10-K

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 ended: December 31, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period           to

Commission File Number: 1-11852

HEALTHCARE REALTY TRUST INCORPORATED

(Exact name of Registrant as specified in its charter)

Maryland
(State or other jurisdiction of
Incorporation or organization) 62-1507028
(I.R.S. Employer
Identification No.)

3310 West End Avenue
Suite 700
Nashville, Tennessee 37203
(Address of principal executive offices)

(615) 269-8175
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common stock, $0.01 par value per share	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:
None
(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 þ No o

     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 Noþ

     Indicate by check mark whether the Registrant (1) has filed all reports 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 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation 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 this Form 10-K or any amendment to this Form 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,” “accelerated filer” and “smaller reporting company” in rule 12b -2 of the Exchange Act. (Check one):

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

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

     The aggregate market value of the shares of common stock (based upon the closing price of these shares on the New York Stock Exchange, Inc. on June 30, 2010) of the Registrant held by non-affiliates on June 30, 2010 was approximately $1,353,691,371.

     As of January 31, 2011, 67,205,129 shares of the Registrant’s common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 are incorporated by reference into Part III of this Report.

TABLE OF CONTENTS

	Page
Item 1. Business		1
Item 1A. Risk Factors		17
Item 1B. Unresolved Staff Comments		22
Item 2. Properties		22
Item 3. Legal Proceedings		22
Item 4. Submission of Matters to a Vote of Security Holders		23
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		24
Item 6. Selected Financial Data		25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		43
Item 8. Financial Statements and Supplementary Data		44
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		80
Item 9A. Controls and Procedures		80
Item 9B. Other Information		82
Item 10. Directors, Executive Officers and Corporate Governance		82
Item 11. Executive Compensation		83
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		83
Item 13. Certain Relationships and Related Transactions, and Director Independence		83
Item 14. Principal Accountant Fees and Services		83
Item 15. Exhibits and Financial Statement Schedules		83
SIGNATURES		87

PART I

ITEM 1. BUSINESS

Overview

          Healthcare Realty Trust Incorporated (“Healthcare Realty” or the “Company”) was incorporated in Maryland in 1993 and is a self-managed and self-administered real estate investment trust (“REIT”) that owns, acquires, manages, finances and develops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States.

          The Company operates so as to qualify as a REIT for federal income tax purposes. As a REIT, the Company is not subject to corporate federal income tax with respect to net income distributed to its stockholders. See “Federal Income Tax Information” in Item 1 of this report.

     Real Estate Properties

          As of December 31, 2010, the Company’s real estate property investments, excluding assets held for sale and including an investment in one unconsolidated joint venture, are shown in the table below:

	Number of		Gross Investment					Square Feet
(Dollars and Square Feet in thousands)	Investments		Amount		%				Footage		%
Owned properties:
Master leases
Medical office		11	$	100,242		3.8	%			548		4.1	%
Physician clinics		13		106,209		4.1	%			602		4.6	%
Surgical facilities		5		70,631		2.7	%			226		1.7	%
Specialty outpatient		2		4,852		0.2	%			23		0.1	%
Inpatient rehab		11		178,639		6.8	%			734		5.6	%
Other		4		31,726		1.2	%			284		2.0	%
		46		492,299		18.8	%			2,417		18.1	%
Property operating agreements
Medical office		8		84,061		3.2	%			624		4.7	%
		8		84,061		3.2	%			624		4.7	%
Multi-tenanted with occupancy leases
Medical office		114		1,460,397		56.0	%			8,057		60.8	%
Medical office - stabilization in progress		9		253,833		9.7	%			951		7.2	%
Medical office - construction in progress		3		59,490		2.3	%			405		3.1	%
Physician clinics		14		46,015		1.8	%			296		2.2	%
Surgical facilities		5		127,224		4.8	%			368		2.7	%
Specialty outpatient		1		2,433		0.1	%			10		0.1	%
Other		1		10,141		0.4	%			126		1.1	%
		147		1,959,533		75.1	%			10,213		77.2	%
Land held for development		—		20,772		0.8	%			—		—
Corporate property		—		14,940		0.6	%			—		—
		—		35,712		1.4	%			—		—
Total owned properties		201		2,571,605		98.5	%			13,254		100.0	%
Mortgage loans:
Medical office		5		10,934		0.4	%			—		—
Physician clinics		1		14,920		0.6	%			—		—
Surgical facilities		1		10,745		0.4	%			—		—
		7		36,599		1.4	%			—		—
Unconsolidated joint venture:
Other		1		1,266		0.1	%			—		—
		1		1,266		0.1	%			—		—
Total real estate investments		209	$	2,609,470		100.0	%			13,254		100.0	%

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          The Company provided property management services for 137 healthcare-related properties nationwide, totaling approximately 9.2 million square feet at December 31, 2010. The Company’s portfolio of properties is focused predominantly on the medical office and outpatient sector of the healthcare industry and is diversified by tenant, geographic location and facility type.

          The following table details occupancy of the Company’s owned properties by facility type as of December 31, 2010 and 2009.

	Investment (1)		Percentage of			Occupancy (1)
	(in thousands)		Square Feet (1)			2010			2009
Medical office buildings	$	1,958,023		79.9	%		86	%		88	%
Physician clinics		152,224		6.8	%		83	%		92	%
Inpatient rehab		178,639		5.6	%		95	%		100	%
Surgical facilities		197,855		4.4	%		88	%		90	%
Specialty outpatient		7,285		0.2	%		100	%		63	%
Other		41,867		3.1	%		80	%		95	%
Total	$	2,535,893		100.0	%		87	%		90	%

(1) The investment and percentage of square feet columns include all owned real estate properties. The occupancy columns represent the percentage of total rentable square feet leased (including month-to-month and holdover leases), excluding nine properties in stabilization, 11 and six properties classified as held for sale and three and two properties in construction in progress as of December 31, 2010 and 2009, respectively. Properties under financial support or master lease agreements are included at 100% occupancy. Upon expiration of these agreements, occupancy reflects underlying tenant leases in the building.

          As of December 31, 2010, the weighted average remaining years to maturity pursuant to the Company’s long-term master leases, financial support agreements, and multi-tenanted occupancy leases was approximately 4.9 years, with expirations through 2029. The table below details the Company’s lease maturities as of December 31, 2010, excluding 11 properties classified as held for sale.

	Annualized
	Minimum							Average
Expiration	Rents (1)		Number of		Percentage			Square Feet
Year	(in thousands)		Leases		of Revenues			Per Lease
2011	$	29,986		326		13.3	%		3,604
2012		29,675		294		13.2	%		4,133
2013		33,358		268		14.8	%		4,823
2014		35,395		287		15.7	%		5,144
2015		19,020		192		8.5	%		4,720
2016		11,272		61		5.0	%		7,129
2017		17,844		68		7.9	%		13,598
2018		11,567		78		5.1	%		7,412
2019		5,541		28		2.5	%		6,846
2020		7,937		30		3.5	%		12,061
Thereafter		23,475		56		10.5	%		17,394

(1) Represents the annualized minimum rents on leases in-place as of December 31, 2010, excluding the impact of potential lease renewals, future step-ups in rent, sponsor support payments under financial support agreements and straight-line rent.

     Mortgage Notes Receivable

          The Company had seven mortgage notes receivable outstanding as of December 31, 2010 and four mortgage notes receivable as of December 31, 2009 with aggregate principal balances totaling $36.6 million and $31.0 million, respectively. Five of the mortgage notes outstanding at December 31, 2010 were construction loans and at December 31, 2009 one was a construction loan. All of the loans were secured by existing buildings or buildings currently under development. See Note 3 to the Consolidated Financial Statements for more information.

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Business Strategy

          Healthcare Realty’s strategy is to own and operate medical office and other medical-related facilities that produce stable and growing rental income. Additionally, the Company provides a broad spectrum of services needed to own, develop, lease, finance and manage its portfolio of healthcare properties.

          The Company focuses its portfolio on outpatient-related facilities located on or near the campuses of large acute care hospitals and associated with leading health systems because management views these facilities as stable, lower-risk real estate investments. According to the Centers for Medicare & Medicaid Services, the nation’s overall healthcare spending in 2009 was $2.5 trillion, representing 17.6% of the nation’s gross domestic product (“GDP”). Total healthcare spending is expected to grow and could reach an estimated 19.6% of GDP by 2019. Historically, more than half of the nation’s healthcare spending has been received by hospitals and outpatient-related facility tenants. In addition to the consistent growth in demand for outpatient services, management believes that the Company’s diversity of tenants, which includes physicians of nearly two-dozen physician specialties, as well as surgery, imaging, and diagnostic centers, lowers the Company’s overall financial and operational risk.

          The Company plans to continue to meet its liquidity needs, including funding additional investments in 2011, paying dividends, repaying maturing debt and funding other debt service, with available cash on hand, cash flows from operations, borrowings under the $550 million unsecured credit facility due 2012 (the “Unsecured Credit Facility”), proceeds from mortgage notes receivable repayments, proceeds from sales of real estate investments, or additional capital market financings, including the Company’s at-the-market equity offering program, or other debt or equity offerings. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in Item 7 and “Risk Factors” in Item 1A of this report for more discussion concerning the Company’s liquidity and capital resources.

Acquisitions and Dispositions

     Acquisition Activity

          During 2010, the Company acquired approximately $311.5 million in real estate assets and funded $24.4 million in mortgage notes receivable. These acquisitions and mortgage notes were funded with borrowings on the Unsecured Credit Facility, proceeds from $400 million in senior notes due 2021 issued in December 2010 (the “Senior Notes due 2021”), proceeds from real estate dispositions and mortgage note repayments, proceeds from the Company’s at-the-market equity offering program, and from the assumption of existing mortgage debt related to certain acquired properties. See Note 4 to the Consolidated Financial Statements for more information on these acquisitions.

     Dispositions and Impairments

          During 2010, the Company disposed of nine real estate properties for approximately $34.5 million in net proceeds, received $0.8 million in lease termination fees, and recognized approximately $8.4 million in gains from the sale of the properties. Also, three mortgage notes receivable totaling approximately $8.5 million were repaid. Proceeds from these dispositions were used to repay amounts due under the Unsecured Credit Facility, to fund additional real estate investments, and for general corporate purposes. See Note 4 to the Consolidated Financial Statements for more information on these dispositions.

          During 2010, the Company also recorded impairment charges of approximately $7.5 million on properties sold during the year or held for sale at December 31, 2010.

     2011 Acquisition

          In January 2011, the Company originated with Ladco a $40.0 million mortgage loan that is secured by a multi-tenanted office building located in Iowa that was 94% leased at the time the mortgage was originated. The mortgage loan requires interest only payments through maturity, has a stated fixed interest rate and matures in January 2014.

     2011 Dispositions

          In January 2011, the Company disposed of a medical office building located in Maryland that was previously classified as held for sale and in which the Company had a $3.5 million net investment at December 31, 2010. The Company received approximately $3.4 million in net proceeds, net of expenses incurred at the time of the closing.

          In February 2011, the Company disposed of a physician clinic located in Florida that was previously classified as held for sale and in which the Company had a $3.1 million net investment at December 31, 2010. The Company received approximately $3.1 million in consideration on the sale.

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     2011 Potential Dispositions

          During 2010, the Company received notice from a tenant of its intent to purchase six skilled nursing facilities in Michigan and Indiana pursuant to purchase options contained in its leases with the Company. The Company’s aggregate net investment in the buildings, which were classified as held for sale upon receiving notice of the purchase option exercise, was approximately $8.2 million at December 31, 2010. The aggregate purchase price for the properties is expected to be approximately $17.3 million, resulting in a net gain of approximately $9.1 million. The Company expects the sale to occur during the third quarter of 2011.

Purchase Options

          In addition to the six skilled nursing facilities in Michigan and Indiana discussed above, the Company had $91.3 million in real estate properties at December 31, 2010 that were subject to exercisable purchase options that had not been exercised. On a probability-weighted basis, the Company estimates that less than one-third of these options might be exercised in the future. Purchase options on two properties in which the Company had an aggregate gross investment of approximately $35.5 million at December 31, 2010 become exercisable during 2011 and 2012. The Company does not believe it can reasonably estimate the probability that these purchase options will be exercised in the future.

Construction in Progress and Other Commitments

          As of December 31, 2010, the Company had three medical office buildings under construction in Washington and Colorado with aggregate budgets of $147.1 million and estimated completion dates in the third quarter of 2011. At December 31, 2010, the Company had $59.5 million invested in these construction projects. The Company also has four parcels of land totaling $20.8 million in land held for future development that are included in construction in progress on the Company’s Consolidated Balance Sheet. See Note 14 to the Consolidated Financial Statements for more details on the Company’s construction in progress at December 31, 2010.

          The Company also had approximately $32.3 million in various first-generation tenant improvement budgeted amounts remaining as of December 31, 2010 related to properties that were developed by the Company.

          Further, as of December 31, 2010, the Company had remaining funding commitments totaling $54.6 million on five construction loans that the Company expects will be funded during 2011 and 2012.

Contractual Obligations

          As of December 31, 2010, the Company had long-term contractual obligations of approximately $2.3 billion, consisting primarily of $1.9 billion of long-term debt obligations (including related interest). For a more detailed description of these contractual obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Contractual Obligations,” in Item 7 of this report.

Competition

          The Company competes for the acquisition and development of real estate properties with private investors, healthcare providers, other healthcare-related REITs, real estate partnerships and financial institutions, among others. The business of acquiring and constructing new healthcare facilities is highly competitive and is subject to price, construction and operating costs, and other competitive pressures.

          The financial performance of all of the Company’s properties is subject to competition from similar properties. The extent to which the Company’s properties are utilized depends upon several factors, including the number of physicians using or referring patients to the healthcare facility, healthcare employment, competitive systems of healthcare delivery, and the area’s population, size and composition. Private, federal and state payment programs and other laws and regulations may also have an effect on the utilization of the properties. Virtually all of the Company’s properties operate in a competitive environment, and patients and referral sources, including physicians, may change their preferences for a healthcare facility from time to time.

Government Regulation

          The facilities owned by the Company are required to comply with extensive regulation at the federal, state, and local levels. These laws and regulations establish, among other things, requirements for state licensure and criteria to participate in government-sponsored reimbursement programs, such as the Medicare and Medicaid programs. Although lease payments to the Company are not directly affected by these laws and regulations, changes in these programs or the loss by a facility of its license or ability to participate in government-sponsored reimbursement programs due to certification deficiencies or program exclusion resulting from violations of law

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would have a material adverse effect on facility revenues and could adversely affect healthcare provider tenants’ ability to make payments to the Company.

          The facilities owned by the Company are also subject to federal laws that are intended to combat fraud and waste such as the Anti-Kickback Statute, Stark Law, False Claims Act, and Health Insurance Portability and Accountability Act of 1996. Although the Company is not a healthcare provider or in a position to refer patients or order services reimbursable by the federal government, violations of these and similar laws would have a material adverse effect on facility revenues and could adversely affect healthcare provider tenants’ abilities to make payments to the Company. The Company’s leases require the lessees to comply with all applicable laws.

          The Medicare and Medicaid programs are highly regulated and subject to frequent evaluation and change. Government healthcare spending has increased over time; however, changes from year to year in reimbursement methodology, rates and other regulatory requirements have resulted in a challenging operating environment for healthcare providers. Spending on government reimbursement programs is expected to continue to rise significantly over the next 20 years, particularly as the government seeks to expand public insurance programs for the uninsured and senior populations.

          In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Reform Law”) was signed into law to provide for comprehensive reform of the United States healthcare system and extend health insurance benefits to the uninsured population, with the potential to alleviate high uncompensated care expense to healthcare providers. However, the law also increases regulatory scrutiny of providers by federal and state administrative authorities, lowers their annual increase in Medicare payment rates, and will gradually implement significant cost-saving measures to lower the growth of healthcare spending, while also requiring improved access and quality of care, thus presenting the industry and its individual participants with uncertainty. The Health Reform Law has been ruled unconstitutional in whole or in part by certain federal district courts, and the degree to which it is implemented, if at all, will ultimately be decided by the United States Supreme Court. These varied reforms could affect the economic performance of some or all of the Company’s tenants and clients. The Company cannot predict the degree to which these changes may affect the economic performance of the Company, positively or negatively.

          The Company expects healthcare providers to continue to adjust to new operating challenges, as they have in the past, by increasing operating efficiency and modifying their strategies for profitable operations and growth. Furthermore, under comprehensive healthcare reform, the Company could benefit from higher demand for medical office space as the newly insured population would require additional healthcare providers and facilities.

          The Company believes its strategic focus on the medical office and outpatient sector of the healthcare industry mitigates risk from changes in public healthcare spending and reimbursement because physician practices generally derive a large portion of their revenue from private insurance and out-of-pocket patient expense. The diversity of the Company’s multi-tenant medical office facilities also provides lower reimbursement risk as payor mix varies from physician to physician, depending on location, specialty, patients, and physician preferences.

Legislative Developments

          Each year, legislative proposals for health policy are introduced in Congress and state legislatures, and regulatory changes are enacted by government agencies. These proposals, individually or in the aggregate, could significantly change the delivery of healthcare services, either nationally or at the state level, if implemented. Examples of significant legislation currently under consideration or recently enacted include:

• the Health Reform Law;

• proposals to repeal the Health Reform law in whole or in part;

• quality control, cost containment, and payment system refinements for Medicaid, Medicare and other public funding, such as expansion of pay-for-performance criteria and value-based purchasing programs, bundled provider payments, accountable care organizations, increased patient cost-sharing, geographic payment variations, comparative effectiveness research, and lower payments for hospital readmissions;

• reform of the Medicare physician fee-for-service reimbursement formula that dictates annual updates in payment rates for physician services, including significant reductions in the sustainable growth rate; however, Congress is expected to continue its annual practice of extending physician payment rates or providing an increase for the fiscal year 2012;

• significant cuts to state Medicaid payment rates and benefits due to mounting state budgetary pressures;

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• prohibitions on additional types of contractual relationships between physicians and the healthcare facilities and providers to which they refer, and related information-collection activities;

• efforts to increase transparency with respect to pricing and financial relationships among healthcare providers and drug/device manufacturers;

• heightened health information technology standards for healthcare providers;

• increased scrutiny of medical errors and conditions acquired inside health facilities;

• patient and drug safety initiatives;

• re-importation of pharmaceuticals;

• pharmaceutical drug pricing and compliance activities under Medicare part D;

• tax law changes affecting non-profit providers;

• immigration reform and related healthcare mandates;

• modifications to increase requirements for facility accessibility by persons with disabilities; and

• facility requirements related to earthquakes and other disasters, including structural retrofitting.

          The Company cannot predict whether any proposals will be fully implemented, adopted, repealed, or amended, or what effect, whether positive or negative, such proposals would have on the Company’s business.

Environmental Matters

          Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property (such as the Company) may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, under or disposed of in connection with such property, as well as certain other potential costs relating to hazardous or toxic substances (including government fines and injuries to persons and adjacent property). Most, if not all, of these laws, ordinances and regulations contain stringent enforcement provisions including, but not limited to, the authority to impose substantial administrative, civil and criminal fines and penalties upon violators. Such laws often impose liability, without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances and may be imposed on the owner in connection with the activities of an operator of the property. The cost of any required remediation, removal, fines or personal or property damages and the owner’s liability therefore could exceed the value of the property and/or the aggregate assets of the owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or lease such property or to borrow using such property as collateral. A property can also be negatively impacted either through physical contamination or by virtue of an adverse effect on value, from contamination that has or may have emanated from other properties.

          Operations of the properties owned, developed or managed by the Company are and will continue to be subject to numerous federal, state, and local environmental laws, ordinances and regulations, including those relating to the following: the generation, segregation, handling, packaging and disposal of medical wastes; air quality requirements related to operations of generators, incineration devices, or sterilization equipment; facility siting and construction; disposal of non-medical wastes and ash from incinerators; and underground storage tanks. Certain properties owned, developed or managed by the Company contain, and others may contain or at one time may have contained, underground storage tanks that are or were used to store waste oils, petroleum products or other hazardous substances. Such underground storage tanks can be the source of releases of hazardous or toxic materials. Operations of nuclear medicine departments at some properties also involve the use and handling, and subsequent disposal of, radioactive isotopes and similar materials, activities which are closely regulated by the Nuclear Regulatory Commission and state regulatory agencies. In addition, several of the properties were built during the period that asbestos was commonly used in building construction and other such facilities may be acquired by the Company in the future. The presence of such materials could result in significant costs in the event that any asbestos-containing materials requiring immediate removal and/or encapsulation are located in or on any facilities or in the event of any future renovation activities.

          The Company has had environmental site assessments conducted on substantially all of the properties currently owned. These site assessments are limited in scope and provide only an evaluation of potential environmental conditions associated with the property, not compliance assessments of ongoing operations. While it is the Company’s policy to seek indemnification relating to environmental liabilities or conditions, even where leases and sale and purchase agreements do contain such provisions, there can be no assurances that

6

the tenant or seller will be able to fulfill its indemnification obligations. In addition, the terms of the Company’s leases or financial support agreements do not give the Company control over the operational activities of its lessees or healthcare operators, nor will the Company monitor the lessees or healthcare operators with respect to environmental matters.

Insurance

          The Company generally requires its tenants to maintain comprehensive liability and property insurance that covers the Company as well as the tenants. The Company also carries comprehensive liability insurance and property insurance covering its owned and managed properties, including those held under long-term ground leases. In addition, tenants under long-term net master leases are required to carry property insurance covering the Company’s interest in the buildings. The Company has also obtained title insurance with respect to each of the properties it owns, insuring that the Company holds title to each of the properties free and clear of all liens and encumbrances except those approved by the Company.

Employees

          As of December 31, 2010, the Company employed 240 people. The employees are not members of any labor union, and the Company considers its relations with its employees to be excellent.

Federal Income Tax Information

          The Company is and intends to remain qualified as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, the Company’s net income attributable to common stockholders will not be subject to federal taxation to the extent that it is distributed as dividends to stockholders. Distributions to the Company’s stockholders generally will be includable in their income; however, dividends distributed that are in excess of current and/or accumulated earnings and profits will be treated for tax purposes as a return of capital to the extent of a stockholder’s basis and will reduce the basis of the stockholder’s shares.

     Introduction

          The Company is qualified and intends to remain qualified as a REIT for federal income tax purposes under Sections 856 through 860 of the Code. The following discussion addresses the material federal tax considerations relevant to the taxation of the Company and summarizes certain federal income tax consequences that may be relevant to certain stockholders. However, the actual tax consequences of holding particular securities issued by the Company may vary in light of a securities holder’s particular facts and circumstances. Certain holders, such as tax-exempt entities, insurance companies and financial institutions, are generally subject to special rules. In addition, the following discussion does not address issues under any foreign, state or local tax laws. The tax treatment of a holder of any of the securities issued by the Company will vary depending upon the terms of the specific securities acquired by such holder, as well as the holder’s particular situation, and this discussion does not attempt to address aspects of federal income taxation relating to holders of particular securities of the Company. This summary is qualified in its entirety by the applicable Code provisions, rules and regulations promulgated thereunder, and administrative and judicial interpretations thereof. The Code, rules, regulations, and administrative and judicial interpretations are all subject to change at any time (possibly on a retroactive basis).

          The Company is organized and is operating in conformity with the requirements for qualification and taxation as a REIT and intends to continue operating so as to enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code. The Company’s qualification and taxation as a REIT depends upon its ability to meet, through actual annual operating results, the various income, asset, distribution, stock ownership and other tests discussed below. Accordingly, the Company cannot guarantee that the actual results of operations for any one taxable year will satisfy such requirements.

          If the Company were to cease to qualify as a REIT, and the statutory relief provisions were found not to apply, the Company’s income that it distributed to stockholders would be subject to the “double taxation” on earnings (once at the corporate level and again at the stockholder level) that generally results from an investment in the equity securities of a corporation. The distributions would then qualify for the reduced dividend rates created by the Jobs and Growth Tax Relief Reconciliation Act of 2003. However, the reduced dividend rates are scheduled to expire for taxable years beginning after December 31, 2012. Failure to maintain qualification as a REIT would force the Company to significantly reduce its distributions and possibly incur substantial indebtedness or liquidate substantial investments in order to pay the resulting corporate taxes. In addition, the Company, once having obtained REIT status and having thereafter lost such status, would not be eligible to re-elect REIT status for the four subsequent taxable years, unless its failure to maintain its qualification was due to reasonable cause and not willful neglect and certain other requirements were satisfied. In order to elect again to be taxed as a REIT, just as with its original election, the Company would be required to distribute all of its earnings and profits accumulated in any non-REIT taxable year.

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     Taxation of the Company

          As long as the Company remains qualified to be taxed as a REIT, it generally will not be subject to federal income taxes on that portion of its ordinary income or capital gain that is currently distributed to stockholders.

          However, the Company will be subject to federal income tax as follows:

• The Company will be taxed at regular corporate rates on any undistributed “real estate investment trust taxable income,” including undistributed net capital gains.

• Under certain circumstances, the Company may be subject to the “alternative minimum tax” on its items of tax preference, if any.

• If the Company has (i) net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business, or (ii) other non-qualifying income from foreclosure property, it will be subject to tax on such income at the highest regular corporate rate.

• Any net income that the Company has from prohibited transactions (which are, in general, certain sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business) will be subject to a 100% tax.

• If the Company should fail to satisfy either the 75% or 95% gross income test (as discussed below), and has nonetheless maintained its qualification as a REIT because certain other requirements have been met, it will be subject to a percentage tax calculated by the ratio of REIT taxable income to gross income with certain adjustments multiplied by the gross income attributable to the greater of the amount by which the Company fails the 75% or 95% gross income test.

• If the Company fails to distribute during each year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any undistributed taxable income from preceding periods, then the Company will be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed.

• In the event of a more than de minimis failure of any of the asset tests, as described below under “Asset Tests,” as long as the failure was due to reasonable cause and not to willful neglect, the Company files a description of each asset that caused such failure with the Internal Revenue Services (“IRS”), and disposes of the assets or otherwise complies with the asset tests within six months after the last day of the quarter in which the Company identifies such failure, the Company will pay a tax equal to the greater of $50,000 or 35% of the net income from the nonqualifying assets during the period in which the Company failed to satisfy the asset tests.

• In the event the Company fails to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, and such failure is due to reasonable cause and not to willful neglect, the Company will be required to pay a penalty of $50,000 for each such failure.

• To the extent that the Company recognizes gain from the disposition of an asset with respect to which there existed “built-in gain” upon its acquisition by the Company from a Subchapter C corporation in a carry-over basis transaction and such disposition occurs within a maximum ten-year recognition period beginning on the date on which it was acquired by the Company, the Company will be subject to federal income tax at the highest regular corporate rate on the amount of its “net recognized built-in gain.”

• To the extent that the Company has net income from a taxable REIT subsidiary (“TRS”), the TRS will be subject to federal corporate income tax in much the same manner as other non-REIT Subchapter C corporations, with the exceptions that the deductions for interest expense on debt and rental payments made by the TRS to the Company will be limited and a 100% excise tax may be imposed on transactions between the TRS and the Company or the Company’s tenants that are not conducted on an arm’s length basis. A TRS is a corporation in which a REIT owns stock, directly or indirectly, and for which both the REIT and the corporation have made TRS elections.

     Requirements for Qualification as a REIT

          To qualify as a REIT for a taxable year, the Company must have no earnings and profits accumulated in any non-REIT year. The Company also must elect or have in effect an election to be taxed as a REIT and must meet other requirements, some of which are summarized below, including percentage tests relating to the sources of its gross income, the nature of the Company’s assets and the

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distribution of its income to stockholders. Such election, if properly made and assuming continuing compliance with the qualification tests described herein, will continue in effect for subsequent years.

     Organizational Requirements and Share Ownership Tests

          Section 856(a) of the Code defines a REIT as a corporation, trust or association:

(1)	that is managed by one or more trustees or directors;
(2)	the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;
(3)	that would be taxable, but for Sections 856 through 860 of the Code, as a domestic corporation;
(4)	that is neither a financial institution nor an insurance company subject to certain provisions of the Code;
(5)	the beneficial ownership of which is held by 100 or more persons, determined without reference to any rules of attribution (the “share ownership test”);
(6)	that during the last half of each taxable year not more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) (the “five or fewer test”); and
(7)	that meets certain other tests, described below, regarding the nature of its income and assets.

          Section 856(b) of the Code provides that conditions (1) through (4), inclusive, must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of fewer than 12 months. The five or fewer test and the share ownership test do not apply to the first taxable year for which an election is made to be treated as a REIT.

          The Company is also required to request annually (within 30 days after the close of its taxable year) from record holders of specified percentages of its shares written information regarding the ownership of such shares. A list of stockholders failing to fully comply with the demand for the written statements is required to be maintained as part of the Company’s records required under the Code. Rather than responding to the Company, the Code allows the stockholder to submit such statement to the IRS with the stockholder’s tax return.

          The Company has issued shares to a sufficient number of people to allow it to satisfy the share ownership test and the five or fewer test. In addition, to assist in complying with the five or fewer test, the Company’s Articles of Incorporation contain provisions restricting share transfers where the transferee (other than specified individuals involved in the formation of the Company, members of their families and certain affiliates, and certain other exceptions) would, after such transfer, own (a) more than 9.9% either in number or value of the outstanding common stock of the Company or (b) more than 9.9% either in number or value of any outstanding preferred stock of the Company. Pension plans and certain other tax-exempt entities have different restrictions on ownership. If, despite this prohibition, stock is acquired increasing a transferee’s ownership to over 9.9% in value of either the outstanding common stock or any preferred stock of the Company, the stock in excess of this 9.9% in value is deemed to be held in trust for transfer at a price that does not exceed what the purported transferee paid for the stock, and, while held in trust, the stock is not entitled to receive dividends or to vote. In addition, under these circumstances, the Company has the right to redeem such stock.

          For purposes of determining whether the five or fewer test (but not the share ownership test) is met, any stock held by a qualified trust (generally, pension plans, profit-sharing plans and other employee retirement trusts) is, generally, treated as held directly by the trust’s beneficiaries in proportion to their actuarial interests in the trust and not as held by the trust.

     Income Tests

          In order to maintain qualification as a REIT, two gross income requirements must be satisfied annually.

• First, at least 75% of the Company’s gross income (excluding gross income from certain sales of property held as inventory or primarily for sale in the ordinary course of business) must be derived from “rents from real property”; “interest on obligations secured by mortgages on real property or on interests in real property”; gain (excluding gross income from certain sales of property held as inventory or primarily for sale in the ordinary course of business) from the sale or other disposition of, and certain other gross income related to, real property (including interests in real property and in mortgages on real property); and income received or accrued within one year of the Company’s receipt of, and attributable to the temporary investment of,

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“new capital” (any amount received in exchange for stock other than through a dividend reinvestment plan or in a public offering of debt obligations having maturities of at least five years).

•

Second, at least 95% of the Company’s gross income (excluding gross income from certain sales of property held as inventory or primarily for sale in the ordinary course of business) must be derived from dividends; interest; “rents from real property”; gain (excluding gross income from certain sales of property held as inventory or primarily for sale in the ordinary course of business) from the sale or other disposition of, and certain other gross income related to, real property (including interests in real property and in mortgages on real property); and gain from the sale or other disposition of stock and securities.

          The Company may temporarily invest its working capital in short-term investments. Although the Company will use its best efforts to ensure that income generated by these investments will be of a type that satisfies the 75% and 95% gross income tests, there can be no assurance in this regard (see the discussion above of the “new capital” rule under the 75% gross income test).

          For an amount received or accrued to qualify for purposes of an applicable gross income test as “rents from real property” or “interest on obligations secured by mortgages on real property or on interests in real property,” the determination of such amount must not depend in whole or in part on the income or profits derived by any person from such property (except that such amount may be based on a fixed percentage or percentages of receipts or sales). In addition, for an amount received or accrued to qualify as “rents from real property,” such amount may not be received or accrued directly or indirectly from a person in which the Company owns directly or indirectly 10% or more of, in the case of a corporation, the total voting power of all voting stock or the total value of all stock, and, in the case of an unincorporated entity, the assets or net profits of such entity (except for certain amounts received or accrued from a TRS in connection with property substantially rented to persons other than a TRS of the Company and other 10%-or-more owned persons or with respect to certain healthcare facilities, if certain conditions are met). The Company leases and intends to lease property only under circumstances such that substantially all, if not all, rents from such property qualify as “rents from real property.” Although it is possible that a tenant could sublease space to a sublessee in whom the Company is deemed to own directly or indirectly 10% or more of the tenant, the Company believes that as a result of the provisions of the Company’s Articles of Incorporation that limit ownership to 9.9%, such occurrence would be unlikely. Application of the 10% ownership rule is, however, dependent upon complex attribution rules provided in the Code and circumstances beyond the control of the Company. Ownership, directly or by attribution, by an unaffiliated third party of more than 10% of the Company’s stock and more than 10% of the stock of any tenant or subtenant would result in a violation of the rule.

          In addition, the Company must not manage its properties or furnish or render services to the tenants of its properties, except through an independent contractor from whom the Company derives no income or through a TRS unless (i) the Company is performing services that are usually or customarily furnished or rendered in connection with the rental of space for occupancy only and the services are of the sort that a tax-exempt organization could perform without being considered in receipt of unrelated business taxable income or (ii) the income earned by the Company for other services furnished or rendered by the Company to tenants of a property or for the management or operation of the property does not exceed a de minimis threshold generally equal to 1% of the income from such property. The Company self-manages some of its properties, but does not believe it provides services to tenants that are outside the exception.

          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 such personal property will not qualify as “rents from real property.” Generally, this 15% test is applied separately to each lease. The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the property that is rented. The determination of what fixtures and other property constitute personal property for federal tax purposes is difficult and imprecise. The Company does not have 15% by value of any of its properties classified as personal property. If, however, rent payments do not qualify, for reasons discussed above, as rents from real property for purposes of Section 856 of the Code, it will be more difficult for the Company to meet the 95% and 75% gross income tests and continue to qualify as a REIT.

          The Company is and expects to continue performing third-party management services, and may also perform third-party development services. If the gross income to the Company from this or any other activity producing disqualified income for purposes of the 95% or 75% gross income tests approaches a level that could potentially cause the Company to fail to satisfy these tests, the Company intends to take such corrective action as may be necessary to avoid failing to satisfy the 95% or 75% gross income tests.

          The Company may enter into hedging transactions with respect to one or more of its assets or liabilities. The Company’s hedging activities may include entering into interest rate swaps, caps and floors, options to purchase such items, and futures and forward contracts. Income and gain from “hedging transactions” will be excluded from gross income for purposes of the 95% and 75% gross income tests. A “hedging transaction” includes any transaction entered into in the normal course of the Company’s trade or business primarily to manage the risk of interest rate, price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets. The Company will be required to clearly identify any such hedging transaction before the close of the day on which it was acquired, originated or entered into. The Company intends to structure any hedging or similar transactions so as not to jeopardize its status as a REIT.

