Subsequent Events |
12 Months Ended | ||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||
| Subsequent Events [Abstract] | |||||||||||||||||||||||||||
| Subsequent Events [Text Block] |
Note 12 Subsequent Events Summary of Properties Acquired Subsequent to the Year Ended December 31, 2016 Sandusky Facility The Company closed on the acquisition of one of the remaining two Sandusky properties on March 10, 2017 in the amount of approximately $4.3 million using funds from the revolving credit facility. Upon the satisfaction of customary closing conditions, the Company expects to close the acquisition of the remaining property for approximately $1.1 million during the second quarter of 2017. The Company is leasing the property that closed in March 2017 to the NOMS Tenant and will lease the remaining property when acquired to the NOMS Tenant both using a triple-net lease structure with an initial term of 11 years with four additional five-year renewal options. The acquisition of the remaining building will be funded using borrowings from the Company’s revolving credit facility or other available cash. Clermont Facility On March 1, 2017, the Company, as buyer, pursuant to a purchase agreement (the “Purchase Agreement”) with HVI, LLC (the “HVI Seller”), acquired HVI Seller’s interest, as ground lessee, in the ground lease (the “Ground Lease”) that covers and affects certain real property located in Clermont, Florida (the “land”), along with HVI Seller’s right, title and interest arising under the Ground Lease in and to the medical building located upon the Land (the “Clermont Facility”), for a purchase price of $5.225 million. The Ground Lease commenced in 2012 and has an initial term of seventy-five years. The Purchase Agreement contemplates that, upon closing of this acquisition, the Company will also assume the HVI Seller’s interest, as sublessor, in four subleases affecting the Clermont Facility (collectively, the “Subleases”) with South Lake Hospital, Inc. (which is the subtenant under two separate Subleases), Orlando Health, Inc., and Vascular Specialists of Central Florida. The Company funded the acquisition using funds from its revolving credit facility. This acquisition represents will be accounted for as a business combination. The Company is in the process of appraising the assets and liabilities acquired and identifying intangible assets, if any. Prescott Facility
On February 9, 2017, the Company, as buyer, pursuant to a purchase and sale agreement (the “Purchase Agreement”) with Hosn Hojatollah Askari, as seller (“Hosn”), acquired a medical office building (the “Prescott Facility”) located in Prescott, Arizona, for a purchase price of $4.5 million. The acquisition included the Prescott Facility, together with the real property, the improvements, and all appurtenances thereto owned by Hosn. Upon the closing of this acquisition, the Company executed a new 10-year lease for the entire Prescott Facility with Thumb Butte Medical Center, PLLC with a personal guaranty by Hosn. The Company funded the acquisition using funds from its revolving credit facility.
Las Cruces Facility
On February 1, 2017, the Company, as buyer, pursuant to a purchase and sale agreement (the “Purchase Agreement”) with Medical Realty Limited Liability Co., as seller (“Medical Realty”), acquired a medical office building (the “Las Cruces Facility”) located in Las Cruces, New Mexico for a purchase price of $4.88 million. The acquisition included the Las Cruces Facility, together with the real property, the improvements, and all appurtenances thereto owned by Medical Realty. Upon closing of this acquisition, the Company entered into a new 12-year, triple-net lease with four five-year extension options with Las Cruces Orthopedic Associates, as tenant. The Company funded the acquisition using borrowings from its revolving credit facility and available cash.
Cape Coral Facility
On January 10, 2017, pursuant to the terms of a purchase and sale agreement between the Company, as purchaser, and Del Prado North, LLP, as seller (“Del Prado”), the Company acquired a medical office building (the “Cape Coral Facility”) located in Cape Coral, Florida, for a purchase price of $7.25 million. The acquisition included the Cape Coral Facility, together with the real property, the improvements, and all appurtenances thereto owned by Del Prado. Upon the closing of the transaction, the Company entered into a new 10-year, triple-net lease with The Sypert Institute, P.A. (the “Sypert Tenant”), effective as of January 17, 2017, and expiring in 2027. The lease provides for three additional five-year renewal options. The Cape Coral Facility is operated by the Sypert Tenant. The acquisition was funded using proceeds from the Company’s revolving credit facility.
Lewisburg Facility
The following table presents the preliminary purchase price allocation for the assets acquired as part of the Lewisburg facility acquisition:
The above allocation is preliminary and subject to revision within the measurement period, not to exceed one year from the date of the acquisition.
