Quarterly report pursuant to Section 13 or 15(d)

Property Portfolio

v3.21.1
Property Portfolio
3 Months Ended
Mar. 31, 2021
Property Portfolio  
Property Portfolio

Note 3 – Property Portfolio

Summary of Properties Acquired During the Three Months Ended March 31, 2021

During the three months ended March 31, 2021 the Company completed four acquisitions. For each acquisition, substantially all of the fair value was concentrated in a single identifiable asset or group of similar identifiable assets and, therefore, each acquisition represents an asset acquisition. Accordingly, transaction costs for these acquisitions were capitalized.

A rollforward of the gross investment in land, building, improvements, and acquired lease intangible assets as of March 31, 2021 resulting from these acquisitions is as follows:

    

    

Site

    

Tenant

    

Acquired Lease

    

Gross Investment in

    

Land

    

Building

    

Improvements

    

Improvements

    

Intangible Assets

    

Real Estate

Balances as of December 31, 2020

$

128,857

$

851,427

$

15,183

$

49,204

$

98,234

$

1,142,905

Facility Acquired – Date Acquired:

 

  

 

  

 

  

 

  

 

  

 

  

El Paso – 1/12/21

899

7,549

71

160

1,338

10,017

Syracuse – 1/15/21

616

4,745

128

136

772

6,397

West El Paso – 1/15/21

851

7,160

144

567

856

9,578

Fort Worth – 3/9/21

1,817

13,020

143

395

2,069

17,444

Capitalized costs(1)

134

134

Total Additions:

 

4,183

 

32,474

 

486

 

1,392

 

5,035

 

43,570

Balances as of March 31, 2021

$

133,040

$

883,901

$

15,669

$

50,596

$

103,269

$

1,186,475

(1) Represents capital projects that were completed and placed in service during the three months ended March 31, 2021 related to the Company’s existing facilities.

Depreciation expense was $7,848 and $5,836 for the three ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the Company had aggregate capital improvement commitments and obligations to improve, expand, and maintain the Company’s existing facilities of approximately $29,500. Many of these amounts are subject to contingencies that make it difficult to predict when they will be utilized, if at all. In accordance with the terms of the Company’s leases, capital improvement obligations in the next twelve months could total up to approximately $18,900.

The following is a summary of the acquisitions completed during the three months ended March 31, 2021.

El Paso Facility

On January 12, 2021, the Company purchased a medical office building located in El Paso, Texas (the “El Paso Facility”) for a purchase price of approximately $10 million.  Upon closing, the Company assumed three existing leases at the El Paso Facility (the “El Paso Leases”). At acquisition, the El Paso Leases had a weighted-average remaining term of approximately four years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

970

Building and tenant improvements

 

7,709

In-place leases

 

750

Above-market lease intangibles

383

Leasing costs

 

205

Total purchase price

$

10,017

Syracuse Facility

On January 15, 2021, the Company purchased a medical office building located in Syracuse, New York (the “Syracuse Facility”) for a purchase price of approximately $6.2 million.  Upon closing, the Company assumed two existing leases at the Syracuse Facility (the “Syracuse Leases”). At acquisition, the Syracuse Leases had a weighted-average remaining term of approximately eight years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

744

Building and tenant improvements

 

4,881

In-place leases

 

434

Leasing costs

 

338

Below-market lease intangibles

(207)

Total purchase price

$

6,190

West El Paso Facilities

On January 15, 2021, the Company purchased two medical office buildings and an ambulatory surgical center located in El Paso, Texas (the “West El Paso Facilities”) for a total purchase price of approximately $9.6 million. Upon closing, the Company entered into two new leases at the medical office buildings with 12-year terms and assumed the existing lease at the ambulatory surgery center with a remaining term of seven years. All three leases have tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

995

Building and tenant improvements

 

7,727

In-place leases

 

432

Leasing costs

 

424

Total purchase price

$

9,578

Fort Worth Facility

On March 9, 2021, the Company purchased an inpatient psychiatric hospital located in Fort Worth, Texas (the “Fort Worth Facility”) for a purchase price of approximately $17.4 million. Upon closing, the Company assumed the existing lease at the Fort Worth Facility (the “Fort Worth Lease”). At acquisition, the Fort Worth Lease had a remaining term of approximately eight years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,960

