due to increased proxy, distributions and investor statement mailings.

~~(f) Restricted stock compensation~~

The increase in restricted stock compensation of $34,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 was due to a full year of amortization of the directors’ shares expensed in 2008 for five directors, and the expense associated with Mr. Peters’ award of 40,000 shares of restricted common stock on November 14, 2008 under our 2006 Incentive Plan, as compared to amortization of the directors’ shares expensed for four directors for four months and five directors for eight months in 2007. The increase in restricted stock compensation of $45,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was due to a full year of amortization of the directors’ shares expensed in 2007 as compared to less than four months of directors’ shares expensed in 2006.

~~(g) Investor services~~

The increase in investor services of $97,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 and the increase in investor services of $33,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was primarily due to an increased number of stockholders.

~~(h) Acquisition related audit fees~~

The decrease in acquisition related audit fees of $250,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 was due to the fact that for the year ended December 31, 2008, there were fewer acquisitions that were subject to the provisions of~~Article 3-14~~ of~~Regulation S-X,~~ which resulted in fewer acquisition related audits. The increase in acquisition related audit fees of $372,000 for the year ended December 31, 2007, as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was due to the fact that there were no acquisitions in 2006.

~~(i) Bank charges~~

The increase in bank charges of $110,000 for the year ended December 31, 2008, as compared to the year ended December 31, 2007 and the $4,000 increase for the year ended December 31, 2007 as compared to the period from April 28, 2006 (Date of Inception) through December 31, 2006 was primarily due to having an increase in banking activity resulting from an increase in the number of assets. We owned 42, 20 and zero geographically diverse properties and other real estate related assets as of December 31, 2008, 2007 and 2006, respectively.

Depreciation and Amortization

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, depreciation and amortization attributable to our operating properties was ~~$37,398,000, $9,790,000~~$77,338,000, $52,372,000 and ~~$0,~~$36,482,000, respectively. ~~Depreciation~~See Note 3, Real Estate Investments, Net for further information on depreciation of our properties. For information regarding the amortization recorded on our identified intangible assets and ~~amortization~~on our lease commissions, see Note 5, Identified Intangible Assets, Net and Note 6, Other Assets, Net, respectively.

One-time Redemption, Termination, and Release Payment Made to Former Advisor

On October 18, 2010, we entered into a Redemption, Termination, and Release Agreement, or the Redemption Agreement, with our former advisor. This agreement served to purchase the limited partner interest held by our former advisor, including all associated rights, as well as resolve all remaining issues between the parties. Pursuant to the Redemption Agreement, we made a one-time payment to our former advisor of $8,000,000, of which $7,285,000 was charged to operating expense. The remainder of the total payment was applied toward the partnership interest purchase, as discussed in Note 13, Redeemable Noncontrolling Interest of Limited Partners, and toward the resolution of previously-accrued claims between the parties. See Note 12, Related Party Transactions, for further information regarding the Redemption Agreement.

Interest Expense and Gain (Loss) on Derivative Instruments

For the years ended December 31, 2010, 2009, and 2008, interest expense and gain (loss) on derivative financial instruments associated with our operating properties were $29,382,000, $22,833,000 and $33,146,000, respectively. Interest expense and gain (loss) on derivative financial instruments associated with our operating properties consisted of the following for the periods then ended:

Period from

April 28, 2006

(Date of Inception)

Years Ended December 31, through

2008 2007 December 31, 2006

Depreciation of properties $ 20,484,000 $ 4,616,000 $ —
Amortization of identified intangible assets 16,818,000 5,166,000 —
Amortization of lease commissions 93,000 7,000 —
Other 3,000 1,000 —

Total depreciation and amortization $ 37,398,000 $ 9,790,000 $ —


	Years Ended December 31,
	2010			2009			2008

Interest expense on our mortgage loans payable	$	32,503,000		$	25,801,000		$	17,933,000
Interest expense on our previous secured revolving credit facility(1)		—			—			1,266,000
Amortization of deferred financing fees associated with our mortgage loans payable		1,693,000			1,504,000			914,000
Amortization of deferred financing fees associated with our previous credit facility(1)		501,000			381,000			377,000
Amortization of debt discount/premium		395,000			276,000			110,000
Unused credit facility fees on our previous credit facility		244,000			150,000			108,000
Interest expense on our unsecured note payable to affiliate		—			—			2,000

Total interest expense		35,336,000			28,112,000			20,710,000

Net (gain) loss on derivative financial instruments		(5,954,000	)		(5,279,000	)		12,436,000

Total interest expense and (gain) loss on derivative financial instruments	$	29,382,000		$	22,833,000		$	33,146,000

~~Interest Expense~~

For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, interest expense was $34,164,000, $6,400,000 and $0, respectively. Interest expense consisted of the following for the periods then ended:

Period from

April 28, 2006

(Date of Inception)

Years Ended December 31, through

2008 2007 December 31, 2006

Interest expense on our mortgage loan payables $ 18,492,000 $ 4,145,000 $ —
Interest expense on our secured revolving line of credit with LaSalle and KeyBank 1,340,000 600,000 —
Loss on derivative financial instruments 12,821,000 1,377,000 —
Amortization of deferred financing fees associated with our mortgage loan payables 914,000 90,000 —
Amortization of deferred financing fees associated with our line of credit 377,000 80,000 —
Amortization of debt discount 110,000 7,000 —
Unused line of credit fees 108,000 17,000 —
Interest expense on our unsecured note payable to affiliate 2,000 84,000 —

Total interest expense $ 34,164,000 $ 6,400,000 $ —


(1)		Pertains to the credit facility we had initially opened on September 10, 2007 (and modified on December 12, 2007), which we voluntarily terminated during the year ended 2010. As further discussed in Note 9, Revolving Credit Facility, we and our operating partnership entered into a credit agreement for a new, unsecured revolving credit facility on November 22, 2010.

The increase in interest expense for the year ended December 31, ~~2008~~2010 as compared to the year ended December 31, ~~2007~~2009 was ~~primarily~~ due to an increase in ~~our~~average outstanding mortgage ~~loan payables to $460,762,000~~loans payable of $699,526,000 as of December 31, ~~2008 from $185,801,000~~2010 compared to $540,028,000 as of December 31, ~~2007. We did not have any debt~~2009. Additionally, during the year ended December 31, 2010, we terminated two of our interest rate swap derivative financial instruments with an aggregate notional amount of $27,200,000 in conjunction with our prepayment of certain loan balances.

The decrease in interest expense for the ~~period from April 28, 2006 (Date of Inception) through~~year ended December 31, ~~2006.~~

~~In addition, interest expense increased~~2009 as ~~a result of~~compared to the year ended December 31, 2008 was due to the non-cash gain on mark to market adjustments we made on our interest rate swaps. This decrease was partially offset by an increase in our interest expense due to an increase in our mortgage loans payable to $540,028,000 as of December 31, 2009 from $460,762,000 as of December 31, 2008 and a full year of interest expense on new loans incurred in 2008.

We use interest rate swaps in order to minimize the impact ~~to us~~ of fluctuations in interest rates. To achieve our objectives, we borrow at fixed rates and variable rates. We also enter into derivative financial instruments such as interest rate swaps in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements.

Interest and Dividend Income

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, interest and dividend income was ~~$469,000, $224,000~~$119,000, $249,000 and ~~$0,~~$469,000, respectively. For the ~~years~~year ended December 31, ~~2008 and 2007,~~2010, interest and dividend income was related primarily to interest earned on our money market and cash accounts. ~~The increase in~~For the years ended December 31, 2009, and 2008, interest and dividend income was ~~due~~related primarily to ~~having increasingly higher~~interest earned on our money market accounts and U.S. Treasury Bills. The decrease in our interest and dividend income in 2010 as

compared to 2009 was primarily driven by a lower cash ~~balances~~balance throughout 2010 relative to the prior year. The decrease in ~~2008~~our interest and ~~2007~~dividend income in 2009 as compared to 2008 was due to the ~~period from April 28, 2006 (Date~~use of ~~Inception)~~cash investments to offset service fees as well as lower interest rates through ~~December 31, 2006.~~the year. This decrease was partially offset by a higher cash balance in 2009 as compared to 2008.

Liquidity and Capital Resources

We are dependent upon our debt financing, operating cash flows from properties, and the net proceeds from our ~~offering~~offerings to conduct our activities. We stopped offering shares in our primary offering as of February 28, 2011. We continue to offer shares pursuant to our DRIP; however, we may terminate our DRIP at any time. We may also conduct additional public offerings of our common stock in the future. Our ability to raise funds through ~~our offering is~~any potential future offerings will be dependent on general economic conditions, general market conditions for REITs, and our operating performance. The capital required to purchase real estate and other real estate related assets is obtained from the proceeds of our ~~offering~~offerings and from any indebtedness that we may incur.

Our principal demands for funds continue to be for acquisitions of real estate and other real estate related assets, to pay operating expenses and principal and interest on our outstanding indebtedness, and to make distributions to our stockholders. In addition, we require resources to make certain payments to our advisor or its affiliates for reimbursement of certain organizational and offering expenses and to our dealer manager or its affiliates for selling commissions, non-accountable marketing support fees and due diligence expense reimbursements.

Generally, cash needs for items other than acquisitions of real estate and other real estate related assets continue to be met from operations, borrowing, and the net proceeds of our ~~offering.~~offerings. We believe that these cash resources will be sufficient to satisfy our cash requirements for the foreseeable future, and we do not anticipate a need to, though we may, raise funds from other than these sources within the next 12 months.

We evaluate potential additional investments and engage in negotiations with real estate sellers, developers, brokers, investment managers, ~~lenders~~ and ~~others on our behalf. Until we invest~~lenders. As of December 31, 2010, the majority of the proceeds of our ~~offering~~offerings had been invested in ~~real estate~~properties and other real estate related assets, we may invest in short-term, highly liquid or other authorized investments. Such short-term investments will not earn significant returns, and we cannot predict how long it will take to fully invest the proceeds in real estate and other real estate relatedestate-related assets. The number of properties we may acquire and other investments we will make will depend upon the number of shares of our common stock sold in our offering and the resulting amount of the net proceeds available for investment. However, there may be a delay between the sale of shares of our common stock and our investments in real estate and other real estate related assets, which could result in a delay in the benefits to our stockholders, if any, of returns generated from our investments’ operations.

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. The capital plan also sets forth the anticipated sources of the necessary capital, which may include a ~~line of~~ credit facility or other loan established with respect to the investment, operating cash generated by the investment, additional equity investments from us or joint venture partners or, when necessary, capital reserves. Any capital reserve would be established from the ~~gross proceeds of our offering,~~ proceeds from sales of other investments, operating cash generated by other investments, or other cash on ~~hand.~~hand, or the gross proceeds of our offerings. In some cases, a lender may require us to establish capital reserves for a particular investment. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs.

Other Liquidity Needs

In the event that there is a shortfall in net cash available due to various factors, including, without limitation, the timing of distributions or the timing of the collections of receivables, we may seek to obtain capital to pay distributions by means of secured or unsecured debt financing through one or more third parties, or our advisor or its affiliates. There are currently no limits or restrictions on the use of proceeds from our advisor or its affiliate which would prohibit us from making the proceeds available for distribution.parties. We may

also pay distributions from cash from capital transactions, including, without limitation, the sale of one or more of our properties.

As of December 31, ~~2008,~~2010, we estimate that our expenditures for capital improvements will require up to ~~$4,836,000~~approximately $37,114,000 within the next 12 months. As of December 31, ~~2008,~~2010, we had ~~$5,564,000~~$7,276,000 of restricted cash in loan impounds and reserve accounts for such capital expenditures. We cannot provide assurance, however, that we will not exceed these estimated expenditure and distribution levels or be able to obtain additional sources of financing on commercially favorable terms or at all. As of December 31, 2010, we had cash and cash equivalents of approximately $29,270,000. Additionally, as of December 31, 2010, we had unencumbered properties with a gross book value of approximately $978,124,000 that may be used as

collateral to secure additional financing in future periods or as additional collateral to facilitate the refinancing of current mortgage debt as it becomes due.

If we experience lower occupancy levels, reduced rental rates, reduced revenues as a result of asset sales, or increased capital expenditures and leasing costs compared to historical levels due to competitive market conditions for new and renewal leases, the effect would be a reduction of net cash provided by operating activities. If such a reduction of net cash provided by operating activities is realized, we may have a cash flow deficit in subsequent periods. Our estimate of net cash available is based on various assumptions which are difficult to predict, including the levels of leasing activity and related leasing costs. Any changes in these assumptions could impact our financial results and our ability to fund working capital and unanticipated cash needs.

Cash Flows

Cash flows provided by operating activities for the years ended December 31, 2010, 2009, and 2008, were $58,503,000, $21,628,000, and ~~2007 and for~~$20,677,000, respectively. For the ~~period from April 28, 2006 (Date of Inception) through~~year ended December 31, ~~2006, were $20,677,000, $7,005,000~~2010, cash flows provided by operating activities related primarily to operations from our 75 property portfolios and ~~$0, respectively.~~two real estate-related assets. For the year ended December 31, 2009, cash flows provided by operating activities related primarily to operations from our 51 property portfolios and two real estate related assets. For the year ended December 31, 2008, cash flows provided by operating activities related primarily to operations from our 4241 properties and one real estate related ~~assets. For the year ended December 31, 2007, cash flows provided by operating activities related primarily to operations from our 20 properties.~~asset. We anticipate cash flows from operating activities will increase as we purchase more properties.

Cash flows used in investing activities for the years ended December 31, 2010, 2009, and 2008, were $626,849,000, $455,105,000, and ~~2007 and~~$526,475,000, respectively. For the year ended December 31, 2010, cash flows used in investing activities related primarily to cash paid for the ~~period from April 28, 2006 (Date~~acquisitions of ~~Inception) through December��~~our 24 new property portfolios totaling $597,097,000. For the year ended December 31, ~~2006, were $526,475,000, $385,440,000~~2009, cash flows used in investing activities related primarily to cash paid for the acquisition of our 10 new property portfolios and ~~$0, respectively.~~one real estate related asset totaling $402,268,000. For the year ended December 31, 2008, cash flows used in investing activities related primarily to the acquisition of our 21 ~~properties in the~~new property portfolios and one real estate related asset for a total purchase amount of $503,638,000. ~~For the year ended December 31, 2007, cash flows used in investing activities related primarily to the acquisition of our 20 properties in the amount of $380,398,000.~~ Cash flows used in investing activities is heavily dependent upon the deployment of our offering proceeds in properties and real estate related assets.

Cash flows provided by financing activities for the years ended December 31, 2010, 2009, and 2008, were $378,615,000, $524,147,000, and ~~2007 and for~~$628,662,000, respectively. For the ~~period from April 28, 2006 (Date of Inception) through~~year ended December 31, ~~2006, were $628,662,000, $383,700,000~~2010, cash flows provided by financing activities related primarily to funds raised from investors in the amount of $594,677,000, borrowings on mortgage loans payable of $79,125,000, the payment of offering costs of $56,621,000 for our offerings, distributions of $60,176,000, and ~~$202,000, respectively.~~principal and demand note repayments of $123,117,000 on mortgage loans payable and demand notes payable. Additional cash outflows related to our purchase of the noncontrolling interest in the joint venture entity that owns Chesterfield Rehabilitation for $3,900,000, as well as to debt financing costs of $7,507,000. For the year ended December 31, 2009, cash flows provided by financing activities related primarily to funds raised from investors in the amount of $622,652,000 and borrowings on mortgage loans payable of $37,696,000, the payment of offering costs of $68,360,000, distributions of $39,500,000 and principal repayments of $11,671,000 on mortgage loans payable. Additional cash outflows related to deferred financing costs of $792,000 in connection with the debt financing for our acquisitions. For the year ended December 31, 2008, cash flows provided by financing activities related primarily to funds raised from investors in the amount of $528,816,000 and borrowings on mortgage ~~loan payables~~loans payable of $227,695,000, partially offset by net payments under our secured revolving ~~line of~~ credit ~~with LaSalle and KeyBank~~facility of $51,801,000, the payment of offering costs of $54,339,000, distributions of $14,943,000 and principal repayments of $1,832,000 on mortgage ~~loan payables.~~loans payable. Additional cash outflows related to deferred financing costs of $3,688,000 in connection with the debt financing for our acquisitions. For the year ended December 31, 2007, cash flows provided by financing activities related primarily to funds raised from investors in the amount of $210,937,000, borrowings on mortgage loan payables of $148,906,000 and net borrowings under our secured revolving line of credit with LaSalle and KeyBank of $51,801,000, partially offset by principal repayments of $151,000 on mortgage loan payables, offering costs of $22,009,000 and distributions of $3,323,000. Additional cash outflows related to debt financing costs of $2,496,000 in connection with the debt financing for our acquisitions. For the period from April 28, 2006 (Date of Inception) through December 31, 2006, cash flows provided by financing activities related to $2,000 from the sale of 200 shares of our common stock to our advisor and $200,000 invested in our operating partnership from our advisor.

7378

Distributions

The income tax treatment for distributions reportable for the years ended December 31, ~~2008, 2007~~2010, 2009, and ~~2006~~2008 was as follows:


	Years Ended December 31,												Years Ended December 31,
	2008				2007				2006				2010				2009				2008

Ordinary income	$	5,879,000	21.0	%	$	915,000	15.3	%	$	—	—	%	$	47,041,000	40.3	%	$	2,836,000	3.6	%	$	5,879,000	21.0	%
Capital gain		—	—			—	—			—	—			—	—			—	—			—	—
Return of capital		22,163,000	79.0			5,081,000	84.7			—	—			69,686,000	59.7			75,223,000	96.4			22,163,000	79.0

Total													$	116,727,000	100	%	$	78,059,000	100	%	$	28,042,000	100	%
	$	28,042,000	100	%	$	5,996,000	100	%	$	—	—	%

See Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Distributions, for a further discussion of our distributions.

Capital Resources

Financing

We anticipate that our aggregate borrowings, both secured and unsecured, will ~~not exceed 60.0%~~approximate 35%-40% of all of our properties’ and other real estate related assets’ combined fair market values, as determined at the end of each calendar ~~year beginning with our first full year of operations.~~year. 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, ~~2008,~~2010, our aggregate borrowings were ~~47.9%~~38.9% of all of our properties’ and other real estate related assets’ combined fair market values. Of the $194,467,000 of mortgage notes payable maturing in 2011, $152,887,000 have two one-year extensions available and $22,000,000 have a one-year extension available. In addition, the proceeds of our new senior secured real estate term loan, which we obtained on February 1, 2011 and which is further discussed in Note 22, Subsequent Events, will, in part, be used to refinance approximately $81,116,000 of debt scheduled to mature in 2011. At present, there are no extension options associated with our debt that matures in 2012. We anticipate utilizing the extensions available to us.

~~Our~~Until a Listing, our charter precludes us from borrowing in excess of ~~300.0%~~300% of the value of our net assets, unless approved by a majority of our independent directors and the justification for such excess borrowing is disclosed to our stockholders in our next quarterly report. For ~~the~~ purposes of this determination, net assets are our total assets, other than intangibles, calculated at cost before deducting depreciation, ~~amortization,~~ bad debt and other similar non-cash reserves, less total liabilities and computed at least quarterly on a ~~consistently-applied~~consistently- applied basis. Generally, the preceding calculation is expected to approximate 75.0% of the sum of the aggregate cost of our real estate and real estate related assets before depreciation, amortization, bad debt and other similar non-cash reserves. As of March ~~27, 2009~~25, 2011 and December 31, ~~2008,~~2010, our leverage did not exceed ~~300.0%~~300% of the value of our net assets.

Mortgage ~~Loan Payables,~~Loans Payable, Net

See Note 7, Mortgage ~~Loan Payables, Net and Unsecured Note Payables to Affiliate — Mortgage Loan Payables,~~Loans Payable, Net, to ~~the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a further discussion of our mortgage ~~loan payables,~~loans payable, net.

~~Unsecured Note Payables to Affiliate~~Revolving Credit Facility

See Note ~~7, Mortgage Loan Payables, Net and Unsecured Note Payables~~9, Revolving Credit Facility, to ~~Affiliate — Unsecured Note Payables to Affiliate, to the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a further discussion of our unsecured ~~note payables to affiliate.~~revolving credit facility.

~~Line of Credit~~Senior Secured Real Estate Term Loan

See Note ~~9, Line of Credit,~~22, Subsequent Events, to our accompanying consolidated financial statements, for additional information regarding the ~~Consolidated Financial Statements, for a further discussion of our line of credit.~~senior secured real estate term loan that we obtained on February 1, 2011.

REIT Requirements

In order ~~to continue to qualify~~remain qualified as a REIT for federal income tax purposes, we are required to make distributions to our stockholders of at least 90.0% of REIT taxable income. In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collections of receivables, we may seek to obtain capital to pay distributions by means of secured debt financing through one or more third parties. We may also pay distributions from cash from capital transactions including, without limitation, the sale of one or more of our properties.

Limitation on Total Operating Expenses

Our charter provides that our total operating expenses during any four consecutive fiscal quarters cannot exceed the greater of: (1) 2.0% of our average invested assets, as defined in our charter, or (2) 25.0% of our net income, as defined in our charter, for such year. Our board of directors is responsible for limiting our total operating expenses to that amount, unless a majority of our independent directors determine that such excess expenses are justified based on unusual and non-recurring factors and such excess expenses, if any, are disclosed in writing to our stockholders, together with an explanation of the factors the independent directors considered in determining that such excess amount was justified. Our total operating expenses did not exceed this limitation in 2010. Our total operating expenses as a percentage of our average invested assets for the year ended December 31, 2010 was 1.3%.

Commitments and Contingencies

See Note 11, Commitments and Contingencies, to ~~the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a further discussion of our commitments and contingencies.

Debt Service Requirements

One of our principal liquidity needs is the payment of principal and interest on outstanding indebtedness. As of December 31, ~~2008,~~2010, we had fixed and variable rate mortgage ~~loan payables outstanding~~loans payable in the principal amount of ~~$462,542,000 ($460,762,000, net~~$699,526,000, which includes a premium of ~~discount)~~$2,968,000, which are secured by our properties. We are required by the terms of the applicable loan documents to meet certain financial covenants, such as minimum net worth and liquidity amounts, and reporting requirements. As of December 31, ~~2008,~~2010, we believe that we were in compliance with all such covenants and requirements on $638,558,000 of our mortgage loans payable. We have reduced the amount deposited within our restricted collateral account to $12,000,000 as of December 31, 2010, and we ~~expect~~are currently working with lenders in order to ~~remain~~comply with certain covenants on the remaining $58,000,000 balance of our mortgage loans payable. On August 19, 2010, we voluntarily terminated the secured revolving credit facility that we had initially opened on September 10, 2007 and had modified on December 12, 2007. On November 22, 2010, we and Healthcare Trust of America Holdings, LP, our operating partnership, entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, N.A. and Deutsche Bank Securities, Inc., as syndication agents, U.S. Bank National Association and Fifth Third Bank, as documentation agents, and the lenders named therein to obtain an unsecured revolving credit facility in ~~compliance~~an aggregate maximum principal amount of $275,000,000, subject to increase. See Note 9, Revolving Credit Facility, for additional discussion of this credit facility. In addition, See Note 22, Subsequent Events, for information regarding our closure of a $125,500,000 senior secured real estate term loan with ~~all such requirements for the next 12 months.~~Wells Fargo Bank, N.A. on February 1, 2011.

As of December 31, ~~2008, we did not have any amounts outstanding under our secured revolving line of credit with LaSalle and KeyBank.~~

~~As of December 31, 2008,~~2010, the weighted average interest rate on our outstanding debt was ~~4.07%~~4.95% per annum.

Contractual Obligations

The ~~following~~ table ~~provides information with respect~~below presents our obligations and commitments to ~~the maturities~~make future payments under debt obligations and ~~scheduled principal repayments of our secured mortgage loan~~lease agreements as of December 31, ~~2008.~~ 2010.


	Payment Due by Period
	Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total

Long-term debt
Fixed rate(1)	$	7,662,000	$	70,399,000	$	121,620,000	$	271,134,000	$	470,815,000
Variable rate(1)		214,913,000		1,840,000		8,990,000		—		225,743,000
Interest(2)		31,359,000		50,365,000		40,541,000		30,501,000		152,766,000
Credit facility borrowings(3)		7,000,000		—		—		—		7,000,000
Ground lease and other operating lease obligations(4)		2,382,000		6,933,000		7,078,000		179,610,000		196,003,000

Total	$	263,316,000	$	129,537,000	$	178,229,000	$	481,245,000	$	1,052,327,000


(1)		Long-term debt obligations are related to our fixed rate and variable rate mortgage loans payable. Approximately $81,116,000 of the variable debt due in less than one year was refinanced in February 2011 from the proceeds of our senior secured real estate term loan, as further discussed in Note 22, Subsequent Events.

(2)		Interest on variable rate debt is calculated using the rates in effect at December 31, 2010.

(3)		The $7,000,000 drawn on our unsecured revolving credit facility as of December 31, 2010 was repaid on January 31, 2011, as further discussed in Note 22, Subsequent Events.

(4)		Operating lease obligations include our corporate office locations in Scottsdale, Arizona and Johns Island, South Carolina.

With respect to the debt service obligations shown above, the table does not reflect ~~any available extension options.~~

Payments Due by Period
Less than 1 Year
1-3 Years
4-5 Years
More than 5 Years

(2009) (2010-2011) (2012-2013) (After 2013) Total

Principal payments — fixed rate debt $ 9,475,000 $ 3,380,000 $ 17,559,000 $ 110,644,000 $ 141,058,000
Interest payments — fixed rate debt 8,192,000 15,184,000 14,375,000 17,139,000 54,890,000
Principal payments — variable rate debt 2,425,000 319,059,000 — — 321,484,000
Interest payments — variable rate debt (based on rates in effect as of December 31, 2008) 10,999,000 15,107,000 — — 26,106,000

Total $ 31,091,000 $ 352,730,000 $ 31,934,000 $ 127,783,000 $ 543,538,000

~~The table above does not reflect all~~ available extension options. Of the amounts maturing in ~~2010~~2011 and ~~2011, $245,427,000~~2012, $152,887,000 have two ~~one year~~one-year extensions available and ~~$54,717,000~~$22,000,000 have a ~~one year~~one-year extension ~~available.~~available, subject to customary conditions.

Off-Balance Sheet Arrangements

As of December 31, ~~2008~~2010 and ~~2007,~~2009, we had no off-balance sheet transactions nor do we currently have any such arrangements or obligations.

Inflation

We are exposed to inflation risk as income from future long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that protect us from the impact of inflation. These provisions include rent ~~steps,~~escalations, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per square foot allowance. However, due to the long-term nature of the leases, among other factors, the leases may not re-set frequently enough to cover inflation.

Funds from Operations and Modified Funds from Operations

One of our objectives is to provide cash distributions to our stockholders from cash generated by our 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 such as us. FFO is not equivalent to our net income or loss as determined under GAAP.

We define Funds from Operations, or FFO, a non-GAAP measure, ~~consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO~~ as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property but including asset impairment ~~writedowns,~~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~~ We present FFO because we consider it an important supplemental measure of our operating performance and believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. FFO is intended to exclude GAAP historical ~~accounting convention used for~~cost depreciation and amortization of real estate and related assets, ~~requires straight-line depreciation of buildings and improvements,~~ which ~~implies~~assumes that the value of real estate ~~assets~~

diminishes ~~predictably~~ratably over time. ~~Since~~Historically, however, real estate values ~~historically rise and fall~~have risen or fallen with market ~~conditions, presentations of~~conditions. Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating ~~results for a REIT, using historical accounting for depreciation, could be less informative. The use of~~costs, development activities and interest costs, providing perspective not immediately apparent from net income.

We compute FFO ~~is recommended~~in accordance with standards established by the ~~REIT industry as a supplemental performance measure.~~

~~Presentation~~Board of ~~this information is intended to assist~~Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the ~~reader in comparing the operating performance of different~~methodology for calculating FFO utilized by other equity REITs ~~although it should be noted that not all REITs calculate FFO the same way, so comparisons with other REITs~~and, accordingly, may not be ~~meaningful. Furthermore,~~comparable to such other REITs. Further, FFO isdoes not ~~necessarily indicative~~represent amounts available for management’s discretionary use because of ~~cash flow available to fund cash needs~~needed capital replacement or expansion, debt service obligations or other commitments and uncertainties. FFO should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay distributions.

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 use modified funds from operations, or MFFO, which excludes from FFO one-time charges, transition charges, and acquisition-related expenses, to further evaluate our operating performance. We believe that MFFO with these adjustments, like those already 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 better reflects the overall operating performance of our real estate portfolio, which is not immediately apparent from reported net income (loss). As such, we believe MFFO, in addition to net income (loss) as defined by GAAP, is a meaningful supplemental performance measure and is useful in understanding how our management evaluates our ongoing operating performance. However, MFFO should not be considered as an alternative to net income (loss) or to cash flows from operating activities and is not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs, including our ability to make distributions. However, we believe MFFO may provide an indication of the sustainability of our ~~performance.~~ distributions in the future. MFFO should be reviewed in connection with other GAAP measurements. Management considers the following items in the calculation of MFFO:

Acquisition-related expenses: Prior to 2009, acquisition-related expenses were capitalized and have historically been added back to FFO over time through depreciation; however, beginning in 2009, acquisition-related expenses related to business combinations are expensed. These acquisition-related expenses have been and will continue to be funded from the proceeds of our offerings and our debt and not from operations. We believe by excluding expensed acquisition-related expenses, MFFO provides useful supplemental information that is comparable for our real estate investments.

Transition charges: FFO includes certain charges related to the cost of our transition to self-management. These items include, but are not limited to, the majority of the one-time redemption and termination payment made to our former advisor, as further discussed in Note 12, Related Party Transactions, to our consolidated financial statements, as well as additional legal expenses, system conversion costs (including updates to certain estimate development procedures) and non-recurring employment costs. Because MFFO excludes such costs, management believes MFFO provides useful supplemental information by focusing on the changes in our fundamental operations that will be comparable rather than on such transition charges. We do not believe such costs will recur now that our transition to a self-management infrastructure has been substantially completed.

Our calculation of MFFO may have limitations as an analytical tool because it reflects the costs unique to our transition to a self-management model, which may be different from that of other healthcare REITs. Additionally, MFFO reflects features of our ownership interests in our medical office buildings and healthcare-related facilities that are unique to us. Companies that are considered to be in our industry may not have similar ownership structures; and therefore those companies may not calculate MFFO in the same manner that

we do, or at all, limiting its usefulness as a comparative measure. We compensate for these limitations by relying primarily on our GAAP and FFO ~~reporting complies with NAREIT’s policy described above.~~results and using our MFFO as a supplemental performance measure.

The following is the calculation of FFO and MFFO for the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006:~~2008:


							Period from
							April 28, 2006
							(Date of Inception)			Years Ended December 31,
	Years Ended December 31,						through						2010						2009						2008
	2008			2007			December 31, 2006			2010			Per Share			2009			Per Share			2008			Per Share

Net loss	$	(28,448,000	)	$	(7,666,000	)	$	(242,000	)	$	(7,919,000	)	$	(0.05	)	$	(24,773,000	)	$	(0.22	)	$	(28,409,000	)	$	(0.66	)
Add:
Depreciation and amortization — consolidated properties		37,398,000			9,790,000			—			78,561,000			0.47			53,595,000			0.47			37,398,000			0.87
Less:
Depreciation and amortization related to minority interests		(205,000	)		—			—
Net (income) loss attributable to noncontrolling interest of limited partners											16,000			—			(304,000	)		—			(39,000	)		—
Depreciation and amortization related to noncontrolling interests											(1,209,000	)		—			(204,000	)		—			(205,000	)		—

FFO	$	8,745,000		$	2,124,000		$	(242,000	)
FFO attributable to controlling interest										$	69,449,000					$	28,314,000					$	8,745,000

FFO per share — basic and diluted	$	0.20		$	0.21		$	(149.20	)	$	0.42		$	0.42		$	0.25		$	0.25		$	0.20		$	0.20

Weighted average common shares outstanding — basic and diluted		42,844,603			9,952,771			1,622
Add:
Acquisition-related expenses											11,317,000			0.07			15,997,000			0.14			—			—
Transition charges											8,400,000			0.05			3,718,000			0.03			—			—
MFFO attributable to controlling interest										$	89,166,000					$	48,029,000					$	8,745,000

MFFO per share — basic and diluted										$	0.54		$	0.54		$	0.43		$	0.43		$	0.21		$	0.21

Weighted average common shares outstanding — basic											165,952,860			165,952,860			112,819,638			112,819,638			42,844,603			42,844,603
Weighted average common shares outstanding — diluted											165,952,860			165,952,860			112,819,638			112,819,638			42,844,603			42,844,603

~~FFO reflects losses on derivative financial instruments related to our interest rate swaps in the amount of $12,821,000, $1,377,000 and $0 for~~For the years ended December 31, ~~2008, 2007~~2010 and 2009, MFFO per share has been impacted by the increase in net proceeds realized from our initial and follow-on offerings. For the year ended December 31, 2010, we sold 61,191,096 shares of our common stock, increasing our outstanding shares by 43.5%, and for the ~~period from~~

~~April 28, 2006 (Date of Inception) through~~year ended December 31, ~~2006. See Note 8, Derivative Financial Instruments, to the Consolidated Financial Statements, for a further discussion~~2009, we sold 62,696,254 shares of our common stock, increasing our outstanding shares by 83.1%. During both years, 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 ~~rate swaps.~~rates on cash equivalent investments, interest earnings were minimal. As of December 31, 2010, virtually all of our offering proceeds were invested 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.

Net Operating Income

Net operating income is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from our total portfolio of properties (including both our operating

properties and those classified as held for sale as of December 31, 2010) before interest expense, general and administrative expenses, depreciation, amortization, certain one-time charges, and interest and dividend ~~income and minority interests.~~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, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006:~~2008:


							Period from
							April 28, 2006
							(Date of Inception)
	Years Ended December 31,						through			Years Ended December 31,
	2008			2007			December 31, 2006			2010			2009			2008

Net loss	$	(28,448,000	)	$	(7,666,000	)	$	(242,000	)	$	(7,919,000	)	$	(24,773,000	)	$	(28,409,000	)
Add:
General and administrative		9,560,000			3,297,000			242,000
General and administrative expense											18,753,000			12,285,000			3,261,000
Asset management fees											—			3,783,000			6,177,000
Acquisition-related expenses											11,317,000			15,997,000			122,000
Depreciation and amortization		37,398,000			9,790,000			—			78,561,000			53,595,000			37,398,000
Interest expense		34,164,000			6,400,000			—			29,541,000			23,824,000			34,164,000
One-time redemption, termination, and release payment to former advisor											7,285,000			—			—
Less:
Interest and dividend income		(469,000	)		(224,000	)		—			(119,000	)		(249,000	)		(469,000	)
Minority interests		39,000			(8,000	)		—

Net operating income	$	52,244,000		$	11,589,000		$	—		$	137,419,000		$	84,462,000		$	52,244,000

Subsequent Events

See Note ~~23,~~22, Subsequent Events, to ~~the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a further discussion of our subsequent events.


Item 7A.	Quantitative and Qualitative Disclosures ~~About~~about Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, the primary market risk to which we are exposed is interest rate risk.

We are exposed to the effects of interest rate changes primarily as a result of borrowings used to maintain liquidity and fund expansion and refinancing of our real estate investment portfolio and operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk. To achieve our objectives, we borrow at fixed rates and variable rates.

We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. To the extent we ~~do,~~enter into such derivative financial instruments, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and,

therefore, it does not possess credit risk. It is our policy to enter into these transactions with the same party providing the underlying financing. In the alternative, we will seek to minimize the credit risk associated with derivative instruments by entering into transactions with what we believe are high-quality counterparties. We believe the likelihood of realized losses from counterparty non-performance is remote. Market risk is the adverse effect on the value of a financial instrument that results

from a change in interest rates. We manage the market risk associated with interest rate contracts by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. We do not enter into derivative or interest rate transactions for speculative purposes.

We have, and may in the future enter into, derivative instruments for which we have not and may not elect hedge accounting treatment. Because we have not elected to apply hedge accounting treatment to these derivatives, the gains or losses resulting from theirmark-to-market at the end of each reporting period are recognized as an increase or decrease in interest expense on our consolidated statements of operations.

Our interest rate risk is monitored using a variety of techniques.

The table below presents, as of December 31, ~~2008,~~2010, the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate ~~changes.~~changes:


	Expected Maturity Date																							Expected Maturity Date
	2009			2010			2011			2012			2013			Thereafter			Total			Fair Value		2011			2012			2013			2014			2015			Thereafter			Total

Fixed rate debt — principal payments	$	9,475,000		$	1,466,000		$	1,914,000		$	2,047,000		$	15,512,000		$	110,644,000		$	141,058,000		$	137,754,000	$	7,662,000		$	43,470,000		$	26,929,000		$	49,890,000		$	71,730,000		$	271,134,000		$	470,815,000
Weighted average interest rate on maturing debt		5.78	%		5.68	%		5.72	%		5.72	%		5.88	%		5.76	%		5.76	%		—		5.88	%		6.48	%		5.76	%		6.40	%		5.37	%		5.81	%		5.75	%
Variable rate debt — principal payments	$	2,425,000		$	121,944,000		$	197,115,000		$	—		$	—		$	—		$	321,484,000		$	318,852,000	$	214,913,000	(1)	$	913,000		$	927,000		$	193,000		$	8,797,000		$	—		$	225,743,000
Weighted average interest rate on maturing debt (based on rates in effect as of December 31, 2008)		3.14	%		2.87	%		3.61	%		—	%		—	%		—	%		3.33	%		—
Weighted average interest rate on maturing debt (based on rates in effect as of December 31, 2010)																									2.77	%		1.76	%		1.76	%		1.76	%		1.76	%		0.00	%		1.92	%


(1)		Of the total amount of variable rate debt shown to be maturing within 2011, approximately $81,116,000 was refinanced using the proceeds of our new senior secured real estate term loan on February 1, 2011. See Note 22, Subsequent Events, for further information on this secured term loan.

Mortgage ~~loan payables~~loans payable were ~~$462,542,000~~$696,558,000 ($~~460,762,000, net of discount)~~699,526,000, including premium) as of December 31, ~~2008.~~2010. As of December 31, ~~2008,~~2010, we had fixed and variable rate mortgage loans with effective interest rates ranging from ~~1.90%~~1.61% to 12.75% per annum and a weighted average effective interest rate of ~~4.07%~~4.95% per annum. We had ~~$141,058,000~~$470,815,000 ($~~139,278,000, net of discount)~~473,783,000, including premium) of fixed rate debt, or ~~30.5%~~67.6% of mortgage ~~loan payables,~~loans payable, at a weighted average interest rate of ~~5.76%~~6.02% per annum and ~~$321,484,000~~$225,743,000 of variable rate debt, or ~~69.5%~~32.4% of mortgage ~~loan payables,~~loans payable, at a weighted average interest rate of ~~3.33%~~2.72% per ~~annum.~~annum as of December 31, 2010.

As of December 31, ~~2008,~~2010, the fair value of our fixed rate debt was $501,813,000 and the fair value of our variable rate date was $225,557,000.

As of December 31, 2010, we had fixed rate interest rate swaps or caps on ~~all~~four of our variable mortgage loans, thereby effectively fixing our interest rate on those mortgage ~~loan payables.~~loans payable.

As of December 31, ~~2008, there were no amounts outstanding under~~2010, we had drawn $7,000,000 on our ~~secured~~new unsecured revolving ~~line~~credit facility in order to fund the acquisition of ~~credit with LaSalle and KeyBank.~~operating properties. As discussed within the preceding Subsequent Events section, we repaid this amount in full on January 31, 2011.

In addition to changes in interest rates, the value of our future properties is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt if necessary.


Item 8.	Financial Statements and Supplementary Data.

See the index at Item 15. Exhibits, Financial Statement Schedules.


Item 9.	Changes in and Disagreements ~~With~~with Accountants on Accounting and Financial Disclosure.

None.


Item ~~9A(T).~~9A.	Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports pursuant to the Securities

Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief ~~Accounting~~Financial Officer as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As of December 31, ~~2008,~~2010, an evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief ~~Accounting~~Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act). Based on this evaluation, the Chief Executive Officer and the Chief ~~Accounting~~Financial Officer concluded that our disclosure controls and procedures were ~~effective.~~effective as of December 31, 2010.

(b) Management’s ~~Report~~report on internal control over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRules 13a-15(f) and15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief ~~Accounting~~Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation.

Based on our evaluation under the Internal Control-Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, ~~2008.~~2010.

(c) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the fourth quarter ~~ended December 31, 2008~~of 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This Annual Report onForm 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to ~~temporary rules~~the Dodd-Frank Wall Street and Consumer Protection Act, which exempts non-accelerated filers from the auditor attestation requirement of section 404(b) of the ~~SEC that permit us to provide only management’s report in this Annual Report onForm 10-K.~~Sarbanes-Oxley Act.


Item 9B.	Other Information.

None.

7986

PART III


Item 10.	Directors, Executive Officers and Corporate Governance.

The following table and biographical descriptions set forth information with respect to the individuals who are our officers and directors.


Name	*AgeAge**		Position	Term of Office

Scott D. Peters		5153	Chief Executive Officer, President and Chairman of the Board		Since 2006
Kellie S. Pruitt		4345	Chief ~~Accounting~~Financial Officer, Secretary and Treasurer		Since 2009
~~Andrea R. Biller~~Mark D. Engstrom		59	~~Executive Vice President and Secretary~~		~~Since 2006~~
~~Danny Prosky~~		4351	Executive Vice President — Acquisitions		Since ~~2006~~2009
W. Bradley Blair, II		6567	Independent Director		Since 2006
Maurice J. DeWald		6970	Independent Director		Since 2006
Warren D. Fix		7072	Independent Director		Since 2006
Larry L. Mathis		6567	Independent Director		Since 2007
Gary T. Wescombe		6668	Independent Director		Since 2006


*		~~As of March 27, 2009~~

There are no family relationships between any directors, executive officers or between any director and executive officer.

Scott D. Petershas 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~~to July 2008. He served as the Executive Vice President of Grubb & Ellis Apartment REIT, Inc. from January 2006 to November 2008 and served as ~~a director~~one of its directors from April 2007 to June 2008. He also served as the Chief Executive Officer, President and a ~~Director~~director of Grubb & Ellis Company, or Grubb & Ellis, our former sponsor, from December 2007 to July 2008, and as the Chief Executive Officer, President and ~~Director~~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 ~~since~~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 to July 2008.~~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~~director of Golf Trust of America, Inc., a publicly traded REIT. Mr. Peters received ahis B.B.A. degree in ~~accounting~~Accounting and ~~finance~~Finance from Kent State University.

Kellie S. Pruitthas served as our Chief ~~Accounting~~Financial Officer since ~~January~~May 2010, as our Treasurer since April 2009, and as our Secretary since July 2009. She also served as our Chief Accounting Officer from January 2009 until May 2010, as our Assistant Secretary from March 2009 to July 2009, and as our Controller for a portion of January 2009. From September 2007 to December 2008, ~~she~~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 ~~Senior Manager~~a senior manager at Deloitte & Touche LLP, from 1995 to 2007, serving both public and privately held companies primarily concentrated in the real estate and consumer business industries. She graduated from the University of Texas ~~where she received~~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.

~~Andrea R. Biller~~has served as our Executive Vice President and Secretary since April 2006 and as the Executive Vice President of our advisor since July 2006. Ms. Biller also served as the Executive Vice President and Secretary REIT II and as the Executive Vice President of Grubb & Ellis Healthcare REIT II Advisor, LLC, or REIT II Advisor, since January 2009. She has also served as the General Counsel, Executive Vice President and Secretary of Grubb & Ellis, our sponsor, since December 2007, and NNN Realty Advisors, since its formation in September 2006 and as a Director of NNN Realty Advisors since December 2007. She

has served as General Counsel for Grubb & Ellis Realty Investors since March 2003 and as Executive Vice President since January 2007. Ms. Biller has also served as the Secretary of Grubb & Ellis Securities since March 2004. Ms. Biller has also served as the Secretary and Executive Vice President of G REIT, Inc. from June 2004 and December 2005, respectively, until January 2008, the Secretary of T REIT, Inc. from May 2004 to July 2007, the Secretary of Grubb & Ellis Apartment REIT, Inc. from January 2006 through February 2009 and a Director of Grubb & Ellis Apartment REIT, Inc. since June 2008. Ms. Biller practiced as a private attorney specializing in securities and corporate law from 1990 to 1995 and 2000 to 2002. She practiced at the SEC from 1995 to 2000, including two years as special counsel for the Division of Corporation Finance. Ms. Biller received a B.A degree in Psychology from Washington University, an M.A. degree in Psychology from Glassboro State University and a J.D. degree from George Mason University School of Law, where she graduated first with distinction. Ms. Biller is a member of the California, Virginia and the District of Columbia State Bar Associations.

~~Danny Prosky~~Mark D. Engstromhas served as our Executive Vice President — Acquisitions since ~~April 2008, having~~July 2009. From February 2009 to July 2009, Mr. Engstrom served as our ~~Vice President — Acquisitions since September 2006.~~independent consultant providing acquisition and asset management support. Mr. ~~Prosky~~Engstrom has ~~also~~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 ~~the President and Chief Operating Officer~~a Manager of ~~REIT II and as the President and Chief Operating Officer of REIT II Advisor since January 2009. He has served as Grubb & Ellis Realty Investors’ Executive Vice President, Healthcare~~ Real Estate ~~since May 2008, having served as its Managing Director — Healthcare Properties since March 2006. He is~~Services for Hammes Company and created a new business unit within the company which was responsible for ~~all medical~~providing asset and property ~~acquisitions, management and dispositions.~~management. Mr. ~~Prosky previously worked~~Engstrom graduated from Michigan State University with ~~Health Care Property Investors, Inc.,~~ a healthcare-focused REIT where he served as the Assistant Vice President — Acquisitions & Dispositions from 2005 to March 2006, and as Assistant Vice President — Asset Management from 1999 to 2005. From 1992 to 1999, he served as the Manager, Financial Operations, Multi-tenant Facilities for American Health Properties, Inc. Mr. Prosky received a B.S.B.A. degree in ~~Finance~~Pre-Law and Public Administration and a Masters Degree from the University of ~~Colorado~~Minnesota in Hospital and ~~an M.S. degree in Management from Boston University.~~Healthcare Administration.

W. Bradley Blair, IIhas served as an ~~Independent Director~~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~~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 ~~received~~earned a B.S. degree in Business from Indiana University in Bloomington, Indiana and ~~a J.D.~~his Juris Doctorate degree from the University of North Carolina School of Law.

Maurice J. DeWaldhas served as an ~~Independent Director~~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~~director of Mizuho Corporate Bank of California ~~Advanced Materials Group, Inc., Aperture Health, Inc.~~ and as non-executive Chairman of Integrated Healthcare Holdings, Inc. Mr. DeWald also previously served as a ~~Director~~director of Tenet Healthcare Corporation, ~~as well as~~ 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,~~audit partner, a member of their board of directors as well as the ~~Managing Partner~~managing partner of the Orange County, ~~and~~ Los Angeles, ~~California offices as well as its~~and Chicago ~~office.~~offices. Mr. DeWald has served as Chairman and ~~Director~~director of both the United Way of Greater Los Angeles and the United Way of Orange County California. Mr. DeWald ~~received~~holds a B.B.A. degree in Accounting and Finance from the University of Notre Dame and is a member of its Mendoza School of Business Advisory Council. Mr. DeWald is a Certified Public ~~Accountant.~~Accountant (inactive), and is a member of the California Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

Warren D. Fixhas served as an ~~Independent Director~~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~~director of ~~Clark Investment Group, Clark Equity Capital, The Keller~~First Financial ~~Group,~~Advisors, First Foundation Bank, Accel Networks, and ~~Accel Networks.~~CT Realty Investors. Until November of 2008, when he completed a process of dissolution, he served for five years as the ~~Chief Executive Officer~~chief executive officer of WCH, Inc., formerly Candlewood Hotel Company, Inc., having served as its Executive

Vice President, ~~Chief Financial Officer~~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~~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~~partner in The Contrarian Group, a business management and investment company since December 1992. From 1989 to December 1992, Mr. Fix served as President of The Pacific Company, a real estate investment and a 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.~~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 ahis B.A. degree from Claremont McKenna College ~~in California~~ and is a graduate of the UCLA Executive Management Program, the Stanford

Financial Management Program, ~~and~~ the UCLA Anderson Corporate Director ~~Program.~~Program, and the Stanford Directors’ Consortium.

Larry L. Mathishas served as an ~~Independent Director~~independent director of our company since April 2007. Since 1998 he has served as an ~~Executive Consultant~~executive consultant with D. Peterson & Associates in Houston, Texas, providing counsel to select clients on leadership, management, governance, and strategy and is the author ofThe 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, including the last 14 years as CEO before his retirement in ~~1997 as CEO.~~1997. 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~~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 Kansas~~ and ana M.A. degree in Health Administration from Washington University in St. ~~Louis.~~Louis, Missouri.

Gary T. Wescombehas served as an ~~Independent Director~~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.~~principal. He is also ~~Director,~~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~~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~~partner with Ernst & Young, LLP (previously Kenneth Leventhal & Company) from 1970 to 1999. In addition, Mr. Wescombe also served as a ~~Director~~director of G REIT, Inc. from December 2001 to January 2008 and has served as ~~Chairman~~chairman of the ~~Trustees~~trustees of G REIT Liquidating Trust since January 2008. Mr. Wescombe received a B.S. degree in Accounting and Finance from California State University ~~San Jose in 1965~~ and is a member of the American Institute of Certified Public Accountants and California Society of Certified Public Accountants.

~~Our Advisor~~Board Experience

~~Management~~

~~The following table~~Our board of directors has diverse and ~~biographical descriptions set forth information with respect~~extensive knowledge and expertise in industries that are of particular importance to us, including 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 ~~advisor’s~~board of directors has extensive and broad legal, auditing and accounting experience. Our board of directors has numerous years of hands-on and executive ~~officers.~~


~~Name~~	Age *		~~Position~~

~~Jeffrey T. Hanson~~		38		~~Chief Executive Officer~~
~~Andrea R. Biller~~		59		~~Executive Vice President~~

commercial real estate experience drawn from a wide range of disciplines. Each director was nominated to the board of directors on the basis of the unique skills he brings to the board, as well as how such skills collectively enhance our board of directors. On an individual basis:


*	•	AsOur Chairman, Mr. Peters, has over 20 years of ~~March 27, 2009~~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.

	•	Mr. Blair provides broad real estate and legal experience, having served a variety of companies in advisory, executiveand/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

~~Jeffrey T. Hanson~~~~has served as the Chief Executive Officer of our advisor since January 2009. Mr. Hanson has also served as the Chief Executive Officer and Chairman of the Board of REIT II and as the~~

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		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.