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          If the Company were to fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a REIT for such year if it is entitled to relief under certain provisions of the Code. These relief provisions would generally be available if (i) the Company’s failure to meet such test or tests was due to reasonable cause and not to willful neglect and (ii) following its identification of its failure to meet these tests, the Company files a description of each item of income that fails to meet these tests in a schedule in accordance with Treasury Regulations. It is not possible, however, to know whether the Company would be entitled to the benefit of these relief provisions since the application of the relief provisions is dependent on future facts and circumstances. If these provisions were to apply, the Company would be subjected to tax equal to a percentage tax calculated by the ratio of REIT taxable income to gross income with certain adjustments multiplied by the gross income attributable to the greater of the amount by which the Company failed either of the 75% or the 95% gross income tests.

     Asset Tests

          At the close of each quarter of its taxable year, the Company must also satisfy four tests relating to the nature of its assets.

• At least 75% of the value of the Company’s total assets must consist of real estate assets (including interests in real property and interests in mortgages on real property as well as its allocable share of real estate assets held by joint ventures or partnerships in which the Company participates), cash, cash items and government securities.

• Not more than 25% of the Company’s total assets may be represented by securities other than those includable in the 75% asset class.

• Not more than 25% of the Company’s total assets may be represented by securities of one or more TRS.

• Of the investments included in the 25% asset class, except for TRS, (i) the value of any one issuer’s securities owned by the Company may not exceed 5% of the value of the Company’s total assets, (ii) the Company may not own more than 10% of any one issuer’s outstanding voting securities and (iii) the Company may not hold securities having a value of more than 10% of the total value of the outstanding securities of any one issuer. Securities issued by affiliated qualified REIT subsidiaries (“QRS”), which are corporations wholly owned by the Company, either directly or indirectly, that are not TRS, are not subject to the 25% of total assets limit, the 5% of total assets limit or the 10% of a single issuer’s voting securities limit or the 10% of a single issuer’s value limit. Additionally, “straight debt” and certain other exceptions are not “securities” for purposes of the 10% of a single issuer’s value test. The existence of QRS are ignored, and the assets, income, gain, loss and other attributes of the QRS are treated as being owned or generated by the Company, for federal income tax purposes. The Company currently has 65 subsidiaries and other affiliates that it employs in the conduct of its business.

          If the Company meets the asset tests described above at the close of any quarter, it will not lose its status as a REIT because of a change in value of its assets unless the discrepancy exists immediately after the acquisition of any security or other property that is wholly or partly the result of an acquisition during such quarter. Where a failure to satisfy the asset tests results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient non-qualifying assets within 30 days after the close of such quarter. The Company maintains adequate records of the value of its assets to maintain compliance with the asset tests and to take such action as may be required to cure any failure to satisfy the test within 30 days after the close of any quarter. Nevertheless, if the Company were unable to cure within the 30-day cure period, the Company may cure a violation of the 5% asset test or the 10% asset test so long as the value of the asset causing such violation does not exceed the lesser of 1% of the Company’s assets at the end of the relevant quarter or $10 million and the Company disposes of the asset causing the failure or otherwise complies with the asset tests within six months after the last day of the quarter in which the failure to satisfy the asset test is discovered. For violations due to reasonable cause and not due to willful neglect that are larger than this amount, the Company is permitted to avoid disqualification as a REIT after the 30-day cure period by (i) disposing of an amount of assets sufficient to meet the asset tests, (ii) paying a tax equal to the greater of $50,000 or the highest corporate tax rate times the taxable income generated by the non-qualifying asset and (iii) disclosing certain information to the IRS.

     Distribution Requirement

          In order to qualify as a REIT, the Company is required to distribute dividends (other than capital gain dividends) to its stockholders in an amount equal to or greater than the excess of (a) the sum of (i) 90% of the Company’s “real estate investment trust taxable income” (computed without regard to the dividends paid deduction and the Company’s net capital gain) and (ii) 90% of the net income (after tax on such income), if any, from foreclosure property, over (b) the sum of certain non-cash income (from certain imputed rental income and income from transactions inadvertently failing to qualify as like-kind exchanges). These requirements may be waived by the IRS if the Company establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax described below. To the extent that the Company does not distribute all of its net long-term capital gain and all of its “real estate investment trust taxable income,” it will be subject to tax thereon. In addition, the Company will be subject to a 4% excise

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tax to the extent it fails within a calendar year to make “required distributions” to its stockholders of 85% of its ordinary income and 95% of its capital gain net income plus the excess, if any, of the “grossed up required distribution” for the preceding calendar year over the amount treated as distributed for such preceding calendar year. For this purpose, the term “grossed up required distribution” for any calendar year is the sum of the taxable income of the Company for the taxable year (without regard to the deduction for dividends paid) and all amounts from earlier years that are not treated as having been distributed under the provision. Dividends declared in the last quarter of the year and paid during the following January will be treated as having been paid and received on December 31 of such earlier year. The Company’s distributions for 2010 were adequate to satisfy its distribution requirement.

          It is possible that the Company, from time to time, may have insufficient cash or other liquid assets to meet the 90% distribution requirement due to timing differences between the actual receipt of income and the actual payment of deductible expenses or dividends on the one hand and the inclusion of such income and deduction of such expenses or dividends in arriving at “real estate investment trust taxable income” on the other hand. The problem of not having adequate cash to make required distributions could also occur as a result of the repayment in cash of principal amounts due on the Company’s outstanding debt, particularly in the case of “balloon” repayments or as a result of capital losses on short-term investments of working capital. Therefore, the Company might find it necessary to arrange for short-term, or possibly long-term, borrowing or new equity financing. If the Company were unable to arrange such borrowing or financing as might be necessary to provide funds for required distributions, its REIT status could be jeopardized.

          Under certain circumstances, the Company may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to stockholders in a later year, which may be included in the Company’s deduction for dividends paid for the earlier year. The Company may be able to avoid being taxed on amounts distributed as deficiency dividends; however, the Company might in certain circumstances remain liable for the 4% excise tax described above.

     Federal Income Tax Treatment of Leases

          The availability to the Company of, among other things, depreciation deductions with respect to the facilities owned and leased by the Company depends upon the treatment of the Company as the owner of the facilities and the classification of the leases of the facilities as true leases, rather than as sales or financing arrangements, for federal income tax purposes. The Company has not requested nor has it received an opinion that it will be treated as the owner of the portion of the facilities constituting real property and that the leases will be treated as true leases of such real property for federal income tax purposes.

     Other Issues

          With respect to property acquired from and leased back to the same or an affiliated party, the IRS could assert that the Company realized prepaid rental income in the year of purchase to the extent that the value of the leased property exceeds the purchase price paid by the Company for that property. In litigated cases involving sale-leasebacks which have considered this issue, courts have concluded that buyers have realized prepaid rent where both parties acknowledged that the purported purchase price for the property was substantially less than fair market value and the purported rents were substantially less than the fair market rentals. Because of the lack of clear precedent and the inherently factual nature of the inquiry, the Company cannot give complete assurance that the IRS could not successfully assert the existence of prepaid rental income in such circumstances. The value of property and the fair market rent for properties involved in sale-leasebacks are inherently factual matters and always subject to challenge.

          Additionally, it should be noted that Section 467 of the Code (concerning leases with increasing rents) may apply to those leases of the Company that provide for rents that increase from one period to the next. Section 467 provides that in the case of a so-called “disqualified leaseback agreement,” rental income must be accrued at a constant rate. If such constant rent accrual is required, the Company would recognize rental income in excess of cash rents and, as a result, may fail to have adequate funds available to meet the 90% dividend distribution requirement. “Disqualified leaseback agreements” include leaseback transactions where a principal purpose of providing increasing rent under the agreement is the avoidance of federal income tax. Since the Section 467 regulations provide that rents will not be treated as increasing for tax avoidance purposes where the increases are based upon a fixed percentage of lessee receipts, additional rent provisions of leases containing such clauses should not result in these leases being disqualified leaseback agreements. In addition, the Section 467 regulations provide that leases providing for fluctuations in rents by no more than a reasonable percentage, which is 15% for long-term real property leases, from the average rent payable over the term of the lease will be deemed to not be motivated by tax avoidance. The Company does not believe it has rent subject to the disqualified leaseback provisions of Section 467.

          Subject to a safe harbor exception for annual sales of up to seven properties (or properties with a basis of up to 10% of the REIT’s assets) that have been held for at least two years, gain from sales of property held for sale to customers in the ordinary course of business is subject to a 100% tax. The simultaneous exercise of options to acquire leased property that may be granted to certain tenants or other events could result in sales of properties by the Company that exceed this safe harbor. However, the Company believes that in such event, it will not have held such properties for sale to customers in the ordinary course of business.

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     Depreciation of Properties

          For federal income tax purposes, the Company’s real property is being depreciated over 31.5, 39 or 40 years, using the straight-line method of depreciation and its personal property over various periods utilizing accelerated and straight-line methods of depreciation.

     Failure to Qualify as a REIT

          If the Company was to fail to qualify for federal income tax purposes as a REIT in any taxable year, and the relief provisions were found not to apply, the Company would be subject to tax on its taxable income at regular corporate rates (plus any applicable alternative minimum tax). Distributions to stockholders in any year in which the Company failed to qualify would not be deductible by the Company nor would they be required to be made. In such event, to the extent of current and/or accumulated earnings and profits, all distributions to stockholders would be taxable as qualified dividend income, including, presumably, subject to the 15% maximum rate on dividends created by the Jobs and Growth Tax Relief Reconciliation Act of 2003, and, subject to certain limitations in the Code, eligible for the 70% dividends received deduction for corporations that are REIT stockholders. However, this reduced rate for dividend income is set to expire for taxable years beginning after December 31, 2012. Unless entitled to relief under specific statutory provisions, the Company would also be disqualified from taxation as a REIT for the following four taxable years. It is not possible to state whether in all circumstances the Company would be entitled to statutory relief from such disqualification. Failure to qualify for even one year could result in the Company’s incurring substantial indebtedness (to the extent borrowings were feasible) or liquidating substantial investments in order to pay the resulting taxes.

     Taxation of Tax-Exempt Stockholders

          The IRS has issued a revenue ruling in which it held that amounts distributed by a REIT to a tax-exempt employees’ pension trust do not constitute “unrelated business taxable income,” even though the REIT may have financed certain of its activities with acquisition indebtedness. Although revenue rulings are interpretive in nature and are subject to revocation or modification by the IRS, based upon the revenue ruling and the analysis therein, distributions made by the Company to a U.S. stockholder that is a tax-exempt entity (such as an individual retirement account (“IRA”) or a 401(k) plan) should not constitute unrelated business taxable income unless such tax-exempt U.S. stockholder has financed the acquisition of its shares with “acquisition indebtedness” within the meaning of the Code, or the shares are otherwise used in an unrelated trade or business conducted by such U.S. stockholder.

          Special rules apply to certain tax-exempt pension funds (including 401(k) plans but excluding IRAs or government pension plans) that own more than 10% (measured by value) of a “pension-held REIT.” Such a pension fund may be required to treat a certain percentage of all dividends received from the REIT during the year as unrelated business taxable income. The percentage is equal to the ratio of the REIT’s gross income (less direct expenses related thereto) derived from the conduct of unrelated trades or businesses determined as if the REIT were a tax-exempt pension fund (including income from activities financed with “acquisition indebtedness”), to the REIT’s gross income (less direct expenses related thereto) from all sources. The special rules will not require a pension fund to recharacterize a portion of its dividends as unrelated business taxable income unless the percentage computed is at least 5%.

          A REIT will be treated as a “pension-held REIT” if the REIT is predominantly held by tax-exempt pension funds and if the REIT would otherwise fail to satisfy the five or fewer test discussed above. A REIT is predominantly held by tax-exempt pension funds if at least one tax-exempt pension fund holds more than 25% (measured by value) of the REIT’s stock or beneficial interests, or if one or more tax-exempt pension funds (each of which owns more than 10% (measured by value) of the REIT’s stock or beneficial interests) own in the aggregate more than 50% (measured by value) of the REIT’s stock or beneficial interests. The Company believes that it will not be treated as a pension-held REIT. However, because the shares of the Company will be publicly traded, no assurance can be given that the Company is not or will not become a pension-held REIT.

     Taxation of Non-U.S. Stockholders

          The rules governing United States federal income taxation of any person other than (i) a citizen or resident of the United States, (ii) a corporation or partnership created in the United States or under the laws of the United States or of any state thereof, (iii) an estate whose income is includable in income for U.S. federal income tax purposes regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States fiduciaries have the authority to control all substantial decisions of the trust (“Non-U.S. Stockholders”) are highly complex, and the following discussion is intended only as a summary of such rules. Prospective Non-U.S. Stockholders should consult with their own tax advisors to determine the impact of United States federal, state, and local income tax laws on an investment in stock of the Company, including any reporting requirements.

          In general, Non-U.S. Stockholders are subject to regular United States income tax with respect to their investment in stock of the Company in the same manner as a U.S. stockholder if such investment is “effectively connected” with the Non-U.S. Stockholder’s conduct of a trade or business in the United States. A corporate Non-U.S. Stockholder that receives income with respect to its investment in stock of the Company that is (or is treated as) effectively connected with the conduct of a trade or business in the United States also

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may be subject to the 30% branch profits tax imposed by the Code, which is payable in addition to regular United States corporate income tax. The following discussion addresses only the United States taxation of Non-U.S. Stockholders whose investment in stock of the Company is not effectively connected with the conduct of a trade or business in the United States.

     Ordinary Dividends

          Distributions made by the Company that are not attributable to gain from the sale or exchange by the Company of United States real property interests (“USRPI”) and that are not designated by the Company as capital gain dividends will be treated as ordinary income dividends to the extent made out of current or accumulated earnings and profits of the Company. Generally, such ordinary income dividends will be subject to United States withholding tax at the rate of 30% on the gross amount of the dividend paid unless reduced or eliminated by an applicable United States income tax treaty. The Company expects to withhold United States income tax at the rate of 30% on the gross amount of any such dividends paid to a Non-U.S. Stockholder unless a lower treaty rate applies and the Non-U.S. Stockholder has filed an IRS Form W-8BEN with the Company, certifying the Non-U.S. Stockholder’s entitlement to treaty benefits.

     Non-Dividend Distributions

          Distributions made by the Company in excess of its current and accumulated earnings and profits to a Non-U.S. Stockholder who holds 5% or less of the stock of the Company (after application of certain ownership rules) will not be subject to U.S. income or withholding tax. If it cannot be determined at the time a distribution is made whether or not such distribution will be in excess of the Company’s current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to a dividend distribution. However, the Non-U.S. Stockholder may seek a refund from the IRS of any amount withheld if it is subsequently determined that such distribution was, in fact, in excess of the Company’s then current and accumulated earnings and profits.

     Capital Gain Dividends

          As long as the Company continues to qualify as a REIT, distributions made by the Company after December 31, 2005, that are attributable to gain from the sale or exchange by the Company of any USRPI will not be treated as effectively connected with the conduct of a trade or business in the United States. Instead, such distributions will be treated as REIT dividends that are not capital gains and will not be subject to the branch profits tax as long as the Non-U.S. Stockholder does not hold greater than 5% of the stock of the Company at any time during the one-year period ending on the date of the distribution. Non-U.S. Stockholders who hold more than 5% of the stock of the Company will be treated as if such gains were effectively connected with the conduct of a trade or business in the United States and generally subject to the same capital gains rates applicable to U.S. stockholders. In addition, corporate Non-U.S. Stockholders may also be subject to the 30% branch profits tax and to withholding at the rate of 35% of the gross distribution.

     Disposition of Stock of the Company

          Generally, gain recognized by a Non-U.S. Stockholder upon the sale or exchange of stock of the Company will not be subject to United States taxation unless such stock constitutes a USRPI within the meaning of the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”). The stock of the Company will not constitute a USRPI so long as the Company is a “domestically controlled REIT.” A “domestically controlled REIT” is a REIT in which at all times during a specified testing period less than 50% in value of its stock or beneficial interests are held directly or indirectly by Non-U.S. Stockholders. The Company believes that it will be a “domestically controlled REIT,” and therefore that the sale of stock of the Company will generally not be subject to taxation under FIRPTA. However, because the stock of the Company is publicly traded, no assurance can be given that the Company is or will continue to be a “domestically controlled REIT.”

          Under “wash sale” rules applicable to certain dispositions of interests in “domestically controlled REITs,” a Non-U.S. Stockholder could be subject to taxation under FIRPTA on the disposition of stock of the Company if certain conditions are met. If the Company is a “domestically controlled REIT,” a Non-U.S. Stockholder will be treated as having disposed of USRPI, if such Non-U.S. Stockholder disposes of an interest in the Company in an “applicable wash sale transaction.” An “applicable wash sale transaction” is any transaction in which a Non-U.S. Stockholder avoids receiving a distribution from a REIT by (i) disposing of an interest in a “domestically controlled REIT” during the 30-day period preceding a distribution, any portion of which distribution would have been treated as gain from the sale of a USRPI if it had been received by the Non-U.S. Stockholder and (ii) acquiring, or entering into a contract or option to acquire, a substantially identical interest in the REIT during the 61-day period beginning the first day of the 30-day period preceding the distribution. The wash sale rule does not apply to a Non-U.S. Stockholder who actually receives the distribution from the Company or, so long as the Company is publicly traded, to any Non-U.S. Stockholder holding greater than 5% of the outstanding stock of the Company at any time during the one-year period ending on the date of the distribution.

          If the Company did not constitute a “domestically controlled REIT,” gain arising from the sale or exchange by a Non-U.S. Stockholder of stock of the Company would be subject to United States taxation under FIRPTA as a sale of a USRPI unless (i) the stock of the Company is “regularly traded” (as defined in the applicable Treasury regulations) and (ii) the selling Non-U.S. Stockholder’s interest (after application of certain constructive ownership rules) in the Company is 5% or less at all times during the five years

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preceding the sale or exchange. If gain on the sale or exchange of the stock of the Company were subject to taxation under FIRPTA, the Non-U.S. Stockholder would be subject to regular United States income tax with respect to such gain in the same manner as a U.S. stockholder (subject to any applicable alternative minimum tax, a special alternative minimum tax in the case of nonresident alien individuals and the possible application of the 30% branch profits tax in the case of foreign corporations), and the purchaser of the stock of the Company (including the Company) would be required to withhold and remit to the IRS 10% of the purchase price. Additionally, in such case, distributions on the stock of the Company to the extent they represent a return of capital or capital gain from the sale of the stock of the Company, rather than dividends, would be subject to a 10% withholding tax.

          Capital gains not subject to FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Stockholder in two cases:

• if the Non-U.S. Stockholder’s investment in the stock of the Company is effectively connected with a U.S. trade or business conducted by such Non-U.S. Stockholder, the Non-U.S. Stockholder will be subject to the same treatment as a U.S. stockholder with respect to such gain; or

• if the Non-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, the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain.

     Information Reporting Requirements and Backup Withholding Tax

          The Company will report to its U.S. stockholders and to the IRS the amount of dividends paid during each calendar year and the amount of tax withheld, if any, with respect thereto. Under the backup withholding rules, a U.S. stockholder may be subject to backup withholding, currently at a rate of 28% on dividends paid unless such U.S. stockholder:

• is a corporation or falls within certain other exempt categories and, when required, can demonstrate this fact; or

• provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules.

          A U.S. stockholder who does not provide the Company with his correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the U.S. stockholder’s federal income tax liability. In addition, the Company may be required to withhold a portion of any capital gain distributions made to U.S. stockholders who fail to certify their non-foreign status to the Company.

          Additional issues may arise pertaining to information reporting and backup withholding with respect to Non-U.S. Stockholders, and Non-U.S. Stockholders should consult their tax advisors with respect to any such information reporting and backup withholding requirements.

     State and Local Taxes

          The Company and its stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its stockholders may not conform to the federal income tax consequences discussed above. Consequently, prospective holders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in the stock of the Company.

     Real Estate Investment Trust Tax Proposals

          Investors must recognize that the present federal income tax treatment of the Company may be modified by future legislative, judicial or administrative actions or decisions at any time, which may be retroactive in effect, and, as a result, any such action or decision may affect investments and commitments previously made. The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the Treasury Department, resulting in statutory changes as well as promulgation of new, or revisions to existing, regulations and revised interpretations of established concepts. No prediction can be made as to the likelihood of the passage of any new tax legislation or other provisions either directly or indirectly affecting the Company or its stockholders.

     Other Legislation

          The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum individual tax rate for long-term capital gains generally from 20% to 15% (for sales occurring after May 6, 2003 through December 31, 2008) and for dividends generally from 38.6% to 15% (for tax years from 2003 through 2008). These provisions have been extended through the 2012 tax year. Without future

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congressional action, the maximum tax rate on long-term capital gains will return to 20% in 2013, and the maximum rate on dividends will move to 39.6% in 2013. Because a REIT is not generally subject to federal income tax on the portion of its REIT taxable income or capital gains distributed to its stockholders, distributions of dividends by a REIT are generally not eligible for the 15% tax rate on dividends. As a result, the Company’s ordinary REIT dividends will continue to be taxed at the higher tax rates (currently, a maximum of 35%) applicable to ordinary income.

ERISA Considerations

          The following is a summary of material considerations arising under ERISA and the prohibited transaction provisions of Section 4975 of the Code that may be relevant to a holder of stock of the Company. This discussion does not propose to deal with all aspects of ERISA or Section 4975 of the Code or, to the extent not preempted, state law that may be relevant to particular employee benefit plan stockholders (including plans subject to Title I of ERISA, other employee benefit plans and IRAs subject to the prohibited transaction provisions of Section 4975 of the Code, and governmental plans and church plans that are exempt from ERISA and Section 4975 of the Code but that may be subject to state law requirements) in light of their particular circumstances.

          A fiduciary making the decision to invest in stock of the Company on behalf of a prospective purchaser which is an ERISA plan, a tax-qualified retirement plan, an IRA or other employee benefit plan is advised to consult its own legal advisor regarding the specific considerations arising under ERISA, Section 4975 of the Code, and (to the extent not preempted) state law with respect to the purchase, ownership or sale of stock by such plan or IRA.

     Employee Benefit Plans, Tax-Qualified Retirement Plans and IRAs

          Each fiduciary of an employee benefit plan subject to Title I of ERISA (an “ERISA Plan”) should carefully consider whether an investment in stock of the Company is consistent with its fiduciary responsibilities under ERISA. In particular, the fiduciary requirements of Part 4 of Title I of ERISA require (i) an ERISA Plan’s investments to be prudent and in the best interests of the ERISA Plan, its participants and beneficiaries, (ii) an ERISA Plan’s investments to be diversified in order to reduce the risk of large losses, unless it is clearly prudent not to do so, (iii) an ERISA Plan’s investments to be authorized under ERISA and the terms of the governing documents of the ERISA Plan and (iv) that the fiduciary not cause the ERISA Plan to enter into transactions prohibited under Section 406 of ERISA. In determining whether an investment in stock of the Company is prudent for purposes of ERISA, the appropriate fiduciary of an ERISA Plan should consider all of the facts and circumstances, including whether the investment is reasonably designed, as a part of the ERISA Plan’s portfolio for which the fiduciary has investment responsibility, to meet the objectives of the ERISA Plan, taking into consideration the risk of loss and opportunity for gain (or other return) from the investment, the diversification, cash flow and funding requirements of the ERISA Plan and the liquidity and current return of the ERISA Plan’s portfolio. A fiduciary should also take into account the nature of the Company’s business, the length of the Company’s operating history and other matters described below under “Risk Factors.”

          The fiduciary of an IRA or of an employee benefit plan not subject to Title I of ERISA because it is a governmental or church plan or because it does not cover common law employees (a “Non-ERISA Plan”) should consider that such an IRA or Non-ERISA Plan may only make investments that are authorized by the appropriate governing documents, not prohibited under Section 4975 of the Code and permitted under applicable state law.

     Status of the Company under ERISA

          A prohibited transaction may occur if the assets of the Company are deemed to be assets of the investing Plans and “parties in interest” or “disqualified persons” as defined in ERISA and Section 4975 of the Code, respectively, deal with such assets. In certain circumstances where a Plan holds an interest in an entity, the assets of the entity are deemed to be Plan assets (the “look-through rule”). Under such circumstances, any person that exercises authority or control with respect to the management or disposition of such assets is a Plan fiduciary. Plan assets are not defined in ERISA or the Code, but the United States Department of Labor issued regulations in 1987 (the “Regulations”) that outline the circumstances under which a Plan’s interest in an entity will be subject to the look-through rule.

          The Regulations apply only to the purchase by a Plan of an “equity interest” in an entity, such as common stock or common shares of beneficial interest of a REIT. However, the Regulations provide an exception to the look-through rule for equity interests that are “publicly-offered securities.”

          Under the Regulations, a “publicly-offered security” is a security that is (i) freely transferable, (ii) part of a class of securities that is widely held and (iii) either (a) part of a class of securities that is registered under section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), or (b) sold to a Plan as part of an offering of securities to the public pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) and the class of securities of which such security is a part of is registered under the Securities Act within 120 days (or such longer period allowed by the Securities and Exchange Commission (“SEC”)) after the end of the fiscal year of the issuer during which the offering of such securities to the public occurred. Whether a security is considered “freely transferable” depends on the facts and circumstances of each case. Generally, if the

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security is part of an offering in which the minimum investment is $10,000 or less, any restriction on or prohibition against any transfer or assignment of such security for the purposes of preventing a termination or reclassification of the entity for federal or state tax purposes will not of itself prevent the security from being considered freely transferable. A class of securities is considered “widely held” if it is a class of securities that is owned by 100 or more investors independent of the issuer and of one another.

          Management believes that the stock of the Company will meet the criteria of the publicly offered securities exception to the look-through rule in that the stock of the Company is freely transferable, the minimum investment is less than $10,000 and the only restrictions upon its transfer are those required under federal income tax laws to maintain the Company’s status as a REIT. Second, stock of the Company is held by 100 or more investors and at least 100 or more of these investors are independent of the Company and of one another. Third, the stock of the Company has been and will be part of offerings of securities to the public pursuant to an effective registration statement under the Securities Exchange Act and will be registered under the Securities Exchange Act within 120 days after the end of the fiscal year of the Company during which an offering of such securities to the public occurs. Accordingly, management believes that if a Plan purchases stock of the Company, the Company’s assets should not be deemed to be Plan assets and, therefore, that any person who exercises authority or control with respect to the Company’s assets should not be treated as a Plan fiduciary for purposes of the prohibited transaction rules of ERISA and Section 4975 to the Code.

Available Information

          The Company makes available to the public free of charge through its internet website the Company’s Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the SEC. The Company’s internet website address is www.healthcarerealty.com.

          The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of the Company’s reports on its website at www.sec.gov.

Corporate Governance Principles

          The Company has adopted Corporate Governance Principles relating to the conduct and operations of the Board of Directors. The Corporate Governance Principles are posted on the Company’s website (www.healthcarerealty.com) and are available in print to any stockholder who requests a copy.

Committee Charters

          The Board of Directors has an Audit Committee, Compensation Committee, Corporate Governance Committee and Executive Committee. The Board of Directors has adopted written charters for each committee except for the Executive Committee, which are posted on the Company’s website (www.healthcarerealty.com) and are available in print to any stockholder who requests a copy.

Executive Officers

          Information regarding the executive officers of the Company is set forth in Part III, Item 10 of this report and is incorporated herein by reference.

ITEM 1A. RISK FACTORS

          The following are some of the risks and uncertainties that could negatively affect the Company’s financial condition, results of operations, business and prospects. These risks, as well as the risks described in Item 1 under the headings “Competition,” “Government Regulation,” “Legislative Developments,” “Environmental Matters,” and “Federal Income Tax Information” and in Item 7 under the heading “Disclosure Regarding Forward-Looking Statements” should be carefully considered before making an investment decision regarding the Company. The risks and uncertainties described below are not the only ones facing the Company, and there may be additional risks that the Company does not presently know of or that the Company currently considers not likely to have a significant impact. If any of the events underlying the following risks actually occurred, the Company’s business, financial condition and operating results could suffer, and the trading price of its common stock could decline.

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The Company has recently incurred additional debt obligations and leverage may remain at higher levels.

          As of December 31, 2010, the Company had approximately $1.4 billion of outstanding indebtedness. The Company’s leverage ratio [debt divided by (debt plus stockholders’ equity less intangible assets plus accumulated depreciation)] increased from 46.5% at December 31, 2009 to 51.7% at December 31, 2010. Covenants under the Unsecured Credit Facility and the indenture governing the Company’s senior notes permit the Company to incur substantial additional debt, and the Company may borrow additional funds, which may include secured borrowings. A high level of indebtedness would require the Company to dedicate a substantial portion of its cash flow from operations to the payment of indebtedness, thereby reducing the funds available to implement the Company’s business strategy and to make distributions to stockholders. A high level of indebtedness could also:

• Potentially limit the Company’s ability to adjust rapidly to changing market conditions in the event of a downturn in general economic conditions or in the real estate and/or healthcare industries;

• Potentially impair the Company’s ability to obtain additional financing for its business strategy; and

• Potentially downgrade the rating of the Company’s debt securities by one or more rating agencies, which would increase the costs of borrowing under the Unsecured Credit Facility and the cost of issuance of new debt securities, among other things.

          In addition, from time to time the Company mortgages properties to secure payment of indebtedness. If the Company is unable to meet its mortgage payments, then the encumbered properties could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset value. A foreclosure on one or more of our properties could have a material adverse effect on the Company’s financial condition and results of operations.

The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings could have an adverse effect on the Company’s ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and development activity.

          A REIT is required by IRS regulations to make dividend distributions, thereby retaining less of its capital for growth. As a result, a REIT typically grows through steady investments of new capital in real estate assets. Presently, the Company has sufficient capital availability. However, there may be times when the Company will have limited access to capital from the equity and/or debt markets. Changes in the Company’s debt ratings could have a material adverse effect on its interest costs and financing sources. The Company’s debt rating can be materially influenced by a number of factors including, but not limited to, acquisitions, investment decisions, and capital management activities. In recent years, the capital and credit markets have experienced volatility and at times have limited the availability of funds. The Company’s ability to access the capital and credit markets may be limited by these or other factors, which could have an impact on its ability to refinance maturing debt, fund dividend payments and operations, acquire healthcare properties and complete construction projects. If the Company is unable to refinance or extend principal payments due at maturity of its various debt instruments, its cash flow may not be sufficient to repay maturing debt and, consequently, make dividend payments to stockholders. If the Company defaults in paying any of its debts or honoring its debt covenants, it could experience cross-defaults among debt instruments, the debts could be accelerated and the Company could be forced to liquidate assets for less than the values it would otherwise receive.

The Company is exposed to increases in interest rates, which could adversely impact its ability to refinance existing debt, sell assets or engage in acquisition and development activity.

          The Company receives a significant portion of its revenues by leasing its assets under long-term leases in which the rental rate is generally fixed, subject to annual rent escalators. A significant portion of the Company’s debt may be from time to time subject to floating rates, based on LIBOR or other indices. The generally fixed nature of revenues and the variable rate of certain debt obligations create interest rate risk for the Company. Increases in interest rates could make the financing of any acquisition or investment activity more costly. Rising interest rates could limit the Company’s ability to refinance existing debt when it matures or cause the Company to pay higher rates upon refinancing. An increase in interest rates also could have the effect of reducing the amounts that third parties might be willing to pay for real estate assets, which could limit the Company’s ability to sell assets at times when it might be advantageous to do so.

The Company may be required to sell certain properties to tenants or sponsors whose leases or financial support agreements provide for options to purchase. The Company may not be able to reinvest the proceeds from sale at rates of return equal to the return received on the properties sold.

          At December 31, 2010, the Company had approximately $91.3 million in real estate properties, or 3.5% of the Company real estate property investments, that are subject to exercisable purchase options held by lessees or financial support agreement sponsors that had not been exercised. Other properties have purchase options that will become exercisable in the future. The exercise of these purchase

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options exposes the Company to reinvestment risk. Certain properties subject to purchase options are producing returns above the rates of return the Company expects to achieve with new investments. If the Company is unable to reinvest the proceeds of sale at rates of return equal to the return received on the properties that are sold, it may experience a decline in lease revenues and a corresponding material adverse effect on the Company’s business and financial condition, the Company’s ability to make distributions to its stockholders, and the market price of its common stock.

The Company is subject to risks associated with the development of properties.

          The Company is subject to certain risks associated with the development of properties including the following:

• The construction of properties generally requires various government and other approvals that may not be received when expected, or at all, which could delay or preclude commencement of construction;

• Development opportunities that the Company pursued but later abandoned could result in the expensing of pursuit costs, which could impact the Company’s results of operations;

• Construction costs could exceed original estimates, which could impact the building’s profitability to the Company;

• Operating expenses could be higher than forecasted;

• Time required to initiate and complete the construction of a property and lease up a completed development property may be greater than originally anticipated, thereby adversely affecting the Company’s cash flow and liquidity;

• Occupancy rates and rents of a completed development property may not be sufficient to make the property profitable to the Company; and

• Favorable capital sources to fund the Company’s development activities may not be available when needed.

From time to time the Company may make material acquisitions and developments that may involve the expenditure of significant funds and may be unsuccessful in operating new and existing real estate properties.

          The Company regularly pursues potential transactions to acquire or develop additional assets in order to grow stockholder value and believes that there are currently numerous acquisition and development opportunities for the Company to invest in additional medical office and other outpatient-related facilities. Future acquisitions could require the Company to issue equity securities, incur debt, contingent liabilities or amortize expenses related to other intangible assets, any of which could adversely impact the Company’s financial condition or results of operations. In addition, equity or debt financing required for such acquisitions may not be available at times or at favorable rates.

          The Company’s acquired, developed and existing real estate properties may not perform in accordance with management’s expectations because of many factors including the following:

• The Company’s purchase price for acquired facilities may be based upon a series of market or building-specific judgments which may be incorrect;

• The costs of any maintenance or improvements for properties might exceed budgeted costs;

• The Company may incur unexpected costs in the acquisition, construction or maintenance of real estate assets that could impact its expected returns on such assets; and

• Leasing of real estate properties may not occur within expected timeframes or at expected rental rates.

          Further, the Company can give no assurance that acquisition and development opportunities that will meet management’s investment criteria will be available when needed or anticipated.

The Company may incur impairment charges on its real estate properties or other assets.

          The Company performs an annual impairment review on its real estate properties in the third quarter of every fiscal year. In addition, the Company assesses the potential for impairment of identifiable intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the recorded value might not be fully recoverable. At some

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future date, the Company may determine that an impairment has occurred in the value of one or more of its real estate properties or other assets. In such an event, the Company may be required to recognize an impairment loss which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s long-term master leases and financial support agreements may expire and not be extended.

          Long-term master leases and financial support agreements that are expiring may not be extended. To the extent these properties have vacancies or subleases at lower rates upon expiration, income may decline if the Company is not able to re-let the properties at rental rates that are as high as the former rates.

Covenants in the Company’s debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company’s financial condition and results of operations.