Building and tenant improvements

 

13,415

In-place leases

 

1,339

Leasing costs

 

730

Total purchase price

$

17,444

Summary of Properties Acquired During the Year Ended December 31, 2020

During the year ended December 31, 2020 the Company completed 18 acquisitions. For each acquisition, substantially all of the fair value was concentrated in a single identifiable asset or group of similar identifiable assets and, therefore, each acquisition represents an asset acquisition. Accordingly, transaction costs for these acquisitions were capitalized.

A rollforward of the gross investment in land, building, improvements, and acquired lease intangible assets as of December 31, 2020 resulting from these acquisitions is as follows:

    

    

Site

    

Tenant

    

Acquired Lease

    

Gross Investment in

    

Land

    

Building

    

Improvements

    

Improvements

    

Intangible Assets

    

Real Estate

Balances as of December 31, 2019

$

95,381

$

693,533

$

9,912

$

33,909

$

72,794

$

905,529

Facility Acquired – Date Acquired:

 

  

 

  

 

  

 

  

 

  

 

  

High Point – 2/13/20

 

1,749

 

20,367

 

440

 

869

 

1,656

 

25,081

Clinton – 2/27/20

 

664

 

6,551

 

342

 

1,578

 

2,484

 

11,619

West Allis – 3/4/20

 

974

 

7,687

 

137

 

98

 

461

 

9,357

Grand Rapids – 3/20/20

 

2,951

 

17,341

 

470

 

450

 

1,582

 

22,794

Dumfries – 4/27/20

2,597

10,047

289

4,815

4,292

22,040

Centerville – 7/16/20

4,202

160

208

501

5,071

Fairfax – 7/17/20

6,731

6,642

381

2,979

3,012

19,745

Rosedale – 7/31/20

2,856

16,204

567

1,443

2,821

23,891

Lancaster – 9/18/20

696

4,269

110

116

1,114

6,305

Winston-Salem – 9/30/20

1,524

6,407

254

307

748

9,240

Decatur and Jackson – 10/20/20

2,237

7,140

284

296

955

10,912

Sheboygan and Plymouth – 10/27/20

1,088

11,212

253

225

1,046

13,824

Spring Hill and Hudson – 11/18/20

3,473

12,520

420

435

1,370

18,218

Cape Girardeau – 11/23/20

1,150

4,601

73

264

1,262

7,350

Yuma – 12/1/20

1,041

4,715

309

274

640

6,979

Las Vegas – 12/14/20

311

6,813

7,124

Pensacola – 12/29/20

1,786

5,742

332

411

781

9,052

Venice – 12/30/20

1,648

4,204

247

333

543

6,975

Capitalized costs(1)

1,230

203

194

172

1,799

Total Additions:

 

33,476

 

157,894

 

5,271

 

15,295

 

25,440

 

237,376

Balances as of December 31, 2020

$

128,857

$

851,427

$

15,183

$

49,204

$

98,234

$

1,142,905

(1) Represents capital projects that were completed and placed in service during the year ended December 31, 2020  related to the Company’s existing facilities.

The following is a summary of the acquisitions completed during the year ended December 31, 2020.

High Point Facility

On February 13, 2020, the Company purchased a medical office building located in High Point, North Carolina (the “High Point Facility”) for a purchase price of approximately $25.1 million. Upon closing, the Company assumed the existing lease of the High Point Facility with Wake Forest Health Network, LLC, as tenant. At acquisition, the lease had approximately three years remaining in the current term, exclusive of a tenant renewal option. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

2,189

Building and tenant improvements

 

21,236

In-place leases

 

1,207

Leasing costs

 

449

Total purchase price

$

25,081

Clinton Facility

On February 27, 2020, the Company purchased a medical office building located in Clinton, Iowa (the “Clinton Facility”) for a purchase price of approximately $11.6 million. Upon closing, the Company assumed the existing lease of the Clinton Facility with MercyOne Clinton Medical Center, as tenant. At acquisition, the lease had approximately four years remaining in the initial term, exclusive of a tenant renewal option. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,006