Summary of Properties under Executed Asset Purchase Agreements Subsequent to December 31, 2016
Oklahoma City Facilities
Upon closing of the acquisition of OCOM South, the Company will assume the existing absolute triple-net lease agreement (the “OCOM South Lease”), pursuant to which OCOM South is leased from Cruse-Two to Oklahoma Center for Orthopedic & Multi-Specialty Surgery, LLC (“OCOM”) with a remaining initial lease term expiring March 1, 2022, subject to three consecutive five-year renewal options by the tenant. A portion of the rent is guaranteed by United Surgical Partners International, Inc. (“USPI”) and INTEGRIS Health, Inc. (“INTEGRIS”), respectively. Upon closing of the acquisition of OCOM South, the Company will, through a subsidiary of the Operating Partnership, enter into a new absolute triple-net lease agreement (the “Master Lease,”), pursuant to which the subsidiary, as master landlord, will lease OCOM South to Cruse-Two, as master tenant. The Master Lease will have a five-year term. The OCOM South Lease will become a sublease under the Master Lease upon commencement of the Master Lease. USPI and INTEGRIS will continue to serve as guarantors of the OCOM South Lease in the percentages set forth above, while the Master Lease will have no lease guarantees. Upon expiration of the Master Lease, the OCOM South Lease will become a direct lease with the Company. Under the Master Lease, OCOM will continue to be responsible for all lease payments due under the OCOM South Lease, which amounts will be paid directly to the Master Tenant, while Cruse-Two will be responsible for payment of the additional rent amounts payable under the Master Lease. Cruse-Two will provide a standby letter of credit (“Letter of Credit”) addressed to the Company as beneficiary in an amount equal to the aggregate amount of the additional rent payable by Cruse-Two under the Master Lease, less $220,782, which will be placed into an escrow account at closing and will be disbursed three months before the end of the Master Lease.
Upon closing of the acquisition of OCOM North, the Company will assume the existing absolute triple-net lease agreement (the “OCOM North Lease”) pursuant to which OCOM North is leased from Cruse-Six, as landlord, to OCOM, as tenant, with a remaining initial lease term expiring on July 31, 2022, subject to two consecutive five (5)-year renewal options by the tenant. The annual rent under the OCOM North Lease for OCOM North is subject to annual increases equal to the CPI (never to decrease and not to exceed 4.0% over the prior year’s rent and not to exceed an overall increase of 2.5% per year, compounded annually).
The Company’s obligation to close the acquisition is subject to customary terms and conditions as set forth in the Purchase Agreement. Upon the satisfaction of customary closing conditions, the Company expects to close this acquisition in the second quarter of 2017.
Dividends
On March 20, 2017, the Company announced the declaration of a cash dividend of $0.20 per share of common stock to stockholders of record as of March 27, 2017 and to the holders of the LTIP units that were granted on July 1, 2016 and December 21, 2016. This dividend is to be paid on or about April 10, 2017. On December 14, 2016, the Company announced the declaration of a cash dividend of $0.20 per share of common stock to stockholders of record as of December 27, 2016 and to the holders of the LTIP units that were granted on July 1, 2016 and December 21, 2016. This dividend, in the amount of $3,604,037, was accrued as of December 31, 2016 and subsequently paid on January 10, 2017. Amendment to Credit Facility On March 3, 2017, the Company, the Operating Partnership, as borrower, and the Subsidiary Guarantors of the Operating Partnership entered into an amendment to the Credit Facility with BMO Harris Bank N.A., as Administrative Agent, which increased the commitment amount to $200 million plus an accordion feature that allows for up to an additional $50 million of principal amount subject to certain conditions. The Subsidiary Guarantors and the Company are guarantors of the obligations under the amended Credit Facility. The amount available to borrow from time to time under the amended Credit Facility is limited according to a quarterly borrowing base valuation of certain properties owned by the Subsidiary Guarantors. Equity Awards Approved in 2017
On February 28, 2017, the Board approved the recommendations of the Compensation Committee of the Board with respect to the granting of 2017 Annual Performance-Based Long Term Incentive Plan Awards (the “Annual Awards”) and Long-Term Performance-Based LTIP Awards (the “Long-Term Awards”) to the executive officers of the Company and other employees of the Company’s external manager who perform services for the Company. The Annual Awards and Long-Term Awards were granted pursuant to the Company’s 2016 Equity Incentive Plan. An aggregate of 96,529 target LTIP units were awarded under the Annual Awards and an aggregate of 145,133 target LTIP units were awarded under the Long-Term Awards. The number of target LTIP units comprising each Annual Award was based on the closing price of the Company’s common stock reported on the New York Stock Exchange (“NYSE”) on the date of grant (February 28, 2017) and the number of target LTIP Units comprising each Long-Term Award was based on the fair value of the Long-Term Awards as determined by an independent valuation consultant, in each case rounded to the next whole LTIP unit in order to eliminate fractional units.