          The terms of the Unsecured Credit Facility, the indentures governing the Company’s outstanding senior notes and other debt instruments that the Company may enter into in the future are subject to customary financial and operational covenants. The Company’s continued ability to incur debt and operate its business is subject to compliance with these covenants, which limit operational flexibility. Breaches of these covenants could result in defaults under applicable debt instruments, even if payment obligations are satisfied. Financial and other covenants that limit the Company’s operational flexibility, as well as defaults resulting from a breach of any of these covenants in its debt instruments, could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s business operations may not generate the cash needed to service debt or fund planned capital expenditures.

          The Company’s ability to make payments on its indebtedness and to fund planned capital expenditures will depend on its ability to generate cash in the future. There can be no assurance that the Company’s business will generate sufficient cash flow from operations or that future borrowings will be available in amounts sufficient to enable the Company to pay its indebtedness or to fund other liquidity needs.

The Company’s revenues depend on the ability of its tenants and sponsors under its leases and financial support agreements to generate sufficient income from their operations to make loan, rent and support payments to the Company.

          The Company’s revenues are subject to the financial strength of its tenants and sponsors. The Company has no operational control over the business of these tenants and sponsors who face a wide range of economic, competitive, government reimbursement and regulatory pressures and constraints. The slowdown in the economy, decline in the availability of financing from the capital markets, and changes in healthcare regulations have affected, or may in the future adversely affect, the businesses of the Company’s tenants and sponsors to varying degrees. Such conditions may further impact such tenants’ and sponsors’ abilities to meet their obligations to the Company and, in certain cases, could lead to restructurings, disruptions, or bankruptcies of such tenants and sponsors. In turn, these conditions could adversely affect the Company’s revenues and could increase allowances for losses and result in impairment charges, which could decrease net income attributable to common stockholders and equity, and reduce cash flows from operations.

If a healthcare tenant loses its licensure or certification, becomes unable to provide healthcare services, cannot meet its financial obligations to the Company or otherwise vacates a facility, the Company would have to obtain another tenant for the affected facility.

          If the Company loses a tenant or sponsor and is unable to attract another healthcare provider on a timely basis and on acceptable terms, the Company’s cash flows and results of operations could suffer. In addition, many of the Company’s properties are special purpose healthcare facilities that may not be easily adaptable to other uses. Transfers of operations of healthcare facilities are often subject to regulatory approvals not required for transfers of other types of commercial operations and real estate.

Many of the Company’s properties are held under long-term ground leases. These ground leases contain provisions that may limit the Company’s ability to lease, sell, or finance these properties.

          The Company’s ground lease agreements with hospitals and health systems typically contain restrictions that limit building occupancy to physicians on the medical staff of an affiliated hospital and prohibit physician tenants from providing services that compete with the services provided by the affiliated hospital. Ground leases may also contain consent requirements or other restrictions on sale or assignment of the Company’s leasehold interest, including rights of first offer and first refusal in favor of the lessor. These ground lease provisions may limit the Company’s ability to lease, sell, or obtain mortgage financing secured by such properties which, in turn, could adversely affect the income from operations or the proceeds received from a sale. As a ground lessee, the Company is also exposed to the risk of reversion of the property upon expiration of the ground lease term, or an earlier breach by the Company of the ground lease, which may have a material adverse effect on the Company’s business, financial condition and results of operations, the Company’s ability to make distributions to the Company’s stockholders and the trading price of the Company’s common stock.

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If the Company is unable to promptly re-let its properties, if the rates upon such re-letting are significantly lower than expected or if the Company is required to undertake significant capital expenditures to attract new tenants, then the Company’s business, financial condition and results of operations would be adversely affected.

          A portion of the Company’s leases will mature over the course of any year. The Company may not be able to re-let space on terms that are favorable to the Company or at all. Further, the Company may be required to make significant capital expenditures to renovate or reconfigure space to attract new tenants. If it is unable to promptly re-let its properties, if the rates upon such re-letting are significantly lower than expected, or if the Company is required to undertake significant capital expenditures in connection with re-letting units, the Company’s business, financial condition and results of operations, the Company’s ability to make distributions to the Company’s stockholders and the trading price of the Company’s common stock may be materially and adversely affected.

Certain of the Company’s properties are special purpose healthcare facilities and may not be easily adaptable to other uses.

          Some of the Company’s properties are specialized medical facilities. If the Company or the Company’s tenants terminate the leases for these properties or the Company’s tenants lose their regulatory authority to operate such properties, the Company may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, the Company may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or additional capital expenditures occurring as a result may have a material adverse effect on the Company’s business, financial condition and results of operations, the Company’s ability to make distributions to its stockholders, and the market price of the Company’s common stock.

The market price of the Company’s stock may be affected adversely by changes in the Company’s dividend policy.

          The ability of the Company to pay dividends is dependent upon its ability to maintain funds from operations and cash flow, to make accretive new investments and to access capital. A failure to maintain dividend payments at current levels could result in a reduction of the market price of the Company’s stock.

Adverse trends in the healthcare service industry may negatively affect the Company’s lease revenues and the values of its investments.

          The healthcare service industry may be affected by the following:

• Regulatory and government reimbursement uncertainty resulting from the Health Reform Law;

• Federal and state government focus on reducing deficits while also providing more public health benefits to address the expanding uninsured and senior populations and the forthcoming insolvency of the Medicare Trust Fund Part A;

• Reductions in the growth of Medicare and Medicaid payment rates, to be offset, in whole or in part, by higher revenue from an increase in the insured population;

• Pressure from private and governmental payors on healthcare providers to contain costs while increasing patients’ access to quality healthcare services;

• Trends in the method of delivery of healthcare services;

• Competition among healthcare providers;

• Reimbursement rates from government and commercial payors, high uncompensated care expense and limited admissions growth pressuring operating profit margins in an uncertain economy;

• Investment losses;

• Availability of capital;

• Credit downgrades;

• Liability insurance expense; and

• Scrutiny and formal investigations by federal and state authorities.

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          These changes, among others, can adversely affect the economic performance of some or all of the tenants and sponsors who provide financial support to the Company’s investments and, in turn, negatively affect the lease revenues and the value of the Company’s property investments.

The Company is exposed to risks associated with entering new geographic markets.

          The Company’s acquisition and development activities may involve entering geographic markets where the Company has not previously had a presence. The construction and/or acquisition of properties in new geographic areas involves risks, including the risk that the property will not perform as anticipated and the risk that any actual costs for site development and improvements identified in the pre-construction or pre-acquisition due diligence process will exceed estimates. There is, and it is expected that there will continue to be, significant competition for investment opportunities that meet management’s investment criteria, as well as risks associated with obtaining financing for acquisition activities, if necessary.

The Company may experience uninsured or underinsured losses related to casualty or liability.

          The Company generally requires its tenants to maintain comprehensive liability and property insurance that covers the Company as well as the tenants. The Company also carries comprehensive liability insurance and property insurance covering its owned and managed properties. In addition, tenants under long-term master leases are required to carry property insurance covering the Company’s interest in the buildings. Some types of losses, however, either may be uninsurable or too expensive to insure against. Should an uninsured loss or a loss in excess of insured limits occur, the Company could lose all or a portion of the capital it has invested in a property, as well as the anticipated future revenue from the property. In such an event, the Company might remain obligated for any mortgage debt or other financial obligation related to the property. The Company cannot give assurance that material losses in excess of insurance proceeds will not occur in the future.

Failure to maintain its status as a REIT, even in one taxable year, could cause the Company to reduce its dividends dramatically.

          The Company intends to qualify at all times as a REIT under the Code. If in any taxable year the Company does not qualify as a REIT, it would be taxed as a corporation. As a result, the Company could not deduct its distributions to the stockholders in computing its taxable income. Depending upon the circumstances, a REIT that loses its qualification in one year may not be eligible to re-qualify during the four succeeding years. Further, certain transactions or other events could lead to the Company being taxed at rates ranging from four to 100 percent on certain income or gains. For more information about the Company’s status as a REIT, see “Federal Income Tax Information” in Item 1 of this Annual Report on Form 10-K.

If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company’s financial position would be negatively impacted.

          Access to external capital on favorable terms is critical to the Company’s success in growing and maintaining its portfolio. If financial institutions within the Unsecured Credit Facility were unwilling or unable to meet their respective funding commitments to the Company, any such failure would have a negative impact on the Company’s operations, financial condition and ability to meet its obligations, including the payment of dividends to stockholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

          None.

ITEM 2. PROPERTIES

          In addition to the properties described under Item 1, “Business,” in Note 2 to the Consolidated Financial Statements, and in Schedule III of Item 15 of this Annual Report on Form 10-K, the Company leases office space for its headquarters. The Company’s headquarters, located in offices at 3310 West End Avenue in Nashville, Tennessee, are leased from an unrelated third party. The Company amended its current lease agreement during 2010 which extended the expiration date through October 31, 2020, provided amended base rental payments through the expiration date, reset the base year for operating expense reimbursements, and provided the Company with a right of first offer to purchase the building in which the Company is headquartered if the current landlord were to decide to sell the property. The amended lease covers approximately 30,934 square feet of rented space with base rent escalations of approximately 3.25% annually, with an additional base rental increase possible in the fifth year depending on changes in CPI. The Company’s base rent for 2010 was approximately $671,783.

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ITEM 3. LEGAL PROCEEDINGS

          Two affiliates of the Company, HR Acquisition of Virginia Limited Partnership and HRT Holdings, Inc., are defendants in a lawsuit brought by Fork Union Medical Investors Limited Partnership, Goochland Medical Investors Limited Partnership, and Life Care Centers of America, Inc., as plaintiffs, in the Circuit Court of Davidson County, Tennessee. The plaintiffs allege that they overpaid rent between 1991 and 2003 under leases for two skilled nursing facilities in Virginia and seek a refund of such overpayments. Plaintiffs have not specified their damages in the complaint, but based on written discovery responses, the Company estimates the plaintiffs are seeking up to $2.0 million, plus pre- and post-judgment interest. The two leases were terminated by agreement with the plaintiffs in 2003. The Company denies that it is liable to the plaintiffs for any refund of rent paid and will continue to defend the case vigorously. A trial is scheduled for April 2011.

          The Company is, from time to time, involved in litigation arising out of the ordinary course of business or which is expected to be covered by insurance. The Company is not aware of any other pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No matter was submitted to a vote of stockholders during the fourth quarter of 2010.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

          Shares of the Company’s common stock are traded on the New York Stock Exchange under the symbol “HR.” As of December 31, 2010, there were approximately 1,219 stockholders of record. The following table sets forth the high and low sales prices per share of common stock and the dividend declared and paid per share of common stock related to the periods indicated.

					Dividends Declared
2010	High		Low		and Paid per Share
First Quarter	$	24.57	$	19.61	$	0.300
Second Quarter		25.24		20.47		0.300
Third Quarter		24.69		21.36		0.300
Fourth Quarter (Payable on March 3, 2011)		25.00		20.06		0.300
2009
First Quarter	$	23.59	$	12.06	$	0.385
Second Quarter		18.35		13.93		0.385
Third Quarter		23.26		15.78		0.385
Fourth Quarter		22.77		19.75		0.300

          Future dividends will be declared and paid at the discretion of the Board of Directors. The Company’s ability to pay dividends is dependent upon its ability to generate funds from operations, cash flows, and to make accretive new investments.

Equity Compensation Plan Information

          The following table provides information as of December 31, 2010 about the Company’s common stock that may be issued upon grants of restricted stock and the exercise of options, warrants and rights under all of the Company’s existing compensation plans, including the 2007 Employees Stock Incentive Plan and the 2000 Employee Stock Purchase Plan.

					Number of
					Securities
					Remaining Available
	Number of				for Future Issuance
	Securities to be				Under Equity
	Issued upon		Weighted Average		Compensation Plans
	Exercise of		Exercise Price of		(Excluding
	Outstanding		Outstanding		Securities
	Options, Warrants		Options, Warrants		Reflected in the
Plan Category	and Rights (1)		and Rights (1)		First Column)
Equity compensation plans approved by security holders		392,517		—		1,578,063
Equity compensation plans not approved by security holders		—		—		—
Total		392,517		—		1,578,063

(1) The Company’s outstanding rights relate only to its 2000 Employee Stock Purchase Plan. The Company is unable to ascertain with specificity the number of securities to be used upon exercise of outstanding rights under the 2000 Employee Stock Purchase Plan or the weighted average exercise price of outstanding rights under that plan. The 2000 Employee Stock Purchase Plan provides that shares of common stock may be purchased at a per share price equal to 85% of the fair market value of the common stock at the beginning of the offering period or a purchase date applicable to such offering period, whichever is lower.

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ITEM 6. SELECTED FINANCIAL DATA

          The following table sets forth financial information for the Company, which is derived from the Consolidated Financial Statements of the Company:

	Years Ended December 31,
(Dollars in thousands except per share data)	2010			2009 (1)			2008 (1)			2007 (1) (2)			2006 (1)
Statement of Income Data:
Total revenues	$	258,394		$	246,838		$	206,394		$	190,191		$	190,895
Total expenses	$	190,602		$	182,368		$	155,488		$	136,096		$	133,978
Other income (expense)	$	(63,771	)	$	(39,280	)	$	(35,586	)	$	(46,849	)	$	(49,749	)
Income from continuing operations	$	4,021		$	25,190		$	15,320		$	7,246		$	7,168
Discontinued operations	$	4,226		$	25,958		$	26,440		$	52,834		$	32,628
Net income	$	8,247		$	51,148		$	41,760		$	60,080		$	39,796
Less: Net income attributable to noncontrolling interests	$	(47	)	$	(57	)	$	(68	)	$	(18	)	$	(77	)
Net income attributable to common stockholders	$	8,200		$	51,091		$	41,692		$	60,062		$	39,719
Per Share Data:
Basic earnings per common share:
Income from continuing operations	$	0.06		$	0.43		$	0.30		$	0.15		$	0.15
Discontinued operations	$	0.07		$	0.45		$	0.51		$	1.11		$	0.70
Net income attributable to common stockholders	$	0.13		$	0.88		$	0.81		$	1.26		$	0.85
Diluted earnings per common share:
Income from continuing operations	$	0.06		$	0.43		$	0.29		$	0.15		$	0.15
Discontinued operations	$	0.07		$	0.44		$	0.50		$	1.09		$	0.69
Net income attributable to common stockholders	$	0.13		$	0.87		$	0.79		$	1.24		$	0.84
Weighted average common shares outstanding — Basic		61,722,786			58,199,592			51,547,279			47,536,133			46,527,857
Weighted average common shares outstanding — Diluted		62,770,826			59,047,314			52,564,944			48,291,330			47,498,937
Balance Sheet Data (as of the end of the period):
Real estate properties, net	$	2,086,964		$	1,791,693		$	1,634,364		$	1,351,173		$	1,554,620
Mortgage notes receivable	$	36,599		$	31,008		$	59,001		$	30,117		$	73,856
Assets held for sale and discontinued operations, net	$	23,915		$	17,745		$	90,233		$	15,639		$	—
Total assets	$	2,357,309		$	1,935,764		$	1,864,780		$	1,495,492		$	1,736,603
Notes and bonds payable	$	1,407,855		$	1,046,422		$	940,186		$	785,289		$	849,982
Total stockholders’ equity	$	839,010		$	786,766		$	794,820		$	631,995		$	825,672
Noncontrolling interests	$	3,730		$	3,382		$	1,427		$	—		$	—
Total equity	$	842,740		$	790,148		$	796,247		$	631,995		$	825,672
Other Data:
Funds from operations — Basic and Diluted (3)	$	71,573		$	97,882		$	85,437		$	73,156		$	101,106
Funds from operations per common share - Basic (3)	$	1.16		$	1.68		$	1.66		$	1.54		$	2.17
Funds from operations per common share - Diluted (3)	$	1.14		$	1.66		$	1.63		$	1.51		$	2.13
Quarterly dividends declared and paid per common share	$	1.20		$	1.54		$	1.54		$	2.09		$	2.64
Special dividend declared and paid per common share	$	—		$	—		$	—		$	4.75		$	—

(1)	The years ended December 31, 2009, 2008, 2007 and 2006 are restated to conform to the discontinued operations presentation for 2010. See Note 5 to the Consolidated Financial Statements for more information on the Company’s discontinued operations at December 31, 2010.
(2)	The Company completed the sale of its senior living assets in 2007 and paid a $4.75 per share special dividend with a portion of the proceeds.
(3)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of funds from operations (“FFO”), including why the Company presents FFO and a reconciliation of net income attributable to common stockholders to FFO.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward-Looking Statements

          This report and other materials Healthcare Realty has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could” and other comparable terms. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could significantly affect the Company’s current plans and expectations and future financial condition and results.

          Such risks and uncertainties include, among other things, the following:

• The Company has recently incurred additional debt obligations and leverage may remain at higher levels;

• The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings;

• The Company is exposed to increases in interest rates, which could adversely impact its ability to refinance existing debt, sell assets or engage in acquisition and development activity;

• The Company may be required to sell certain properties to tenants or sponsors who hold purchase options and may not be able to reinvest the proceeds at comparable rates of return;

• The Company is subject to risks associated with the development of properties;

• From time to time, the Company may make material acquisitions and developments that could involve the expenditure of significant funds and may be unsuccessful in operating new and existing real estate properties;

• The Company may incur impairment charges on its assets;

• The Company’s long-term master leases and financial support agreements may expire and not be extended;

• Covenants in the Company’s debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company’s financial condition and results of operations;

• The Company’s business operations may not generate the cash needed to service debt or fund planned capital expenditures;

• The Company’s revenues depend on the ability of its tenants and sponsors under its leases and financial support agreements to generate sufficient income from their operations to make loan, rent and support payments to the Company;

• If a tenant loses its licensure or certification, becomes unable to provide healthcare services, cannot meet its financial obligations to the Company or otherwise vacates a facility, the Company would have to obtain another tenant for the affected facility;

• Many of the Company’s properties are held under long-term ground leases containing provisions that may limit the Company’s ability to lease, sell, or finance these properties;

• If the Company is unable to re-let its properties, if the rates upon such re-letting are significantly lower than expected or if the Company is required to undertake significant capital expenditures to attract new tenants, then the Company’s business, financial condition and results of operations would be adversely affected;

• Certain of the Company’s properties are special purpose healthcare facilities and may not be easily adapted to other uses;

• The market price of the Company’s stock may be affected adversely by changes in the Company’s dividend policy;

• Adverse trends in the healthcare services industry may negatively affect the Company’s lease revenues and the value of its investments;

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• The Company is exposed to risks associated with entering new geographic markets;

• The Company may experience uninsured or underinsured losses related to casualty or liability;

• Failure to maintain its status as a REIT could cause the Company to reduce its dividends dramatically; and

• The ability and willingness of the Company’s lenders to make their funding commitments to the Company.

          Other risks, uncertainties and factors that could cause actual results to differ materially from those projected are detailed in Item 1A “Risk Factors” of this report and in other reports filed by the Company with the SEC from time to time.

          The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.

Overview

     Business Overview

          The Company is a self-managed and self-administered REIT that owns, acquires, manages, finances, and develops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. Management believes that by providing a complete spectrum of real estate services, the Company can differentiate its competitive market position, expand its asset base and increase revenues over time.

          The Company’s revenues are primarily derived from rentals on its healthcare real estate properties. The Company incurs operating and administrative expenses, including compensation, office rent and other related occupancy costs, as well as various expenses incurred in connection with managing its existing portfolio and acquiring additional properties. The Company also incurs interest expense on its various debt instruments and depreciation and amortization expense on its real estate portfolio.

          The Company’s real estate portfolio, diversified by facility type, geography and tenancy, helps mitigate its exposure to fluctuating economic conditions, tenant and sponsor credit risks and changes in clinical practice and reimbursement patterns.

     Executive Overview

          The Company acquired or funded $335.9 million in real estate properties and mortgage notes during 2010. Management continues to see investment opportunities across the country, some of which involve healthcare systems seeking outside capital and expertise and others involving third-parties or developers monetizing their holdings or seeking a capital partner.

          Income from continuing operations, net income attributable to common stockholders, funds from operations and cash flows were negatively impacted in 2010 compared to the prior year mainly due to two factors:

• Interest expense from continuing operations increased $22.6 million in 2010 compared to 2009. The property acquisitions in late 2008 were initially funded with the Company’s unsecured credit facility due 2012 (the “Unsecured Credit Facility”) that bore interest at a low, variable rate. However, in the latter part of 2009, the Company completed several capital financing transactions, including the renewal of the Unsecured Credit Facility that contributed to higher interest expense in 2010. Also, in December 2010, the Company issued $400 million in new 5.75% senior notes (the “Senior Notes due 2021”). The Company used a portion of the proceeds from the Senior Notes due 2021 to repay the outstanding balance on the Unsecured Credit Facility and created capacity for the repayment of the $278.2 million of senior notes due 2011 (the “Senior Notes due 2011”). Until such time that the Senior Notes due 2011 are repaid, the Company’s operating results will reflect interest expense on both senior note issuances.

• The Company recorded non-cash impairment charges totaling $7.5 million in 2010 relating to properties sold or held for sale. Also, gains recognized from the sale of properties were $8.4 million in 2010 compared to $20.1 million in 2009.

          At December 31, 2010, the Company’s leverage ratio [debt divided by (debt plus stockholders’ equity less intangible assets plus accumulated depreciation)] was approximately 51.7%. At December 31, 2010, the Company had $113.3 million in cash and had full capacity available on its $550.0 million Unsecured Credit Facility.

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Trends and Matters Impacting Operating Results

          Management monitors factors and trends important to the Company and REIT industry in order to gauge the potential impact on the operations of the Company. Discussed below are some of the factors and trends that management believes may impact future operations of the Company.

      Interest Expense

          In December 2010, the Company issued the Senior Notes due 2021 bearing interest at 5.75%. The proceeds from the offering were used to repay the outstanding balance on the Unsecured Credit Facility, to fund acquisitions and to provide advanced funding for the repayment of the Senior Notes due 2011. The Company’s results of operations will temporarily be negatively impacted by the interest paid on the Senior Notes due 2011 until they are repaid.

          As disclosed in more detail in Note 9 to the Consolidated Financial Statements, the Company intends to redeem the 8.125% Senior Notes due 2011 on March 28, 2011. Upon redemption, the Company will be required to pay an aggregate of $289.4 million to the holders of the notes consisting of: a) outstanding principal, b) accrued but unpaid interest and c) a “make-whole amount” per the provisions of the indenture, which is approximately equal to the interest that would otherwise be due through the stated maturity date. The Company will use available cash on hand and the Unsecured Credit Facility to fund the redemption of the notes and expects to record a one-time charge of approximately $1.9 million in the first quarter of 2011 for early extinguishment of debt. As a result of the redemption, all interest expense for 2011 related to these notes will be recognized in the first quarter of 2011.

      Acquisition Activity

          During 2010, the Company acquired approximately $311.5 million in real estate assets and funded $24.4 million in mortgage notes receivable. These acquisitions and mortgage notes were funded with borrowings on the Unsecured Credit Facility, proceeds from the Senior Notes due 2021, proceeds from real estate dispositions and mortgage note repayments, proceeds from the Company’s at-the-market equity offering program, and from the assumption of existing mortgage debt related to certain acquired properties. See Note 4 to the Consolidated Financial Statements for more information on these acquisitions.

      Development Activity

          One medical office building in Hawaii with a budget of approximately $86.0 million commenced operations during 2010. The building is currently in stabilization, which generally takes two to three years.

          During 2010, the Company began construction of two medical office buildings in Colorado with aggregate budgets totaling approximately $54.9 million and continued construction on a third medical office building in Washington with a budget of approximately $92.2 million. The Company expects completion of the core and shell of these buildings during the third quarter of 2011.

          The Company’s ability to complete and stabilize these facilities in a given period of time will impact the Company’s results of operations and cash flows. More favorable completion dates, stabilization periods and rental rates will result in improved results of operations and cash flows, while lagging completion dates, stabilization periods and rental rates will result in less favorable results of operations and cash flows. The Company’s disclosures regarding projections or estimates of completion dates and leasing may not reflect actual results. See Note 14 to the Consolidated Financial Statements for more information on the Company’s development activities.

          In addition to the projects currently under construction, the Company has remaining funding commitments totaling $54.6 million as of December 31, 2010 on five construction loans. The Company expects that these remaining commitments will be funded during 2011 and 2012.

      Dispositions and Impairments

          During 2010, the Company disposed of nine real estate properties for approximately $34.5 million in net proceeds, received $0.8 million in lease termination fees, and recognized approximately $8.4 million in gains from the sale of the properties. Also, three mortgage notes receivable totaling approximately $8.5 million were repaid. Proceeds from these dispositions were used to repay amounts due under the Unsecured Credit Facility, to fund additional real estate investments, and for general corporate purposes. See Note 4 to the Consolidated Financial Statements for more information on these dispositions.

          During 2010, the Company also recorded impairment charges of approximately $7.5 million on properties sold during the year or held for sale at December 31, 2010.

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      2011 Acquisition

          In January 2011, the Company originated with Ladco a $40.0 million mortgage loan that is secured by a multi-tenanted office building located in Iowa that was 94% leased at the time the mortgage was originated. The mortgage loan requires interest only payments through maturity, has a stated fixed interest rate and matures in January 2014.

      2011 Dispositions

          In January 2011, the Company disposed of a medical office building located in Maryland that was previously classified as held for sale and in which the Company had a $3.5 million net investment at December 31, 2010. The Company received approximately $3.4 million in net proceeds, net of expenses incurred at the time of the closing.

          In February 2011, the Company disposed of a physician clinic located in Florida that was previously classified as held for sale and in which the Company had a $3.1 million net investment at December 31, 2010. The Company received approximately $3.1 million in consideration on the sale.

      2011 Potential Dispositions

          During 2010, the Company received notice from a tenant of its intent to purchase six skilled nursing facilities in Michigan and Indiana pursuant to purchase options contained in its leases with the Company. The Company’s aggregate net investment in the buildings, which were classified as held for sale upon receiving notice of the purchase option exercise, was approximately $8.2 million at December 31, 2010. The aggregate purchase price for the properties is expected to be approximately $17.3 million, resulting in a net gain of approximately $9.1 million. The Company expects the sale to occur during the third quarter of 2011.

      Purchase Options

          As discussed in “Liquidity and Capital Resources,” certain of the Company’s leases include purchase option provisions, which if exercised, could require the Company to sell a property to a lessee or operator, which could have a negative impact on the Company’s future results of operations and cash flows.

      Expiring Leases

          Master leases on three of the Company’s properties that were set to expire during 2011 have been renewed. Leases on three other master-leased properties are set to expire during 2011. The Company expects that it will not renew the three remaining master leases but will assume any tenant leases in the buildings and manage the operations of those buildings.

          The Company also has 320 leases in its multi-tenanted buildings that will expire during 2011, with each occupying an average of approximately 2,723 square feet. Approximately 81% of these leases are located in on-campus buildings, which traditionally have a higher probability of renewal. The 2011 expirations are widely distributed throughout the portfolio and are not concentrated with one tenant, health system or location.

          The Company expects there could be a short-term negative impact to its results of operations from leases that are not renewed but anticipates that over time it will be able to re-lease the properties or increase tenant rents to offset any short-term decline in revenue.

      Discontinued Operations

          As discussed in more detail in Note 1 to the Consolidated Financial Statements, a company must present the results of operations of real estate assets disposed of or held for sale as discontinued operations. Therefore, the results of operations from such assets are classified as discontinued operations for the current period, and all prior periods presented are restated to conform to the current period presentation. Readers of the Company’s Consolidated Financial Statements should be aware that each future disposal will result in a change to the presentation of the Company’s operations in the historical Consolidated Statements of Income as previously filed. Such reclassifications to the Consolidated Statements of Income will have no impact on previously reported net income attributable to common stockholders.

Funds from Operations

          Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.” Impairment

29

charges may not be added back to net income attributable to common stockholders in calculating FFO, which have the effect of decreasing FFO in the period recorded.

          The comparability of FFO for the three years ended December 31, 2010 was affected by the various acquisitions and dispositions of the Company’s real estate portfolio and the results of operations of the portfolio from period to period, as well as from the commencement of operations of properties that were previously under construction. Other items also impacted the comparability of FFO between the three years as discussed below and in Results of Operations:

• Interest expense, including interest expense from discontinued operations, increased $22.0 million, or $0.35 per diluted common share in 2010 compared to 2009 due to debt financings;

• Impairment charges totaling $7.5 million, or $0.12 per diluted common share, were recorded in 2010 relating to five properties classified to held for sale and one property sold during the year. Impairment charges totaling $2.5 million, or $0.05 per diluted common share, were recorded in 2008 relating to properties sold or held for sale and certain patient receivables assigned to the Company as part of a lease termination and debt restructuring;

• A re-measurement gain totaling $2.7 million, or $0.05 per diluted common share, was recognized in 2009 in connection with the acquisition of the remaining interests in a joint venture; and

• A net gain of approximately $4.1 million, or $0.08 per diluted common share, was recognized in 2008 and a net loss of approximately $0.5 million, or $0.01 per diluted common share, was recognized in 2010 from the repurchase of a portion of the Senior Notes due 2011 and the senior notes due 2014 (the “Senior Notes due 2014”).

          Management believes FFO and FFO per share to be supplemental measures of a REIT’s performance because they provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with generally accepted accounting principles (“GAAP”) assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization and gains from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO and FFO per share can facilitate comparisons of operating performance between periods. The Company reports FFO and FFO per share because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share is consistently reported, discussed, and compared by research analysts in their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share. However, FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income attributable to common stockholders as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.

          The table below reconciles net income attributable to common stockholders to FFO for the three years ended December 31, 2010.

	Year Ended December 31,
(Dollars in thousands, except per share data)	2010			2009			2008
Net income attributable to common stockholders	$	8,200		$	51,091		$	41,692
Gain on sales of real estate properties		(8,352	)		(20,136	)		(10,227	)
Real estate depreciation and amortization		71,725			66,927			53,972
Total adjustments		63,373			46,791			43,745
Funds from Operations — Basic and Diluted	$	71,573		$	97,882		$	85,437
Funds from Operations per Common Share — Basic	$	1.16		$	1.68		$	1.66
Funds from Operations per Common Share — Diluted	$	1.14		$	1.66		$	1.63
Weighted Average Common Shares Outstanding — Basic		61,722,786			58,199,592			51,547,279
Weighted Average Common Shares Outstanding — Diluted		62,770,826			59,047,314			52,564,944

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Results of Operations

2010 Compared to 2009

          The Company’s results of operations for 2010 compared to 2009 were most significantly impacted by higher interest expense in 2010 resulting from financing activities that occurred in late 2009 and 2010. The results of operations were also impacted by impairments and gains on sales related to properties sold or classified as held for sale, which are included in discontinued operations.

							Change
(Dollars in thousands, except per share data)	2010			2009			$			%
REVENUES
Master lease rent	$	54,659		$	53,340		$	1,319			2.5	%
Property operating		190,205			177,849			12,356			6.9	%
Straight-line rent		2,509			2,052			457			22.3	%
Mortgage interest		2,377			2,646			(269	)		(10.2	)%
Other operating		8,644			10,951			(2,307	)		(21.1	)%
		258,394			246,838			11,556			4.7	%
EXPENSES
General and administrative		16,894			22,478			(5,584	)		(24.8	)%
Property operating		101,355			93,249			8,106			8.7	%
Bad debt, net		(429	)		535			(964	)		(180.2	)%
Depreciation		67,440			60,847			6,593			10.8	%
Amortization		5,342			5,259			83			1.6	%
		190,602			182,368			8,234			4.5	%
OTHER INCOME (EXPENSE)
Loss on extinguishment of debt		(480	)		—			(480	)		—
Re-measurement gain of equity interest upon acquisition		—			2,701			(2,701	)		(100.0	)%
Interest expense		(65,710	)		(43,080	)		(22,630	)		(52.5	)%
Interest and other income, net		2,419			1,099			1,320			120.1	%
		(63,771	)		(39,280	)		(24,491	)		62.3	%
INCOME FROM CONTINUING OPERATIONS		4,021			25,190			(21,169	)		(84.0	)%
DISCONTINUED OPERATIONS
Income from discontinued operations		3,385			5,844			(2,459	)		(42.1	)%
Impairments		(7,511	)		(22	)		(7,489	)		34,040.9	%
Gain on sales of real estate properties		8,352			20,136			(11,784	)		(58.5	)%
INCOME FROM DISCONTINUED OPERATIONS		4,226			25,958			(21,732	)		(83.7	)%
NET INCOME		8,247			51,148			(42,901	)		(83.9	)%
Less: Net income attributable to noncontrolling interests		(47	)		(57	)		10			(17.5	)%
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	8,200		$	51,091		$	(42,891	)		(84.0	)%
EARNINGS PER COMMON SHARE
Net income attributable to common stockholders — Basic	$	0.13		$	0.88		$	(0.75	)		(85.2	)%
Net income attributable to common stockholders — Diluted	$	0.13		$	0.87		$	(0.74	)		(85.1	)%

          Total revenues from continuing operations for the twelve months ended December 31, 2010 increased $11.6 million, or 4.7%, compared to the same period in 2009, mainly for the reasons discussed below:

          • Master lease rental income increased $1.3 million, or 2.5%. Master lease rental income increased approximately $2.3 million as a result of the timing of the Company’s 2009 acquisitions. The Company also recognized master lease income of $1.6 million related to a new master lease agreement executed during 2009 on a property whose income was previously reported in property operating income and recognized a $1.2 million increase in annual contractual rent increases. These increases to master lease rent were partially offset by a reduction of approximately $3.5 million related to 13 properties whose master leases expired during 2009 and 2010. The Company began recognizing the underlying tenant rents, generally in property operating income, for the underlying tenant leased space and is in the process of locating new tenants for any unoccupied space.

          • Property operating income increased $12.4 million, or 6.9%, due mainly to the recognition of additional revenue of approximately $11.5 million from the Company’s 2009 and 2010 real estate acquisitions and approximately $0.8 million from properties

31

that were previously under construction that commenced operations during 2009. Also, the Company began recognizing the underlying tenant rental income on properties whose master leases had expired, resulting in approximately $0.6 million in additional property operating income in 2010. Annual contractual rent increases, rent increases related to lease renewals and new leases executed with various tenants resulted in an additional $1.7 million of income in 2010. These increases in property operating income were partially offset by a $2.1 million decrease related to a property whose revenues were previously reported in property operating income, but are now reported in master lease income upon execution of a new master lease agreement with the tenant.

          • Straight-line rent increased $0.5 million, or 22.3%, due mainly to recognition of straight-line rental revenue on new leases from the Company’s 2009 and 2010 real estate acquisitions.

          • Other operating income decreased $2.3 million, or 21.1%, due mainly to the expiration of five property operating agreements totaling approximately $0.8 million and the expiration of an agreement with one operator in 2009 which provided to the Company replacement rent totaling approximately $1.3 million.

          Total expenses for the twelve months ended December 31, 2010 increased $8.2 million, or 4.5%, compared to the same period in 2009, mainly for the reasons discussed below:

          • General and administrative expenses decreased $5.6 million, or 24.8%. A $3.6 million reduction resulted from changes in benefits upon retirement for the named executive officers and an additional $1.9 million reduction related to certain general and administrative expenses from recent acquisitions that were classified to property operating expense.