Building and tenant improvements

 

8,129

In-place leases

 

2,115

Leasing costs

 

369

Total purchase price

$

11,619

West Allis Facility

On March 4, 2020, the Company purchased a medical office building located in West Allis, Wisconsin (the “West Allis Facility”) for a purchase price of approximately $9.1 million. Upon closing, the Company assumed the existing lease of the West Allis Facility with Ascension Columbia St. Mary’s Hospital Milwaukee, as tenant. At acquisition, the lease had approximately four years remaining in the initial term, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,111

Building and tenant improvements

 

7,785

In-place leases

 

263

Leasing costs

 

198

Below-market lease intangibles

 

(264)

Total purchase price

$

9,093

Grand Rapids Facilities

On March 20, 2020, the Company purchased a four-building medical office portfolio located in the greater Grand Rapids, Michigan area (the “Grand Rapids Facilities”) for a total purchase price of approximately $22.7 million. Upon closing, the Company assumed 11 existing leases at the Grand Rapids Facilities (the “Grand Rapids Leases”). At acquisition, the Grand Rapids Leases had a weighted-average remaining term of five years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

3,417

Building and tenant improvements

 

17,791

In-place leases

 

761

Above-market lease intangibles

 

685

Leasing costs

 

136

Below-market lease intangibles

 

(125)

Total purchase price

$

22,665

Dumfries Facility

On April 27, 2020, the Company purchased a medical office building located in Dumfries, Virginia (the “Dumfries Facility”) for a purchase price of approximately $19.6 million. Upon closing, the Company assumed the existing lease of the Dumfries Facility with Spectrum Healthcare Resources, Inc., as tenant. At acquisition, the lease had approximately nine and a half years left in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

2,886

Building and tenant improvements

 

14,862

In-place leases

 

3,255

Leasing costs

 

1,037

Below-market lease intangibles

 

(2,419)

Total purchase price

$

19,621

In connection with this acquisition, the Company assumed an existing $12.1 million commercial mortgage-backed securities (“CMBS”) loan with an interest rate of 4.68% and a term of four years.

Centerville Facility

On July 16, 2020, the Company purchased a medical office building located in Centerville, Iowa (the “Centerville Facility”) and the seller’s interest, as ground lessee, in an existing ground lease, for a purchase price of approximately $5.1 million. At acquisition, the ground lease had a remaining term of approximately 49 years.  Upon closing, the Company assumed the existing lease of the Centerville Facility with Mercy Medical Center-Centerville One St. Joseph Drive, as tenant. At acquisition, the lease had approximately 10.5 years remaining in the initial term, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

160

Building and tenant improvements

 

4,410

In-place leases

 

216

Leasing costs

 

285

Total purchase price

$

5,071

Fairfax Facility

On July 17, 2020, the Company purchased a medical office building located in Fairfax, Virginia (the “Fairfax Facility”) for a purchase price of approximately $17.9 million. Upon closing, the Company assumed the existing lease of the Fairfax Facility with Spectrum Healthcare Resources, Inc., as tenant. At acquisition, the lease had approximately 9.1 years remaining in the initial term, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

7,112

Building and tenant improvements

 

9,621

In-place leases

 

2,314

Leasing costs

 

698

Below-market lease intangibles

 

(1,866)

Total purchase price

$

17,879

Rosedale Facilities

On July 31, 2020, the Company purchased certain condominium units within a medical office building and a medical office building, both located in Rosedale, Maryland (the “Rosedale Facilities”) for a total purchase price of approximately $23.1 million.  Upon closing, the Company assumed eight leases with six tenants at the Rosedale Facilities (the “Rosedale Leases”).  At acquisition, the

Rosedale Leases had a weighted-average remaining lease term of approximately 6.6 years,  exclusive of renewal options.  The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

3,423

Building and tenant improvements

 

17,647

In-place leases

 

1,063

Leasing costs

 

892

Above-market lease intangibles

866

Below-market lease intangibles

 

(785)

Total purchase price

$

23,106

In connection with this acquisition, the Company entered into a loan with FVCbank in the amount of $14.8 million with an annual interest rate of 3.85% and a term of five years.

