Real Estate Properties

3 Months Ended

Mar. 31, 2013

Real Estate Properties

Real Estate Properties

Note 3.  Real Estate Properties

At March 31, 2013, we owned 395 properties located in 40 states and Washington, D.C.

Triple Net Senior Living Communities Acquisitions:

In January 2013, we acquired a senior living community located in Redmond, WA with 150 living units for approximately $22,350, excluding closing costs.  We funded this acquisition using cash on hand, borrowings under our revolving credit facility, and by assuming approximately $12,266 of mortgage debt which was recorded at a fair value of $13,306.  Details of this acquisition are as follows:

Triple Net Senior Living Communities Acquisitions since January 1, 2013:

Date	Location	Number of Properties	Units/ Beds	Purchase Price (1)		Land		Buildings and Improvements		FF&E		Intangible Assets		Assumed Debt		Premium on Assumed Debt
January 2013 (2)	Redmond, WA	1	150	$	22,350	$	5,120	$	16,562	$	669	$	1,039	$	12,266	$	1,040

(1) Purchase price includes the assumption of mortgage debt and excludes closing costs.  The allocation of the purchase price of our acquisition shown above is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed.  Consequently, amounts preliminarily allocated to assets acquired and liabilities assumed could change significantly from those used in these condensed consolidated financial statements.

(2) We leased this property to a subsidiary of Stellar Senior Living, LLC for an initial term expiring in 2028 for initial rent of approximately $1,732 per year.  Percentage rent, based on an increase in gross revenues at this property, will commence in 2016.

Managed Senior Living Communities Acquisitions:

In April 2013, we entered into an agreement to acquire one senior living community for approximately $22,030, excluding closing costs.  The senior living community is located in Cumming, GA and includes 93 private pay assisted living units. We expect that a subsidiary of Five Star Quality Care, Inc., which together with its subsidiaries, we refer to in this report as Five Star, will manage this community for our account pursuant to a long term management agreement. The closing of this acquisition is contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase this property. As of March 31, 2013, we own 39 communities that are managed by Five Star. We use the taxable REIT subsidiary, or TRS, structures authorized by the Real Estate Investment Trust Investment Diversification and Empowerment Act for our managed senior living communities, which we began acquiring in June 2011. See Note 11 for more information regarding our management arrangements with Five Star.

MOB Acquisitions:

In February 2013, we acquired two properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants, or MOBs, with a total of 144,900 square feet located in Bothell, WA for approximately $38,000, excluding closing costs.  We funded this acquisition using cash on hand. In March 2013, we acquired a MOB with 71,824 square feet located in Hattiesburg, MS for approximately $14,600, excluding closing costs. We funded this acquisition using cash on hand. Details of these acquisitions are as follows:

MOB Acquisitions since January 1, 2013:

Date	Location	Number of Properties	Square Feet	Purchase Price (1)		Land		Buildings and Improvements		Acquired Real Estate Leases		Acquired Real Estate Lease Obligations
February 2013	Bothell, WA	2	145	$	38,000	$	5,639	$	25,239	$	8,442	$	1,539
March 2013	Hattiesburg, MS	1	72	$	14,600	$	1,269	$	11,691	$	2,323	$	683
		3	217	$	52,600	$	6,908	$	36,930	$	10,765	$	2,222

(1) Purchase price excludes closing costs.  The allocation of the purchase price of our acquisitions shown above is based upon preliminary estimates of the fair value of assets acquired and liabilities assumed.  Consequently, amounts preliminarily allocated to assets acquired and liabilities assumed could change significantly from those used in these condensed consolidated financial statements.

In April 2013, we entered into an agreement to acquire an MOB, which has not yet closed, for approximately $21,500, excluding closing costs. The MOB is located in Cherry Hill, NJ and includes 53,976 square feet. The closing of this acquisition is contingent upon completion of our diligence and other customary closing conditions; accordingly, we can provide no assurance that we will purchase this property.

We periodically evaluate our properties for impairments. Impairment indicators may include declining tenant occupancy, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If indicators of impairment are present, we evaluate the carrying value of the affected property by comparing it to the expected future undiscounted net cash flows to be generated from that property. If the sum of these expected future net cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value.  During the three months ended March 31, 2013 and 2012, we recorded impairment of assets charges of $1,304 and $3,071, respectively, to reduce the carrying value of one of our properties to its estimated net sale price.

At March 31, 2013, one of our senior living communities located in Pittsburgh, PA is classified as held for sale.  This property is included in real estate properties in our condensed consolidated balance sheets and has a net book value of approximately $850 at March 31, 2013 and December 31, 2012, respectively.

During the three months ended March 31, 2013, pursuant to the terms of our existing leases with Five Star, we purchased $8,171 of improvements made to our properties leased to Five Star, and, as a result, the annual rent payable to us by Five Star increased by approximately $656.