          • Property operating expense increased $8.1 million, or 8.7%, due mainly to the recognition of additional expenses of approximately $4.2 million from the Company’s 2009 and 2010 real estate acquisitions and $2.4 million from properties that were previously under construction that commenced operations during 2009 and 2010. Property operating expense also increased approximately $1.3 million for properties whose master leases expired, and the Company began incurring the underlying operating expenses of the buildings. Further, certain additional general and administrative expenses allocated to recent real estate acquisitions totaling approximately $1.9 million were classified to property operating expense. These increases were partially offset by a decrease in legal fees and property taxes of approximately $1.2 million. Also, expenses of approximately $0.5 million that were recognized in 2009 related to a property were not recognized in 2010 due to the execution of a master lease agreement in the fourth quarter of 2009.

          • Bad debt expense decreased $1.0 million due mainly to collections or reversals of reserves that were previously included in bad debt expense.

          • Depreciation expense increased $6.6 million, or 10.8%, due mainly to additional depreciation recognized of approximately $2.7 million related to the Company’s real estate acquisitions in 2009 and 2010 and approximately $2.1 million related to properties previously under construction that commenced operations in 2009. The remaining $1.8 million increase was due mainly to additional depreciation expense recognized related to various building and tenant improvement expenditures.

          Other income (expense) for the twelve months ended December 31, 2010 changed unfavorably by $24.5 million, or 62.3%, compared to the same period in 2009 mainly due to the reasons below:

          • The Company recognized a $0.5 million loss on the early extinguishment of debt in 2010 relating to the repurchase of a portion of the Senior Notes due 2011.

          • The Company recognized a $2.7 million gain in 2009 related to the valuation and re-measurement of the Company’s equity interest in a joint venture in connection with the Company’s acquisition of the remaining equity interest in the joint venture.

          • Interest expense increased $22.6 million, or 52.5%, from 2009 to 2010. The increase is mainly attributable to interest of approximately $18.5 million on the Senior Notes due 2017 issued in December 2009, interest of approximately $5.3 million on $80 million of mortgage debt entered into in December 2009, and interest of approximately $1.2 million on the Senior Notes due 2021 issued in December 2010. These increases were partially offset by decreases in interest of approximately $1.6 million from a lower average principal balance on the Unsecured Credit Facility, $0.6 million from the repurchases of a portion of the Senior Notes due 2011 and 2014 and $0.3 million from an increase in capitalized interest on development properties.

          Income from discontinued operations totaled $4.2 million and $26.0 million, respectively, for the twelve months ended December 31, 2010 and 2009, which includes the results of operations, impairments and gains on sale related to assets classified as held for sale or disposed of as of December 31, 2010. The Company disposed of nine properties in 2010 and seven properties in 2009 and had 11 properties classified as held for sale at December 31, 2010.

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2009 Compared to 2008

          The Company’s income from continuing operations and net income attributable to common stockholders for 2009 compared to 2008 was significantly impacted by the Company’s acquisitions of real estate properties in the latter half of 2008 of approximately $337.1 million and in 2009 of approximately $106.4 million. The acquisitions of the real estate properties were temporarily funded at a relatively low interest rate on the Unsecured Credit Facility until the Company completed its capital financing transactions in the latter part of 2009.

							Change
(Dollars in thousands, except per share data)	2009			2008			$			%
REVENUES
Master lease rent	$	53,340		$	52,472		$	868			1.7	%
Property operating		177,849			134,746			43,103			32.0	%
Straight-line rent		2,052			717			1,335			186.2	%
Mortgage interest		2,646			2,207			439			19.9	%
Other operating		10,951			16,252			(5,301	)		(32.6	)%
		246,838			206,394			40,444			19.6	%
EXPENSES
General and administrative		22,478			23,514			(1,036	)		(4.4	)%
Property operating		93,249			79,732			13,517			17.0	%
Impairment of long-lived assets		—			1,600			(1,600	)		(100.0	)%
Bad debt, net		535			1,252			(717	)		(57.3	)%
Depreciation		60,847			46,541			14,306			30.7	%
Amortization		5,259			2,849			2,410			84.6	%
		182,368			155,488			26,880			17.3	%
OTHER INCOME (EXPENSE)
Gain on extinguishment of debt		—			4,102			(4,102	)		(100.0	)%
Re-measurement gain of equity interest upon acquisition		2,701			—			2,701			—
Interest expense		(43,080	)		(42,126	)		(954	)		2.3	%
Interest and other income, net		1,099			2,438			(1,339	)		(54.9	)%
		(39,280	)		(35,586	)		(3,694	)		10.4	%
INCOME FROM CONTINUING OPERATIONS		25,190			15,320			9,870			64.4	%
DISCONTINUED OPERATIONS
Income from discontinued operations		5,844			17,483			(11,639	)		(66.6	)%
Impairments		(22	)		(886	)		864			(97.5	)%
Gain on sales of real estate properties		20,136			9,843			10,293			104.6	%
INCOME FROM DISCONTINUED OPERATIONS		25,958			26,440			(482	)		(1.8	)%
NET INCOME		51,148			41,760			9,388			22.5	%
Less: Net income attributable to noncontrolling interests		(57	)		(68	)		11			(16.2	)%
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	51,091		$	41,692		$	9,399			22.5	%
EARNINGS PER COMMON SHARE
Net income attributable to common stockholders — Basic	$	0.88		$	0.81		$	0.07			8.6	%
Net income attributable to common stockholders — Diluted	$	0.87		$	0.79		$	0.08			10.1	%

          Total revenues from continuing operations for the twelve months ended 2009 increased $40.4 million, or 19.6%, compared to the same period in 2008, mainly for the reasons discussed below:

          • Master lease income increased $0.9 million, or 1.7%, from 2008 to 2009. Master lease income increased approximately $2.7 million related to 2009 acquisitions and a $2.2 million increase related mainly to annual contractual rental increases. Partially offsetting this increase, master lease income decreased $4.0 million from properties whose master leases had expired and the Company began recognizing the underlying tenant rents in property operating income.

          • Property operating income increased $43.1 million, or 32.0%, from 2008 to 2009. The Company’s acquisitions of real estate properties during 2009 and 2008 resulted in additional property operating income in 2009 compared to 2008 of approximately $36.4 million. Also, properties previously under construction that commenced operations during 2008 and 2009 resulted in approximately $1.4 million in additional property operating income from 2008 to 2009, and for properties, whose master leases had expired, the Company

33

began recognizing the underlying tenant rents totaling approximately $3.1 million. The remaining increase of approximately $2.2 million was mainly related to annual contractual rent increases, rental increases related to lease renewals and new leases executed with various tenants.

          • Straight-line rent increased $1.3 million, or 186.2%, from 2008 to 2009. Additional straight-line rent recognized on leases subject to straight-lining from properties acquired in 2008 and 2009 was approximately $2.6 million, partially offset by reduction in straight-line rent on leases with contractual rent increases of approximately $1.1 million.

          • Mortgage interest increased $0.4 million, or 19.9%, from 2008 to 2009 due mainly to additional fundings on construction mortgage notes.

          • Other operating income decreased $5.3 million, or 32.6%, from 2008 to 2009. The decrease is due primarily to the expirations in 2008 and 2009 of five property operating agreements totaling approximately $3.7 million with one operator and the expiration of replacement rent received from an operator of approximately $1.2 million.

          Total expenses for the twelve months ended 2009 increased $26.9 million, or 17.3%, compared to the same period in 2008, mainly for the reasons discussed below:

          • General and administrative expenses decreased $1.0 million, or 4.4%, from 2008 to 2009. This decrease was mainly attributable to lower pension costs in 2009 of approximately $1.5 million, net of additional pension expense recorded in 2009 related to the partial settlement of an officer’s pension benefit, and a decrease in acquisition and development costs of approximately $0.7 million. These amounts were partially offset by an increase in other compensation related items of approximately $1.3 million. See Note 11 to the Consolidated Financial Statements for more details on the Company’s pension plans.

          • Property operating expense increased $13.5 million, or 17.0%, from 2008 to 2009. The Company’s real estate acquisitions during 2008 and 2009 resulted in additional property operating expense in 2009 of approximately $13.7 million. Also, the Company recognized additional expense in 2009 of approximately $2.1 million related to properties that were previously under construction and commenced operations during 2008 and 2009 and approximately $1.6 million related to properties whose master leases have expired and the Company began incurring underlying operating expenses. Partially offsetting these increases were reductions in legal expenses of approximately $3.1 million in 2009 compared to 2008 and in real estate taxes of approximately $0.8 million.

          • An impairment charge totaling $1.6 million was recognized in 2008 on patient accounts receivable assigned to the Company as part of a lease termination and debt restructuring in late 2005 related to a physician clinic owned by the Company.

          • Bad debt expense decreased $0.7 million from 2008 to 2009 mainly due to a reserve recorded by the Company in 2008 related to additional rental income due from an operator on four properties.

          • Depreciation expense increased $14.3 million, or 30.7%, from 2008 to 2009 mainly due to increases of approximately $9.8 million related to the Company’s real estate acquisitions, approximately $1.6 million related to the commencement of operations during 2008 and 2009 of buildings that were previously under construction, as well as approximately $2.9 million related to additional building and tenant improvement expenditures during 2008 and 2009.

          • Amortization expense increased $2.4 million, or 84.6% from 2008 to 2009, mainly due to the amortization of lease intangibles associated with properties acquired during 2008 and 2009, partially offset by a decrease in amortization of lease intangibles becoming fully amortized on properties acquired during 2003 and 2004.

          Other income (expense) for the twelve months ended December 31, 2009 changed unfavorably by $3.7 million, or 10.4%, compared to the same period in 2008, mainly for the reasons discussed below:

          • The Company recognized a net gain on extinguishment of debt in 2008 of approximately $4.1 million related to repurchases of the Senior Notes due 2011 and 2014, which is discussed in more detail in Note 9 to the Consolidated Financial Statements.

          • The Company recognized a $2.7 million gain related to the valuation and re-measurement of the Company’s equity interest in a joint venture in connection with the Company’s acquisition of the remaining equity interests in the joint venture in 2009.

          • Interest expense increased $1.0 million, or 2.3%, from 2008 to 2009. The increase was mainly attributable to additional interest expense of approximately $3.8 million related to mortgage notes payable assumed in the 2008 and 2009 real estate acquisitions, a higher average outstanding balance on the unsecured credit facility of approximately $0.4 million, as well as interest incurred on the Senior Notes due 2017 of approximately $1.5 million and interest on $80 million of mortgage debt entered into during 2009 of approximately $0.6 million. These amounts are partially offset by interest savings of approximately $1.9 million related to the

34

repurchases of the Senior Notes due 2011 and 2014 in 2008, as well as an increase in capitalized interest of approximately $3.4 million on development projects during 2009.

          • Interest and other income decreased $1.3 million, or 54.9%, from 2008 to 2009. The decrease is primarily a result of additional equity income recognized in 2008 of approximately $1.0 million related to a joint venture investment that the Company accounted for under the equity method until it acquired the remaining interests in the joint venture in 2009, at which time the Company began to consolidate the accounts of the joint venture.

          Income from discontinued operations totaled $26.0 million and $26.4 million, respectively, for the twelve months ended December 31, 2009 and 2008, which includes the results of operations, impairments, and net gains and impairments related to property disposals and properties classified as held for sale. The Company disposed of seven properties in 2009 and seven properties and two parcels of land in 2008. Six properties were classified as held for sale at December 31, 2009. Income from discontinued operations for 2008 also included a $7.2 million fee received from an operator to terminate its financial support agreement with the Company in connection with the disposition of the property.

Liquidity and Capital Resources

          The Company derives most of its revenues from its real estate property and mortgage portfolio based on contractual arrangements with its tenants, sponsors and borrowers. The Company may, from time to time, also generate funds from capital market financings, sales of real estate properties or mortgages, borrowings under the Unsecured Credit Facility, or from other private debt or equity offerings. For the twelve months ended December 31, 2010, the Company generated approximately $80.8 million in cash from operations and generated approximately $26.6 million in net cash from investing and financing activities as detailed in the Company’s Consolidated Statements of Cash Flows.

     Interest Expense

          In December 2010, the Company issued the Senior Notes due 2021 bearing interest at 5.75%. The proceeds from the offering were used to repay the outstanding balance on the Unsecured Credit Facility, to fund acquisitions and to provide advanced funding for the repayment of the Senior Notes due 2011. The Company’s results of operations will temporarily be negatively impacted by the interest paid on the Senior Notes due 2011 until they are repaid.

          As disclosed in more detail in Note 9 to the Consolidated Financial Statements, the Company intends to redeem the 8.125% Senior Notes due 2011 on March 28, 2011. Upon redemption, the Company will be required to pay an aggregate of $289.4 million to the holders of the notes consisting of outstanding principal, accrued but unpaid interest and a “make-whole amount” per the provisions of the indenture, which is approximately equal to the interest that would otherwise be due through the stated maturity date. The Company will use available cash on hand and the Unsecured Credit Facility to fund the redemption of the notes and expects to record a one-time charge of approximately $1.9 million in the first quarter of 2011 for early extinguishment of debt. As a result of the redemption, all interest expense for 2011 related to these notes will be recognized in the first quarter of 2011.

     Key Indicators

          The Company monitors its liquidity and capital resources and relies on several key indicators in its assessment of capital markets for financing acquisitions and other operating activities as needed, including the following:

          • Debt metrics;

          • Dividend payout percentage; and

          • Interest rates, underlying treasury rates, debt market spreads and equity markets.

          The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.

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     Contractual Obligations

          The Company monitors its contractual obligations to ensure funds are available to meet obligations when due. The following table represents the Company’s long-term contractual obligations for which the Company was making payments at December 31, 2010, including interest payments due where applicable. At December 31, 2010, the Company had no long-term capital lease or purchase obligations.

	Payments Due by Period
(Dollars in thousands)	Total		Less than 1 Year		1 -3 Years		3 - 5 Years		More than 5 Years
Long-term debt obligations, including interest (1)	$	1,902,040	$	350,821	$	155,441	$	411,360	$	984,418
Operating lease commitments (2)		277,659		5,139		8,633		8,867		255,020
Construction in progress (3)		96,853		78,278		14,105		4,470		—
Tenant improvements (4)		—		—		—		—		—
Pension obligations (5)		—		—		—		—		—
Construction loan obligation (6)		54,607		44,708		9,899		—		—
Total contractual obligations	$	2,331,159	$	478,946	$	188,078	$	424,697	$	1,239,438

(1) The amounts shown include estimated interest on total debt other than the Unsecured Credit Facility. Excluded from the table above are the premium on the Senior Notes due 2011 of $0.1 million, the discount on the Senior Notes due 2014 of $0.5 million, the discount on the Senior Notes due 2017 of $1.8 million, and the discount on the Senior Notes due 2021 of $3.2 million which are included in notes and bonds payable on the Company’s Consolidated Balance Sheet as of December 31, 2010. Also excluded from the table above are discounts and premiums on six mortgage notes payable, totaling approximately $6.4 million. The Company’s long-term debt principal obligations are presented in more detail in the table below.

							Contractual
	Principal Balance		Principal Balance				Interest Rates at
(In thousands)	at Dec. 31, 2010		at Dec. 31, 2009		Maturity Date		December 31, 2010			Principal Payments	Interest Payments
Unsecured Credit Facility due 2012	$	—	$	50.0		9/12	LIBOR + 2.80%			At maturity	Quarterly
Senior Notes due 2011		278.2		286.3		5/11		8.125	%	At maturity	Semi-Annual
Senior Notes due 2014		264.7		264.7		4/14		5.125	%	At maturity	Semi-Annual
Senior Notes due 2017		300.0		300.0		1/17		6.500	%	At maturity	Semi-Annual
Senior Notes due 2021		400.0		—		1/21		5.750	%	At maturity	Semi-Annual
Mortgage Notes Payable		176.7		155.4		4/13-10/30		5.000%-7.765	%	Monthly	Monthly
	$	1,419.6	$	1,056.4

(2)	Includes primarily the corporate office and ground leases, with expiration dates through 2101, related to various real estate investments for which the Company is currently making payments. Also, 2011 includes an obligation of approximately $0.9 million related to connecting one of the Company’s buildings with an adjacent hospital.
(3)	Includes cash flow projections related to the construction of three buildings, a portion of which relates to tenant improvements that will generally be funded after the core and shell of the building is completed. This amount includes $9.2 million of invoices that were accrued and included in the construction in progress on the Company’s Consolidated Balance Sheet as of December 31, 2010.
(4)	The Company has various first-generation tenant improvements budgeted amounts remaining as of December 31, 2010 of approximately $32.3 million related to properties developed by the Company that the Company may fund for tenant improvements as leases are signed. The Company cannot predict when or if these amounts will be expended and, therefore, has not included estimated fundings in the table above.
(5)	At December 31, 2010, one employee, the Company’s chief executive officer, was eligible to retire under the Executive Retirement Plan. If the chief executive officer retired and received full retirement benefits based upon the terms of the plan, the future benefits to be paid are estimated to be approximately $29.9 million as of December 31, 2010. Because the Company does not know when its chief executive officer will retire, it has not projected when the retirement benefits would be paid in the table above. At December 31, 2010, the Company had recorded a $15.5 million liability, included in other liabilities, related to its pension plan obligations.
(6)	Includes the Company’s remaining funding commitment on five construction mortgage loans as of December 31, 2010.

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          The Company has a $550.0 million Unsecured Credit Facility with a syndicate of 16 lenders. Loans outstanding under the Unsecured Credit Facility bear interest at a rate equal to (x) LIBOR or the base rate (defined as the highest of (i) the Federal Funds Rate plus 0.5%; (ii) the Bank of America prime rate and (iii) LIBOR) plus (y) a margin ranging from 2.15% to 3.20% (2.80% at December 31, 2010) for LIBOR-based loans and 0.90% to 1.95% (1.55% at December 31, 2010) for base rate loans, based upon the Company’s unsecured debt ratings. In addition, the Company pays a facility fee per annum on the aggregate amount of commitments. The facility fee is 0.40% per annum, unless the Company’s credit rating falls below a BBB-/Baa3, at which point the facility fee would be 0.50%. As of December 31, 2010, the Company had no outstanding borrowings on its Unsecured Credit Facility, its only variable rate debt. Also, at December 31, 2010, 80.1% of the Company’s debt balances were due after 2011. The Unsecured Credit Facility contains certain representations, warranties, and financial and other covenants customary in such loan agreements.

          For the year ended December 31, 2010, the Company’s stockholders’ equity totaled approximately $839.0 million and its leverage ratio [debt divided by (debt plus stockholders’ equity less intangible assets plus accumulated depreciation)] was approximately 51.7%. Also, at December 31, 2010, the Company’s earnings from continuing operations were insufficient to cover its fixed charges by approximately $6.3 million, with a ratio of 0.92 to 1.00. This fixed charge ratio, calculated in accordance with Item 503 of Regulation S-K, includes only income from continuing operations which is reduced by depreciation and amortization and the operating results of properties currently classified as held for sale (see Note 5 to the Consolidated Financial Statements), as well as other income from discontinued operations. Also, in December 2010, the Company issued $400 million of its Senior Notes due 2021. A portion of the proceeds from this issuance will be used to repay the Senior Notes due 2011 which are due in May 2011. Until such time that the Senior Notes due 2011 are repaid, the Company is recognizing interest expense on both senior notes, resulting in a lower fixed charge ratio. The Company plans to redeem the Senior Notes due 2011 on March 28, 2011.

          As of December 31, 2010, the Company was in compliance with its financial covenant provisions under its various debt instruments.

     At-The-Market Equity Offering Program

          Since December 31, 2008, the Company has had in place an at-the-market equity offering program to sell shares of the Company’s common stock from time to time in at-the-market sales transactions. During 2010, the Company sold 5,258,700 shares of common stock under this program at prices ranging from $20.23 per share to $25.16 per share, generating approximately $117.7 million in net proceeds, and during 2009 sold 1,201,600 shares of common stock at prices ranging from $21.62 per share to $22.50 per share, generating approximately $25.7 million in net proceeds.

          During January 2011, the Company sold an additional 1,056,678 shares of common stock under this program for net proceeds totaling approximately $21.6 million, resulting in 2,383,322 authorized shares remaining to be sold under the program.

     Security Deposits and Letters of Credit

          As of December 31, 2010, the Company held approximately $6.5 million in letters of credit, security deposits, and capital replacement reserves for the benefit of the Company in the event the obligated lessee or borrower fails to perform under the terms of its respective lease or mortgage. Generally, the Company may, at its discretion and upon notification to the operator or tenant, draw upon these instruments if there are any defaults under the leases or mortgage notes.

     Acquisition Activity

          During 2010, the Company acquired approximately $311.5 million in real estate assets and funded $24.4 million in mortgage notes receivable. These acquisitions and mortgage notes were funded with borrowings on the Unsecured Credit Facility, proceeds from the Senior Notes due 2021, proceeds from real estate dispositions and mortgage note repayments, proceeds from the Company’s at-the-market equity offering program, and from the assumption of existing mortgage debt related to certain acquired properties. See Note 4 to the Consolidated Financial Statements for more information on these acquisitions.

     Dispositions and Impairments

          During 2010, the Company disposed of nine real estate properties for approximately $34.5 million in net proceeds, received $0.8 million in lease termination fees, and recognized approximately $8.4 million in gains from the sale of the properties. Also, three mortgage notes receivable totaling approximately $8.5 million were repaid. Proceeds from these dispositions were used to repay amounts due under the Unsecured Credit Facility, to fund additional real estate investments, and for general corporate purposes. See Note 4 to the Consolidated Financial Statements for more information on these dispositions.

          During 2010, the Company also recorded impairment charges of approximately $7.5 million on properties sold during the year or held for sale at December 31, 2010.

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     2011 Acquisition

          In January 2011, the Company originated with Ladco a $40.0 million mortgage loan that is secured by a multi-tenanted office building located in Iowa that was 94% leased at the time the mortgage was originated. The mortgage loan requires interest only payments through maturity, has a stated fixed interest rate and matures in January 2014.

     2011 Dispositions

          In January 2011, the Company disposed of a medical office building located in Maryland that was previously classified as held for sale and in which the Company had a $3.5 million net investment at December 31, 2010. The Company received approximately $3.4 million in net proceeds, net of expenses incurred at the time of the closing.

     In February 2011, the Company disposed of a physician clinic located in Florida that was previously classified as held for sale and in which the Company had a $3.1 million net investment at December 31, 2010. The Company received approximately $3.1 million in consideration on the sale.

     2011 Potential Dispositions

          During 2010, the Company received notice from a tenant of its intent to purchase six skilled nursing facilities in Michigan and Indiana pursuant to purchase options contained in its leases with the Company. The Company’s aggregate net investment in the buildings, which were classified as held for sale upon receiving notice of the purchase option exercise, was approximately $8.2 million at December 31, 2010. The aggregate purchase price for the properties is expected to be approximately $17.3 million, resulting in a net gain of approximately $9.1 million. The Company expects the sale to occur during the third quarter of 2011.

     Purchase Options

          In addition to the six skilled nursing facilities in Michigan and Indiana discussed above, the Company had $91.3 million in real estate properties at December 31, 2010 that were subject to exercisable purchase options that had not been exercised. On a probability-weighted basis, the Company estimates that less than one-third of these options might be exercised in the future. Purchase options on two properties in which the Company had an aggregate gross investment of approximately $35.5 million at December 31, 2010 become exercisable during 2011 and 2012. The Company does not believe it can reasonably estimate the probability that these purchase options will be exercised in the future.

     Construction in Progress and Other Commitments

          As of December 31, 2010, the Company had three medical office buildings under construction in Washington and Colorado with aggregate budgets of $147.1 million and estimated completion dates in the third quarter of 2011. At December 31, 2010, the Company had $59.5 million invested in these construction projects. The Company also has four parcels of land totaling $20.8 million in land held for future development that are included in construction in progress on the Company’s Consolidated Balance Sheet. See Note 14 to the Consolidated Financial Statements for more details on the Company’s construction in progress at December 31, 2010.

          The Company also had approximately $32.3 million in various first-generation tenant improvement budgeted amounts remaining as of December 31, 2010 related to properties that were developed by the Company.

          Further, as of December 31, 2010, the Company had remaining funding commitments totaling $54.6 million on five construction loans that the Company expects will be funded during 2011 and 2012.

          The Company intends to fund these commitments with available cash on hand, cash flows from operations, proceeds from the Unsecured Credit Facility, proceeds from the sale of real estate properties, proceeds from repayments of mortgage notes receivable, proceeds from secured debt, capital market financings, including the Company’s at-the-market equity offering program, or private debt or equity offerings.

     Operating Leases

          As of December 31, 2010, the Company was obligated under operating lease agreements consisting primarily of the Company’s corporate office lease and ground leases related to 45 real estate investments, excluding leases the Company has prepaid. These operating leases have expiration dates through 2101. Rental expense relating to the operating leases for the years ended December 31, 2010, 2009 and 2008 was $4.0 million, $3.8 million, and $3.3 million, respectively.

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     Dividends

          The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT. Common stock cash dividends paid during or related to 2010 are shown in the table below:

Quarter	Quarterly Dividend		Date of Declaration	Date of Record	Date Paid/*Payable
4th Quarter 2009	$	0.30	February 2, 2010	February 18, 2010	March 4, 2010
1st Quarter 2010	$	0.30	May 4, 2010	May 20, 2010	June 3, 2010
2nd Quarter 2010	$	0.30	August 3, 2010	August 19, 2010	September 2, 2010
3rd Quarter 2010	$	0.30	November 2, 2010	November 18, 2010	December 2, 2010
4th Quarter 2010	$	0.30	February 1, 2011	February 17, 2011	* March 3, 2011

          The ability of the Company to pay dividends is dependent upon its ability to generate funds from operations and cash flows and to make accretive new investments.

     Liquidity

          Net cash provided by operating activities was $80.8 million, $103.2 million and $105.3 million for 2010, 2009 and 2008, respectively. The Company’s cash flows are dependent upon rental rates on leases, occupancy levels of the multi-tenanted buildings, acquisition and disposition activity during the year, and the level of operating expenses, among other factors.

          The Company plans to continue to meet its liquidity needs, including funding additional investments in 2011, paying dividends, repaying maturing debt and funding other debt service, with available cash on hand, cash flows from operations, borrowings under the Unsecured Credit Facility (full capacity available at December 31, 2010), proceeds from mortgage notes receivable repayments, proceeds from sales of real estate investments, or additional capital market financings, including the Company’s at-the-market equity offering program, or other debt or equity offerings. The Company also had unencumbered real estate assets with a cost of approximately $2.3 billion at December 31, 2010, which could serve as collateral for secured mortgage financing. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.

          The Company has some exposure to variable interest rates and its stock price has been impacted by the volatility in the stock markets. However, the Company’s leases, which provide its main source of income and cash flow, have terms of approximately one to 15 years and have lease rates that generally increase on an annual basis at fixed rates or based on consumer price indices.

     Impact of Inflation

          Inflation has not significantly affected the Company’s earnings due to the moderate inflation rate in recent years and the fact that most of the Company’s leases and financial support arrangements require tenants and sponsors to pay all or some portion of the increases in operating expenses, thereby reducing the Company’s risk to the adverse effects of inflation. In addition, inflation has the effect of increasing gross revenue the Company is to receive under the terms of certain leases and financial support arrangements. Leases and financial support arrangements vary in the remaining terms of obligations, further reducing the Company’s risk to any adverse effects of inflation. Interest payable under the Unsecured Credit Facility is calculated at a variable rate; therefore, the amount of interest payable under the Unsecured Credit Facility is influenced by changes in short-term rates, which tend to be sensitive to inflation. During periods where interest rate increases outpace inflation, the Company’s operating results should be negatively impacted. Conversely, when increases in inflation outpace increases in interest rates, the Company’s operating results should be positively impacted.

     New Accounting Pronouncements

          Note 1 to the Consolidated Financial Statements provides a discussion of new accounting standards. The Company does not believe these new standards will have a significant impact on the Company’s Consolidated Financial Statements or results of operations.

     Market Risk

          The Company is exposed to market risk in the form of changing interest rates on its debt and mortgage notes receivable. Management uses regular monitoring of market conditions and analysis techniques to manage this risk.

          At December 31, 2010, all of the Company’s debt totaling $1.4 billion bore interest at fixed rates. Additionally, $36.0 million of the Company’s mortgage notes and other notes receivable bore interest at fixed rates.

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          The following table provides information regarding the sensitivity of certain of the Company’s financial instruments, as described above, to market conditions and changes resulting from changes in interest rates. For purposes of this analysis, sensitivity is demonstrated based on hypothetical 10% changes in the underlying market interest rates.

					Impact on Earnings and Cash Flows
	Outstanding				Assuming 10%		Assuming 10%
	Principal Balance		Calculated Annual		Increase in Market		Decrease in Market
(Dollars in thousands)	As of 12/31/10		Interest (1)		Interest Rates		Interest Rates
Variable Rate Receivables:
Mortgage Notes Receivable	$	4,371	$	284	$	1	$	(1	)

			Fair Value
					Assuming 10%		Assuming 10%
	Carrying Value at				Increase in Market		Decrease in Market		December 31, 2009
(Dollars in thousands)	December 31, 2010		December 31, 2010		Interest Rates		Interest Rates		(2)
Fixed Rate Debt:
Senior Notes due 2011, including premium	$	278,311	$	286,856	$	286,835	$	286,875	$	307,568
Senior Notes due 2014, net of discount		264,227		282,824		281,757		283,930		282,883
Senior Notes due 2017, net of discount		298,218		320,539		316,490		324,697		297,988
Senior Notes due 2021, net of discount		396,812		396,812		386,173		408,670		—
Mortgage Notes Payable		170,287		173,190		169,831		177,526		150,115
	$	1,407,855	$	1,460,221	$	1,441,086	$	1,481,698	$	1,038,554
Fixed Rate Receivables:
Mortgage Notes Receivable	$	32,228	$	31,521	$	30,586	$	32,488	$	26,485
Other Notes Receivable		3,821		3,803		3,776		3,829		3,276
	$	36,049	$	35,324	$	34,362	$	36,317	$	29,761

(1)	Annual interest on the variable rate receivables was calculated using a constant principal balance and the December 31, 2010 market rate of 6.50%. The increase or decrease in market interest rate is based on the variable LIBOR portion of the interest rate which is 0.26% as of December 31, 2010.
(2)	Fair values as of December 31, 2009 represent fair values of obligations or receivables that were outstanding as of that date, and do not reflect the effect of any subsequent changes in principal balances and/or additions or extinguishments of instruments.

     Off-Balance Sheet Arrangements

          The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Application of Critical Accounting Policies to Accounting Estimates

          The Company’s Consolidated Financial Statements are prepared in accordance with GAAP and the rules and regulations of the SEC. In preparing the Consolidated Financial Statements, management is required to exercise judgment and make assumptions that impact the carrying amount of assets and liabilities and the reported amounts of revenues and expenses reflected in the Consolidated Financial Statements.

          Management routinely evaluates the estimates and assumptions used in the preparation of its Consolidated Financial Statements. These regular evaluations consider historical experience and other reasonable factors and use the seasoned judgment of management personnel. Management has reviewed the Company’s critical accounting policies with the Audit Committee of the Board of Directors.

          Management believes the following paragraphs in this section describe the application of critical accounting policies by management to arrive at the critical accounting estimates reflected in the Consolidated Financial Statements. The Company’s accounting policies are more fully discussed in Note 1 to the Consolidated Financial Statements.

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     Valuation of Long-Lived and Intangible Assets and Goodwill

          The Company assesses the potential for impairment of identifiable intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the recorded value might not be fully recoverable. Important factors that could cause management to review for impairment include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company reviews for possible impairment those assets subject to purchase options and those impacted by casualties, such as hurricanes. If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property. The Company recorded impairment charges totaling $7.5 million, $22,000 and $2.5 million, respectively, for the years ended December 31, 2010, 2009 and 2008 related to real estate properties and other long-lived assets. The impairment charges in 2010 included $1.0 million related to one property sold in 2010 and $6.5 million related to five properties classified as held for sale in 2010, reducing the Company’s carrying values on the properties to the estimated fair values of the properties less costs to sell. The impairment charge in 2009 was recorded in connection with the sale of a property in Washington. The impairment charges in 2008 included $1.6 million related to a long-lived asset, $0.1 million related to two properties sold in 2008, and $0.8 million related to two properties classified as held for sale in 2008, reducing the Company’s carrying values on the properties to the estimated fair values of the properties less costs to sell.

          The Company also performs an annual goodwill impairment review. The Company’s reviews are performed as of December 31 of each year. The Company’s 2010 and 2009 reviews indicated that no impairment had occurred with the respect to the Company’s $3.5 million goodwill asset.

     Capitalization of Costs

          GAAP generally allows for the capitalization of various types of costs. The rules and regulations on capitalizing costs and the subsequent depreciation or amortization of those costs versus expensing them in the period incurred vary depending on the type of costs and the reason for capitalizing the costs.

          Direct costs of a development project generally include construction costs, professional services such as architectural and legal costs, travel expenses, land acquisition costs as well as other types of fees and expenses. These costs are capitalized as part of the basis of an asset to which such costs relate. Indirect costs include capitalized interest and overhead costs. The Company’s overhead costs are based on overhead load factors that are charged to a project based on direct time incurred. The Company computes the overhead load factors annually for its acquisition and development departments, which have employees who are involved in the projects. The overhead load factors are computed to absorb that portion of indirect employee costs (payroll and benefits, training, occupancy and similar costs) that are attributable to the productive time the employee incurs working directly on projects. The employees in the Company’s acquisitions and development departments who work on these projects maintain and report their hours daily, by project. Employee costs that are administrative, such as vacation time, sick time, or general and administrative time, are expensed in the period incurred.

          Acquisition-related costs of an existing building include finder’s fees, advisory, legal, accounting, valuation, other professional or consulting fees, and certain general and administrative costs. These costs are also expensed in the period incurred.

          Management’s judgment is also exercised in determining whether costs that have been previously capitalized to a project should be reserved for or written off if or when the project is abandoned or circumstances otherwise change that would call the project’s viability into question. The Company follows a standard and consistently applied policy of classifying pursuit activity as well as reserving for these types of costs based on their classification.

          The Company classifies its pursuit projects into four categories, of which three relate to development and one relates to acquisitions. The first category includes pursuits of developments that have a remote chance of producing new business. Costs for these projects are expensed in the period incurred. The second category includes pursuits of developments that might reasonably be expected to produce new business opportunities although there can be no assurance that they will result in a new project or contract. Costs for these projects are capitalized but, due to the uncertainty of projects in this category, these costs are reserved at 50%, which means that 50% of the costs are expensed in the period incurred. The third category includes those pursuits of developments that are either highly probable to result in a project or contract or already have resulted in a project or contract in which the contract requires the operator to reimburse the Company’s costs. Many times, these are pursuits involving operators with which the Company is already doing business. Since the Company believes it is probable that these pursuits will result in a project or contract, it capitalizes these costs in full and records no reserve. The fourth category includes pursuits that involve the acquisition of existing buildings. As discussed above, costs related to acquisitions of existing buildings are expensed in the period incurred.