Lancaster Facility

On September 18, 2020, the Company purchased a medical office building located in Lancaster, Texas (the “Lancaster Facility”) for a purchase price of approximately $6.3 million.  Upon closing, the Company assumed the existing lease at the Lancaster Facility with Biomat USA, Inc., as tenant. At acquisition, the lease had approximately eight and a half years left in the initial term, exclusive of a tenant renewal option.  The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

806

Building and tenant improvements

 

4,385

In-place leases

 

244

Leasing costs

 

283

Above-market lease intangibles

 

587

Total purchase price

$

6,305

Winston-Salem Facility

On September 30, 2020, the Company purchased a medical office building located in Winston-Salem, North Carolina (the “Winston-Salem Facility”) for a total purchase price of approximately $8.5 million. Upon closing, the Company assumed five existing leases at the Winston-Salem Facility (the “Winston-Salem Leases”). At acquisition, the Winston-Salem Leases had a weighted-average remaining term of approximately four years, exclusive of a tenant renewal option. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,778

Building and tenant improvements

 

6,714

In-place leases

 

581

Leasing costs

 

167

Below-market lease intangibles

 

(725)

Total purchase price

$

8,515

Decatur and Jackson Facilities

On October 20, 2020, the Company purchased two medical office buildings, one located in Decatur, Georgia, and one located in Jackson, Tennessee (the “Decatur and Jackson Facilities”) for a total purchase price of approximately $10.9 million. Upon closing, the Company assumed six leases with five tenants at the Decatur and Jackson Facilities (the “Decatur and Jackson Leases”). At acquisition, the Decatur and Jackson Leases had a weighted-average remaining lease term of approximately six years, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

2,521

Building and tenant improvements

 

7,436

In-place leases

 

556

Leasing costs

 

264

Above-market lease intangibles

135

Below-market lease intangibles

 

(27)

Total purchase price

$

10,885

Sheboygan and Plymouth Facilities

On October 27, 2020, the Company purchased two medical office buildings, one located in Sheboygan, Wisconsin, and one located in Plymouth, Wisconsin (the “Sheboygan and Plymouth Facilities”) for a total purchase price of approximately $13.8 million. Upon closing, the Company assumed three leases with two tenants at the Sheboygan and Plymouth Facilities (the “Sheboygan and Plymouth Leases”).  At acquisition, the Sheboygan and Plymouth Leases had a weighted-average remaining lease term of approximately five years, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,341

Building and tenant improvements

 

11,437

In-place leases

 

756

Leasing costs

 

290

Total purchase price

$

13,824

Spring Hill and Hudson Facilities

On November 18, 2020, the Company purchased three medical office buildings, two located in Spring Hill, Florida, and one located in Hudson, Florida (the “Spring Hill and Hudson Facilities”) for a total purchase price of approximately $18.2 million. Upon closing, the Company assumed the three existing leases at the Spring Hill and Hudson Facilities with Florida Cancer Specialists & Research Institute LLC, as tenant.  At acquisition, each lease had approximately eight years left in the initial term, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

3,893

Building and tenant improvements

 

12,955

In-place leases

 

831

Leasing costs

 

539

Total purchase price

$

18,218

Cape Girardeau Facility

On November 23, 2020, the Company purchased an ambulatory surgery center located in Cape Girardeau, Missouri (the “Cape Girardeau Facility”) for a total purchase price of approximately $7.4 million. Upon closing, the Company assumed the existing lease at the Cape Girardeau Facility with Physicians Alliance, L.C., as tenant.  At acquisition, the lease had a remaining term of approximately six years, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,223

Building and tenant improvements

 

4,865

In-place leases

 

687

Leasing costs

 

188

Above-market lease intangibles

 