Chief Executive Officer of REIT II Advisor since January 2009. He has also served as the Executive Vice President, Investment Programs, of Grubb & Ellis since December 2007. In addition, he has served as the President and Chief investment Officer of Grubb & Ellis Realty Investors since December 2007 and January 2007, respectively, and has served as the President and Chief Executive Officer of Realty since July 2006 and as its Chairman of the board of directors since April 2007. Mr. Hanson’s responsibilities include managing Grubb & Ellis’ real estate portfolio and directing acquisitions and dispositions nationally for Grubb & Ellis’ public and private real estate programs. He has also served as the Chief Investment Officer of NNN Realty Advisors, a wholly owned subsidiary of Grubb & Ellis, since September 2006 and as a Director of NNN Realty Advisors since November 2008. From 1996 to July 2006, Mr. Hanson served as Senior Vice President with Grubb & Ellis Company’s Institutional Investment Group in the firm’s Newport Beach office. While with that entity, he managed investment sale assignments throughout Southern California and other Western U.S. markets for major private and institutional clients. Mr. Hanson is a member of the Sterling College Board of Trustees and formerly served as a member of the Grubb & Ellis President’s Counsel and Institutional Investment Group Board of Advisors. Mr. Hanson received a B.S. degree in Business from the University of Southern California with an emphasis in Real Estate Finance.


	•	Mr. 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.

	•	Mr. Fix offers financial and management expertise, with particular industry knowledge in real estate, hospitality, agriculture and financial services. He has served in various executiveand/or director roles in a number of public and private companies in the real estate, financial and technology sectors, for over 40 years.

	•	Mr. 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.

	•	Mr. Wescombe provides expertise in accounting, real estate investments and financing strategies, having served a number of companies in various executiveand/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 biographical information regarding Ms. Biller, see — Directors, Executive Officers and Corporate Governance, above.~~

Grubb & Ellis Realty Investors owns a 75.0% managing member interest in our advisor. Grubb & Ellis Healthcare Management, LLC owns a 25.0% non-managing member interest in our advisor. The members of Grubb & Ellis Healthcare Management, LLC include Andrea R. Biller, our Executive Vice President and Secretary, our advisor’s Executive Vice President, our advisors’ Executive Vice President, Grubb & Ellis’ Executive Vice President, Secretary and General Counsel, NNN Realty Advisors’ Executive Vice President, Secretary, General Counsel, and Director, Grubb & Ellis Realty Investors’ Executive Vice President and General Counsel, and Grubb & Ellis Securities’ Secretary; Jeffrey T. Hanson, our advisor’s Chief Executive Officer, Grubb & Ellis’ Executive Vice President, Investment Programs, Grubb & Ellis Realty Investors’ President and Chief Investment Officer, NNN Realty Advisors’ Chief Investment Officer and Director and Realty’s Chief Executive Officer, Chairman of the board of directors; and Grubb & Ellis Realty Investors for the benefit of other employees who perform services for us. Ms. Biller own 18.0% membership interests in Grubb & Ellis Healthcare Management, LLC. Grubb & Ellis Realty Investors owns a 64.0% membership interest in Grubb & Ellis Healthcare Management, LLC.

We rely on our advisor to manage our day-to-day activities and to implement our investment strategy. We, our advisor and Grubb & Ellis Realty Investors are parties to an advisory agreement, as amended and restated on November 14, 2008 and effective as of October 24, 2008, or the Advisory Agreement, pursuant to which our advisor performs its duties and responsibilities as our fiduciary.

~~Grubb & Ellis, NNN Realty Advisors and Grubb & Ellis Realty Investors~~

Our current sponsor Grubb & Ellis, headquartered in Santa Ana, California, is one of the nation’s leading commercial real estate services and investment companies. Drawing on the resources of nearly 5,500 real estate professionals, including a brokerage sales force of approximately 1,800 brokers nationwide, Grubb & Ellis and its affiliates combine local market knowledge with a national service network to provide innovative, customized solutions for real estate owners, corporate occupants and investors.

On December 7, 2007, NNN Realty Advisors, which previously served as our sponsor, merged with and into a wholly owned subsidiary of our current sponsor, Grubb & Ellis. The transaction was structured as a reverse merger whereby stockholders of NNN Realty Advisors received shares of Grubb & Ellis in exchange

~~for their NNN Realty Advisors shares and, immediately following the merger, former NNN Realty Advisor stockholders held approximately 59.5% of Grubb & Ellis.~~

The merger combined one of the world’s leading full-service commercial real estate organization with a leading sponsor of commercial real estate programs to create a diversified real estate services business providing a complete range of transaction, management and consulting services, and possessing a strong platform for continued growth. Grubb & Ellis continues to use the “Grubb & Ellis” name and continues to be listed on the New York Stock Exchange under the ticker symbol “GBE.”

As a result of the merger, we consider Grubb & Ellis to be our sponsor. Upon Grubb & Ellis becoming our sponsor, we changed our name from NNN Healthcare/Office REIT, Inc. to Grubb & Ellis Healthcare REIT, Inc.

Grubb & Ellis Realty Investors, the parent and manager of our advisor and an indirect wholly owned subsidiary of our sponsor, offers a diverse line of investment products as well as a full-range of services including asset and property management, brokerage, leasing, analysis and consultation. Grubb & Ellis Realty Investors is also an active seller of real estate, bringing many of its investment programs full cycle.

~~Upon completion of our transition to self-management, we will no longer be advised by our advisor or consider our sponsor to be Grubb & Ellis.~~

Committees of Our 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, ~~and~~ an investment committee and a risk management committee.

Audit Committee. Our audit committee’s primary function is to assist the board ~~with~~of directors in fulfilling its oversight responsibilities by reviewing the financial information to be provided to the stockholders and others, the system of ~~the integrity of our financial statements, compliance with legal and regulatory financial disclosure requirements, independent auditor’s qualifications and independence~~internal controls which management has established, and the ~~performance of our internal~~ audit ~~function~~ and ~~independent auditor.~~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~~Messrs Blair, ~~II, Warren D.~~DeWald, Fix, 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.

~~The audit committee has adopted a written charter under which it operates. The charter is available on our sponsor’s website at~~~~www.gbe-reits.com/healthcare.~~

Compensation Committee. The primary responsibilities of our compensation committee are to advise the board on compensation policies, establish performance objectives for our executive officers, ~~prepare the report on executive compensation for inclusion in our annual proxy statement,~~ 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 ~~W. Bradley~~Messrs. Blair, ~~II, Warren D.~~DeWald, Fix and ~~Gary T.~~ Wescombe, all of whom are independent directors. Mr. Wescombe currently serves as the chairman.

~~The compensation committee has adopted a written charter under which it operates. The charter is available on our sponsor’s website at~~~~www.gbe-reits.com/healthcare.~~

Nominating and Corporate Governance Committee. The nominating and corporate governance committee’s 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 ~~our~~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

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comprised of ~~W. Bradley~~Messrs. Blair, ~~II, Warren D.~~ Fix and ~~Larry L.~~ Mathis, all of whom are independent directors. Mr. Fix currently serves as the chairman.

~~The nominating and corporate governance committee has adopted a written charter under which it operates. The charter is available on our sponsor’s website at~~~~www.gbe-reits.com/healthcare.~~

Investment Committee. Our investment committee’s primary function is to assist the board of directors in ~~fulfilling its responsibilities with respect to investments in specific real estate assets~~reviewing proposed acquisitions presented by our ~~advisor, reviewing and overseeing~~management. The investment committee has the ~~performance~~authority to reject but not to approve proposed acquisitions, which must receive the approval of ~~our assets, reviewing and overseeing~~ the ~~capital raising activities and performance~~board of ~~our dealer manager and reviewing our investment policies and procedures on an ongoing basis.~~directors. The investment committee is currently comprised of ~~W. Bradley~~Messrs. Blair, ~~II, Warren D.~~ Fix, ~~Scott D.~~ Peters and ~~Gary T.~~ Wescombe. Messrs. Blair, Fix and Wescombe are independent directors. Mr. Blair currently serves as the chairman.

Risk Management Committee. Our risk management committee’s 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) management’s policies and procedures for risk management. The ~~investment~~risk management committee ~~has adopted a written charter under which it operates. The charter~~ is ~~available on our sponsor’s website at~~~~www.gbe-reits.com/healthcare.~~currently comprised of Messrs. Blair, DeWald and Mathis, all of whom are independent directors. Mr. Mathis currently serves as the chairman.

Amended and Restated 2006 Incentive Plan and Independent Directors Compensation Plan

We have adopted an incentive stock plan, which we use to attract and retain qualified independent directors, employees and consultants providing services to us who are considered essential to our long-term success by offering these individuals an opportunity to participate in our growth through awards in the form of, or based on, our common stock.

The incentive stock plan provides for the granting of awards to participants in the following forms to those independent directors, employees, and consultants selected by the plan administrator for participation in the incentive stock plan:


	•	options to purchase shares of our common stock, which may be nonstatutory stock options or incentive stock options under the U.S. tax code;

	•	stock appreciation rights, which give the holder the right to receive the difference between the fair market value per share on the date of exercise over the grant price;

	•	performance awards, which are payable in cash or stock upon the attainment of specified performance goals;

	•	restricted stock, which is subject to restrictions on transferability and other restrictions set by the committee;

	•	restricted stock units, which give the holder the right to receive shares of our common stock, or the equivalent value in cash or other property, in the future;

	•	deferred stock units, which give the holder the right to receive shares of our common stock, or the equivalent value in cash or other property, at a future time;

	•	dividend equivalents, which entitle the participant to payments equal to any dividends paid on the shares of our common stock underlying an award; and/or

	•	other stock based awards in the discretion of the plan administrator, including unrestricted stock ~~grants.~~grants and units of our operating partnership.

Any such awards will provide for exercise prices, where applicable, that are not less than the fair market value of our common stock on the date of the grant. Any shares issued under the incentive stock plan will be subject to the ownership limits contained in our charter.

Our board of directors or a committee of its independent directors ~~will administer~~administers the incentive stock plan, with sole authority to select participants, determine the types of awards to be granted and all of the terms and conditions of the awards, including whether the grant, vesting or settlement of awards may be subject to the attainment of one or more performance goals. No awards will be granted under the plan if the grant, vesting

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~~vesting~~and/or exercise of the awards would jeopardize our status as a REIT under the Code or otherwise violate the ownership and transfer restrictions imposed under our charter.

The maximum number of shares of our common stock that may be issued upon the exercise or grant of an award under the incentive stock plan is ~~2,000,000.~~10,000,000. In the event of a nonreciprocal corporate transaction that causes the per-share value of our common stock to change, such as a stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend, the share authorization limits of the incentive stock plan will be adjusted proportionately.

Unless otherwise provided in an award certificate or any special plan document governing an award, upon the termination of a participant’s service due to death or disability (as defined in the plan) or a change of control for grants made prior to February 24, 2011, (i) all of that participant’s outstanding options and stock appreciation rights will become fully vested and exercisable; (ii) all time-based vesting restrictions on that participant’s outstanding awards will lapse; and (iii) the payout level under all of that participant’s outstanding performance-based awards will be determined and deemed to have been earned based upon an assumed achievement of all relevant performance goals at the “target” level, and the awards will payout on a ~~participant,~~pro rata basis, based on the time within the performance period that has elapsed prior to the date of termination.

Unless otherwise provided in an award certificate or any special plan document governing an award, upon the occurrence of a change in control of the company (as defined in the plan) in which awards are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control in a manner approved by the compensation committee or our board of directors: (i) all outstanding options and stock appreciation rights will become fully vested and exercisable; (ii) all time-based vesting restrictions on outstanding awards will lapse as of the date of termination; and (iii) the payout level under outstanding performance-based awards will be determined and deemed to have been earned as of the effective date of the change in control based upon an assumed achievement of all relevant performance goals at the “target” level, and the awards will payout on a pro rata basis, based on the time within the performance period that has elapsed prior to the change in control. With respect to awards assumed by the surviving entity or otherwise equitably converted or substituted in connection with a change in control, if within one year after the effective date of the change in control, a participant’s employment is terminated without cause or the participant resigns for good reason (as such terms are defined in the plan), then: (i) all of ~~such~~that participant’s outstanding options and stock appreciation rights will become fully vested and exercisable; (ii) all time-based vesting restrictions on that participant’s outstanding awards will lapse as of the date of termination; and (iii) the payout level under all of that participant’s performance-based awards that were outstanding immediately prior to effective time of the ~~incentive stock plan~~change in control will ~~become fully vested.~~ be determined and deemed to have been earned as of the date of termination based upon an assumed achievement of all relevant performance goals at the “target” level, and the awards will payout on a pro rata basis, based on the time within the performance period that has elapsed prior to the date of termination.

The plan will automatically expire on the tenth anniversary of the date on which it is adopted, unless extended or earlier terminated by the board of directors. The board of directors may terminate the plan at any time, but such termination will have no adverse impact on any award that is outstanding at the time of such termination. The board of directors may amend the plan at any time, but any amendment would be subject to stockholder approval if, in the reasonable judgment of the board, stockholder approval would be required by any law, regulation or rule applicable to the plan. No termination or amendment of the plan may, without the written consent of the participant, reduce or diminish the value of an outstanding award determined as if the award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination. The board may amend or terminate outstanding awards, but those amendments may require consent of the participant and, unless approved by the stockholders or otherwise permitted by the antidilution provisions of the plan, the exercise price of an outstanding option may not be reduced, directly or indirectly, and the original term of an option may not be extended.

Under Section 162(m) of the Code, a public company generally may not deduct compensation in excess of $1 million paid to its Chief Executive Officer and the four next most highly compensated executive

officers. Until the annual meeting of our stockholders in 2010, or until the incentive stock plan is materially amended, if earlier, awards granted under the incentive stock plan will be exempt from the deduction limits of Section 162(m). In order for awards granted ~~after~~under the ~~expiration of such grace period~~plan to be exempt, the incentive stock plan must be amended to comply with the exemption conditions and be resubmitted for approval by our stockholders.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics, or the Code of Ethics, which contains general guidelines for conducting our business and is designed to help directors, employees and independent consultants resolve ethical issues in an increasingly complex business environment. The Code of Ethics applies to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and all members of our board of directors. The Code of Ethics covers topics including, but not limited to, conflicts of interest, confidentiality of information, and compliance with laws and regulations. ~~Stockholders may request a copy~~The full text of ~~the~~our Code of Ethics ~~which will be provided without charge, by writing~~is published on our web site atwww.htareit.com. We intend to ~~Grubb & Ellis Healthcare REIT, Inc. at 1551 N. Tustin Avenue, Suite 300, Santa Ana, California 92705, Attention: Secretary.~~disclose future amendments to certain provisions of our Code of Ethics, or waivers of such provisions granted to executive officers and directors, on the web site within four business days following the date of such amendment or waiver.

Indemnification Agreements

We have entered into indemnification agreements with each of our independent directors, non-independent director and executive officers. 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.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires each director, officer, and individual beneficially owning more than 10.0% of a registered security of the company to file with the SEC, within specified time frames, initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) of common stock of the company. These specified time frames require the reporting of changes in ownership within two business days of the transaction giving rise to the reporting obligation. Reporting persons are required to furnish us with copies of all Section 16(a) forms filed with the SEC. Based solely on a review of the copies of such forms furnished to us during and with respect to the year ended December 31, ~~2008~~2010 or written representations that no additional forms were required, to the best of our knowledge, all required Section 16(a) filings were timely and correctly made by reporting persons during ~~2008, except that Messrs. Blair, DeWald, Fix, Mathis and Wescombe did not timely file one Form 4.~~2010.


Item 11.	Executive Compensation.

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 ~~that~~ we have made under those programs and policies with respect to ~~Mr. Peters,~~ our ~~Chief Executive Officer and President,~~named executive officers, and the material factors that we considered in making those decisions. Following this Compensation Discussion and Analysis, under ~~Summary Compensation Table,~~the heading “Executive Compensation” you will find a series of tables containing specific data about the compensation earned in 2010 by ~~Mr. Peters in 2008.~~

~~Compensation Program Objectives~~

~~During 2008, Mr. Peters was~~ the ~~only executive officer employed by us - each of our other executive officers was employed by our advisor or its affiliates, and was compensated by these entities for their services~~following individuals, whom we refer to ~~us. Mr. Peters served~~ as our Chief Executive Officer and President on a non-employee basis until November 2008, when we entered into an employment agreement with him as part of our transition to self-management. Our compensation committee was formed in August 2008. As a result, for the majority of 2008, we did not have, nor did our board of directors consider, a compensation policy or program for ournamed executive ~~officers. As we complete our transition to self-management and expand our employee base, our compensation committee expects to continue to develop and refine our compensation program and objectives.~~

In designing Mr. Peters’ initial compensation package, our objective was to provide compensation that directly relates to and rewards his contribution to our operating and financial performance, and its transition toward self-management. We also are mindful of the importance of retaining qualified leadership.

~~How We Determined Mr. Peters’ Initial Compensation Package~~

In setting the terms of Mr. Peters’ compensation package, our compensation committee considered Mr. Peters’ past, present and anticipated future contributions to us, as well as the pay practices within the REIT industry.officers:


	•	~~Mr.~~Scott D. Peters, ~~has played an integral role with our Company since 2006,~~President, Chief Executive Officer and ~~his experience and length~~Chairman of ~~service with our Company was~~ the primary factor considered by our compensation committee in setting his initial pay. Our compensation committee also considered Mr. Peters’ leadership role in our transition to a self-management structure, as described elsewhere in this Annual Report on~~Form 10-K.~~Board;

	•	The compensation committee reviewed the NAREIT 2008 Compensation Survey for the chief executive officer position (the “NAREIT Survey”), as well as a report provided by Christenson Advisors, LLC, the compensation consultant engaged by the compensation committee. The compensation consultant’s report provided information regarding the compensation packages of chief executive officers of REITs with a total capitalization of approximately $1 billion to $2 billion. The compensation consultant’s report was not based on a formal benchmarking analysis but rather upon surveysKellie S. Pruitt, Chief Financial Officer, Secretary and ~~its knowledge of the industry. The committee did not target Mr. Peters’ compensation to be at the median or any other~~Treasurer; and

	•	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 officer. Our executive compensation packages reflect the increased level of responsibilities and scope of duties attendant with our self-management model, the increase in the size of our company, and our focus on performance-based compensation. We completed the transition to self-management in the third quarter of 2009. 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, appropriately reward our executives and maximize their performance over the long-term. We recognize the importance of our compensation system being properly aligned with our current business model and strategic plans.

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.

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.

Ongoing Assessment of Compensation Program

The compensation committee and the Board of Directors conduct ongoing comprehensive reviews of our compensation program to ensure it meets our primary objective — to reward demonstrated performance and to incentivize future performance by our management and Board of Directors, which results in added value to our company and our stockholders, in the short, mid, and long term. The compensation committee and the Board of Directors as a whole recognize that an effective compensation structure is critical to our success now and in the future. A key element of this ongoing compensation review is to look at our company today as a self-managed entity and to take into account our future strategic direction and objectives, including potential stockholder value enhancement and liquidity events. Our compensation structure needs to be both competitive and focused on aligning the performance by our executives and employees with a fair reward system.

We recently determined that certain strategic opportunities and initiatives should be undertaken and that our compensation programs need to be adjusted and amended to be consistent with changes in our corporate strategies, different timeframes, changes in scope of work, changes in the potential value and application of previously contemplated incentive programs, extraordinary performance and other factors. The compensation committee and Board of Directors are reviewing and adjusting the existing compensation program to ensure that performance incentives are put in place consistent with our strategic initiatives and the expected employee performance to achieve these initiatives. The compensation committee has engaged Towers Watson & Co., an independent compensation consultant, to assist and advise the compensation committee with this review. The compensation committee may also engage additional consultants as part of this process. After such review is completed, the compensation committee and our Board of Directors may make changes to the current compensation structure, including, without limitation, the establishment of performance compensation based on early and mid-range liquidity and other stockholder value enhancement actions and changes to the employee retention program discussed below.

Our Business and 2010 Performance

During 2010, we continued to execute our business plan, generate stockholder value and position our company for continued 2011 growth. Here are some of the highlights.

Equity Proceeds. In March of 2010, we successfully launched a follow-on offering to raise up to $2.2 billion. Under the follow-on offering, we raised approximately $506 million during the year ended December 31, 2010, excluding shares issued under the DRIP. As part of our strategic review process and in response to the substantial equity being raised, we announced our intention to stop raising equity in the near

future. On February 28, 2011, we terminated our follow-on offering, except for sales pursuant to the DRIP. As of the date of this Annual Report onForm 10-K, we have raised approximately $2.2 billion in equity proceeds since our inception, excluding proceeds associated with shares issued under the DRIP.

Acquisitions. During 2010, we purchased a substantial amount of assets, investing approximately $806 million in 24 new portfolio acquisitions. These acquisitions consist of over 3.5 million square feet with approximately 96% occupancy as of December 31, 2010. They were chosen for and are located in areas that continue to complement our existing overall portfolio. Notably, over 50% of our acquisitions were identified and made available to us through direct, off-market sources with quality healthcare systems and owners. We believe this reflects the strength of our acquisition network and our relationships in the industry.

Balance Sheet. In 2010, we continued to focus on maintaining a strong balance sheet with leverage levels in the low 30% range. Our strategy has been and continues to be a prudent consumer and user of credit. In tight economic times, our strong balance sheet and low leverage are critical and provide significant acquisition opportunities. We have avoided the credit problems which affected many highly leveraged companies. In 2010, our strong liquidity position continued to provide us with the funding ability to take advantage of acquisition opportunities.

Credit Transactions. In addition to asset acquisitions, we entered into a number of key credit transactions and expanded key lending relationships in 2010. As the economy and credit markets improved, we took the opportunity to access quality credit at low interest rates. Accessing such credit provides us with a lower cost structure as the cost of credit is well below the cost of capital associated with raising equity.

In 2010, we established key banking relationships with J.P. Morgan, Wells Fargo, Deutsche Bank and other quality investment bankers and banks. In November 2010, we successfully closed a $275 million, three-year, unsecured credit facility with this banking group. This unsecured credit facility can be expanded to $500 million, subject to conditions.

Asset Management. As of December 31, 2010, our total assets were approximately $2.27 billion based on purchase price. Our portfolio consists of approximately 10.9 million square feet with an overall portfolio occupancy over 91% as of December 31, 2010. Our assets are located in 24 states. We continue to focus on states that we believe have strong healthcare macro-economic drivers, like Arizona, Texas, South Carolina, and Indiana. We believe that the healthcare reform legislation enacted in 2010 builds upon the strong sector fundamentals with expanded coverage for individuals, increasing GDP spending, an aging population, and the continued demand for healthcare services.

Cost Savings. For the year ended December 31, 2010, we would have been required to pay acquisition, asset management and above market property management fees of approximately $44,351,000, to our former advisor if we were still subject to the advisory agreement under its original terms prior to the commencement of our transition to self-management. The cost of self-management during the year ended December 31, 2010 was approximately $10,630,000. Therefore, we achieved a net cost savings of approximately $33,721,000 ($44,351,000 fees saved minus $10,630,000) for the year ended December 31, 2010 resulting from our self-management cost structure. In addition and just as importantly, we eliminated internalization fees, established a management and employee team dedicated to our stockholders, and we put ourselves in a position to move our company forward to the next stage of our lifecycle.

How We Determine our Compensation Arrangements

The compensation committee reviews on an ongoing basis the compensation arrangements of our executive officers and employees, and our overall compensation structure. In addition, the employment agreements of our named executive officers require that their base salary be reviewed by the compensation committee no less frequently than annually. In conducting these ongoing reviews in 2010, the compensation committee took into account, among other things, the following:


	•	~~specific level~~the successful completion of ~~compensation within~~ the ~~surveyed group(s). Rather,~~highlighted actions set forth in the ~~committee used both~~ section above entitled “Our Business and 2010 Performance”;


	•	the ~~NAREIT Survey~~successful completion of our transition to self-management and the ~~consultant’s report~~continued growth and productivity of our organization as a self-managed entity;

	•	the commencement and success of our follow-on offering;

	•	the substantial level and quality of new acquisitions that we completed in the past year;

	•	our increasing coverage of distributions with cash flow from operations;

	•	the gross cost savings of $10.8 million in 2009 and $44.4 million in 2010 resulting from our self-management program;

	•	our completion of significant credit transactions;

	•	our overall financial strength and growth; and

	•	the anticipated added scope of work in 2011 and beyond as we explore strategic opportunities to ~~evaluate whether Mr. Peters’ compensation would be reasonable as compared to the compensation provided by the Company’s competitors.~~benefit our stockholders.

Our compensation committee’s independent consultant, Towers Watson, conducted a competitive market assessment of the compensation levels of each of our named executive officers compared to survey data from the 2009 NAREIT Compensation Survey, as well as a peer group assembled by Towers Watson consisting of the following companies:*


HCP, Inc.		Nationwide Health Properties, Inc.
Health Care REIT, Inc.		BioMed Realty Trust, Inc.
Ventas, Inc.		Healthcare Realty Trust Incorporated
Alexandria Real Estate Equities, Inc.		Omega Healthcare Investors, Inc.
Brandywine Realty Trust		Medical Properties Trust, Inc.


*		Companies reviewed from the 2009 NAREIT Compensation Survey included healthcare REITs of all sectors with total capitalization within a range of $3 billion to $6 billion. Towers Watson selected the peer group companies based on financial scope ($1 billion to $12 billion in assets and median assets of $3.6 billion), business segment (healthcare-related and office REITs) and structure (self-managed and publicly traded). In its market assessment, Towers Watson analyzed median and 75th percentile pay levels. For market pay comparisons, Towers Watson considers executives to be paid “competitively” and within the range of competitive practice if their: (i) base salary is within +/−10% of the competitive pay standard; (ii) total cash compensation is within +/−15% of the competitive pay standard; and (iii) total direct compensation is within +/−20% of the competitive pay standard.

Towers Watson found that total direct compensation (base salary, annual bonus and long-term incentives) for our Chief Executive Officer is competitive at the market median and that total direct compensation for our other named executive officers was below the median when compared to both the 2009 NAREIT Compensation Survey data and the peer group proxy data. As ~~we transition~~stated above, Towers Watson also reviewed competitive equity holdings and found that our named executive officers’ total equity holdings were low relative to ~~self-management,~~current total equity holdings of named executive officers at our peer companies. Finally, Towers Watson reviewed thechange-in-control severance protections afforded to our named executive officers and concluded that for the Chief Executive Officer, the current severance provision is above competitive practice and for the other named executive officers, the current severance provisions are somewhat below competitive levels. The compensation committee uses the market information to help guide its compensation decisions, but does not benchmark to a particular percentile within the peer group or otherwise target any element of compensation at a particular level or quartile within the peer group. As discussed below, the compensation committee approved a change to the base salary for Ms. Pruitt and approved a change to the bonus target for Ms. Pruitt to bring her compensation more in line with peers at similar companies. In addition, our compensation committee ~~feels that it is important~~approved additional equity grants to ~~preserve discretion~~Messrs. Peters and Engstrom and Ms. Pruitt to ~~change Mr. Peters’ compensation arrangement, including, among other things,~~increase their level of equity holdings closer to ~~implement~~the levels held by named executive officers at our peer

companies, as well as to provide performance ~~guidelines~~ and ~~objectives. As a result,~~retention incentives to these executive officers, as discussed in connection with its approval of Mr. Peters’ initial compensation package, our compensation committee reserved the right to review and revise the terms of such arrangement. Our compensation committee may change the terms of his employment arrangement and compensation; provided, however, that the committee agreed not to decrease Mr. Peters’ base salary by more ~~than twenty percent.~~detail below.

Elements of ~~Mr. Peters’~~our 2010 Compensation Program

~~Currently,~~During 2010, the key elements of compensation for ~~Mr. Peters are~~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, ~~Mr. Peters is entitled to~~we also provide severance ~~in the event we terminate his employment without cause before November 1, 2010.~~protection for our named executive officers, as discussed below.

Base ~~Salary.~~Salary. Base salary provides the fixed portion of compensation for ~~Mr. Peters~~our named executive officers and is intended to reward core competence in ~~his~~their role relative to skill, experience and contributions to us. In connection with entering into the employment agreements in 2009, the compensation committee approved the following initial annual base salaries: Mr. Peters, $500,000; Mr. Engstrom, $275,000; and Ms. Pruitt, $180,000. In May 2010, as a result of its review of our ~~Company.~~compensation structure discussed above, the compensation committee approved a $250,000 increase to Mr. Peters’ annual base salary and a $45,000 increase to Ms. Pruitt’s base salary. The compensation committee determined that Mr. Engstrom’s base salary continued to be appropriate at that time. In December 2010, based on continued demonstrated performance and added scope of work, which includes ongoing assessment and implementation of anticipated strategic opportunities to benefit our stockholders, the compensation committee approved increases to the annual base salaries of Mr. Engstrom and Ms. Pruitt, both to $300,000.

Annual Bonus. Annual bonuses reward and recognize contributions to our financial goals and achievement of individual objectives. Each of our 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. Engstrom’s target bonus is 100% of base salary. In May 2010, the compensation committee increased Ms. Pruitt’s target bonus to 100% of her base salary ~~is $350,000. As noted above,~~in order to better align her performance based compensation with her level of responsibilities and duties.

The compensation committee, together with Mr. Peters, developed a broad list of goals and objectives for Mr. Peters’ for 2010. 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 2010. In reviewing his performance, the compensation committee concluded that Mr. Peters accomplished, and in many cases, exceeded such goals and objectives, which included:


	•	effectively leading the expansion of the company, including growing our portfolio through the acquisition of quality, performing assets;

	•	successfully negotiating substantial and creative value-added transaction terms and conditions;

	•	coordinating successful and competitive refinancing transactions during a time of significant dislocations in the credit markets;

	•	maintaining a strong and solid balance sheet;

	•	successfully launching our follow-on offering;

	•	recruiting and effectively supervising our employees;

	•	implementing effective risk management at all key levels of the company;

	•	establishing and enhancing our relationships with commercial and investment banks;

	•	maintaining and actively enhancing our “stockholder first,” performance-driven philosophy;

	•	effectively establishing our independent brand name as an asset to our company; and

	•	facilitating an open and effective dialogue with our board.

The compensation committee relied primarily on the recommendations of Mr. Peters in determining the bonus amounts for Mr. Engstrom and Ms. Pruitt. Mr. Peters’ ~~2008 base salary,~~based his recommendations on his assessment of

Mr. Engstrom and Ms. Pruitt’s performance during 2010. For example, Mr. Peters considered the number of successful acquisitions that Mr. Engstrom negotiated and completed and his management of our acquisitions team. Mr. Peters considered Ms. Pruitt’s outstanding performance and significant accomplishments during 2010, including playing a key role in obtaining unsecured and secured financing for the company and developing relationships with key commercial and investment banks, as well as further developing our corporate office and infrastructure, building our accounting team and assisting in the coordination of ongoing stockholder value enhancement actions. The compensation committee considered ~~his history with our Company, his increased responsibilities~~Mr. Peters’ recommendations and ~~oversight, with a particular focus on his role in our transition to self-management, as well as salary practices in~~approved the ~~REIT industry.~~bonuses for Mr. Engstrom and Ms. Pruitt.

~~Annual Bonus.~~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 executive’s compensation arrangement. In 2010, restricted stock was 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, and with the demonstrated performance to date, and expected ongoing performance and correlated added value to us in the future.

In May 2010, our board approved an employee retention program pursuant to which we have and will grant our executive officers and employees restricted shares of our common stock. The purpose of this program is to incentivize our executive officers and employees to remain with us for a minimum of three years, subject to meeting our performance standards. The board and the compensation committee determined that this program is consistent with our overall goal of hiring and retaining highly qualified employees. Pursuant to this program, on May 24, 2010, Messrs. Peters and Engstrom and Ms. Pruitt were entitled to receive grants of 100,000, 50,000 and 50,000 shares of restricted stock, respectively. Mr. Peters elected to receive a restricted cash award in lieu of 50,000 shares. The restricted shares and the restricted cash award granted to Mr. Peters will vest in three equal installments on each anniversary of the grant date, and the restricted shares granted to Ms. Pruitt and Mr. Engstrom will vest 100% on the third anniversary of the grant date, in each case provided that the executive is employed by us on each vesting date. Mr. Peters is also entitled to certain annual restricted stock grants pursuant to the terms of his employment ~~agreement,~~agreement. For additional information regarding these grants, see the Grants of Plan-Based Award table and the narrative following such table later in this Annual Report onForm 10-K.

In December 2010, our board approved additional grants to our named executive officers that were made on January 3, 2011, taking into account advice from Towers Watson, demonstrated extraordinary performance, our current strategic plan, and the importance to our company of retaining and motivating experienced key officers as we move into the next stage of our life-cycle. Messrs. Peters and Engstrom and Ms. Pruitt were entitled to receive grants of 200,000, 80,000 and 80,000 shares of restricted stock, respectively. Mr. Peters ~~is eligible~~elected to ~~earn an annual bonus, up~~receive a restricted cash award in lieu of 100,000 shares. The restricted shares and the restricted cash award granted to ~~a maximum of 100% of his base salary. In determining~~ Mr. Peters’ annual bonus for the year ended December 31, 2008, our compensation committee made a subjective assessment of Mr. Peters’ individual performance and increased responsibilities, particularly in connectionPeters vested with ~~our transition towards self-management. His bonus for 2008 was prorated based~~respect to 25% on the ~~number~~grant date and will vest in three additional installments of ~~days~~25% on each anniversary of the grant date, and the restricted shares granted to Ms. Pruitt and Mr. Engstrom will vest 100% on the third anniversary of the grant date, in each case provided that ~~he was~~the executive is employed by us ~~during such year.~~on each vesting date.

Restricted stock has a number of attributes that makes it an attractive equity award for our named executive officers. The vesting schedule provides a strong retention element to their compensation package — if the executive voluntarily terminates employment, he or she will forfeit any unvested restricted stock. At the same time, the executive 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’ ~~2008 bonus is shown in the “Bonus” column~~award so that he could elect to receive a portion of the ~~Summary Compensation Table below.~~value of the award in cash in order to satisfy his tax obligations.

~~Long-Term Equity Incentives.~~Employment Agreements. ~~In connection with the commencement of his employment with us, Mr. Peters received 40,000 shares of restricted common stock, which vest as~~We are party to one-third of the shares on each of the first, second and third anniversaries of the date of grant. Our compensation committee chose restricted common stock as the equity component of Mr. Peters’ arrangement because it both aligns his interests with those of our stockholders and provides a strong retentive component to his compensation arrangement. In addition, we currently use restricted common stock as the equity component of our director compensation program. Based on its knowledge of the industry and its review of peer practices, our compensation committee believes that the size of the restricted stock award is in line with current market practices.

~~Other Benefits.~~ ~~As discussed above, on November 14, 2008, we entered into~~ an employment agreement with each of Messrs. Peters and Engstrom and Ms. Pruitt. 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. Pursuant~~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 ~~his employment agreement, if we terminate Mr. Peters’~~which Messrs. Peters and Engstrom and Ms. Pruitt are entitled upon a termination of employment for ~~other than cause~~specified reasons. For additional information regarding the potential severance payments to our named executive officers, see “Potential Payments Upon Termination or ~~disability prior to November 1, 2010, he will be entitled to receive a severance payment equal to 50% of his base salary, and a pro-rata bonus for the year of termination.~~Change in Control” later in this Annual Report onForm 10-K.

~~REPORT OF THE~~ Material Changes to Our Compensation Program

Approval of Amended and Restated 2006 Incentive Plan. On February 24, 2011, our board approved the Amended and Restated 2006 Incentive Plan in order to increase the number of shares available for grant thereunder from 2,000,000 to 10,000,000. The Amended and Restated 2006 Incentive Plan also includes additional amendments designed, among other things, to address recent tax developments and address stockholder preferences, including removal of the “liberal” share counting provisions and elimination of the single-trigger vesting of awards upon a change in control on a go-forward basis. Our board has not yet made any additional grants pursuant to the Amended and Restated 2006 Incentive Plan.

COMPENSATION COMMITTEE REPORT

Our compensation committee of our board of directors oversees our compensation program on behalf of our board. In fulfilling its oversight responsibilities, the committee reviewed and discussed with management the above Compensation Discussion and Analysis included in this report.

In reliance on the review and discussion referred to above, our compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in our Annual Report onForm 10-K for the year ended December 31, ~~2008,~~2010, and our proxy statement on Schedule 14A to be filed in

connection with our ~~2009~~2011 annual meeting of stockholders, each of which has been or will be filed with the SEC.

This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Annual Report onForm 10-K into any filing under the Securities Act of 1933, as amended, or the Exchange Act and shall not otherwise be deemed filed under such acts. This report is provided by the following independent directors, who constitute the committee:

Gary T. Wescombe, Chair
W. Bradley Blair, II
Maurice J. DeWald
Warren D. Fix

Summary Compensation Table

The summary compensation table below reflects the total compensation earned by ~~Mr. Peters,~~ our ~~Chief Executive Officer and President~~named executive officers for the ~~year~~years ended December 31, ~~2008.~~2008, 2009 and 2010. We did not employ any other executive officer other than Mr. Peters for the year ended December 31, 2008.

All Other

Name and Principal Position Year Salary ($)(1) Bonus ($) Stock Awards ($)(2) Compensation ($)(3) Total ($)

Scott D. Peters
Chief Executive Officer and President 2008 148,333 58,333 17,037 2,252 225,955


										Non-Equity
										Incentive Plan			All Other
Name and Principal Position	Year		Salary ($)			Bonus ($)(4)		Stock Awards ($)(5)		Compensation ($)			Compensation ($)(7)		Total ($)

Scott D. Peters		2010		655,208			1,500,000		1,100,000		325,000	(6)		217,045		3,797,253
Chief Executive Officer,		2009		504,753			1,200,000		750,000		375,000	(6)		67,623		2,897,376
President and Chairman of the Board (Principal Executive Officer)		2008		148,333	(3)		58,333		400,000		—			2,252		608,918
Kellie S. Pruitt(1)		2010		207,937			225,000		500,000					40,594		973,531
Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer)		2009		168,942			125,000		250,000		—			3,022		546,964
Mark D. Engstrom(2)		2010		275,000			275,000		500,000					41,877		1,091,877
Executive Vice President — Acquisitions		2009		252,403			110,000		400,000		—			26,589		788,992


(1)		Ms. Pruitt was appointed as Chief Accounting Officer in January 2009, as Treasurer in April 2009, as Secretary in July 2009, and was promoted to Chief Financial Officer in May 2010.

(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.

~~(2)~~(4)		~~The amounts in this column represent~~Reflects the ~~proportionate amount of~~annual cash bonuses earned by our named executive officers for the ~~total~~applicable year.

(5)		Reflects the aggregate grant date fair value of ~~stock~~ awards ~~recognized by us in 2008 for financial accounting purposes, disregarding for this purpose~~granted to the ~~estimate of forfeitures related to service-based vesting conditions. The amount included~~named executive officers in the ~~table includes the amount recorded as expense in our statement of operations for the~~reported year, ~~ended December 31, 2008. The fair values of these awards and the amounts expensed in 2008 were~~ determined in accordance with ~~Statement of~~ Financial Accounting Standards ~~or SFAS, No. 123(R),~~~~Share-Based Payment,~~~~or SFAS No. 123(R)~~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, to our accompanying consolidated financial statements.

~~(3)~~(6)		~~Reflects our payment of~~For 2010, reflects two restricted cash awards that Mr. Peters’ ~~monthly premium~~elected to receive in lieu of a grant of restricted shares. Under one award, $200,000 was fully-vested on the date of grant and $400,000 remains subject to vesting. Under the second award, $125,000 vested from a previous grant. For 2009, 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 ~~two months~~additional information regarding this award.

(7)		Amounts in this column for 2010 include: (1) payments for 100% of the premiums for health care coverage under ~~COBRA~~our group health plan for ~~participation~~each of the named executive officers in ~~Grubb & Ellis’s~~the following amounts: Mr. Peters, $15,338; Ms. Pruitt, $15,338; and Mr. Engstrom, $15,338; (2) distributions on stock awards in the following amounts: Mr. Peters, $187,284; Ms. Pruitt, $20,929; and Mr. Engstrom, $21,261; and (3) payment for unused earned vacation benefit in the following amounts: Mr. Peters, $14,423; Ms. Pruitt, $4,327; and Mr. Engstrom, $5,288. Amounts in this column for 2009 include: (1) payments for 100% of the premiums for health care coverage under our group ~~medical, dental, vision and/or prescription drug plans.~~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; (2) distributions on stock awards of $62,688 for Mr. Peters; and (3) relocation expenses of $21,654 for Mr. Engstrom. 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 ~~Mr. Peters~~our named executive officers for the year ended December 31, ~~2008.~~2010. All awards were granted pursuant to the NNN Healthcare/

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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 ~~For~~Table in Fiscal Year ~~2008~~2010

All Other Stock

Grant Date Fair

All Other Stock

Awards: Number of

Value of Stock and

Estimated Future Payouts under Non-Equity

Awards: Number of

Grant Date Fair

Shares of Stock or

Option Awards

Incentive Plan Awards(1)

Shares of Stock or

Value of Stock and

Name

Grant Date

Units (#)(1)

($)(2)

Grant Date

Threshold ($)

Target ($)

Maximum ($)

Units (#)

Option Awards ($)

Scott D. Peters

11/14/08

40,000

400,000

Mr. Peters

05/24/10

500,000

07/01/10

600,000

05/24/10

50,000(2

)

500,000

07/01/10

60,000(3

)

600,000

Ms. Pruitt

05/24/10

50,000(2

)

500,000

Mr. Engstrom

05/24/10

50,000(2

)

500,000


(1)		Reflects ~~shares of~~ restricted ~~common stock granted~~cash awards. There is no threshold, target or maximum payable pursuant to this award; instead, the award vests based on Mr. ~~Peters under our 2006 Incentive Plan.~~Peters’ continued service with us. See the narrative following this table for additional information regarding the 2010 restricted cash award.

(2)		Reflects ~~the~~a grant ~~date fair value~~ of ~~Mr. Peters’~~50,000 restricted ~~stock award, determined pursuant to SFAS No. 123(R). The fair value of each share of restricted common stock was estimated at the date of grant at $10.00 per share, the per share price of~~ shares of our common ~~stock in~~stock.

(3)		Reflects a grant of 60,000 restricted shares of our ~~offering.~~common stock.

Material Terms of 2010 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. In conjunction with the termination of our follow-on offering, the compensation committee is reviewing the terms of these employment agreements.

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. Engstrom’s and Ms. Pruitt’s employment agreement each had an initial term of two years, ending on June 30, 2011. The compensation committee has exercised its right to extend the employment agreements of Mr. Engstrom and Ms. Pruitt for a period of one year, ending on June 30, 2012.

Base Salary and Benefits. The agreements provided 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. On May 20, 2010, the compensation committee increased Mr. Peters’ and Ms. Pruitt’s annual base salary from $500,000 to $750,000 and from $180,000 to $225,000, respectively. In December 2010, the compensation committee increased both Ms. Pruitt’s and Mr. Engstrom’s salaries to $300,000. 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. Engstrom’s initial target bonus is 100% of base salary. On May 24, 2010, the compensation committee increased Ms. Pruitt’s target bonus from 60% to 100% of her 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 executive’s health care coverage under our group health plan.

Equity Grants. Pursuant to the terms of his employment agreement, Mr. Peters is entitled to receive additional restricted stock grants on each of July 1, 2010, July 1, 2011 and July 1, 2012 (the first three anniversaries of the effective date of the agreement), which restricted shares 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. 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, 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. On May 20, 2010, the compensation committee approved an

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amendment to Mr. Peters’ employment agreement to (i) increase the number of restricted shares Mr. Peters will receive on each of the first three anniversaries of the effective date of his employment agreement from 100,000 to 120,000; and (ii) provide that we will pay interest at the distribution rate we pay on our shares of common stock (currently 7.25%) on Mr. Peters’ outstanding restricted cash award and any future restricted cash award(s) granted to Mr. Peters upon his election. Accordingly, on July 1, 2010, Mr. Peters received 60,000 restricted shares and a $600,000 restricted cash award, each as described below.


	•	On July 1, 2010, Mr. Peters was entitled to receive a grant of 120,000 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 60,000 restricted shares. The restricted shares vest as follows: 20,000 on July 1, 2010 (the date of grant); 20,000 on July 1, 2011; and 20,000 on July 1, 2012, provided Mr. Peters is employed by us on each such vesting date.

	•	As described above, Mr. Peters elected to receive a restricted cash award in lieu of 60,000 restricted shares. The restricted cash award is equal to $600,000, 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: $150,000 vested on July 1, 2010 (the date of grant), $150,000 on July 1, 2011; $150,000 on July 1, 2012; and $150,000 on July 1, 2013, provided Mr. Peters is employed by us on each such vesting date. Pursuant to the terms of the restricted cash award, we will pay interest at the distribution rate paid by us on our shares of common stock (currently 7.25%) on such award.

Pursuant to the employee retention plan described in the Compensation Discussion and Analysis, on May 24, 2010, Mr. Peters, Ms. Pruitt and Mr. Engstrom were entitled to receive grants of 100,000, 50,000 and 50,000 shares of restricted stock, respectively. Mr. Peters elected to receive a restricted cash award in lieu of 50,000 shares. The restricted shares and the restricted cash award granted to Mr. Peters will vest in three equal installments on each anniversary of the grant date, provided that he is employed by us on such date. The shares granted to Ms. Pruitt and Mr. Engstrom will vest 100% on the third anniversary of the grant date, provided that the executive is employed by us on such date. All shares have been granted pursuant to our 2006 Incentive Plan. The restricted shares will become immediately vested upon the earlier occurrence of (1) the executive’s termination of employment by reason of his or her death or disability, (2) a change in control (as defined in the 2006 Plan) or (3) the executive’s termination of employment by us without cause or by the executive for good reason (as such terms are defined in the executive officers’ respective employment agreements).

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 filing, for a description of these benefits.

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Outstanding Equity Awards

The following table presents information concerning outstanding equity awards held by ~~Mr. Peters~~our named executive officers as of December 31, ~~2008.~~2010. Our named executive officers do not hold any option awards.

Outstanding Equity Awards at ~~2008~~2010 Fiscal Year-End


	Stock Awards					Stock Awards
	Number of Shares or Units of			Market Value of Shares or		Number of Shares or Units of			Market Value of Shares or
	Stock That Have			Units of Stock That Have Not		Stock That Have			Units of Stock That Have Not
Name	Not Vested (#)			Vested ($)(2)		Not Vested (#)			Vested ($)(8)

Scott D. Peters		40,000	(1)		400,000
Mr. Peters							13,333(1	)		133,333
							25,000(2	)		250,000
							50,000(3	)		500,000
							40,000(4	)		400,000
Ms. Pruitt							16,667(5	)		166,667
							50,000(6	)		500,000
Mr. Engstrom							26,667(7	)		266,667
							50,000(6	)		500,000


(1)		Reflects restricted shares of ~~restricted~~our common stock, ~~granted to Mr. Peters~~which vest and become non-forfeitable on November 14, ~~2008,~~2011, provided Mr. Peters is employed by us on such vesting date.

(2)		Reflects restricted shares of our common stock, which ~~will~~ vest and become non-forfeitable in equal ~~annual~~ installments on each of ~~33.3%~~July 1, 2011 and July 1, 2012, provided Mr. Peters is employed by us on each ~~on the first, second and third anniversaries of the grant~~such vesting date.

~~(2)~~(3)		Reflects restricted shares of our common stock, which vest and become non-forfeitable in equal installments on each of May 24, 2011, May 24, 2012 and May 24, 2013, provided Mr. Peters is employed by us on each such vesting date.

(4)		Reflects restricted shares of our common stock, which vest and become non-forfeitable in equal installments on each of July 1, 2011 and July 1, 2012, provided Mr. Peters is employed by us on each such vesting date.

(5)		Reflects restricted stock units, which vest in equal annual installments on each of July 30, 2011, and July 30, 2012, provided Ms. Pruitt is employed by us on each such vesting date.

(6)		Reflects restricted shares of our common stock, which vest and become non-forfeitable on May 24, 2013, the third anniversary of the date of grant, provided the executive is employed by us on such vesting date.

(7)		Reflects restricted stock units, which vest in equal annual installments on each of August 31, 2011 and August 31, 2012, provided Mr. Engstrom is employed by us on each such vesting date.

(8)		Calculated using the per share price of shares of our common stock as of the close of business on December 31, ~~2008~~2010, based upon the price per share offered in our initial and follow-on public offerings ($~~10.00)~~10).

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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 2010


	Stock Awards
	Number of Shares			Value Realized
Named Executive Officer	Acquired on Vesting (#)			on Vesting ($)

Mr. Peters		13,333	(1)		133,333
		12,500	(2)		125,000
		20,000	(3)		200,000
Ms. Pruitt		8,333	(4)		83,333
Mr. Engstrom		13,333	(5)		133,333


(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.

(3)		Reflects shares that vested pursuant to the terms of Mr. Peters’ restricted stock grant on July 1, 2010.

(4)		Reflects restricted stock units that vested and converted to shares of our common stock pursuant to the terms of Ms. Pruitt’s restricted stock unit grant on July 30, 2009.

(5)		Reflects restricted stock units that vested and converted to shares of our common stock pursuant to the terms of Mr. Engstrom’s restricted stock unit grant on August 31, 2009.

Potential Payments Upon Termination or Change in Control

~~Benefits~~Summary of Potential Payments Upon Termination of ~~Employment.~~Employment. ~~Our~~As mentioned earlier in this Annual Report on Form 10-K, we are party to an employment agreement with ~~Mr. Peters provides that~~each of our named executive officers, which provide benefits to the executive in the event ~~that, during~~of his or her termination of employment under certain conditions. The amount of the ~~two-year employment period,~~benefits varies depending on the reason for the termination, as explained below.

Termination without Cause; Resignation for Good Reason. If we terminate ~~his~~the executive’s employment ~~other than~~without Cause, or he or she resigns for ~~cause or disability~~Good Reason (as such terms are defined in the employment agreement), ~~Mr. Peters~~the executive will be entitled to ~~receive~~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, 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, one; 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. Engstrom’s and Ms. Pruitt’s restricted stock units.

“Cause,” as defined in the employment agreements, generally means: (i) the executive’s conviction of or entering into a ~~lump sum severance payment equal~~plea of guilty or no contest to ~~50.0%~~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 executive’s substantial and repeated failure to perform his or her duties; (iii) with respect to Ms. Pruitt

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and Mr. Engstrom, gross negligence or willful misconduct in the performance of the executive’s duties which materially injures us or our reputation; or (iv) with respect to Ms. Pruitt and Mr. Engstrom, the executive’s willful breach of the material covenants of his ~~annual~~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 his base salary; (iii) relocation more than 35 miles from Scottsdale, Arizona; or (iv) a material 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 of directors. “Good Reason” as defined in Ms. Pruitt’s and Mr. Engstrom’s employment agreements, generally means, in the absence of a written consent of the executive: (i) except for executive nonperformance, a material diminution in the executive’s authority, duties or responsibilities (provided that this provision will not apply if executive’s then-current base salary ~~and~~is kept in place) or (ii) except in connection with a ~~payment equal to~~material decrease in our business, a ~~pro-rata portion~~diminution in the executive’s base salary in excess of ~~his annual bonus for~~30%.