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          Each quarter, all capitalized pursuit costs are again reviewed carefully for viability or a change in classification, and a management decision is made as to whether any additional reserve is deemed necessary. If necessary and considered appropriate, management would record an additional reserve at that time. Capitalized pursuit costs, net of the reserve, are carried in other assets in the Company’s Consolidated Balance Sheets, and any reserve recorded is charged to general and administrative expenses on the Consolidated Statements of Income. All pursuit costs will ultimately be written off to expense or capitalized as part of the constructed real estate asset.

          As of December 31, 2010 and 2009, the Company had capitalized pursuit costs totaling $1.1 million and $2.2 million, respectively, and had provided reserves against its capitalized pursuit costs of $1.0 million and $2.1 million, respectively.

     Depreciation of Real Estate Assets and Amortization of Related Intangible Assets

          As of December 31, 2010, the Company had investments of approximately $2.4 billion in depreciable real estate assets and related intangible assets. When real estate assets and related intangible assets are acquired or placed in service, they must be depreciated or amortized. Management’s judgment involves determining which depreciation method to use, estimating the economic life of the building and improvement components of real estate assets, and estimating the value of intangible assets acquired when real estate assets are purchased that have in-place leases.

          As described in more detail in Note 1 to the Consolidated Financial Statements, when the Company acquires real estate properties with in-place leases, the cost of the acquisition must be allocated between the acquired tangible real estate assets “as if vacant” and any acquired intangible assets. Such intangible assets could include above- (or below-) market in-place leases and at-market in-place leases, which could include the opportunity costs associated with absorption period rentals, direct costs associated with obtaining new leases such as tenant improvements, and customer relationship assets. Any remaining excess purchase price is then allocated to goodwill. The identifiable tangible and intangible assets are then subject to depreciation and amortization. Goodwill is evaluated for impairment on an annual basis unless circumstances suggest that a more frequent evaluation is warranted.

          If assumptions used to estimate the “as if vacant” value of the building or the intangible asset values prove to be inaccurate, the pro-ration of the purchase price between building and intangibles and resulting depreciation and amortization could be incorrect. The amortization period for the intangible assets is the average remaining term of the actual in-place leases as of the acquisition date. To help prevent errors in its estimates from occurring, management applies consistent assumptions with regard to the elements of estimating the “as if vacant” values of the building and the intangible assets, including the absorption period, occupancy increases during the absorption period, and tenant improvement amounts. The Company uses the same absorption period and occupancy assumptions for similar building types, adding the future cash flows expected to occur over the next 10 years as a fully occupied building. The net present value of these future cash flows, discounted using a market rate of return, becomes the estimated “as if vacant” value of the building.

          With respect to the building components, there are several depreciation methods available under GAAP. Some methods record relatively more depreciation expense on an asset in the early years of the asset’s economic life, and relatively less depreciation expense on the asset in the later years of its economic life. The straight-line method of depreciating real estate assets is the method the Company follows because, in the opinion of management, it is the method that most accurately and consistently allocates the cost of the asset over its estimated life. The Company assigns a useful life to its owned buildings based on many factors, including the age of the property when acquired.

     Allowance for Doubtful Accounts and Credit Losses

          Many of the Company’s investments are subject to long-term leases or other financial support arrangements with hospital systems and healthcare providers affiliated with the properties. Due to the nature of the Company’s agreements, the Company’s accounts receivable, notes receivable and interest receivables result mainly from monthly billings of contractual tenant rents, lease guaranty amounts, principal and interest payments due on notes and mortgage notes receivable, late fees and additional rent.

          Payments on the Company’s accounts receivable are normally collected within 30 days of billing. When receivables remain uncollected, management must decide whether it believes the receivable is collectible and whether to provide an allowance for all or a portion of these receivables. Unlike a financial institution with a large volume of homogeneous retail receivables such as credit card loans or automobile loans that have a predictable loss pattern over time, the Company’s receivable losses have historically been infrequent, and are tied to a unique or specific event. The Company’s allowance for doubtful accounts is generally based on specific identification and is recorded for a specific receivable amount once determined that such an allowance is needed.

          The Company also evaluates collectability of its mortgage notes and notes receivable. A loan is impaired when it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan as scheduled, including both contractual interest and principal payments. The Company did not record any provisions for doubtful accounts on its mortgage notes or notes receivable during the three years ended December 31, 2010.

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          Management monitors the age and collectibility of receivables on an ongoing basis. At least monthly, a report is produced whereby all receivables are “aged” or placed into groups based on the number of days that have elapsed since the receivable was billed. Management reviews the aging report for evidence of deterioration in the timeliness of payments from tenants, sponsors or borrowers. Whenever deterioration is noted, management investigates and determines the reason(s) for the delay, which may include discussions with the delinquent tenant, sponsor or borrower. Considering all information gathered, management’s judgment must be exercised in determining whether a receivable is potentially uncollectible and, if so, how much or what percentage may be uncollectible. Among the factors management considers in determining uncollectibility are the following:

• type of contractual arrangement under which the receivable was recorded, e.g., a mortgage note, a triple net lease, a gross lease, a sponsor guaranty agreement or some other type of agreement;

• tenant’s or debtor’s reason for slow payment;

• industry influences and healthcare segment under which the tenant or debtor operates;

• evidence of willingness and ability of the tenant or debtor to pay the receivable;

• credit-worthiness of the tenant or debtor;

• collateral, security deposit, letters of credit or other monies held as security;

• tenant’s or debtor’s historical payment pattern;

• other contractual agreements between the tenant or debtor and the Company;

• relationship between the tenant or debtor and the Company;

• state in which the tenant or debtor operates; and

• existence of a guarantor and the willingness and ability of the guarantor to pay the receivable.

          Considering these factors and others, management must conclude whether all or some of the aged receivable balance is likely uncollectible. If management determines that some portion of a receivable is likely uncollectible, the Company records a provision for bad debt expense for the amount expected to be uncollectible. There is a risk that management’s estimate is over- or under-stated; however, management believes that this risk is mitigated by the fact that it re-evaluates the allowance at least once each quarter and bases its estimates on the most current information available. As such, any over- or under-stated estimates in the allowance should be adjusted for as soon as new and better information becomes available.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          See “Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” incorporated herein by reference to Item 7 of this report.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Healthcare Realty Trust Incorporated
Nashville, Tennessee

          We have audited the accompanying consolidated balance sheets of Healthcare Realty Trust Incorporated as of December 31, 2010 and 2009 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. In connection with our audits of the financial statements, we have also audited the financial statement schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and 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. An audit 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 presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Healthcare Realty Trust Incorporated at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

          Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financial statements as a whole, present fairly, in all material respects, the information set forth therein.

          We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Healthcare Realty Trust Incorporated’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 22, 2011 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP  

Nashville, Tennessee
February 22, 2011

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Consolidated
BALANCE SHEETS

	December 31,
(Dollars in thousands, except per share amounts)	2010			2009
ASSETS
Real estate properties:
Land	$	163,020		$	135,495
Buildings, improvements and lease intangibles		2,310,404			1,977,264
Personal property		17,919			17,509
Construction in progress		80,262			95,059
		2,571,605			2,225,327
Less accumulated depreciation		(484,641	)		(433,634	)
Total real estate properties, net		2,086,964			1,791,693
Cash and cash equivalents		113,321			5,851
Mortgage notes receivable		36,599			31,008
Assets held for sale and discontinued operations, net		23,915			17,745
Other assets, net		96,510			89,467
Total assets	$	2,357,309		$	1,935,764
LIABILITIES AND EQUITY
Liabilities:
Notes and bonds payable	$	1,407,855		$	1,046,422
Accounts payable and accrued liabilities		62,652			55,043
Liabilities of discontinued operations		423			251
Other liabilities		43,639			43,900
Total liabilities		1,514,569			1,145,616
Commitments and contingencies
Equity:
Preferred stock, $.01 par value; 50,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $.01 par value; 150,000,000 shares authorized; 66,071,424 and 60,614,931 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively		661			606
Additional paid-in capital		1,641,379			1,520,893
Accumulated other comprehensive loss		(5,269	)		(4,593	)
Cumulative net income attributable to common stockholders		796,165			787,965
Cumulative dividends		(1,593,926	)		(1,518,105	)
Total stockholders’ equity		839,010			786,766
Noncontrolling interests		3,730			3,382
Total equity		842,740			790,148
Total liabilities and equity	$	2,357,309		$	1,935,764

See accompanying notes.

45

Consolidated
STATEMENTS OF INCOME

	Year Ended December 31,
(Dollars in thousands, except per share data)	2010			2009			2008
REVENUES
Master lease rent	$	54,659		$	53,340		$	52,472
Property operating		190,205			177,849			134,746
Straight-line rent		2,509			2,052			717
Mortgage interest		2,377			2,646			2,207
Other operating		8,644			10,951			16,252
		258,394			246,838			206,394
EXPENSES
General and administrative		16,894			22,478			23,514
Property operating		101,355			93,249			79,732
Impairment of long-lived assets		—			—			1,600
Bad debt, net		(429	)		535			1,252
Depreciation		67,440			60,847			46,541
Amortization		5,342			5,259			2,849
		190,602			182,368			155,488
OTHER INCOME (EXPENSE)
Gain (loss) on extinguishment of debt		(480	)		—			4,102
Re-measurement gain of equity interest upon acquisition		—			2,701			—
Interest expense		(65,710	)		(43,080	)		(42,126	)
Interest and other income, net		2,419			1,099			2,438
		(63,771	)		(39,280	)		(35,586	)
INCOME FROM CONTINUING OPERATIONS		4,021			25,190			15,320
DISCONTINUED OPERATIONS
Income from discontinued operations		3,385			5,844			17,483
Impairments		(7,511	)		(22	)		(886	)
Gain on sales of real estate properties		8,352			20,136			9,843
INCOME FROM DISCONTINUED OPERATIONS		4,226			25,958			26,440
NET INCOME		8,247			51,148			41,760
Less: Net income attributable to noncontrolling interests		(47	)		(57	)		(68	)
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	8,200		$	51,091		$	41,692
BASIC EARNINGS PER COMMON SHARE:
Income from continuing operations	$	0.06		$	0.43		$	0.30
Discontinued operations		0.07			0.45			0.51
Net income attributable to common stockholders	$	0.13		$	0.88		$	0.81
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations	$	0.06		$	0.43		$	0.29
Discontinued operations		0.07			0.44			0.50
Net income attributable to common stockholders	$	0.13		$	0.87		$	0.79
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC		61,722,786			58,199,592			51,547,279
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — DILUTED		62,770,826			59,047,314			52,564,944

See accompanying notes.

46

Consolidated
STATEMENTS OF STOCKHOLDERS’ EQUITY

								Accumulated
					Additional			Other			Cumulative					Total			Non-
	Preferred		Common		Paid-In			Comprehensive			Net		Cumulative			Stockholders’			controlling			Total
(Dollars in thousands, except per share data)	Stock		Stock		Capital			Loss			Income		Dividends			Equity			Interests			Equity
Balance at December 31, 2007	$	—	$	507	$	1,286,071		$	(4,346	)	$	695,182	$	(1,345,419	)	$	631,995		$	—		$	631,995
Issuance of stock, net of costs		—		83		201,968			—			—		—			202,051			—			202,051
Common stock redemption		—		—		(282	)		—			—		—			(282	)		—			(282	)
Stock-based compensation		—		2		2,778			—			—		—			2,780			—			2,780
Net income		—		—		—			—			41,692		—			41,692			68			41,760
Other comprehensive loss		—		—		—			(2,115	)		—					(2,115	)		—			(2,115	)
Comprehensive income		—																					39,645
Dividends to common stockholders ($1.54 per share)		—		—		—			—			—		(81,301	)		(81,301	)		—			(81,301	)
Distributions to noncontrolling interests		—		—		—			—			—		—			—			(110	)		(110	)
Proceeds from noncontrolling interests		—		—		—			—			—		—			—			1,469			1,469
Balance at December 31, 2008		—		592		1,490,535			(6,461	)		736,874		(1,426,720	)		794,820			1,427			796,247
Issuance of stock, net of costs		—		13		26,656			—			—		—			26,669			—			26,669
Common stock redemption		—		—		(8	)		—			—		—			(8	)		—			(8	)
Stock-based compensation		—		1		3,710			—			—		—			3,711			—			3,711
Net income		—		—		—			—			51,091		—			51,091			57			51,148
Other comprehensive income		—		—		—			1,868			—		—			1,868			—			1,868
Comprehensive income		—																					53,016
Dividends to common stockholders ($1.54 per share)		—		—		—			—			—		(91,385	)		(91,385	)		—			(91,385	)
Distributions to noncontrolling interests		—		—		—			—			—		—			—			(330	)		(330	)
Proceeds from noncontrolling interests		—		—		—			—			—		—			—			2,228			2,228
Balance at December 31, 2009		—		606		1,520,893			(4,593	)		787,965		(1,518,105	)		786,766			3,382			790,148
Issuance of stock, net of costs		—		53		118,077			—			—		—			118,130			—			118,130
Stock-based compensation		—		2		2,409			—			—		—			2,411			—			2,411
Net income		—		—		—			—			8,200		—			8,200			47			8,247
Other comprehensive loss		—		—		—			(676	)		—		—			(676	)		—			(676	)
Comprehensive income		—															—						7,571
Dividends to common stockholders ($1.20 per share)		—		—		—			—			—		(75,821	)		(75,821	)		—			(75,821	)
Distributions to noncontrolling interests		—		—		—			—			—		—			—			(467	)		(467	)
Proceeds from noncontrolling interests		—		—		—			—			—		—			—			768			768
Balance at December 31, 2010	$	—	$	661	$	1,641,379		$	(5,269	)	$	796,165	$	(1,593,926	)	$	839,010		$	3,730		$	842,740

See accompanying notes.

47

Consolidated
STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(Dollars in thousands)	2010			2009			2008
OPERATING ACTIVITIES
Net income	$	8,247		$	51,148		$	41,760
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		77,894			70,921			54,748
Stock-based compensation		2,411			3,711			2,780
Straight-line rent receivable		(2,472	)		(1,925	)		(643	)
Straight-line rent liability		92			444			423
Gain on sales of real estate properties		(8,352	)		(20,136	)		(9,843	)
Gain on sales of land		—			—			(384	)
(Gain) loss on extinguishment of debt		480			—			(4,102	)
Re-measurement gain of equity interest upon acquisition		—			(2,701	)		—
Impairments		7,511			22			2,486
Equity in (income) losses from unconsolidated joint ventures		—			2			(1,021	)
Provision for bad debt, net		(409	)		517			1,904
State income taxes paid, net of refunds		(533	)		(674	)		(612	)
Payment of partial pension settlement		(2,582	)		(2,300	)		—
Changes in operating assets and liabilities:
Other assets		(9,137	)		(1,017	)		6,794
Accounts payable and accrued liabilities		6,367			5,127			3,097
Other liabilities		1,318			75			7,864
Net cash provided by operating activities		80,835			103,214			105,251
INVESTING ACTIVITIES
Acquisition and development of real estate properties		(369,034	)		(170,520	)		(383,702	)
Funding of mortgages and notes receivable		(25,109	)		(23,391	)		(36,970	)
Investments in unconsolidated joint venture		—			(184	)		—
Distributions from unconsolidated joint ventures		—			—			882
Partial redemption of preferred equity investment in an unconsolidated joint venture		—			—			5,546
Proceeds from sales of real estate		34,512			83,441			37,133
Proceeds from mortgages and notes receivable repayments		9,201			12,893			8,236
Net cash used in investing activities		(350,430	)		(97,761	)		(368,875	)
FINANCING ACTIVITIES
Net borrowings (repayments) on unsecured credit facilities		(50,000	)		(279,000	)		193,000
Borrowings on notes and bonds payable		396,800			377,969			—
Repayments on notes and bonds payable		(2,516	)		(28,433	)		(3,813	)
Repurchase of notes payable		(8,556	)		—			(45,460	)
Quarterly dividends paid		(75,821	)		(91,385	)		(81,301	)
Proceeds from issuance of common stock		118,235			26,467			197,255
Common stock redemptions		—			(8	)		(282	)
Capital contributions received from noncontrolling interests		633			2,228			1,469
Distributions to noncontrolling interest holders		(481	)		(282	)		(110	)
Credit facility amendment and extension fees		—			—			(1,126	)
Equity issuance costs		(30	)		(3	)		(389	)
Debt issuance and assumption costs		(1,199	)		(11,293	)		—
Net cash provided by (used in) financing activities		377,065			(3,740	)		259,243
Increase (decrease) in cash and cash equivalents		107,470			1,713			(4,381	)
Cash and cash equivalents, beginning of year		5,851			4,138			8,519
Cash and cash equivalents, end of year	$	113,321		$	5,851		$	4,138
Supplemental Cash Flow Information:
Interest paid	$	62,274		$	50,052		$	49,997
Capitalized interest	$	10,315		$	10,087		$	6,679
Invoices accrued for construction, tenant improvement and other capitalized costs	$	13,555		$	16,266		$	12,500
Mortgage notes payable assumed upon acquisition (adjusted to fair value)	$	24,268		$	11,716		$	50,825
Mortgage note payable disposed of upon sale of joint venture interest	$	—		$	5,425		$	—

See accompanying notes.

48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

     Business Overview

          Healthcare Realty Trust Incorporated (the “Company”) is a real estate investment trust that owns, acquires, manages, finances, and develops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. As of December 31, 2010, excluding assets classified as held for sale and including an investment in one unconsolidated joint venture, the Company had investments of approximately $2.6 billion in 209 real estate properties and mortgages. The Company’s 201 owned real estate properties, excluding assets classified as held for sale, are located in 28 states, totaling approximately 13.3 million square feet. In addition, the Company provided property management services to approximately 9.2 million square feet nationwide. Square footage disclosures in this Annual Report on Form 10-K are unaudited.

     Principles of Consolidation

          The Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, joint ventures and partnerships where the Company controls the operating activities.

          The Company consolidates two joint ventures with the same joint venture partner, Ladco MPF I, LLC, in which it has a controlling interest. The Company also does business with Ladco MPF I, LLC and its affiliates (“Ladco”) that are not part of the joint ventures. The Company’s Consolidated Financial Statements at December 31, 2010 included approximately $102.1 million in real estate investments, including mortgage notes receivable, related to these consolidated joint ventures. Information on these joint ventures is as follows:

• The Company holds an 80% interest in the HR Ladco Holdings, LLC joint venture, formed during 2008. This joint venture owned $87.6 million and $72.9 million in real estate properties as of December 31, 2010 and 2009, respectively. A substantial number of properties held in this joint venture were developed by Ladco with the Company providing construction financing. Upon the properties’ completion and stabilization, the joint venture had the option to acquire the properties. The Company’s construction financings were converted to its equity contribution with additional mortgage financing (eliminated in consolidation) provided by the Company. As of December 31, 2010, the Company had funded $15.9 million of the total $60.6 million in funding commitments under four construction loans to Ladco for projects under development. Ladco is responsible for asset and property management services for which it receives a fee from the revenues of the joint venture.

• The Company also holds a 98.75% interest in the Lakewood MOB, LLC joint venture, formed during 2010 that is currently developing two medical office buildings and a parking garage in Colorado for $54.9 million. As of December 31, 2010, the Company has funded $14.5 million for the medical office buildings and garage, which are expected to be completed during 2011. Ladco is developing the properties and will be responsible for asset and property management services upon completion. The joint venture agreement allows Ladco to expand its ownership to a maximum of 5% via a cash contribution.

          The Company reports noncontrolling interests in subsidiaries as equity and the related net income attributable to the noncontrolling interests as part of consolidated net income in its financial statements.

          The Company has other mortgage and notes receivable with Ladco that are not part of these joint ventures.

          The Company also had an investment in one unconsolidated joint venture at December 31, 2010 and 2009 and an investment in two unconsolidated joint ventures at December 31, 2008. The Company’s investment in its unconsolidated joint ventures is included in other assets and the related equity income is recognized in other income (expense) on the Company’s Consolidated Financial Statements.

          All significant intercompany accounts, transactions and balances have been eliminated in the Consolidated Financial Statements.

     Use of Estimates in the Consolidated Financial Statements

          Preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Segment Reporting

          The Company owns, acquires, manages, finances and develops outpatient healthcare-related properties. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore, the Company discloses its operating results in a single segment.

     Reclassifications

          Certain reclassifications for discontinued operations have been made to the Consolidated Financial Statements for the years ended December 31, 2009 and 2008 to conform to the 2010 presentation. The operating results for assets classified as held for sale as of December 31, 2010 or sold during 2010 have been reclassified from continuing operations to discontinued operations on the Consolidated Financial Statements for the years ended December 31, 2009 and 2008.

     Real Estate Properties

          Real estate properties are recorded at cost. Cost at the time of the acquisition is allocated between land, buildings, tenant improvements, lease and other intangibles, and personal property based upon estimated fair values at the time of acquisition. The Company’s gross real estate assets, on a book-basis, totaled approximately $2.6 billion and $2.3 billion, respectively, as of December 31, 2010 and 2009.

          Depreciation and amortization of real estate assets and liabilities in place as of December 31, 2010, is provided for on a straight-line basis over the asset’s estimated useful life:

Land improvements	15.0 years
Buildings and improvements	1.3 to 39 years
Lease intangibles (including ground lease intangibles)	2.6 to 93.1 years
Personal property	3.0 to 15.8 years

     Land Held for Development

          Included in construction in progress (“CIP”) on the Company’s Consolidated Balance Sheets are four parcels of land held for future development. As of December 31, 2010 and 2009, the Company’s investment in land held for development totaled approximately $20.8 million and $17.3 million, respectively.

     Accounting for Acquisitions of Real Estate Properties with In-Place Leases

          When a building is acquired with in-place leases, the cost of the acquisition must be allocated between the tangible real estate assets and the intangible real estate assets related to in-place leases based on their estimated fair values. Where appropriate, the intangible assets recorded could include goodwill or customer relationship assets. The values related to above- or below-market in-place lease intangibles are amortized to rental income where the Company is the lessor, are amortized to property operating expense where the Company is the lessee, and are amortized over the average remaining term of the leases upon acquisition. The values of at-market in-place leases and other intangible assets, such as customer relationship assets, are amortized and reflected in amortization expense in the Company’s Consolidated Statements of Income.

          The Company’s approach to estimating the value of in-place leases is a multi-step process.

• First, the Company considers whether any of the in-place lease rental rates are above- or below-market. An asset (if the actual rental rate is above-market) or a liability (if the actual rental rate is below-market) is calculated and recorded in an amount equal to the present value of the future cash flows that represent the difference between the actual lease rate and the average market rate.

• Second, the Company estimates an absorption period assuming the building is vacant and must be leased up to the actual level of occupancy when acquired. During that absorption period the owner would incur direct costs, such as tenant improvements, and would suffer lost rental income. Likewise, the owner would have acquired a measurable asset in that, assuming the building was vacant, certain fixed costs would be avoided because the actual in-place lessees would reimburse a certain portion of fixed costs through expense reimbursements during the absorption period. All of these assets (tenant improvement costs avoided, rental income lost, and fixed costs recovered through in-place lessee reimbursements) are estimated and recorded in amounts equal to the present value of future cash flows.

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

• Third, the Company estimates the value of the building “as if vacant.” The Company uses the same absorption period and occupancy assumptions used in step two, adding to those the future cash flows expected in a fully occupied building. The net present value of these future cash flows, discounted at a market rate of return, becomes the estimated “as if vacant” value of the building.

• Fourth, the actual purchase price is allocated based on the various asset fair values described above. The building and tenant improvement components of the purchase price are depreciated over the estimated useful life of the building or the average remaining term of the in-places leases. The above- or below-market rental rate assets or liabilities are amortized to rental income or property operating expense over the remaining term of the leases. The at-market, in-place leases are amortized to amortization expense over the average remaining term of the leases, customer relationship assets are amortized to amortization expense over terms applicable to each acquisition, and any goodwill recorded would be reviewed for impairment at least annually.

          See Note 8 for more details on the Company’s intangible assets as of December 31, 2010 and 2009.

     Fair Value Measurements

          Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements.

          A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:

• Level 1 — quoted prices for identical instruments in active markets;

• Level 2 — quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3 — fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

          In connection with its acquisition of real estate assets during 2010 and 2009, the Company assumed mortgage notes payable. The valuation of the mortgage notes payable was determined using level two inputs. Levels 2 and 3 were used to determine the fair value of the assets classified as held for sale at December 31, 2010, which is discussed in more detail in Note 6.

     Cash and Cash Equivalents

          Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. At December 31, 2010, the Company had $99.0 million invested in a short-term money market fund, bearing interest at 0.18% and with a weighted average maturity of assets in the fund of 46 days at December 31, 2010. The cash in the money market fund was generated from a portion of the proceeds from the Senior Notes due 2021 issued in late December 2010. The Company expects to use these funds to repay the Senior Notes due 2011 or for other general corporate purposes.

     Allowance for Doubtful Accounts and Credit Losses

          Accounts Receivable

          Management monitors the aging and collectibility of its accounts receivable balances on an ongoing basis. At least monthly, a report is produced whereby all receivables are “aged” or placed into groups based on the number of days that have elapsed since the receivable was billed. Management reviews the aging report for evidence of deterioration in the timeliness of payment from a tenant or sponsor. Whenever deterioration is noted, management investigates and determines the reason(s) for the delay, which may include discussions with the delinquent tenant or sponsor. Considering all information gathered, management’s judgment is exercised in determining whether a receivable is potentially uncollectible and, if so, how much or what percentage may be uncollectible. Among the

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

factors management considers in determining collectibility are the type of contractual arrangement under which the receivable was recorded, e.g., a triple net lease, a gross lease, a sponsor guaranty agreement, or some other type of agreement; the tenant’s reason for slow payment; industry influences under which the tenant operates; evidence of willingness and ability of the tenant to pay the receivable; credit-worthiness of the tenant; collateral, security deposit, letters of credit or other monies held as security; tenant’s historical payment pattern; other contractual agreements between the tenant and the Company; relationship between the tenant and the Company; the state in which the tenant operates; and the existence of a guarantor and the willingness and ability of the guarantor to pay the receivable.

          Considering these factors and others, management concludes whether all or some of the aged receivable balance is likely uncollectible. Upon determining that some portion of the receivable is likely uncollectible, the Company records a provision for bad debts for the amount it expects will be uncollectible. When efforts to collect a receivable are exhausted, the receivable amount is charged off against the allowance. The Company does not hold any accounts receivable for sale.

          Mortgage Notes and Notes Receivable

          The Company had seven mortgage notes receivable outstanding as of December 31, 2010 and four mortgage notes receivable as of December 31, 2009 with aggregate principal balances totaling $36.6 million and $31.0 million, respectively. The weighted average maturity of the notes was approximately 3.9 years and 4.7 years, respectively, with interest rates ranging from 6.5% to 11.0% and 6.2% to 8.5%, respectively, as of December 31, 2010 and 2009.

          The Company also had notes receivable outstanding as of December 31, 2010 and 2009 of approximately $3.8 million and $3.3 million, respectively. Interest rates on the notes were fixed, ranging from 8.0% to 11.6% with maturity dates ranging from 2011 through 2016 as of December 31, 2010 and 2009.

          Management believes that its mortgage notes and notes receivable outstanding as of December 31, 2010 and 2009 were collectible, and therefore, did not record any allowances or reserves related to its notes during 2010 or 2009. The Company evaluates collectibility of its mortgage notes and notes receivable and records allowances on the notes as necessary. A loan is impaired when it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan as scheduled, including both contractual interest and principal payments. If a mortgage loan or note receivable becomes past due, the Company will review the specific circumstances and may discontinue the accrual of interest on the loan. The loan is not returned to accrual status until the debtor has demonstrated the ability to continue debt service in accordance with the contractual terms. As of December 31, 2010 and 2009, there were no recorded investments in mortgage notes or notes receivable that were either on non-accrual status or were past due more than ninety days and continued to accrue interest. Also, as of December 31, 2010, the Company did not hold any of its mortgage notes or notes receivable available for sale.

     Goodwill and Other Intangible Assets

          Goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present.

          Identifiable intangible assets of the Company are comprised of enterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and deferred financing costs. In-place lease and customer relationship intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Deferred financing costs are amortized over the term of the related credit facility or other debt instrument under the straight-line method, which approximates amortization under the effective interest method. Goodwill is not amortized but is evaluated annually on December 31 for impairment. The 2010 and 2009 impairment evaluations each indicated that no impairment had occurred with respect to the $3.5 million goodwill asset. See Note 8 for more detail on the Company’s intangible assets.

     Contingent Liabilities

          From time to time, the Company may be subject to loss contingencies arising from legal proceedings, which are discussed in Note 14. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages.

          The Company continually monitors any matters that may present a contingent liability, and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are first recorded when a loss is determined to be both probable and can be

52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

reasonably estimated. Changes in estimates regarding the exposure to a contingent loss are reflected as adjustments to the related liability in the periods when they occur.

          Because of uncertainties inherent in the estimation of contingent liabilities, it is possible that management’s provision for contingent losses could change materially in the near term. To the extent that any losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements.

     Accounting for Defined Benefit Pension Plans

          The Company has a pension plan under which certain designated officers may receive retirement benefits upon retirement and the completion of five years of service with the Company. The plan is unfunded and benefits will be paid from earnings of the Company. The Company recognizes pension expense on an accrual basis over an estimated service period. The Company calculates pension expense and the corresponding liability annually on the measurement date (December 31) which requires certain assumptions, such as a discount rate and the recognition of actuarial gains and losses.

          The Company historically has also had a pension plan for its non-employee outside directors (the “Outside Director Plan”). The Company terminated the Outside Director Plan in November 2009 and paid to each outside director who participated in the plan a lump-sum payment, which aggregated to approximately $2.6 million, during 2010 in full settlement of the directors’ benefits payable under the Outside Director Plan. See Note 11 for further discussion.

     Incentive Plans

          The Company has various employee stock-based awards outstanding. These awards include common stock issued to employees pursuant to the 2007 Employees Stock Incentive Plan and its predecessor plan (the “Incentive Plan”), the Optional Deferral Plan and the 2000 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). See Note 12 for details on the Company’s stock-based awards. The Employee Stock Purchase Plan features a “look-back” provision which enables the employee to purchase a fixed number of common shares at the lesser of 85% of the market price on the date of grant or 85% of the market price on the date of exercise, with optional purchase dates occurring once each quarter for 27 months.

          The Company accounts for awards to its employees based on fair value, using the Black-Scholes model, and generally recognizes expense over the award’s vesting period, net of estimated forfeitures. Since the options granted under the Employee Stock Purchase Plan immediately vest, the Company records compensation expense for those options when they are granted in the first quarter of each year. In each of the first quarters of 2010, 2009 and 2008, the Company recognized in general and administrative expenses approximately $0.2 million, $0.3 million and $0.2 million of compensation expense, respectively, related to the annual grant of options to its employees to purchase shares under the Employee Stock Purchase Plan.

     Accumulated Other Comprehensive Loss

          Certain items must be included in comprehensive income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains or losses on available-for-sale securities. The Company’s accumulated other comprehensive loss includes the cumulative pension liability adjustments, which are generally recognized in the fourth quarter of each year.

     Revenue Recognition

          The Company recognizes revenue when it is realized or realizable and earned. There are four criteria that must all be met before a Company may recognize revenue, including persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered (i.e., the tenant has taken possession of and controls the physical use of the leased asset), the price has been fixed or is determinable, and collectibility is reasonably assured.

          The Company derives most of its revenues from its real estate property and mortgage notes receivable portfolio. The Company’s rental and mortgage interest income is recognized based on contractual arrangements with its tenants, sponsors or borrowers. These contractual arrangements fall into three categories: leases, mortgage notes receivable, and property operating agreements as described in the following paragraphs. The Company may accrue late fees based on the contractual terms of a lease or note. Such fees, if accrued, are included in master lease income, property operating income, or mortgage interest income on the Company’s Consolidated Statements of Income, based on the type of contractual agreement.

          Income received but not yet earned is deferred until such time it is earned. Deferred revenue, included in other liabilities on the Consolidated Balance Sheets, was $17.3 million and $18.4 million, respectively, at December 31, 2010 and 2009.

53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          Rental Income

          Rental income related to non-cancelable operating leases is recognized as earned over the life of the lease agreements on a straight-line basis. Rental income from properties under a master lease arrangement with the tenant is included in master lease rental income and rental income from properties under various tenant lease arrangements, including operating expense recoveries, is included in property operating income on the Company’s Consolidated Statements of Income. Included in income from continuing operations were operating expense recoveries of approximately $23.0 million, $20.8 million and $10.3 million, respectively, for the years ended December 31, 2010, 2009 and 2008.

          Additional rent, generally defined in most lease agreements as the cumulative increase in a Consumer Price Index (“CPI”) from the lease start date to the CPI as of the end of the previous year, is calculated as of the beginning of each year, and is then billed and recognized as income during the year as provided for in the lease. Included in income from continuing operations was additional rental income, net of reserves, of approximately $2.3 million, $2.5 million and $1.7 million, respectively, for the years ended December 31, 2010, 2009 and 2008.

          Mortgage Interest Income

          Interest income on the Company’s mortgage notes receivable is recognized based on the interest rates, maturity dates and amortization periods in accordance with each note agreement. Interest rates on five of its mortgage notes receivable outstanding as of December 31, 2010 were fixed and interest rates on two notes were variable. The Company amortizes any fees paid related to its mortgage notes receivable to mortgage interest income over the term of the loan on a straight-line basis.

     Other Operating Income

          Other operating income on the Company’s Consolidated Statements of Income generally includes shortfall income recognized under its property operating agreements, interest income on notes receivable, replacement rent from an operator, management fee income, and prepayment penalty income.

          Applicable to eight of the Company’s 201 owned real estate properties as of December 31, 2010, property operating agreements between the Company and sponsoring health systems contractually obligate the sponsoring health system to provide to the Company a minimum return on the Company’s investment in the property in exchange for the right to be involved in the operating decisions of the property, including tenancy. If the minimum return is not achieved through normal operations of the property, the Company will calculate and accrue any shortfalls as income that the sponsor is responsible to pay to the Company under the terms of the property operating agreement.

          The Company also receives management fees related to property management services it provides to third parties. Management fees related to the Company’s owned properties are eliminated in consolidation. Management fees are generally calculated, accrued and billed monthly based on a percentage of cash collections of tenant receivables for the month.

          Other operating income for the years ended December 31, 2010, 2009 and 2008 is detailed in the table below:

	Year Ended December 31,
(Dollars in millions)	2010		2009		2008
Property lease guaranty revenue	$	7.5	$	8.2	$	12.8
Interest income on notes receivable		0.8		0.6		0.6
Management fee income		0.2		0.2		0.2
Replacement rent		—		1.3		2.5
Other		0.1		0.7		0.2
	$	8.6	$	11.0	$	16.3

     Federal Income Taxes

          No provision has been made for federal income taxes. The Company intends at all times to qualify as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986 (the “Code”), as amended. The Company must distribute at least 90% per annum of its real estate investment trust taxable income to its stockholders and meet other requirements to continue to qualify as a real estate investment trust. See Note 15 for further discussion.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          The Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and administrative expense. No such amounts were recognized during the three years ended December 31, 2010.

