Property, Plant and Equipment Disclosure [Text Block] | Note 3 – Property Portfolio Implementation of New Business Combination Accounting Standard Effective January 1, 2018, the Company adopted the provisions of ASU 2017-01 – “Business Combinations (Topic 805): Clarifying the Definition of a Business” (“ASU 2017-01”). ASU 2017-01 provides revised guidance to determine when an acquisition meets the definition of a business or alternatively should be accounted for as an asset acquisition. ASU 2017-01 requires that, when substantially all of the fair value of an acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets, the asset or group of similar identifiable assets does not meet the definition of a business and therefore is required to be accounted for as an asset acquisition. Transaction costs will continue to be capitalized for asset acquisitions and expensed as incurred for business combinations. ASU 2017-01 will result in most, if not all, of the Company’s post-January 1, 2018 acquisitions being accounted for as asset acquisitions because substantially all of the fair value of the gross assets the Company acquires are concentrated in a single asset or group of similar identifiable assets. For asset acquisitions that are “owner occupied” (meaning that the seller either is the tenant or controls the tenant) the purchase price, including capitalized acquisition costs, will be allocated to land and building based on their relative fair values with no value allocated to intangible assets or liabilities. For asset acquisitions where there is a lease in place but not “owner occupied,” the Company will allocate the purchase price to tangible assets and any intangible assets acquired or liabilities assumed based on their relative fair values. Summary of Properties Acquired During the Nine Months Ended September 30, 2018 During the nine months ended September 30, 2018, the Company completed eight acquisitions. For all eight acquisitions, substantially all of the fair value of the acquisitions was concentrated in a single identifiable asset or group of similar identifiable assets and, therefore, all of the acquisitions represent asset acquisitions under the guidance provided by ASU 2017-01. Accordingly, transaction costs for these acquisitions were capitalized. A rollforward of the gross investment in land, building and improvements as of September 30, 2018, resulting from these acquisitions is as follows: Land Building Site & Tenant Improvements Acquired Lease Intangibles Gross Investment in Real Estate Balances as of January 1, 2018 $ 42,701 $ 384,338 $ 12,818 $ 31,650 $ 471,507 Facility Acquired – Date Acquired: Moline / Silvis – 1/24/18 - 4,895 1,216 989 7,100 Freemont – 2/9/18 162 8,335 - - 8,497 Gainesville – 2/23/18 625 9,885 - - 10,510 Dallas – 3/1/18 6,272 17,012 - - 23,284 Orlando – 3/22/18 2,543 11,720 756 1,395 16,414 Belpre – 4/19/18 3,025 50,526 3,966 7,166 64,683 McAllen – 7/3/18 1,099 4,296 5,395 Derby – 8/3/18 412 2,496 243 453 3,604 Tenant improvements (1) - - 2,043 - 2,043 Total Additions (2) 14,138 109,165 8,224 10,003 141,530 Balances as of September 30, 2018 $ 56,839 $ 493,503 $ 21,042 $ 41,653 $ 613,037 (1) Represents tenant improvements that were completed and placed in service during the three months ended September 30, 2018 related to the Silvis and Sherman facilities that were acquired in January 2018 and June 2017, respectively. These amounts were recorded as construction-in-process within the “Other Assets” line item in the Company’s Consolidated Balance Sheet as of June 30, 2018, and reclassified to investment in real estate once completed. (2) The Belpre acquisition included $4,742 of OP Units issued as part of the total consideration for the transaction. As indicated in (1) above, $2,043 of completed construction-in-process costs were reclassified to investment in real estate during the three months ended September 30, 2018. Additionally, an aggregate of $894 of intangible liabilities were acquired from the acquisitions that occurred during the nine months ended September 30, 2018. Accordingly, the total addition to gross investment in real estate funded with cash was $133,851. Depreciation expense was $3,614 and $9,965 for the three and nine months ended September 30, 2018, respectively, and $2,176 and $5,372 for the three and nine months ended September 30, 2017, respectively. As of September 30, 2018, the Company had aggregate capital improvement commitments to improve or expand existing tenant space of $17,003. Many of these commitments are subject to contingencies that make it difficult to predict when such commitments will be called upon, if at all. However, the Company expects to be obligated to spend approximately $721 in tenant improvements during 2018 (of which $521 was incurred as of September 30, 2018) in connection with its Sherman, Silvis, and Gainesville facilities. The following is a summary of the acquisitions completed during the nine months ended September 30, 2018. Moline / Silvis Facilities Moline Facility - On January 24, 2018, the Company purchased a medical office building located in Moline, Illinois, which included the seller’s interest, as ground lessee, in an existing ground lease. The ground lease has approximately 10 years remaining in the initial term, with 12 consecutive five-year renewal options. Upon the closing of this acquisition, the Company assumed two subleases: one sublease with Fresenius Medical Care Quad Cities, LLC (“Fresenius”) with approximately 13 years remaining in the initial term, with three consecutive five-year renewal options; and one sublease with Quad Cities Nephrology Associates, P.L.C. with approximately 15 years remaining in the initial term, with three consecutive five-year renewal options. Silvis Facility - On January 24, 2018, the Company purchased a medical office building located in Silvis, Illinois from the same seller as the Moline facility, which included the seller’s interest, as ground lessee, in an existing ground lease. The ground lease has approximately 67 years remaining in the initial term, with no renewal options. Upon the closing of this acquisition, the Company assumed one sublease with Fresenius with approximately 13 years remaining in the initial term, with three consecutive five-year renewal options. The aggregate purchase price for the Moline/Silvis facilities was $6.9 million. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed for this acquisition: Site improvements $ 249 Building and tenant improvements 5,862 In-place leases 343 Above market ground lease intangibles 219 Leasing costs 427 Below market lease intangibles (229 ) Total purchase price $ 6,871 Fremont Facility - On February 9, 2018, the Company purchased a medical office building located in Fremont, Ohio for a purchase price of approximately $8.5 million. Upon the closing of this acquisition, the Company entered into a new 12-year lease with Northern Ohio Medical Specialists, LLC (NOMS) with four consecutive five-year renewal options. Gainesville Facility - On February 23, 2018, the Company purchased a medical office building and ambulatory surgery center located in Gainesville, Georgia for a purchase price of approximately $10.5 million. Upon the closing of this acquisition, the Company entered into a new 12-year lease with SCP Eye Care Services, LLC with four consecutive five-year renewal options. Dallas Facility - On March 1, 2018, the Company purchased a hospital, a three-story parking garage, and land all located in Dallas, Texas for an aggregate purchase price of $23.3 million. In addition to the hospital and the parking garage, the land underlays two medical office buildings that are not owned by the Company, each of which is ground leased to the hospital. Upon the closing of this acquisition, the Company entered into two leases with Pipeline East Dallas, LLC, with one lease relating to the hospital and the other lease relating to the underlying land and parking garage. Orlando Facilities - On March 22, 2018, the Company purchased five medical office buildings from five affiliated sellers for an aggregate purchase price of $16.4 million. Upon the closing of this acquisition, the Company assumed five existing leases with Orlando Health, Inc. One lease has approximately one year remaining in its initial term, with one 10-year renewal option; one lease has approximately six years remaining in its initial term, with three consecutive five-year renewal options; one lease has approximately six years remaining in its initial term, with four consecutive five-year renewal options; one lease has approximately six years remaining in its initial term, with three consecutive five-year renewal options; and one lease was amended at closing to extend the remaining term to five years with four consecutive five-year renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed: Land and site improvements $ 3,075 Building and tenant improvements 11,944 In-place leases 808 Above market lease intangibles 229 Leasing costs 358 Below market lease intangibles (10 ) Total purchase price $ 16,404 Belpre Portfolio - On April 19, 2018, the Company purchased a portfolio of four medical office buildings and a right of first refusal to purchase a fifth, yet to be built, medical office building on the same campus, for an aggregate purchase price of $64.1 million. Upon the closing of the acquisition the Company assumed the existing leases with Marietta Memorial Hospital, a subsidiary of Memorial Health System and such leases had a weighted average remaining lease term of approximately 11.35 years, each with three consecutive five-year tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed: Land and site improvements $ 3,997 Building and tenant improvements 53,520 In-place leases 2,660 Above market lease intangibles 2,527 Leasing costs 1,979 Below market lease intangibles (632 ) Total purchase price $ 64,051 McAllen Facility - On July 3, 2018, the Company purchased a medical office building (and adjacent condominium) located in McAllen, Texas for a purchase price of $5.4 million. Upon the closing of this acquisition, the Company entered into a new 11-year lease with Valley Ear, Nose, and Throat Specialists, PA, with two consecutive 10-year renewal options. Derby Facility - On August 3, 2018, the Company purchased a medical office building located in Derby, Kansas for a purchase price of $3.6 million. Upon the closing of this acquisition, the Company assumed the existing lease with Rock Surgery Center, LLC. The lease has approximately nine years remaining in its initial term, with one five-year tenant renewal option. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed: Land and site improvements $ 566 Building and tenant improvements 2,585 In-place leases 299 Above market lease intangibles Leasing costs 154 Below market lease intangibles (23 ) Total purchase price $ 3,581 Intangible Assets and Liabilities The following is a summary of the carrying amount of intangible assets and liabilities as of the dates presented: As of September 30, 2018 Cost Accumulated Amortization Net Assets In-place leases $ 21,171 $ (3,374 ) $ 17,797 Above market ground lease 707 (22 ) 685 Above market leases 7,381 (840 ) 6,541 Leasing costs 12,394 (1,386 ) 11,008 $ 41,653 $ (5,622 ) $ 36,031 Liabilities Below market leases $ 2,284 $ (250 ) $ 2,034 As of December 31, 2017 Cost Accumulated Amortization Net Assets In-place leases $ 17,061 $ (1,577 ) $ 15,484 Above market ground lease 488 (6 ) 482 Above market leases 4,625 (220 ) 4,405 Leasing costs 9,476 (538 ) 8,938 $ 31,650 $ (2,341 ) $ 29,309 Liabilities Below market leases $ 1,389 $ (98 ) $ 1,291 The following is a summary of the acquired lease intangible amortization: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 Amortization expense related to in-place leases $ 647 $ 388 $ 1,797 $ 1,022 Amortization expense related to leasing costs $ 307 $ 135 $ 848 $ 304 Decrease in rental revenue related to above market ground lease $ 6 $ 2 $ 16 $ 4 Decrease in rental revenue related to above market leases $ 240 $ 55 $ 620 $ 73 Increase in rental revenue related to below market leases $ 56 $ 32 $ 152 $ 63 As of September 30, 2018, scheduled future aggregate net amortization of the acquired lease intangible assets and liabilities for each fiscal year ended December 31 is listed below: Net Decrease in Revenue Net Increase in Expenses 2018 (three months remaining) $ (189 ) $ 958 2019 (653 ) 3,722 2020 (602 ) 3,668 2021 (605 ) 3,053 2022 (606 ) 2,744 Thereafter (2,537 ) 14,660 Total $ (5,192 ) $ 28,805 As of September 30, 2018, the weighted average amortization periods for asset lease intangibles and liability lease intangibles were 7.49 years and 9.02 years, respectively. |