Disability. If we terminate the year in which his date of termination occurs. In addition, pursuant to the terms of his restricted stock award on November 14, 2008, his shares of restricted common stock will become fully vested upon his termination ofexecutive’s employment by reason of ~~death~~his or ~~disability. If~~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, ~~voluntarily terminates~~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. Engstrom’s and Ms. Pruitt’s 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 ~~employment, retires~~ or ~~if we terminate him for cause,~~her accrued rights, but he isor she will not be entitled to ~~any payments or~~receive severance benefits under ~~any plan~~the agreement. In the event of the executive’s death, Mr. Peters’ shares of restricted stock and restricted cash award(s) and Mr. Engstrom’s and Ms. Pruitt’s 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 ~~arrangement~~employees during employment through the occurrence of a liquidity event. The agreements also limit the executives’ ability to disclose or use any of our ~~Company.~~confidential business information or practices.

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The following table summarizes the ~~approximate~~ value of the termination payments and benefits that ~~Mr. Peters~~each of our named executive officers would receive if ~~his employment~~he or she had terminated ~~at the close of business~~employment on December 31, ~~2008.~~2010 under the circumstances shown. The amounts shown in the tables do not include accrued but unpaid salary, earned annual bonus for 2010, 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		—		10,800,000	(1)		—		—
Benefit Continuation(2)		—		24,173			—		24,173
Value of Unvested Equity Awards(3)		—		1,283,333			1,283,333		1,283,333
Value of Unvested Restricted Cash		—		1,150,000			1,150,000		1,150,000
Awards(4)		—
TOTAL		—		13,257,506			2,433,333		2,457,506
Ms. Pruitt
Cash Severance		—		450,000	(5)		—		—
Benefit Continuation(2)		—		8,058			—		8,058
Value of Unvested Equity Awards(3)		—		666,667			666,667		666,667
TOTAL		—		1,124,725			666,667		674,725
Mr. Engstrom
Cash Severance		—		550,000	(5)		—		—
Benefit Continuation(2)		—		8,058			—		8,058
Value of Unvested Equity Awards(3)		—		766,667			766,667		766,667
TOTAL		—		1,324,725			766,667		774,725


(1)		Represents a lump sum cash severance payment calculated using the following formula (as discussed above): (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, 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, one.

(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 executive’s termination of service with us due to death or disability or upon the executive’s termination by us without Cause or the executive’s resignation for Good Reason. Awards of restricted stock and restricted stock units are valued as of year-end 2010 based upon the fair market value of our common stock on December 31, 2010, the last day in our 2010 fiscal year ($10).

(4)		Represents the value of Mr. Peters’ unvested restricted cash awards.

(5)		Represents a lump sum cash severance payment equal to two times the executive’s then-current base salary.

Summary of Potential Payments upon a Change in Control. Pursuant to the 2006 Incentive Plan, equity awards, and Mr. Peters’ restricted cash awards, 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%

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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.

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, 2010, independent of whether the executive incurs a termination of employment. Upon the occurrence of a change in control followed by the executive’s termination by us without Cause or the executive’s resignation for Good Reason, the executive would also be entitled to the severance benefits set forth above.


~~Termination of Employment By our Company other than for Cause or Disability~~ Mr. Peters	$	~~233,333(1)~~
~~Termination~~Value of ~~Employment By Reason of Death or Disability~~Unvested Equity Awards(1)	$	~~400,000(2)~~1,283,333
Value of Unvested Restricted Cash Awards(2)		1,150,000
TOTAL		2,433,333
Ms. Pruitt
Value of Unvested Equity Awards(1)		666,667
TOTAL		666,667
Mr. Engstrom
Value of Unvested Equity Awards(1)		766,667
TOTAL		766,667


(1)		~~Reflects (a) a payment equal to a pro-rata portion~~Represents the value of ~~his annual bonus for 2008~~unvested awards of restricted stock and restricted stock units, as applicable, which are valued as of year-end 2010 based upon the fair market value of our common stock on December 31, 2010, the last day in our 2010 fiscal year ($~~58,333), and (b) a lump sum cash severance payment equal to 50% of his current annual base salary ($175,000)~~10).

(2)		~~Reflects~~Represents the value of ~~Mr. Peters’~~ unvested restricted stock award which, pursuant to our 2006 Incentive Plan, vests upon his termination of employment by reason of death or disability. The restricted stock award is valued based upon the price of our common stock on December 31, 2008 ($10.00).cash awards.

~~Benefits Upon Change in Control.~~ ~~Pursuant~~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

Our independent directors receive compensation pursuant to the terms of our 2006 Independent Directors Compensation Plan, asub-plan of our 2006 Incentive Plan, as amended. In 2010, the compensation committee reviewed the compensation payable to our independent directors. In conducting this review, the compensation committee took into account, among other things, the substantial time and effort required of our directors, the value to our company of retaining experienced directors with a history at our company, the successful completion of our transition to self-management, and our overall financial strength and growth, as well as the results of a 2008 NAREIT survey regarding director compensation and a 2009 report from Towers Watson. On May 20, 2010, based upon the recommendation of the compensation committee, our board approved certain amendments to our independent director compensation plan, each of which is described below.

Annual Retainer. Our independent directors receive an annual retainer of $50,000.

Annual Retainer, Committee Chairman. Effective May 20, 2010, the board increased the annual retainer payable to the chairman of the audit committee from $7,500 to $15,000 and increased the annual retainer payable to the chairman of each of the compensation committee, the nominating and corporate governance committee, the investment committee and the risk management committee from $7,500 to $12,500. These retainers are in addition to the annual retainer payable to all independent board members for board service.

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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. Effective May 20, 2010, if a ~~change in control~~board meeting is held on the same day as a committee meeting, the independent directors will receive a fee for each meeting attended.

Equity Compensation. Upon initial election to our board of directors, each independent director receives 5,000 shares of restricted common stock. Effective May 20, 2010, our ~~Company had occurred on December 31, 2008, Mr. Peters’~~board increased the number shares of restricted common stock ~~would have become fully vested, regardless~~each independent director is entitled to receive upon his or her subsequent election each year from 5,000 to 7,500 restricted shares. The shares of ~~whether his employment was terminated. The value~~restricted common stock vest as to 20% of ~~Mr. Peters’ unvested restricted stock award is $400,000, based upon~~ the ~~price~~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 reasonableout-of-pocket expenses incurred in connection with attendance at meetings, including committee meetings, of our ~~common stock on December 31, 2008 ($10.00).~~

~~2008 Director Compensation~~

~~Pursuant to the terms~~board of our director compensation program, which are contained in our 2006 Independent Directors Compensation Plan, a sub-plan of our 2006 Incentive Plan, our independent directors received the following forms of compensation during 2008:directors.


	•	~~Annual Retainer.~~ ~~Our independent directors receive an annual retainer of $36,000.~~


	•	~~Meeting Fees.~~ Our independent directors receive $1,000 for each board meeting attended in person or by telephone and $500 for each committee meeting attended in person or by telephone. An additional $500 is paid to the audit committee chair for each audit 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 2,500 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 of our Company.~~director.

The following table sets forth the compensation earned by our independent directors for the year ended December 31, ~~2008:~~2010:

Fees Earned

or Paid in Cash
Stock Awards

Name ($)(1) ($)(2) Total ($)

W. Bradley Blair, II 54,000 22,681 76,681
Maurice J. DeWald 55,000 22,681 77,681
Warren D. Fix 53,000 22,681 75,681
Larry L. Mathis 49,000 22,681 71,681
Gary T. Wescombe 52,500 22,681 75,181

Director Compensation Table for 2010


	Fees Earned or		Stock Awards		Total
Name	Paid in Cash ($)		($)(1)		($)

W. Bradley Blair, II		133,000		75,000		208,000
Maurice J. DeWald		128,000		75,000		203,000
Warren D. Fix		126,000		75,000		201,000
Larry L. Mathis		121,000		75,000		196,000
Gary T. Wescombe		129,000		75,000		204,000


(1)		~~Consists of~~Reflects the ~~amounts described below:~~

Basic Annual
Meeting

Retainer
Fees

Name ($) ($)

Blair 36,000 18,000
DeWald 36,000 19,000
Fix 36,000 17,000
Mathis 36,000 13,000
Wescombe 36,000 16,500


~~(2)~~		~~The amounts in this column represent the proportionate amount of the total~~aggregate grant date fair value of restricted stock awards ~~we recognized in 2008 for financial accounting purposes, disregarding for this purpose~~granted to the estimate of forfeitures related to service-based vesting conditions. The amounts included in the table for each award include the amount recorded as expense in our statement of operations for the year ended December 31, 2008. The fair values of these awards and the amounts expensed in 2008 weredirectors, determined in accordance with ~~SFAS No. 123(R).~~

ASC Topic 718. For information regarding the grant date fair value of awards of restricted stock, see Note 14, Stockholders’ Equity, to our accompanying consolidated financial statements. On December 8, 2010, each of the independent directors received 7,500 shares of restricted stock. The following table shows the shares of restricted common stock awarded to each independent director for the year ended December 31, 2008, and the aggregate grant date fair value for each award (computed in accordance with SFAS No. 123(R)).

Full Grant

Number of
Date Fair

Restricted
Value of

Director Grant Date Shares (#) Award ($)

Blair 06/17/08 2,500 25,000
DeWald 06/17/08 2,500 25,000
Fix 06/17/08 2,500 25,000
Mathis 06/17/08 2,500 25,000
Wescombe 06/17/08 2,500 25,000

~~The following table shows the~~ aggregate number of ~~nonvested shares of restricted common stock held by each independent director as of December 31, 2008:~~


	~~Nonvested~~
~~Director~~	~~Restricted Stock (#)~~

~~Blair~~		~~5,500~~
~~DeWald~~		~~5,500~~
~~Fix~~		~~5,500~~
~~Mathis~~		~~6,500~~
~~Wescombe~~		~~5,500~~

~~Key Changes to the Director Compensation Program for 2009.~~ ~~On December 30, 2008, we amended the 2006 Independent Directors Compensation Plan as follows, which amendments became effective as of January 1, 2009:~~


	•	~~Annual Retainer.~~ ~~The annual retainer for independent directors was increased to $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 and the investment committee) will receive an additional annual retainer of $7,500.

	•	~~Meeting Fees.~~ The meeting fee for each board meeting attended in person of by telephone was increased from $1,000 to $1,500 and the meeting fee for each committee meeting attended in person or by telephone was increased from $500 to $1,000.

	•	~~Equity Compensation.~~ ~~Each independent director will receive a grant of 5,000~~ shares of restricted common stock ~~upon~~held by each ~~re-election to the board, rather than 2,500 shares.~~independent director as of December 31, 2010 is as follows: Mr. Blair, 22,500; Mr. DeWald, 22,500; Mr. Fix, 26,006; Mr. Mathis, 28,025; and Mr. Wescombe, 22,500.

We amended the 2006 Independent Directors Compensation Plan primarily as a result of two factors. First, in connection with our transition to self-management, our board of directors is required to spend a substantially greater amount of time overseeing our company and the transition. As a result, we believed that a greater level of compensation was appropriate. Second, our board reviewed a survey from an independent consultant of the compensation paid to the independent directors of both traded and non-traded REITs and determined that our prior compensation structure was below average. As amended, we believe our compensation to be paid to our independent directors is consistent with the average compensation paid to independent directors of traded and non-traded REITs.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During ~~2008,~~2010, 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~~company in ~~2008~~2010 or any time prior thereto. During ~~2008,~~2010, none of the members of the compensation committee had any relationship with our ~~Company~~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~~another entity, one of whose executive officer(s) served as a member of our board of directors or our compensation committee.

108

PRINCIPAL STOCKHOLDERS

The following table shows, as of March ~~13, 2009,~~21, 2011, the number of shares of our common stock beneficially owned by: (1) any person who is known by us to be the beneficial owner of more than 5.0% of the outstanding shares of our common stock, (2) our directors, (3) our named executive officers and (4) all of our directors and executive officers as a group. The percentage of common stock beneficially owned is based on ~~91,264,688~~225,235,398 shares of our common stock outstanding as of March ~~13, 2009.~~21, 2011. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes securities over which a person has voting or investment power and securities that a person has the right to acquire within 60 days.

EQUITY COMPENSATION PLAN INFORMATION

~~Under~~The following table gives information as of December 31, 2010 about the ~~terms of our 2006 Incentive Plan, as amended January 1, 2009, the aggregate number of shares of our~~ common stock ~~subject to options, shares of restricted common stock, stock purchase rights, stock appreciation rights or other awards, including those issuable~~that may be issued under ~~its sub-plan, the 2006 Independent Directors Compensation Plan, will be no more than 2,000,000 shares.~~our equity compensation plan.

~~Plan Category~~


(1)		~~On September 20,~~ 2006 ~~October 4, 2006, April 12, 2007, June 12, 2007 and June 17, 2008, we granted 15,000~~Incentive Plan.

(2)		Includes shares ~~5,000 shares, 5,000 shares, 12,500 shares and 12,500 shares, respectively,~~issuable pursuant to conversion of restricted stock units. Does not include 364,333 outstanding restricted shares granted under the 2006 Incentive Plan.

(3)		Excludes restricted stock and restricted stock units that convert to shares of common stock for no consideration.

(4)		Includes approximately 1,387,500 shares that are available for issuance pursuant to grants of full-value stock awards, such as ~~defined in~~restricted stock and restricted stock units as of December 31, 2010. As discussed

109


		above, on February 24, 2011, our board approved the Amended and Restated 2006 Incentive Plan, to our independent directors under the 2006 Independent Directors Compensation Plan. On November 14, 2008, we also granted 40,000 shares of restricted common stock to Scott D. Peters, our Chief Executive Officer, President and Chairman of the board of directors, under our 2006 Incentive Plan. Such shares are not shown in the chart above as they are deemed outstanding shares of our common stock; however such grants reducewhich increased the number of ~~securities remaining~~shares available for ~~future issuance.~~grant thereunder from 2,000,000 to 10,000,000.


Item 13.	Certain Relationships and Related Transactions, and Director Independence.

~~Relationships Among Our Affiliates~~

Grubb & Ellis Realty Investors, which is an indirect wholly owned subsidiary of our sponsor Grubb & Ellis, owns a 75.0% managing member interest in our advisor. Grubb & Ellis Healthcare Management, LLC owns a 25.0% non-managing member interest in our advisor. The members of Grubb & Ellis Healthcare Management, LLC include Andrea R. Biller, our Executive Vice President and Secretary, our advisor’s Executive Vice President, Grubb & Ellis’ Executive Vice President, Secretary and General Counsel, NNN Realty Advisors’ Executive Vice President, Secretary, General Counsel and Director, Grubb & Ellis Realty Investors’ Executive Vice President and General Counsel and Grubb & Ellis Securities’ Secretary; and Grubb & Ellis Realty Investors for the benefit of other employees who perform services for us. As of March 27, 2009, Ms. Biller owns an 18.0% membership interest in Grubb & Ellis Healthcare Management, LLC and Grubb & Ellis Realty Investors owns a 64.0%, membership interest in Grubb & Ellis Healthcare Management, LLC. See Item 1. Business — Our Structure for an organizational chart.

Fees and Expenses Paid to Affiliates

See Note 12, Related Party Transactions, to ~~the Consolidated Financial Statements,~~our accompanying consolidated financial statements, for a further discussion of our related party transactions.

~~Certain Conflict Resolution Restrictions and Procedures~~Related Person Transactions

In order to reduce or eliminate certain potential conflicts of interest, our charter ~~and the Advisory Agreement contain~~contains restrictions and conflict resolution procedures relating ~~to: (1)~~to transactions we enter into with our ~~advisor, our~~ directors or their respective affiliates, (2) certain future offerings and (3) allocation of properties among affiliated entities. Each of the restrictions and procedures that apply to transactions with our advisor and its affiliates will also apply to any transaction with any entity or real estate program advised, managed or controlled by Grubb & Ellis and its affiliates. These restrictions and procedures include, among others, the following:


	•	~~Except as otherwise described in our Registration Statement on FormS-11~~ ~~(FileNo. 333-133652,~~ effective September 20, 2006) filed with the SEC, or our offering prospectus, we will not accept goods or services from our advisor or its affiliates unless a majority of our directors, including a majority of our independent directors, not otherwise interested in the transactions, approve such transactions as fair, competitive and commercially reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties.

	•	We will not purchase or lease any asset (including any property) in which ~~our advisor,~~ any of our directors or any of their ~~respective~~ affiliates has an interest without a determination by a majority of our directors, including a majority of ~~our~~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 ~~our advisor,~~ 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.

	•	We will not sell or lease assets to ~~our advisor,~~ any of our directors or any of their ~~respective~~ affiliates unless a majority of our directors, including a majority of ~~our~~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.


	•	We will not make any loans to ~~our advisor,~~ any of our directors or any of their ~~respective~~ affiliates. In addition, any loans made to us by our ~~advisor, our~~ directors or any of their ~~respective~~ affiliates must be approved by a majority of our directors, including a majority of ~~our~~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.

	•	~~Our advisor and its affiliates shall be entitled to reimbursement, at cost, for actual expenses incurred by them on our behalf or on behalf of~~We will not invest in any joint ventures ~~in which we are a joint venture partner, subject to the limitation on reimbursement of operating expenses to the extent that they exceed the greater of 2.0%~~with any of our ~~average invested assets~~directors or ~~25.0%~~any of their affiliates unless a majority of our ~~net income, as described above.~~

	•	~~The Advisory Agreement provides that if Grubb & Ellis Realty Investors identifies an opportunity to make an investment in one or more office buildings or other facilities for which greater than 50.0%~~directors, including a majority of the ~~gross leaseable area~~independent directors, not otherwise interested in the transaction determine the transaction is ~~leased~~fair and reasonable to ~~or reasonably expected to be leased to, one or more medical or healthcare related tenants, either directly or indirectly through an affiliate or in a~~us and on substantially the same terms and conditions as those received by other joint venture or other co-ownership arrangement, for itself or for any other Grubb & Ellis program, then Grubb & Ellis Realty Investors will provide us with the first opportunity to purchase such investment. Grubb & Ellis Realty Investors will provide all necessary information related to such investment to our advisor, in order to enable our board of directors to determine whether to proceed with such investment. Our advisor will present the information to our board of directors within three business days of receipt from Grubb & Ellis Realty Investors. If our board of directors does not affirmatively authorize our advisor to proceed with the investment on our behalf within seven days of receipt of such information from our advisor, then Grubb & Ellis Realty Investors may proceed with the investment opportunity for its own account or offer the investment opportunity to any other person or entity. This right of first opportunity will remain in effect after the end of our offering so long as monies raised by our advisor are available for funding new acquisitions of properties for which our advisor will continue to receive an acquisition fee pursuant to the Advisory Agreement.

	•	The Advisory Agreement provides that our advisor and Grubb & Ellis Realty Investors agree to coordinate the timing, marketing and other activities for any new healthcare REIT sponsored by Grubb & Ellis Realty Investors or its affiliates so as not to negatively impact our company. In addition, the equity raising for any new healthcare REIT sponsored by Grubb & Ellis Realty Investors or its affiliates shall not begin until after the end of our offering, provided that consistent with industry practice and standards and without there being any negative impact on our equity raise, such new healthcare REIT may initiate a limited equity raise from a limited broker dealer group, commencing August 1, 2009 or later, to satisfy the escrow requirements applicable to such new healthcare REIT.ventures.

Our board of directors recognizes that transactions between us and any of our directors, executive officers and significant stockholders can present potential or actual conflicts of interest and create the appearance that our decisions are based on considerations other than the best interests of our company and our stockholders. Therefore, as a general matter and consistent with our charter and code of ethics, it is our preference to avoid such transactions. Nevertheless, we recognize that there are situations where such transactions may be in, or may not be inconsistent with, the best interests of our company and our stockholders. Accordingly, in addition to the restrictions and conflict resolution procedures described above and as set forth in our charter, our board of directors has adopted a Related Person Transactions Policy which provides that our nominating and corporate governance committee will review all transactions in which we are or will be a participant and the amount involved exceeds $120,000 if a related person had, has or will have a direct or indirect material interest in such transaction. Any such potential transaction is required to be reported to our nominating and corporate governance committee for their review. Our nominating and corporate governance committee will only approve or ratify such related person transactions that are (i) in, or are not inconsistent with, the best interests of us and our stockholders, as the nominating and corporate governance committee determines in good faith, (ii) on terms comparable to those that could be obtained in arm’s length dealings with an unrelated

110

third person and (iii) approved or ratified by a majority of the disinterested members of the nominating and corporate governance committee.

In making such a determination, the nominating and corporate governance committee is required to consider all of the relevant and material facts and circumstances available to it including (if applicable, and without limitation) the benefits to us of the transaction, the ongoing impact of the transaction on a director’s independence, the availability of other sources for comparable products or services, the terms of the transaction, and whether the terms are comparable to the terms available to unrelated third parties generally. A member of the nominating and corporate governance committee is precluded from participating in any review, consideration or approval of any transaction with respect to which the director or the director’s immediate family members are related persons.

Director Independence

We have a six-member board of directors. One of our directors, ~~Scott D.~~Mr. Peters, is ~~affiliated with~~employed by us and we do not consider him to be an independent director. Our remaining directors qualify as “independent directors” as defined in our charter in compliance with the requirements of the North American Securities Administrators Association’s Statement of Policy Regarding Real Estate Investment Trusts. Our charter is available on our web site at www.htareit.com. Our charter provides that a majority of the directors must be “independent directors.” As defined in our charter, the term “independent director” means a director who is not on the date of determination, and within the last two years from the date of determination has not been, directly or indirectly associated with our sponsor or our advisor by virtue of: (1) ownership of an interest in our sponsor, our advisor or any of their affiliates, other than the Corporation; (2) employment by our sponsor, our advisor or any of their affiliates; (3) service as an officer or

director of our sponsor, our advisor or any of their affiliates; (4) performance of services, other than as a director for us; (5) service as a director or trustee of more than three REITs organized by our sponsor or advised by our advisor; or (6) maintenance of a material business or professional relationship with our sponsor, our advisor or any of their affiliates.

Each of our independent directors would also qualify as independent under the rules of the New York Stock Exchange and our ~~Audit Committee~~audit committee members would qualify as independent under the New York Stock Exchange’s rules applicable to ~~Audit Committee~~audit committee members. However, our stock is not listed on the New York Stock Exchange.


Item 14.	Principal Accounting Fees and Services.

Deloitte & Touche, LLP has served as our independent auditors since April 24, 2006 and audited our consolidated financial statements for the years ended December 31, 2010, 2009, 2008 and 2007.

The following table lists the fees for services billed by our independent auditors ~~for 2008~~in 2010 and ~~2007:~~2009:


Services	2008		2007		2010		2009

Audit Fees(1)	$	448,000	$	428,000	$	1,496,000	$	1,221,000
Audit related fees(2)		—		8,000		—		—
Tax fees(3)		19,000		2,000		284,000		77,000
All other fees		—		—		—		—

Total	$	467,000	$	438,000	$	1,580,000	$	1,298,000


(1)		Audit fees billed in ~~2008~~2010 and ~~2007~~2009 consisted of the audit of our annual consolidated financial statements, a review of our quarterly consolidated financial statements, and statutory and regulatory audits, consents and other services related to filings with the SEC, including filings related to our offering. These amounts include fees paid by our advisor and its affiliates for costs in connection with our offering and to the extent cumulative other organizational and offering expenses exceed 1.5% of the gross proceeds of our offering, these amounts are not included within our consolidated financial statements, as they are subject to the accounting policy described in Note 11 to the Consolidated Financial Statements, Commitments and Contingencies — Other Organizational and Offering Expenses.

(2)		Audit related fees consist of financial accounting and reporting consultations.

(3)		Tax services consist of tax compliance and tax planning and advice.

The audit committee preapproves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(b) of the Exchange Act and the rules and regulations of the SEC.

96111

PART IV


Item 15.	Exhibits, Financial Statement Schedules.

(a)(1)Financial Statements:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page

Report of Independent Registered Public Accounting Firm		98113
Consolidated Balance Sheets as of December 31, ~~2008~~2010 and ~~2007~~2009		99114
Consolidated Statements of Operations for the Years Ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the Period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008		~~100~~115
Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~ for the Years Ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the Period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008		~~101~~116
Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the Period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008		~~102~~117
Notes to Consolidated Financial Statements		~~103~~118

(a)(2)Financial Statement ~~Schedule:~~Schedules:

The following financial statement ~~schedule~~schedules for the year ended December 31, ~~2008~~2010 are submitted herewith:


	Page

Valuation and Qualifying Accounts (Schedule II)		167
Real Estate ~~Operating Properties~~Investments and Accumulated Depreciation (Schedule III)		~~140~~168
Mortgage loans on Real Estate (Schedule IV)		172

(a)(3)Exhibits:

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this annual report.

(b) Exhibits:

See ~~item~~Item 15(a)(3) above.


	~~Page~~

~~Real Estate Operating Properties and Accumulated Depreciation (Schedule III)~~		~~140~~

See Item 15(a)(2) above.

97112

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

Scottsdale, Arizona

We have audited the accompanying consolidated balance sheets of ~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc. and subsidiaries (the “Company”) as of December 31, ~~2008~~2010 and ~~2007~~2009, and the related consolidated statements of operations, stockholders’ equity, ~~(deficit)~~ and cash flows for each of the three years in the period ended December 31, ~~2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006.~~2010. Our audits also included the ~~consolidated~~ financial statement ~~schedule~~schedules listed in the ~~index~~Index at Item 15. These consolidated financial statements and ~~the consolidated~~ financial statement ~~schedule~~schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on ~~these~~the consolidated financial statements and ~~the consolidated~~ financial statement ~~schedule~~schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc. and subsidiaries as of December 31, ~~2008~~2010 and ~~2007,~~2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such ~~consolidated~~ financial statement ~~schedule,~~schedules, when considered in relation to the basic consolidated financial statements taken as a whole, ~~presents~~present fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, due to recent accounting pronouncements that became effective on January 1, 2009, the Company changed its method of accounting for acquisition costs in business combinations.

/s/Deloitte & Touche LLP

~~Los Angeles, California~~Phoenix, Arizona

March ~~27, 2009~~25, 2011

98113

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

CONSOLIDATED BALANCE SHEETS

As of December 31, ~~2008~~2010 and ~~2007~~2009


		December 31,							December 31,
		2008			2007				2010			2009

ASSETS	ASSETS							ASSETS
Real estate investments:
Real estate investments, net:
Operating properties, net		$	810,920,000		$	352,994,000			$	1,772,923,000		$	1,149,789,000
Real estate note receivables, net			15,360,000			—
Properties classified as held for sale, net										24,540,000			—

Total real estate investments, net										1,797,463,000			1,149,789,000

Real estate notes receivable, net										57,091,000			54,763,000
Cash and cash equivalents			128,331,000			5,467,000				29,270,000			219,001,000
Accounts and other receivables, net			5,428,000			1,233,000				16,385,000			10,820,000
Restricted cash			7,747,000			4,605,000
Restricted cash and escrow deposits										26,679,000			14,065,000
Identified intangible assets, net			134,623,000			62,921,000				300,587,000			203,222,000
Non-real estate assets of properties held for sale										3,768,000			—
Other assets, net			11,514,000			4,392,000				40,552,000			21,875,000

Total assets		$	1,113,923,000		$	431,612,000			$	2,271,795,000		$	1,673,535,000


LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY
LIABILITIES AND EQUITY								LIABILITIES AND EQUITY
Liabilities:
Mortgage loan payables, net		$	460,762,000		$	185,801,000
Line of credit			—			51,801,000
Mortgage loans payable, net									$	699,526,000		$	540,028,000
Outstanding balance on unsecured revolving credit facility										7,000,000			—
Accounts payable and accrued liabilities			21,919,000			7,983,000				43,033,000			30,471,000
Accounts payable due to affiliates, net			3,063,000			2,356,000
Derivative financial instruments			14,198,000			1,377,000
Accounts payable due to former affiliates, net										—			4,776,000
Derivative financial instruments — interest rate swaps										1,527,000			8,625,000
Security deposits, prepaid rent and other liabilities			4,582,000			1,974,000				16,168,000			7,815,000
Identified intangible liabilities, net			8,128,000			1,639,000				13,059,000			6,954,000
Liabilities of properties held for sale										369,000			—

Total liabilities			512,652,000			252,931,000				780,682,000			598,669,000

Commitments and contingencies (Note 11)

Minority interest of limited partner in operating partnership			1,000			—
Minority interest of limited partner — redemption value of $3,133,000 (Note 11)			1,950,000			3,091,000
Redeemable noncontrolling interest of limited partners (Note 13)										3,867,000			3,549,000
Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding			—			—				—			—
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 75,465,437 and 21,449,451 shares issued and outstanding as of December 31, 2008 and 2007, respectively			755,000			214,000
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 202,643,705 and 140,590,686 shares issued and outstanding as of December 31, 2010 and 2009, respectively										2,026,000			1,405,000
Additional paid-in capital			673,351,000			190,534,000				1,795,413,000			1,251,996,000
Accumulated deficit			(74,786,000	)		(15,158,000	)			(310,193,000	)		(182,084,000	)

Total stockholders’ equity			599,320,000			175,590,000				1,487,246,000			1,071,317,000

Total liabilities, minority interest and stockholders’ equity		$	1,113,923,000		$	431,612,000
Total liabilities and equity									$	2,271,795,000		$	1,673,535,000

The accompanying notes are an integral part of these consolidated financial statements.

99114

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, ~~2008~~2010, 2009 and ~~2007 and~~
~~for the Period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008


							Period from
							April 28, 2006
							(Date of Inception)
	Years Ended December 31,						through			Years Ended December 31,
	2008			2007			December 31, 2006			2010			2009			2008

Revenues:
Rental income	$	80,415,000		$	17,626,000		$	—		$	192,294,000		$	123,133,000		$	78,007,000
Interest income from real estate note receivables		3,000			—			—
Interest income from mortgage notes receivable and other income											7,585,000			3,153,000			3,000

Total revenues		80,418,000			17,626,000			—			199,879,000			126,286,000			78,010,000
Expenses:
Rental expenses		28,174,000			6,037,000			—			65,338,000			44,667,000			27,912,000
General and administrative		9,560,000			3,297,000			242,000
General and administrative expenses											18,753,000			12,285,000			3,261,000
Asset management fees to former advisor (Note 12)											—			3,783,000			6,177,000
Acquisition-related expenses											11,317,000			15,997,000			122,000
Depreciation and amortization		37,398,000			9,790,000			—			77,338,000			52,372,000			36,482,000
Redemption, termination, and release payment to former advisor (Note 12)											7,285,000			—			—

Total expenses		75,132,000			19,124,000			242,000			180,031,000			129,104,000			73,954,000

Income (loss) before other income (expense)		5,286,000			(1,498,000	)		(242,000	)		19,848,000			(2,818,000	)		4,056,000
Other income (expense):
Interest expense (including amortization of deferred financing costs and debt discount):
Interest expense related to unsecured note payables to affiliate		(2,000	)		(84,000	)		—
Interest expense related to mortgage loan payables and line of credit		(21,341,000	)		(4,939,000	)		—
Loss on derivative financial instruments		(12,821,000	)		(1,377,000	)		—
Interest expense related to unsecured notes payable to affiliate											—			—			(2,000	)
Interest expense related to mortgage loans payable, credit facility, and derivative financial instruments											(35,336,000	)		(28,112,000	)		(20,708,000	)
Net gain (loss) on derivative financial instruments											5,954,000			5,279,000			(12,436,000	)
Interest and dividend income		469,000			224,000			—			119,000			249,000			469,000

Loss before minority interests	$	(28,409,000	)	$	(7,674,000	)	$	(242,000	)
Loss from continuing operations										$	(9,415,000	)	$	(25,402,000	)	$	(28,621,000	)

Minority interests		(39,000	)		8,000			—
Discontinued operations:
Income from discontinued operations											1,496,000			629,000			212,000

Net loss	$	(28,448,000	)	$	(7,666,000	)	$	(242,000	)	$	(7,919,000	)	$	(24,773,000	)	$	(28,409,000	)

Net loss per share — basic and diluted	$	(0.66	)	$	(0.77	)	$	(149.03	)
Less: Net (income) loss attributable to noncontrolling interest of limited partners											16,000			(304,000	)		(39,000	)

Weighted average number of shares outstanding — basic and diluted		42,844,603			9,952,771			1,622
Net loss attributable to controlling interest										$	(7,903,000	)	$	(25,077,000	)	$	(28,448,000	)

Net income (loss) per share attributable to controlling interest on distributed and undistributed earnings — basic and diluted:
Continuing operations										$	(0.06	)	$	(0.23	)	$	(0.67	)
Discontinued operations										$	0.01		$	0.01		$	0.01

Net loss per share attributable to controlling interest										$	(0.05	)	$	(0.22	)	$	(0.66	)

Weighted average number of shares outstanding
Basic											165,952,860			112,819,638			42,844,603

Diluted											165,952,860			112,819,638			42,844,603

The accompanying notes are an integral part of these consolidated financial statements.

~~100~~115

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

For the Years Ended December 31, ~~2008~~2010, 2009 and ~~2007 and~~
~~for the Period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008


	Common Stock														Total			Common Stock														Total
	Number of						Additional			Preferred		Accumulated			Stockholders’			Number of						Additional			Preferred		Accumulated			Stockholders’
	Shares			Amount			Paid-In Capital			Stock		Deficit			Equity (Deficit)			Shares			Amount			Paid-In Capital			Stock		Deficit			Equity

BALANCE — April 28, 2006 (Date of Inception)		—		$	—		$	—		$	—	$	—		$	—
Issuance of common stock		200			—			2,000			—		—			2,000
Issuance of vested and nonvested restricted common stock		20,000			—			40,000			—		—			40,000
Amortization of nonvested common stock compensation		—			—			11,000			—		—			11,000
Net loss		—			—			—			—		(242,000	)		(242,000	)

BALANCE — December 31, 2006		20,200			—			53,000			—		(242,000	)		(189,000	)
Issuance of common stock		21,130,370			211,000			210,835,000			—		—			211,046,000
Issuance of vested and nonvested restricted common stock		17,500			—			35,000			—		—			35,000
Offering costs		—			—			(23,120,000	)		—		—			(23,120,000	)
Amortization of nonvested common stock compensation		—			—			61,000			—		—			61,000
Issuance of common stock under the DRIP		281,381			3,000			2,670,000			—		—			2,673,000
Distributions		—			—			—			—		(7,250,000	)		(7,250,000	)
Net loss		—			—			—			—		(7,666,000	)		(7,666,000	)

BALANCE — December 31, 2007		21,449,451			214,000			190,534,000			—		(15,158,000	)		175,590,000			21,449,451			214,000			190,534,000			—		(15,158,000	)		175,590,000
Issuance of common stock		52,694,439			528,000			525,824,000			—		—			526,352,000			52,694,439			528,000			525,824,000			—		—			526,352,000
Issuance of vested and nonvested restricted common stock		52,500			—			25,000			—		—			25,000
Offering costs		—			—			(55,146,000	)		—		—			(55,146,000	)		—			—			(55,146,000	)		—		—			(55,146,000	)
Amortization of nonvested common stock compensation		—			—			105,000			—		—			105,000
Issuance of restricted common stock																			52,500			—			—			—		—			—
Amortization of share-based compensation																			—			—			130,000			—		—			130,000
Issuance of common stock under the DRIP		1,378,795			14,000			13,085,000			—		—			13,099,000			1,378,795			14,000			13,085,000			—		—			13,099,000
Repurchase of common stock		(109,748	)		(1,000	)		(1,076,000	)		—		—			(1,077,000	)		(109,748	)		(1,000	)		(1,076,000	)		—		—			(1,077,000	)
Distributions		—			—			—			—		(31,180,000	)		(31,180,000	)		—			—			—			—		(31,180,000	)		(31,180,000	)
Net loss		—			—			—			—		(28,448,000	)		(28,448,000	)
Net loss attributable to controlling interest																			—			—			—			—		(28,448,000	)		(28,448,000	)

BALANCE — December 31, 2008		75,465,437		$	755,000		$	673,351,000		$	—	$	(74,786,000	)	$	599,320,000			75,465,437		$	755,000		$	673,351,000			—	$	(74,786,000	)	$	599,320,000

Issuance of common stock																			62,696,254			627,000			622,025,000			—					622,652,000
Offering costs																			—			—			(64,793,000	)		—		—			(64,793,000	)
Issuance of restricted common stock																			100,000			—			—			—		—			—
Amortization of share-based compensation																			—			—			816,000			—		—			816,000
Issuance of common stock under the DRIP																			4,059,006			40,000			38,519,000			—		—			38,559,000
Repurchase of common stock																			(1,730,011	)		(17,000	)		(16,249,000	)		—		—			(16,266,000	)
Distributions																			—			—			—			—		(82,221,000	)		(82,221,000	)
Adjustment to redeemable noncontrolling interests																			—			—			(1,673,000	)		—		—			(1,673,000	)
Net loss attributable to controlling interest																			—			—			—			—		(25,077,000	)		(25,077,000	)

BALANCE — December 31, 2009																			140,590,686		$	1,405,000		$	1,251,996,000			—	$	(182,084,000	)	$	1,071,317,000

Issuance of common stock																			61,191,096			615,000			594,062,000			—					594,677,000
Offering costs																			—			—			(56,621,000	)		—		—			(56,621,000	)
Issuance of restricted common stock																			357,500			—			—			—		—			—
Amortization of share-based compensation																			—			—			1,313,000			—		—			1,313,000
Issuance of common stock under the DRIP																			5,952,683			60,000			56,491,000			—		—			56,551,000
Repurchase of common stock																			(5,448,260	)		(54,000	)		(51,802,000	)		—		—			(51,856,000	)
Distributions																			—			—			—			—		(120,507,000	)		(120,507,000	)
Adjustment to redeemable noncontrolling interests																			—			—			(26,000	)		—		301,000			275,000
Net loss attributable to controlling interest																			—			—			—			—		(7,903,000	)		(7,903,000	)

BALANCE — December 31, 2010																			202,643,705		$	2,026,000		$	1,795,413,000			—	$	(310,193,000	)	$	1,487,246,000

The accompanying notes are an integral part of these consolidated financial statements.

~~101~~116

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the Period from~~
~~April 28, 2006 (Date of Inception) through December 31, 2006~~2008


							Period from
							April 28, 2006
							(Date of Inception)
	Years Ended December 31,						through			Years Ended December 31,
	2008			2007			December 31, 2006			2010			2009			2008

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(28,448,000	)	$	(7,666,000	)	$	(242,000	)	$	(7,919,000	)	$	(24,773,000	)	$	(28,409,000	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization (including deferred financing costs, above/below market leases, debt discount, leasehold interests, deferred rent receivable and lease inducements)		35,617,000			9,466,000			—
Stock based compensation, net of forfeitures		130,000			96,000			51,000
Depreciation and amortization (including deferred financing costs, above/below market leases, debt discount, leasehold interests, deferred rent receivable, note receivable closing costs and discount, and lease inducements) — operating properties and held for sale properties											72,678,000			48,808,000			35,617,000
Share-based compensation, net of forfeitures											1,313,000			816,000			130,000
Loss on property insurance settlements		90,000			—			—			—			6,000			90,000
Bad debt expense		442,000			—			—			1,022,000			965,000			442,000
Change in fair value of derivative financial instruments		12,822,000			1,377,000			—			(6,095,000	)		(5,523,000	)		12,822,000
Minority interests		39,000			(8,000	)		—
Changes in operating assets and liabilities:
Prepaid expenses		—			—			(180,000	)
Accounts and other receivables, net		(4,261,000	)		(1,114,000	)		—			(7,102,000	)		(5,167,000	)		(4,261,000	)
Other assets		(1,076,000	)		(655,000	)		(3,000	)		(3,207,000	)		(3,332,000	)		(1,076,000	)
Accounts payable and accrued liabilities		5,578,000			4,721,000			62,000			7,815,000			4,856,000			5,578,000
Accounts payable due to affiliates, net		(176,000	)		927,000			312,000
Accounts payable due to former affiliates, net											(4,776,000	)		3,631,000			(176,000	)
Security deposits, prepaid rent and other liabilities		(80,000	)		(139,000	)		—			4,774,000			1,341,000			(80,000	)

Net cash provided by operating activities		20,677,000			7,005,000			—			58,503,000			21,628,000			20,677,000

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of real estate operating properties		(503,638,000	)		(380,398,000	)		—			(597,097,000	)		(402,268,000	)		(503,638,000	)
Acquisition of real estate note receivables		(15,000,000	)		—			—
Acquisition costs related to real estate note receivables		(338,000	)		—			—
Acquisition of real estate notes receivable and related options											—			(37,135,000	)		(15,000,000	)
Acquisition costs related to real estate notes receivable											—			(555,000	)		(338,000	)
Capital expenditures		(4,478,000	)		(437,000	)		—			(14,888,000	)		(9,060,000	)		(4,478,000	)
Restricted cash		(3,142,000	)		(4,605,000	)		—
Restricted cash and escrow deposits											(12,614,000	)		(6,318,000	)		(3,142,000	)
Real estate deposits											(2,250,000	)		(250,000	)		—
Proceeds from insurance settlement		121,000			—			—			—			481,000			121,000

Net cash used in investing activities		(526,475,000	)		(385,440,000	)		—			(626,849,000	)		(455,105,000	)		(526,475,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on mortgage loan payables		227,695,000			148,906,000			—
Borrowings on unsecured note payables to affiliate		6,000,000			19,900,000			—
(Payments) borrowings under the line of credit, net		(51,801,000	)		51,801,000			—
Payments on mortgage loan payables		(1,832,000	)		(151,000	)		—
Payments on unsecured note payables to affiliate		(6,000,000	)		(19,900,000	)		—
Borrowings on mortgage loans payable											79,125,000			37,696,000			227,695,000
Purchase of noncontrolling interest											(4,097,000	)		—			—
Borrowings on unsecured notes payable to affiliate											—			—			6,000,000
(Payments) borrowings under the previous secured revolving credit facility with LaSalle Bank and KeyBank, net											—			—			(51,801,000	)
(Payments) borrowings under the unsecured revolving credit facility with JPMorgan Chase Bank, NA, net											7,000,000			—			—
Payments on mortgage loans payable and demand note											(123,117,000	)		(11,671,000	)		(1,832,000	)
Payments on unsecured notes payable to affiliate											—			—			(6,000,000	)
Derivative financial instrument termination payments											(793,000	)		—			—
Proceeds from issuance of common stock		528,816,000			210,937,000			2,000			594,677,000			622,652,000			528,816,000
Deferred financing costs		(3,688,000	)		(2,496,000	)		—			(7,507,000	)		(792,000	)		(3,688,000	)

Security deposits		127,000			35,000			—			2,144,000			767,000			127,000
Repurchase of common stock		(1,077,000	)		—			—			(51,856,000	)		(16,266,000	)		(1,077,000	)
Minority interest contributions to our operating partnership		—			—			200,000
Payment of offering costs		(54,339,000	)		(22,009,000	)		—			(56,621,000	)		(68,360,000	)		(54,339,000	)
Distributions		(14,943,000	)		(3,323,000	)		—			(60,176,000	)		(39,500,000	)		(14,943,000	)
Distributions to minority interest limited partner		(296,000	)		—			—
Distributions to noncontrolling interest of limited partners											(164,000	)		(379,000	)		(296,000	)

Net cash provided by financing activities		628,662,000			383,700,000			202,000			378,615,000			524,147,000			628,662,000

NET CHANGE IN CASH AND CASH EQUIVALENTS		122,864,000			5,265,000			202,000			(189,731,000	)		90,670,000			122,864,000
CASH AND CASH EQUIVALENTS — Beginning of period		5,467,000			202,000			—			219,001,000			128,331,000			5,467,000

CASH AND CASH EQUIVALENTS — End of period	$	128,331,000		$	5,467,000		$	202,000		$	29,270,000		$	219,001,000		$	128,331,000

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	19,323,000		$	4,328,000		$	—		$	30,438,000		$	27,623,000		$	19,323,000
Income taxes	$	45,000		$	2,000		$	—		$	345,000		$	337,000		$	45,000
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Investing Activities:
Accrued capital expenditures	$	2,112,000		$	609,000		$	—		$	2,768,000		$	1,783,000		$	2,112,000
The following represents the increase in certain assets and liabilities in connection with our acquisitions of operating properties and note receivables:
Accounts and other receivables, net	$	—		$	10,000		$	—
Other assets, net	$	415,000		$	715,000		$	—
Mortgage loan payables, net	$	48,989,000		$	37,039,000		$	—
Accounts payable and accrued liabilities	$	2,542,000		$	1,459,000		$	—
Accounts payable due to affiliates, net	$	77,000		$	5,000		$	—
Security deposits, prepaid rent and other liabilities	$	2,416,000		$	1,952,000		$	—
Minority interests	$	—		$	2,899,000		$	—
The following represents the significant increase in certain assets & liabilities in connection with our acquisitions of real estate investments & notes receivable:
Mortgage loan payable, net										$	190,294,000		$	52,965,000		$	48,989,000
Security deposits, prepaid rent, and other liabilities										$	14,552,000		$	—		$	—
Issuance of operating partnership units in connection with Fannin acquisition										$	1,557,000		$	—		$	—
Financing Activities:								—
Issuance of common stock under the DRIP	$	13,099,000		$	2,673,000		$	—		$	56,551,000		$	38,559,000		$	13,099,000
Distributions declared but not paid	$	4,393,000		$	1,254,000		$	—
Accrued offering costs	$	1,918,000		$	1,111,000		$	—
Accrued deferred financing costs	$	29,000		$	—		$	—
Receivable from transfer agent for issuance of common stock	$	—		$	109,000		$	—
Distributions declared but not paid including stock issued under the DRIP										$	12,317,000		$	8,555,000		$	4,393,000
Accrued offering costs to former affiliate										$	—		$	—		$	1,918,000
Adjustment to redeemable noncontrolling interests										$	(275,000	)	$	1,673,000		$	883,000

The accompanying notes are an integral part of these consolidated financial statements.

~~102~~117

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the Period from April 28, 2006~~
~~(Date of Inception) through December 31, 2006~~2008


1.	Organization and Description of Business

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc., a Maryland corporation, was incorporated on April 20, 2006. We were initially capitalized on April 28, 2006 and ~~therefore we~~ consider that to be our date of inception.

We are a fully integrated, self-administered, and self-managed real estate investment trust, or REIT. Accordingly, our internal management team manages ourday-to-day operations and oversees and supervises our employees and outside service providers. Acquisitions and asset management services are performed in-house by our employees, with certain monitored services provided by third parties at market rates. We do not pay acquisition, disposition, or asset management fees to an external advisor, and we have not and will not pay any internalization fees.

We provide stockholders the potential for income and growth through investment in a diversified portfolio of real estate ~~properties, focusing~~properties. We focus primarily on medical office buildings and ~~healthcare related~~healthcare-related facilities. We ~~may~~ also invest to a limited extent in other real ~~estate related~~estate-related assets. However, we do not presently intend to invest more than 15.0% of our total assets in such other real estate-related assets. We focus primarily on investments that produce recurring income. WeSubject to the discussion in Note 11, Commitments and Contingencies, regarding the closing agreement that we intend to request from the IRS, we believe that we have qualified ~~and elected~~ to be taxed as a ~~real estate investment trust, or~~ REIT ~~under the Internal Revenue Code of 1986, as amended, or the Code,~~ for federal income tax purposes and we intend to continue to be taxed as a REIT. We conduct substantially all of our operations through Healthcare Trust of America Holdings, LP, or our operating partnership.

~~We are conducting~~As of December 31, 2010, we had made 77 portfolio acquisitions comprising approximately 10,919,000 square feet of gross leasable area, or GLA, which includes 238 buildings and two real estate-related assets. Additionally, we purchased the remaining 20% interest that we previously did not own in HTA-Duke Chesterfield Rehab, LLC, or the JV Company that owns the Chesterfield Rehabilitation Center. The aggregate purchase price of these acquisitions was $2,266,359,000. As of December 31, 2010, the average occupancy of these properties was 91%.

On September 20, 2006, we commenced a best efforts initial public offering, or our initial offering, in which we ~~are offering~~offered up to 200,000,000 shares of our common stock for $10.00 per share and up to 21,052,632 shares of our common stock pursuant to our distribution reinvestment plan, or the DRIP, ~~for~~at $9.50 per share, aggregating up to $2,200,000,000. ~~We will sell shares in our offering until the earlier~~As of ~~September 20, 2009, or~~March 19, 2010, the date onupon which ~~the maximum amount has been sold. As of December 31, 2008,~~our initial offering terminated, we had received and accepted subscriptions in our initial offering for ~~73,824,809~~147,562,354 shares of our common stock, or ~~$737,398,000,~~$1,474,062,000, excluding shares of our common stock issued under the DRIP.

~~We conduct substantially all~~On March 19, 2010, we commenced a best efforts follow-on public offering, or our follow-on offering, in which we offered up to 200,000,000 shares of our ~~operations through Grubb & Ellis Healthcare REIT Holdings, L.P., or~~common stock for $10.00 per share in our ~~operating partnership. We are currently externally advised by Grubb & Ellis Healthcare REIT Advisor, LLC, or~~primary offering and up to 21,052,632 shares of our ~~advisor,~~common stock pursuant to ~~an advisory agreement, as amended~~the DRIP at $9.50 per share, aggregating up to $2,200,000,000. As of December 31, 2010, we received and ~~restated on November 14, 2008 and effective as of October 24, 2008, or the Advisory Agreement, between us,~~accepted subscriptions in our ~~advisor and Grubb & Ellis Realty Investors, LLC, or Grubb & Ellis Realty Investors, who is the managing member~~follow-on offering for 50,604,239 shares of our ~~advisor. Our advisor is affiliated~~common stock, or $505,534,000, excluding shares of our common stock issued under the DRIP. The primary offering terminated on February 28, 2011. For noncustodial accounts, subscription agreements signed on or before February 28, 2011 with ~~us in that~~all documents and funds received by the end of business March 15, 2011 were accepted. For custodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by the end of business March 31, 2011 will be accepted. As of March 21, 2011, we had received and ~~our advisor have a common officer, who also owns an indirect equity interest~~accepted subscriptions in our advisor. Our advisor engages affiliated entities, including Triple Net Properties Realty, Inc., or Realty, and Grubb & Ellis Management Services, Inc. to provide various services to us, including property management services.