          Federal tax returns for the years 2007, 2008 and 2009 are currently subject to examination by taxing authorities.

     State Income Taxes

          The Company must pay certain state income taxes and the provisions are generally included in general and administrative expense on the Company’s Consolidated Statements of Income. See Note 15 for further discussion.

     Sales and Use Taxes

          The Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in the Company’s Consolidated Statements of Income.

     Discontinued Operations

          The Company sells properties from time to time due to a variety of factors, such as market conditions or the exercise of purchase options by tenants. The operating results of properties that have been sold or are held for sale are reported as discontinued operations in the Company’s Consolidated Statements of Income. A company must report discontinued operations when a component of an entity has either been disposed of or is deemed to be held for sale if (i) both the operations and cash flows of the component have been or will be eliminated from ongoing operations as a result of the disposal transaction, and (ii) the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. Long-lived assets held for sale are reported at the lower of their carrying amount or their fair value less cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as discontinued operations. Losses resulting from the sale of such properties are characterized as impairment losses relating to discontinued operations in the Consolidated Statements of Income.

          In the Company’s Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008, income related to properties sold or held for sale as of December 31, 2010 was included in discontinued operations for each of the three years totaling approximately $4.2 million, $26.0 million, and $26.4 million, respectively.

          Assets held for sale at December 31, 2010 and 2009 included 11 and six properties, respectively.

     Earnings per Share

          Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding but unvested restricted shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of the outstanding stock options from the Employee Stock Purchase Plan and restricted shares of common stock, using the treasury stock method and the average stock price during the period. See Note 13 for the calculations of earnings per share.

     New Accounting Pronouncements

          Accounting Standards Update 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses,” (“ASU 2010-20”), issued in July 2010, became effective for the Company as of December 31, 2010. ASU 2010-20 requires new qualitative and quantitative disclosures in the notes to the financial statements relating to a Company’s financing receivables, such as a rollforward of the allowance for credit losses, credit quality information, impaired loan information, modification information and nonaccrual and past due information. The adoption of ASU 2010-20 did not have a material impact on the Company’s Consolidated Financial Statements.

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Property Investments

     The Company invests in healthcare-related properties and mortgages located throughout the United States. The Company provides management, leasing and development services, and capital for the construction of new facilities, as well as for the acquisition of existing properties. The Company had investments of approximately $2.6 billion in 209 real estate properties and mortgage notes receivable as of December 31, 2010, excluding assets classified as held for sale and including an investment in one unconsolidated joint venture. The following table summarizes the Company’s investments.

					Buildings,
					Improvements,
	Number of				Lease Intangibles		Personal				Accumulated
(Dollars in thousands)	Facilities (1)		Land		and CIP		Property		Total		Depreciation
Medical Office:
California		7	$	15,903	$	81,487	$	106	$	97,496	$	(31,865	)
Florida		14		9,152		127,336		171		136,659		(49,110	)
Hawaii		3		8,314		98,057		42		106,413		(7,526	)
North Carolina		14		28		142,845		91		142,964		(12,780	)
Tennessee		18		6,177		159,691		165		166,033		(46,052	)
Texas		37		40,521		548,384		1,111		590,016		(87,534	)
Washington		5		2,200		102,309		1		104,510		(4,553	)
Other states		47		38,305		575,248		379		613,932		(91,430	)
		145		120,600		1,835,357		2,066		1,958,023		(330,850	)
Physician Clinics:
Florida		7		9,732		40,674		2		50,408		(14,630	)
Virginia		3		1,623		29,169		127		30,919		(10,846	)
Other states		17		5,091		65,544		262		70,897		(17,783	)
		27		16,446		135,387		391		152,224		(43,259	)
Surgical Facilities:
Indiana		1		1,071		42,335		—		43,406		(4,885	)
Texas		4		11,334		123,396		83		134,813		(15,889	)
Other states		5		5,219		14,399		18		19,636		(7,053	)
		10		17,624		180,130		101		197,855		(27,827	)
Specialty Outpatient:
Alabama		1		—		2,698		—		2,698		(1,042	)
Iowa		1		180		1,974		—		2,154		(175	)
Virginia		1		80		2,353		—		2,433		(881	)
		3		260		7,025		—		7,285		(2,098	)
Inpatient Rehab:
Pennsylvania		6		1,214		112,653		—		113,867		(40,651	)
Texas		2		1,623		17,713		—		19,336		(6,927	)
Other states		3		3,641		41,795		—		45,436		(9,649	)
		11		6,478		172,161		—		178,639		(57,227	)
Other:
California		1		—		12,688		—		12,688		(5,329	)
Virginia		2		1,178		10,629		5		11,812		(4,314	)
Other states		2		434		16,517		416		17,367		(6,322	)
		5		1,612		39,834		421		41,867		(15,965	)
Land Held for Development		—		—		20,772		—		20,772		(13	)
Corporate Property		—		—		—		14,940		14,940		(7,402	)
Total owned properties		201		163,020		2,390,666		17,919		2,571,605		(484,641	)
Mortgage notes receivable		7		—		—		—		36,599		—
Unconsolidated joint venture investment		1		—		—		—		1,266		—
Total real estate investments		209	$	163,020	$	2,390,666	$	17,919	$	2,609,470	$	(484,641	)

(1) Includes three properties under construction.

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Real Estate Leases and Mortgage Notes Receivable

     Real Estate Leases

          The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases or are supported through other financial support arrangements with expiration dates through 2029. Some leases and financial arrangements provide for fixed rent renewal terms of five years, or multiples thereof, in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease and for a short period thereafter, with an option or a right of first refusal to purchase the leased property. The Company’s portfolio of master leases generally requires the lessee to pay minimum rent, additional rent based upon fixed percentage increases or increases in the Consumer Price Index and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

          Future minimum lease payments under the non-cancelable operating leases and guaranteed amounts due to the Company under property operating agreements as of December 31, 2010 are as follows (in thousands):

2011	$	221,731
2012		195,620
2013		167,041
2014		136,291
2015		108,167
2016 and thereafter		436,239
	$	1,265,089

     Customer Concentrations

          The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that accounted for 10% or more of the Company’s revenues, including revenues from discontinued operations, for the years ended December 31, 2010 and 2009, and had only one customer that accounted for 10% or more of the Company’s revenues for the year ended December 31, 2008 (HealthSouth at 11%).

     Purchase Option Provisions

          Certain of the Company’s leases include purchase option provisions. The provisions vary from lease to lease but generally allow the lessee to purchase the property covered by the lease at the greater of fair market value or an amount equal to the Company’s gross investment. As of December 31, 2010, the Company had a gross investment of approximately $91.3 million in real estate properties that were subject to outstanding, exercisable contractual options to purchase, with various conditions and terms, that had not been exercised.

     Mortgage Notes Receivable

          The Company had seven mortgage notes receivable outstanding as of December 31, 2010 and four mortgage notes receivable as of December 31, 2009 with aggregate principal balances totaling $36.6 million and $31.0 million, respectively. Five of the mortgage notes outstanding at December 31, 2010 were construction loans and one outstanding at December 31, 2009 was a construction loan. Also, five of the Company’s seven mortgage notes receivable, having an aggregate principal balance of $19.6 million or 54% of the Company’s outstanding loan balances at December 31, 2010, were with Ladco. All of the loans were secured by existing buildings or buildings currently under development.

4. Acquisitions and Dispositions and Mortgage Repayments

     2010 Real Estate and Mortgage Note Acquisitions

          During 2010, the Company acquired the following properties:

• a 68,534 square foot medical office building in Iowa was acquired by the HR Ladco Holdings, LLC joint venture for a total purchase price of approximately $13.8 million. The building was 100% leased at the time of the acquisition with lease expirations through 2017. The Company had provided $9.9 million in mortgage financing on the building prior to the acquisition by the joint venture. Upon acquisition, the mortgage note was refinanced with a permanent mortgage note payable to the Company, which is eliminated in consolidation;

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

• a 73,331 square foot medical office building in Ohio, adjacent to a 287-bed acute-care hospital, for a purchase price of approximately $14.5 million. The Company assumed a $4.2 million mortgage note payable with this acquisition, which has a fixed interest rate of 5.53% and matures in 2018. The building was 100% leased at the time of the acquisition, with lease expirations through 2017;

• a 134,032 square foot, on-campus medical office building in Indiana for a purchase price of $23.3 million, including a $0.3 million prepaid ground lease payment. The building was 100% leased at the time of the acquisition, with lease expirations through 2020;

• two adjacent medical office buildings in Colorado, aggregating 112,155 square feet, for a purchase price of $30.0 million. In the aggregate, the buildings were 89% leased at the time of the acquisition, with lease expirations through 2020. The Company assumed a mortgage note payable related to one of the buildings totaling $15.7 million ($15.2 million with a $0.5 million fair value adjustment) which bears a contractual interest rate of 6.75% and matures in 2013;

• five medical office buildings, either on or adjacent to two acute-care hospitals, in Texas for a purchase price of $76.4 million. The portfolio includes 302,094 square feet and was approximately 98% leased at the time of the acquisitions, with lease expirations through 2022. The Company assumed a mortgage note payable related to one of the buildings totaling $4.4 million which bears a contractual interest rate of 5.25% and matures in 2015;

• an 80,125 square foot, on-campus medical office building in Colorado for a purchase price of $19.4 million. The building was 94% leased at the time of the acquisition, with lease expirations through 2021; and

• two medical office buildings, a 68-bed surgical facility, and two parcels of unimproved land in Texas for a purchase price of $133.5 million. The buildings included an aggregate of approximately 311,710 square feet, including 155,465 square feet in the two medical office buildings, and were 85% leased at the time of the acquisition and with lease expirations through 2027. The properties are located on 23 acres of land, including 4.3 undeveloped acres, providing room for additional expansion.

     Also, during 2010, the Company:

• began funding in January 2010 a $2.7 million loan for the construction of a medical office building in Iowa by Ladco. The Company had funded $2.3 million when it was repaid in August 2010;

• began funding in July 2010 to Ladco a $40.0 million loan for the construction of a 48-bed surgical facility in South Dakota. At December 31, 2010, the Company had funded approximately $11.2 million of the loan and expects to fund the remaining $28.8 million in 2011 and 2012. The Company received an origination fee of $0.6 million in conjunction with this loan that will be amortized to mortgage interest income over the term of the loan. As of December 31, 2010, the Company had amortized $0.2 million of the loan origination fee to mortgage interest. At completion, the surgical facility will be operated by Sanford Health under a long-term lease with an option to purchase the facility. Should Sanford Health elect to lease the surgical facility rather than acquire it upon completion, the HR Ladco Holdings, LLC joint venture has the option to acquire the property;

• began funding in August 2010 a $12.4 million loan for the construction of a medical office building in Texas. At December 31, 2010, the Company had funded $2.5 million of the loan and expects to fund the remaining $9.9 million in 2011. The Company has the option to acquire the medical office building from the developer 12 months after the building is completed, which is expected to occur by mid-2011;

• began funding two mortgage notes receivable in August 2010 totaling $18.4 million to Ladco for the construction of two medical office buildings in Iowa as part of the development of a six-facility outpatient campus. As of December 31, 2010, the Company had funded $4.4 million of the notes and expects to fund the remaining $14.0 million during 2011 and 2012. The Company’s joint venture, HR Ladco Holdings, LLC, will have an option to purchase the two buildings at a fair market value price upon completion and full occupancy. Concurrently, and in conjunction with entering into the two mortgage notes, an existing mortgage note receivable due to the Company totaling $4.3 million was repaid by Ladco Properties XVIII, LLC;

• began funding in October 2010 a $2.1 million loan for the construction of a medical office building in Iowa by Ladco. At December 31, 2010, the Company had funded $0.3 million of the loan and expects to fund the remaining $1.8 million during 2011; and

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

• funded in November 2010 a $3.7 million loan to Ladco which was secured by a medical office building located in Iowa.

A summary of the Company’s 2010 acquisitions and financings follows:

	Dates						Mortgage		Mortgage
	Acquired/Initial		Cash		Real		Note		Notes Payable						Square
(Dollars in millions)	Fundings		Consideration		Estate		Fundings		Assumed			Other			Footage
Real estate acquisitions (1)
Iowa (2)		3/26/10	$	2.9	$	14.7	$	—	$	—		$	(11.8	)		68,534
Ohio		8/13/10		10.3		14.5		—		(4.2	)		—			73,331
Indiana		8/27/10		23.5		23.3		—		—			0.2			134,032
Colorado (3)		8/31/10		14.8		31.0		—		(15.7	)		(0.5	)		112,155
Texas		9/23/10, 12/29/10		71.6		75.8		—		(4.4	)		0.2			302,094
Colorado		12/17/10		19.1		18.4		—		—			0.7			80,125
Texas		12/29/10		134.0		133.8		—		—			0.2			311,710
				276.2		311.5		—		(24.3	)		(11.0	)		1,081,981
Mortgage note financings (4)
Iowa (5)		1/27/10		2.3		—		2.3		—			—			—
South Dakota		7/26/10		10.6		—		11.2		—			(0.6	)		—
Texas		8/02/10		2.5		—		2.5		—			—			—
Iowa		8/27/10		4.4		—		4.4		—			—			—
Iowa		10/29/10		0.3		—		0.3		—			—			—
Iowa		11/23/10		3.7		—		3.7		—			—			—
				23.8		—		24.4		—			(0.6	)		—
Total 2010 acquisitions and financings			$	300.0	$	311.5	$	24.4	$	(24.3	)	$	(11.6	)		1,081,981

(1)	The Company expensed $1.2 million in transaction costs during 2010 related to these acquisitions.
(2)	The Other column includes a $9.9 million mortgage note receivable that was repaid upon acquisition of the property.
(3)	The mortgage note payable assumed amount includes a fair value adjustment of $0.5 million.
(4)	Amounts in table include fundings through December 31, 2010.
(5)	This mortgage note was acquired and subsequently repaid during 2010.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the real estate acquisitions as of the acquisition date:

	Estimated			Estimated
	Fair Value			Useful Life
	(In millions)			(In years)
Buildings	$	291.4			29.0 - 37.0
Prepaid ground lease		0.3			75.0
Mortgage notes payable assumed, including fair value adjustment		(24.3	)		—
Mortgage notes payable repayments		(9.9	)		—
Accounts receivable and other assets assumed		1.4			—
Accounts payable, accrued liabilities and other liabilities assumed		(3.4	)		—
Prorated rent, net of expenses paid		0.4			—
Intangibles:
At-market lease intangibles		20.1			3.0 - 16.4
Above-market lease intangibles		1.1			4.6 - 9.1
Below-market lease intangibles		(1.4	)		5.3 - 9.3
Below-market ground lease intangibles		0.5			75.0
Total intangibles		20.3			115.84
	$	276.2

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2009 Real Estate and Mortgage Note Acquisitions

During 2009, the Company acquired the following properties:

• the remaining 50% equity interest in a joint venture (Unico 2006 MOB), which owned a 62,246 square foot on-campus medical office building in Oregon, for approximately $4.4 million in cash consideration. The building was approximately 97% occupied at the time of the acquisition with lease maturities through 2025. In connection with the acquisition, the Company assumed an outstanding mortgage note payable held by the joint venture totaling $12.8 million ($11.7 million including a $1.1 million fair value adjustment) which bears an effective interest rate of 6.43% and matures in 2021. Prior to the acquisition, the Company had a 50% equity investment in the joint venture totaling approximately $1.7 million which it accounted for under the equity method. In connection with the acquisition, the Company re-measured its previously held equity interest at the acquisition-date fair value and recognized a gain on the re-measurement of approximately $2.7 million which was recognized as income;

• a 51,903 square foot specialty inpatient facility in Arizona for a purchase price of approximately $15.5 million. The building was 100% occupied at the time of the acquisition by one tenant whose lease expires in 2024;

• a medical office building with 146,097 square feet in Indiana for a purchase price of approximately $25.8 million. The building was 100% occupied at the time of the acquisition with lease expiration dates ranging from 2011 to 2021;

• four medical office buildings in Iowa, aggregating 155,189 square feet, were acquired by the Company’s consolidated joint venture, HR Ladco Holdings, LLC, in which the Company has an 80% controlling interest, for a total purchase price of approximately $44.6 million. All four buildings were 100% leased at the time of the acquisition with lease expirations ranging from 2010 through 2029. Three of the buildings were constructed by Ladco, and the construction was funded by the Company through a construction loan. Upon the acquisition of the buildings by the joint venture, $30.8 million of the Company’s construction loan was converted to a permanent mortgage note payable to the Company, which is eliminated in consolidation, with the remaining balance of the construction loan of $5.0 million added to the Company’s equity investment in the joint venture; and

• a mortgage note receivable was originated for $9.9 million in connection with a medical office building in Iowa.

A summary of the Company’s 2009 acquisitions follows:

							Mortgage			Mortgage
	Dates		Cash		Real		Note			Notes Payable						Square
(Dollars in millions)	Acquired		Consideration		Estate		Financing			Assumed			Other			Footage
Real estate acquisitions
Oregon (1)		1/16/09	$	4.4	$	20.5	$	—		$	(11.7	)	$	(4.4	)		62,246
Arizona		10/20/09		16.0		16.0		—			—			—			51,903
Indiana		12/18/09		28.2		26.0		—			—			2.2			146,097
Iowa		2/23/09, 7/16/09		6.8		43.9		(35.7	)		—			(1.4	)		155,189
		7/23/09, 12/8/09
				55.4		106.4		(35.7	)		(11.7	)		(3.6	)		415,435
Mortgage note financings
Iowa		12/30/09		9.9		—		9.9			—			—			—
Total 2009 acquisitions and financings			$	65.3	$	106.4	$	(25.8	)	$	(11.7	)	$	(3.6	)		415,435

(1) The mortgage notes payable assumed in the Oregon acquisition reflects a fair value adjustment of $1.1 million recorded by the Company upon acquisition.

     The Company assigned $8.2 million to real estate lease intangible assets, net of ground lease intangible liabilities, related to its 2009 acquisitions with amortization periods ranging from 7.3 years to 75 years.

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     2010 Real Estate Dispositions and Mortgage Repayments

During 2010, the Company disposed of the following properties:

• five medical office buildings in Virginia in which the Company had an aggregate gross investment of approximately $23.9 million ($16.0 million, net) were sold pursuant to purchase options in its leases with one operator. The Company received approximately $19.6 million in net proceeds and $0.8 million in lease termination fees. The Company recognized a gain on sale of approximately $2.7 million, net of receivables collected and straight-line rent receivables written off;

• a 14,563 square foot specialty outpatient facility in Florida in which the Company had a gross investment of $3.4 million ($2.4 million, net) was sold for approximately $4.0 million in net proceeds. The Company recognized a gain on sale of $1.5 million, net of straight-line rent receivables written off;

• a 25,000 square foot ambulatory surgery center in Florida in which the Company had an aggregate gross investment of $6.1 million ($5.0 million, net) was sold for approximately $9.7 million in net proceeds. The Company recognized a gain on sale of $4.1 million, net of straight-line rent receivables written off;

• an 11,963 square foot specialty outpatient facility in Arkansas in which the Company had a gross investment of approximately $2.1 million ($1.0 million, net) was sold for approximately $1.0 million in net proceeds. The Company recognized an immaterial gain on the disposition; and

• a 15,474 square foot physician clinic in Georgia in which the Company had a gross investment of approximately $1.6 million ($0.9 million, net) was sold for approximately $0.2 million in net proceeds. The Company also received $0.7 million in insurance proceeds to repair flood damage to the building. The Company recorded an immaterial gain on the disposition.

Also, during 2010, three mortgage notes receivable totaling approximately $8.5 million were repaid.

A summary of the Company’s 2010 dispositions follows:

			Net Real		Other			Mortgage
	Net		Estate		(Including			Notes				Square
(Dollars in millions)	Proceeds		Investment		Receivables)			Receivable		Gain		Footage
Real estate dispositions
Virginia	$	19.6	$	16.0	$	0.9		$	—	$	2.7		222,045
Florida		4.0		2.4		0.1			—		1.5		14,563
Florida		9.7		5.0		0.6			—		4.1		25,000
Arkansas		1.0		1.0		(0.1	)		—		0.1		11,963
Georgia		0.2		0.9		(0.7	)		—		—		15,474
		34.5		25.3		0.8			—		8.4		289,045
Mortgage note repayments		8.5		—		—			8.5		—		—
Total 2010 dispositions and repayments	$	43.0	$	25.3	$	0.8		$	8.5	$	8.4		289,045

     2009 Real Estate Dispositions and Mortgage Repayments

During 2009, the Company disposed of the following properties:

• an 11,538 square foot medical office building in Florida in which the Company had a total gross investment of approximately $1.4 million ($1.0 million, net) was sold for approximately $1.4 million in net proceeds, and the Company recognized a $0.4 million net gain on the sale;

• a 139,647 square foot medical office building in Wyoming to the sponsor for $21.4 million. During 2008, the Company received a $2.4 million deposit from the sponsor on the sale and received a $7.2 million termination fee from the sponsor in accordance with its financial support agreement with the Company. In 2009, the Company received the remaining consideration of approximately $19.0 million (plus $0.2 million of interest). The Company had an aggregate investment of approximately $20.0 million ($15.8 million, net) in the medical office building and recognized a gain on sale of approximately $5.6 million;

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

• the Company’s membership interests in an entity which owns an 86,942 square foot medical office building in Washington. The Company acquired the entity in December 2008 and had an aggregate and net investment of approximately $10.7 million. The Company received approximately $5.3 million in net proceeds, and the purchaser assumed the mortgage note secured by the property of approximately $5.4 million. The Company recognized an insignificant impairment charge on the disposition related to closing costs;

• a 198,064 square foot medical office building in Nevada in which the Company had a gross investment of approximately $46.8 million ($32.7 million, net) was sold for approximately $38.0 million in net proceeds, and the Company concurrently paid off a $19.5 million mortgage note secured by the property. The Company recognized a gain on sale of approximately $6.5 million, net of liabilities of $1.2 million;

• a 113,555 square foot specialty inpatient facility in Michigan in which the Company had a gross investment of approximately $13.9 million ($10.8 million, net) was sold for approximately $18.5 million in net proceeds, and the Company recognized a gain on sale of approximately $7.5 million, net of liabilities of $0.2 million;

• a 10,255 square foot ambulatory surgery center in Florida in which the Company had a gross investment of approximately $3.4 million ($2.0 million, net) was sold for approximately $0.5 million in net cash proceeds and title to a land parcel adjoining another medical office building owned by the Company valued at $1.5 million. The Company recognized no gain on the transaction; and

• an 8,243 square foot physician clinic in Virginia in which the Company had a gross investment of approximately $0.7 million ($0.5 million, net) was sold for approximately $0.6 million in net proceeds, and the Company recognized a gain on sale of approximately $0.1 million.

          During 2009, one mortgage note receivable totaling approximately $12.6 million was repaid. This mortgage note, which provided financing for the construction of a building in Iowa, was repaid upon acquisition of the building by a third party.

          A summary of the Company’s 2009 dispositions follows:

			Net Real		Other			Mortgage
	Net		Estate		(Including			Note		Gain/		Square
(Dollars in millions)	Proceeds		Investment		Receivables)			Receivable		(Loss)		Footage
Real estate dispositions
Florida	$	1.4	$	1.0	$	—		$	—	$	0.4		11,538
Wyoming (1)		21.4		15.8		—			—		5.6		139,647
Washington		5.3		10.7		(5.4	)		—		—		86,942
Nevada		38.0		32.7		(1.2	)		—		6.5		198,064
Michigan		18.5		10.8		0.2			—		7.5		113,555
Florida		0.5		0.5		—			—		—		10,255
Virginia		0.6		0.5		—			—		0.1		8,243
		85.7		72.0		(6.4	)		—		20.1		568,244
Mortgage note repayments		12.6		—		—			12.6		—		—
Total 2009 dispositions and repayments	$	98.3	$	72.0	$	(6.4	)	$	12.6	$	20.1		568,244

(1) Net proceeds include $2.4 million in proceeds received in 2008 as a deposit for the Wyoming property sale.

     2011 Acquisition

          In January 2011, the Company originated with Ladco a $40.0 million mortgage loan that is secured by a multi-tenanted office building located in Iowa that was 94% leased at the time the mortgage was originated. The mortgage loan requires interest only payments through maturity, has a stated fixed interest rate and matures in January 2014.

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     2011 Dispositions

          In January 2011, the Company disposed of a medical office building located in Maryland that was previously classified as held for sale and in which the Company had a $3.5 million net investment at December 31, 2010. The Company received approximately $3.4 million in net proceeds, net of expenses incurred at the time of the closing.

          In February 2011, the Company disposed of a physician clinic located in Florida that was previously classified as held for sale and in which the Company had a $3.1 million net investment at December 31, 2010. The Company received approximately $3.1 million in consideration on the sale.

     2011 Potential Dispositions

          During 2010, the Company received notice from a tenant of its intent to purchase six skilled nursing facilities in Michigan and Indiana pursuant to purchase options contained in its leases with the Company. The Company’s aggregate net investment in the buildings, which were classified as held for sale upon receiving notice of the purchase option exercise, was approximately $8.2 million at December 31, 2010. The aggregate purchase price for the properties is expected to be approximately $17.3 million, resulting in a net gain of approximately $9.1 million. The Company expects the sale to occur during the third quarter of 2011.

5. Discontinued Operations

          Assets and liabilities of properties sold or to be sold are classified as held for sale, to the extent not sold, on the Company’s Consolidated Balance Sheets, and the results of operations of such properties are included in discontinued operations on the Company’s Consolidated Statements of Income for all periods presented. Properties classified as held for sale at December 31, 2010 include the properties discussed in “2011 Potential Dispositions” in Note 4, as well as five other properties the Company had decided to sell.

          The tables below reflect the assets and liabilities of the properties classified as held for sale and discontinued operations as of December 31, 2010 and the results of operations of the properties included in discontinued operations on the Company’s Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008.

	December 31,
(Dollars in thousands)	2010			2009
Balance Sheet data (as of the period ended):
Land	$	7,099		$	3,374
Buildings, improvements and lease intangibles		35,424			22,178
Personal property		429			—
		42,952			25,552
Accumulated depreciation		(19,447	)		(8,697	)
Assets held for sale, net		23,505			16,855
Other assets, net (including receivables)		410			890
Assets of discontinued operations, net		410			890
Assets held for sale and discontinued operations, net	$	23,915		$	17,745
Accounts payable and accrued liabilities	$	229		$	—
Other liabilities		194			251
Liabilities of discontinued operations	$	423		$	251

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Year Ended December 31,
(Dollars in thousands, except per share data)	2010			2009			2008
Statements of Income data (for the period ended):
Revenues (1)
Master lease rent	$	4,230		$	8,551		$	12,488
Property operating		2,307			3,003			9,998
Straight-line rent		(37	)		(127	)		(74	)
Other operating		1			223			8,017
		6,501			11,650			30,429
Expenses (2)
General and administrative		12			14			(27	)
Property operating		2,231			2,862			6,394
Other operating		(135	)		—			—
Bad debt, net		20			(18	)		652
Depreciation		1,211			2,640			3,919
Amortization		—			—			25
		3,339			5,498			10,963
Other Income (Expense) (3)
Interest expense		—			(667	)		(2,009	)
Interest and other income, net		223			359			26
		223			(308	)		(1,983	)
Income from Discontinued Operations		3,385			5,844			17,483
Impairments (4)		(7,511	)		(22	)		(886	)
Gain on sales of real estate properties (5)		8,352			20,136			9,843
Income from Discontinued Operations	$	4,226		$	25,958		$	26,440
Income from Discontinued Operations per common share — basic	$	0.07		$	0.45		$	0.51
Income from Discontinued Operations per common share — diluted	$	0.07		$	0.44		$	0.50

(1)	Total revenues for the years ended December 31, 2010, 2009 and 2008 included $1.6 million, $6.9 million and $25.8 million (including a $7.2 million fee received from an operator to terminate its financial support agreement with the Company), respectively, related to properties sold; and $4.9 million, $4.8 million and $4.6 million, respectively, related to 11 properties held for sale at December 31, 2010.
(2)	Total expenses for the years ended December 31, 2010, 2009 and 2008 included $0.4 million, $2.4 million and $7.8 million, respectively, related to properties sold; and $2.9 million, $3.1 million and $3.2 million, respectively, related to 11 properties held for sale at December 31, 2010.
(3)	Other income (expense) for the year ended December 31, 2010 included income of $0.2 million related to properties held for sale and the years ended December 31, 2009 and 2008 included net expenses of $0.3 million and $2.0 million, respectively, related to properties sold.
(4)	Impairments for the year ended December 31, 2010 included $1.0 million related to one property sold and $6.5 million related to five properties held for sale; December 31, 2009 included approximately $22,000 related to one property sold; and December 31, 2008 included $0.6 million related to one property held for sale and $0.3 million related to three properties sold.
(5)	Gain on sales of real estate properties for the years ended December 31, 2010, 2009 and 2008 included gains on the sale of eight, six and six properties, respectively.

6. Impairment Charges

          A Company must assess the potential for impairment of its long-lived assets, including real estate properties, whenever events occur or there is a change in circumstances, such as the sale of a property or the decision to sell a property, that indicate that the recorded value might not be fully recoverable. An asset is impaired when undiscounted cash flows expected to be generated by the asset are less than the carrying value of the asset.

          The Company recorded impairment charges on properties sold or classified as held for sale, which are included in discontinued operations, for the years ended December 31, 2010, 2009 and 2008 totaling $7.5 million, $22,000 and $0.9 million, respectively.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          The Company also recorded an impairment charge, which is included in continuing operations, for the year ended December 31, 2008 of $1.6 million related to changes in management’s estimate of fair value and collectibility of patient receivables assigned to the Company in late 2005, resulting from a lease termination and debt restructuring of a physician clinic owned by the Company.

          Both level 2 and level 3 fair value techniques were used to derive these impairment charges. Executed purchase and sale agreements, since they are binding agreements, are categorized as level 2. Brokerage estimates, letters of intent, or unexecuted purchase and sale agreements are considered to be level 3 as they are nonbinding in nature.

7. Other Assets

          Other assets consist primarily of straight-line rent receivables, prepaids, intangible assets, and receivables. Items included in other assets on the Company’s Consolidated Balance Sheets as of December 31, 2010 and 2009 are detailed in the table below.

	December 31,
(Dollars in millions)	2010			2009
Prepaid assets	$	27.9		$	24.7
Straight-line rent receivables		27.0			25.2
Above-market intangible assets, net		13.4			12.0
Deferred financing costs, net		12.0			12.1
Accounts receivable		6.1			9.0
Notes receivable		3.8			3.3
Goodwill		3.5			3.5
Equity investment in joint venture — cost method		1.3			1.3
Customer relationship intangible assets, net		1.2			1.2
Allowance for uncollectible accounts		(1.2	)		(3.7	)
Other		1.5			0.9
	$	96.5		$	89.5

     Equity Investments in Joint Ventures

          At December 31, 2010 and 2009, the Company had an investment in an unconsolidated joint venture, which had investments in real estate properties. In January 2009, the Company acquired the remaining membership interest in one of its joint ventures previously accounted for under the equity method. The Company accounts for its remaining joint venture investment under the cost method. The Company recognized income related to the joint venture accounted for under the cost method of approximately $0.1 million, $0.3 million and $0.7 million, respectively, for the years ended December 31, 2010, 2009 and 2008. The Company’s net investments in the joint ventures are included in other assets on the Company’s Consolidated Balance Sheets, and the related income or loss is included in interest and other income, net on the Company’s Consolidated Statements of Income. The table below details the Company’s investments in its unconsolidated joint ventures.

	December 31,
(Dollars in thousands)	2010		2009			2008
Net joint venture investments, beginning of year	$	1,266	$	2,784		$	18,356
Equity in income (losses) recognized during the year		—		(2	)		1,021
Acquisition of remaining equity interest in a joint venture		—		(1,700	)		(10,165	)
Partial redemption of preferred equity investment in an unconsolidated joint venture		—		—			(5,546	)
Additional investment in a joint venture		—		184			—
Distributions received during the year		—		—			(882	)
Net joint venture investments, end of year	$	1,266	$	1,266		$	2,784

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Intangible Assets and Liabilities

          The Company has several types of intangible assets and liabilities included in its Consolidated Balance Sheets, including goodwill, deferred financing costs, above-, below-, and at-market lease intangibles, and customer relationship intangibles. The Company’s intangible assets and liabilities as of December 31, 2010 and 2009 consisted of the following:

	Gross						Accumulated
	Balance at						Amortization						Weighted
	December 31,						at December 31,						Avg. Life		Balance Sheet
(Dollars in millions)	2010			2009			2010			2009			(Years)		Classification
Goodwill	$	3.5		$	3.5		$	—		$	—			N/A	Other assets
Deferred financing costs		20.7			17.1			8.7			5.0			5.3	Other assets
Above-market lease intangibles		14.6			12.8			1.2			0.8			58.4	Other assets
Customer relationship intangibles		1.4			1.4			0.2			0.2			32.6	Other assets
Below-market lease intangibles		(8.8	)		(7.2	)		(2.9	)		(1.8	)		11.5	Other liabilities
At-market lease intangibles		93.0			72.9			49.0			43.7			8.4	Real estate properties
	$	124.4		$	100.5		$	56.2		$	47.9			18.6

          Amortization of the Company’s intangible assets and liabilities, in place as of December 31, 2010, is expected to be approximately $9.9 million, $9.0 million, $6.4 million, $5.9 million, and $4.8 million, respectively, for the years ended December 31, 2011 through 2015.

9. Notes and Bonds Payable

          The table below details the Company’s notes and bonds payable.

	December 31,
(Dollars in thousands)	2010		2009
Unsecured Credit Facility due 2012	$	—	$	50,000
Senior Notes due 2011, including premium		278,311		286,655
Senior Notes due 2014, net of discount		264,227		264,090
Senior Notes due 2017, net of discount		298,218		297,988
Senior Notes due 2021, net of discount		396,812		—
Mortgage notes payable, net of discount and including premiums		170,287		147,689
	$	1,407,855	$	1,046,422

          The Company’s various debt agreements contain certain representations, warranties, and financial and other covenants customary in such loan agreements. Among other things, these provisions require the Company to maintain certain financial ratios and minimum tangible net worth and impose certain limits on the Company’s ability to incur indebtedness and create liens or encumbrances. At December 31, 2010, the Company was in compliance with its financial covenant provisions under its various debt instruments.