387

Total purchase price

$

7,350

Yuma Facilities

On December 1, 2020, the Company purchased two medical office buildings located in Yuma, Arizona (the “Yuma Facilities”) for a total purchase price of approximately $7.0 million. Upon closing, the Company assumed the two existing leases at the Yuma Facilities with Yuma Regional Medical Center, as tenant. At acquisition, the leases had a weighted-average remaining term of approximately four years, exclusive of a renewal option. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,350

Building and tenant improvements

 

4,989

In-place leases

 

439

Leasing costs

 

136

Above-market lease intangibles

 

65

Total purchase price

$

6,979

Las Vegas Facilities

On December 14, 2020, the Company purchased two medical office buildings located in Las Vegas, Nevada (the “Las Vegas Facilities”) for a total purchase price of approximately $7.1 million. Upon closing, the Company entered into new leases with two existing tenants at the Las Vegas Facilities (the “Las Vegas Leases”). The Las Vegas Leases have a term of 12 years, exclusive of renewal options. The following table presents the details of the tangible assets acquired:

Land and site improvements

    

$

311

Building and tenant improvements

 

6,813

Total purchase price

$

7,124

Pensacola Facilities

On December 29, 2020, the Company purchased three medical office buildings located in Pensacola, Florida (the “Pensacola Facilities”) for a total purchase price of approximately $9.1 million. Upon closing, the Company assumed the three existing leases with two tenants at the Pensacola Facilities (the “Pensacola Leases”).  At acquisition, the Pensacola Leases had a weighted-average remaining lease term of approximately nine years, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

2,118

Building and tenant improvements

 

6,153

In-place leases

 

456

Leasing costs

 

325

Total purchase price

$

9,052

Venice Facilities

On December 30, 2020, the Company purchased two medical office buildings located in Venice, Florida (the “Venice Facilities”) for a total purchase price of approximately $7.0 million. Upon closing, the Company assumed the two existing leases at the Venice Facilities with Gulf Coast HMA Physician Management, LLC, as tenant.  At acquisition, each lease had approximately five and a half years left in initial term, with no renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

    

$

1,895

Building and tenant improvements

 

4,537

In-place leases

 

387

Leasing costs

 

156

Total purchase price

$

6,975

Lease Intangible Assets and Liabilities

The following is a summary of the carrying amount of lease intangible assets and liabilities as of the dates presented:

As of March 31, 2021

Accumulated

    

Cost

    

Amortization

    

Net

Assets

In-place leases

$

58,284

$

(16,682)

$

41,602

Above market leases

 

15,357

 

(4,514)

 

10,843

Leasing costs

 

29,628

 

(7,178)

 

22,450

$

103,269

$

(28,374)

$

74,895

Liability

Below market leases

$

10,279

$

(2,281)

$

7,998

As of December 31, 2020

    

    

Accumulated

    

Cost

Amortization

Net

Assets

 

  

 

  

 

  

In-place leases

$

55,561

$

(14,592)

$

40,969

Above market leases

 

14,972

 

(4,023)

 

10,949

Leasing costs

 

27,701

 

(6,284)

 

21,417

$

98,234

$

(24,899)

$

73,335

Liability

 

 

 

Below market leases

$

10,072

$

(1,850)

$

8,222

The following is a summary of the acquired lease intangible amortization:

Three Months Ended

March 31, 

    

2021

    

2020

    

Amortization expense related to in-place leases

$

2,090

$

1,333

Amortization expense related to leasing costs

$

894

$

588

Decrease in rental revenue related to above market leases

$

491

$

375

Increase in rental revenue related to below market leases

$

431

$

128

As of March 31, 2021, scheduled future aggregate net amortization of the acquired lease intangible assets and liabilities for each year ended December 31 is listed below:

    

    

Net Decrease

Net Increase

in Revenue

in Expenses

2021 (nine months remaining)

$

(205)

$

8,633

2022

 

(290)

 

11,294

2023

 

(324)

 

10,332

2024

 

(104)

 

8,939

2025

 

(438)

 

5,919

Thereafter

 

(1,484)

 

18,935

Total

$

(2,845)

$

64,052

As of March 31, 2021, the weighted average amortization periods for asset lease intangibles and liability lease intangibles were 5.2 years and 4.6 years, respectively.