The Advisory Agreement expires on September 20, 2009. Our main objectives in amending the Advisory Agreement on November 14, 2008 were to reduce acquisition and asset management fees and to set the frameworkfollow-on offering for ~~our transition to self-management. Under the Advisory Agreement, as amended November 14, 2008, our advisor agreed to use reasonable efforts to cooperate with us as we pursue aself-management~~ ~~program. Upon or prior to completion~~71,659,602 shares of our ~~transition to self-management and/~~common stock, or ~~the termination~~$715,591,000, excluding shares of ~~the Advisory Agreement, we will no longer be advised by~~ our ~~advisor or consider our company to be sponsored by Grubb & Ellis Company, or Grubb & Ellis.~~

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 acquisition fees, asset management fees, property management fees and other fees to its advisor for services provided as we do under our Advisory Agreement. In contrast, under our self-management program, we will be managed internally by our management team led by Scott D. Peters, our Chief Executive Officer, President and Chairman of the board of directors,common stock issued under the direction of our board of directors. With a self-managed REIT, fees paid to third parties are expected to be substantially reduced. By pursuing self-management, we have effectively eliminated the potential need for us to pay any fee to our advisor in the future to “internalize” certain of the functions thatDRIP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~they currently provide to us. The Advisory Agreement, as amended November 14, 2008, recognizes our self-management~~Realty Capital Securities, LLC, or RCS, an unaffiliated third party, served as the ~~alternative to internalization.~~

~~The Advisory Agreement, as amended November 14, 2008, also resulted in~~dealer manager for our follow-on offering. RCS is registered with the ~~substantial reduction~~Securities and Exchange Commission, or the SEC, and with all 50 states and is a member of the ~~acquisition fees and the asset management fees payable to~~Financial Industry Regulatory Authority, or FINRA. RCS offered our advisor, potentially offsetting the various costs of self-management. Upon completion of our transition to self-management, we will no longer be advised by our advisor or consider our company to be sponsored by Grubb & Ellis Company, or Grubb & Ellis.

On December 7, 2007, NNN Realty Advisors, Inc., or NNN Realty Advisors, which previously served as our sponsor, merged with and into a wholly owned subsidiary of Grubb & Ellis. The transaction was structured as a reverse merger whereby stockholders of NNN Realty Advisors received shares of common stock for sale through a network of ~~Grubb & Ellis in exchange for~~broker-dealers and their NNN Realty Advisors shares of common stock and, immediately following the merger, former NNN Realty Advisor stockholders held approximately 59.5% of the common stock of Grubb & Ellis. As a result of the merger, we consider Grubb & Ellis to be our sponsor. Following the merger, NNN Healthcare/Office REIT, Inc., NNN Healthcare/Office REIT Holdings, L.P., NNN Healthcare/Office REIT Advisor, LLC, NNN Healthcare/Office Management, LLC, Triple Net Properties, LLC and NNN Capital Corp. changed their names to Grubb & Ellis Healthcare REIT, Inc., Grubb & Ellis Healthcare REIT Holdings, L.P., Grubb & Ellis Healthcare REIT Advisor, LLC, Grubb & Ellis Healthcare Management, LLC, Grubb & Ellis Realty Investors, LLC and Grubb & Ellis Securities, Inc., respectively.

As of December 31, 2008, we owned 41 geographically diverse properties comprising 5,156,000 square feet of gross leasable area, or GLA, and one real estate related asset, for an aggregate purchase price of $966,416,000.licensed registered representatives.


2.	Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our consolidated financial statements. Such financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying consolidated financial statements.

Basis of Presentation

Our accompanying consolidated financial statements include our accounts and those of our operating partnership, the ~~wholly owned~~wholly-owned subsidiaries of our operating partnership and any variable interest entities, or VIEs, as defined in the Financial Accounting Standards Board, ~~Interpretation,~~ or ~~FIN, No. 46,~~the FASB, Accounting Standard Codification, or ASC, 810,Consolidation ~~of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51,~~~~as revised,~~, or ~~FIN No. 46(R), that we~~ASC 810. All significant intercompany balances and transactions have ~~concluded should be consolidated.~~been eliminated in the consolidated financial statements. We ~~operate and intend to continue to~~ operate in an umbrella partnership REIT, or UPREIT, structure in which ~~our operating partnership, or wholly owned~~wholly-owned subsidiaries of our operating partnership own ~~substantially~~ all of the properties ~~we acquire.~~acquired on our behalf. We are the sole general partner of our operating partnership and as of December 31, ~~2008~~2010 and ~~2007,~~December 31, 2009, we owned aan approximately 99.92% and an approximately 99.99%, respectively, general ~~partnership~~partner interest in our operating partnership. ~~Our~~Grubb & Ellis Healthcare REIT Advisor, LLC, or our former advisor, iswas a limited partner of our operating partnership and as of December 31, ~~2008 and 2007,~~2009, owned aan approximately 0.01% limited ~~partnership~~partner interest in our operating partnership. ~~Our~~On October 18, 2010, we entered into a Redemption, Termination, and Release Agreement, or the Redemption Agreement, with our former advisor, ~~is also entitled~~our former dealer manager, and certain of their affiliates. Pursuant to ~~certain~~the Redemption Agreement, we purchased the limited partner interest, including all rights with respect to a subordinated distribution upon the occurrence of specified liquidity events and other rights ~~under the partnership agreement for~~held by our former advisor in our operating partnership. See Note 12, Related Party Transactions, for further information regarding redemption of this limited partner interest held by our former advisor. Additionally, as of December 31, 2010, approximately 0.08% of our operating partnership was owned by certain physician investors who obtained limited partner interests in connection with the Fannin acquisition (see Note 13).

Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our consolidated financial statements. ~~All significant intercompany accounts and transactions are eliminated in consolidation.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Use of Estimates

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Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments with a maturity of three months or less when purchased.

Restricted Cash

Restricted cash is comprised of impound reserve accounts for property taxes, insurance, capital improvements and tenant ~~improvements.~~improvements as well as collateral accounts for debt and interest rate swaps.

Revenue Recognition, Tenant Receivables and Allowance for Uncollectible Accounts

In accordance with ~~Statement of Financial Accounting Standards, or SFAS No. 13,~~ASC 840,~~Accounting for~~ Leases, or ~~SFAS No. 13, as amended and interpreted,~~ASC 840, minimum annual rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). Differences between rental income recognized and amount contractually due under the lease agreements will be credited or charged, as applicable, to rent receivable. Tenant reimbursement revenue, which is comprised of additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, is recognized as revenue in the period in which the related expenses are incurred. Tenant reimbursements are recognized and presented in accordance with ~~Emerging Issues Task Force, or EITF, IssueNo. 99-19,~~ASC 605-45,~~Reporting~~ Revenue ~~Gross as a~~— Principal ~~versus Net as an~~ Agent Considerations~~, or IssueNo. 99-19.~~ ~~IssueNo. 99-19~~. This guidance requires that these reimbursements be recorded on a gross basis, as we are generally the primary obligor with respect to purchasing goods and services from third-party suppliers, have discretion in selecting the supplier and have credit risk. We recognize lease termination fees if there is a signed termination letter agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property.

Tenant receivables and unbilled deferred rent receivables are carried net of the allowances for uncollectible current tenant receivables and unbilled deferred rent. An allowance is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. We maintain an allowance for deferred rent receivables arising from the straight-lining of rents. Such allowance is charged to bad debt expense which is included in general and administrative on our accompanying consolidated statement of operations. Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the tenant’s financial condition, security deposits, letters of credit, lease guarantees and current economic conditions and other relevant factors. As December 31, ~~2008~~2010, 2009, and ~~2007,~~2008, we had ~~$416,000~~$1,926,000, $1,222,000 and ~~$7,000,~~$398,000, respectively, in allowances for uncollectible accounts as determined to be necessary to reduce receivables to our estimate of the amount recoverable. During the years ended December 31, 2010, 2009 and 2008, $1,022,000, $965,000 and ~~2007,~~ $442,000, ~~and $11,000,~~ respectively, of receivables was directly written off to bad debt expense. ~~For the period from April 28, 2006 (Date of Inception) through December 31, 2006, there was no bad debt expense recorded.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Properties Held for Sale~~

~~We account for our properties held for sale in accordance with SFAS No. 144,~~~~Accounting for the Impairment or Disposal of Long Lived Assets~~, or SFAS No. 144, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and requires that, in a period in which a component of an entity either has been disposed of or is classified as held for sale, the statements of operations for current and prior periods shall report the results of operations of the component as discontinued operations.

In accordance with SFAS No. 144, at such time as a property is held for sale, such property is carried at the lower of: (1) its carrying amount or (2) fair value less costs to sell. In addition, a property being held for sale ceases to be depreciated. We classify operating properties as property held for sale in the period in which all of the following criteria are met:


	•	~~management, having the authority to approve the action, commits to a plan to sell the asset;~~

	•	~~the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;~~

	•	~~an active program to locate a buyer and other actions required to complete the plan to sell the asset has been initiated;~~

	•	~~the sale of the asset is probable and the transfer of the asset is expected to qualify for recognition as a completed sale within one year;~~

	•	~~the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and~~

	•	~~given the actions required to complete the plan to sell the asset, it is unlikely that significant changes to the plan would be made or that the plan would be withdrawn.~~

~~As of December 31, 2008 and 2007, we did not have any properties held for sale.~~

Purchase Price Allocation

In accordance with ~~SFAS, No. 141,~~ASC 805,Business Combinations, or ASC 805, we, with the assistance of independent valuation specialists, allocate the purchase price of acquired properties to tangible and identified intangible assets and liabilities based on their respective fair values. The allocation to tangible assets (building and land) is based upon our determination of the value of the property as if it were to be replaced and vacant using discounted cash flow models similar to those used by independent appraisers. Factors considered by us include an estimate of carrying costs during the expectedlease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price of the applicable property is allocated to the above or below market value of in place leases, the value of in place leases, tenant relationships and above or below market debt assumed.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acquired leases) of the difference between: (1) the contractual amounts to be paid pursuant to the lease over its remaining term, and (2) our estimate of the amounts that would be paid using fair market rates over the remaining term of the lease including any bargain renewal periods, with respect to a below market lease. The amounts allocated to above market leases are included in identified intangible assets, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining non-cancelable lease term of the acquired leases with each property. The amounts allocated to below market lease values are included in identified intangible liabilities, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining non-cancelable lease term plus any below market renewal options of the acquired leases with each property.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

The total amount of other intangible assets acquired is further allocated to in place lease costs and the value of tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by us in allocating these values include the nature and extent of the credit quality and expectations of lease renewals, among other factors. The amounts allocated to in place lease costs are included in identified intangible assets, net in our accompanying consolidated balance sheets and will be amortized over the average remaining non-cancelable lease term of the acquired leases with each property. The amounts allocated to the value of tenant relationships are included in identified intangible assets, net in our accompanying consolidated balance sheets and are amortized over the average remaining non-cancelable lease term of the acquired leases plus a market lease term.

The value allocable to above or below market debt is determined based upon the present value of the difference between the cash flow stream of the assumed mortgage and the cash flow stream of a market rate mortgage. The amounts allocated to above or below market debt are included in mortgage ~~loan payables,~~loans payable, net on our accompanying consolidated balance sheets and are amortized to interest expense over the remaining term of the assumed mortgage.

On January 1, 2009, in accordance with the provisions of ASC 805,Business Combinations, we began to expense acquisition-related costs for acquisitions. Prior to this date, acquisition-related expenses had been capitalized as part of the purchase price allocations. We expensed $11,317,000 and $15,997,000 for acquisition related expenses during the years ended December 31, 2010 and 2009, respectively.

~~Operating Properties,~~Real Estate Investments, Net

Operating properties are carried at the lower of historical cost less accumulated depreciation or fair value less costs to sell. The cost of operating properties includes the cost of land and completed buildings and related improvements. Expenditures that increase the service life of properties are capitalized and the cost of maintenance and repairs is charged to expense as incurred. The cost of buildings is depreciated on a straight-line basis over the estimated useful lives of the buildings up to 39 years and for tenant improvements, the shorter of the lease term or useful life, ranging from one month to ~~241~~240 months, respectively. Furniture, fixtures and equipment is depreciated over five years. When depreciable property is retired, replaced or disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.

Investment in Real EstateHeld-for-Sale

We evaluate theheld-for-sale classification of our owned real estate each quarter. Assets that are classified asheld-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. The fair value is based on discounted cash flow analyses, which involve management’s best estimate of market

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participants’ holding period, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods, and capital requirements. Assets are generally classified asheld-for-sale once management commits to a plan to sell the properties and has determined that the sale of the asset is probable and transfer of the asset is expected to occur within one year. The results of operations of these real estate properties are reflected as discontinued operations in all periods reported, and the properties are presented separately on our balance sheet at the lower of their carrying value or their fair value less costs to sell. As of December 31, 2010, we determined that four buildings within one of our portfolios should be classified as held for sale. See Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations, for further discussion of our assets classified as held for sale as of December 31, 2010.

Recoverability of Real Estate Investments

An operating property is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Impairment losses are recorded on an operating property when indicators of impairment are present and the carrying amount of the asset is greater than the sum of the future undiscounted cash flows expected to be generated by that asset. We would recognize an impairment loss to the extent the carrying amount exceeded the fair value of the property. The fair value of the property is based on discounted cash flow analyses, which involve management’s best estimate of market participants’ holding periods, market comparables, future occupancy levels, rental rates, capitalization rates,lease-up periods, and capital requirements. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, there were no impairment losses recorded.

Real Estate Notes Receivable, Net

Real estate notes receivable consist of mortgage loans. Interest income from loans is recognized as earned based upon the principal amount outstanding. Mortgage loans are collateralized by interests in real property. We record loans at cost. We evaluate the collectability of both interest and principal for each of our loans to determine whether they are impaired. A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is considered to be impaired, the amount of the allowance is calculated by comparing the recorded investment to either the value determined by discounting the expected future cash flows using the loans effective interest rate or to the fair value of the collateral if the loan is collateral dependent.

Derivative Financial Instruments

We are exposed to the effect of interest rate changes in the normal course of business. We seek to mitigate these risks by following established risk management policies and procedures which include the occasional use of derivatives. Our primary strategy in entering into derivative contracts is to add stability to interest expense and to manage our exposure to interest rate movements. We utilize derivative instruments, including interest rate swaps and caps, to effectively convert a portion of our variable-rate debt to fixed-rate debt. We do not enter into derivative instruments for speculative purposes.

Derivatives are recognized as either assets or liabilities in our consolidated balance sheets and are measured at fair value in accordance with ~~SFAS No. 133,~~ASC 815,~~Derivative Instruments~~Derivatives and Hedging, ~~Activities,~~or

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~~SFAS No. 133.~~ ASC 815. Since our derivative instruments are not designated as hedge instruments, they do not qualify for hedge accounting under ~~SFAS No. 133,~~ASC 815, and accordingly, changes in fair value are included as a component of interest expense in our consolidated statements of operations in the period of change.

Fair Value Measurements

~~On January 1, 2008, we adopted SFAS No. 157,~~ASC 820,Fair Value Measurements and Disclosures,, or ~~SFAS No. 157. SFAS No. 157~~ASC 820, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ~~SFAS No. 157~~ASC 820 applies

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to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use We have provided these disclosures in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independentNote 15, Fair Value of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.Financial Instruments.

Other Assets, Net

Other assets consist primarily of deferred rent receivables, leasing commissions, prepaid expenses, deposits and deferred financing costs. Costs incurred for property leasing have been capitalized as deferred assets. Deferred leasing costs include leasing commissions that are amortized using the straight-line method over the term of the related lease. Deferred financing costs include amounts paid to lenders and others to obtain financing. Such costs are amortized using the straight-line method over the term of the related loan, which approximates the effective interest rate method. Amortization of deferred financing costs is included in interest expense in our accompanying consolidated statements of operations.

Stock Compensation

We follow ~~SFAS No. 123(R),~~ASC 718,~~Share-Based Payment~~Compensation — Stock Compensation, to account for our stock compensation pursuant to our 2006 Incentive Plan and the 2006 Independent Directors Compensation Plan, asub-plan of our 2006 Incentive Plan. See Note 14, Stockholders’ Equity ~~(Deficit)~~ — 2006 Incentive Plan and Independent Directors Compensation Plan, for a further discussion of grants under our 2006 Incentive Plan.

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~~Minority~~Redeemable Noncontrolling Interests

~~Minority~~Redeemable noncontrolling interests relate to the interests in our consolidated entities that are not wholly owned by us. As these redeemable noncontrolling interests provide for redemption features not solely within the control of the issuer, we classify such interests outside of permanent equity in accordance with Accounting Series Release 268:Presentation in the Financial Statements of “Redeemable Preferred Stock”, as applied in ASUNo. 2009-4,Accounting for Redeemable Equity Instruments.

Income Taxes

WeSubject to the discussion in Note 11, Commitments and Contingencies, regarding the closing agreement that we intend to request from the IRS, we believe that we have qualified ~~and elected~~ to be taxed as a REIT beginning with our taxable year ended December 31, 2007 under Sections 856 through 860 of the Code, for federal income tax purposes and we intend to continue to be taxed as a REIT. To continue to qualify as a REIT for federal income tax purposes, we must meet certain organizational and operational requirements, including a requirement to pay distributions to our stockholders of at least 90.0% of our annual taxable income (computed without regard to the dividends paid deduction and excluding net capital gain). As a REIT, we generally are not subject to federal income tax on net income that we distribute to our stockholders.

If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could have a material adverse effect on our results of operations and net cash available for distribution to stockholders.

~~In July 2006, the Financial Accounting Standards Board, or the FASB, issued Interpretation No. 48,~~~~Accounting for Uncertainty in~~We followASC 740-10, Income Taxes,, or ~~FIN No. 48. We adopted FIN No. 48 effective January 1, 2007,~~ASC 740-10, and ~~as a result we did not have any liability for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We follow FIN No. 48~~requires us to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take ~~on a~~on. We do not have any liability for uncertain tax ~~return.~~positions that we believe should be recognized in our consolidated financial statements.

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Segment Disclosure

~~The Financial Accounting Standards Board,~~ASC 280,Segment Reporting, or ~~FASB, issued Statement of Financial Accounting Standards, SFAS No. 131,~~~~Disclosures about Segments of an Enterprise and Related Information~~,ASC 280, which establishes standards for reporting financial and descriptive information about an enterprise’s reportable ~~segments.~~segment. We have determined that we have one reportable segment, with activities related to investing in medical office buildings, ~~healthcare related~~healthcare-related facilities, ~~quality~~ commercial office properties and other real estate related assets. Our investments in real estate and other real estate related assets are geographically diversified and ~~management~~our chief operating decision maker evaluates operating performance on an individual ~~portfolio~~asset level. ~~However, as~~As each of our assets has similar economic characteristics, tenants, and products and services, our assets have been aggregated into one reportable ~~segment for the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006.~~segment.

Recently Issued Accounting Pronouncements

Below are the recently issued accounting pronouncements and our evaluation of the impact of such pronouncements.

Consolidation Pronouncements

In ~~September 2006,~~June 2009, the FASB issued ~~SFAS~~Statement of Financial Accounting Standards No. ~~157,~~167,Amendments to FASB Interpretation No. 46(R)codified primarily inASC 810-10,Consolidation — Overall, orASC 810-10, which ~~will~~modifies how a company determines when an entity that is a VIE should be ~~applied~~consolidated. This guidance clarifies that the determination of whether a company is required to consolidate an entity is based on, among other ~~accounting pronouncements~~things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. It also requires an ongoing reassessment of whether a company is the primary beneficiary of a VIE, and it requires additional disclosures about a company’s involvement in VIEs and any significant changes in risk exposure due to that involvement. This guidance became effective for us on January 1, 2010. The adoption of this pronouncement did not have a material impact on our consolidated financial statements.

Fair Value Pronouncements

In September 2009, the FASB issued Accounting Standards Update2009-12,Fair Value Measurements and Disclosures: Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), or ASU2009-12, (previously exposed for comments as proposed FSPFAS 157-g) to provide guidance on measuring the fair value of certain alternative investments. The ASU amends ASC 820 to offer investors a practical expedient for measuring the fair value of investments in certain entities that calculate net asset value per share. The ASU is effective for the first reporting period (including interim periods) ending after December 15, 2009; early adoption is permitted. The adoption of ASU2009-12 did not have a material impact on our consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update2010-06,Fair Value Measurements and Disclosures (Topic 820), or ASU2010-06, which provides amendments to Subtopic820-10 that require ~~or permit fair value measurements, defines fair value, establishes a framework for measuring fair value~~new disclosures and that clarify existing disclosures in ~~generally accepted accounting principles~~order to increase transparency in financial reporting with regard to recurring and ~~provides for expanded disclosure about~~nonrecurring fair value measurements. ~~SFAS No. 157 was issued~~ASU2010-06 requires new disclosures with respect to ~~increase consistency~~the amounts of significant transfers in and ~~comparability in~~out of Level 1 and Level 2 fair value measurements and the reasons for those transfers, as well as separate presentation about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). In addition, ASU2010-06 provides amendments that clarify existing disclosures, requiring a reporting entity to ~~expand~~provide fair value measurement disclosures for each class of assets and liabilities as well as disclosures about the valuation techniques and inputs used to measure fair value ~~measurements. In February 2008,~~for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3. Finally, ASU2010-06 amends guidance on employers’ disclosures about postretirement benefit plan assets under ASC 715 to require that disclosures be provided by classes of assets instead of by major categories of assets. ASU2010-06 is effective for the ~~FASB issued FASB Staff Position, or FSP,SFAS No. 157-1,~~~~Application of FASB Statement No. 157 to FASB Statement No. 13~~interim and ~~Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,or FSPFAS No. 157-1.~~ ~~FSPSFAS No. 157-1~~ ~~excludes from the scope of SFAS No. 157 certain leasing transactions accounted for under SFAS No. 13,~~~~Accounting for Leases~~~~. In February 2008, the FASB also issued FSPSFAS No. 157-2,~~~~Effective Date of FASB Statement~~annual

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~No. 157,~~~~or FSPSFAS No. 157-2.~~ ~~FSPSFAS No. 157-2~~ ~~defers~~reporting periods beginning after December 15, 2009, except for the ~~effective date~~disclosures about purchases, sales, issuances, and settlements in the rollforward of ~~SFAS No. 157 for allnon-financial~~ ~~assets and non-financial liabilities, except those that are recognized or disclosed at~~activity in Level 3 fair value ~~in the financial statements on a recurring basis, to~~measurements, which are effective for fiscal years beginning after ~~November~~December 15, 2010. Accordingly, ASU2010-06 became effective for us on January 1, ~~2008.~~ 2010 (except for the Level 3 activity disclosures, which will become effective for us on January 1, 2011). The adoption of ASU2010-06 has not had a material impact on our consolidated financial statements.
Equity Pronouncements

In ~~October 2008,~~January 2010, the FASB issued ~~FSP~~Accounting Standards Update~~SFAS No. 157-3,~~2010-01,~~Determining~~Accounting for Distributions to Shareholders with Components of Stock and Cash, or ASU2010-01, the ~~Fair Value~~objective of which was to address the diversity in practice related to the accounting for a distribution to shareholders that offers them the ability to elect to receive their entire distribution in cash or shares of equivalent value with a potential limitation on the total amount of cash that shareholders can elect to receive in the aggregate. ASU2010-01 clarifies that the stock portion of a ~~Financial Asset When~~distribution to shareholders that allows them to elect to receive cash or shares with a potential limitation on the ~~Market~~total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share (EPS) prospectively. ASU2010-01 became effective for ~~That Asset Is Not Active,or FSPSFAS No. 157-3.~~ ~~FSPSFAS No. 157-3~~ amends SFAS No. 157 by providing an example to illustrate key considerations and the emphasis on measurement principles when applying SFAS No. 157 to financial assets when the market for those financial assets is not active. We adopted SFAS No. 157 and FSP~~SFAS 157-1~~ ~~on a prospective basis on~~us January 1, ~~2008.~~2010. The adoption of ~~SFAS No. 157 and FSP~~ASU~~SFAS No. 157-1~~2010-01 did not have a material impact on our consolidated financial ~~statements except with regards~~statements.

Credit Risk Pronouncements

In July 2010, the FASB issued Accounting Standards Update2010-20,Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, or ASU2010-20, which requires disclosures about the nature of the credit risk in an entity’s financing receivables, how that risk is incorporated into the allowance for credit losses, and the reasons for any changes in the allowance. Disclosure is required to ~~enhanced~~be disaggregated, primarily at the level at which an entity calculates its allowance for credit losses. The specific required disclosures ~~(see Note 8, Derivative Financial Instruments). We adopted FSPSFAS No. 157-3~~ ~~upon issuance, which did not have~~are a ~~material impact on our consolidated financial statements. We adopted FSPSFAS No. 157-2~~ ~~on a prospective basis on January 1, 2009. The implementation~~rollforward schedule of ~~FSPSFAS No. FAS 157-2~~ ~~did not have~~the allowance for credit losses for the reporting period, the related investment in financing receivables, the nonaccrual status of financing receivables, impaired financing receivables, credit quality indicators, the aging of past due financing receivables, any troubled debt restructurings and ~~is not anticipated to have a material~~their effect on the ~~methods~~allowance for credit losses, the extent of any financing receivables modified by troubled debt restructuring that have defaulted and their impact on the allowance for credit losses, and significant sales or ~~processes we use~~purchases of financing receivables. The ASU2010-20 disclosure requirements primarily pertain to ~~value these non-financial assets~~our mortgage notes receivables and ~~non-financial liabilities~~are effective for interim and annual reporting periods ending on or ~~information disclosed.~~

~~In February 2007, the FASB issued SFAS No. 159,~~~~The Fair Value Option for Financial Assets and Financial Liabilities,~~or SFAS No. 159. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the guidance is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. We adopted SFAS No. 159 on a prospective basis on January 1, 2008.after December 15, 2010. The adoption of ~~SFAS No. 159~~this pronouncement did not have a material impact on our consolidated financial statements, ~~since we did not elect to apply the fair value option for any of our eligible financial instruments or other items on the January 1, 2008 effective date.~~as discussed within Note 4, Real Estate Notes Receivable, Net.

Other Pronouncements

In ~~December 2007,~~May 2009, the FASB issued ~~SFAS~~Statement of Financial Accounting Standards No. ~~141(R)~~165,Subsequent Events, ~~Business Combinations,~~codified primarily inASC 855-10,Subsequent Events — Overall, or ~~SFAS No. 141(R), and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment~~ASC 855-10, which provides guidance to establish general standards of ~~ARB No. 51, or SFAS No. 160. SFAS No. 141(R) and SFAS No. 160 will significantly change the~~ accounting for and ~~reporting~~disclosures of ~~business combination transactions and noncontrolling (minority) interests in consolidated~~events that occur after the balance sheet date but before financial statements. SFAS No. 141(R) requires an acquiring entity to recognize acquired assets and liabilities assumed in a transaction at fair value as of the acquisition date, changes the disclosure requirements for business combination transactions and changes the accounting treatment for certain items, including contingent consideration agreements which will be requiredstatements are issued or are available to be ~~recorded at acquisition date fair value~~issued. We adoptedASC 855-10 on April 1, 2009 and ~~acquisition costs which will be~~provided the required to be expensed as incurred. SFAS No. 160 requires that noncontrolling interests be presented as a component of consolidated stockholders’ equity, eliminates minority interest accounting such that the amount of net income attributable to the noncontrolling interests will be presented as part of consolidated net income in our accompanying consolidated statements of operations and not as a separate component of income and expense, and requires that upon any changes in ownership that result in the loss of control of the subsidiary, the noncontrolling interest be re-measured at fair value with the resultant gain or loss recorded in net income. SFAS No. 141(R) and SFAS No. 160 require simultaneous adoption and are to be applied prospectively for the first annual reporting period beginning on or after December 15, 2008. Early adoption of either standard was prohibited. We have adopted SFAS No. 141(R) and SFAS No. 160 on a prospective basis on January 1, 2009. The adoption of SFAS No. 160 is not expected to have a material impact on our consolidated statements of operations or cash flows. However, we are currently evaluating whether the adoption of SFAS No. 160 could have a material impact on the consolidated balance sheets and statements of stockholders’ equity. The adoption of SFAS No. 141(R) will have a material impact on our results of operations when we acquire real estate properties.

disclosures. In ~~March 2008,~~February 2010, the FASB issued ~~SFAS No. 161,~~ASU2010-09,~~Disclosures about Derivative Instruments~~Subsequent Event(Topic 855) Amendments to Certain Recognition and ~~Hedging Activities~~Disclosure Requirements,. ASU2010-09 removes the requirement for an SEC filer to disclose a date through which subsequent events are evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or ~~SFAS No. 161. SFAS No. 161~~retrospective application of GAAP. All of the amendments in SU2010-09 are effective upon issuance of the final ASU, except for the use of the issued date for conduit debt obligors (which is ~~intended to improve financial reporting about derivative~~effective for interim or annual periods ending after June 15, 2010). We adopted ASU

~~110~~125

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~instruments~~2010-09 in February 2010, and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 achieves these improvements by requiringas such our Subsequent Event footnote does not include disclosure of the ~~fair values~~date through which subsequent events were evaluated for the 2010 consolidated financial statements.

On December 21, 2010, the FASB issued ASU2010-29,Disclosure of ~~derivative instruments~~Supplementary Pro Forma Information for Business Combinations, to address differences in the ways entities have interpreted the requirements of ASC 805,BusinessCombinations, or ASC 805, for disclosures about pro forma revenue and ~~their gains and losses~~earnings in a ~~tabular format. It also provides more information about an entity’s liquidity by requiring disclosure~~business combination. The ASU states that “if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of ~~derivative features~~the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.” In addition, the ASU “expand[s] the supplemental pro forma disclosures under ASC 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.” The amendments in this ASU are credit risk-related. Finally, SFAS No. 161 requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS No. 161effective prospectively for business combinations for which the acquisition date is ~~effective for quarterly interim periods~~on or after the beginning of the first annual reporting period beginning on or after ~~November~~December 15, ~~2008, and fiscal years that include those quarterly interim periods with early application encouraged.~~2010. We ~~adopted SFAS No. 161 on a prospective basis on January 1, 2009. The~~do not expect the adoption of ~~SFAS No. 161 did not~~ASU 2010-29 to have a material impact on our consolidated financial statements.


3.	Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations

~~In April 2008, the FASB issued FSP~~

~~SFAS No. 142-3,~~Investment in Operating Properties~~Determination~~

Our investments in our consolidated operating properties consisted of the ~~Useful Life~~following as of ~~Intangible~~ December 31, 2010 and 2009:

December 31,
2010 2009

Land $ 164,821,000 $ 122,972,000
Building and improvements 1,711,054,000 1,083,496,000
Furniture and equipment 10,000 10,000

1,875,885,000 1,206,478,000

Less: accumulated depreciation (102,962,000 ) (56,689,000 )

Total
$ 1,772,923,000 $ 1,149,789,000

Depreciation expense related to our portfolio of operating properties for the years ended December 31, 2010, 2009, and 2008 was $48,043,000, $31,701,000, and $19,898,000, respectively.
Assets Held for Sale and Discontinued Operations
Assets and liabilities of properties sold or ~~FSPSFAS No. 142-3.~~ ~~FSPSFAS No. 142-3~~ ~~is intended~~ to ~~improve~~be sold are classified as held for sale, to the ~~consistency between~~extent not sold, on the ~~useful life of recognized intangible assets under SFAS No. 142,~~~~Goodwill and Other Intangible Assets,~~~~or SFAS No. 142,~~Company’s Consolidated Balance Sheets, and the ~~period~~results of ~~expected cash flows used~~operations of such properties are included in discontinued operations on the Company’s Consolidated Statements of Operations for all periods presented. Properties classified as held for sale at December 31, 2010 include four buildings within our Senior Care 1 portfolio, which is a portfolio consisting of six total buildings located in various cities throughout Texas and California. Pursuant to ~~measure~~a master lease agreement in effect at the ~~fair value~~time of our purchase of this portfolio, the lessee of the ~~assets under SFAS No. 141(R). FSPSFAS No. 142-3~~ ~~amends~~four buildings within the ~~factors an entity should consider~~portfolio that are located in ~~developing renewal or extension assumptions in determining~~Texas was afforded the ~~useful life of recognized intangible assets. FSPSFAS No. 142-3~~ ~~requires an entity~~option to ~~consider its own historical experience in renewing or extending similar arrangements, or to consider market participant assumptions consistent with~~purchase these buildings at the ~~highest and best use~~June 30, 2011 expiration of the ~~assets if relevant historical experience does not exist. In addition to the required disclosures under SFAS No. 142, FSPSFAS No. 142-3~~ ~~requires disclosure~~first five years of the ~~entity’s accounting policy regarding costs incurred~~ten year lease term. On December 31, 2010, the lessee opened escrow with a deposit of 5% of the minimum repurchase price and provided us with timely notice, as required by the agreement, of their intent to ~~renew or extend the term~~exercise this option. As a result of ~~recognized intangible assets, the weighted average period to the next renewal or extension,~~these actions, in accordance withASC 360-10-45-9,Property, Plant, and ~~the total amount of capitalized costs incurred to renew or extend the term of recognized intangible assets. FSPSFAS No. 142-3~~ ~~is effective~~Equipment — Overall — Other Presentation Matters — Long Lived Assets Classified as Held for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. While the standard for determining the useful life of recognized intangible assets is to be applied prospectively only to intangible assets acquired after the effective date, the disclosure requirements shall be applied prospectively to all recognized intangible assets as of, and subsequent to, the effective date. Early adoption is prohibited. WeSale, we have ~~adopted FSPSFAS No. 142-3~~ ~~on a prospective basis on January 1, 2009. The adoption of FSPSFAS No. 142-3~~ ~~did not have a material impact on our consolidated financial statements.~~
~~In June 2008, the FASB issued FSP Emerging Issues Task Force, or EITF, IssueNo. 03-6-1,~~~~Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,~~~~or FSP EITFNo. 03-6-1.~~ ~~FSP EITFNo. 03-6-1~~ addresses whether instruments granted by an entity in share-based payment transactions should be considered as participating securities prior to vesting and, therefore, should be included in the earnings allocation in computing earnings per share under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128,~~Earnings per Share.~~~~FSP EITFNo. 03-6-1~~ ~~clarifies~~determined that instruments granted in share-based payment transactions can be participating securities prior to vesting (that is, awards for which the requisite service had not yet been rendered). Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF~~No. 03-6-1~~ requires us to retrospectively adjust our earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform to the provisions of FSP EITF~~No. 03-6-1.~~ ~~FSP EITFNo. 03-6-1~~ ~~is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. FSP EITFNo. 03-6-1~~ ~~is effective for quarterly interim periods beginning after December 15, 2008, and fiscal years that include those quarterly interim periods. Early adoption was prohibited. We have adopted FSP EITFNo. 03-6-1~~ ~~on a prospective basis on January 1, 2009. The adoption of FSP EITFNo. 03-6-1~~ ~~did not have a material impact on our consolidated financial statements because we do not have any material share-based payment transactions.~~these four

~~111~~126

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	~~Real Estate Investments~~

buildings meet the criteria for held for sale designation and we have therefore separately presented the assets and liabilities of these buildings on our Consolidated Balance Sheet.

~~Our investments in our consolidated~~The table below reflects the assets and liabilities of properties ~~consisted of the following~~classified as held for sale as of December 31, ~~2008 and 2007:~~2010:

December 31,
2008 2007

Land $ 107,389,000 $ 52,428,000
Building and improvements 728,171,000 305,150,000
Furniture and equipment 10,000 5,000

835,570,000 357,583,000

Less: accumulated depreciation (24,650,000 ) (4,589,000 )

$ 810,920,000 $ 352,994,000

Assets: Real Estate Investments, net

2010

Land $ 2,302,000
Building and improvements, net of accumulated depreciation of $2,161,000 as of December 31, 2010 22,238,000

Total real estate investments of properties held for sale, net
$ 24,540,000

Depreciation expense related to our properties classified as held for sale for the years ended December 31, 2010, 2009, and 2008 was $786,000, $786,000 and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006 was $20,487,000, $4,616,000 and $0,~~$589,000, respectively.

~~Property Acquisitions in 2008~~Assets: Identified Intangible Assets, net

2010

In place leases, net of accumulated amortization of $824,000 as of December 31, 2010 $ 1,648,000
Tenant relationships, net of accumulated amortization of $376,000 as of December 31, 2010 2,120,000

Total assets of properties held for sale, net
$ 3,768,000

~~During~~Amortization expense recorded on the ~~year~~identified intangible assets related to our properties classified as held for sale for the years ended December 31, 2010, 2009, and 2008 ~~we completed~~was $437,000, $437,000, and $327,000, respectively.
Liabilities: Identified Intangible Liabilities, net

2010

Below market leases, net of accumulated amortization of $184,000 as of December 31, 2010 $ 369,000

Total liabilities of properties held for sale, net
$ 369,000

Amortization expense recorded on the ~~acquisition~~identified intangible liabilities related to our properties classified as held for sale for the years ended December 31, 2010, 2009 and 2008 was $68,000, $68,000, and $50,000, respectively, which is recorded to rental income in our accompanying consolidated statements of ~~21 properties. The aggregate purchase price~~operations.
In accordance withASC 205-20,Presentation of these properties was $542,976,000, of which $254,135,000 was initially financed through our secured revolving line of credit with LaSalle Bank National Association, or LaSalle, and KeyBank National Association, or KeyBank, or our secured revolving line of credit with LaSalle and KeyBank (see Note 9), and $6,000,000 was initially financed through an unsecured note payable to NNN Realty Advisors (see Note 7). A portionFinancial Statements — Discontinued Operations, the operating results of the ~~aggregate purchase price~~buildings classified as held for ~~these acquisitions was also initially financed or subsequently secured by $278,477,000~~sale has been reported within Discontinued Operations for all periods presented in ~~mortgage loan payables. We paid $16,001,000 in acquisition fees to~~ our ~~advisor and its affiliates in connection with these acquisitions.~~consolidated statements of operations. The table below reflects the results of operations of the properties classified as held for sale at December 31, 2010, which are included within

Borrowings Incurred in

Connection with the Acquisition Acquisition

Mortgage
Line
Unsecured
Fee to our

Date
Ownership
Purchase
Loan
of
Note Payable
Advisor and

Property Property Location Acquired Percentage Price Payables(1) Credit(2) to Affiliate(3) its Affiliate

Medical Portfolio 1 Overland, KS and
Largo, Brandon
and Lakeland, FL 02/01/08 100 % $ 36,950,000 $ 22,000,000 $ 16,000,000 $ — $ 1,109,000
Fort Road Medical Building St. Paul, MN 03/06/08 100 % 8,650,000 5,800,000 3,000,000 — 260,000
Liberty Falls Medical Plaza Liberty Township, OH 03/19/08 100 % 8,150,000 — 7,600,000 — 245,000
Epler Parke Building B Indianapolis, IN 03/24/08 100 % 5,850,000 3,861,000 6,100,000 — 176,000
Cypress Station Medical Office Building Houston, TX 03/25/08 100 % 11,200,000 7,300,000 4,500,000 — 336,000
Vista Professional Center Lakeland, FL 03/27/08 100 % 5,250,000 — 5,300,000 — 158,000
Senior Care Portfolio 1 Arlington, Galveston,
Port Arthur and
Texas City, TX and
Lomita and
El Monte, CA
Various 100 % 39,600,000 24,800,000 14,800,000 6,000,000 1,188,000
Amarillo Hospital Amarillo, TX 05/15/08 100 % 20,000,000 — 20,000,000 — 600,000
5995 Plaza Drive Cypress, CA 05/29/08 100 % 25,700,000 16,830,000 26,050,000 — 771,000
Nutfield Professional Center Derry, NH 06/03/08 100 % 14,200,000 8,808,000 14,800,000 — 426,000

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Borrowings Incurred in

Connection with the Acquisition Acquisition

Mortgage
Line
Unsecured
Fee to our

Date
Ownership
Purchase
Loan
of
Note Payable
Advisor and

Property Property Location Acquired Percentage Price Payables(1) Credit(2) to Affiliate(3) its Affiliate

SouthCrest Medical Plaza Stockbridge, GA 06/24/08 100 % 21,176,000 12,870,000 — — 635,000
Medical Portfolio 3 Indianapolis, IN 06/26/08 100 % 90,100,000 58,000,000 32,735,000 — 2,703,000
Academy Medical Center Tucson, AZ 06/26/08 100 % 8,100,000 5,016,000 8,200,000 — 243,000
Decatur Medical Plaza Decatur, GA 06/27/08 100 % 12,000,000 7,900,000 12,600,000 — 360,000
Medical Portfolio 2 O’Fallon and
St. Louis, MO and
Keller and
Wichita Falls, TX Various 100 % 44,800,000 30,304,000 — — 1,344,000
Renaissance Medical Centre Bountiful, UT 06/30/08 100 % 30,200,000 20,495,000 — — 906,000
Oklahoma City Medical Portfolio Oklahoma City, OK 09/16/08 100 % 29,250,000 — 29,700,000 — 878,000
Medical Portfolio 4 Phoenix, AZ,
Parma and Jefferson
West, OH, and
Waxahachie,
Greenville, and
Cedar Hill, TX Various 100 % 48,000,000 29,989,000 40,750,000 — 1,440,000
Mountain Empire Portfolio Kingsport and
Bristol, TN and
Pennington Gap
and Norton, VA 09/12/08 100 % 25,500,000 17,304,000 12,000,000 — 765,000
Mountain Plains Portfolio San Antonio
and Webster, TX 12/18/08 100 % 43,000,000 — — — 1,075,000
Marietta Health Park Marietta, GA 12/22/08 100 % 15,300,000 7,200,000 — — 383,000

Total
$ 542,976,000 $ 278,477,000 $ 254,135,000 $ 6,000,000 $ 16,001,000

discontinued operations within the Company’s Consolidated Statements of Operations for the years ended December 31, 2010, 2009, and 2008:

Years Ended December 31,
2010 2009 2008

Revenues:

Rental income $ 3,202,000 $ 3,200,000 $ 2,408,000
Expenses:

Rental expenses 324,000 357,000 262,000
Depreciation and amortization 1,223,000 1,223,000 916,000

Total expenses 1,547,000 1,580,000 1,178,000

Income before other income (expense)
$ 1,655,000 $ 1,620,000 $ 1,230,000
Other income (expense):
Interest expense:
Interest expense related to mortgage loan payables and credit facility (300,000 ) (1,235,000 ) (633,000 )
Gain (loss) on derivative financial instruments 141,000 244,000 (385,000 )

Income from discontinued operations
$ 1,496,000 $ 629,000 $ 212,000

Income from discontinued operations per common share — basic and diluted
$ 0.01 $ 0.01 $ 0.01

Weighted average number of shares outstanding

Basic
165,952,860 112,819,638 42,844,603

Diluted
165,952,860 112,819,638 42,844,603

Property Acquisitions in 2010
During the year ended December 31, 2010, we completed the acquisition of 24 new property portfolios as well as purchased additional buildings within six of our existing portfolios. Additionally, we purchased the remaining 20.0% interest that we previously did not own in HTA-Duke Chesterfield Rehab, LLC, the JV Company that owns Chesterfield Rehabilitation Center. The aggregate purchase price of these properties was $806,048,000. See Note 18, Business Combinations, for the allocation of the purchase price of the acquired properties to tangible assets and to identified intangible assets and liabilities based on their respective fair values. A portion of the aggregate purchase price for these acquisitions was initially financed or subsequently secured by $218,538,000 in mortgage loans payable. Total acquisition-related expenses of $11,317,000 include amounts for legal fees, closing costs, due diligence and other costs. Acquisitions completed during the year ended December 31, 2010 are set forth below:

Mortgage

Date
Ownership
Purchase
Loans

Property Property Location Acquired Percentage Price Payable(1)

Camp Creek Atlanta, GA 3/02/10 100 % $ 19,550,000 $ —
King Street Jacksonville, FL 3/09/10 100 10,775,000 6,602,000
Sugarland Houston, TX 3/23/10 100 12,400,000 —
Deaconess Evansville, IN 3/23/10 100 45,257,000 21,250,000
Chesterfield Rehabilitation Center(2) Chesterfield, MO 3/24/10 100 3,900,000 —
Pearland — Cullen Pearland, TX 3/31/10 100 6,775,000 —
Hilton Head — Heritage Hilton Head, SC 3/31/10 100 8,058,000 —
Triad Technology Center Baltimore, MD 3/31/10 100 29,250,000 12,000,000
Mt. Pleasant (E. Cooper) Mount Pleasant, SC 3/31/10 100 9,925,000 —
Federal North Pittsburgh, PA 4/29/10 100 40,472,000 —
Balfour Concord Portfolio Lewisville, TX 6/25/10 100 4,800,000 —

128

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Mortgage

Date
Ownership
Purchase
Loans

Property Property Location Acquired Percentage Price Payable(1)

Cannon Park Place Charleston, SC 6/28/10 100 10,446,000 —
7900 Fannin(3) Houston, TX 6/30/10 84 38,100,000 22,687,000
Balfour Concord Portfolio(4) Denton, TX 6/30/10 100 8,700,000 4,657,000
Pearland — Broadway(4) Pearland, TX 6/30/10 100 3,701,000 2,381,000
Overlook Stockbridge, GA 7/15/10 100 8,140,000 5,440,000
Sierra Vista San Luis Obispo, CA 8/04/10 100 10,950,000 —
Hilton Head — Moss Creek(4) Hilton Head, SC 8/12/10 100 2,652,000 —
Orlando Portfolio Orlando & Oviedo, FL 9/29/10 100 18,300,000 —
Santa Fe Portfolio — Building 440 Santa Fe, NM 9/30/10 100 9,560,000 —
Rendina Portfolio — San Martin and St. Francis Las Vegas, NV and 9/30/10 100 40,204,000 —
Poughkeepsie, NY
Allegheny Admin Headquarters Pittsburgh, PA 10/29/10 100 39,000,000 —
Rendina Portfolio — Des Peres(4) St. Louis, MO 11/12/10 100 14,034,000 —
Raleigh Medical Center Raleigh, NC 11/12/10 100 16,500,000 —
Columbia Portfolio — Washington Medical Arts I & II Albany, NY 11/19/10 100 23,533,000 —
Columbia — 1092 Madison & Patroon Creek(4) Albany, NY 11/22/10 100 36,254,000 26,057,000
Columbia Portfolio — Capital Region Health Park & Latham, NY and
FL Orthopaedic(4) Temple Terrace, FL 11/23/10 100 63,254,000 29,432,000
Rendina Portfolio — Gateway(4) Tucson, AZ 12/07/10 100 16,349,000 10,613,000
Florida Orthopaedic ASC Temple Terrace, FL 12/08/10 100 5,875,000 —
Select Medical LTACH Portfolio Orlando and 12/17/10 100 102,045,000 —
Tallahassee, FL, Augusta, GA, and Dallas, TX
Santa Fe Portfolio — Building 1640(4) Santa Fe, NM 12/22/10 100 6,232,000 3,555,000
Phoenix Portfolio — Estrella & MOB IV Phoenix, AZ 12/22/10 100 35,809,000 25,050,000
Rendina Portfolio — Wellington(4) Wellington, FL 12/23/10 100 12,825,000 8,303,000
Columbia Portfolio — Putnam(4) Carmel, NY 12/29/10 100 28,216,000 19,329,000
Columbia Portfolio — CDPHP Corporate Headquarters(4) Albany, NY 12/30/10 100 36,207,000 21,182,000
Medical Park of Cary Cary, NC 12/30/10 100 28,000,000 —

$ 806,048,000 $ 218,538,000

(1) Represents the amount of the mortgage loan payable assumed or newly placed on the property in connection with the acquisition or secured by the property subsequent to acquisition.
(2) Represents our purchase of the remaining 20% interest we previously did not own in the JV Company that owns Chesterfield Rehabilitation Center. See Note 13, Redeemable Noncontrolling Interest of Limited Partners, and Note 16, Business Combinations, for further information regarding this purchase.
(3) Represents our purchase of the majority interest in the Fannin partnership, which owns the 7900 Fannin medical office building, the value of which is approximately $38,100,000. We acquired both the general partner interest and the majority of the limited partner interests in the Fannin partnership. The transaction provided the original physician investors with the right to remain in the Fannin partnership, to receive limited partnership units in our operating partnership, and/or receive cash. Ten investors elected to remain in the Fannin partnership, which represents a 16% noncontrolling interest in the property.
(4) Represent purchases of additional medical office buildings during the year ended December 31, 2010 that are within portfolios we had previously acquired.
Property Acquisitions in 2009
During the year ended December 31, 2009, we completed the acquisition of 10 new property portfolios as well as purchased three additional buildings within two of our existing portfolios. The aggregate purchase price of these properties was $456,760,000. A portion of the aggregate purchase price for these acquisitions
129

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

was initially financed or subsequently secured by $91,590,000 in mortgage loans payable. Total acquisition-related expenses of $15,997,000 also include amounts for legal fees, closing costs, due diligence and other costs. We paid $10,183,000 in acquisition fees to our former advisor and its affiliates in connection with these acquisitions.

Mortgage
Fee to our Former

Date
Ownership
Purchase
Loan
Advisor and its

Property Property Location Acquired Percentage Price Payables(1) its Affiliate

Lima Medical Office Ste 207 Add-On(2) Lima, OH 01/16/09 100 % $ 385,000 $ — $ 9,000
Wisconsin Medical Portfolio 1 Milwaukee, WI 02/27/09 100 % 33,719,000 — 843,000
Rogersville (Mountain Empire) Add-On(2) Rogersville, TN 03/27/09 100 % 2,275,000 1,696,000 57,000
Lima Medical Office Ste 220 Add-On(2) Lima, OH 04/21/09 100 % 425,000 — 11,000
Wisconsin Medical Portfolio 2 Franklin, WI 05/28/09 100 % 40,700,000 — 1,017,000
Greenville Hospital Portfolio Greenville, SC 09/18/09 100 % 162,820,000 36,000,000 4,071,000
Mary Black Medical Office Building Spartanburg, SC 12/11/09 100 % 16,250,000 — 406,000
Hampden Place Medical Office Building Englewood, CO 12/21/09 100 % 18,600,000 8,785,000 465,000
Dallas LTAC Hospital Dallas, TX 12/23/09 100 % 27,350,000 — 684,000
Smyth Professional Building Baltimore, MD 12/30/09 100 % 11,250,000 — 281,000
Atlee Medical Portfolio Corsicana, TX and 12/30/09 100 % 20,501,000 — 410,000
Ft. Wayne, IN and San Angelo, TX
Denton Medical Rehabilitation Hospital Denton, TX 12/30/09 100 % 15,485,000 — 324,000
Banner Sun City Medical Portfolio Sun City, AZ and 12/31/09 100 % 107,000,000 45,109,000 1,605,000
Sun City West, AZ

Total
$ 456,760,000 $ 91,590,000 $ 10,183,000

(1) Represents the amount of the mortgage loan payable assumed by us or newly placed on the property in connection with the acquisition or secured by the property subsequent to acquisition.