     Unsecured Credit Facility due 2012

          On September 30, 2009, the Company entered into an amended and restated $550.0 million unsecured credit facility (the “Unsecured Credit Facility”) with a syndicate of 16 lenders that matures on September 30, 2012. Amounts outstanding under the Unsecured Credit Facility bear interest at a rate equal to (x) LIBOR or the base rate (defined as the highest of (i) the Federal Funds Rate plus 0.5%; (ii) the Bank of America prime rate and (iii) LIBOR) plus (y) a margin ranging from 2.15% to 3.20% (2.80% at December 31, 2010) for LIBOR-based loans and 0.90% to 1.95% (1.55% at December 31, 2010) for base rate loans, based upon the Company’s unsecured debt ratings. In addition, the Company pays a facility fee per annum on the aggregate amount of commitments. The facility fee is 0.40% per annum, unless the Company’s credit rating falls below a BBB-/Baa3, at which point the facility fee would be 0.50%. At December 31, 2009, the Company had $50.0 million outstanding under the facility with a weighted average interest rate of approximately 3.03% At December 31, 2010, the Company had no borrowings outstanding under the facility and had borrowing capacity remaining, under its financial covenants, of approximately $550.0 million.

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Senior Notes due 2011

          In 2001, the Company publicly issued $300.0 million of unsecured senior notes due 2011 (the “Senior Notes due 2011”). The Senior Notes due 2011 bear interest at 8.125%, payable semi-annually on May 1 and November 1, and are due on May 1, 2011, unless redeemed earlier by the Company. The Company repurchased $13.7 million during 2008 and $8.1 million during 2010 of the Senior Notes due 2011. The notes were originally issued at a discount of approximately $1.5 million, which yielded an 8.202% interest rate per annum upon issuance. The original discount is combined with the premium resulting from the termination of interest rate swaps in 2006 that were entered into to offset changes in the fair value of $125.0 million of the notes. The net premium is combined with the principal balance of the Senior Notes due 2011 on the Company’s Consolidated Balance Sheets and is being amortized against interest expense over the remaining term of the notes yielding an effective interest rate on the notes of 7.896%. For each of the years ended December 31, 2010, 2009 and 2008, the Company amortized approximately $0.3 million, $0.2 million and $0.2 million, respectively, of the net premium which is included in interest expense on the Company’s Consolidated Statements of Income. The following table reconciles the balance of the Senior Notes due 2011 on the Company’s Consolidated Balance Sheets as of December 31, 2010 and 2009.

	December 31,
(Dollars in thousands)	2010		2009
Senior Notes due 2011 face value	$	278,221	$	286,300
Unamortized net gain (net of discount)		90		355
Senior Notes due 2011 carrying amount	$	278,311	$	286,655

          On February 17, 2011, the Company’s Board of Directors approved the redemption prior to maturity of all of the outstanding Senior Notes Due 2011. The terms of the notes and the related indenture require the Company to pay upon redemption an aggregate of $289.4 million to the holders of the notes consisting of: a) $278.2 million in outstanding principal; b) $9.3 million in interest accrued but not yet paid as of the redemption date; and c) $1.9 million in accordance with the “make-whole” provisions of the indenture, which is approximately equal to the interest that would otherwise be due through the stated maturity date. A formal notice of redemption is being sent separately to the affected holders of the Senior Notes Due 2011 in accordance with the terms of the indenture. The Company intends to redeem these notes on March 28, 2011. The Company will use cash on hand and the Unsecured Credit Facility to fund the redemption and expects to record a one-time charge of approximately $1.9 million in the first quarter of 2011 for early extinguishment of debt. As a result of the redemption, all interest expense for 2011 related to these notes will be recognized in the first quarter of 2011.

     Senior Notes due 2014

          In 2004, the Company publicly issued $300.0 million of unsecured senior notes due 2014 (the “Senior Notes due 2014”). The Senior Notes due 2014 bear interest at 5.125%, payable semi-annually on April 1 and October 1, and are due on April 1, 2014, unless redeemed earlier by the Company. During 2008, the Company repurchased approximately $35.3 million of the Senior Notes due 2014. The notes were issued at a discount of approximately $1.5 million, which yielded a 5.19% interest rate per annum upon issuance. For each of the years ended December 31, 2010, 2009 and 2008, the Company amortized approximately $0.1 million of the discount which is included in interest expense on the Company’s Consolidated Statements of Income. The following table reconciles the balance of the Senior Notes due 2014 on the Company’s Consolidated Balance Sheets as of December 31, 2010 and 2009.

	December 31,
(Dollars in thousands)	2010			2009
Senior Notes due 2014 face value	$	264,737		$	264,737
Unaccreted discount		(510	)		(647	)
Senior Notes due 2014 carrying amount	$	264,227		$	264,090

     Senior Notes due 2011 and 2014 Repurchases

          During 2010, the Company repurchased $8.1 million of the Senior Notes due 2011, amortized a pro-rata portion of the premium related to the notes and recognized a net loss of $0.5 million. During 2008, the Company repurchased $13.7 million of the Senior Notes due 2011 and $35.3 million of the Senior Notes due 2014, amortized a pro-rata portion of the premium or discount related to the notes and recognized a net gain of $4.1 million. The Company may elect, from time to time, to repurchase and retire its notes when market conditions are appropriate.

67

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Senior Notes due 2017

          On December 4, 2009, the Company publicly issued $300.0 million of unsecured senior notes due 2017 (the “Senior Notes due 2017”). The Senior Notes due 2017 bear interest at 6.50%, payable semi-annually on January 17 and July 17, and are due on January 17, 2017, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $2.0 million, which yielded a 6.618% interest rate per annum upon issuance. For each of the years ended December 31, 2010 and 2009, the Company amortized approximately $0.2 million and $19,000, respectively, of the discount which is included in interest expense on the Company’s Consolidated Statements of Income. The following table reconciles the balance of the Senior Notes due 2017 on the Company’s Consolidated Balance Sheets as of December 31, 2010.

	December 31,
(Dollars in thousands)	2010			2009
Senior Notes due 2017 face value	$	300,000		$	300,000
Unaccreted discount		(1,782	)		(2,012	)
Senior Notes due 2017 carrying amount	$	298,218		$	297,988

     Senior Notes due 2021

          On December 13, 2010, the Company publicly issued $400.0 million of unsecured senior notes due 2021 (the “Senior Notes due 2021”). The Senior Notes due 2021 bear interest at 5.75%, payable semi-annually on January 15 and July 15, beginning July 15, 2011, and are due on January 15, 2021, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $3.2 million, which yielded a 5.855% interest rate per annum upon issuance. For the year ended December 31, 2010, the Company amortized approximately $12,000 of the discount which is included in interest expense on the Company’s Consolidated Statement of Income. The following table reconciles the balance of the Senior Notes due 2021 on the Company’s Consolidated Balance Sheet as of December 31, 2010.

	December 31,
(Dollars in thousands)	2010
Senior Notes due 2021 face value	$	400,000
Unaccreted discount		(3,188	)
Senior Notes due 2021 carrying amount	$	396,812

     Mortgage Notes Payable

          The following table reconciles the Company’s aggregate mortgage notes principal balance with the Company’s Consolidated Balance Sheets.

	December 31,
(Dollars in thousands)	2010			2009
Mortgage notes payable principal balance	$	176,638		$	155,355
Unaccreted discount, net		(6,351	)		(7,666	)
Mortgage notes payable carrying amount	$	170,287		$	147,689

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          The following table details the Company’s mortgage notes payable, with related collateral.

											Investment in
			Effective					Number			Collateral at		Balance at
	Original		Interest			Maturity		of Notes			December 31,		December 31,
(Dollars in millions)	Balance		Rate (13)			Date		Payable (14)		Collateral (15)	2010		2010		2009
Life Insurance Co. (1)	$	4.7		7.765	%		1/17		1	MOB	$	11.4	$	2.2	$	2.5
Commercial Bank (2)		1.8		5.550	%		10/30		1	OTH		7.9		1.7		1.7
Life Insurance Co. (3)		15.1		5.490	%		1/16		1	MOB		32.5		13.5		13.9
Commercial Bank (4)		17.4		6.480	%		5/15		1	MOB		19.9		14.5		14.4
Commercial Bank (5)		12.0		6.110	%		7/15		1	2 MOBs		19.5		9.7		9.7
Commercial Bank (6)		15.2		7.650	%		7/20		1	MOB		20.1		12.8		12.8
Life Insurance Co. (7)		1.5		6.810	%		7/16		1	SOP		2.2		1.2		1.2
Commercial Bank (8)		12.9		6.430	%		2/21		1	MOB		20.6		11.5		11.6
Investment Fund (9)		80.0		7.250	%		12/16		1	15 MOBs		153.9		79.2		79.9
Life Insurance Co. (10)		7.0		5.530	%		1/18		1	MOB		14.5		4.0		—
Investment Co. (11)		15.9		6.550	%		4/13		1	MOB		23.3		15.6		—
Investment Co. (12)		4.6		5.250	%		9/15		1	MOB		6.9		4.4		—
									12		$	332.7	$	170.3	$	147.7

(1)	Payable in monthly installments of principal and interest based on a 20-year amortization with the final payment due at maturity.
(2)	Payable in monthly installments of principal and interest based on a 27-year amortization with the final payment due at maturity.
(3)	Payable in monthly installments of principal and interest based on a 10-year amortization with the final payment due at maturity.
(4)	Payable in monthly installments of principal and interest based on a 10-year amortization with the final payment due at maturity. The Company recorded a $2.7 million discount on this note upon acquisition which is included in the balance above.
(5)	Payable in monthly installments of principal and interest based on a 10-year amortization with the final payment due at maturity. The Company recorded a $2.1 million discount on this note upon acquisition which is included in the balance above.
(6)	Payable in monthly installments of interest only for 24 months and then installments of principal and interest based on an 11-year amortization with the final payment due at maturity. The Company recorded a $2.4 million discount on this note upon acquisition which is included in the balance above.
(7)	Payable in monthly installments of principal and interest based on a 9-year amortization with the final payment due at maturity. The Company recorded a $0.2 million discount on this note upon acquisition which is included in the balance above.
(8)	Payable in monthly installments of principal and interest based on a 12-year amortization with the final payment due at maturity. The Company recorded a $1.0 million discount on this note upon acquisition which is included in the balance above.
(9)	Payable in monthly installments of principal and interest based on a 30-year amortization with a 7-year initial term (maturity 12/01/16) and the option to extend the initial term for two, one-year floating rate extension terms.
(10)	Payable in monthly installments of principal and interest based on a 15-year amortization with the final payment due at maturity. The Company acquired this mortgage note in an acquisition during the third quarter 2010.
(11)	Payable in monthly installments of principal and interest based on a 30-year amortization with the option to extend for three years at a fixed rate of 6.75%. The Company recorded a $0.5 million premium on this note upon acquisition which is included in the balance above.
(12)	Payable in monthly installments of principal and interest with a balloon payment of $4.0 million due at maturity.
(13)	The contractual interest rates for the nine outstanding mortgage notes ranged from 5.00% to 7.625% at December 31, 2010.
(14)	Number of mortgage notes payable outstanding at December 31, 2010.
(15)	MOB-Medical office building; SOP-Specialty outpatient; OTH-Other.

69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Long-Term Debt Information

          Future maturities of the Company’s notes and bonds payable as of December 31, 2010 were as follows:

	Principal		Net Accretion/			Notes and
(Dollars in thousands)	Maturities		Amortization (1)			Bonds Payable		%
2011	$	281,502	$	(1,331	)	$	280,171		19.9	%
2012		3,491		(1,508	)		1,983		0.2	%
2013		18,284		(1,738	)		16,546		1.2	%
2014		268,460		(1,785	)		266,675		18.9	%
2015		32,632		(1,443	)		31,189		2.2	%
2016 and thereafter		815,227		(3,936	)		811,291		57.6	%
	$	1,419,596	$	(11,741	)	$	1,407,855		100.0	%

(1) Includes discount and premium amortization related to the Company’s Senior Notes due 2011, Senior Notes due 2014, Senior Notes due 2017, Senior Notes due 2021, and six mortgage notes payable.

10. Stockholders’ Equity

     Common Stock

          The Company had no preferred shares outstanding and had common shares outstanding for the three years ended December 31, 2010 as follows:

	Year Ended December 31,
	2010		2009		2008
Balance, beginning of year		60,614,931		59,246,284		50,691,331
Issuance of stock		5,287,098		1,244,914		8,373,014
Restricted stock-based awards, net of forfeitures		169,395		123,733		181,939
Balance, end of year		66,071,424		60,614,931		59,246,284

     At-The-Market Equity Offering Program

          Since December 31, 2008, the Company has had in place an at-the-market equity offering program to sell shares of the Company’s common stock from time to time in at-the-market sales transactions. During 2010, the Company sold 5,258,700 shares of common stock under this program at prices ranging from $20.23 per share to $25.16 per share, generating approximately $117.7 million in net proceeds, and during 2009 sold 1,201,600 shares of common stock at prices ranging from $21.62 per share to $22.50 per share, generating approximately $25.7 million in net proceeds.

          During January 2011, the Company sold an additional 1,056,678 shares of common stock under this program for net proceeds totaling approximately $21.6 million, resulting in 2,383,322 authorized shares remaining to be sold under the program.

     Dividends Declared

          During 2010, the Company declared and paid quarterly common stock dividends in the amounts of $0.30 per share.

          On February 1, 2011, the Company declared a quarterly common stock dividend in the amount of $0.30 per share payable on March 3, 2011 to stockholders of record on February 17, 2011.

     Authorization to Repurchase Common Stock

          In 2006, the Company’s Board of Directors authorized management to repurchase up to 3,000,000 shares of the Company’s common stock. As of December 31, 2010, the Company had not repurchased any shares under this authorization. The Company may

70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

elect, from time to time, to repurchase shares either when market conditions are appropriate or as a means to reinvest excess cash flows. Such purchases, if any, may be made either in the open market or through privately negotiated transactions.

     Accumulated Other Comprehensive Loss

          During the year ended December 31, 2010, the Company recorded a $0.7 million increase to future benefit obligations related to its pension plans, resulting in an increase to other liabilities, with an offset to accumulated other comprehensive loss which is included in stockholders’ equity on the Company’s Consolidated Balance Sheet. The future benefit obligation reflects an overall reduction, resulting in a decrease to other liabilities, due to the settlement and payout of benefits in 2010, totaling approximately $2.6 million, to the outside directors upon termination in late 2009 of the retirement plan for the directors. For the year ended December 31, 2009, the Company recorded $1.9 million reduction to future benefit obligations related to its pension plans, resulting in a decrease to other liabilities, with an offset to accumulated other comprehensive loss, included in stockholders’ equity, on the Company’s Consolidated Balance Sheet. The reduction to the benefit obligation is primarily due to the one-time cash payment of $2.3 million in January 2009 to its chief executive officer resulting from the curtailment and partial settlement of his future pension benefit.

11. Benefit Plans

     Executive Retirement Plan

          The Company has an Executive Retirement Plan, under which certain officers designated by the Compensation Committee of the Board of Directors may receive upon normal retirement (defined to be when the officer reaches age 65 and has completed five years of service with the Company) an amount equal to 60% of the officer’s final average earnings (defined as the average of the executive’s highest three years’ earnings) plus 6% of final average earnings multiplied by the years of service after age 60 (but not more than five years), less 100% of certain other retirement benefits received by the officer to be paid either in lump sum or in monthly installments over a period not to exceed the greater of the life of the retired officer or his surviving spouse.

          In December 2008, the Company froze the maximum annual benefits payable under the plan at $896,000 as a cost savings measure. This revision resulted in a curtailment of benefits under the retirement plan for the Company’s chief executive officer. In consideration of the curtailment and as partial settlement of benefits under the retirement plan, the Company paid a one-time cash payment of $2.3 million to its chief executive officer in January 2009. Also, in connection with the partial settlement, the chief executive officer agreed to receive his remaining retirement benefits under the plan in installment payments upon retirement, rather than in a lump sum. Of the two remaining officers in the plan, one has elected to receive their benefits in monthly installments and one has elected a lump sum payment upon retirement.

          At December 31, 2010, only the Company’s chief executive officer was eligible to retire under the plan. Upon retirement, the chief executive officer will be paid in annual installments of approximately $0.9 million, increasing annually based on CPI. The Company also has one other officer to whom it is currently making benefit payments of approximately $84,000 per year that retired under the plan.

          Also, in November 2008, an officer and participant in the Executive Retirement Plan voluntarily resigned from employment. The officer was eligible to receive a lump-sum distribution of earned benefits under this plan of approximately $4.5 million. The Company granted the officer an equivalent number of shares of common stock in satisfaction of this pension benefit, resulting in a curtailment and partial settlement of the plan. The Company also recognized $1.1 million in additional compensation expense, a component of general and administrative expense, related to the settlement of the officer’s pension benefit. See Note 12.

     Retirement Plan for Outside Directors

          In November 2009, the Company terminated the Outside Director Plan. During 2010, the Company paid to each outside director who participated in the plan a lump sum payment, which aggregated to approximately $2.6 million, in full settlement of the directors’ benefits payable under the Outside Director Plan.

71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Retirement Plan Information

          Net periodic benefit cost for both the Executive Retirement Plan and the Outside Director Plan (the “Plans”) for the three years in the period ended December 31, 2010 is comprised of the following:

(Dollars in thousands)	2010			2009			2008
Service cost	$	51		$	286		$	1,288
Interest cost		933			926			1,190
Effect of settlement		(243	)		1,005			1,143
Amortization of net gain/loss		671			669			758
	$	1,412		$	2,886		$	4,379
Net loss (gain) recognized in other comprehensive income		676			(1,868	)		2,115
Total recognized in net periodic benefit cost and accumulated other comprehensive loss	$	2,088		$	1,018		$	6,494

          The Company estimates that approximately $0.9 million of the net loss recognized in accumulated other comprehensive loss will be amortized to expense in 2011.

          The Plans are unfunded, and benefits will be paid from earnings of the Company. The following table sets forth the benefit obligations as of December 31, 2010 and 2009.

(Dollars in thousands)	2010			2009
Benefit obligation at beginning of year	$	16,122		$	17,488
Service cost		51			286
Interest cost		933			926
Benefits paid		(2,666	)		(2,384	)
Curtailment gain		—			(14	)
Settlement (gain) loss		(243	)		1,005
Actuarial (gain) loss, net		1,348			(1,185	)
Benefit obligation at end of year	$	15,545		$	16,122

          Amounts recognized in the Consolidated Balance Sheets are as follows:

(Dollars in thousands)	2010			2009
Net liabilities included in accrued liabilities	$	(10,276	)	$	(11,529	)
Amounts recognized in accumulated other comprehensive loss		(5,269	)		(4,593	)

          The Company assumed discount rates of 5.5% for 2010 and 6.0% for 2009 and 2008 and compensation increases of 2.7% for 2010, 2009 and 2008 related to the Plans to measure the year-end benefit obligations and the earnings effects for the subsequent year related to the Plans.

12. Stock and Other Incentive Plans

     2007 Employees Stock Incentive Plan

          The Incentive Plan authorizes the Company to issue 2,390,272 shares of common stock to its employees and directors. The Incentive Plan will continue until terminated by the Company’s Board of Directors. As of December 31, 2010, 2009 and 2008, the Company had issued, net of forfeitures, a total of 1,091,007, 921,612 and 822,706 shares, respectively, under the Incentive Plan for compensation-related awards to employees and directors, with a total of 1,299,265, 1,468,660 and 1,567,566 authorized shares, respectively, remaining which had not been issued. Under the Incentive Plan’s predecessor plans, 329,404 shares were forfeited during 2008. Restricted shares issued under the Incentive Plan are generally subject to fixed vesting periods varying from three to 10 years beginning on the date of issue. If an employee voluntarily terminates employment with the Company before the end of the vesting period, the shares are forfeited, at no cost to the Company. Once the shares have been issued, the employee has the right to receive dividends and the right to vote the shares. Compensation expense recognized during the years ended December 31, 2010, 2009 and 2008 from the amortization of the value of restricted shares issued to employees was $1.6 million, $2.9 million and $3.7 million, respectively.

          In the fourth quarters of 2010, 2009 and 2008, the Company released performance-based awards to 30, 30 and 31, respectively, of its officers under the Incentive Plan totaling approximately $1.4 million, $0.9 million and $3.3 million, respectively, which were

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

granted in the form of restricted shares totaling approximately 67,800 shares, 39,500 shares and 130,400 shares, respectively. The shares have vesting periods ranging from three to eight years with a weighted average vesting period of approximately six years. The Company expects the issuance of the 67,800 restricted shares in 2010 will increase amortization expense in 2011 by approximately $0.3 million.

          In November 2008, an officer of the Company voluntarily resigned from employment. As a result of his resignation, the officer forfeited 329,404 in unvested restricted shares, resulting in the reversal of $1.7 million (net) in compensation expense previously recognized pertaining to these unvested shares. The officer was also a participant in the Executive Retirement Plan and was eligible to receive a lump-sum distribution of earned benefits under this plan of approximately $4.5 million. The Company granted the officer 616,500 in unrestricted common shares under the Incentive Plan, which were valued at $15.90 per share on the date of grant, in satisfaction of the lump-sum pension benefit earned under the Executive Retirement Plan of approximately $4.5 million and an additional award.

          The Incentive Plan also authorizes the Company’s Compensation Committee of its Board of Directors to grant restricted stock units or other performance awards to eligible employees. Such awards, if issued, will also be subject to restrictions and other conditions as determined appropriate by the Compensation Committee. Grantees of restricted stock units will not have stockholder voting rights and will not receive dividend payments. The award of performance units does not create any stockholder rights. Upon satisfaction of certain performance targets as determined by the Compensation Committee, payment of the performance units may be made in cash, shares of common stock, or a combination of cash and common stock, at the option of the Compensation Committee. As of December 31, 2010, the Company had not granted any restricted stock units or other performance awards under the Incentive Plan.

          The Company also, beginning in 2009, began issuing shares to its non-employee directors under the Incentive Plan. Previously, the Company issued shares to its directors under the 1995 Restricted Stock Plan for Non-Employee Directors (the “1995 Directors’ Plan”) but all shares authorized for issuance have been issued. The directors’ stock issued generally has a three-year vesting period and is subject to forfeiture prior to such date upon termination of the director’s service, at no cost to the Company. During 2010, 2009 and 2008, the Company issued 25,392, 36,688, and 16,000 shares, respectively, to its non-employee directors through the Incentive Plan or the 1995 Directors’ Plan. For 2010, 2009 and 2008, compensation expense resulting from the amortization of the value of these shares was $0.6 million, $0.5 million, and $0.5 million, respectively.

     Non-Employee Directors’ Stock Plan

          The 1995 Restricted Stock Plan for Non-Employee Directors (the “1995 Directors’ Plan”) authorizes the Company to issue 100,000 shares to its directors. As of December 31, 2009, the Company had issued all shares authorized under the plan and had issued 75,173 shares as of December 31, 2008 pursuant to the 1995 Directors’ Plan. As of December 31, 2008, a total of 24,827 authorized shares had not been issued. Upon issuance of all authorized shares under the 1995 Directors’ Plan, a portion of the directors’ 2009 restricted stock grant was issued under the Incentive Plan. Beginning in 2010, all shares granted to the directors will be issued under the Incentive Plan. For 2010, 2009 and 2008, compensation expense resulting from the amortization of the value of these shares was $0.6 million, $0.5 million, and $0.5 million, respectively.

          A summary of the activity under the Incentive Plan, and its predecessor plan, and the 1995 Directors’ Plan and related information for the three years in the period ended December 31, 2010 follows:

	2010			2009			2008
Stock-based awards, beginning of year		1,224,779			1,111,728			1,289,646
Granted		175,412			124,587			812,654
Vested		(20,948	)		(11,536	)		(657,888	)
Forfeited		—			—			(332,684	)
Stock-based awards, end of year		1,379,243			1,224,779			1,111,728
Weighted-average grant date fair value of:
Stock-based awards, beginning of year	$	25.16		$	25.71		$	25.12
Stock-based awards granted during the year	$	21.19		$	21.01		$	18.18
Stock-based awards vested during the year	$	22.60		$	32.80		$	16.54
Stock-based awards forfeited during the year	$	—		$	—		$	24.06
Stock-based awards, end of year	$	24.71		$	25.16		$	25.71
Grant date fair value of shares granted during the year	$	3,600,160		$	2,617,678		$	14,773,448

          The vesting periods for the restricted shares granted during 2010 ranged from three to eight years with a weighted-average amortization period remaining at December 31, 2010 of approximately 6.2 years.

73

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          During 2010, 2009 and 2008, the Company withheld 520 shares, 854 shares and 10,935 shares, respectively, of common stock from its officers to pay estimated withholding taxes related to restricted stock that vested. Also, during 2010, 6,586 restricted shares vested upon the retirement of a member of the board of directors.

     401(k) Plan

          The Company maintains a 401(k) plan that allows eligible employees to defer salary, subject to certain limitations imposed by the Code. The Company provides a matching contribution of up to 3% of each eligible employee’s salary, subject to certain limitations. The Company’s matching contributions were approximately $0.3 million for each of the three years ended December 31, 2010.

     Dividend Reinvestment Plan

          The Company is authorized to issue 1,000,000 shares of common stock to stockholders under the Dividend Reinvestment Plan. As of December 31, 2010, the Company had 467,520 shares issued under the plan of which 19,267 shares were issued in 2010, 33,511 shares were issued in 2009 and 24,970 shares were issued in 2008.

     Employee Stock Purchase Plan

          In January 2000, the Company adopted the Employee Stock Purchase Plan, pursuant to which the Company is authorized to issue shares of common stock. As of December 31, 2010, 2009 and 2008, the Company had a total of 278,978, 344,838 and 439,382 shares authorized under the Employee Stock Purchase Plan, respectively, which had not been issued or optioned. Under the Employee Stock Purchase Plan, each eligible employee in January of each year is able to purchase up to $25,000 of common stock at the lesser of 85% of the market price on the date of grant or 85% of the market price on the date of exercise of such option (the “Exercise Date”). The number of shares subject to each year’s option becomes fixed on the date of grant. Options granted under the Employee Stock Purchase Plan expire if not exercised 27 months after each such option’s date of grant. Cash received from employees upon exercising options under the Employee Stock Purchase Plan was $0.2 million for each of the three years ended December 31, 2010.

          A summary of the Employee Stock Purchase Plan activity and related information for the three years in the period ended December 31, 2010 is as follows:

	2010			2009			2008
Outstanding, beginning of year		335,608			250,868			179,603
Granted		256,080			219,184			194,832
Exercised		(9,131	)		(9,803	)		(10,948	)
Forfeited		(53,504	)		(42,032	)		(38,325	)
Expired		(136,536	)		(82,609	)		(74,294	)
Outstanding and exercisable, end of year		392,517			335,608			250,868
Weighted-average exercise price of:
Options outstanding, beginning of year	$	18.24		$	19.96		$	21.58
Options granted during the year	$	18.24		$	19.96		$	21.58
Options exercised during the year	$	18.19		$	15.43		$	21.24
Options forfeited during the year	$	18.69		$	16.87		$	21.02
Options expired during the year	$	19.80		$	12.74		$	20.20
Options outstanding, end of year	$	17.99		$	18.24		$	19.96
Weighted-average fair value of options granted during the year (calculated as of the grant date)	$	8.07		$	7.75		$	5.82
Intrinsic value of options exercised during the year	$	29,037		$	31,566		$	38,537
Intrinsic value of options outstanding and exercisable (calculated as of December 31)	$	1,248,204		$	1,080,658		$	883,055
Exercise prices of options outstanding (calculated as of December 31)	$	17.99		$	18.24		$	19.96
Weighted-average contractual life of outstanding options (calculated as of December 31, in years)		0.8			0.8			0.9

74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          The fair values for these options were estimated at the date of grant using a Black-Scholes options pricing model with the weighted-average assumptions for the options granted during the period noted in the following table. The risk-free interest rate was based on the U.S. Treasury constant maturity-nominal two-year rate whose maturity is nearest to the date of the expiration of the latest option outstanding and exercisable; the expected life of each option was estimated using the historical exercise behavior of employees; expected volatility was based on historical volatility of the Company’s stock; and expected forfeitures were based on historical forfeiture rates within the look-back period.

	2010			2009			2008
Risk-free interest rates		1.14	%		0.76	%		3.05	%
Expected dividend yields		5.68	%		6.05	%		5.92	%
Expected life (in years)		1.50			1.50			1.43
Expected volatility		69.5	%		58.2	%		26.2	%
Expected forfeiture rates		91	%		84	%		82	%

13. Earnings Per Share

          The table below sets forth the computation of basic and diluted earnings per Common share for the three years in the period ended December 31, 2010.

	Year Ended December 31,
(Dollars in thousands, except per share data)	2010			2009			2008
Weighted Average Common Shares
Weighted average Common Shares outstanding		63,038,663			59,385,018			52,846,988
Unvested restricted stock		(1,315,877	)		(1,185,426	)		(1,299,709	)
Weighted average Common Shares — Basic		61,722,786			58,199,592			51,547,279
Weighted average Common Shares — Basic		61,722,786			58,199,592			51,547,279
Dilutive effect of restricted stock		979,260			790,291			973,353
Dilutive effect of employee stock purchase plan		68,780			57,431			44,312
Weighted average Common Shares — Diluted		62,770,826			59,047,314			52,564,944
Net Income
Income from continuing operations	$	4,021		$	25,190		$	15,320
Noncontrolling interests’ share in earnings		(47	)		(57	)		(68	)
Income from continuing operations attributable to common stockholders		3,974			25,133			15,252
Discontinued operations		4,226			25,958			26,440
Net income attributable to common stockholders	$	8,200		$	51,091		$	41,692
Basic Earnings Per Common Share
Income from continuing operations	$	0.06		$	0.43		$	0.30
Discontinued operations		0.07			0.45			0.51
Net income attributable to common stockholders	$	0.13		$	0.88		$	0.81
Diluted Earnings Per Common Share
Income from continuing operations	$	0.06		$	0.43		$	0.29
Discontinued operations		0.07			0.44			0.50
Net income attributable to common stockholders	$	0.13		$	0.87		$	0.79

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. Commitments and Contingencies

     Construction in Progress

          During 2010, one building located in Hawaii that was previously under construction commenced operations. The Company is in the process of leasing this building and anticipates an aggregate investment of approximately $86.0 million upon completion of tenant improvements.

          As of December 31, 2010, the Company had three medical office buildings under construction with estimated completion dates in the third quarter of 2011. The table below details the Company’s construction in progress and land held for development at December 31, 2010. The information included in the table below represents management’s estimates and expectations at December 31, 2010 which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates and leasing may not reflect actual results.

	Estimated							CIP at		Estimated		Estimated
	Completion		Property			Approximate		Dec. 31,		Remaining		Total
State	Date		Type (1)	Properties		Square Feet		2010		Fundings		Investment
(Dollars in thousands)
Under construction:
Washington		3Q 2011	MOB		1		206,000	$	44,997	$	47,203	$	92,200
Colorado		3Q 2011	MOB		2		199,000		14,493		40,407		54,900
Land held for development:
Texas									20,772
					3		405,000	$	80,262	$	87,610	$	147,100

(1) MOB-Medical office building

     Other Construction

          The Company had approximately $32.3 million in various first-generation tenant improvement budgeted amounts remaining as of December 31, 2010 related to properties that were developed by the Company.

          Further, as of December 31, 2010, the Company had remaining funding commitments totaling $54.6 million on five construction loans. The Company expects the remaining commitments on the loans will be funded during 2011 and 2012.

     Operating Leases

          As of December 31, 2010, the Company was obligated under operating lease agreements consisting primarily of the Company’s corporate office lease and ground leases related to 45 real estate investments with expiration dates through 2101. The Company’s corporate office lease covers approximately 30,934 square feet of rented space and expires on October 31, 2020. Annual base rent on the corporate office lease increases approximately 3.25% annually with an additional base rental increase possible in the fifth year depending on changes in CPI. The Company’s ground leases generally increase annually based on increases in CPI. Rental expense relating to the operating leases for the years ended December 31, 2010, 2009 and 2008 was $4.0 million, $3.8 million and $3.3 million, respectively. The Company has prepaid certain of its ground leases which represented approximately $0.3 million, $0.3 million and $0.2 million, respectively, of the Company’s rental expense for the years ended December 31, 2010, 2009 and 2008. The Company’s future minimum lease payments for its operating leases, excluding leases that the Company has prepaid and leases in which an operator pays or fully reimburses the Company, as of December 31, 2010 were as follows (in thousands):

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2011	$	4,264
2012		4,309
2013		4,323
2014		4,399
2015		4,468
2016 and thereafter		255,021
	$	276,784

     Legal Proceedings

          Two affiliates of the Company, HR Acquisition of Virginia Limited Partnership and HRT Holdings, Inc., are defendants in a lawsuit brought by Fork Union Medical Investors Limited Partnership, Goochland Medical Investors Limited Partnership, and Life Care Centers of America, Inc., as plaintiffs, in the Circuit Court of Davidson County, Tennessee. The plaintiffs allege that they overpaid rent between 1991 and 2003 under leases for two skilled nursing facilities in Virginia and seek a refund of such overpayments. Plaintiffs have not specified their damages in the complaint, but based on written discovery responses, the Company estimates the plaintiffs are seeking up to $2.0 million, plus pre- and post-judgment interest. The two leases were terminated by agreement with the plaintiffs in 2003. The Company denies that it is liable to the plaintiffs for any refund of rent paid and will continue to defend the case vigorously. A trial is scheduled for April 2011.

          The Company is, from time to time, involved in litigation arising out of the ordinary course of business or which is expected to be covered by insurance. The Company is not aware of any other pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

15. Other Data

     Taxable Income (unaudited)

          The Company has elected to be taxed as a REIT, as defined under the Internal Revenue Code of 1986, as amended. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its taxable income to its stockholders.

          As a REIT, the Company generally will not be subject to federal income tax on taxable income it distributes currently to its stockholders. Accordingly, no provision for federal income taxes has been made in the accompanying Consolidated Financial Statements. If the Company fails to qualify as a REIT for any taxable year, then it will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum tax, and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies as a REIT, it may be subject to certain state and local taxes on its income and property and to federal income and excise tax on its undistributed taxable income.

          Earnings and profits, the current and accumulated amounts of which determine the taxability of distributions to stockholders, vary from net income attributable to common stockholders and taxable income because of different depreciation recovery periods and methods, and other items.

          On a tax-basis, the Company’s gross real estate assets totaled approximately $2.5 billion, $2.1 billion, and $2.0 billion, respectively, for the three years ended December 31, 2010.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          The following table reconciles the Company’s consolidated net income attributable to common stockholders to taxable income for the three years ended December 31, 2010:

	Year Ended December 31,
(In thousands)	2010			2009			2008
Net income attributable to common stockholders	$	8,200		$	51,091		$	41,692
Reconciling items to taxable income:
Depreciation and amortization		19,603			17,196			12,667
Gain or loss on disposition of depreciable assets		6,916			8,549			(3,762	)
Straight-line rent		(1,520	)		(1,623	)		528
Receivable allowances		(3,652	)		523			2,713
Stock-based compensation		1,977			9,323			7,651
Other		4,752			(4,104	)		(5,206	)
		28,076			29,864			14,591
Taxable income (1)	$	36,276		$	80,955		$	56,283
Dividends paid	$	75,821		$	91,385		$	81,301

(1) Before REIT dividend paid deduction.