Annual Awards. The Annual Awards are subject to the terms and conditions of LTIP Annual Award Agreements (“LTIP Annual Award Agreements”) between the Company and each grantee.
The Compensation Committee established various operating performance goals for calendar year 2017, as set forth in Exhibit A to the LTIP Annual Award Agreements (the “Performance Goals”), that will be used to determine the actual number of LTIP Units earned by each grantee under each LTIP Annual Award Agreement. As soon as reasonably practicable following the last day of the 2017 fiscal year, the Compensation Committee will determine the extent to which the Company has achieved the Performance Goals and, based on such determination, will calculate the number of LTIP Units that each grantee is entitled to receive under the grantee’s Annual Award based on the performance percentages described in the grantee’s LTIP Annual Award Agreement. Each grantee may earn up to 150% of the number of target LTIP units covered by the grantee’s Annual Award. Any target LTIP Units that are not earned will be forfeited and cancelled.
Long-Term Awards. The Long-Term Awards are subject to the terms and conditions of LTIP Long-Term Award Agreements (“LTIP Long-Term Award Agreements”) between the Company and each grantee. The number of LTIP Units that each grantee is entitled to earn under the LTIP Long-Term Award Agreements will be determined following the conclusion of a three-year performance period based on the Company’s total shareholder return, which is determined based on a combination of appreciation in stock price and dividends paid during the performance period (“TSR”). Each grantee may earn up to 200% of the number of target LTIP units covered by the grantee’s Long-Term Award. Any target LTIP Units that are not earned will be forfeited and cancelled. The number of LTIP Units earned under the Long-Term Awards will be determined as soon as reasonably practicable following the end of the three-year performance period based on the Company’s TSR on an absolute basis (as to 75% of the Long-Term Award) and relative to the SNL Healthcare REIT Index (as to 25% of the Long-Term Award).
Vesting. LTIP units that are earned as of the end of the applicable performance period will be subject to forfeiture restrictions that will lapse (“vesting”), subject to continued employment through each vesting date, in two installments as follows: 50% of the earned LTIP units will vest upon being earned as of the end of the applicable performance period and the remaining 50% will vest on the first anniversary of the date on which such LTIP units are earned.
Distributions. Pursuant to both the LTIP Annual Award Agreements and LTIP Long-Term Award Agreements, distributions equal to the dividends declared and paid by the Company will accrue during the applicable performance period on the maximum number of LTIP Units that the grantee could earn and will be paid with respect to all of the earned LTIP Units at the conclusion of the applicable performance period, in cash or by the issuance of additional LTIP Units at the discretion of the Compensation Committee.
Director Compensation
On February 28, 2017, the Board also approved the new annual compensation amounts for its independent directors for the year beginning with the 2017 annual meeting of the Company’s stockholders. Each independent director will receive an annual cash retainer of $30,000, payable quarterly in arrears, and each independent director will receive a $30,000 award of LTIP units based on the average closing price of the Company’s common stock as reported on the NYSE during the 10 trading days preceding the date of the annual meeting and subject to forfeiture restrictions that will lapse on the first anniversary of the grant date subject to continued service as a director through such vesting date. In addition, the Board approved new annual compensation amounts for its independent directors who serve on Board committees for the year beginning with the 2017 annual meeting of the Company’s stockholders. Each independent director who serves on a Board committee will receive an annual cash retainer, payable quarterly in arrears, of $6,000 for service on the Audit Committee, $5,000 for service on the Compensation Committee, $3,500 for service on the Nominating & Corporate Governance Committee, and $5,500 for service on the Investment Committee. In addition, the Chairperson each such committee will receive an annual cash retainer, payable quarterly in arrears, of $12,000 for the Chair of the Audit Committee, $10,000 for the Chair the Compensation Committee, $7,000 for the Chair of the Nominating & Corporate Governance Committee, and $11,000 for the Chair of the Investment Committee. If the Board appoints one of the independent directors to serve as Lead Independent Director, such director will receive an annual cash retainer, payable quarterly in arrears, of $15,000. Finally, the independent directors who were appointed to serve as directors prior to the closing date of the Company’s initial public offering on July 1, 2016 (the “IPO”) will be paid a one-time cash amount equal to (i) $15,000 for the first of such independent directors to be appointed as a director of the Company and (ii) a pro rata amount of $15,000 for the independent directors appointed as directors of the Company after the first such independent director was appointed based on the number of calendar days served from appointment through the closing date of the IPO relative to the total number of days served by the first such director to be appointed through the closing date of the IPO. |