(2) ~~Borrowings under our secured revolving line~~Represent purchases of ~~credit with LaSalle and KeyBank.~~
~~(3)~~ Represents our unsecured note payable to affiliate evidenced by an unsecured promissory note. Our unsecured note payable to affiliate bears interest at a fixed rate and requires monthly interest-only payments foradditional medical office buildings during the ~~term of the unsecured note payable to affiliate.~~
~~Property Acquisitions in 2007~~
During the year ended December 31, 2007, we completed the acquisition of 20 properties. The aggregate purchase price of these properties was $408,440,000, of which $115,471,000 was initially financed through our secured revolving line of credit with LaSalle Bank National Association, or LaSalle, and KeyBank National Association, or KeyBank, or our secured revolving line of credit with LaSalle and KeyBank (see Note 9), and $19,900,000 was initially financed through unsecured note payables to NNN Realty Advisors (see Note 7). A portion of the aggregate purchase price for these acquisitions was also initially financed or subsequently secured by $186,050,000 in mortgage loan payables. We paid $12,255,000 in acquisition fees to our advisor and its affiliates in connection with these acquisitions.
~~113~~

~~Grubb & Ellis Healthcare REIT, Inc.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Grubb & Ellis Healthcare REIT, Inc.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~


~~(4)~~		This property was acquired from an affiliate and as such an independent appraiser was engaged to value the property and the transaction was approved and determined by a majority of our board of directors, including a majority of our independent directors, as fair and reasonable to us, and at a price no greater than the cost of the investment to our affiliate or the property’s appraised value.year ended December 31, 2009 that are within portfolios we had previously acquired.


4.	Real Estate ~~Note Receivables,~~Notes Receivable, Net

On December 1, 2009, we acquired a real estate related asset in a note receivable secured by the Rush Medical Office Building, or the Rush Presbyterian Note Receivable, for a total purchase price of $37,135,000, plus closing costs. The note may be repaid in full on or within ninety days prior to the maturity date for a $4,000,000 cancellation of principal due. We acquired the real estate related asset from an unaffiliated third party. We financed the purchase price of the real estate related asset with funds raised through our initial offering. An acquisition fee of $555,000, or approximately 1.5% of the purchase price, was paid to our former advisor.

On December 31, 2008, we acquired a real estate related asset in four ~~note receivables~~notes receivable secured by two buildings located in Phoenix, Arizona and Berwyn, Illinois, or the Presidential Note Receivable, for a total purchase price of $15,000,000, plus closing costs. We acquired the real estate related asset from an unaffiliated third party. We financed the purchase price of the real estate related asset with funds raised through our initial offering. An acquisition fee of $225,000, or approximately 1.5% of the purchase price, was paid to our ~~advisor and its affiliate.~~former advisor.

130

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Real estate ~~note receivables,~~notes receivable, net consisted of the following as of December 31, ~~2008~~2010 and ~~2007:~~2009:


Property Name							December 31,						Contractual					December 31,
Location of Property	Property Type	Interest Rate			Maturity Date		2008			2007		Property Type	Interest Rate			Maturity Date		2010			2009

MacNeal Hospital Medical Office Building Berwyn, Illinois	Medical Office Building		5.95	%		11/01/11	$	7,500,000		$	—	Medical Office Building		5.95	%(1)		11/01/11	$	7,500,000		$	7,500,000
MacNeal Hospital Medical Office Building Berwyn, Illinois	Medical Office Building		5.95	%		11/01/11		7,500,000			—	Medical Office Building		5.95	%(1)		11/01/11		7,500,000			7,500,000
St. Luke’s Medical Office Building Phoenix, Arizona	Medical Office Building		5.85	%		11/01/11		3,750,000			—	Medical Office Building		5.85	%(2)		11/01/11		3,750,000			3,750,000
St. Luke’s Medical Office Building Phoenix, Arizona	Medical Office Building		5.85	%		11/01/11		1,250,000			—	Medical Office Building		5.85	%(2)		11/01/11		1,250,000			1,250,000
Rush Presbyterian Medical Office Building Oak Park, Illinois(b)												Medical Office Building		7.76	%(3)		12/01/14		41,150,000			41,150,000

Total real estate note receivable								20,000,000			—								61,150,000			61,150,000
Add: Note receivable closing costs								360,000			—
Less: discount								(5,000,000	)		—
Add: Note receivable closing costs, net																			540,000			788,000
Less: discount, net																			(4,599,000	)		(7,175,000	)

Real estate note receivables, net							$	15,360,000		$	—
Real estate notes receivable, net																		$	57,091,000		$	54,763,000


(1)		The effective interest rate associated with these notes as of December 31, 2010 is 7.93%.

(2)		The effective interest rate associated with these notes as of December 31, 2010 is 7.80%.

(3)		Represents an average contractual interest rate for the life of the note with an effective interest rate of 8.6%.

(4)		The closing costs and discount are amortized on a straight-line basis over the respective life, and impact the yield, of each note.

We monitor the credit quality of our real estate notes receivable portfolio on an ongoing basis by tracking possible credit quality indicators. As of December 31, 2010, all of our real estate notes receivable are current and we have not provided for any allowance for losses on notes receivable. Additionally, as of December 31, 2010 we have had no impairment with respect to our notes receivable. We made no significant purchases or sales of notes or other receivables during the year ended December 31, 2010.

~~115~~131

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	Identified Intangible Assets, Net

Identified intangible assets, net for our operating properties consisted of the following as of December 31, ~~2008~~2010 and ~~2007:~~2009:

December 31,
2008 2007

In place leases, net of accumulated amortization of $13,350,000 and $3,326,000 as of December 31, 2008 and 2007, respectively, (with a weighted average remaining life of 91 months and 79 months as of December 31, 2008 and 2007, respectively). $ 55,144,000 $ 25,540,000
Above market leases, net of accumulated amortization of $1,513,000 and $265,000 as of December 31, 2008 and 2007, respectively, (with a weighted average remaining life of 99 months and 119 months as of December 31, 2008 and 2007, respectively). 10,482,000 3,083,000
Tenant relationships, net of accumulated amortization of $6,479,000 and $1,527,000 as of December 31, 2008 and 2007, respectively, (with a weighted average remaining life of 140 months and 140 months as of December 31, 2008 and 2007, respectively). 64,881,000 31,184,000
Leasehold interests, net of accumulated amortization of $45,000 and $3,000 as of December 31, 2008 and 2007, respectively, (with a weighted average remaining life of 982 months and 1,071 months as of December 31, 2008 and 2007, respectively). 3,998,000 3,114,000
Master lease, net of accumulated amortization of $231,000 and $0 as of December 31, 2008 and 2007, respectively, (with a weighted average remaining life of 8 months and 0 months as of December 31, 2008 and 2007, respectively). 118,000 —

$ 134,623,000 $ 62,921,000

December 31,
2010 2009

In place leases, net of accumulated amortization of $42,361,000 and $25,452,000 as of December 31, 2010 and 2009, respectively, (with a weighted average remaining life of 154 months and 95 months as of December 31, 2010 and 2009, respectively). $ 122,682,000 $ 80,577,000
Above market leases, net of accumulated amortization of $5,971,000 and $3,233,000 as of December 31, 2010 and 2009, respectively, (with a weighted average remaining life of 89 months and 87 months as of December 31, 2010 and 2009, respectively). 17,943,000 11,831,000
Tenant relationships, net of accumulated amortization of $23,561,000 and $13,598,000 as of December 31, 2010 and 2009, respectively, (with a weighted average remaining life of 168 months and 150 months as of December 31, 2010 and 2009, respectively). 133,901,000 89,610,000
Leasehold interests, net of accumulated amortization of $526,000 and 103,000 as of December 31, 2010 and 2009, respectively, (with a weighted average remaining life of 855 months and 899 months as of December 31, 2010 and 2009, respectively). 26,061,000 21,204,000

$ 300,587,000 $ 203,222,000

For identified intangible assets, net associated with our properties classified as held for sale as of December 31, 2010, see Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations.

Amortization expense recorded on the identified intangible assets related to our operating properties for the years ended December 31, 2010, 2009, and 2008 was $32,042,000, $22,287,000, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006 was $18,229,000, $5,435,000 and $0,~~$17,902,000, respectively, which included ~~$1,369,000, $265,000~~$3,046,000, $1,889,000, and ~~$0,~~$1,369,000, respectively, of amortization recorded against rental income for above market leases and ~~$42,000, $3,000~~$423,000, $58,000, and ~~$0,~~42,000, respectively, of amortization recorded against rental expenses for above market leasehold interests.

Estimated amortization expense on the identified intangible assets associated with our operating properties as of December 31, ~~2008~~2010 for each of the next five years ending December 31 and thereafter is as follows:

Year Amount Amount

2009 $ 20,897,000
2010 $ 17,882,000
2011 $ 15,140,000 $ 42,442,000
2012 $ 13,802,000 36,184,000
2013 $ 11,897,000 30,771,000
2014 27,636,000
2015 24,610,000
Thereafter $ 55,005,000 138,944,000

Total $ 300,587,000

~~116~~132

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


6.	Other Assets, Net

Other assets, net for our operating properties consisted of the following as of December 31, ~~2008~~2010 and ~~2007:~~2009:

December 31,
2008 2007

Deferred financing costs, net of accumulated amortization of $1,461,000 and $170,000 as of December 31, 2008 and 2007, respectively $ 4,751,000 $ 2,334,000
Lease commissions, net of accumulated amortization of $99,000 and $7,000 as of December 31, 2008 and 2007, respectively 1,009,000 275,000
Lease inducements, net of accumulated amortization of $107,000 and $19,000 as of December 31, 2008 and 2007, respectively 753,000 773,000
Deferred rent receivable 3,928,000 534,000
Prepaid expenses and deposits 1,073,000 476,000

$ 11,514,000 $ 4,392,000

December 31,
2010 2009

Deferred financing costs, net of accumulated amortization of $5,015,000 and $3,346,000 as of December 31, 2010 and 2009, respectively $ 8,620,000 $ 3,281,000
Lease commissions, net of accumulated amortization of $1,132,000 and $427,000 as of December 31, 2010 and 2009, respectively 4,275,000 3,061,000
Lease inducements, net of accumulated amortization of $527,000 and $280,000 as of December 31, 2010 and 2009, respectively 1,284,000 1,215,000
Deferred rent receivable 17,422,000 9,380,000
Prepaid expenses, deposits, and other assets 8,951,000 4,938,000

Total $ 40,552,000 $ 21,875,000

Amortization expense recorded on deferred financing costs, lease commissions, lease inducements and note receivable closing costs for the years ended December 31, 2010, 2009, and 2008 was $3,163,000, $2,064,000, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006 was~~ $1,472,000, ~~$196,000 and $0,~~ respectively, of which ~~$1,291,000, $170,000~~$2,195,000, $1,885,000, and ~~$0,~~$1,291,000, respectively, of amortization was recorded as interest expense for deferred financing costs and ~~$88,000, $19,000~~$248,000, $153,000, and ~~$0,~~$88,000, respectively, of amortization was recorded against rental income for lease inducements and note receivable closing costs.

Estimated amortization expense on the deferred financing costs, lease commissions and lease inducements as of December 31, ~~2008~~2010 for each of the next five years ending December 31 and thereafter is as follows:

Year Amount Amount

2009 $ 2,152,000
2010 $ 1,803,000
2011 $ 860,000 $ 3,778,000
2012 $ 411,000 3,165,000
2013 $ 366,000 2,638,000
2014 1,264,000
2015 975,000
Thereafter $ 921,000 2,359,000

Total $ 14,179,000

7. Mortgage ~~Loan Payables,~~Loans Payable, Net ~~and Unsecured Note Payables to Affiliate~~

Mortgage ~~Loan Payables,~~Loans Payable, Net

Mortgage ~~loan payables~~loans payable were ~~$462,542,000~~$696,558,000 ($~~460,762,000, net of discount)~~699,526,000, including premium) and ~~$185,899,000~~$542,462,000 ($~~185,801,000,~~540,028,000, net of discount) as of December 31, ~~2008~~2010 and ~~2007,~~2009, respectively. As of December 31, ~~2008,~~2010, we had fixed and variable rate mortgage loans with effective interest rates ranging from ~~1.90%~~1.61% to 12.75% per annum and a weighted average effective interest rate of ~~4.07%~~4.95% per annum. As of December 31, ~~2008,~~2010, we had ~~$141,058,000~~$470,815,000 ($~~139,278,000, net of discount)~~473,783,000, including premium) of fixed rate debt, or ~~30.5%~~67.6% of mortgage ~~loan payables,~~loans payable, at a weighted average interest rate of ~~5.76%~~6.02% per annum and ~~$321,484,000~~$225,743,000 of variable rate debt, or ~~69.5%~~32.4% of mortgage ~~loan payables,~~loans payable, at a weighted average interest rate of ~~3.33%~~2.72% per annum. As of December 31, ~~2007,~~2009, we had fixed and variable rate mortgage loans with effective interest rates ranging from ~~5.52%~~1.58% to ~~6.78%~~12.75% per annum and a weighted average effective interest rate of ~~6.07%~~3.94% per annum. As of December 31, ~~2007,~~2009, we had ~~$90,919,000~~$209,858,000 ($~~90,821,000~~207,424,000, net of discount) of fixed rate debt, or ~~48.9%~~38.7% of mortgage ~~loan payables,~~loans payable, at a weighted average interest rate of ~~5.79%~~5.99% per annum and ~~$94,980,000~~$332,604,000 of variable rate debt, or ~~51.1%~~61.3% of mortgage ~~loan payables,~~loans payable, at a weighted average interest rate of ~~6.35%~~2.65% per annum.

~~117~~133

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We are required by the terms of the applicable loan documents to meet certain financial covenants, such as debt service coverage ratios, rent coverage ratios and reporting requirements. As of December 31, ~~2008 and 2007,~~2010, we believe that we were in compliance with all such covenants and ~~requirements.~~requirements on $638,558,000 of our mortgage loans payable and were making appropriate adjustments to comply with such covenants on $58,000,000 of our mortgage loans payable by maintaining a deposit of $12,000,000 within a restricted collateral account. As of December 31, 2009, we were in compliance with all such covenants and requirements on $457,262,000 of our mortgage loans payable and were making appropriate adjustments to comply with such covenants on $85,200,000 of our mortgage loans payable by depositing $22,676,000 into a restricted collateral account.

Mortgage ~~loan payables,~~loans payable, net consisted of the following as of December 31, ~~2008~~2010 and ~~2007:~~2009:

December 31,
Property/ Loan Interest Rate Maturity Date 2008 2007

Fixed Rate Debt:

Southpointe Office Parke and Epler Parke I 6.11 % 09/01/16 $ 9,146,000 $ 9,146,000
Crawfordsville Medical Office Park and Athens Surgery Center 6.12 % 10/01/16 4,264,000 4,264,000
The Gallery Professional Building 5.76 % 03/01/17 6,000,000 6,000,000
Lenox Office Park, Building G 5.88 % 02/01/17 12,000,000 12,000,000
Commons V Medical Office Building 5.54 % 06/11/17 9,939,000 10,000,000
Yorktown Medical Center and Shakerag Medical Center 5.52 % 05/11/17 13,530,000 13,530,000
Thunderbird Medical Plaza 5.67 % 06/11/17 14,000,000 14,000,000
Gwinnett Professional Center 5.88 % 01/01/14 5,604,000 5,699,000
St. Mary Physicians Center 5.80 % 09/04/09 8,280,000 8,280,000
Northmeadow Medical Center 5.99 % 12/01/14 7,866,000 8,000,000
Medical Porfolio 2 5.91 % 07/01/13 14,408,000 —
Renaissance Medical Centre 5.38 % 09/01/15 19,078,000 —
Renaissance Medical Centre 12.75 % 09/01/15 1,245,000 —
Medical Porfolio 4 5.50 % 06/01/19 6,771,000 —
Medical Porfolio 4 6.18 % 06/01/19 1,727,000 —
Marietta Health Park 5.11 % 11/01/15 7,200,000 —

141,058,000 90,919,000
Variable Rate Debt:

Senior Care Portfolio 1 4.75 %(a) 03/31/10 24,800,000 (b) —
1 and 4 Market Exchange 1.93 %(a) 09/30/10 14,500,000 (b) 14,500,000 (c)
East Florida Senior Care Portfolio 1.90 %(a) 10/01/10 29,917,000 (b) 30,384,000 (c)
Kokomo Medical Office Park 1.98 %(a) 11/30/10 8,300,000 (b) 8,300,000 (c)
Chesterfield Rehabilitation Center 3.54 %(a) 12/30/10 22,000,000 (b) 22,000,000 (c)
Park Place Office Park 2.13 %(a) 12/31/10 10,943,000 (b) 10,943,000 (c)
Highlands Ranch Medical Plaza 2.13 %(a) 12/31/10 8,853,000 (b) 8,853,000 (c)
Medical Portfolio 1 2.26 %(a) 02/28/11 21,340,000 (b) —
Fort Road Medical Building 3.09 %(a) 03/06/11 5,800,000 (b) —
Medical Portfolio 3 3.69 %(a) 06/26/11 58,000,000 (b) —
SouthCrest Medical Plaza 2.78 %(a) 06/30/11 12,870,000 (b) —
Wachovia Pool Loan(d) 4.65 %(a) 06/30/11 50,322,000 (b) —
Cypress Station Medical Office Building 2.26 %(a) 09/01/11 7,235,000 (b) —
Medical Portfolio 4 3.25 %(a) 09/24/11 21,400,000 (b) —
Decatur Medical Plaza 3.25 %(a) 09/26/11 7,900,000 (b) —
Mountain Empire Portfolio 3.97 %(a) 09/28/11 17,304,000 (b) —

321,484,000 94,980,000

Total fixed and variable debt 462,542,000 185,899,000

Less: discount (1,780,000 ) (98,000 )

Mortgage loan payables, net $ 460,762,000 $ 185,801,000

~~(a)~~ ~~Represents the interest rate in effect as of December 31, 2008.~~
~~(b)~~ As of December 31, 2008, we had variable rate mortgage loans on 20 of our properties with effective interest rates ranging from 1.90% to 4.75% per annum and a weighted average effective interest rate of 3.33% per annum. However, as of December 31, 2008, we had fixed rate interest rate swaps, ranging from

December 31,
Property Interest Rate Maturity Date 2010(a) 2009(b)

Fixed Rate Debt:

Southpointe Office Parke and Epler Parke I 6 .11% 09/01/16 $ 9,121,000 $ 9,146,000
Crawfordsville Medical Office Park and Athens Surgery Center 6 .12 10/01/16 4,256,000 4,264,000
The Gallery Professional Building 5 .76 03/01/17 6,000,000 6,000,000
Lenox Office Park, Building G 5 .88 02/01/17 12,000,000 12,000,000
Commons V Medical Office Building 5 .54 06/11/17 9,672,000 9,809,000
Yorktown Medical Center and Shakerag Medical Center 5 .52 05/11/17 13,434,000 13,530,000
Thunderbird Medical Plaza 5 .67 06/11/17 13,740,000 13,917,000
Gwinnett Professional Center 5 .88 01/01/14 5,417,000 5,509,000
Northmeadow Medical Center 5 .99 12/01/14 7,545,000 7,706,000
Medical Portfolio 2 5 .91 07/01/13 14,024,000 14,222,000
Renaissance Medical Centre 5 .38 09/01/15 18,464,000 18,767,000
Renaissance Medical Centre 12 .75 09/01/15 1,240,000 1,242,000
Medical Portfolio 4 5 .50 06/01/19 6,404,000 6,586,000
Medical Portfolio 4 6 .18 06/01/19 1,625,000 1,684,000
Marietta Health Park 5 .11 11/01/15 7,200,000 7,200,000
Hampden Place 5 .98 01/01/12 8,551,000 8,785,000
Greenville — Patewood 6 .18 01/01/16 35,609,000 36,000,000
Greenville — Greer 6 .00 02/01/17 8,413,000 —
Greenville — Memorial 6 .00 02/01/17 4,454,000 —
Greenville — MMC 6 .25 06/01/20 22,743,000 —
Sun City-Note B 6 .54 09/01/14 14,819,000 14,997,000
Sun City-Note C 6 .50 09/01/14 4,412,000 4,509,000
Sun City Note D 6 .98 09/01/14 13,839,000 13,985,000
King Street 5 .88 03/05/17 6,429,000 —
Wisconsin MOB II — Mequon 6 .25 07/10/17 9,952,000 —
Balfour Concord — Denton 7 .95 08/10/12 4,592,000 —
Pearland-Broadway 5 .57 09/01/12 2,361,000 —
7900 Fannin-Note A 7 .30 01/01/21 21,783,000 —
7900 Fannin-Note B 7 .68 01/01/16 819,000 —
Deaconess — Evansville 4 .90 08/06/15 21,151,000 —
Overlook 6 .00 11/05/16 5,408,000 —
Triad 5 .60 09/01/22 11,961,000 —
Santa Fe — Building 1640 5 .57 07/01/15 3,555,000 —
Rendina — Wellington 5 .97 11/21/16 8,296,000 —
Rendina — Gateway 6 .49 08/13/18 10,596,000 —
Columbia — Patroon Creek Note A 6 .10 06/01/16 23,123,000 —
Columbia — Patroon Creek Note B 6 .10 06/01/16 890,000 —
Columbia — 1092 Madison 6 .25 01/30/18 2,006,000 —
Columbia — FL Orthopaedic 5 .45 06/30/13 7,041,000 —
Columbia — Capital Region Health Park 6 .51 06/30/12 22,309,000 —
Columbia — Putnam 5 .33 04/30/15 19,329,000 —
Columbia — CDPHP 5 .40 05/15/16 21,182,000 —
Phoenix — Estrella 6 .26 08/01/17 20,695,000
Phoenix — MOB IV 6 .01 06/11/17 4,355,000 —

Total fixed rate debt 470,815,000 209,858,000

~~118~~134

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31,
Property Interest Rate Maturity Date 2010(a) 2009(b)

Variable Rate Debt:

Senior Care Portfolio 1 4 .75%(c) 03/31/10 — (e) 24,800,000
1 and 4 Market Exchange 1 .61(c) 09/30/10 — (e) 14,500,000
East Florida Senior Care Portfolio 1 .66(c) 10/01/10 — (e) 29,451,000
Kokomo Medical Office Park 1 .66(c) 11/30/10 — (e) 8,300,000
Chesterfield Rehabilitation Center 1 .91(c) 12/30/11 22,000,000 22,000,000
Park Place Office Park 1 .81(c) 12/31/10 10,943,000 (g) 10,943,000
Highlands Ranch Medical Plaza 1 .81(c) 12/31/10 8,853,000 (f) 8,853,000
Medical Portfolio 1 1 .94(c) 02/28/11 19,580,000 (f) 20,460,000
Fort Road Medical Building 1 .91(c) 03/06/11 — (e) 5,800,000
Medical Portfolio 3 2 .51(c) 06/26/11 58,000,000 58,000,000
SouthCrest Medical Plaza 2 .46(c) 06/30/11 12,870,000 (f) 12,870,000
Wachovia Pool Loans(d) 4 .65(c) 06/30/11 48,666,000 (f) 49,696,000
Cypress Station Medical Office Building 2 .01(c) 09/01/11 7,043,000 7,131,000
Medical Portfolio 4 2 .41(c) 09/24/11 — (e) 21,400,000
Decatur Medical Plaza 2 .26(c) 09/26/11 7,900,000 7,900,000
Mountain Empire Portfolio 2 .36(c) 09/28/11 18,408,000 18,882,000
Sun City-Sun 1 1 .76(c) 12/31/14 2,000,000 2,000,000
Sun City-Sun 2 1 .76(c) 12/31/14 9,480,000 9,618,000

Total variable rate debt 225,743,000 332,604,000

Total fixed and variable debt 696,558,000 542,462,000

Add: Net premium 2,968,000 —
Less: Net discount — (2,434,000 )

Mortgage loans payable, net $ 699,526,000 $ 540,028,000

(a) As of December 31, 2010, we had variable rate mortgage loans on 15 of our properties with effective interest rates ranging from 1.76% to 4.65% per annum and a weighted average effective interest rate of 2.72% per annum. However, as of December 31, 2010, we had fixed rate interest rate swaps and caps on our Medical Portfolio 1, Decatur, Mountain Empire, and Sun City-Sun 1 variable rate mortgage loans payable, thereby effectively fixing our interest rates on those mortgage loans payable at 5.23%, 5.16%, 5.87%, and 2.00%, respectively.
(b) As of December 31, 2009, we had variable rate mortgage loans on 22 of our properties with effective interest rates ranging from 1.58% to 4.75% per annum and a weighted average effective interest rate of 2.65% per annum. However, as of December 31, 2009, we had fixed rate interest rate swaps, ranging from 4.51% to 6.02%, on our variable rate mortgage ~~loan payables~~loans payable on 20 of our properties, thereby effectively fixing our interest rate on those mortgage ~~loan payables.~~loans payable.

(c) ~~As of December 31, 2007, we had variable rate mortgage loans on six of our properties with effective interest rates ranging from 6.15% to 6.78% per annum and a weighted average effective~~Represents the interest rate ~~of 6.35% per annum. However,~~in effect as of December 31, 2007, we had fixed rate interest rate swaps, ranging from 5.52% to 6.02%, on all of our variable rate mortgage loan payables, thereby effectively fixing our interest rate on those mortgage loan payables.2010.

(d) We have a mortgage loan in the principal amount of ~~$50,322,000~~$48,666,000 and $49,696,000, as of December 31, 2010 and December 31, 2009, respectively, secured by Epler Parke Building B, 5995 Plaza Drive, Nutfield Professional Center, Medical Portfolio 2 and Academy Medical Center.
(e) Represent loan balances that have matured or that we have paid off during the year ended December 31, 2010.
(f) Represent bank loans, the aggregate principal balance of which as of December 31, 2010 was $89,969,000, which were refinanced using the proceeds of our $125,500,000 senior secured real estate term loan. We closed on this term loan with Wells Fargo Bank, N.A., on February 1, 2011. See Note 22, Subsequent Events, for additional discussion of this new financing.
(g) Represents a bank loan, the principal balance of which as of December 31, 2010 was $10,943,000, which was paid off using the proceeds of our $125,500,000 senior secured real estate term loan. See Note 22, Subsequent Events, for additional discussion of this new financing.
135

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The principal payments due on our mortgage ~~loan payables~~loans payable as of December 31, ~~2008~~2010 for each of the next five years ending December 31 and thereafter is as follows:


Year	Amount		Amount

2009	$	11,900,000
2010	$	123,410,000
2011	$	199,029,000	$	222,575,000
2012	$	2,047,000		44,383,000
2013	$	15,512,000		27,856,000
2014				50,083,000
2015				80,527,000
Thereafter	$	110,644,000		271,134,000

Total			$	696,558,000

The table above does not reflect all available extension options. Of the amounts maturing in ~~2010, $64,596,000 have~~2011, $152,887,000 has two one year extensions available and ~~$54,717,000 have~~$22,000,000 has a one year extension available. ~~Of the amounts maturing~~At present, there are no extension options associated with our debt that matures in ~~2011, $180,831,000 have two one year extensions available.~~

~~Unsecured Note Payables to Affiliate~~

For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we entered into, and subsequently paid down, the following unsecured note payables with NNN Realty Advisors, evidenced by unsecured promissory notes:

Date of Note
Amount Maturity Date Interest Rate Date Paid in Full

06/30/08 $ 6,000,000 12/30/14 4.96 % 07/07/08
09/05/07 $ 6,100,000 03/05/08 6.86 % 09/11/07
08/30/07 $ 1,300,000 03/01/08 6.85 % 09/04/07
06/08/07 $ 4,000,000 12/08/07 6.82 % 06/18/07
03/09/07 $ 1,000,000 09/09/07 6.84 % 03/28/07
01/22/07 $ 7,500,000 07/22/07 6.86 % 03/28/07
The unsecured note payables to affiliate bore interest at a fixed rate and required monthly interest-only payments for the terms of the unsecured note payables to affiliate. As of December 31, 2008 and 2007, there were no amounts outstanding under the unsecured note payables to affiliate.
Because these loans were related party loans, the terms of the unsecured note payables to affiliate were approved by our board of directors, including a majority of our independent directors, and deemed fair, competitive and commercially reasonable by our board of directors.2012.

8. Derivative Financial Instruments

~~SFAS No. 133,~~ASC 815,~~Accounting for Derivative Instruments~~Derivatives and Hedging ~~Activities~~, or ~~SFAS No. 133, as amended and interpreted,~~ASC 815, establishes accounting and reporting standards for derivative instruments, including

~~119~~

~~Grubb & Ellis Healthcare REIT, Inc.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

certain derivative instruments embedded in other contracts, and for hedging activities. We utilize derivatives such as fixed interest rate swaps and interest rate caps to add stability to interest expense and to manage our exposure to interest rate movements. Consistent with ~~SFAS No. 133~~ASC 815, we record derivative financial instruments on our accompanying consolidated balance sheets as either an asset or a liability measured at fair value. ~~SFAS No. 133~~ASC 815 permits special hedge accounting if certain requirements are met. Hedge accounting allows for gains and losses on derivatives designated as hedges to be offset by the change in value of the hedged item(s) or to be deferred in other comprehensive income.

As of December 31, ~~2008~~2010 and ~~2007,~~December 31, 2009, no derivatives were designated as fair value hedges or cash flow hedges. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, but do not meet the strict hedge accounting requirements of ~~SFAS No. 133.~~ASC 815. Changes in the fair value of derivative financial instruments are recorded in ~~loss~~the net gain on derivative financial instruments in our accompanying consolidated statements of operations.

On November 3, 2010, we entered into an interest rate swap with Wells Fargo Bank, N.A. as counterparty for a notional amount of $75,000,000. The interest rate swap is secured by the pool of assets collateralizing the $125,500,000 secured term loan with Wells Fargo Bank, N.A., which we obtained on February 1, 2011 (see Note 22, Subsequent Events, for further discussion of this term loan). The effective date of the swap is February 1, 2011, and its termination date of December 31, 2013 coincides with the initial term of the secured term loan. The swap will fix the LIBOR portion of our monthly interest payments at 1.0725%, thereby effectively fixing our all-in interest rate on the secured term loan at 3.4225%. As this instrument is a forward swap with a trade date of November 3, 2010, its fair value as of December 31, 2010, and the associated impact to our consolidated statement of operations for the year ended December 31, 2010 are presented in the tables below.

During the year ended December 31, 2010, eleven of our interest rate swap derivative instruments with an aggregate notional amount of $246,980,000 reached maturity and two of our interest rate swap derivative instruments with an aggregate notional amount of $27,200,000 were terminated early in conjunction with our prepayment of certain loan balances. In connection with our prepayment of these loan balances, we paid approximately $793,000 to unwind the associated interest rate swaps.

136

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table lists the derivative financial instruments held by us as of December 31, ~~2008:~~2010:


Notional Amount	Notional Amount	Index	Rate			Fair Value			Instrument		Maturity		Notional Amount	Index	Rate		Fair Value			Instrument	Maturity

$	14,500,000	LIBOR		5.97	%	$	(870,000	)		Swap		09/28/10	19,507,000	LIBOR		5.23		(109,000	)	Swap		01/31/11
$	8,300,000	LIBOR		5.86	%	$	(512,000	)		Swap		11/30/10
$	8,853,000	LIBOR		5.52	%	$	(480,000	)		Swap		12/31/10
$	10,943,000	LIBOR		5.52	%	$	(593,000	)		Swap		12/31/10
$	22,000,000	LIBOR		5.59	%	$	(1,167,000	)		Swap		12/30/10
$	29,917,000	LIBOR		6.02	%	$	(1,776,000	)		Swap		10/01/10
$	21,340,000	LIBOR		5.23	%	$	(976,000	)		Swap		01/31/11
$	5,800,000	LIBOR		4.70	%	$	(221,000	)		Swap		03/06/11
$	7,235,000	LIBOR		4.51	%	$	(168,000	)		Swap		05/03/10
$	24,800,000	LIBOR		4.85	%	$	(554,000	)		Swap		03/31/10
$	50,322,000	LIBOR		5.60	%	$	(1,797,000	)		Swap		06/30/10
$	12,870,000	LIBOR		5.65	%	$	(460,000	)		Swap		06/30/10
$	58,000,000	LIBOR		5.59	%	$	(1,972,000	)		Swap		06/26/10
$	21,400,000	LIBOR		5.27	%	$	(936,000	)		Swap		09/23/11
$	7,900,000	LIBOR		5.16	%	$	(355,000	)		Swap		09/26/11
$	17,304,000	LIBOR		5.87	%	$	(1,361,000	)		Swap		09/28/13
													7,900,000	LIBOR		5.16		(185,000	)	Swap		09/26/11
													16,912,000	LIBOR		5.87		(1,233,000	)	Swap		09/28/13
													75,000,000	LIBOR		3.42		297,000		Swap		12/31/13
													9,480,000	LIBOR		2.00		383,000		Cap		12/31/14

The following table lists the derivative financial instruments held by us as of December 31, ~~2007:~~2009:


Notional Amount	Notional Amount	Index	Rate			Fair Value			Instrument		Maturity		Notional Amount	Index	Rate			Fair Value			Instrument	Maturity

$	14,500,000	LIBOR		5.97	%	$	(306,000	)		Swap		09/28/10	14,500,000	LIBOR		5.97	%	$	(505,000	)	Swap		09/28/10
$	8,300,000	LIBOR		5.86	%	$	(164,000	)		Swap		11/30/10
$	8,853,000	LIBOR		5.52	%	$	(23,000	)		Swap		12/31/10
$	10,943,000	LIBOR		5.52	%	$	(65,000	)		Swap		12/31/10
$	22,000,000	LIBOR		5.59	%	$	(117,000	)		Swap		12/30/10
$	30,384,000	LIBOR		6.02	%	$	(702,000	)		Swap		10/01/10
													8,300,000	LIBOR		5.86			(327,000	)	Swap		11/30/10
													8,853,000	LIBOR		5.52			(326,000	)	Swap		12/31/10
													10,943,000	LIBOR		5.52			(403,000	)	Swap		12/31/10
													22,000,000	LIBOR		5.59			(759,000	)	Swap		12/30/10
													29,101,000	LIBOR		6.02			(998,000	)	Swap		10/01/10
													22,000,000	LIBOR		5.23			(688,000	)	Swap		01/31/11
													5,800,000	LIBOR		4.70			(173,000	)	Swap		03/06/11
													7,292,000	LIBOR		4.51			(75,000	)	Swap		05/03/10
													24,800,000	LIBOR		4.85			(206,000	)	Swap		03/31/10
													50,321,000	LIBOR		5.60			(922,000	)	Swap		06/30/10
													12,870,000	LIBOR		5.65			(236,000	)	Swap		06/30/10
													58,000,000	LIBOR		5.59			(1,016,000	)	Swap		06/26/10
													21,400,000	LIBOR		5.27			(782,000	)	Swap		09/23/11
													7,900,000	LIBOR		5.16			(296,000	)	Swap		09/26/11
													17,304,000	LIBOR		5.87			(913,000	)	Swap		09/28/13
													9,618,000	LIBOR		2.00			890,000		Cap		12/31/14
																					Participation
													54,000,000	N/A		N/A			1,051,000		Interest(a)		12/01/29


(a)		During the year ended December 31, 2010, we reevaluated a feature within the Rush Presbyterian Note Receivable which had been disclosed in the 2009 Annual Report onForm 10-K as a derivative financial instrument. Based on this reevaluation, we determined that this feature, by its nature, qualifies for a scope exception under ASC 815,Derivatives and Hedging, and thus may be excluded from classification as a derivative financial instrument. As such, we have prospectively corrected our fair value and derivative instrument disclosures with respect to this feature.

As of December 31, ~~2008~~2010 and ~~2007,~~December 31, 2009, the fair value of our derivative financial instruments was ~~$(14,198,000) and $(1,377,000), respectively.~~as follows:

Asset Derivatives Liability Derivatives
Derivatives Not
December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009
Designated as
Balance Sheet
Balance Sheet
Balance Sheet
Balance Sheet

Hedging Instruments:
Location Fair Value Location Fair Value Location Fair Value Location Fair Value

Interest Rate Swaps Other Assets $ 297,000 Other Assets $ — Derivative Financial Instruments $ 1,527,000 Derivative Financial Instruments $ 8,625,000

Interest Rate Cap Other Assets $ 383,000 Other Assets $ 890,000
For the years ended December 31, 2008 and 2007 and for the period April 28, 2006 (Date of Inception) through December 31, 2006, we recorded $12,821,000, $1,377,000 and $0, respectively, as an increase to

~~120~~137

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the year ended December 31, 2010 and 2009, the derivative financial instruments associated with our operating properties had the following effect on our consolidated statements of operations:

Recognized
Derivatives Not Designated
Location of Gain (Loss)
For the Year Ended
as Hedging Instruments Under:
Recognized: December 31, 2010 December 31, 2009 December 31, 2008

Interest Rate Swaps Gain (loss) on derivative instruments $ 6,461,000 $ 5,279,000 $ (12,436,000 )
Interest Rate Cap Gain (loss) on derivative instruments $ (507,000 ) $ — $ —
We have agreements with each of our interest ~~expense~~rate swap derivative counterparties that contain a provision whereby if we default on certain of our unsecured indebtedness, then we could also be declared in default on our interest rate swap derivative obligations resulting in an acceleration of payment. In addition, we are exposed to credit risk in the event of non-performance by our derivative counterparties. We believe we mitigate our credit risk by entering into agreements with credit-worthy counterparties. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, our fair value of interest rate swap derivative liabilities is adjusted to reflect the impact of our credit quality. As of December 31, 2010 and December 31, 2009, there have been no termination events or events of default related to the ~~change in the fair value of our derivative financial instruments. See Note 16, Fair Value Measurements for a further discussion of the fair value of our derivative financial instruments.~~interest rate swaps.

9. ~~Line of~~Revolving Credit Facility

~~We have~~On September 10, 2007, we entered into a loan agreement, or the Loan Agreement, ~~with LaSalle and KeyBank,~~ in which we ~~obtained~~had a secured revolving ~~line of~~ credit ~~with LaSalle and KeyBank~~facility in an aggregate maximum principal amount of $50,000,000. A modification to this agreement executed on December 12, 2007, increased the aggregate maximum principal amount to $80,000,000. We voluntarily closed this credit facility on August 19, 2010. We did not borrow on this credit facility during the years ended December 31, 2010 or 2009. Additionally, we were in compliance with all covenants and requirements associated with this facility, all of which were customary for facilities and transactions of this type, as of August 19, 2010, the date of this credit facility’s closure, and December 31, 2009.
On November 22, 2010, we and Healthcare Trust of America Holdings, LP, our operating partnership, entered into a credit agreement, or the credit agreement, with JPMorgan Chase Bank, N.A., as administrative agent, or JPMorgan, Wells Fargo Bank, N.A. and Deutsche Bank Securities Inc., as syndication agents, U.S. Bank National Association and Fifth Third Bank, as documentation agents, and the lenders named therein to obtain an unsecured revolving credit facility in an aggregate maximum principal amount of $275,000,000, or the unsecured credit facility, subject to increase as described below.
The proceeds of loans made under the credit agreement may be used for our working capital needs and general corporate purposes, including permitted acquisitions and repayment of debt. In addition to loans, our operating partnership may obtain up to $27,500,000 of the credit available under the credit agreement in the form of letters of credit or up to $15,000,000 of the credit available under the credit agreement in the form of swingline loans. The credit facility matures in November 2013.
The actual amount of credit available under the ~~Loan Agreement~~credit agreement is a function of certain ~~loan to cost, loan to value~~loan-to-cost,loan-to-value and debt service coverage ratios contained in the ~~Loan Agreement. The~~credit agreement. Subject to the terms of the credit agreement, the maximum principal amount of the ~~Loan Agreement~~credit agreement may be increased by up to ~~$120,000,000~~an additional $225,000,000, for a total principal amount of $500,000,000, subject to ~~the terms of the Loan Agreement. Also,~~such additional ~~financial institutions may become~~financing being offered and provided by existing lenders or new lenders under the ~~Loan Agreement. The initial maturity date~~credit agreement.

138

Healthcare Trust of ~~the Loan Agreement is September 10, 2010, which may be extended by one~~America, Inc.

~~12-month~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) ~~period subject to satisfaction of certain conditions, including payment of an extension fee equal to 0.20% of the principal balance of loans then outstanding.~~

At the option of our ~~option,~~operating partnership, loans under the ~~Loan Agreement~~credit agreement bear interest at per annum rates equal to: ~~(1)~~


	•	(i) the greatest of: (x) the prime rate publicly announced by JPMorgan, (y) the Federal Funds effective rate plus 0.5% and (z) the Adjusted LIBO Rate plus 1.0%, plus (ii) a margin ranging from 1.50% to 2.50% based on our operating partnership’s total leverage ratio, which we refer to as ABR loans; or

	•	(i) the Adjusted LIBO Rate plus (ii) a margin ranging from 2.50% to 3.50% based on our operating partnership’s total leverage ratio, which we refer to as Eurodollar loans.

Accrued interest under the ~~London Interbank Offered Rate, or LIBOR, plus~~credit agreement is payable quarterly and at maturity. If our operating partnership obtains a credit rating, the margin for ABR loans will be adjusted so that it ranges from 0.85% to 1.95%, and the margin for Eurodollar loans will be adjusted so that it ranges from 1.85% to 2.95%, in each case based on our operating partnership’s credit rating.

Our operating partnership is required to pay a fee on the unused portion of ~~1.50%, (2)~~ the lenders’ commitments under the credit agreement at a per annum rate equal to 0.375% if the average daily used amount is greater than 50% of ~~LaSalle’s prime rate or~~ the ~~Federal Funds Rate (as defined~~commitments and 0.50% if the average daily used amount is less than 50% of the commitments, payable quarterly in arrears. In the event our operating partnership obtains a credit rating, our operating partnership is required to pay a facility fee on the total commitments ranging from 0.40% to 0.55% but no longer will be required to pay a fee on unused commitments.

Our operating partnership’s obligations with respect to the credit agreement are guaranteed by us and by certain subsidiaries of our operating partnership, as identified in the ~~Loan Agreement) plus 0.50%, or (3) a combination of these rates.~~credit agreement.

The ~~Loan Agreement~~credit agreement contains various affirmative and negative covenants that we believe are ~~customary~~usual for facilities and transactions of this type, including limitations on the incurrence of debt by us, our operating partnership and ~~our~~its subsidiaries that own ~~properties that serve as collateral for the Loan Agreement,~~unencumbered assets, limitations on the nature of our operating partnership’s business, and limitations on distributions by our operating partnership and its subsidiaries that own ~~properties that serve as collateral~~unencumbered assets. Pursuant to the credit agreement, beginning with the quarter ending September 30, 2011, our operating partnership may not make distribution payments to us in excess of the greater of: (i) 100% of its normalized adjusted FFO (as defined in the credit agreement) for the ~~Loan Agreement.~~ period of four quarters ending September 30, 2011 and December 31, 2011, (ii) 95% of normalized adjusted FFO for the period of four quarters ending March 31, 2012 and (iii) 90% of normalized adjusted FFO for the period of four quarters ending June 30, 2012 and thereafter.

The ~~Loan Agreement~~credit agreement also imposes ~~the following~~a number of financial covenants on us and our operating partnership, ~~as applicable: (1)~~including: a maximum ratio of total indebtedness to total asset value; a maximum ratio of secured indebtedness to total asset value; a maximum ratio of recourse secured indebtedness to total asset value; a minimum ratio of ~~operating cash flow~~EBITDA to ~~interest expense, (2)~~fixed charges; a minimum tangible net worth covenant; a maximum ratio of unsecured indebtedness to unencumbered asset value; a minimum ratio of unencumbered net operating ~~cash flow~~income to ~~fixed charges, (3)~~unsecured indebtedness; and a ~~maximum~~minimum ratio of ~~liabilities to~~unencumbered asset value ~~(4) a maximum distribution covenant and (5) a minimum net worth covenant, all~~to total commitments. As of ~~which are defined~~December 31, 2010, we were in ~~the Loan Agreement.~~ compliance with these covenants.

In addition, the ~~Loan Agreement~~credit agreement includes events of default that we believe are ~~customary~~usual for facilities and transactions of this ~~type. As of December 31, 2008 and 2007,~~type, including restricting us from making distributions to our stockholders in the event we ~~were~~are in ~~compliance with all such covenants and requirements.~~default under the credit agreement, except to the extent necessary for us to maintain our REIT status.

As of December 31, ~~2008~~2010, we had drawn $7,000,000 on our new unsecured revolving credit facility in order to fund the acquisition of operating properties. See Note 22, Subsequent Events, for information regarding our repayment of this amount in full on January 31, 2011.

In connection with the entry into the credit agreement, a temporary credit agreement entered into on October 13, 2010, by and ~~2007, borrowings~~among us, our operating partnership, JPMorgan, as administrative agent, Wells

139

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fargo Bank, N.A. and Deutsche Bank Securities Inc., as syndication agents, and the lenders named therein, to obtain an unsecured revolving credit facility in an aggregate maximum principal amount of $200,000,000 was terminated, and, in connection with such termination, we paid commitment fees of approximately $111,000. There were no amounts outstanding under ~~our secured revolving line~~such credit facility at the time of ~~credit with LaSalle and KeyBank totaled $0 and $51,801,000, respectively. Borrowings as of December 31, 2007 bore interest at a weighted average interest rate of 6.93% per annum.~~its termination.


10.	Identified Intangible Liabilities, Net

Identified intangible liabilities, net for our operating properties consisted of the following as of December 31, ~~2008~~2010 and ~~2007:~~2009:

December 31,
2008 2007

Below market leases, net of accumulated amortization of $1,400,000 and $245,000 as of December 31, 2008 and 2007, respectively, (with a weighted average remaining life of 113 months and 55 months as of December 31, 2008 and 2007, respectively). $ 8,128,000 $ 1,639,000

$ 8,128,000 $ 1,639,000

December 31,
2010 2009

Below market leases, net of accumulated amortization of $4,550,000 and $3,033,000 as of December 31, 2010 and 2009, respectively, (with a weighted average remaining life of 213 months and 94 months as of December 31, 2010 and 2009, respectively). $ 9,271,000 $ 6,954,000
Below market leasehold interests, net of accumulated amortization of $40,000 and $0 as of December 31, 2010 and 2009, respectively, (with a weighted average remaining life of 738 months and 0 months as of December 31, 2010 and 2009, respectively). $ 3,788,000 $ —

$ 13,059,000 $ 6,954,000

For identified intangible liabilities, net associated with our properties classified as held for sale as of December 31, 2010, see Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations.

Amortization expense recorded on the identified intangible liabilities attributable to our operating properties for the years ended December 31, 2010, 2009 and 2008 was $1,669,000, $1,715,000, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006 was $1,280,000, $255,000 and $0,~~$1,230,000, respectively, which is recorded to rental income in our accompanying consolidated statements of operations.

~~121~~

~~Grubb & Ellis Healthcare REIT, Inc.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

Estimated amortization expense on the identified intangible liabilities associated with our operating properties as of December 31, ~~2008~~2010 for each of the next five years ending December 31 and thereafter is as follows:


Year	Amount		Amount

2009	$	1,751,000
2010	$	1,441,000
2011	$	1,013,000	$	1,624,000
2012	$	841,000	$	1,359,000
2013	$	704,000	$	1,152,000
2014			$	760,000
2015			$	601,000
Thereafter	$	2,378,000	$	7,563,000

Total			$	13,059,000


11.	Commitments and Contingencies

Litigation

We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.

140

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Environmental Matters

We follow the policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Other Organizational and Offering Expenses

~~Our other~~As a self-managed company, we are responsible for all of our current and future organizational and offering expenses, ~~are being paid by~~including those incurred in connection with our ~~advisor or its affiliates on our behalf.~~follow-on offering. These other organizational and offering expenses include all expenses (other than selling commissions and ~~the marketing support fee~~dealer manager fees, which generally represent 7.0% and ~~2.5%~~3.0% of our gross offering proceeds, respectively) ~~to be~~ paid by us in connection with our follow-on offering. These expenses will only become our liability to the extent other organizational and offering expenses do not exceed 1.5% of the gross proceeds of our offering. As of December 31, 2008, our advisor and its affiliates have not incurred other organizational and offering expenses that exceed 1.5% of the gross proceeds of our offering. As of December 31, 2007, our advisor and its affiliates had incurred other organizational and offering expenses of $1,086,000 in excess of 1.5% of the gross proceeds of our offering, and therefore these expenses are not recorded in our accompanying consolidated financial statements as of December 31, 2007, however, these expenses were recorded and have been paid in 2008. In the future, to the extent our advisor or its affiliates incur additional other organizational and offering expenses in excess of 1.5% of the gross proceeds of our offering, these amounts may become our liability. See Note 12, Related Party Transactions — Offering Stage, for a further discussion of other organizational and offering expenses.

~~Chesterfield Rehabilitation Center~~Tax Status

~~The operating~~We intend to request a closing agreement with ~~BD St.~~ ~~Louis Development, LLC, or BD St. Louis,~~the IRS granting us relief for ~~G&E Healthcare REIT/Duke Chesterfield Rehab, LLC,~~any preferential dividends we may have paid. Preferential dividends cannot be used to satisfy the REIT distribution requirements. In 2007, 2008 and through July 2009, shares of common stock issued pursuant to our DRIP were treated as issued as of the first day following the close of the month for which the distributions were declared, and not on the date that the cash distributions were paid to stockholders not participating in our DRIP. Because we declare distributions on a daily basis, including with respect to shares of common stock issued pursuant to our DRIP, the IRS could take the position that distributions paid by us during these periods were preferential. In addition, during the six months beginning September 2009 through February 2010, we paid certain IRA custodial fees with respect to IRA accounts that invested in our shares. The payment of such amounts could also be treated as dividend distributions to the IRAs, and therefore could result in our being treated as having made additional preferential dividends to our stockholders.

We cannot assure you that the IRS will accept our proposal for a closing agreement. Even if the IRS accepts our proposal, we may be required to pay a penalty if the IRS were to view the prior operation of our DRIP or the ~~JV Company, which owns Chesterfield Rehabilitation Center, provides~~payment of such fees as preferential dividends. We cannot predict whether such a penalty would be imposed or, if so, the amount of the penalty. If the IRS does not agree to our proposal for a closing agreement and treats the foregoing amounts as preferential dividends, we would likely rely on the deficiency dividend provisions of the Code to address our continued qualification as a REIT and to satisfy our distribution requirements. We estimate the range of loss that is reasonably possible is from ~~January 1, 2010~~$60,000 to ~~March 31, 2010, our operating partnership has the right and option to purchase the 20.0% membership interest in the JV Company held by BD St. Louis at a fixed price of~~

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~~$3,900,000. We anticipate exercising our right to purchase the 20.0% membership interest. However,~~$150,000 if we ~~do not exercise that right,~~obtain the ~~operating~~closing agreement. If we cannot obtain a closing agreement, ~~provides that from January 1, 2011~~we would likely pursue the deficiency dividend procedure which would require us to ~~March 31, 2011, BD St. Louis has the right and option to sell all, but not less than all,~~pay a penalty of its 20.0% membership interest in the JV Company to our operating partnership at the greater of $10.00 or the fair market value as determined in accordance with the operating agreement. As of December 31, 2008 the estimated redemption value is $3,133,000.approximately $500,000.

Other

Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In our opinion, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.


12.	Related Party Transactions

~~Fees and Expenses Paid to Affiliates~~Transition: Self-Management

~~Some of our executive officers are also executive officers and employeesand/or~~ ~~holders of a direct or indirect interest in our advisor, our sponsor, Grubb & Ellis Realty Investors, or other affiliated entities.~~ Upon the effectiveness of our initial offering on September 20, 2006, we entered into the Advisory Agreement with our former advisor, and Grubb & Ellis Realty Investors, LLC, or GERI, and a dealer manager

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agreement ~~or the Dealer Manager Agreement,~~ with Grubb & Ellis Securities, Inc., ~~or Grubb & Ellis Securities, or~~ our former dealer manager. These agreements ~~entitle~~entitled our former advisor, our former dealer manager and their affiliates to specified compensation for certain services as well as reimbursement of certain expenses.

OnIn 2008, we announced our plans to transition to a self-managed company. As part of our transition to self management, on November 14, 2008, we amended and restated the Advisory Agreement ~~with our advisor and Grubb & Ellis Realty Investors. The Advisory Agreement, as amended November 14, 2008, was~~ effective as of October 24, 2008, to reduce acquisition and ~~expires~~asset management fees, eliminate the need to pay disposition or internalization fees, to set the framework for our transition to self-management and to create an enterprise value for our company. On November 14, 2008, we also amended the partnership agreement for our operating partnership. Pursuant to the terms of the partnership agreement as amended, our former advisor had the ability to elect to defer its right, if applicable, to receive a subordinated distribution from our operating partnership after the termination or expiration of the advisory agreement upon certain liquidity events if specified stockholder return thresholds were met. This right was subject to a number of conditions and had been the subject of dispute between the parties, as well as monetary and other claims.

On May 21, 2009, we provided notice to Grubb & Ellis Securities that we would proceed with a dealer manager transition pursuant to which Grubb & Ellis Securities ceased to serve as our dealer manager for our initial offering at the end of the day on August 28, 2009. Commencing August 29, 2009, RCS, an unaffiliated third party, assumed the role of dealer manager for the remainder of the offering period. The Advisory Agreement expired in accordance with its terms on September 20, 2009.

On October 18, 2010, we and our former advisor and certain of its affiliates entered into a redemption, termination and release agreement, or the Redemption Agreement. Pursuant to the Redemption Agreement, we purchased the limited partner interest, including all rights with respect to a subordinated distribution upon the occurrence of specified liquidity events and other rights held by our former advisor in our operating partnership, for $8,000,000, of which $7,285,000 is reflected in our Consolidated Statement of Operations for the year ended December 31, 2010. In addition, pursuant to the Redemption Agreement the parties resolved all monetary claims and other matters between them, and entered into certain mutual and other releases of the parties. We believe that the execution of the Redemption Agreement represents the final stage of our successful separation from Grubb & Ellis and that the Redemption Agreement further positions us to take advantage of potential strategic opportunities in the future.

Fees and Expenses Paid to Former Affiliates

In the aggregate, for the years ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$82,622,000, $38,283,000 and $312,000, respectively,~~fees to our former advisor orand its affiliates ~~as detailed below.~~of $0, $71,194,000, and $82,622,000, respectively.

Offering Stage

Selling Commissions

~~Our~~Prior to the transition of the dealer manager ~~receives~~function to RCS, our former dealer manager received selling commissions of up to 7.0% of the gross offering proceeds from the sale of shares of our common stock in our initial offering other than shares of our common stock sold pursuant to the DRIP. Our former dealer manager ~~may re-allow~~re-allowed all or a portion of these fees to participating broker-dealers. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$36,307,000, $14,568,000~~$0, $35,337,000, and ~~$0,~~$36,307,000, respectively, in selling commissions to our former dealer manager. Such selling commissions are charged to stockholders’ equity ~~(deficit)~~ as such amounts ~~are~~were reimbursed to our former dealer manager from the gross proceeds of our initial offering.

Marketing Support ~~Fee~~Fees and Due Diligence Expense Reimbursements

Our former dealer manager ~~receives~~received non-accountable marketing support fees of up to 2.5% of the gross offering proceeds from the sale of shares of our common stock in our initial offering other than shares of our

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common stock sold pursuant to the DRIP. Our former dealer manager ~~may re-allow~~re-allowed a portion up to 1.5% of the gross offering proceeds for non-accountable marketing fees to participating broker-dealers. In addition, in our initial offering, we ~~may reimburse~~reimbursed our former dealer manager or its affiliates an additional 0.5% of the gross offering proceeds for accountablebona fidedue diligence expenses, all or a portion of which could be re-allowed to participating ~~broker-dealers for accountable bona fide due diligence expenses.~~broker-dealers. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~$13,209,000, $5,382,000~~ $0, $12,786,000, and ~~$0,~~$13,209,000, respectively, in marketing support fees and due diligence expense reimbursements to our former dealer manager. Such fees and reimbursements are charged to stockholders’ equity ~~(deficit)~~ as such amounts are reimbursed to our former dealer manager or its affiliates from the gross proceeds of our initial offering.

Other Organizational and Offering Expenses

Our other organizational and offering expenses ~~are~~were paid by our former advisor or ~~Grubb & Ellis Realty Investors~~its affiliates, who we generally refer to as our former advisor, on our behalf. Our former advisor ~~or Grubb & Ellis Realty Investors are~~was reimbursed for actual expenses incurred up to 1.5% of the gross offering proceeds from the sale of shares of our common stock in our initial offering other than shares of our common stock sold pursuant to the DRIP. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$5,630,000, $3,170,000~~$0, $2,557,000, and ~~$0,~~$5,630,000, respectively, in offering expenses to our ~~advisor and its affiliates.~~former advisor. Other organizational expenses are expensed as incurred, and offering expenses are charged to stockholders’ equity ~~(deficit)~~ as such amounts are reimbursed to our former advisor ~~or its affiliates~~ from the gross proceeds of our initial offering.

Acquisition and Development Stage

Acquisition Fee

For the period from September 20, 2006 through October 24, 2008, our former advisor ~~or its affiliates~~ received, as compensation for services rendered in connection with the investigation, selection and acquisition of properties, an acquisition fee of up to 3.0% of the contract purchase price for each property acquired or up to 4.0% of the total development cost of any development property acquired, as applicable.

~~In connection with~~ As we moved toward self-management, we entered into an amendment to the Advisory Agreement, effective as ~~amended November 14,~~of October 24, 2008, which reduced the acquisition fee payable to our former advisor ~~or its affiliate for services rendered in connection with the investigation, selection and acquisition of our properties was reduced~~ from up to 3.0% to ~~an amount~~a lower fee determined as follows:


	•	for the first $375,000,000 in aggregate contract purchase price for properties acquired directly or indirectly by us after October 24, 2008, 2.5% of the contract purchase price of each such property;

	•	for the second $375,000,000 in aggregate contract purchase price for properties acquired directly or indirectly by us after October 24, 2008, 2.0% of the contract purchase price of each such property, which amount is subject to downward adjustment, but not below 1.5%, based on reasonable projections regarding the anticipated amount of net proceeds to be received in our initial offering; and

	•	for above $750,000,000 in aggregate contract purchase price for properties acquired directly or indirectly by us after October 24, 2008, 2.25% of the contract purchase price of each such property.

The Advisory Agreement ~~as amended November 14, 2008,~~ also ~~provides~~provided that we ~~will~~would pay an acquisition fee in connection with the acquisition of real estate related assets in an amount equal to 1.5% of the amount funded to acquire or originate each such real estate related asset.

~~Our~~We paid our former advisor ~~or its affiliate will be entitled to receive these~~ acquisition fees for ~~real estate~~properties and other real estate related assets acquired with funds raised in our initial offering ~~including~~by our former dealer manager for such acquisitions completed after the ~~termination~~expiration of the Advisory ~~Agreement, as amended November 14, 2008, subject~~Agreement. We are no longer required to ~~certain conditions.~~pay such fees to our former advisor.

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$16,226,000, $12,253,000~~$0, $10,738,000, and ~~$0,~~$16,226,000, respectively, in acquisition fees to our ~~advisor or its affiliates. Through December 31, 2008, acquisition~~former advisor. Acquisition fees are ~~capitalized as part of the purchase price allocations.~~included in acquisition-related

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~Reimbursement~~expenses in our accompanying consolidated statements of ~~Acquisition Expenses~~

~~Our advisor or its affiliates are reimbursed~~operations for acquisition expenses related to selecting, evaluating, acquiring and investing in properties. Acquisition expenses, excluding amounts paid to third parties, will not exceed 0.5% of the purchase price of the properties. The reimbursement of acquisition fees and expenses, including real estate commissions paid to unaffiliated parties, will not exceed, in the aggregate, 6.0% of the purchase price or total development costs, unless fees in excess of such limits are determined to be commercially competitive, fair and reasonable to us by a majority of our directors not interested in the transaction and by a majority of our independent directors not interested in the transaction. For the years ended December 31, ~~2008~~2010 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we incurred $24,000, $12,000 and $0, respectively, for such expenses to our advisor and its affiliates, excluding amounts our advisor and its affiliates paid directly to third parties. Through December 31, 2008, acquisition expenses2009. Acquisition fees are capitalized as part of the purchase price ~~allocations.~~allocations for the year ended December 31, 2008.

Operational Stage

Asset Management Fee

For the period from September 20, 2006 through October 24, 2008, our former advisor ~~or its affiliates were~~was paid a monthly fee for services rendered in connection with the management of our assets in an amount equal to one-twelfth of 1.0% of the average invested assets calculated as of the close of business on the last day of each month, subject to our stockholders receiving annualized distributions in an amount equal to at least 5.0% per annum on average invested capital. The asset management fee iswas calculated and payable monthly in cash or shares of our common stock at the option of our ~~advisor or one of its affiliates.~~former advisor.

In connection with the amendment to the Advisory Agreement, effective as ~~amended November 14,~~of October 24, 2008, we reduced the monthly asset management fee ~~we pay to our advisor in connection with the management of our assets was reduced from one-twelfth of 1.0% of our average invested assets~~ to one-twelfth of 0.5% of our average invested assets. As part of our transition to self-management, this fee to our former advisor was eliminated in connection with the expiration of the Advisory Agreement.

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$6,177,000, $1,590,000~~$0, $3,783,000, and ~~$0,~~$6,177,000, respectively, in asset management fees to our ~~advisor and its affiliates, which is included in general and administrative in our accompanying consolidated statements of operations.~~former advisor.

Property Management Fee

Our former advisor ~~or its affiliates are~~was paid a monthly property management fee equal to 4.0% of the ~~monthly~~ gross cash receipts ~~from each property managed.~~of our properties through August 31, 2009. For properties managed by other third parties besides our former advisor, ~~or its affiliates,~~ our former advisor ~~or its affiliates will be~~was paid up to 1.0% of the gross cash receipts from the property ~~for~~as a monthly oversight fee. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$2,372,000, $591,000~~$0, $2,289,000, and ~~$0,~~$2,372,000, respectively, in property management fees and oversight fees to our former advisor, ~~and its affiliates,~~ which is included in rental expenses in our accompanying consolidated statements of operations. As part of our transition to self-management, this fee to our former advisor was eliminated in connection with the expiration of the Advisory Agreement. Under self-management, we pay property management fees to third parties at market rates.

Lease Fee

Our former advisor, ~~or its affiliates,~~ as the property manager, ~~may receive~~was paid a separate fee for leasing activities in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties, as determined by a survey of brokers and agents in such area ranging between 3.0% and 8.0% of gross revenues generated from the initial term of the lease. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$1,248,000, $265,000~~$0, $1,665,000, and ~~$0,~~$1,248,000, respectively, to Triple Net Properties Realty, Inc., or Realty and its affiliates in lease ~~fees.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~fees, which are capitalized and included in other assets, net, in our accompanying consolidated balance sheets.

On-site Personnel and Engineering Payroll

For the years ended December 31, 2010, 2009, and 2008, GERI incurred $0, $1,827,000, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, Grubb & Ellis Realty Investors incurred payroll foron-site~~ ~~personnel and engineering on our behalf of~~ $1,012,000 ~~$162,000 and $0,~~ respectively, which is included in rental expenses in our accompanying consolidated statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Operating Expenses

We ~~reimburse~~reimbursed our former advisor ~~or its affiliates~~ for operating expenses incurred in rendering its services to us, subject to certain limitations on our operating expenses. ~~However, we cannot~~We did not reimburse our former advisor ~~or its affiliates~~ for operating expenses that ~~in the four consecutive fiscal quarters then ended exceed~~exceeded the greater of: (1) 2.0% of our average invested assets, as defined in the Advisory Agreement, or (2) 25.0% of our net income, as defined in the Advisory Agreement, unless a majority of our independent directors ~~determine~~determined that such excess expenses were justified based on unusual and non-recurring ~~factors they deem sufficient. For the 12 months ended December 31, 2008, our~~factors. Our operating expenses did not exceed this ~~limitation. Our operating expenses as a percentage~~limitation during the term of ~~average invested assets and as a percentage of net income were 1.2% and 81.4%, respectively, for~~ the ~~12 months ended December 31, 2008.~~Advisory Agreement.

For the years ended December 31, 2010, 2009, and 2008, ~~and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, Grubb & Ellis Realty Investors~~GERI incurred on our behalf ~~$278,000, $203,000~~$0, $35,000, and ~~$312,000,~~$278,000, respectively, in operating expenses which is included in general and administrative expenses in our accompanying condensed consolidated statements of operations.

Related Party Services Agreement

We entered into a services agreement, effective January 1, 2008, with ~~Grubb & Ellis Realty Investors~~GERI for subscription agreement processing and investor services. The services agreement had an initial one year term and ~~is automatically renewed for~~was subject to successive one year ~~terms. Since Grubb & Ellis Realty Investors is~~renewals. On March 17, 2009, GERI provided notice of its termination of the ~~managing member~~services agreement. The termination was to be effective September 20, 2009; however as part of our ~~advisor,~~transition to self-management, we transitioned to DST Systems, Inc., our transfer agent and provider of subscription processing and investor relations services, as of August 10, 2009. Accordingly, the terms of this agreement were approved and determined by a majority of our directors, including a majority of our independent directors, as fair and reasonable to us and at fees charged to us in an amount no greater than the cost to Grubb & Ellis Realty Investors for providing such services to us, which amount shall be no greater than that which would be paid to an unaffiliated third party for similar services. The services agreement ~~requires Grubb & Ellis Realty Investors to provide us~~ with ~~a 180 day advance written notice for any termination, while we have the right to terminate upon 30 days advance written notice.~~GERI terminated on August 9, 2009.

For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$130,000,~~ $0, $177,000, and ~~$0,~~$130,000, respectively, for investor services that ~~Grubb & Ellis Realty Investors~~GERI provided to us, which is included in general and administrative expenses in our accompanying condensed consolidated statements of operations.

For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, our advisor and its affiliates incurred $172,000, $0 and $0, respectively, in subscription agreement processing that Grubb & Ellis Realty Investors provided to us. As an other organizational and offering expense, these subscription agreement processing expenses will only become our liability to the extent cumulative other organizational and offering expenses do not exceed 1.5% of the gross proceeds of our offering.

Compensation for Additional Services

~~Our~~In periods preceding our transition to self-management during the third quarter of 2009, our former advisor ~~or its affiliates are~~was paid for services performed for us other than those required to be rendered by our former advisor ~~or its affiliates~~ under the Advisory Agreement. The rate of compensation for these

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services ~~must~~was required to be approved by a majority of our board of directors, including a majority of our independent directors, and ~~cannot~~could not exceed an amount that would be paid to unaffiliated third parties for similar services. For the years ended December 31, ~~2008~~2010, 2009, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we incurred ~~$7,000, $3,000~~$0, $0, and ~~$0,~~$7,000, respectively, for tax services that ~~Grubb & Ellis Realty Investors~~GERI provided to us, which is included in general and administrative expense in our accompanying consolidated statements of operations.

Liquidity Stage

Disposition Fee

~~Our~~We paid no disposition fees to our former advisor ~~or its affiliates will be paid, for services relating to a sale of one or more properties, a disposition fee up to~~under the ~~lesser of 1.75%~~terms of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, as determined by our board of directors, which will not exceed market norms. The amount ofAdvisory Agreement. In addition, we have no obligation to pay any disposition fees ~~paid, plus any real estate commissions paid~~ to ~~unaffiliated parties, will not exceed~~our former advisor in the lesser of a customary competitive real estate disposition fee given the circumstances surrounding the sale or an amount equal to 6.0% of the contract sales price. For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we did not incur such disposition fees.future.

Subordinated Participation Interest

~~Subordinated Distribution~~Pursuant to the terms of ~~Net Sales Proceeds~~

~~Upon liquidation of~~the partnership agreement for our ~~portfolio,~~operating partnership, as amended on November 14, 2008, our former advisor ~~will be paid~~had the right to receive a subordinated distribution upon the occurrence of ~~net sales proceeds. The distribution will be equal to 15.0% of~~certain liquidity events based on the ~~net proceeds from the sales of properties, after subtracting distributions to our stockholders of: (1) their initial contributed capital (less amounts paid to repurchase shares~~value of our ~~common stock pursuant to~~assets owned at the time the Advisory Agreement was terminated plus any assets acquired after such termination for which our ~~share repurchase program) plus (2)~~former advisor received an ~~annual cumulative, non-compounded return of 8.0% on average invested capital. Actual amounts depend upon the sales prices of properties upon liquidation.~~

~~For~~acquisition fee. We incurred no such distribution during the years ended December 31, 2010, 2009, and 2008, and, ~~2007 and for the period April 28, 2006 (Date of Inception) through December 31, 2006, we did not incur such distribution.~~

~~Subordinated Distribution upon Listing~~

~~Upon the listing of shares of~~on October 18, 2010, this right was purchased along with our common stock on a national securities exchange, our advisor will be paid a distribution equal to 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 stockholders (less amounts paid to repurchase shares pursuant to our share repurchase plan) and the 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 through the date of listing. Actual amounts depend upon the market value of shares of our common stock at the time of listing, among other factors. For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we did not incur such distribution.

~~Subordinated Distribution upon Termination~~

Upon termination of the Advisory Agreement, other than a termination by us for cause, our advisor will be entitled to receive a distribution from our operating partnership in an amount equal to 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 terminationformer advisor’s

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~date, exceeds (2) the sum of the total amount of capital raised from stockholders (less amounts paid to redeem shares~~partnership units in our operating partnership pursuant to the Redemption Agreement as discussed above. As a result, our ~~share repurchase plan) plus an annual 8.0% cumulative, non-compounded return on average invested capital through~~former advisor no longer has the ~~termination date. However, our advisor will not be entitled to this distribution if our shares have been listed on a national securities exchange prior to the termination of the Advisory Agreement.~~

~~Pursuant to the terms of the Partnership Agreement Amendment, our advisor may elect to defer its~~ right to receive aany subordinated ~~distribution from our operating partnership after the termination of the Advisory Agreement subject to certain conditions.~~

On November 14, 2008, we entered into an amendment to the partnership agreement for our operating partnership, or the Partnership Agreement Amendment. The Partnership Agreement Amendment provides that after the termination of the Advisory Agreement without cause, if there is a listing of our shares of common stock on a national securities exchange or a merger in which our stockholders receive in exchange for shares of our common stock shares of a company that are tracked on a national securities exchange, our advisor will be entitled to receive a distribution from our operating partnership 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 termination of the Advisory Agreement, plus any assets acquired after such termination for which our advisor was entitled to receive an acquisition fee (as described above under Advisory Agreement — 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 our offering) (less amounts paid to redeem shares pursuant to our share repurchase plan) plus an annual 8.0% cumulative, noncompounded 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.

~~For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we did not incur such~~ distribution.

Accounts Payable Due to Former Affiliates, Net

The following amounts were outstanding to former affiliates as of December 31, ~~2008~~2010 and ~~2007:~~December 31, 2009:


		December 31,					December 31,
Entity	Fee	2008		2007		Fee	2010		2009

Grubb & Ellis Realty Investors	Operating Expenses	$	33,000	$	79,000	Operating expenses	$	—	$	27,000
Grubb & Ellis Realty Investors	Offering Costs		797,000		798,000	Offering costs		—		90,000
Grubb & Ellis Realty Investors	Due Diligence		—		25,000	Due diligence		—		15,000
Grubb & Ellis Realty Investors	On-site Payroll and Engineering		207,000		51,000	On-site payroll and engineering		—		104,000
Grubb & Ellis Realty Investors	Acquisition Related Expenses		103,000		4,000	Acquisition related expenses		—		3,769,000
Grubb & Ellis Securities	Selling Commissions and Marketing Support Fees		1,120,000		288,000
Realty	Asset and Property Management Fees		726,000		941,000
Realty	Lease Commissions		77,000		170,000
Triple Net Properties Realty, Inc.						Asset and property management fees		—		771,000

		$	3,063,000	$	2,356,000		$	—	$	4,776,000

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Unsecured Note Payables~~Pursuant to ~~Affiliate~~

~~For~~ the ~~years ended December 31, 2008~~Redemption Agreement with our former advisor, which was executed on October 18, 2010 and ~~2007~~is discussed in further detail above, all monetary claims and ~~for~~other matters between the ~~period from April 28, 2006 (Date of Inception) through December 31, 2006,~~parties were resolved and we ~~incurred $2,000, $84,000 and $0, respectively, in interest expense~~no longer owe any fees or payments to ~~NNN Realty Advisors. See Note 7, Mortgage Loan Payables, Net and Unsecured Note Payables to Affiliate — Unsecured Note Payables to Affiliate, for a further discussion.~~our former advisor.


13.	~~Minority Interests~~Redeemable Noncontrolling Interest of Limited Partners

As of December 31, ~~2008~~2010 and ~~2007,~~2009, we owned aan approximately 99.92% and an approximately 99.99%, respectively, general ~~partnership interest in our operating partnership and our advisor owned a 0.01% limited partnership~~partner interest in our operating partnership. Our former advisor was a limited partner of our operating partnership as of December 31, 2009, and owned an approximately 0.01% limited partner interest in our operating partnership. This limited partner interest was redeemed pursuant to the Redemption Agreement we entered into with our former advisor on October 18, 2010. See Note 12, Related Party Transactions, for additional information on our redemption of this interest. As ~~such, 0.01%~~of December 31, 2010, approximately 0.08% of our operating partnership was owned by individual physician investors that elected to exchange their partnership interests in the partnership that owns the 7900 Fannin medical office building for limited partner units of our operating partnership. We acquired the majority interest in the Fannin partnership on June 30, 2010. In aggregate, approximately 0.08% of the earnings of our operating partnership are allocated to ~~minority interests.~~redeemable noncontrolling interest of limited partners.

~~In addition, as~~As of December 31, ~~2008 and 2007,~~2009, we owned an 80.0% interest in the JV Company that owns the Chesterfield Rehabilitation Center, which was originally purchased on December 20, 2007. ~~As of~~The redeemable noncontrolling interest balance related to this arrangement at December 31, ~~2008 and 2007, the balance~~2009 was comprised of the ~~minority~~noncontrolling interest’s initial contribution, ~~and~~ 20.0% of the earnings at the Chesterfield Rehabilitation ~~Center.~~ Center, and accretion of the change in the redemption value over the period from the purchase date to January 1, 2011, the earliest redemption date. On March 24, 2010, our subsidiary exercised its call option to buy, for $3,900,000, 100% of the interest owned by its joint venture partner, BD St. Louis, in the JV Company. As a result of the closing of the purchase on March 24, 2010, we own a 100% interest in the Chesterfield Rehabilitation Center, and the associated redeemable noncontrolling interest balance related to this entity was reduced to zero.

On June 30, 2010, we completed the acquisition of the majority interest in the Fannin partnership, which owns the 7900 Fannin medical office building located in Houston, Texas on the Texas Medical Center campus. At closing, we acquired the general partner interest and the majority of the limited partner interests in the Fannin partnership. The original physician investors were provided the right to remain in the Fannin

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partnership, receive limited partner units in our operating partnership,and/or receive cash. Some of the original physician investors elected to remain in the Fannin partnership post-closing as limited partners. Those investors electing to remain in the Fannin partnership or to receive limited partner units in our operating partnership were provided opportunities for future redemption of their interests/units, exercisable at the option of the holder during periods specified within the agreement.

Redeemable noncontrolling interests are accounted for in accordance with ASC 480,Distinguishing Liabilities From Equity,or ASC 480, at the greater of their carrying amount or redemption value at the end of each reporting period. Changes in the redemption value from the purchase date to the earliest redemption date are accreted using the straight-line method. Additionally, as the noncontrolling interests provide for redemption features not solely within the control of the issuer, we classify such interests outside of permanent equity in accordance with Accounting Series Release 268:Presentation in the Financial Statements of “Redeemable Preferred Stock”, as applied in ASUNo. 2009-4,Accounting for Redeemable Equity Instruments. As of December 31, 2010 and 2009, redeemable noncontrolling interest of limited partners was $3,867,000 and $3,549,000, respectively. Below is a table reflecting the activity of the redeemable noncontrolling interests.

Balance as of December 31, 2008 $ 1,951,000
Net income attributable to noncontrolling interest of limited partners 304,000
Distributions (379,000 )
Adjustments to noncontrolling interests 1,673,000

Balance as of December 31, 2009 $ 3,549,000

Balance as of December 31, 2009 $ 3,549,000
Net loss attributable to noncontrolling interest of limited partners (16,000 )
Distributions (145,000 )
Valuation adjustments to noncontrolling interests 570,000
Redemption of limited partner interest of former advisor (197,000 )
Purchase of Chesterfield 20% interest (3,900,000 )
Addition of noncontrolling interest attributable to the Fannin acquisition 4,006,000

Balance as of December 31, 2010 $ 3,867,000

The ($16,000) in net loss attributable to noncontrolling interest shown on our December 31, 2010 condensed consolidated statement of operations reflects $64,000 in net income earned by the noncontrolling interest in the JV Company prior to our purchase of this noncontrolling interest on March 24, 2010 and $18,000 in net income attributable to our operating partnership unit holders during the year ended December 31, 2010, offset by a net loss of ($98,000) attributable to the Fannin partnership following our purchase of this partnership on June 30, 2010.
For the year ended December 31, ~~2008,~~2010, we recorded ~~a purchase price allocation adjustment related~~no additional net income attributable to the Chesterfield ~~Rehabilitation Center.~~noncontrolling interest beyond the $64,000 earned prior to our purchase of this noncontrolling interest. The net impact to our equity as a result of this purchase was $275,000.

14. Stockholders’ Equity ~~(Deficit)~~

Common Stock

Through December 31, ~~2008,~~2010, we granted an aggregate of ~~90,200~~564,324 shares of restricted common stock to our independent directors, Chief Executive Officer, Chief Financial Officer, Executive Vice President — Acquisitions, and ~~affiliates~~other employees pursuant to the terms and conditions of our 2006 Incentive ~~Plan.~~Plan,

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Employment Agreements, and the employee retention program described below. Through December 31, ~~2008,~~2010, we issued ~~73,824,809~~197,712,159 shares of our common stock in connection with our initial offering and ~~1,660,176~~follow-on offering and 11,671,865 shares of our common stock under the DRIP, and we repurchased ~~109,748~~7,288,019 shares of our common stock under our share repurchase plan. As of December 31, ~~2008~~2010 and ~~2007,~~2009, we had ~~75,465,437~~202,643,705 and ~~21,449,451~~140,590,686 shares of our common stock outstanding, respectively.

~~We are~~Pursuant to our follow-on offering, ~~and selling~~we offered to the public up to 200,000,000 shares of our $0.01 par value common stock for $10.00 per share and up to 21,052,632 shares of our $0.01 par value common stock ~~to be issued~~ pursuant to the DRIP at $9.50 per share. Our charter authorizes us to issue 1,000,000,000 shares of our common stock. On February 28, 2011, we stopped offering shares in our primary offering. However, for noncustodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by end of business March 15, 2011 were accepted. For custodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by end of business March 31, 2011 will be accepted.

Preferred Stock

Our charter authorizes us to issue 200,000,000 shares of our $0.01 par value preferred stock. As of December 31, ~~2008~~2010 and ~~2007,~~2009, no shares of preferred stock were issued and outstanding.

Distribution Reinvestment Plan

We adopted the DRIP that allows stockholders to purchase additional shares of common stock through the reinvestment of distributions, subject to certain conditions. We registered and reserved 21,052,632 shares of our common stock for sale pursuant to the DRIP in our initial offering and we registered and reserved 21,052,632 shares of our common stock for sale pursuant to the DRIP in our follow-on offering. For the years ended December 31, 2010, 2009 and 2008, $56,551,000, $38,559,000, and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~ $13,099,000, ~~$2,673,000 and $0,~~ respectively, in distributions were reinvested and ~~1,378,795, 281,381~~5,952,683, 4,059,006, and 01,378,795 shares of our common stock, respectively, were issued under the DRIP. AsWe are conducting an ongoing review of ~~December 31, 2008 and 2007, a total~~potential alternatives for our DRIP, including the suspension or termination of ~~$15,772,000 and $2,673,000, respectively, in distributions were reinvested and 1,660,176 and 281,381 shares of our common stock, respectively, were issued under~~ the ~~DRIP.~~plan.

Share Repurchase Plan

Our board of directors has approved a share repurchase plan. On August 24, 2006, we received SEC exemptive relief from rules restricting issuer purchases during distributions. The share repurchase plan allows

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

for share repurchases by us when certain criteria are met by the requesting stockholders. Share repurchases will be made at the sole discretion of our board of directors. On November 24, 2010, we, with the approval of our board of directors, elected to amend and restate our share repurchase plan. Starting in the first calendar quarter of 2011, we will fund a maximum of $10 million of share repurchase requests per quarter, subject to available funding. Funds for the repurchase of shares of our common stock will come exclusively from the proceeds we receive from the sale of shares of our common stock under the DRIP.

~~Our board~~ In addition, with the termination of ~~directors adopted and approved certain amendments to~~our follow-on offering on February 28, 2011, except for the DRIP, we are conducting an ongoing review of potential alternatives for our share repurchase plan, ~~which became effective August 25, 2008. The primary purpose~~including the suspension or termination of the ~~amendments is to provide stockholders with~~plan.

For the ~~opportunity to have their~~years ended December 31, 2010, 2009, and 2008 we repurchased 5,448,260 shares of our common stock, ~~redeemed, at the sole discretion~~for an aggregate amount of our board of directors, during the period we are engaged in a public offering at increasing prices based upon the period of time the shares of common stock have been continuously held. Under the amended share repurchase plan, redemption prices range from $9.25 per share, or 92.5% of the price paid per share, following a one year holding period to an amount equal to not less than 100% of the price paid per share following a four year holding period. Under the previous share repurchase plan, stockholders could only request to have their$51,856,000, 1,730,011 shares of our common stock ~~redeemed at $9.00 per share during the period we are engaged in a public offering.~~

~~For the year ended December 31, 2008, we repurchased~~for an aggregate amount of $16,266,000, and 109,748 shares of our common stock for an aggregate amount of ~~$1,077,000. During the year ended~~$1,077,000, respectively. As of December 31, ~~2007~~2010 and ~~for the period from April 28, 2006 (Date~~2009, we had repurchased a total of ~~Inception) through December 31, 2006, we did not repurchase any share~~7,288,019 shares of our common ~~stock.~~stock for an aggregate amount of $69,199,000, and 1,839,759 shares of our common stock for an aggregate amount of $17,343,000, respectively.

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2006 Incentive Plan and Independent Directors Compensation Plan

Under the terms of our 2006 Incentive Plan, the aggregate number of shares of our common stock subject to options, shares of restricted common stock, stock purchase rights, stock appreciation rights or other awards, including those issuable under itssub-plan, the 2006 Independent Directors Compensation Plan, will be no more than 2,000,000 shares. On May 20, 2010, based upon the recommendation of the compensation committee, our board of directors approved the following amendments to our independent director compensation plan, all of which were effective May 20, 2010:


	•	Annual Retainer. The annual retainer for independent directors remains unchanged at $50,000.

	•	Annual Retainer, Committee Chairman. The chairman of the audit committee will receive an annual retainer of $15,000. The chairman of each of the compensation committee, the nominating and corporate governance committee, the investment committee and the risk management committee will receive an annual retainer of $12,500. These retainers are in addition to the annual retainer payable to all independent board members for board service.

	•	Meeting Fees. The meeting fee for each board of directors meeting attended in person or by telephone remains unchanged at $1,500 and the meeting fee for each committee meeting attended in person or by telephone remains unchanged at $1,000.

	•	Equity Compensation. Each independent director will receive a grant of 7,500 shares of restricted common stock upon each re-election to the board.

	•	Fees for Non-Telephonic Meetings on the Same Day. Independent board members will be entitled to receive fees for non-telephonic committee meetings that occur on the same day as non-telephonic board meetings.

~~On September 20,~~

In 2006, 2007 and ~~October 4, 2006,~~2008, we granted an aggregate of ~~15,000~~20,000, 17,500 and 12,500 shares, ~~and 5,000 shares,~~ respectively ~~of restricted common stock, as defined in our 2006 Incentive Plan,~~ to our independent ~~directors under~~directors. During the ~~2006 Independent Director Compensation Plan. On April 12, 2007,~~years ended December 31, 2010 and 2009, we granted ~~5,000~~an aggregate of 37,500 and 25,000 shares, of restricted common stock to our newly appointed independent director. On each of June 12, 2007 and June 17, 2008, in connection with their re-election, we granted 12,500 shares of restricted common stock in the aggregaterespectively, to our independent directors. Each of these restricted stock awards vested 20.0% 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, we granted Mr. Peters 40,000 shares of restricted common stock under, and pursuant to the terms and conditions of our 2006 Incentive Plan. 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. Pursuant to the terms of his new employment agreement, on July 1, 2009, Mr. Peters was entitled to receive 50,000 shares of fully vested stock under, and pursuant to, the terms and conditions of our 2006 Incentive plan and his employment agreement. Pursuant to the terms of his new employment agreement, on July 1, 2009, Mr. Peters was also entitled to receive an annual award of 100,000 shares of restricted common stock with three additional annual awards of 100,000 shares beginning July 1, 2010, subject to board approval, under, and pursuant to, the terms and conditions of our 2006 Incentive plan and his employment agreement. On May 20, 2010, the Board approved an amendment to Mr. Peters’ employment agreement with the Company to increase the number of restricted shares Mr. Peters is entitled to receive on each of the first three anniversaries of the effective date of his employment agreement from 100,000 to 120,000. The share awards will vest and become non-forfeitable over the balance of the term of his employment agreement. The terms of his employment agreement provide Mr. Peters with the option to receive cash in lieu of stock for up to 50% of the grants made under his employment agreement at the time of issuance at the common stock fair value on the grant date, which option has been exercised with respect to all grants under his agreement.

In the third quarter of 2009, we granted an aggregate of 65,000 shares of restricted common stock units under, and pursuant to the terms and conditions of our 2006 Incentive plan and the employment agreement of certain key employees. The shares of restricted common stock units will vest and convert on aone-to-one

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basis into common stock shares in equal annual installments of 33.3% which will vest on each of the first three anniversaries of the date of grant.

Employee Retention Program

The Board approved on May 20, 2010 the adoption of an employee retention program pursuant to which the Company will grant its executive officers and employees restricted shares of the Company’s common stock. The purpose of this program is to incentivize the Company’s executive officers and employees to remain with the Company for a minimum of three years, subject to meeting the Company’s performance standards. The Board and the compensation committee determined that this program is consistent with the Company’s overall goal of hiring and retaining highly qualified employees. The program will be implemented in two stages. The first stage is aimed at the Company’s three named executive officers. The second stage applies to all of the Company’s employees. This program will be subject to adjustment in the future to accommodate the comprehensive compensation review being conducted by the compensation committee and the Board.

As part of the first stage of this program, on May 24, 2010, Mr. Peters, Ms. Pruitt and Mark D. Engstrom were entitled to receive grants of 100,000, 50,000 and 50,000 shares of restricted stock, respectively. Mr. Peters elected to receive a restricted cash award in lieu of 50,000 shares. The restricted shares and the restricted cash award granted to Mr. Peters will vest in thirds on each anniversary of the grant date, provided that the grantee is employed by the Company on such date. The shares granted to Ms. Pruitt and Mr. Engstrom will vest 100% on the third anniversary of the grant date, provided that the grantee is employed by the Company on such date. All shares have been granted pursuant to the Company’s 2006 Incentive Plan, as amended. The restricted shares will become immediately vested upon the earlier occurrence of (1) the executive’s termination of employment by reason of his or her death or disability, (2) a change in control of the Company (as defined in the 2006 Plan) or (3) the executive’s termination of employment by the Company without cause or by the executive for good reason (as such terms are defined in the executive officers’ respective employment agreements). In December 2010, we granted 110,000 shares to other employees as part of the second stage of this program.

Share-Based Compensation

The fair value of each share of restricted common stock ~~was~~and restricted common stock unit that has been granted under the plan is estimated at the date of grant at $10.00 per share, the per share price of shares ofin our ~~common stock in~~initial offering and our follow-on offering, and is amortized on a straight-line basis over the vesting period. Shares of restricted common stock and restricted common stock units may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered. Such restrictions expire upon vesting.

For the years ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, we recognized compensation expense of ~~$130,000, $96,000~~$1,313,000, $816,000, and ~~$51,000,~~$130,000, respectively, related to the restricted common stock grants, which is included in general and administrative in our accompanying consolidated statements of operations. Shares of restricted common stock have full voting rights and rights to dividends. Shares of restricted common stock units do not have voting rights or rights to dividends.

A portion of our awards may be paid in cash in lieu of stock in accordance with the respective employment agreement and vesting schedule of such awards. These awards are revalued every reporting period end with the cash redemption liability reflected on our consolidated balance sheets, if material. For the years ended December 31, 2010 and 2009, approximately 32,500 shares were settled in cash for approximately $325,000 and 37,500 shares were settled in cash for approximately $375,000, respectively. As of December 31, 2010, the liability balance associated with the cash awards was $263,000.

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As of December 31, ~~2008~~2010 and ~~2007,~~2009, there was ~~$623,000~~$4,143,000, and ~~$228,000,~~$1,881,000, respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to nonvested shares of restricted common stock. As of December 31, ~~2008,~~2010, this expense is expected to be recognized over a remaining weighted average period of ~~2.8~~2.4 years.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

As of December 31, ~~2008~~2010 and ~~2007,~~2009, the fair value of the nonvested shares of restricted common stock was ~~$685,000~~$4,352,000 and ~~$260,000,~~$1,677,000, respectively. A summary of the status of the nonvested shares of restricted common stock as of December 31, ~~2008, 2007~~2010, 2009 and ~~2006, and the changes for the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, is presented below:


				Weighted					Weighted
	Restricted			Average Grant		Restricted			Average Grant
	Common			Date Fair		Common			Date Fair
	Stock			Value		Stock/Units			Value

Balance — April 28, 2006 (Date of Inception)		—		$	—
Granted		20,000			10.00
Vested		(4,000	)		10.00
Forfeited		—			—

Balance — December 31, 2006		16,000			10.00
Granted		17,500			10.00
Vested		(7,500	)		10.00
Forfeited		—			—

Balance — December 31, 2007		26,000			10.00		26,000			10.00
Granted		52,500			10.00		52,500			10.00
Vested		(10,000	)		10.00		(10,000	)		10.00
Forfeited		—			—		—			—

Balance — December 31, 2008		68,500		$	10.00		68,500		$	10.00

Expected to vest — December 31, 2008		68,500		$	10.00
Nonvested shares expected to vest — December 31, 2008							68,500		$	10.00

Granted							165,500			10.00
Vested							(65,833	)		10.00
Forfeited							—			—

Balance — December 31, 2009							167,667		$	10.00

Nonvested shares expected to vest — December 31, 2009							167,667		$	10.00

Granted							357,500			10.00
Vested							(85,157	)		10.00
Forfeited							(4,842	)		10.00
Balance — December 31, 2010							435,168		$	10.00

Nonvested shares expected to vest — December 31, 2010							435,168		$	10.00


15.	~~Subordinated Participation Interest~~Fair Value of Financial Instruments

~~On November 14, 2008, we entered into an amendment~~ASC 820,Fair Value Measurements and Disclosures, or ASC 820, defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, as opposed to a transaction-specific measurement and most of the ~~partnership agreement~~provisions were effective for our ~~operating partnership,~~consolidated financial statements beginning January 1, 2008.

Fair value is defined by ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the ~~Partnership Agreement Amendment. Pursuant to~~measurement date. Depending on the ~~terms~~nature of the ~~Partnership Agreement Amendment, our advisor may elect~~asset or liability, various techniques and assumptions can be used to ~~defer its right to receive a subordinated distribution~~estimate the fair value. Financial assets and liabilities are measured using inputs from ~~our operating partnership after the termination~~three levels of the ~~Advisory Agreement, subject to certain conditions.~~fair value hierarchy, as follows:

~~The Partnership Agreement Amendment provides~~Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that ~~after~~we have the ~~termination of~~ability to access at the ~~Advisory Agreement if there~~measurement date. An active market is defined as a ~~listing of our shares on a national securities exchange or a merger~~market in which our stockholders receive in exchange for shares of our common stock shares of a company that are tracked on a national securities exchange, our advisor will be entitled to receive a distribution from our operating partnership 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 termination of the Advisory Agreement, plus any assets acquired after such termination for which our advisor was entitled to receive an acquisition fee (as described above under Advisory Agreement — 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 our offering) (less amounts paid to redeem shares of our common stock 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~In addition, the Partnership Agreement Amendment provides that after the termination date in the event of a liquidation or sale of all or substantially all of~~transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 — Unobservable inputs, only used to the extent that observable inputs are not available, reflect our assumptions about the pricing of ~~the operating partnership,~~an asset or ~~an other liquidity event, then our advisor will be entitled to receive a distribution from our operating partnership in an amount equal to 15.0%~~liability.

ASC 825,Financial Instruments, ASC 825, requires disclosure 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 capitalfair 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~~financial instruments in interim financial statements as well as in 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.~~financial statements.

For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we have not recorded any charges to earnings related to the subordinated participation interest.


~~16.~~	~~Fair Value of Financial Instruments~~

We use fair value measurements to record fair value of certain assets and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair ~~value under SFAS No. 107,~~~~Disclosure About Fair Value of Financial Instruments~~~~, or SFAS No. 107.~~value.

Financial Instruments Reported at Fair Value

Cash and Cash Equivalents

We invest in money market funds which are classified within Level 1 of the fair value hierarchy because they are valued using unadjusted quoted market prices in active markets for identical securities.

Derivative Financial Instruments

Currently, we use interest rate swaps and interest rate caps to manage interest rate risk associated with floating rate debt. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The fair values of interest rate swaps and interest rate caps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of ~~SFAS No. 157,~~ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we have determined that the majority of the inputs used to value our interest rate swap and interest rate cap derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with ~~our derivatives~~these instruments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of December 31, ~~2008,~~2010, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap and interest rate cap derivative positions and have determined that the credit valuation adjustments are not significant to ~~the~~their overall ~~valuation of our derivatives.~~valuation. As a result, we have determined that our interest rate swap and interest rate cap derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

As of December 31, 2010, there have been no transfers of assets or liabilities between levels.

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Assets and ~~liabilities~~Liabilities at ~~fair value~~Fair Value

The table below presents our assets and liabilities measured at fair value on a recurring basis as of December 31, ~~2008,~~2010, aggregated by the level in the fair value hierarchy within which those measurements fall.


	Quoted Prices in										Quoted Prices in
	Active Markets for										Active Markets for
	Identical Assets		Significant Other			Significant					Identical Assets		Significant Other			Significant
	and Liabilities		Observable Inputs			Unobservable Inputs					and Liabilities		Observable Inputs			Unobservable Inputs
	(Level 1 )		(Level 2)			(Level 3)		Total			(Level 1 )		(Level 2)			(Level 3)		Total

Assets
Money market funds	$	110,330,000	$	—		$	—	$	110,330,000		$	43,000	$	—		$	—	$	43,000

Derivative financial instruments											$	—	$	680,000		$	—	$	680,000

Total assets at fair value	$	110,330,000	$	—		$	—	$	110,330,000		$	43,000	$	680,000		$	—	$	723,000

Liabilities
Derivative financial instruments	$	—	$	(14,198,000	)	$	—	$	(14,198,000	)	$	—	$	(1,527,000	)	$	—	$	(1,527,000	)

Total liabilities at fair value	$	—	$	(14,198,000	)	$	—	$	(14,198,000	)	$	—	$	(1,527,000	)	$	—	$	(1,527,000	)

~~We did not have any~~The table below presents our assets and liabilities measured at fair value ~~measurements using significant unobservable inputs (Level 3)~~on a recurring basis as of December 31, ~~2008.~~2009, aggregated by the level in the fair value hierarchy within which those measurements fall:

Quoted Prices in

Active Markets for

Identical Assets
Significant Other
Significant

and Liabilities
Observable Inputs
Unobservable Inputs

(Level 1 ) (Level 2) (Level 3) Total

Assets

Money market funds $ 43,000 $ — $ — $ 43,000
Derivative financial instruments(a) $ — $ 890,000 $       1,051,000 (a) $ 1,941,000

Total assets at fair value $        43,000 $ 890,000 $ 1,051,000 (a) $ 1,984,000

Liabilities

Derivative financial instruments $ — $     (8,625,000 ) $ — $ (8,625,000 )

Total liabilities at fair value $ — $ (8,625,000 ) $ — $ (8,625,000 )

(a) During the third quarter of 2010, we reevaluated a feature within the Rush Presbyterian Note Receivable which had been disclosed in our Annual Report onForm 10-K as a derivative financial instrument. Based on this reevaluation, we determined that this feature, by its nature, qualifies for a scope exception under ASC 815,Derivatives and Hedging, and thus may be excluded from classification as a derivative financial instrument. As such, we have prospectively corrected our fair value and derivative instrument disclosures with respect to this feature.

Financial Instruments Disclosed at Fair Value

~~SFAS No. 107~~ASC 825 requires disclosure of the fair value of financial instruments, whether or not recognized on the face of the balance sheet. Fair value is defined under ~~SFAS No. 157.~~ASC 820.

Our accompanying consolidated balance sheets include the following financial instruments: real estate ~~note receivables,~~notes receivable, net, cash and cash equivalents, restricted cash, accounts and other receivables, net, accounts payable and accrued liabilities, accounts payable due to affiliates, net, mortgage ~~loan payables,~~loans payable, net, and borrowings under the ~~line~~credit facility.

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~~The carrying value of our note receivables, net reasonably approximates fair value based on expected interest rates for notes to similar borrowers with similar terms and remaining maturities.~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We consider the carrying values of cash and cash equivalents, restricted cash, accounts and other receivables, net, and accounts payable and accrued liabilities to approximate fair value for these financial instruments because of the short period of time between origination of the instruments and their expected realization. The fair value of accounts payable due to affiliates, net, is not determinable due to the related party nature.

The fair value of the mortgage loan payable is estimated using borrowing rates available to us for mortgage ~~loan payables~~loans payable with similar terms and maturities. As of December 31, ~~2008,~~2010, the fair value of the mortgage ~~loan payables~~loans payable was ~~$456,606,000,~~$727,370,000 compared to the carrying value of ~~$460,762,000.~~$699,526,000. As of December 31, ~~2007,~~2009, the fair value of the mortgage ~~loan payables~~loans payable was ~~$181,067,000,~~$532,000,000, compared to the carrying value of ~~$185,801,000.~~ $540,028,000.

The fair value of ~~our secured revolving line~~the notes receivable is estimated by discounting the expected cash flows on the notes at current rates at which management believes similar loans would be made. The fair value of ~~credit with LaSalle~~these notes was approximately $67,540,000 and ~~KeyBank as of~~approximately $61,120,000 at December 31, ~~2008~~2010 and ~~2007 was $0 and $51,801,000,~~December 31, 2009, respectively, as compared to athe carrying ~~value~~values of $0approximately $57,091,000 and ~~$51,801,000.~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~approximately $54,763,000 at December 31, 2010 and December 31, 2009, respectively.


~~17.~~16.	Tax Treatment of Distributions

The income tax treatment for distributions reportable for the years ended December 31, ~~2008, 2007~~2010, 2009, and ~~2006~~2008 was as follows:


	Years Ended December 31,												Years Ended December 31,
	2008				2007				2006				2010				2009				2008

Ordinary income	$	5,879,000	21.0	%	$	915,000	15.3	%	$	—	—	%	$	47,041,000	40.3	%	$	2,836,000	3.6	%	$	5,879,000	21.0	%
Capital gain		—	—			—	—			—	—			—	—			—	—			—	—
Return of capital		22,163,000	79.0			5,081,000	84.7			—	—			69,686,000	59.7			75,223,000	96.4			22,163,000	79.0

	$	28,042,000	100	%	$	5,996,000	100	%	$	—	—	%	$	116,727,000	100	%	$	78,059,000	100	%	$	28,042,000	100	%


~~18.~~17.	Future Minimum Rent

Rental Income

We have operating leases with tenants that expire at various dates through 2037 and in some cases subject to scheduled fixed increases or adjustments based on the consumer price index. Generally, the leases grant tenants renewal options. Leases also provide for additional rents based on certain operating expenses. Future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, ~~2008~~2010 for each of the next five years ending December 31 and thereafter is as follows:


Year	Amount		Amount

2009	$	83,797,000
2010	$	77,291,000
2011	$	68,364,000	$	199,572,000
2012	$	62,464,000		191,958,000
2013	$	50,866,000		174,385,000
2014				157,674,000
2015				142,316,000
Thereafter	$	213,320,000		737,137,000

Total	$	556,102,000	$	1,603,042,000

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A certain amount of our rental income is from tenants with leases which are subject to contingent rent provisions. These contingent rents are subject to the tenant achieving periodic revenues in excess of specified levels. For the years ended December 31, ~~2008~~2010, 2009 and ~~2007 and the period from April 28, 2006 (Date of Inception) through December 31, 2006,~~2008, the amount of contingent rent earned by us was not significant.


~~19.~~18.	Business Combinations

For the year ended December 31, ~~2008,~~2010, we completed the acquisition of ~~21 consolidated properties, adding~~24 new property portfolios as well as purchased additional medical office buildings within six of our existing portfolios. In addition, we purchased the remaining 20% interest in the JV Company that owns Chesterfield Rehabilitation Center. These purchases added a total of approximately ~~2,920,000~~3,514,000 square feet of GLA to our overall property portfolio. The aggregate purchase price ~~of the 21 properties~~for these acquisitions was ~~$542,976,000~~$806,048,000 plus closing costs of ~~$14,213,000.~~$6,253,000. See Note 3, Real Estate Investments, for a listing of the properties acquired and the dates of acquisition. Results of operations for the property acquisitions are reflected in our condensed consolidated statements of operations for the year ended December 31, ~~2008~~2010 for the periods subsequent to the acquisition dates.

~~In accordance with SFAS No. 141,~~For the year ended December 31, 2009, we ~~allocated~~completed the acquisition of ten property portfolios, as well as purchased three office condominiums related to existing property portfolios, adding a total of approximately 2,258,000 square feet of GLA to our overall property portfolio. The aggregate purchase price of these properties was $456,760,000 plus closing costs of $1,099,000. The aggregate purchase price was allocated in the amount of $15,584,000 to ~~the fair value of the assets acquired~~land, $323,888,000 to building and ~~the liabilities assumed, including allocating~~improvements, $23,921,000 to ~~the intangibles associated with the~~tenant improvements, $14,432,000 to lease commissions, $24,542,000 to leases in place, $31,848,000 to tenant relationships, $17,499,000 to leasehold interest in land, $930,000 to below market debt, $3,238,000 to above market leases, ~~considering the following factors: lease origination costs~~$(610,000) to below market leases, and ~~tenant relationships. Certain allocations as of December 31, 2008 are subject~~$890,000 to ~~change based on information received within one year of the purchase date related to one or more events at the time of purchase which confirm~~other assets reflecting the value of an ~~asset acquired or a~~

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interest rate cap derivative instrument associated with debt assumed on one of our acquisitions. Additionally, the allocable portion of the aggregate purchase price does not include $598,000 in certain credits representative of liabilities assumed by us that served to reduce the total cash tendered for these acquisitions.

In accordance with ASC 805,Business Combinations(“ASC 805”), formerly Statement of Financial Accounting Standards No. 141R,Business Combinations, we, with assistance from independent valuation specialists, allocate the purchase price of acquired properties to tangible and identified intangible assets and liabilities based on their respective fair values. The allocation to tangible assets (building and land) is based upon our determination of the value of the property as if it were to be replaced and vacant using discounted cash flow models similar to those used by independent appraisers. Factors considered by us include an estimate of carrying costs during the expected~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~lease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price of the applicable property is allocated to the above or below market value of in place leases, the value of in place leases, tenant relationships, above or below market debt assumed, and any contingent consideration transferred in the combination.

~~liability assumed in an acquisition of a property.~~ The following ~~table summarizes~~sections summarize the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition for ~~our properties where the~~acquisitions occurring during 2010. We present a separate purchase price ~~exceeded 10.0%~~allocation for our purchase of eight of the nine buildings comprising the Columbia portfolio, which we consider to be an individually significant acquisition during the year based on purchase price. The purchase price allocation disclosure for the remaining acquisitions that occurred during the year ended December 31, 2010 is presented in the aggregate in accordance with the provisions of ASC 805, which allow aggregate presentation for individually immaterial business combinations that are material collectively.

Amounts presented in the allocations below pertain to all acquisitions completed during the year ended December 31, 2010 except for the Chesterfield Rehabilitation Center noncontrolling interest purchase; this purchase of the remaining 20% interest in the joint venture entity that owns the Chesterfield Rehabilitation Center was accounted for as an equity transaction and thus it is not included within the aggregate purchase price allocation disclosed herein. Additionally, the allocable portion of the aggregate purchase price does not

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include $1,004,000 in certain credits representative of contingent purchase price adjustments and liabilities assumed by us that served to reduce the total cash tendered for these acquisitions.

As of December 31, 2010, we owned one property, purchased during the third quarter of 2010, that is subject to an earnout provision obligating us to pay additional consideration to the seller contingent on the future leasing and occupancy of vacant space at the property. This earnout payment is based on a predetermined formula and has a set24-month time period regarding the obligation to make these payments. If, at the end of this time period, certain space has not been leased and occupied, we will have no further obligation. Assuming all conditions are satisfied under the earnout agreement, we, at the time of acquisition, calculated that we would be obligated to pay an estimated $1,752,000 to the seller. Upon review of this item of contingent consideration as of December 31, 2010, we determined that no material change to this valuation was warranted. As of December 31, 2010, no payments under the earnout agreement have been made.

Columbia Portfolio

Throughout the fourth quarter of 2010, we, through our subsidiaries, acquired eight buildings within a nine-building portfolio, seven of which are located in upstate New York and one of which is located in Florida. See Note 22, Subsequent Events, for information regarding our purchase of the ~~21 properties~~final building within this portfolio, located in Massachusetts, which was purchased on February 16, 2011. We refer to these nine buildings collectively as the Columbia Portfolio, which is composed of a total of approximately 960,000 square feet of both on- and ~~all other properties aggregated together:~~off-campus medical office buildings and has a total aggregate purchase price of $196,646,000. The occupancy rate of the entire portfolio is approximately 97% (unaudited) as of December 31, 2010.

Total

Land $ 55,062,000
Building and improvements 418,060,000
Above market leases 8,768,000
In place leases 41,308,000
Tenant relationships 38,694,000
Leasehold interest 926,000
Master lease 349,000

Total assets acquired 563,167,000
Below market leases (7,768,000 )

Total liabilities assumed (7,768,000 )

Net assets acquired $ 555,399,000

During the year ended December 31, 2010, we paid an aggregate purchase price of $187,464,000 for the following eight buildings within this portfolio (occupancy rates provided are unaudited):
• An approximately 81,000 square foot building located in Albany, New York. This two-story medical office building was purchased on November 19, 2010 for approximately $13,545,000 and was approximately 97% occupied as of December 31, 2010.
• An interest in a condominium building consisting of approximately 41,000 rentable square feet, located in Albany, New York that was 98% occupied as of December 31, 2010 and was purchased on November 19, 2010 for approximately $9,988,000.
• An approximately 166,000 square foot medical office building located in Albany New York. This building, which had an occupancy rate in excess of 99% as of December 31, 2010, was purchased November 22, 2010 for $33,083,000.
• An approximately 15,000 square foot medical office building located in Albany, New York. This building was approximately 97% occupied as of December 31, 2010 and was purchased on November 22, 2010 for $3,171,000.
• An approximately 259,000 square foot medical mall located in Latham, New York, which was 90% occupied as of December 31, 2010 and was purchased on November 23, 2010 for approximately $45,861,000.
• A three-story building consisting of approximately 82,000 square feet located in Temple Terrace, Florida. This building, which was purchased on November 23, 2010 for $17,393,000, is 100% occupied to and serves as the primary and corporate headquarters for Florida Orthopaedic Institute.
• An approximately 90,000 square foot, three-story medical office building located on the main campus of Putnam Hospital Center in Carmel, New York. This building is 100% leased to Putnam Hospital

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		Center and to private physician groups, and it was purchased on December 29, 2010 for approximately $28,216,000.


	•	A four-story, approximately 180,000 square foot building located in Albany, New York. This building, which was purchased on December 30, 2010 for $36,207,000, is 100% leased to and serves as the corporate headquarters for Capital District Physician’s Health Plan, Inc, anot-for-profit individual practice association model health maintenance organization.

Relative to the purchase prices associated with the majority of our 2010 acquisitions, we consider the acquisition of the majority of this portfolio to be significant. As such, in accordance with ASC 805, the relevant details of the transaction and the aggregate purchase price allocation, as depicted below, are presented on a standalone basis.

Total

Land $ 9,567,000
Building as vacant 139,227,000
Site improvements 6,389,000
Unamortized tenant improvement costs 7,822,000
Leasehold interest in land, net 236,000
Leased fee interest in land (272,000 )
Above market debt (834,000 )
Above market leases 1,023,000
Below market leases (3,227,000 )
Unamortized lease origination costs 8,310,000
In place leases 8,984,000
Tenant relationships 10,239,000

Net assets acquired $ 187,464,000

Other Aggregate 2010 Acquisitions
As the remaining acquisitions that occurred in 2010 were individually not significant but material collectively, the purchase price allocations for these acquisitions are presented in the aggregate, in accordance with the guidance prescribed by ASC 805.

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Total

Land $ 34,483,000
Building as vacant 447,439,000
Site improvements 15,653,000
Unamortized tenant improvement costs 20,271,000
Leasehold interest in land, net 1,768,000
Leased fee interest in land —
Above market debt (4,171,000 )
Above market leases 7,585,000
Below market leases (885,000 )
Unamortized lease origination costs 13,981,000
In place leases 30,729,000
Tenant relationships 46,827,000

Net assets acquired $ 613,680,000

A brief description of the remaining property acquisitions completed in 2010 are as follows (occupancy rates provided are unaudited):
• An approximately 80,000 square foot medical office portfolio consisting of two buildings located in Atlanta, Georgia. This portfolio was approximately 98% occupied as of December 31, 2010 and was purchased on March 2, 2010 for $19,550,000.
• An approximately 53,000 square foot medical office building located in Jacksonville, Florida, purchased on March 9, 2010 for $10,775,000. This building was 100% occupied as of December 31, 2010, and it is situated on the campus of St. Vincent’s Medical Center.
• An approximately 60,000 square foot medical office building located in Sugarland, Texas, purchased on March 23, 2010 for $12,400,000. This facility is located near three acute-care hospitals and was, as of December 31, 2010, 100% occupied with 83% of the space occupied by Texas Children’s Health Centers.
• A five-building medical office portfolio located in Evansville and Newburgh, Indiana, totaling approximately 262,000 square feet and purchased on March 23, 2010 for $45,257,000. The portfolio is 100% master-leased to Deaconess Clinic, Inc., an affiliate of Deaconess Health System, Inc.
• An approximately 61,000 square foot medical office building located on the campus of East Cooper Regional Medical Center in Mount Pleasant, South Carolina, purchased on March 31, 2010 for $9,925,000. The building was 88% occupied of December 31, 2010.
• An approximately 35,000 square foot medical office building located in Pearland, Texas, purchased on March 31, 2010 for $6,775,000. The building was 98% occupied as of December 31, 2010. On June 30, 2010, we purchased a second building within the Pearland portfolio: this add-on acquisition consisted of an approximately 20,000 square foot medical office building that was purchased for $3,701,000 and was 100% occupied as of December 31, 2010.
• An approximately 22,000 square foot medical office building located in Hilton Head, South Carolina, purchased on March 31, 2010 for $8,058,000. The building was 100% occupied as of December 31, 2010. On August 12, 2010, we purchased a second building within the Hilton ad portfolio: this add-on acquisition consisted of an approximately 9,000 square foot medical office building that is 100% occupied and was purchased for $2,652,000.
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	•	An approximately 101,000 square foot medical office building located in Baltimore, Maryland, purchased on March 31, 2010 for $29,250,000. The building is located on the Johns Hopkins University Bayview Medical Center Research Campus and was 100% occupied as of December 31, 2010.

	•	The remaining 20% interest in the JV Company that owns Chesterfield Rehabilitation Center. Our subsidiary exercised its call option to buy, for $3,900,000, 100% of the interest owned by its joint venture partner. As we continued to retain control of this entity despite the change in ownership interest, in accordance with ASC 805, we are accounting for this as an equity transaction. Thus, no gains or losses with respect to these changes were recognized in net income, nor are the carrying amounts of the assets and liabilities of the subsidiary adjusted. As such, this acquisition is not included within the purchase price allocation disclosed within this footnote.

	•	An approximately 192,000 square foot medical office building located in Pittsburgh, Pennsylvania. This building, which is located near the Federal North and Allegheny General Hospital Centers, was 99% occupied as of December 31, 2010 and was purchased on April 29, 2010 for $40,472,000.

	•	A two-building medical office portfolio in Denton, Texas, and Lewisville, Texas totaling approximately 56,000 square feet. The Lewisville medical office building, purchased on June 25, 2010 for $4,800,000, consists of approximately 18,000 square feet and is 100% leased to one tenant with a remaining term of 10 years. The Denton medical office building, purchased on June 30, 2010 for $8,700,000, is an approximately 38,000 square foot facility located on the campus of Texas Health Presbyterian Hospital Denton, and it is 100% leased through 2017.

	•	An approximately 47,000 square foot medical office building located in Charleston, South Carolina for approximately $10,446,000. This building, which was purchased on June 28, 2010, was 100% leased as of December 31, 2010, and it is located immediately adjacent to the campus of the Medical University of South Carolina, or MUSC, and MUSC Children’s Hospital.

	•	The majority interest in the Fannin partnership, which owns a medical office building located in Houston, Texas, on June 30, 2010. The value of the 7900 Fannin building is approximately $38,100,000. We acquired the general partner interest and the majority of the limited partner interests in the Fannin partnership. The original physician investors were provided the right to remain in the Fannin partnership, receive limited partner units in our operating partnership,and/or receive cash. Some of the original physician investors elected to remain in the Fannin partnership post-closing as limited partners. The property, known as 7900 Fannin, consists of a four-story building totaling approximately 176,000 square feet that is adjacent to The Woman’s Hospital of Texas, an HCA-affiliated hospital within the Texas Medical Center. The building was over 99% occupied as of December 31, 2010.

	•	An approximately 35,000 square foot medical office building located in Stockbridge, Georgia. This building, which is situated in the southern suburbs of Atlanta, Georgia near the Henry Medical Center, had an occupancy rate of 89% as of December 31, 2010 and was purchased on July 15, 2010 for $8,140,000.

	•	An approximately 45,000 square foot Class A medical office building located in San Luis Obispo, California. This building, which is located on the campus of the Sierra Vista Regional Medical Center, was approximately 85% occupied as of December 31, 2010 and was purchased on August 4, 2010 for $10,950,000.

	•	A two-building medical office portfolio in Orlando, Florida totaling approximately 102,000 square feet for an aggregate purchase price of $18,300,000. The Oviedo Medical Center is located approximately 10 miles northeast of Orlando and is adjacent to Florida Hospital’s CentraCare urgent care center. The Lake Underhill Medical Center is located on the campus of Florida Hospital East Orlando. Both

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		buildings were purchased on September 29, 2010, and they had an aggregate occupancy of 86% as of December 31, 2010.


	•	A two-building medical office portfolio is Santa Fe, New Mexico totaling approximately 54,000 square feet for an aggregate purchase price of $15,792,000. One of these buildings, which comprises approximately 34,000 square feet of the total, was purchased on September 30, 2010 for $9,560,000. The second, approximately 20,000 square foot building was purchased on December 22, 2010 for $6,232,000. Both of the buildings are located adjacent to the CHRISTUS St. Vincent Hospital and are 100% leased by St. Vincent Hospital.

	•	A five-building portfolio located in Nevada, New York, Missouri, Arizona, and Florida. The portfolio, which had an aggregate purchase price of approximately $83,412,000, was 97% leased as of December 31, 2010 and is comprised of on-campus medical office buildings totaling over 306,000 square feet. San Martin Medical Arts Pavilion is an approximately 73,000 square foot multi-tenant medical office building located in Las Vegas, Nevada, that was purchased on September 30, 2010 for approximately $18,061,000. The St. Francis Medical Arts Pavilion, also purchased on September 30, 2010, is an approximately 77,000 square foot multi-tenant medical office building located in Poughkeepsie, New York that was acquired for approximately $22,143,000. We purchased the Des Peres Medical Arts Pavilion, an approximately 48,000 square foot multi-tenant medical office building located in St. Louis, Missouri, for approximately $14,034,000 on November 12, 2010. The Gateway Medical Plaza, an approximately 60,000 square foot multi-tenant medical office building in Tucson, Arizona, was purchased on December 7, 2010 for approximately $16,349,000. Finally, the Medical Arts Pavilion, an approximately 48,000 square foot multi-tenant medical office building located on the campus of the Wellington Regional Medical Center acute care hospital in Wellington, Florida, was purchased on December 23, 2010 for approximately $12,825,000.

	•	A six-story, approximately 229,000 square foot building located in Pittsburgh, Pennsylvania that serves as the corporate headquarters for West Penn Allegheny Health System. This building, which was purchased for $39,000,000 on October 29, 2010, was approximately 88% occupied as of December 31, 2010 and is located a half mile from Allegheny General Hospital.

	•	An approximately 89,000 square foot medical office building located in Raleigh, North Carolina. This building was purchased on November 12, 2010 for $16,500,000 and had an occupancy rate of approximately 91% as of December 31, 2010.

	•	An approximately 17,000 square foot, single tenant building in Temple Terrace, Florida. This building, which is located adjacent to a medical office building purchased as part of the Columbia Portfolio, is 100% occupied by the Florida Orthopaedic Institute Surgery Center and was purchased on December 7, 2010 for $5,875,000.

	•	A portfolio of four long-term acute care hospitals located in Orlando and Tallahassee, Florida, Augusta, Georgia, and Dallas Texas totaling approximately 219,000 square feet. Each hospital is 100% occupied by a single tenant, and all are within proximity to multiple referring health systems. This portfolio was purchased on December 17, 2010 for an aggregate purchase price of $102,045,000.

	•	Two buildings within a three-building, approximately 201,000 aggregate square foot medical office portfolio located in Phoenix, Arizona. The Estrella Medical Center, which was approximately 93% occupied as of December 31, 2010 and was purchased December 22, 2010 for $29,500,000, is an approximately 147,000 square foot medical office building located on the campus of the Banner Estrella Hospital. Phoenix Medical Center, which was 100% occupied as of December 31, 2010 and was purchased on December 22, 2010 for $6,309,000, is a two story off-campus medical office building consisting of approximately 34,000 square feet. See Note 22, Subsequent Events, for discussion of our purchase of the third and final building within this portfolio.

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	•	Nine buildings consisting of approximately 152,000 square feet located in Cary, North Carolina. This medical office park, which was purchased December 30, 2010 for $28,000,000, is situated on 15 acres of land adjacent to the Wake Med Cary Hospital and had a weighted average aggregate occupancy rate of 85% as of December 31, 2010.

We recorded revenues and net income for the year ended December 31, 2010 of approximately $27,365,000 and $622,000 respectively, related to our 2010 acquisitions.

Supplementary Pro Forma Information

Assuming the property acquisitions discussed above had occurred on January 1, ~~2008,~~2010, for the year ended December 31, ~~2008,~~2010, pro forma revenues, net income (loss) attributable to controlling interest and net income (loss) per basic and diluted share would have been ~~$109,346,000, $(40,590,000)~~$267,887,000, $35,284,000 and ~~$(0.95),~~$0.21, respectively.

Assuming the property acquisitions discussed above had occurred on January 1, ~~2007,~~2009, for the year ended December 31, ~~2007,~~2009, pro forma revenues, net income (loss) attributable to controlling interest and net income (loss) per basic and diluted share would have been ~~$75,711,000, $(32,134,000)~~$228,880,000, $32,684,000 and ~~$(3.23),~~$0.29, respectively.

The pro forma results are not necessarily indicative of the operating results that would have been obtained had the acquisitions occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.


~~20.~~19.	Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash and cash equivalents, restricted cash and accounts receivable from tenants. As of December 31, ~~2008~~2010 and ~~2007,~~2009, we had cash and cash ~~equivalent~~equivalents and restricted cash accounts in excess of Federal Deposit Insurance Corporation, or FDIC, insured limits. We believe this risk is not significant. Concentration of credit risk with respect to accounts receivable from tenants is limited. We perform credit evaluations of prospective tenants, and security deposits or letters of credit are obtained upon lease execution. In addition, we evaluate tenants in connection with the acquisition of a property.

As of December 31, 2010, we had interests in 16 consolidated properties located in Texas, which accounted for 15.3% of our total annualized rental income, interests in seven consolidated properties in Arizona, which accounted for 11.7% of our total annualized rental income, interests in five consolidated properties located in South Carolina, which accounted for 9.7% of our total annualized rental income, interests in 10 consolidated properties in Florida, which accounted for 8.8% of our total annualized rental income, and interests in seven consolidated properties in Indiana, which accounted for 8.5% of our total annualized rental income. This rental income is based on contractual base rent from leases in effect as of December 31, 2010. Accordingly, there is a geographic concentration of risk subject to fluctuations in each of these states’ economies.

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 state’s economy.

For the year ended December 31, 2008, we had interests in seven consolidated properties located in Texas, which accounted for 17.1% of our total rental income and interests in five consolidated properties located in Indiana, which accounted for 15.5% of our total rental income. Medical Portfolio 3 accounts for 11.3% of our aggregate total rental income. This rental income is based on contractual base rent from leases

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in effect as of December 31, 2008. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.

For the ~~year~~years ended December 31, 2010, 2009, and 2008, none of our tenants at our consolidated properties accounted for 10.0% or more of our aggregate annual rental ~~income~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

For the year ended December 31, 2007, we had interests in three consolidated properties located in Ohio, which accounted for 15.1% of our total rental income, interests in six consolidated properties located in Florida, which accounted for 14.2% of our total rental income and interest in three consolidated properties located in Georgia, which accounted for 12.8% of our total rental income. This rental income is based on contractual base rent from leases in effect as of December 31, 2007. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.

~~For the year ended December 31, 2007, one of our tenants at our consolidated properties accounted for 10.0% or more of our aggregate annual rental income, as follows:~~

Percentage of
Lease

2007 Annual
2007 Annual
GLA
Expiration

Tenant Base Rent * Base Rent Property (Square Feet) Date

Institute for Senior Living of Florida $ 4,095,000 11.2 % East Florida
Senior Care
Portfolio 355,000 05/31/14
* Annualized rental income is based on contractual base rent from leases in effect as of December 31, 2007. The loss of the tenant or their inability to pay rent could have a material adverse effect on our business and results of operations.
~~For the period from April 28, 2006 (Date of Inception) through December 31, 2006, we did not own any properties.~~

~~21.~~20. Per Share Data

We report earnings (loss) per share pursuant to ~~SFAS No. 128,~~ASC 260,Earnings Per ~~Share.~~Share,or ASC 260. We include unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” in the computation of basic and diluted income per share pursuant to the two-class method as described in ASC 260. We have two classes of common stock for purposes of calculating our earnings per share. These classes are our common stock and our restricted stock. For the years ended December 31, 2010, 2009, and 2008, all of our earnings were distributed and the calculated earnings per share amount would be the same for both classes as they all have the same rights to distributed earnings.
Basic earnings (loss) per share attributable for all periods presented are computed by dividing net income (loss), reduced by the amount of dividends declared in the current period, by the weighted average number of shares of our common stock outstanding during the period. Diluted earnings (loss) per share are computed based on the weighted average number of shares of our common stock and all potentially dilutive securities, if any. ~~Shares of restricted common stock give~~For the years ended December 31, 2010, 2009 and 2008, we did not have any securities that gave rise to potentially dilutive shares of our common stock.
For the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006, we recorded a net loss of $28,448,000, $7,666,000 and $242,000, respectively. As of December 31, 2008, 2007 and 2006, 68,500 shares, 26,000 shares and 16,000 shares, respectively, of restricted common stock were outstanding, but were excluded from the computation of diluted earnings per share because such shares of restricted common stock were anti-dilutive during these periods.

~~22.~~21. Selected Quarterly Financial Data (Unaudited)

Set forth below is the unaudited selected quarterly financial data. We believe that all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly, and in accordance with GAAP, the unaudited selected quarterly financial data when read in conjunction with our consolidated financial statements.

~~136~~162

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Quarters Ended												Quarters Ended
	December 31, 2008			September 30, 2008			June 30, 2008			March 31, 2008			December 31, 2010			September 30, 2010			June 30, 2010			March 31, 2010

Revenues	$	27,108,000		$	23,920,000		$	16,273,000		$	13,117,000		$	56,717,000		$	51,692,000		$	46,522,000		$	44,948,000
Expenses		(24,814,000	)		(22,671,000	)		(15,078,000	)		(12,569,000	)		(58,230,000	)		(43,413,000	)		(39,968,000	)		(38,420,000	)

Income before other income (expense)		2,294,000			1,249,000			1,195,000			548,000
Income (loss) before other income (expense)														(1,513,000	)		8,279,000			6,554,000			6,528,000
Other expense, net		(18,890,000	)		(6,887,000	)		(681,000	)		(7,237,000	)		(7,596,000	)		(7,682,000	)		(6,686,000	)		(7,299,000	)

(Loss) income before minority interests		(16,596,000	)		(5,638,000	)		514,000			(6,689,000	)
Income (loss) before discontinued operations														(9,109,000	)		597,000			(132,000	)		(771,000	)
Income from discontinued operations														419,000			411,000			377,000			289,000

Minority interests		117,000			(47,000	)		(188,000	)		79,000
Net income (loss)														(8,690,000	)		1,008,000			245,000			(482,000	)

Net (loss) income	$	(16,479,000	)	$	(5,685,000	)	$	326,000		$	(6,610,000	)
Less: net (income) loss attributable to noncontrolling interest of limited partners														(44,000	)		125,000			(1,000	)		(64,000	)

Net income (loss) per share — basic	$	(0.25	)	$	(0.12	)	$	0.01		$	(0.27	)
Net income (loss) attributable to controlling interest													$	(8,734,000	)	$	1,133,000		$	244,000		$	(546,000	)

Net income (loss) per share — diluted	$	(0.25	)	$	(0.12	)	$	0.01		$	(0.27	)
Net income (loss) per share — basic and diluted:
Continuing operations													$	(0.05	)	$	0.00		$	0.00		$	0.00

Discontinued operations													$	0.00		$	0.00		$	0.00		$	0.00

Net income (loss) per share attributable to controlling interest													$	(0.05	)	$	0.00		$	0.00		$	0.00

Weighted average number of shares outstanding —
Basic		65,904,688			47,735,536			33,164,866			24,266,342			191,583,752			166,281,800			154,594,418			145,335,661

Diluted		65,904,688			47,735,536			33,165,015			24,266,342			191,583,752			166,480,852			154,815,137			145,335,661

Quarters Ended
December 31, 2007 September 30, 2007 June 30, 2007 March 31, 2007

Revenues $ 8,914,000 $ 4,787,000 $ 3,183,000 $ 742,000
Expenses (8,850,000 ) (5,545,000 ) (3,726,000 ) (1,003,000 )

Income (loss) before other income (expense) 64,000 (758,000 ) (543,000 ) (261,000 )
Other expense, net (4,070,000 ) (1,175,000 ) (660,000 ) (271,000 )

Loss before minority interests (4,006,000 ) (1,933,000 ) (1,203,000 ) (532,000 )

Minority interests 8,000 — — —

Net loss $ (3,998,000 ) $ (1,933,000 ) $ (1,203,000 ) $ (532,000 )

Loss per share — basic and diluted $ (0.21 ) $ (0.15 ) $ (0.18 ) $ (0.73 )

Weighted average number of shares outstanding — basic and diluted 18,893,438 13,223,746 6,727,995 730,986

~~23.~~ ~~Subsequent Events~~
~~Status of our Offering~~
From January 1, 2009 through March 13, 2009, we had received and accepted subscriptions in our offering for 15,206,071 shares of our common stock, for an aggregate amount of $151,903,000, excluding shares of our common stock issued under the DRIP. As of March 13, 2009, we had received and accepted subscriptions in our offering for 89,030,880 shares of our common stock, for an aggregate amount of $889,301,000, excluding shares of our common stock issued under the DRIP.
~~137~~163

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Quarters Ended
December 31, 2009 September 30, 2009 June 30, 2009 March 31, 2009

Revenues $ 36,644,000 $ 30,948,000 $ 29,678,000 $ 29,016,000
Expenses (36,254,000 ) (34,481,000 ) (28,587,000 ) (29,782,000 )

Income (loss) before other income (expense) 390,000 (3,533,000 ) 1,091,000 (766,000 )
Other expense, net (4,947,000 ) (6,671,000 ) (4,780,000 ) (6,186,000 )

Loss before discontinued operations (4,557,000 ) (10,204,000 ) (3,689,000 ) (6,952,000 )
Income from discontinued operations 193,000 130,000 154,000 152,000

Net loss (4,364,000 ) (10,074,000 ) (3,535,000 ) (6,800,000 )

Less: net income attributable to noncontrolling interest of limited partners (62,000 ) (70,000 ) (102,000 ) (70,000 )

Net loss attributable to controlling interest $ (4,426,000 ) $ (10,144,000 ) $ (3,637,000 ) $ (6,870,000 )

Net income (loss) per share — basic and diluted:
Continuing operations $ (0.03 ) $ (0.08 ) $ (0.03 ) $ (0.08 )

Discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00

Net loss per share attributable to controlling interest $ (0.03 ) $ (0.08 ) $ (0.03 ) $ (0.08 )

Weighted average number of shares outstanding —
Basic 135,259,514 124,336,078 106,265,880 84,672,174

Diluted 135,259,514 124,336,078 106,265,880 84,672,174

22. Subsequent Events
The significant events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the consolidated financial statements are summarized below.
Status of our Offering
From January 1, 2011 through February 28, 2011, the date at which we stopped offering shares in our follow-on offering (except for the DRIP), we had received and accepted subscriptions in our follow-on offering for 15,978,486 shares of our common stock, for an aggregate amount of $159,458,000, excluding shares of our common stock issued under the DRIP. As of February 28, 2011, we had received and accepted subscriptions in our follow-on offering for 66,582,725 shares of our common stock, for an aggregate amount of $664,992,000, excluding shares of our common stock issued under the DRIP.
For noncustodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by end of business March 15, 2011 were accepted. For custodial accounts, subscription agreements signed on or before February 28, 2011 with all documents and funds received by end of business March 31, 2011 will be accepted. From January 1, 2011 through March 21, 2011, we had received and accepted subscriptions in our follow-on offering for 21,055,363 shares of our common stock, for an
164

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

aggregate amount of $210,057,000, excluding shares of our common stock issued under the DRIP. As of March 21, 2011, we had received and accepted subscriptions in our follow-on offering for 71,659,602 shares of our common stock, for an aggregate amount of $715,591,000, excluding shares of our common stock issued under the DRIP.

Financing

On February 1, 2011, we closed a senior secured real estate term loan in the amount of $125,500,000 from Wells Fargo Bank, National Association, or Wells Fargo Bank, N.A. The primary purposes of the term loan included refinancing four Wells Fargo Bank loans totaling approximately $89,969,000, paying off one Wells Fargo Bank loan totaling $10,943,000, and providing post-acquisition financing on a recently purchased property. Interest shall be payable monthly at a rate of one-month LIBOR plus 2.35%, which currently equates to 2.61%. Including the impact of the interest rate swap discussed below, the weighted average rate associated with this term loan is 3.10%. This is lower than the weighted average rate of 4.18% (including the impact of interest rate swaps) that we were previously paying on the refinanced debt. The term loan matures on December 31, 2013 and includes two12-month extension options, subject to the satisfaction of certain conditions. The loan agreement for the term loan includes customary financial covenants for loans of this type, including a maximum ratio of total indebtedness to total assets, a minimum ratio of EBITDA to fixed charges, and a minimum level of tangible net worth. In addition, the term loan agreement for this secured term loan includes events of default that we believe are usual for loans and transactions of this type. The term loan is secured by 25 buildings within 12 property portfolios in 13 states and has a two year period in which no prepayment is permitted. Our operating partnership has guaranteed 25% of the principal balance and 100% of the interest under the term loan.

In anticipation of the term loan, we purchased an interest rate swap on November 3, 2010, with Wells Fargo Bank as counterparty, for a notional amount of $75,000,000. The interest rate swap was amended on January 25, 2011. The interest rate swap is secured by the pool of assets collateralizing the secured term loan. The effective date of the swap is February 1, 2011, and matures no later than December 31, 2013. The swap will fix one-month LIBOR at 1.0725% which when added to the spread of 2.35%, will result in a total interest rate of approximately 3.4225% for $75,000,000 of the term loan during the initial term.

Credit Facility Repayment

As discussed in Note 9, Revolving Credit Facility, as of December 31, 2010, we had drawn $7,000,000 on our new unsecured revolving credit facility in order to fund the acquisition of operating properties. This amount was repaid in full on January 31, 2011.

Share Repurchases

In January ~~2009,~~2011, we repurchased ~~133,842~~815,845 shares of our common stock, for an aggregate amount of ~~$1,310,000,~~approximately $7,857,000, under our share repurchase plan.

~~Property~~Distributions

On January 3, 2011, for the month ended December 31, 2010, we paid distributions of $12,280,000 ($6,401,000 in cash and $5,879,000 in shares of our common stock) pursuant to the DRIP.

On February 1, 2011, for the month ended January 31, 2011, we paid distributions of $12,722,000 ($6,646,000 in cash and $6,076,000 in shares of our common stock) pursuant to the DRIP.

On March 1, 2011, for the month ended February 28, 2011, we paid distributions of $11,969,000 ($6,273,000 in cash and $5,696,000 in shares of our common stock) pursuant to the DRIP.

165

Healthcare Trust of America, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Completed Acquisitions


	•	On February 11, 2011, we closed on the final building within a portfolio of three medical office buildings located in Phoenix, Arizona. This one story, approximately 20,000 square foot medical office building was purchased for $3,762,000 and has an occupancy rate of approximately 84%. As discussed in Note 18, Business Combinations, the other two buildings comprising this portfolio were purchased during the year ended December 31, 2010. The aggregate purchase price of the total portfolio was $39,494,000 and the aggregate gross leasable area acquired is approximately 201,000 square feet. The portfolio has an aggregate weighted average occupancy rate of approximately 95%.

	•	On February 16, 2011, we closed on the final building within a portfolio of nine medical office buildings located in Albany and Carmel, New York, North Adams, Massachusetts, and Temple Terrace Florida, the aggregate purchase price for which was $196,646,000. As discussed in Note 18, Business Combinations, the other eight buildings comprising the remainder of this portfolio were purchased during the year ended December 31, 2010. This particular building, purchased for $9,182,000 is located in North Adams, Massachusetts has approximately 47,000 square feet of gross leasable area and is 100% occupied.

	•	On March 24, 2011, we closed on a portfolio of two medical office buildings located in Bristol, Tennessee, both of which are located near the campus of Wellmont Health System’s Bristol Regional Medical Center. The first building, which is a two-story, approximately 40,000 square foot medical office building, was purchased for $5,925,000 and is 100% occupied. The second building, the purchase price for which was $17,445,000, is a three-story medical office building consisting of approximately 81,000 square feet. This building is also 100% occupied.

~~In March 2009, we acquired~~

Amended and Restated 2006 Incentive Plan

On February 24, 2011, our board approved the Amended and Restated 2006 Incentive Plan in order to increase the number of shares available for grant thereunder from 2,000,000 to 10,000,000. The Amended and Restated 2006 Incentive Plan also includes additional amendments designed, among other things, to address recent tax developments and address stockholder preferences, including removal of the “liberal” share counting provisions and elimination of the single-trigger vesting of awards upon a ~~medical condo~~change in control on a go-forward basis. Our board has not yet made any additional grants pursuant to the Amended and ~~a four-building medical office property comprising 188,000 square feet of gross leasable area in two states, for an aggregate purchase price of $34,104,000.~~Restated 2006 Incentive Plan.

~~Termination of Services Agreement~~April 2011 Distributions

On March 17, 2009, Grubb & Ellis Realty Investors provided notice of its termination of the Services Agreement, pursuant to which it provides subscription processing and investor relations services to us. The termination24, 2011, our board authorized distributions for April 2011. These distributions will be ~~effective September 20, 2009.~~calculated based on stockholders of record each day during such month and will equal a 7.25% annualized rate based on a $10.00 share price.

~~138~~166

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

December 31, 2010

Balance at
Adjustments

Beginning
Charged to
to Valuation
Balance at

of Period Expenses Accounts Deductions End of Period

Year Ended December 31, 2008
Allowance for doubtful accounts $ — $ 442,000 $ — $ 44,000 $ 398,000
Year Ended December 31, 2009
Allowance for doubtful accounts $ 398,000 $ 965,000 $ — $ 141,000 $ 1,222,000
Year Ended December 31, 2010
Allowance for doubtful accounts $ 1,222,000 $ 1,022,000 $ — $ 318,000 $ 1,926,000

Healthcare Trust of America, Inc.

SCHEDULE III — REAL ESTATE ~~OPERATING PROPERTIES~~INVESTMENTS AND
ACCUMULATED DEPRECIATION
December 31, ~~2008~~2010

Cost
Gross Amount at Which

Initial Cost to Company Capitalized
Carried at Close of Period
Buildings,
Subsequent
Buildings,

Improvements and
to
Improvements and
Accumulated
Date of
Date

Encumbrances Land Fixtures Acquisition(a) Land Fixtures Total(b) Depreciation(d)(e) construction acquired

Southpointe Office Parke and Epler Parke I (Medical Office) Indianapolis, IN $ 9,146,000 $ 2,889,000 $ 10,015,000 $ 130,000 $ 2,889,000 $ 10,145,000 $ 13,034,000 $ (754,000) 1991 & 1996/2002 01/22/07

Crawfordsville Medical Office Park and Athens Surgery Center (Medical Office) Crawfordsville, IN 4,264,000 699,000 5,473,000 — 699,000 5,473,000 6,172,000 (364,000) 1998/2000 01/22/07

The Gallery Professional Building (Medical Office) St. Paul, MN 6,000,000 1,157,000 5,009,000 1,008,000 1,157,000 6,017,000 7,174,000 (450,000) 1979 03/09/07

Lenox Office Park, Building G (Office) Memphis, TN 12,000,000 1,670,000 13,626,000 23,000 1,670,000 13,649,000 15,319,000 (1,275,000) 2000 03/23/07

Commons V Medical Office Building (Medical Office) Naples, FL 9,939,000 4,173,000 9,070,000 — 4,173,000 9,070,000 13,243,000 (471,000) 1991 04/24/07

Yorktown Medical Center and Shakerag Medical Center (Medical Office) Peachtree City and Fayetteville, GA 13,530,000 3,545,000 15,792,000 49,000 3,545,000 15,841,000 19,386,000 (1,192,000) 1987/1994 05/02/07

Thunderbird Medical Plaza (Medical Office) Glendale, AZ 14,000,000 3,842,000 19,680,000 275,000 3,842,000 19,955,000 23,797,000 (1,205,000) 1975, 1983, 1987 05/15/07

Triumph Hospital Northwest and Triumph Hospital Southwest (Healthcare Related Facility) Houston and Sugarland, TX — 3,047,000 28,550,000 (1,000 ) 3,047,000 28,549,000 31,596,000 (1,829,000) 1986/1989 06/08/07

Gwinnett Professional Center (Medical Office) Lawrenceville, GA 5,604,000 1,290,000 7,246,000 198,000 1,290,000 7,444,000 8,734,000 (426,000) 1985 07/27/07

1 and 4 Market Exchange (Medical Office) Columbus, OH 14,500,000 2,326,000 17,208,000 276,000 2,326,000 17,484,000 19,810,000 (883,000) 2001/2003 08/15/07

Kokomo Medical Office Park (Medical Office) Kokomo, IN 8,300,000 1,779,000 9,613,000 225,000 1,779,000 9,838,000 11,617,000 (589,000) 1992, 1994, 1995, 2003 08/30/07

St. Mary Physicians Center (Medical Office) Long Beach, CA 8,280,000 1,815,000 10,242,000 (4,000 ) 1,815,000 10,238,000 12,053,000 (386,000) 1992 09/05/07

2750 Monroe Boulevard (Office) Valley Forge, PA — 2,323,000 22,634,000 (3,000 ) 2,323,000 22,631,000 24,954,000 (1,052,000) 1985 09/10/07

East Florida Senior Care Portfolio (Healthcare Related Facility) Jacksonville, Winter Park and Sunrise, FL 29,917,000 10,078,000 34,870,000 (1,000 ) 10,078,000 34,869,000 44,947,000 (1,887,000) 1985, 1988, 1989 09/28/07

Northmeadow Medical Center (Medical Office) Roswell, GA 7,865,000 1,245,000 9,109,000 171,000 1,245,000 9,280,000 10,525,000 (441,000) 1999 11/15/07

Tucson Medical Office Portfolio (Medical Office) Tucson, AZ — 1,309,000 17,574,000 181,000 1,309,000 17,755,000 19,064,000 (738,000) 1979, 1980, 1994 1970, 1985, 1990, 11/20/07

Lima Medical Office Portfolio (Medical Office) Lima, OH — 701,000 18,336,000 37,000 701,000 18,373,000 19,074,000 (930,000) 1996, 2004, 1920 12/07/07

Highlands Ranch Park Plaza (Medical Office) Highlands Ranch, CO 8,853,000 2,240,000 10,426,000 255,000 2,240,000 10,681,000 12,921,000 (490,000) 19,831,985 12/19/07

Park Place Office Park (Medical Office) Dayton, OH 10,943,000 1,987,000 11,341,000 138,000 1,987,000 11,479,000 13,466,000 (603,000) 1987, 1988, 2002 12/20/07

Chesterfield Rehabilitation Center (Medical Office) Chesterfield, MO 22,000,000 4,212,000 27,901,000 — 4,212,000 27,901,000 32,113,000 (807,000) 2007 12/20/07

Medical Portfolio 1 (Medical Office) Overland, KS and Largo, Brandon, and Lakeland, FL 21,340,000 4,206,000 28,373,000 810,000 4,206,000 29,183,000 33,389,000 (1,035,000) 1978, 1986, 1997, 1995 02/01/08
The following schedule presents our total real estate investments and accumulated depreciation for both our operating properties and those properties classified as held for sale as of December 31, 2010:

Cost
Gross Amount at Which

Initial Cost to Company Capitalized
Carried at Close of Period
Buildings,
Subsequent
Buildings,

Improvements and
to
Improvements and
Accumulated
Date

Encumbrances Land Fixtures Acquisition(a) Land Fixtures Total(b) Depreciation(d)(e) Date of construction acquired
Southpointe Office Parke and Epler Parke I (Medical Office) Indianapolis, IN $ 9,121,000 $ 2,889,000 $ 10,015,000 $ 4,700,000 $ 2,889,000 $ 14,716,000 $ 17,605,000 (2,145,000) 1991 &1996/2002 1/22/2007
Crawfordsville Medical Office Park and Athens Surgery Center (Medical Office) Crawfordsville, IN 4,256,000 699,000 5,474,000 20,000 699,000 5,494,000 6,193,000 (747,000) 1998/2000 1/22/2007
The Gallery Professional Building (Medical Office) St. Paul, MN 6,000,000 1,157,000 5,009,000 2,587,000 1,157,000 7,596,000 8,753,000 (1,300,000) 1979 3/9/2007
Lenox Office Park, Building G (Office) Memphis, TN 12,000,000 1,670,000 13,626,000 67,000 1,670,000 13,693,000 15,363,000 (2,518,000) 2000 3/23/2007
Commons V Medical Office Building (Medical Office) Naples, FL 9,672,000 4,173,000 9,070,000 61,000 4,173,000 9,131,000 13,304,000 (1,032,000) 1991 4/24/2007
Yorktown Medical Center and Shakerag Medical Center (Medical Office) Peachtree City and Fayetteville, GA 13,434,000 3,545,000 15,792,000 1,988,000 3,545,000 17,780,000 21,325,000 (2,516,000) 1987/1994 5/2/2007
Thunderbird Medical Plaza (Medical Office) Glendale, AZ 13,741,000 3,842,000 19,680,000 1,352,000 3,842,000 21,032,000 24,874,000 (2,792,000) 1975, 1983, 1987 5/15/2007
Triumph Hospital Northwest and Triumph Hospital Southwest (Healthcare Related Facility) Houston and Sugarland, TX — 3,047,000 28,550,000 — 3,047,000 28,550,000 31,597,000 (4,139,000) 1986/1989 6/8/2007
Gwinnett Professional Center (Medical Office) Lawrenceville, GA 5,417,500 1,290,000 7,246,000 293,000 1,290,000 7,539,000 8,829,000 (1,057,000) 1985 7/27/2007
1 and 4 Market Exchange (Medical Office) Columbus, OH 0 2,326,000 17,208,000 1,387,000 2,326,000 18,595,000 20,921,000 (2,025,000) 2001/2003 8/15/2007
Kokomo Medical Office Park (Medical Office) Kokomo, IN 0 1,779,000 9,613,000 308,000 1,779,000 9,921,000 11,700,000 (1,520,000) 1992, 1994, 1995, 2003 8/30/2007
St. Mary Physicians Center (Medical Office) Long Beach, CA — 1,815,000 10,242,000 115,000 1,815,000 10,358,000 12,173,000 (951,000) 1992 9/5/2007
2750 Monroe Boulevard (Office) Valley Forge, PA — 2,323,000 22,631,000 14,000 2,323,000 22,645,000 24,968,000 (2,631,000) 1985 9/10/2007
East Florida Senior Care Portfolio (Healthcare Related Facility) Jacksonville, Winter Park and Sunrise,FL 0 10,078,000 34,870,000 — 10,078,000 34,869,000 44,948,000 (4,907,000) 1985, 1988, 1989 9/28/2007
Northmeadow Medical Center (Medical Office) Roswell, GA 7,545,000 1,245,000 9,109,000 174,000 1,245,000 9,283,000 10,528,000 (1,215,000) 1999 11/15/2007
Tucson Medical Office Portfolio (Medical Office) Tucson, AZ — 1,309,000 17,574,000 403,000 1,309,000 17,976,000 19,286,000 (2,127,000) 1979, 1980, 1994 1970, 1985, 1990, 11/20/2007
Lima Medical Office Portfolio (Medical Office) Lima, OH — 701,000 19,052,000 86,000 701,000 19,137,000 19,839,000 (2,531,000) 1996, 2004, 1920 12/7/2007
Highlands Ranch Park Plaza (Medical Office) Highlands Ranch, CO 8,853,000 2,240,000 10,426,000 709,000 2,240,000 11,136,000 13,376,000 (1,536,000) 19,831,985 12/19/2007
Park Place Office Park (Medical Office) Dayton, OH 10,943,000 1,987,000 11,341,000 275,000 1,987,000 11,616,000 13,603,000 (1,670,000) 1987, 1988, 2002 12/20/2007
Chesterfield Rehabilitation Center (Medical Office) Chesterfield, MO 22,000,000 4,212,000 27,901,000 771,000 4,313,000 28,570,400 32,883,400 (2,467,000) 2007 12/20/2007
Medical Portfolio 1 (Medical Office) Overland, KS and Largo, Brandon, and Lakeland, FL 19,580,000 4,206,000 28,373,000 1,393,000 4,206,000 29,766,000 33,972,000 (3,364,000) 1978, 1986, 1997, 1995 2/1/2008
~~139~~
168

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

SCHEDULE III — REAL ESTATE ~~OPERATING PROPERTIES~~INVESTMENTS AND

ACCUMULATED DEPRECIATION — (Continued)


								Cost			Gross Amount at Which
				Initial Cost to Company				Capitalized			Carried at Close of Period
						Buildings,		Subsequent					Buildings,																	Cost			Gross Amount at Which
						Improvements and		to					Improvements and					Accumulated		Date of	Date					Initial Cost to Company				Capitalized			Carried at Close of Period
		Encumbrances		Land		Fixtures		Acquisition(a)			Land		Fixtures		Total(b)			Depreciation(d)(e)		construction	acquired							Buildings,		Subsequent					Buildings,
						Improvements and		to					Improvements and					Accumulated			Date
																								Encumbrances		Land		Fixtures		Acquisition(a)			Land		Fixtures			Total(b)		Depreciation(d)(e)		Date of construction	acquired
Fort Road Medical Building (Medical Office)	St. Paul, MN	$	5,800,000	$	1,571,000	$	5,786,000	$	21,000		$	1,571,000	$	5,807,000	$	7,378,000		$	(184,000)	1981		03/06/08	St. Paul, MN	$	0	$	1,571,000	$	5,786,000		199,000		$	1,571,000	$	5,984,000		$	7,556,000		(615,000)	1981		3/6/2008

Liberty Falls Medical Plaza (Medical Office)	Liberty Township, OH		—		842,000		5,639,000		1,000			842,000		5,640,000		6,482,000			(155,000)	2008		03/19/08	Liberty Township, OH		—		842,000		5,640,000		514,000			842,000		6,153,000			6,996,000		(664,000)	2008		3/19/2008

Epler Parke Building B (Medical Office)	Indianapolis, IN		3,861,000		857,000		4,497,000		(17,000	)		857,000		4,480,000		5,337,000			(183,000)	2004		03/24/08	Indianapolis, IN		3,734,000		857,000		4,461,000		(4,610,000	)		857,000		(148,000	)		708,000		—	2004		3/24/2008

Cypress Station Medical Office Building (Medical Office)	Houston, TX		7,235,000		1,345,000		8,312,000		11,000			1,345,000		8,323,000		9,668,000			(254,000)	1981/2004-2006		03/25/08	Houston, TX		7,043,000		1,345,000		8,312,000		584,000			1,345,000		8,897,000			10,241,000		(945,000)	1981/2004-2006		3/25/2008

Vista Professional Center (Medical Office)	Lakeland, FL		—		1,082,000		3,588,000		(29,000	)		1,082,000		3,559,000		4,641,000			(150,000)	1996/1998		03/27/08	Lakeland, FL		—		1,082,000		3,588,000		27,000			1,082,000		3,614,819			4,696,819		(547,000)	1996/1998		3/27/2008

Senior Care Portfolio 1 (Healthcare Related Facility)	Arlington, Galveston, Port Arthur and Texas City, TX and Lomita and El Monte, CA		24,800,000		4,871,000		30,002,000		—			4,871,000		30,002,000		34,873,000			(679,000)	1993, 1994, 1994, 1994/1996 1964/1969 1959/1963		Various	Arlington, Galveston, Port Arthur and Texas City, TX and Lomita and El Monte, CA		0		4,871,000		30,002,000		—			4,871,000		30,002,000			34,873,000		(2,609,000)	1993, 1994, 1994, 1994/1996 1964/1969 1959/1963		Various

Amarillo Hospital (Healthcare Related Facility)	Amarillo, TX		—		1,110,000		17,688,000		—			1,110,000		17,688,000		18,798,000			(331,000)	2007		05/15/08	Amarillo, TX		—		1,110,000		17,688,000		5,000			1,110,000		17,693,000			18,803,000		(1,327,000)	2007		5/15/2008

5995 Plaza Drive (Office)	Cypress, CA		16,830,000		5,109,000		17,961,000		58,000			5,109,000		18,019,000		23,128,000			(398,000)	1986		05/29/08	Cypress, CA		16,276,000		5,109,000		17,961,000		161,000			5,109,000		18,122,000			23,231,000		(1,806,000)	1986		5/29/2008

Nutfield Professional Center (Medical Office)	Derry, NH		8,808,000		1,075,000		10,320,000		38,000			1,075,000		10,358,000		11,433,000			(172,000)	1963/1990 & 1996		06/03/08	Derry, NH		8,518,000		1,075,000		10,320,000		102,000			1,075,000		10,423,000			11,497,000		(774,000)	1963/1990 & 1996		6/3/2008

SouthCrest Medical Plaza (Medical Office)	Stockbridge, GA		12,870,000		4,259,000		14,636,000		(103,000	)		4,259,000		14,533,000		18,792,000			(307,000)	2005-2006		06/24/08	Stockbridge, GA		12,870,000		4,259,000		14,636,000		119,000			4,259,000		14,755,000			19,014,000		(1,589,000)	2005-2006		6/24/2008

Medical Portfolio 3 (Medical Office)	Indianapolis, IN		58,000,000		9,355,000		70,259,000		1,335,000			9,355,000		71,594,000		80,949,000			(1,744,000)	1995, 1993, 1994, 1996, 1993, 1995, 1989, 1988, 1989, 1992, 1989		06/26/08	Indianapolis, IN		58,000,000		9,355,000		70,259,000		6,555,000			9,355,000		76,813,000			86,169,000		(9,056,000)	1995, 1993, 1994, 1996, 1993, 1995, 1989, 1988, 1989, 1992, 1989		6/26/2008

Academy Medical Center (Medical Office)	Tuczon, AZ		5,016,000		1,193,000		6,106,000		154,000			1,193,000		6,260,000		7,453,000			(163,000)	1975-1985		06/26/08	Tuczon, AZ		4,851,000		1,193,000		6,106,000		375,000			1,193,000		6,481,000			7,674,000		(813,000)	1975-1985		6/26/2008

Decatur Medical Plaza (Medical Office)	Decatur, GA		7,900,000		3,166,000		6,862,000		325,000			3,166,000		7,187,000		10,353,000			(118,000)	1976		06/27/08	Decatur, GA		7,900,000		3,166,000		6,862,000		325,000			3,166,000		7,187,000			10,353,000		(631,000)	1976		6/27/2008

Medical Portfolio 2 (Medical Office)	O’Fallon and St. Louis, MO and Keller and Wichita Falls, TX		30,216,000		5,360,000		33,506,000		43,000			5,360,000		33,549,000		38,909,000			(674,000)	2001, 2001, 2006, 1957/1989/2003 & 2003		Various	O’Fallon and St. Louis, MO and Keller and Wichita Falls, TX		29,311,000		5,360,000		33,506,000		71,000			5,360,000		33,576,000			38,937,000		(3,372,000)	2001, 2001, 2006, 1957/1989/2003 & 2003		Various

Renaissance Medical Centre (Medical Office)	Bountiful, UT		20,323,000		3,701,000		24,442,000		—			3,701,000		24,442,000		28,143,000			(345,000)	2004		06/30/08	Bountiful, UT		19,703,000		3,701,000		24,442,000		39,000			3,701,000		24,481,000			28,182,000		(1,708,000)	2004		6/30/2008

Oklahoma City Medical Portfolio (Medical Office)	Oklahoma City, OK		—		—		25,976,000		456,000			—		26,432,000		26,432,000			(208,000)	1991, 1996/2007		09/16/08	Oklahoma City, OK		—				25,976,000		1,505,000					27,481,000			27,481,000		(2,044,000)	1991, 1996/2007		9/16/2008

Medical Portfolio 4 (Medical Office)	Phoenix, AZ, Parma and Jefferson West, OH, and Waxahachie, Greenville, and Cedar Hill, TX		29,898,000		2,632,000		38,652,000		343,000			2,632,000		38,995,000		41,627,000			(415,000)	1972/1980 & 2006, 1977, 1984, 2006, 2007, 2007		Various	Phoenix, AZ, Parma and Jefferson West, OH, and Waxahachie, Greenville, and Cedar Hill, TX		8,029,000		2,632,000		38,652,000		1,200,000			2,632,000		39,852,000			42,484,000		(3,248,000)	1972/1980 & 2006, 1977, 1984, 2006, 2007, 2007		Various

Mountain Empire Portfolio (Medical Office)	Kingsport and Bristol, TN and Pennington Gap and Norton, VA		17,304,000		804,000		18,400,000		—			804,000		18,403,000		19,207,000			—	1986/1991/1993/1982/ 1990,1997/1976 & 2007, 1986, 1993 & 1995, 1981 & 1987/1999		09/12/08	Kingsport and Bristol, TN and Pennington Gap and Norton, VA		18,408,000		804,000		20,149,000		630,000			804,000		20,775,000			21,579,000		(2,692,000)	1986/1991/1993/1982/1990,1997/1976 & 2007, 1986, 1993 & 1995, 1981 & 1987/1999		9/12/2008

Mountain Plains — TX (Medical Office)	San Antonio and Webster, TX		—		1,248,000		34,858,000		—			1,248,000		34,858,000		36,106,000			(363,000)	1998, 2005, 2006, 2006		12/18/08	San Antonio and Webster, TX		—		1,248,000		34,857,000		(14,000	)		1,248,000		34,843,000			36,091,000		(2,405,000)	1998, 2005, 2006, 2006		12/18/2008

Marietta Health Park (Medical Office)	Marietta, GA		7,200,000		1,276,000		12,197,000		—			1,276,000		12,197,000		13,473,000			—	2000		12/22/08	Marietta, GA		7,200,000		1,276,000		12,197,000		200,000			1,276,000		12,397,000			13,673,000		(1,017,000)	2000		12/22/2008



		$	462,542,000	$	107,389,000	$	721,775,000	$	6,403,000		$	107,389,000	$	728,181,000	$	835,570,000	(c)	$	(24,650,000)


Wisconsin Medical Portfolio 1																							Milwaukee, WI		—		1,980,000		26,032,000		—			1,980,000		26,032,000			28,012,000		(2,168,000)	1964/1969, 1983-1997 & 2007		2/27/2009
Wisconsin Medical Portfolio 2																							Franklin, WI		9,952,000		1,574,000		31,655,000		—			1,574,000		31,655,000			33,229,000		(2,007,000)	2001-2004		5/28/2009
Greenville Hospital Portfolio																							Greenville, SC		71,220,000		3,952,000		135,776,000		923,000			3,952,000		136,699,000			140,651,000		(5,187,000)	1974, 1982-1999, & 2004-2009		9/18/2009

~~140~~169

~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.

SCHEDULE III — REAL ESTATE ~~OPERATING PROPERTIES~~INVESTMENTS AND

ACCUMULATED DEPRECIATION — (Continued)

Healthcare Trust of America, Inc.

SCHEDULE III — REAL ESTATE INVESTMENTS AND

ACCUMULATED DEPRECIATION — (Continued)

(a) The cost capitalized subsequent to acquisition is net of dispositions.

(b)

The changes in total real estate (including both our operating properties and those classified as held for sale as of December 31, 2010) for the years ended December 31, 2010, 2009 and 2008 are as follows:


	Amount

Balance as of December 31, 2007	$	357,578,000
Acquisitions		473,132,000
Additions		6,590,000
Dispositions		(1,730,000	)

Balance as of December 31, 2008		835,570,000
Acquisitions		363,679,000
Additions		7,556,000
Dispositions		(327,000	)

Balance as of December 31, 2009		1,206,478,000
Acquisitions		683,055,000
Additions		13,358,000
Dispositions		(305,000	)

Balance as of December 31, 2010	$	1,902,586,000


(c)		The aggregate cost of our real estate (both operating properties and those classified as held for sale as of December 31, 2010) for federal income tax purposes was $2,262,357,000.

(d)		The changes in accumulated depreciation (including both our operating properties and those classified as held for sale as of December 31, 2010) for the years ended December 31, ~~2008~~2010, 2009 and ~~2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006~~2008 are as follows:

Amount

Balance as of April 28, 2006 (Date of Inception) $ —
Acquisitions —
Additions —
Dispositions —

Balance as of December 31, 2006 —
Acquisitions 356,565,000
Additions 1,046,000
Dispositions (33,000 )

Balance as of December 31, 2007 357,578,000
Acquisitions 473,132,000
Additions 6,590,000
Dispositions (1,730,000 )

Balance as of December 31, 2008 $ 835,570,000

~~(c) The aggregate cost of our real estate for federal income tax purposes was $994,509,000.~~


~~(d)~~	~~The changes in accumulated depreciation for the years ended December 31, 2008 and 2007 and for the period from April 28, 2006 (Date of Inception) through December 31, 2006 are as follows:~~


	Amount			Amount

Balance as of April 28, 2006 (Date of Inception)	$	—
Additions		—
Dispositions		—

Balance as of December 31, 2006		—
Additions		4,590,000
Dispositions		(2,000	)

Balance as of December 31, 2007		4,588,000
Additions		20,523,000		$	20,523,000
Dispositions		(461,000	)		(461,000	)

Balance as of December 31, 2008	$	24,650,000			24,650,000
Additions					32,189,000
Dispositions					(150,000	)

Balance as of December 31, 2009					56,689,000
Additions					48,737,000
Dispositions					(303,000	)

Balance as of December 31, 2010				$	105,123,000


(e)		The cost of building and improvements is depreciated on a straight-line basis over the estimated useful lives of 39 years and the shorter of the lease term or useful life, ranging from one month to ~~241~~240 months, respectively. Furniture, fixtures and equipment is depreciated over five years.

~~141~~171

Healthcare Trust of America, Inc.

SCHEDULE IV — MORTGAGE LOANS ON REAL ESTATE ASSETS

12/31/2010


									Periodic				Carrying
									Payment		Face Amount		Amount of
Mortgage Loans	Description	Security		Interest Rate			Maturity Date		Terms(4)		of Mortgages		Mortgages


MacNeal Hospital Medical Office Building Berwyn, Illinois	Medical Office Building		Property		5.95	%(1)		11/01/2011		I	$	7,500,000	$	6,988,000

MacNeal Hospital Medical Office Building Berwyn, Illinois	Medical Office Building		Property		5.95	%(1)		11/01/2011		I		7,500,000		6,988,000

St. Luke’s Medical Office Building Phoenix, Arizona	Medical Office Building		Property		5.85	%(2)		11/01/2011		I		3,750,000		3,495,000

St. Luke’s Medical Office Building Phoenix, Arizona	Medical Office Building		Property		5.85	%(2)		11/01/2011		I		1,250,000		1,165,000

Rush Presbyterian Medical Office Building Oak Park, Illinois	Medical Office Building		Property		7.76	%(3)		12/01/2014		I		41,150,000		38,455,000


Total											$	61,150,000	$	57,091,000




(1)		The effective interest rate associated with these notes as of December 31, 2010 is 7.93%.

(2)		The effective interest rate associated with these notes as of December 31, 2010 is 7.80%.

(3)		Represents an average interest rate for the life of the note with an effective interest rate of 8.6%.

(4)		I = Interest only

The following shows changes in the carrying amounts of mortgage loans receivable during the period:


Balance at December 31, 2009	$	54,763,000
Additions:
New mortgage loans		—
Amortization of discount and capitalized loan costs		2,328,000
Deductions:
Collections of principal		—

Balance at December 31, 2010	$	57,091,000

172

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc. (Registrant)

By	/s/ Scott D. Peters Scott D. Peters	Chief Executive Officer, President and ~~President~~Chairman of the Board (principal executive officer)

Date	March ~~27, 2009~~25, 2011

By	/s/ Kellie S. Pruitt Kellie S. Pruitt	Chief ~~Accounting~~Financial Officer (principal financial officer and principal accounting officer)

Date	March ~~27, 2009~~25, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



By	/s/ Scott D. Peters Scott D. Peters	Chief Executive Officer, President and ~~President~~Chairman of the Board (principal executive officer)

Date	March ~~27, 2009~~25, 2011

By	/s/ Kellie S. Pruitt Kellie S. Pruitt	Chief ~~Accounting~~Financial Officer (principal financial officer and principal accounting officer)

Date	March ~~27, 2009~~25, 2011

By	/s/ Maurice J. DeWald Maurice J. DeWald	Director

Date	March ~~27, 2009~~25, 2011

By	/s/ W. Bradley Blair, II W. Bradley Blair, II	Director

Date	March ~~27, 2009~~25, 2011

By	/s/ Warren D. Fix Warren D. Fix	Director

Date	March ~~27, 2009~~25, 2011

By	/s/ Larry L. Mathis Larry L. Mathis	Director

Date	March ~~27, 2009~~25, 2011

By	/s/ Gary T. Wescombe Gary T. Wescombe	Director

Date	March ~~27, 2009~~25, 2011

~~142~~173

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 ~~Triple Net Properties, LLC and NNN Capital Corp.~~ 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 Registrant’s transition to self-management, on August 24, 2009, Grubb & Ellis ~~Realty Investors, LLC,~~Healthcare REIT, Inc. and Grubb & Ellis ~~Securities,~~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 ~~the~~such name changes in order to accurately reflect the names of the parties on the documents listed.

Pursuant to Item 601(a)(2) ofRegulation S-K, this Exhibit Index immediately precedes the exhibits.

The following exhibits are included, or incorporated by reference, in this Annual Report onForm 10-K for the fiscal year ended December 31, ~~2008~~2010 (and are numbered in accordance with Item 601 ofRegulation ~~S-K~~S-K).


3.1		~~Third~~Fourth Articles of Amendment and Restatement ~~of NNN Healthcare/Office REIT, Inc. (included as Exhibit 3.1 to our Annual Report onForm 10-K~~ ~~for the year ended December 31, 2006 and incorporated herein by reference)~~
~~3.2~~		~~Articles of Amendment, effective December 10, 2007~~ (included as Exhibit 3.1 to our Current Report onForm 8-K filed December ~~10, 2007)~~20, 2010 and incorporated herein by reference).
~~3.3~~3.2		Bylaws of NNN Healthcare/Office REIT, Inc. (included as Exhibit 3.2 to ~~the registrant’s~~our Registration Statement onForm S-11 ~~(File~~(Commission File.No. 333-133652) filed on April 28, 2006 and incorporated herein by reference)
~~4.1~~3.3		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 onForm S-11 (FileNo. 333-133652) filed on April 21, 2009
3.4		Amendment to the Bylaws of Grubb & Ellis Healthcare REIT, Inc., effective January 1, 2011 (included as Exhibit 3.2 to our Current Report onForm 8-K filed August 27, 2009 and incorporated herein by reference)
4.1		Healthcare Trust of America, Inc. Share Repurchase Plan, effective August 25, 2008 (included as Exhibit ~~4.1~~C to our ~~Current Report on for~~Post-Effective Amendment No. 14 to the~~8-K~~Form S-11 filed ~~August 25, 2008~~on October 23, 2009 and incorporated herein by reference)
4.2		~~Form~~Healthcare Trust of ~~Subscription Agreement~~America, Inc. Distribution Reinvestment Plan, effective September 20, 2006 (included as Exhibit B to ~~the prospectus)~~
~~4.3~~		~~Distribution Reinvestment Plan (included as Exhibit C~~our Post-Effective Amendment No. 14 to the ~~prospectus)~~
~~4.4~~		~~Escrow Agreement (included as Exhibit 4.4 to our Quarterly Report~~Form S-11 filed on ~~theForm 10-Q~~ ~~for the quarter ended September 30, 2006~~October 23, 2009 and incorporated herein by reference)
10.1		Amended and Restated Advisory Agreement among Grubb & Ellis Healthcare REIT, Inc., Grubb & Ellis Healthcare REIT Holdings, LP, Grubb & Ellis Healthcare REIT Advisory, 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)~~
~~10.2~~		Agreement of Limited Partnership of NNN Healthcare/Office REIT Holdings, L.P. (included as Exhibit 10.2 to our Quarterly Report onForm 10-Q for the quarter ended September 30, 2006 and incorporated herein by reference)
~~10.2.1~~10.2		Amendment No. 1 to Agreement of Limited Partnership of Grubb & Ellis Healthcare REIT Holdings, LP (included as Exhibit 10.2 to our Current Report onForm 8-K filed on November 19, 2008 and incorporated herein by reference)
~~10.3†~~10.3		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 onForm 8-K filed August 27, 2009 and incorporated herein by reference)
10.4†		NNN Healthcare/Office REIT, Inc. 2006 Incentive Plan (including the 2006 Independent Directors Compensation Plan) (included as Exhibit 10.3 to ~~the registrant’s~~our Registration Statement onForm S-11 ~~(File~~(Commission FileNo. 333-133652) filed on April 28, 2006 and incorporated herein by reference)

174

~~10.4†~~
10.5†		Amendment to the NNN Healthcare/Office REIT, Inc. 2006 Incentive Plan (including the 2006 Independent Directors Compensation Plan) (included as Exhibit 10.4 to ~~the registrant’s~~Amendment No. 6 to our Registration Statement onForm S-11 ~~Amendment No. 6 (File~~(Commission FileNo. 333-133652) filed on September 12, 2006 and incorporated herein by reference)
~~10.5~~10.6†		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 ofForm 10-K filed March 27, 2009 and incorporated herein by reference)
10.7†		Amendment to the Healthcare Trust 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~~America, Inc. 2006 Independent Directors Compensation Plan, effective as of May 20, 2010 (included as Exhibit 10.1 to our ~~Current~~Quarterly Report onForm ~~8-K~~10-Q filed ~~on March 5, 2007~~August 16, 2010 and incorporated herein by reference).

~~143~~

10.8†
~~10.6~~		~~Agreement for Purchase~~Healthcare Trust of America, Inc. Amended and ~~Sale of Real Property and Escrow Instructions by and between Fort Road Associated Limited Partnership and Triple Net Properties, LLC,~~Restated 2006 Incentive Plan, dated ~~January 14, 2008~~February 24, 2011 (included as Exhibit 10.1 to our Current Report onForm 8-K filed March ~~12, 2008~~2, 2011 and incorporated herein by reference).
~~10.7~~10.9†		~~First Amendment to~~Employment 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)~~
~~10.8~~		~~ISDA Master Agreement by and~~ between ~~National City Bank and G&E~~Grubb & Ellis Healthcare REIT, ~~Chesterfield Rehab Hospital, LLC, dated January 20, 2008~~Inc. and Scott D. Peters, effective as of July 1, 2009 (included as Exhibit 10.1 to our Current Report onForm 8-K filed ~~February 1, 2008~~July 8, 2009 and incorporated herein by reference)
~~10.9~~10.10†		~~First~~ Amendment to Employment Agreement ~~for Purchase and Sale~~with Scott D. Peters, effective as of ~~Real Property and Escrow Instructions by and between Fort Road Associates Limited Partnership and Triple Net Properties, LLC, dated January 31, 2008~~May 20, 2010 (included as Exhibit 10.2 to our ~~Current~~Quarterly Report onForm ~~8-K~~10-Q filed ~~March 12, 2008~~August 16, 2010 and incorporated herein by reference).
~~10.10~~10.11†		~~Second Amendment to~~Employment 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)~~
~~10.11~~		~~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 onForm 8-K~~ ~~filed February 7, 2008 and incorporated herein by reference)~~
~~10.12~~		~~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 onForm 8-K~~ ~~filed February 7, 2008 and incorporated herein by reference)~~
~~10.13~~		~~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 onForm 8-K~~ ~~filed February 7, 2008 and incorporated herein by reference)~~
~~10.14~~		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)~~
~~10.15~~		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)~~
~~10.16~~		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)~~
~~10.17~~		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)~~
~~10.18~~		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)~~

~~144~~


~~10.19~~		~~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 onForm 8-K~~ ~~filed February 7, 2008~~ and ~~incorporated herein by reference)~~
~~10.20~~		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)~~
~~10.21~~		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)~~
~~10.22~~		~~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~~Mark Engstrom, effective as of ~~February 12, 2008 (included as Exhibit 10.1 to our Current Report onForm 8-K~~ ~~filed February 26, 2008 and incorporated herein by reference)~~
~~10.23~~		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)~~
~~10.24~~		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)~~
~~10.25~~		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)~~
~~10.26~~		~~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 onForm 8-K~~ ~~filed March 12, 2008 and incorporated herein by reference)~~
~~10.27~~		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)~~
~~10.28~~		~~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 onForm 8-K~~ ~~filed March 12, 2008 and incorporated herein by reference)~~
~~10.29~~		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)~~
~~10.30~~		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)~~
~~10.31~~		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)~~
~~10.32~~		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)~~

~~145~~


~~10.33~~		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)~~
~~10.34~~		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)~~
~~10.35~~		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)~~
~~10.36~~		~~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 onForm 8-K~~ ~~filed March 31, 2008 and incorporated herein by reference)~~
~~10.37~~		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)~~
~~10.38~~		~~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 onForm 8-K~~ ~~filed March 31, 2008 and incorporated herein by reference)~~
~~10.39~~		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)~~
~~10.40~~		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)~~
~~10.41~~		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)~~
~~10.42~~		~~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 onForm 8-K~~ ~~filed June 25, 2008 and incorporated herein by reference)~~
~~10.43~~		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)~~
~~10.44~~		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)~~
~~10.45~~		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)~~

~~146~~


~~10.46~~		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)~~
~~10.47~~		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)~~
~~10.48~~		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)~~
~~10.49~~		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)~~
~~10.50~~		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)~~
~~10.51~~		~~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 onForm 8-K~~ ~~filed June 27, 2008 and incorporated herein by reference)~~
~~10.52~~		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)~~
~~10.53~~		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)~~
~~10.54~~		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)~~
~~10.55~~		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)~~
~~10.56~~		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)~~
~~10.57~~		~~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~~July 1, 2009 (included as Exhibit 10.2 to our Current Report onForm 8-K filed July ~~1, 2008~~8, 2009 and incorporated herein by reference)
~~10.58~~10.12†		~~Syndicated Promissory Note (1) by G&E~~Employment Agreement between Grubb & Ellis Healthcare REIT, ~~Medical Portfolio 3, LLC for the benefit~~Inc. and Kellie S. Pruitt, effective as of ~~Fifth Third Bank, dated June 26, 2008~~July 1, 2009 (included as Exhibit 10.3 to our Current Report onForm 8-K filed July ~~1, 2008~~8, 2009 and incorporated herein by reference)

~~147~~

10.13
~~10.59~~		~~Syndicated Promissory Note (2)~~Form of Amended and Restated Indemnification Agreement executed by ~~G&E Healthcare REIT Medical Portfolio 3, LLC for the benefit of Fifth Third Bank, dated June 26, 2008~~Scott D. Peters, W. Bradley Blair, II, Maurice J. DeWald, Warren D. Fix, Larry L. Mathis and Gary T. Wescombe (included as Exhibit ~~10.4~~10.1 to our Current Report onForm 8-K filed ~~July 1, 2008~~December 20, 2010 and incorporated herein by reference).
~~10.60~~10.14		~~Guaranty~~Form of ~~Payment~~Indemnification Agreement executed by ~~Grubb & Ellis Healthcare REIT, Inc. for the benefit of Fifth Third Bank, dated June 26, 2008~~Kellie S. Pruitt and Mark D. Engstrom (included as Exhibit ~~10.5~~10.2 to our Current Report onForm 8-K filed ~~July 1, 2008~~December 20, 2010 and incorporated herein by reference).
~~10.61~~10.15		~~Mortgage, Security~~Purchase and Sale Agreement ~~Fixture Filing and Assignment of Leases and Rents (Boone County)~~ by and between ~~G&E Healthcare REIT Medical Portfolio 3,~~Greenville Hospital System and HTA Greenville, LLC, ~~and Fifth Third Bank,~~ dated ~~June 26, 2008 (included as Exhibit 10.6 to our Current Report onForm 8-K~~ ~~filed~~ July ~~1, 2008 and incorporated herein by reference)~~
~~10.62~~		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)~~
~~10.63~~		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)~~
~~10.64~~		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)~~
~~10.65~~		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)~~
~~10.66~~		~~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~~15, 2009 (included as Exhibit 10.1 to our Current Report onForm 8-K filed July ~~3, 2008~~16, 2009 and incorporated herein by reference)
~~10.67†~~10.16		~~Employment~~First Amendment to Purchase and Sale Agreement by and between ~~Grubb & Ellis Healthcare REIT, Inc.~~Greenville Hospital System and ~~Scott D. Peters~~HTA Greenville, LLC, dated August 14, 2009 (included as Exhibit 10.1 to our Current Report onForm 8-K filed August 20, 2009 and incorporated herein by reference)
10.17		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 onForm 8-K filed August 27, 2009 and incorporated herein by reference)
10.18		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 onForm 8-K filed ~~on November 19, 2008~~August 27, 2009 and incorporated herein by reference)
~~10.68†~~10.19		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 onForm 8-K, filed September 11, 2009 and incorporated herein by reference)
10.20		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 onForm 8-K, filed September 22, 2009 and incorporated herein by reference)

175


10.21		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 onForm 8-K, filed September 22, 2009 and incorporated herein by reference)
10.22		Credit Agreement by and among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., Deutsche Bank Securities Inc., U.S. Bank National Association and Fifth Third Bank and the ~~Grubb & Ellis~~Lenders Party Hereto, dated November 22, 2010 (included as Exhibit 10.1 to our Current Report onForm 8-K filed November 23, 2010 and incorporated herein by reference).
10.23		Guaranty for the benefit of JPMorgan Chase Bank, N.A. dated November 22, 2010 by Healthcare ~~REIT,~~Trust of America, Inc. ~~2006 Independent Directors Compensation Plan, effective January~~and certain Subsidiaries of Healthcare Trust of America, Inc. named therein (included as Exhibit 10.2 to our Current Report onForm 8-K filed November 23, 2010 and incorporated herein by reference).
10.24		Purchase and Sale Agreement dated October 26, 2010 by and between COLUMBIA NAH GROUP, LLC and HTA — NORTHERN BERKSHIRE, LLC (included as Exhibit 10.7 to Post-Effective Amendment No. 1 ~~2009~~to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.25		Purchase and Sale Agreement dated October 26, 2010 by and between COLUMBIA 90 ASSOCIATES, LLC and HTA — REGION HEALTH, LLC (included as Exhibit 10.8 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.26		Purchase and Sale Agreement dated October 26, 2010 by and between WASHINGTON AVE. CAMPUS, LLC and HTA — 1223 WASHINGTON, LLC (included as Exhibit 10.9 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.27		Purchase and Sale Agreement dated October 26, 2010 by and between COLUMBIA TEMPLE TERRACE, LLC and HTA — 13020 TELECOM, LLC (included as Exhibit 10.10 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.28		Purchase and Sale Agreement dated October 26, 2010 by and between PATROON CREEK BLVD, LLC and HTA — PATROON CREEK, LLC (included as Exhibit 10.11 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.29		Purchase and Sale Agreement dated October 26, 2010 by and between COLUMBIA PHC GROUP, LLC and HTA — PUTNAM CENTER, LLC (included as Exhibit 10.12 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.30		Purchase and Sale Agreement dated October 26, 2010 by and between PINSTRIPES, LLC and HTA — 1092 MADISON, LLC (included as Exhibit 10.13 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.31		Purchase and Sale Agreement dated October 26, 2010 by and between COLUMBIA WASHINGTON VENTURES, LLC and HTA — WASHINGTON MEDICAL ARTS I, LLC (included as Exhibit 10.14 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).
10.32		Purchase and Sale Agreement dated October 26, 2010 by and between 1375 ASSOCIATES, LLC, ERLY REALTY DEVELOPMENT, INC, and HTA — WASHINGTON MEDICAL ARTS II, LLC (included as Exhibit 10.15 to Post-Effective Amendment No. 1 to the Company’sForm S-11 Registration Statement (Commission FileNo. 333-158418), filed on December 27, 2010 and incorporated herein by reference).

176


21.1*		Subsidiaries of ~~Grubb & Ellis~~ Healthcare ~~REIT,~~Trust of America, Inc.
23.1*		Consent of Independent Registered Public Accounting Firm
31.1*		Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief ~~Accounting~~Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief ~~Accounting~~Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002


*		Filed herewith.

†		Compensatory plan or arrangement.

~~148~~177


				Page

PART I
	Item 1.	Business			3
	Item 1A.	Risk Factors			1728
	Item 1B.	Unresolved Staff Comments			5156
	Item 2.	Properties			5157
	Item 3.	Legal Proceedings			5460
	Item 4.	~~Submission of Matters to a Vote of Security Holders~~Reserved			5460

PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			5561
	Item 6.	Selected Financial Data			5864
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			6066
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk			7784
	Item 8.	Financial Statements and Supplementary Data			7885
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			7885
	Item ~~9A(T).~~9A.	Controls and Procedures			7886
	Item 9B.	Other Information			7986

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance			8087
	Item 11.	Executive Compensation			8793
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			93109
	Item 13.	Certain Relationships and Related Transactions, and Director Independence			94110
	Item 14.	Principal Accounting Fees and Services			96111

PART IV
	Item 15.	Exhibits, Financial Statement Schedules			97112
			SIGNATURES			~~SIGNATURES~~173
~~EX-10.68~~EX-21.1
~~EX-21.1~~EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2


	•	consist of 53 medical office buildings, four long-term acute care hospitals, and one healthcare-related office;

	•	comprise a total of approximately 3,514,000 square feet of GLA, bringing our total portfolio square footage to ~~preserve, protect and return our stockholders’ capital contributions;~~

	•	~~to realize growth in the value~~approximately 10,919,000 square feet as of ~~our investments upon our ultimate sale of such investments;~~December 31, 2010; and

	•	possess an average occupancy rate of approximately 96% (unaudited) as of December 31, 2010.


	•	Our total portfolio of properties maintained an average occupancy rate of approximately 91% (unaudited) as of December 31, 2010.

	•	In March of 2010, we launched a follow-on offering to raise up to $2.2 billion. As part of our strategic review process, and in response to the substantial equity being raised in our follow-on offering, we determined that it was in the best interest of our stockholders to cease raising equity in that offering. We announced the termination of our follow-on offering in December 2010 and we stopped offering shares on February 28, 2011, except for sales of shares pursuant to the DRIP. Under the follow-on offering, we raised approximately $506 million during the year ended December 31, 2010, excluding shares issued under the DRIP.

	•	On November 22, 2010, we entered into a credit agreement, under which we obtained an unsecured revolving credit facility in an aggregate maximum principal amount of $275,000,000. Subject to the terms of the credit agreement, the maximum principal amount of the credit agreement may be increased by up to an additional $225,000,000, for a total principal amount of $500,000,000, subject to customary conditions. JP Morgan Chase Bank, N.A., serves as administrative agent with Wells Fargo Bank, N.A. and Deutsche Bank Securities Inc. as syndication agents, U.S. Bank National Association and Fifth Third Bank as documentation agents, and a syndicate of banks as lenders.

	•	During the year ended December 31, 2010, we secured approximately $79,125,000 in new long term financing with a weighted average interest rate of 5.75% and a weighted average term of 8.1 years. These loans are secured by our Greenville, Wisconsin MOB II, Deaconess, and NIH Triad properties.

	•	On February 1, 2011, we closed a senior secured real estate term loan in the amount of $125,500,000. Our lender is Wells Fargo Bank, National Association, or Wells Fargo Bank, N.A. The purpose of the term loan was to refinance four Wells Fargo Bank loans maturing in 2010 and 2011 that totaled approximately $89,969,000, to pay off one Wells Fargo Bank loan totaling $10,943,000, and to provide post-acquisition financing on a recently purchased property. Additionally, we entered into an interest rate swap on $75,000,000 of this secured term loan, effectively fixing the interest rate for this portion from the variable rate of one-month LIBOR plus 2.35% to 3.42%.

	•	In August 2010, we engaged J.P. Morgan Securities, LLC, or JP Morgan, to act as our lead strategic advisor. JP Morgan is assisting our board and management team in exploring various actions to maximize stockholder value, including the assessment of various liquidity alternatives. As we have previously disclosed, we intend to effect a liquidity event by September 2013. We may consider, among other alternatives, listing our shares on a national securities exchange, or a Listing, a merger transaction, or a sale of substantially all of our assets.

	•	On October 18, 2010 we entered into a Redemption, Termination, and Release Agreement, or the Redemption Agreement, with our former advisor to purchase the limited partner interest, including all


	•	changes in the demand for and methods of delivering healthcare services;

	•	changes in third party reimbursement policies;

	•	significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas;

	•	continued pressure by private and governmental payors to reduce payments to providers of services; and

	•	increased scrutiny of billing, referral and other practices by federal and state authorities.


(1)		With respect to property type, MOB refers to Medical Office Building, HOSP refers to specialty inpatient facilities including specialty rehabilitation hospitals and long-term acute care hospitals, SEN refers to senior care facilities, and OFF refers to healthcare-related office buildings.

(2)		Annualized ~~rental revenue~~base rent is based on contractual base rent from leases in effect as of December 31, ~~2008.~~2010.

~~(2)~~(3)		Occupancy includes all leased space of the respective portfolio including master leases, as of December 31, 2010.

(4)		Average ~~annual~~annualized base rent per occupied square foot as of December 31, ~~2008.~~2010.

(5)		On December 31, 2010, we received notice from the lessee of four of the buildings within our Senior Care Portfolio 1 portfolio that the lessee intended to exercise a purchase option within the lease. This option provides the lessee with the ability to purchase these buildings at the July 6, 2011 expiration of the lease, provided that we were given timely notice and that a specified deposit was made, among other customary closing conditions. The lessee made the necessary deposit to evidence their intention to purchase these buildings, and we have thus classified these buildings as held for sale as of December 31, 2010 within our consolidated financial statements, as further discussed within Note 3, Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations, to our consolidated financial statements.


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


	Three Months Ended
	December 31,		September 30,		June 30,		March 31,
	2010		2010		2010		2010

Distributions paid in cash	$	17,306,000	$	15,666,000	$	14,366,000	$	12,838,000
Distributions reinvested		15,995,000		14,490,000		13,544,000		12,522,000

Total distributions	$	33,301,000	$	30,156,000	$	27,910,000	$	25,360,000

Source of distributions:
Cash flow from operations	$	8,880,000	$	17,847,000	$	19,230,000	$	12,546,000
Debt financing		24,421,000		12,309,000		8,680,000		12,814,000
Offering proceeds		—		—		—		—

Total sources	$	33,301,000	$	30,156,000	$	27,910,000	$	25,360,000


							Maximum
							Approximate
							Dollar Value
					Total Number of		of Shares that May
					Shares Purchased		Yet be Purchased
					as Part of		Under the
	Total Number of		Average Price		Publicly Announced		Plans or
Period	Shares Purchased		Paid per Share		Plan or Program(1)		Programs

October 1, 2008 to October 31, 2008		46,322	$	9.58		46,322	$	(2	)
November 1, 2008 to November 30, 2008		—	$	—		—	$	—
December 1, 2008 to December 31, 2008		—	$	—		—	$	—


(1)		Our board of directors adopted a share repurchase plan effective September 20, 2006. Our board of directors adopted, and we publicly announced, an amended share repurchase plan effective August 25, 2008. ~~Through~~On November 24, 2010, we amended and restated our share repurchase plan again effective January 1, 2011. From inception through December 31, ~~2008,~~2010, we had repurchased ~~109,748~~7,288,019 shares of our common stock pursuant to our share repurchase plan. Our share repurchase plan does not have an expiration date but may be terminated at our board of directors’ discretion.

(2)		~~Subject~~Repurchases under our share repurchase plan are subject to the discretion of our board of directors. The plan provides that repurchases are subject to funds being available ~~we will limit the number of shares of our common stock repurchased during~~and are limited in any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year. The plan also provides that we will fund a maximum of $10 million of share repurchase requests per quarter, subject to available funding, and that funding for repurchases will come exclusively from and will be limited to proceeds we receive from the sale of shares under our DRIP during such quarter.


	Payments Due by Period
	Less than 1 Year		1-3 Years		4-5 Years		More than 5 Years
	(2009)		(2010-2011)		(2012-2013)		(After 2013)		Total

Principal payments — fixed rate debt	$	9,475,000	$	3,380,000	$	17,559,000	$	110,644,000	$	141,058,000
Interest payments — fixed rate debt		8,192,000		15,184,000		14,375,000		17,139,000		54,890,000
Principal payments — variable rate debt		2,425,000		319,059,000		—		—		321,484,000
Interest payments — variable rate debt (based on rates in effect as of December 31, 2008)		10,999,000		15,107,000		—		—		26,106,000

Total	$	31,091,000	$	352,730,000	$	31,934,000	$	127,783,000	$	543,538,000


	Fees Earned
	or Paid in Cash		Stock Awards
Name	($)(1)		($)(2)		Total ($)

W. Bradley Blair, II		54,000		22,681		76,681
Maurice J. DeWald		55,000		22,681		77,681
Warren D. Fix		53,000		22,681		75,681
Larry L. Mathis		49,000		22,681		71,681
Gary T. Wescombe		52,500		22,681		75,181


	Basic Annual		Meeting
	Retainer		Fees
Name	($)		($)

Blair		36,000		18,000
DeWald		36,000		19,000
Fix		36,000		17,000
Mathis		36,000		13,000
Wescombe		36,000		16,500


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.


	Number of Shares
Name of Beneficial Owners(1)	Beneficially Owned			Percentage

Scott D. ~~Peters(2)~~Peters		~~40,000~~325,000	*
~~Shannon K S Johnson(3)~~Kellie Pruitt		—136,343	*
Mark D. Engstrom		140,481	*
W. Bradley Blair, ~~II(2)~~II		~~10,000~~22,500	*
Maurice J. ~~DeWald(2)~~DeWald		~~10,000~~22,500	*
Warren D. ~~Fix(2)~~Fix		~~11,371~~26,006	*
Larry L. ~~Mathis(2)~~Mathis		~~15,525~~28,025	*
Gary T. ~~Wescombe(2)~~Wescombe		~~10,000~~22,500	*

All directors and executive officers as a group (9(8 persons)		~~96,896~~723,355	*


(1)		The address of each beneficial owner listed isc/o ~~Grubb &~~Healthcare ~~Ellis Healthcare REIT,~~Trust of America, Inc., The Promenade, ~~16427~~16435 North Scottsdale Road, Suite ~~440,~~320, Scottsdale, Arizona ~~85254, except for Shannon K S Johnson, whose address is 1551 N. Tustin Avenue, Suite 300, Santa Ana, California 92705.~~

~~(2)~~		~~Includes vested and non-vested shares of restricted common stock.~~

~~(3)~~		~~Served as our Chief Financial Officer until March 2009.~~85254.


	2010

Land	$	2,302,000
Building and improvements, net of accumulated depreciation of $2,161,000 as of December 31, 2010		22,238,000

Total real estate investments of properties held for sale, net	$	24,540,000


	2010

In place leases, net of accumulated amortization of $824,000 as of December 31, 2010	$	1,648,000
Tenant relationships, net of accumulated amortization of $376,000 as of December 31, 2010		2,120,000

Total assets of properties held for sale, net	$	3,768,000


	2010

Below market leases, net of accumulated amortization of $184,000 as of December 31, 2010	$	369,000

Total liabilities of properties held for sale, net	$	369,000


									Borrowings Incurred in
									Connection with the Acquisition						Acquisition
									Mortgage		Line		Unsecured		Fee to our
		Date		Ownership			Purchase		Loan		of		Note Payable		Advisor and
Property	Property Location	Acquired		Percentage			Price		Payables(1)		Credit(2)		to Affiliate(3)		its Affiliate

Medical Portfolio 1	Overland, KS and Largo, Brandon and Lakeland, FL		02/01/08		100	%	$	36,950,000	$	22,000,000	$	16,000,000	$	—	$	1,109,000
Fort Road Medical Building	St. Paul, MN		03/06/08		100	%		8,650,000		5,800,000		3,000,000		—		260,000
Liberty Falls Medical Plaza	Liberty Township, OH		03/19/08		100	%		8,150,000		—		7,600,000		—		245,000
Epler Parke Building B	Indianapolis, IN		03/24/08		100	%		5,850,000		3,861,000		6,100,000		—		176,000
Cypress Station Medical Office Building	Houston, TX		03/25/08		100	%		11,200,000		7,300,000		4,500,000		—		336,000
Vista Professional Center	Lakeland, FL		03/27/08		100	%		5,250,000		—		5,300,000		—		158,000
Senior Care Portfolio 1	Arlington, Galveston, Port Arthur and Texas City, TX and Lomita and El Monte, CA		Various		100	%		39,600,000		24,800,000		14,800,000		6,000,000		1,188,000
Amarillo Hospital	Amarillo, TX		05/15/08		100	%		20,000,000		—		20,000,000		—		600,000
5995 Plaza Drive	Cypress, CA		05/29/08		100	%		25,700,000		16,830,000		26,050,000		—		771,000
Nutfield Professional Center	Derry, NH		06/03/08		100	%		14,200,000		8,808,000		14,800,000		—		426,000


(1)		Represents the amount of the mortgage loan payable assumed or newly placed on the property in connection with the acquisition or secured by the property subsequent to acquisition.

(2)		Represents our purchase of the remaining 20% interest we previously did not own in the JV Company that owns Chesterfield Rehabilitation Center. See Note 13, Redeemable Noncontrolling Interest of Limited Partners, and Note 16, Business Combinations, for further information regarding this purchase.

(3)		Represents our purchase of the majority interest in the Fannin partnership, which owns the 7900 Fannin medical office building, the value of which is approximately $38,100,000. We acquired both the general partner interest and the majority of the limited partner interests in the Fannin partnership. The transaction provided the original physician investors with the right to remain in the Fannin partnership, to receive limited partnership units in our operating partnership, and/or receive cash. Ten investors elected to remain in the Fannin partnership, which represents a 16% noncontrolling interest in the property.

(4)		Represent purchases of additional medical office buildings during the year ended December 31, 2010 that are within portfolios we had previously acquired.


									Mortgage		Fee to our Former
		Date		Ownership			Purchase		Loan		Advisor and its
Property	Property Location	Acquired		Percentage			Price		Payables(1)		its Affiliate

Lima Medical Office Ste 207 Add-On(2)	Lima, OH		01/16/09		100	%	$	385,000	$	—	$	9,000
Wisconsin Medical Portfolio 1	Milwaukee, WI		02/27/09		100	%		33,719,000		—		843,000
Rogersville (Mountain Empire) Add-On(2)	Rogersville, TN		03/27/09		100	%		2,275,000		1,696,000		57,000
Lima Medical Office Ste 220 Add-On(2)	Lima, OH		04/21/09		100	%		425,000		—		11,000
Wisconsin Medical Portfolio 2	Franklin, WI		05/28/09		100	%		40,700,000		—		1,017,000
Greenville Hospital Portfolio	Greenville, SC		09/18/09		100	%		162,820,000		36,000,000		4,071,000
Mary Black Medical Office Building	Spartanburg, SC		12/11/09		100	%		16,250,000		—		406,000
Hampden Place Medical Office Building	Englewood, CO		12/21/09		100	%		18,600,000		8,785,000		465,000
Dallas LTAC Hospital	Dallas, TX		12/23/09		100	%		27,350,000		—		684,000
Smyth Professional Building	Baltimore, MD		12/30/09		100	%		11,250,000		—		281,000
Atlee Medical Portfolio	Corsicana, TX and		12/30/09		100	%		20,501,000		—		410,000
	Ft. Wayne, IN and San Angelo, TX
Denton Medical Rehabilitation Hospital	Denton, TX		12/30/09		100	%		15,485,000		—		324,000
Banner Sun City Medical Portfolio	Sun City, AZ and		12/31/09		100	%		107,000,000		45,109,000		1,605,000
	Sun City West, AZ

Total							$	456,760,000	$	91,590,000	$	10,183,000


(1)		Represents the amount of the mortgage loan payable assumed by us or newly placed on the property in connection with the acquisition or secured by the property subsequent to acquisition.

(2)		~~Borrowings under our secured revolving line~~Represent purchases of ~~credit with LaSalle and KeyBank.~~

~~(3)~~		Represents our unsecured note payable to affiliate evidenced by an unsecured promissory note. Our unsecured note payable to affiliate bears interest at a fixed rate and requires monthly interest-only payments foradditional medical office buildings during the ~~term of the unsecured note payable to affiliate.~~


~~(1)~~		~~Represents the amount of the mortgage loan payable assumed by us or newly placed on the property in connection with the acquisition or secured by the property subsequent to acquisition.~~

~~(2)~~		~~Borrowings under our secured revolving line of credit with LaSalle and KeyBank.~~

~~(3)~~		Represents our unsecured note payables to affiliate evidenced by unsecured promissory notes. Our unsecured note payables to affiliate bears interest at a fixed rate and require monthly interest-only payments for the term of the unsecured note payables to affiliate.


7.	Mortgage ~~Loan Payables,~~Loans Payable, Net ~~and Unsecured Note Payables to Affiliate~~


						December 31,
Property/ Loan	Interest Rate			Maturity Date		2008			2007

*Fixed Rate Debt:*
Southpointe Office Parke and Epler Parke I		6.11	%		09/01/16	$	9,146,000		$	9,146,000
Crawfordsville Medical Office Park and Athens Surgery Center		6.12	%		10/01/16		4,264,000			4,264,000
The Gallery Professional Building		5.76	%		03/01/17		6,000,000			6,000,000
Lenox Office Park, Building G		5.88	%		02/01/17		12,000,000			12,000,000
Commons V Medical Office Building		5.54	%		06/11/17		9,939,000			10,000,000
Yorktown Medical Center and Shakerag Medical Center		5.52	%		05/11/17		13,530,000			13,530,000
Thunderbird Medical Plaza		5.67	%		06/11/17		14,000,000			14,000,000
Gwinnett Professional Center		5.88	%		01/01/14		5,604,000			5,699,000
St. Mary Physicians Center		5.80	%		09/04/09		8,280,000			8,280,000
Northmeadow Medical Center		5.99	%		12/01/14		7,866,000			8,000,000
Medical Porfolio 2		5.91	%		07/01/13		14,408,000			—
Renaissance Medical Centre		5.38	%		09/01/15		19,078,000			—
Renaissance Medical Centre		12.75	%		09/01/15		1,245,000			—
Medical Porfolio 4		5.50	%		06/01/19		6,771,000			—
Medical Porfolio 4		6.18	%		06/01/19		1,727,000			—
Marietta Health Park		5.11	%		11/01/15		7,200,000			—

							141,058,000			90,919,000
*Variable Rate Debt:*
Senior Care Portfolio 1		4.75	%(a)		03/31/10		24,800,000	(b)		—
1 and 4 Market Exchange		1.93	%(a)		09/30/10		14,500,000	(b)		14,500,000	(c)
East Florida Senior Care Portfolio		1.90	%(a)		10/01/10		29,917,000	(b)		30,384,000	(c)
Kokomo Medical Office Park		1.98	%(a)		11/30/10		8,300,000	(b)		8,300,000	(c)
Chesterfield Rehabilitation Center		3.54	%(a)		12/30/10		22,000,000	(b)		22,000,000	(c)
Park Place Office Park		2.13	%(a)		12/31/10		10,943,000	(b)		10,943,000	(c)
Highlands Ranch Medical Plaza		2.13	%(a)		12/31/10		8,853,000	(b)		8,853,000	(c)
Medical Portfolio 1		2.26	%(a)		02/28/11		21,340,000	(b)		—
Fort Road Medical Building		3.09	%(a)		03/06/11		5,800,000	(b)		—
Medical Portfolio 3		3.69	%(a)		06/26/11		58,000,000	(b)		—
SouthCrest Medical Plaza		2.78	%(a)		06/30/11		12,870,000	(b)		—
Wachovia Pool Loan(d)		4.65	%(a)		06/30/11		50,322,000	(b)		—
Cypress Station Medical Office Building		2.26	%(a)		09/01/11		7,235,000	(b)		—
Medical Portfolio 4		3.25	%(a)		09/24/11		21,400,000	(b)		—
Decatur Medical Plaza		3.25	%(a)		09/26/11		7,900,000	(b)		—
Mountain Empire Portfolio		3.97	%(a)		09/28/11		17,304,000	(b)		—

							321,484,000			94,980,000

Total fixed and variable debt							462,542,000			185,899,000

Less: discount							(1,780,000	)		(98,000	)

Mortgage loan payables, net						$	460,762,000		$	185,801,000


~~(a)~~		~~Represents the interest rate in effect as of December 31, 2008.~~

~~(b)~~		As of December 31, 2008, we had variable rate mortgage loans on 20 of our properties with effective interest rates ranging from 1.90% to 4.75% per annum and a weighted average effective interest rate of 3.33% per annum. However, as of December 31, 2008, we had fixed rate interest rate swaps, ranging from


(a)		As of December 31, 2010, we had variable rate mortgage loans on 15 of our properties with effective interest rates ranging from 1.76% to 4.65% per annum and a weighted average effective interest rate of 2.72% per annum. However, as of December 31, 2010, we had fixed rate interest rate swaps and caps on our Medical Portfolio 1, Decatur, Mountain Empire, and Sun City-Sun 1 variable rate mortgage loans payable, thereby effectively fixing our interest rates on those mortgage loans payable at 5.23%, 5.16%, 5.87%, and 2.00%, respectively.

(b)		As of December 31, 2009, we had variable rate mortgage loans on 22 of our properties with effective interest rates ranging from 1.58% to 4.75% per annum and a weighted average effective interest rate of 2.65% per annum. However, as of December 31, 2009, we had fixed rate interest rate swaps, ranging from 4.51% to 6.02%, on our variable rate mortgage ~~loan payables~~loans payable on 20 of our properties, thereby effectively fixing our interest rate on those mortgage ~~loan payables.~~loans payable.

(c)		~~As of December 31, 2007, we had variable rate mortgage loans on six of our properties with effective interest rates ranging from 6.15% to 6.78% per annum and a weighted average effective~~Represents the interest rate ~~of 6.35% per annum. However,~~in effect as of December 31, 2007, we had fixed rate interest rate swaps, ranging from 5.52% to 6.02%, on all of our variable rate mortgage loan payables, thereby effectively fixing our interest rate on those mortgage loan payables.2010.

(d)		We have a mortgage loan in the principal amount of ~~$50,322,000~~$48,666,000 and $49,696,000, as of December 31, 2010 and December 31, 2009, respectively, secured by Epler Parke Building B, 5995 Plaza Drive, Nutfield Professional Center, Medical Portfolio 2 and Academy Medical Center.

(e)		Represent loan balances that have matured or that we have paid off during the year ended December 31, 2010.

(f)		Represent bank loans, the aggregate principal balance of which as of December 31, 2010 was $89,969,000, which were refinanced using the proceeds of our $125,500,000 senior secured real estate term loan. We closed on this term loan with Wells Fargo Bank, N.A., on February 1, 2011. See Note 22, Subsequent Events, for additional discussion of this new financing.

(g)		Represents a bank loan, the principal balance of which as of December 31, 2010 was $10,943,000, which was paid off using the proceeds of our $125,500,000 senior secured real estate term loan. See Note 22, Subsequent Events, for additional discussion of this new financing.


Date of Note	Amount		Maturity Date		Interest Rate			Date Paid in Full

06/30/08	$	6,000,000		12/30/14		4.96	%		07/07/08
09/05/07	$	6,100,000		03/05/08		6.86	%		09/11/07
08/30/07	$	1,300,000		03/01/08		6.85	%		09/04/07
06/08/07	$	4,000,000		12/08/07		6.82	%		06/18/07
03/09/07	$	1,000,000		09/09/07		6.84	%		03/28/07
01/22/07	$	7,500,000		07/22/07		6.86	%		03/28/07


		Recognized
Derivatives Not Designated	Location of Gain (Loss)	For the Year Ended
as Hedging Instruments Under:	Recognized:	December 31, 2010			December 31, 2009		December 31, 2008

Interest Rate Swaps	Gain (loss) on derivative instruments	$	6,461,000		$	5,279,000	$	(12,436,000	)
Interest Rate Cap	Gain (loss) on derivative instruments	$	(507,000	)	$	—	$	—


Balance as of December 31, 2008	$	1,951,000
Net income attributable to noncontrolling interest of limited partners		304,000
Distributions		(379,000	)
Adjustments to noncontrolling interests		1,673,000

Balance as of December 31, 2009	$	3,549,000

Balance as of December 31, 2009	$	3,549,000
Net loss attributable to noncontrolling interest of limited partners		(16,000	)
Distributions		(145,000	)
Valuation adjustments to noncontrolling interests		570,000
Redemption of limited partner interest of former advisor		(197,000	)
Purchase of Chesterfield 20% interest		(3,900,000	)
Addition of noncontrolling interest attributable to the Fannin acquisition		4,006,000

Balance as of December 31, 2010	$	3,867,000