     Characterization of Distributions (unaudited)

          Distributions in excess of earnings and profits generally constitute a return of capital. The following table gives the characterization of the distributions on the Company’s common stock for the three years ended December 31, 2010.

          For the three years ended December 31, 2010, there were no preferred shares outstanding. As such, no dividends were distributed related to preferred shares for those periods.

	2010					2009					2008
	Per Share		%			Per Share		%			Per Share		%
Common stock:
Ordinary income	$	0.40		33.8	%	$	0.90		58.7	%	$	1.05		68.4	%
Return of capital		0.56		46.4	%		0.16		10.1	%		0.41		26.5	%
Unrecaptured section 1250 gain		0.24		19.8	%		0.48		31.2	%		0.08		5.1	%
Common stock distributions	$	1.20		100.0	%	$	1.54		100.0	%	$	1.54		100.0	%

     State Income Taxes

          The Company must pay certain state income taxes, which are included in general and administrative expense on the Company’s Consolidated Statements of Income.

          Certain states have implemented new state tax laws in the past few years that have impacted the Company. The state of Texas implemented in 2007 a gross margins tax on gross receipts from operations in Texas at 1%, less a 30% deduction for expenses. The Company understands that the Securities and Exchange Commission views this gross margins tax as an income tax. As such, the Company has disclosed the gross margins tax in the table below. The State of Michigan signed into law in 2008 the Michigan Business Tax Act (“MBTA”), which replaced the Michigan single business tax with a combined business income tax and modified gross receipts tax. The enactment of the MBTA resulted in the creation of a deferred tax liability for the Company which at the end of December 31, 2010 totaled $0.2 million.

78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

          State income tax expense and state income tax payments for the three years ended December 31, 2010 are detailed in the table below:

(Dollars in thousands)	2010			2009		2008
State income tax expense:
Texas gross margins tax (1)	$	528		$	464	$	686
Michigan gross receipts deferred tax liability		(90	)		45		—
Other		116			57		123
Total state income tax expense	$	554		$	566	$	809
State income tax payments, net of refunds and collections	$	533		$	674	$	612

(1) In the table above, income tax expense for 2009 and 2008 includes $0.1 million and $0.3 million, respectively, that was recorded to the gain on sale of real estate properties sold, which is included in discontinued operations rather than general and administrative expenses on the Company’s Consolidated Statements of Income.

16. Fair Value of Financial Instruments

          The carrying amounts of cash and cash equivalents, receivables and payables are a reasonable estimate of their fair value as of December 31, 2010 and 2009 due to their short-term nature. The fair value of notes and bonds payable is estimated using cash flow analyses as of December 31, 2010 and 2009, based on the Company’s current interest rates for similar types of borrowing arrangements. The fair value of the mortgage notes and notes receivable is estimated based either on cash flow analyses at an assumed market rate of interest or at a rate consistent with the rates on mortgage notes acquired by the Company or notes receivable entered into by the Company recently. The table below details the fair value and carrying values for notes and bonds payable, mortgage notes receivable and notes receivable at December 31, 2010 and 2009.

	December 31, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
(Dollars in millions)	Value		Value		Value		Value
Notes and bonds payable	$	1,407.9	$	1,460.2	$	1,046.4	$	1,088.6
Mortgage notes receivable	$	36.6	$	35.9	$	31.0	$	30.8
Notes receivable, net of allowances	$	3.8	$	3.8	$	3.3	$	3.3

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17. Selected Quarterly Financial Data (unaudited)

          Quarterly financial information for the years ended December 31, 2010 and 2009 is summarized below. The results of operations have been restated, as applicable, to show the effect of reclassifying properties sold or to be sold as discontinued operations.

	Quarter Ended
(Dollars in thousands, except per share data)	March 31			June 30			September 30			December 31
2010
Revenues from continuing operations	$	62,995		$	63,932		$	64,465		$	67,002
Income (loss) from continuing operations	$	433		$	4,280		$	(447	)	$	(245	)
Discontinued operations		4,225			2,234			(2,860	)		627
Net income (loss)		4,658			6,514			(3,307	)		382
Less: (Income) loss from noncontrolling interests		(64	)		(40	)		59			(2	)
Net income (loss) attributable to common stockholders	$	4,594		$	6,474		$	(3,248	)	$	380
Basic earnings (loss) per common share
Income (loss) from continuing operations	$	0.01		$	0.07		$	(0.01	)	$	0.00
Discontinued operations		0.07			0.04			(0.04	)		0.01
Net income (loss) attributable to common stockholders	$	0.08		$	0.11		$	(0.05	)	$	0.01
Diluted earnings (loss) per common share
Income (loss) from continuing operations	$	0.01		$	0.07		$	(0.01	)	$	0.00
Discontinued operations		0.07			0.03			(0.04	)		0.01
Net income (loss) attributable to common stockholders	$	0.08		$	0.10		$	(0.05	)	$	0.01
2009
Revenues from continuing operations	$	60,390		$	62,634		$	61,688		$	62,126
Income from continuing operations	$	6,736		$	7,919		$	7,328		$	3,207
Discontinued operations		14,144			8,895			1,711			1,208
Net income		20,880			16,814			9,039			4,415
Less: (Income) loss from noncontrolling interests		(15	)		(62	)		65			(45	)
Net income attributable to common stockholders	$	20,865		$	16,752		$	9,104		$	4,370
Basic earnings per common share
Income from continuing operations	$	0.12		$	0.14		$	0.13		$	0.05
Discontinued operations		0.24			0.15			0.03			0.02
Net income attributable to common stockholders	$	0.36		$	0.29		$	0.16		$	0.07
Diluted earnings per common share
Income from continuing operations	$	0.11		$	0.13		$	0.12		$	0.05
Discontinued operations		0.24			0.15			0.03			0.02
Net income attributable to common stockholders	$	0.35		$	0.28		$	0.15		$	0.07

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

          None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

          The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure.

          The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act.

Changes in the Company’s Internal Control over Financial Reporting

          None.

Management’s Annual Report on Internal Control Over Financial Reporting

          The management of Healthcare Realty Trust Incorporated is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

          Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

          Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2010. The Company’s independent registered public accounting firm, BDO USA, LLP, has also issued an attestation report on the effectiveness of the Company’s internal control over financial reporting included herein.

81

Report of
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Healthcare Realty Trust Incorporated
Nashville, Tennessee

          We have audited Healthcare Realty Trust Incorporated’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Healthcare Realty Trust Incorporated’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

          We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

          A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

          Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

          In our opinion, Healthcare Realty Trust Incorporated maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the COSO criteria.

          We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Healthcare Realty Trust Incorporated as of December 31, 2010 and 2009 and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010 and our report dated February 22, 2011 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP  

Nashville, Tennessee
February 22, 2011

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ITEM 9B. OTHER INFORMATION

          None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

          Information with respect to directors, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the caption “Election of Directors,” is incorporated herein by reference.

Executive Officers

          The executive officers of the Company are:

Name	Age		Position
David R. Emery		66	Chairman of the Board & Chief Executive Officer
Scott W. Holmes		56	Executive Vice President & Chief Financial Officer
John M. Bryant, Jr.		44	Executive Vice President & General Counsel
B. Douglas Whitman, II		42	Executive Vice President — Corporate Finance
Todd J. Meredith		36	Executive Vice President — Investments

          Mr. Emery formed the Company and has held his current positions since May 1992. Prior to 1992, Mr. Emery was engaged in the development and management of commercial real estate in Nashville, Tennessee. Mr. Emery has been active in the real estate industry for nearly 40 years.

          Mr. Holmes has served as the Chief Financial Officer since January 1, 2003 and was the Senior Vice President — Financial Reporting (principal accounting officer) from October 1998 until January 1, 2003. Mr. Holmes is a Certified Public Accountant. Prior to joining the Company, he was with Ernst & Young LLP for more than 13 years. His extensive audit and financial reporting experience included healthcare and real estate companies in addition to public companies in other industries. Mr. Holmes has previously served in a management capacity with two other public companies.

          Mr. Bryant became the Company’s General Counsel on November 1, 2003. From April 22, 2002 until November 1, 2003, Mr. Bryant was Vice President and Assistant General Counsel. Prior to joining the Company, Mr. Bryant was a shareholder with the law firm of Baker Donelson Bearman & Caldwell in Nashville, Tennessee.

          Mr. Whitman joined the Company in 1998 and became the Executive Vice President — Corporate Finance on February 17, 2011 and is responsible for all aspects of the Company’s financing activities, including capital raises, debt compliance, banking relationships and investor relations. Previously, Mr. Whitman served as the Company’s Chief Operating Officer from March 1, 2007 until February 17, 2011. Prior to joining the Company, Mr. Whitman worked for the University of Michigan Health System and HCA Inc.

          Mr. Meredith was appointed Executive Vice President — Investments on February 17, 2011 and is responsible for overseeing the Company’s investment activities, including the acquisition, financing and development of medical office and other primarily outpatient medical facilities. From 2006 through February 2011, he led the Company’s development activities as a Senior Vice President. Prior to joining the Company in 2001, Mr. Meredith worked in investment banking and corporate finance, most recently with Robert W. Baird & Co.

Code of Ethics

          The Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, as well as all directors, officers and employees of the Company. The Code of Ethics is posted on the Company’s website (www.healthcarerealty.com) and is available in print free of charge to any stockholder who requests a copy. Interested parties may address a written request for a printed copy of the Code of Ethics to: Investor Relations: Healthcare Realty Trust Incorporated, 3310 West End Avenue, Suite 700, Nashville, Tennessee 37203. The Company intends to satisfy the disclosure requirement regarding any amendment to, or a waiver of, a provision of the Code of Ethics for the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions by posting such information on the Company’s website.

83

Section 16(a) Compliance

          Information with respect to compliance with Section 16(a) of the Securities Exchange Act set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the caption “Security Ownership of Certain Beneficial Owners and Management — Section 16(a) Beneficial Ownership Reporting Compliance,” is incorporated herein by reference.

Stockholder Recommendation of Director Candidates

          There have been no material changes with respect to the Company’s policy relating to stockholder recommendations of director candidates. Such information is set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the caption “Shareholder Recommendation or Nomination of Director Candidates,” and is incorporated herein by reference.

Audit Committee

          Information relating to the Company’s Audit Committee, its members and the Audit Committee’s financial expert is set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the caption “Committee Membership,” and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

          Information relating to executive compensation, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Director Compensation,” is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

          Information relating to the security ownership of management and certain beneficial owners, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the caption “Security Ownership of Certain Beneficial Owners and Management,” is incorporated herein by reference.

          Information relating to securities authorized for issuance under the Company’s equity compensation plans, set forth in Item 5 of this report under the caption “Equity Compensation Plan Information,” is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

          Information relating to certain relationships and related transactions, and director independence, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the captions “Certain Relationships and Related Transactions,” and “Corporate Governance — Independence of Directors,” are incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

          Information relating to the fees paid to the Company’s accountants, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 17, 2011 under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm,” is incorporated herein by reference.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Index to Historical Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements:

          The following financial statements of Healthcare Realty Trust Incorporated are incorporated herein by reference to Item 8 of this Annual Report on Form 10-K.

• Consolidated Balance Sheets — December 31, 2010 and 2009.

• Consolidated Statements of Income for the years ended December 31, 2010, December 31, 2009 and December 31, 2008.

84

• Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2010, December 31, 2009 and December 31, 2008.

• Consolidated Statements of Cash Flows for the years ended December 31, 2010, December 31, 2009 and December 31, 2008.

• Notes to Consolidated Financial Statements.

(2) Financial Statement Schedules:

Schedule II	— Valuation and Qualifying Accounts at December 31, 2010	89
Schedule III	— Real Estate and Accumulated Depreciation at December 31, 2010	90
Schedule IV	— Mortgage Loans on Real Estate at December 31, 2010	91

          All other schedules are omitted because they are either not applicable, not required or because the information is included in the consolidated financial statements or notes thereto.

(3) Exhibits:

Exhibit Index

Exhibit
Number		Description of Exhibits
1.1	—	Controlled Equity Offering Sales Agreement, dated as of January 11, 2011, between the Company and Cantor Fitzgerald & Co. (1)
1.2	—	Sales Agreement, dated as of January 11, 2011, between the Company and Credit Agricole Securities (USA) Inc. (1)
1.3	—	Controlled Equity Offering Sales Agreement, dated as of February 22, 2010, between the Company and Cantor Fitzgerald & Co. (2)
1.4	—	Controlled Equity Offering Sales Agreement, dated as of December 31, 2008, between the Company and Cantor Fitzgerald & Co. This agreement was terminated on February 19, 2010 and superseded by Exhibit 1.2 hereto. (3)
1.5	—	Underwriting Agreement, dated as of December 8, 2010, by and among the Company and Barclays Capital Inc. and UBS Securities LLC, as representatives of the several underwriters named herein. (4)
3.1	—	Second Articles of Amendment and Restatement of the Company. (5)
3.2	—	Amended and Restated Bylaws of the Company. (6)
4.1	—	Specimen stock certificate. (5)
4.2	—	Indenture, dated as of May 15, 2001, by and between the Company and Regions Bank, as Trustee (as successor to the trustee named therein). (7)
4.3	—	First Supplemental Indenture, dated as of May 15, 2001, by the Company to Regions Bank, as Trustee (as successor to the trustee named therein). (7)
4.4	—	Form of 8.125% Senior Note Due 2011. (7)
4.5	—	Second Supplemental Indenture, dated as of March 30, 2004, by the Company to Regions Bank, as Trustee (as successor to the trustee named therein). (8)
4.6	—	Form of 5.125% Senior Note Due 2014. (8)
4.7	—	Third Supplemental Indenture, dated December 4, 2009, by and between the Company and Regions Bank as Trustee. (9)
4.8	—	Form of 6.50% Senior Note due 2017 (set forth in Exhibit B to the Third Supplemental Indenture filed as Exhibit 4.7 thereto). (9)
4.9	—	Fourth Supplemental Indenture, dated December 13, 2010, by and between the Company and Regions Bank as Trustee. (4)
4.10	—	Form of 5.750% Senior Note due 2021 (set forth in Exhibit B to the Fourth Supplemental Indenture filed as Exhibit 4.9 thereto). (4)
10.1	—	1995 Restricted Stock Plan for Non-Employee Directors of the Company. (10)
10.2	—	Amendment to 1995 Restricted Stock Plan for Non-Employee Directors of the Company. (3)
10.3	—	Second Amended and Restated Executive Retirement Plan. (3)
10.4	—	Amended and Restated Retirement Plan for Outside Directors. (3)
10.5	—	2000 Employee Stock Purchase Plan. (11)
10.6	—	Dividend Reinvestment Plan, as Amended. (12)
10.7	—	Amended and Restated Employment Agreement by and between David R. Emery and the Company. (13)
10.8	—	Employment Agreement by and between John M. Bryant, Jr. and the Company. (14)
10.9	—	Employment Agreement by and between Scott W. Holmes and the Company. (15)
10.10	—	Employment Agreement by and between B. Douglas Whitman, II and the Company. (16)

85

Exhibit
Number		Description of Exhibits
10.11	—	Amended and Restated Credit Agreement, dated as of September 30, 2009, by and among the Company, Bank of America, N.A., as Administrative Agent, and the other lenders named herein. (17)
10.12	—	Amendment No. 1, dated as of May 12, 2010, to the Amended and Restated Credit Agreement, dated as of September 30, 2009, by and among the Company, Bank of America, N.A., as Administrative Agent, and the other lenders named therein. (18)
10.13	—	2007 Employees Stock Incentive Plan. (19)
10.14	—	The Company’s Long-Term Incentive Program. (20)
10.15	—	Amendment, dated December 21, 2007, to 2007 Employees Stock Incentive Plan. (21)
10.16	—	Purchase and sale agreement, dated December 29, 2010, between the Company and Frisco Surgery Center Limited, Frisco POB I Limited, Frisco POB II Limited, and Medland L.P. (filed herewith)
11	—	Statement re: computation of per share earnings (contained in Note 13 to the Notes to the Consolidated Financial Statements for the year ended December 31, 2009 in Item 8 to this Annual Report on Form 10-K).
21	—	Subsidiaries of the Registrant. (filed herewith)
23	—	Consent of BDO USA, LLP, independent registered public accounting firm. (filed herewith)
31.1	—	Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
31.2	—	Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
32	—	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
101.INS	—	XBRL Instance Document. (furnished herewith)
101.SCH	—	XBRL Taxonomy Extension Schema Document. (furnished herewith)
101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document. (furnished herewith)
101.LAB	—	XBRL Taxonomy Extension Labels Linkbase Document. (furnished herewith)
101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document. (furnished herewith)

(1)	Filed as an exhibit to the Company’s Form 8-K filed January 11, 2011 and hereby incorporated by reference.
(2)	Filed as an exhibit to the Company’s Form 10-K filed February 22, 2010 and hereby incorporated by reference.
(3)	Filed as an exhibit to the Company’s Form 8-K filed December 31, 2008 and hereby incorporated by reference.
(4)	Filed as an exhibit to the Company’s Form 8-K filed December 13, 2010 and hereby incorporated by reference.
(5)	Filed as an exhibit to the Company’s Registration Statement on Form S-11 (Registration No. 33-60506) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference.
(6)	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2007 and hereby incorporated by reference.
(7)	Filed as an exhibit to the Company’s Form 8-K filed May 17, 2001 and hereby incorporated by reference.
(8)	Filed as an exhibit to the Company’s Form 8-K filed March 29, 2004 and hereby incorporated by reference.
(9)	Filed as an exhibit to the Company’s Form 8-K filed December 4, 2009 and hereby incorporated by reference.
(10)	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 1995 and hereby incorporated by reference.
(11)	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 1999 and hereby incorporated by reference.
(12)	Filed as an exhibit to the Company’s Registration Statement on Form S-3 (Registration No. 33-79452) previously filed on September 26, 2003 pursuant to the Securities Act of 1933 and hereby incorporated by reference.
(13)	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2004 and hereby incorporated by reference.
(14)	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2003 and hereby incorporated by reference.
(15)	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2002 and hereby incorporated by reference.
(16)	Filed as an exhibit to the Company’s Form 10-K filed March 1, 2007 and hereby incorporated by reference.
(17)	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2009 and hereby incorporated by reference.
(18)	Filed as an exhibit to the Company’s Form 10-Q for the quarter ended June 30, 2010 and hereby incorporated by reference.
(19)	Filed as an exhibit to the Company’s Form 8-K filed May 21, 2007 and hereby incorporated by reference.
(20)	Filed as an exhibit to the Company’s Form 8-K filed December 14, 2007 and hereby incorporated by reference.
(21)	Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2007 and hereby incorporated by reference.

Executive Compensation Plans and Arrangements

     The following is a list of all executive compensation plans and arrangements filed as exhibits to this Annual Report on Form 10-K:

1.	1995 Restricted Stock Plan for Non-Employee Directors of the Company (filed as Exhibit 10.1)
2.	Amendment to 1995 Restricted Stock Plan for Non-Employee Directors of the Company (filed as Exhibit 10.2)
3.	Second Amended and Restated Executive Retirement Plan (filed as Exhibit 10.3)
4.	Amended and Restated Retirement Plan for Outside Directors (filed as Exhibit 10.4)
5.	2000 Employee Stock Purchase Plan (filed as Exhibit 10.5)
6.	Amended and Restated Employment Agreement by and between David R. Emery and the Company (filed as Exhibit 10.7)

86

7.	Employment Agreement by and between John M. Bryant, Jr. and the Company (filed as Exhibit 10.8)
8.	Employment Agreement by and between Scott W. Holmes and the Company (filed as Exhibit 10.9)
9.	Employment Agreement by and between B. Douglas Whitman, II and the Company (filed as Exhibit 10.10)
10.	2007 Employees Stock Incentive Plan (filed as Exhibit 10.13)
11.	The Company’s Long-Term Incentive Program (filed as Exhibit 10.14)
12.	Amendment, dated December 21, 2007, to 2007 Employees Stock Incentive Plan (filed as Exhibit 10.15)

87

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Nashville, State of Tennessee, on February 22, 2011.

HEALTHCARE REALTY TRUST INCORPORATED
By:	/s/ David R. Emery
	David R. Emery
	Chairman of the Board and Chief Executive Officer

          Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Company and in the capacities and on the date indicated.

Signature	Title	Date
/s/ David R. Emery	Chairman of the Board and Chief Executive	February 22, 2011
David R. Emery	Officer (Principal Executive Officer)
/s/ Scott W. Holmes	Executive Vice President and Chief Financial	February 22, 2011
Scott W. Holmes	Officer (Principal Financial Officer)
/s/ David L. Travis	Senior Vice President and Chief Accounting	February 22, 2011
David L. Travis	Officer (Principal Accounting Officer)
/s/ Errol L. Biggs, Ph.D.	Director	February 22, 2011
Errol L. Biggs, Ph.D.
/s/ Charles Raymond Fernandez, M.D.	Director	February 22, 2011
Charles Raymond Fernandez, M.D.
/s/ Batey M. Gresham, Jr.	Director	February 22, 2011
Batey M. Gresham, Jr.
/s/ Edwin B. Morris, III	Director	February 22, 2011
Edwin B. Morris, III
/s/ John Knox Singleton	Director	February 22, 2011
John Knox Singleton
/s/ Bruce D. Sullivan	Director	February 22, 2011
Bruce D. Sullivan
/s/ Roger O. West	Director	February 22, 2011
Roger O. West
/s/ Dan S. Wilford	Director	February 22, 2011
Dan S. Wilford

88

Schedule II — Valuation and Qualifying Accounts at December 31, 2010
(Dollars in thousands)

	Balance at		Additions					Uncollectible		Balance at
	Beginning		Charged to Costs			Charged to Other		Accounts		End
Description	of Period		and Expenses			Accounts		Written-off		of Period
2010 Accounts and notes receivable allowance	$	3,674	$	(409	)	$	—	$	2,080	$	1,185
	$	3,674	$	(409	)	$	—	$	2,080	$	1,185
2009 Accounts and notes receivable allowance	$	3,323	$	517		$	—	$	166	$	3,674
	$	3,323	$	517		$	—	$	166	$	3,674
2008 Accounts and notes receivable allowance	$	1,499	$	1,904		$	—	$	80	$	3,323
Preferred stock investment reserve		1,000		—			—		1,000		—
	$	2,499	$	1,904		$	—	$	1,080	$	3,323

89

Schedule III — Real Estate and Accumulated Depreciation at December 31, 2010

										Buildings, Improvements,
				Land						Lease Intangibles and CIP
						Cost Capitalized						Cost Capitalized								(1) (4)
						Subsequent to						Subsequent to						(1) (3) (4)		Accumulated		(5)		Date
Property Type	Number of Properties		State	Initial Investment		Acquisition		Total		Initial Investment		Acquisition		Total		Personal Property		Total Assets		Depreciation		Encumbrances		Acquired	Date Constructed
Medical Office		148	AL, AZ, CA, CO, DC, FL, GA, HI, IA, IL, IN, KS, LA, MD, MI, MO, MS, NC, NV, OH, OR, PA, SC, TN, TX, VA, WA	$	124,032	$	1,996	$	126,028	$	1,673,602	$	176,223	$	1,849,825	$	2,277	$	1,978,130	$	339,214	$	167,462	1993-2010	1905 — 2010 3 Under Const. (2)
Physician Clinics		29	AL, AZ, CA, FL, GA, IA, IN, MA, TX, VA		17,379		449		17,828		133,672		6,281		139,953		394		158,175		45,620		—	1993-2008	1968-2003
Surgical Facilities		10	CA, GA, IL, IN, MO, NV, TX		17,181		443		17,624		174,861		5,269		180,130		101		197,855		27,827		—	1993-2010	1985-2006
Specialty Outpatient		3	AL, IA, VA		—		260		260		6,773		252		7,025		—		7,285		2,098		1,146	1998-2008	1993-2006
Inpatient Rehab		11	AL, AZ, FL, PA, TN, TX		6,328		150		6,478		172,051		110		172,161		—		178,639		57,227		—	1994-2009	1983-2009
Other		11	AL, CA, TN, VA		1,828		73		1,901		49,011		7,213		56,224		636		58,761		24,687		1,679	1993-2007	1967-1995
Total Real Estate		212			166,748		3,371		170,119		2,209,970		195,348		2,405,318		3,408		2,578,845		496,673		170,287
Land Held for Development		—			—		—		—		20,772		—		20,772		—		20,772		13		—
Corporate Property		—			—		—		—		—		—		—		14,940		14,940		7,402		—
Total Properties		212		$	166,748	$	3,371	$	170,119	$	2,230,742	$	195,348	$	2,426,090	$	18,348	$	2,614,557	$	504,088	$	170,287

(1)	Includes 11 assets held for sale at December 31, 2010 of approximately $43.0 million (gross) and accumulated depreciation of $19.5 million; six assets at December 31, 2009 of $25.6 million (gross) and accumulated depreciation of $8.7 million; and twelve assets at December 31, 2008 of $119.1 million (gross) and accumulated depreciation of $29.9 million.
(2)	Development at December 31, 2010.
(3)	Total assets at December 31, 2010 have an estimated aggregate total cost of $2.5 billion for federal income tax purposes.
(4)	Depreciation is provided for on a straight-line basis on buildings and improvements over 1.3 to 39.0 years, lease intangibles over 2.6 to 93.1 years, personal property over 3.0 to 15.8 years, and land improvements over 15.0 years.
(5)	Includes discounts and premiums totaling $6.4 million as of December 31, 2010.
(6)	A reconciliation of Total Property and Accumulated Depreciation for the twelve months ended December 31, 2010, 2009 and 2008 follows:

	Year to Date						Year to Date						Year to Date
	Ending 12/31/10 (1)						Ending 12/31/09 (1)						Ending 12/31/08 (1)
	Total			Accumulated			Total			Accumulated			Total			Accumulated
(Dollars in thousands)	Property			Depreciation			Property			Depreciation			Property			Depreciation
Beginning Balance	$	2,250,879		$	442,331		$	2,120,853		$	397,265		$	1,722,491		$	355,919
Additions during the period:
Real Estate		337,223			72,825			141,579			67,680			362,073			52,451
Corporate Property		316			740			284			784			320			651
Construction in Progress		63,301			—			85,120			—			74,085			—
Retirement/dispositions:
Real Estate		(37,155	)		(11,801	)		(96,954	)		(23,395	)		(38,103	)		(11,746	)
Corporate Property		(7	)		(7	)		(3	)		(3	)		(13	)		(10	)
Ending Balance	$	2,614,557		$	504,088		$	2,250,879		$	442,331		$	2,120,853		$	397,265

90

Schedule IV — Mortgage Loans on Real Estate at December 31, 2010
(Dollars in thousands)

						Periodic			Original
	Interest			Maturity		Payment			Face		Carrying
Description	Rate			Date		Terms			Amount		Amount		Balloon
Mortgage Notes Receivables:
Physician clinic facility located in California		8.30	%		05/12/2016		(1	)	$	14,920	$	14,920	$	13,895	(2)
Medical office building in Iowa		8.00	%		12/01/2020		(3	)		3,700		3,700		3,230	(3)
Construction Loans:
Surgical facility in South Dakota		7.00	%		05/01/2012		(4	)		40,000		10,746		11,175	(5)
Medical office building in Iowa		6.50	% (6)		05/31/2012		(4	)		4,392		1,136		1,136
Medical office building in Iowa		6.50	% (6)		02/29/2012		(4	)		14,045		3,234		3,234
Medical office building in Iowa		11.00	%		03/31/2012		(4	)		2,136		377		377
Medical office building in Texas		7.50	% (7)		08/01/2012		(8	)		12,444		2,486		2,486
Total Mortgage Notes Receivable											$	36,599

(1)	Interest only until May 12, 2011, then principal and interest amortized monthly based on a 25-year amortization schedule.
(2)	Prepayment of all or part of the principal, with premium, may be made after May 12, 2008. The balloon amount above represents the principal amount due at maturity.
(3)	Interest only until maturity. However, the borrower must pay an amount sufficient to reduce the principal sum of the note to $3.2 million on the earlier of 270 days after the date of the Note, which is November 23, 2010, or on the date any third party acquires any interest in the borrower or property.
(4)	Interest only until maturity. Principal payments may be made during term without penalty with remaining principal balance due at maturity.
(5)	The carrying amount is net of an unamortized loan origination fee of $0.4 million at December 31, 2010 that is being amortized through the maturity of the loan.
(6)	The interest rate is the greater of 6.00% plus LIBOR or 6.50%.
(7)	The interest rate is 7.50% per annum through the construction completion date and is 8.10% thereafter.
(8)	The initial maturity date is 365 days after the construction completion date. If the payee has not exercised its purchase option and the maker exercises the extension option, the loan will be due on the second anniversary of the initial maturity date. Prepayments may be made at any time after the initial maturity date.
(9)	A rollforward of Mortgage loans on real estate for the three years ended December 31, 2010 follows:

	Years Ended December 31,
(Dollars in thousands)	2010			2009			2008
Balance at beginning of period	$	31,008		$	59,001		$	30,117
Additions during period:
New or acquired mortgages		24,440			9,900			7,996
Amortization of loan origination fee (5)		153			—			—
Increased funding on existing mortgages		—			10,616			28,974
		24,593			20,516			36,970
Deductions during period:
Scheduled principal payments		(27	)		(26	)		(29	)
Principal repayments and reductions (10)		(9,075	)		(12,747	)		(8,057	)
Principal reductions due to acquisitions (11)		(9,900	)		(35,736	)		—
		(19,002	)		(48,509	)		(8,086	)
Balance at end of period	$	36,599		$	31,008		$	59,001

(10)

Principal repayments for the years ended December 31, 2010, 2009 and 2008 include unscheduled principal reductions on mortgage notes of $1.9 million, $0.1 million and $5.6 million, respectively.

(11)

A consolidated joint venture, in which the Company owns an 80% controlling interest, purchased three medical office buildings in 2009 and one medical office building in 2010 which are located in Iowa. Ladco constructed the medical office buildings which were financed by the Company through a construction loan. Upon acquisition of the buildings by the Company’s consolidated joint venture, the construction loan was partially converted to additional equity investment by the Company in the joint venture with the balance remaining converting to a permanent mortgage

91

	note payable to the Company by the consolidated joint venture, which is eliminated in consolidation in the Company’s Consolidated Financial Statements.
(12)	Total mortgages at December 31, 2010 have an aggregate total cost of $36.6 million for federal income tax purposes.

92

EX-10.16

Exhibit 10.16

PURCHASE AGREEMENT

BETWEEN

HEALTHCARE REALTY TRUST INCORPORATED
(“PURCHASER”)
AND

FRISCO SURGERY CENTER LIMITED, FRISCO POB I LIMITED, FRISCO POB II LIMITED, and MEDLAND L.P.

(COLLECTIVELY, “SELLERS”)

Dated as of December 29, 2010

Table of Contents

	Page
ARTICLE 1 DEFINITIONS		1
1.1 Definition of Certain Terms		1
ARTICLE 2 PURCHASE AND SALE OF THE PROPERTY		7
2.1 Purchase of the Property		7
2.1 Purchase Price and Terms of Payment		7
ARTICLE 3 REPRESENTATIONS, WARRANTIES, AND COVENANTS		9
3.1 Representations and Warranties of Sellers		9
3.2 Representations and Warranties of Purchaser		12
3.3 Additional Obligations, Covenants, and Agreements of Sellers		14
3.4 Additional Obligations, Covenants, and Agreements of Purchaser		16
ARTICLE 4 STUDY PERIOD; PURCHASER’S INSPECTIONS		16
4.1 Study Period		16
4.2 Conditions of Conducting the Inspections		17
4.3 Indemnification		17
ARTICLE 5 CONDITIONS PRECEDENT		17
5.1 Conditions Precedent to Purchaser’s Obligation to Purchase		17
5.2 Conditions Precedent to Sellers’ Obligation to Sell		18
5.3 Failure to Satisfy Conditions		19
ARTICLE 6 SELLERS’ DISCLAIMER		19
6.1 Purchaser’s Independent Investigation		19
6.2 Property Conveyed “As-Is”		20
ARTICLE 7 CLOSING		20
7.1 Closing		20
7.2 Closing Adjustments and Prorations		21
ARTICLE 8 BREACH; TERMINATION		25
8.1 Breach by Sellers		25
8.2 Breach by Purchaser		25
ARTICLE 9 TITLE EXAMINATION		26
9.1 Title Commitment		26
9.2 Title Objections; Permitted Exceptions		26
ARTICLE 10 MISCELLANEOUS PROVISIONS		27
10.1 Brokers		27
10.2 Entire Agreement; Modification		27
10.3 Survival of Covenants and Agreements		27
10.4 Binding Upon Successors and Assigns		27
10.5 Governing Law		28
10.6 Notices		28
10.7 Exhibits		29
10.8 Confidentiality		29
10.9 Study Materials		29

i

	Page
10.10 No Offer		29
10.11 Rules of Construction		29
10.12 Time of the Essence		29
10.13 Severability of MB Owners’ Interests		30
10.14 Notice Regarding Aboveground Storage Tanks		30
10.15 Waiver of Consumer Rights		30

EXHIBITS:
Exhibit 1.1	Description of MB Properties and Land Sites
Exhibit 2.1(b)	List of Contracts
Exhibit 2.1(e)	Incomplete Construction Projects and Tenant Improvement Work
Exhibit 3.1	Closing Certificate
Exhibit 3.1(c)	List of Existing Tenant Leases
Exhibit 3.1(f)	Leasing Commission Agreements
Exhibit 3.1(i)	List of Security Deposits
Exhibit 3.3(a)	Notice to Tenants
Exhibit 3.3(g)	Sellers Closing Documents
Exhibit 3.3(g)(10)	Reserved
Exhibit 3.3(g)(11)	Reserved
Exhibit 3.3(g)(12)	MOB Development Agreement Assignment
Exhibit 3.3(g)(13)	County Abatement Assignment
Exhibit 3.3(g)(14)	City Abatement Assignment
Exhibit 3.3(g)(15)	Developer Assignment
Exhibit 3.4(b)	Purchaser Closing Documents
Exhibit 4.1	Sellers Deliverables
Exhibit 5.1(c)-1	Tenant Estoppel
Exhibit 5.1(c)-2	Parking Space Lease Estoppel
Exhibit 5.1(c)-3	FSC Lease Estoppel
Exhibit 9.1	Purchaser’s Survey Requirements
Exhibit 9.2-A-1	MB Property#1 Texas Special Warranty Deed
Exhibit 9.2-A-2	MB Property#2 Texas Special Warranty Deed
Exhibit 9.2-A-3	MB Property#3 Texas Special Warranty Deed
Exhibit 9.2-A-4	Land Sites Texas Special Warranty Deed
Exhibit 9.2-B-1	MB Property#1 General Assignment and Bill of Sale
Exhibit 9.2-B-2	MB Property#2 General Assignment and Bill of Sale
Exhibit 9.2-B-3	MB Property#3 General Assignment and Bill of Sale
Exhibit 9.2-B-4	Land Sites General Assignment and Bill of Sale
Exhibit 9.2-C	Sellers’ Affidavit

ii

PURCHASE AGREEMENT

     THIS PURCHASE AGREEMENT (together with all exhibits attached hereto and any and all amendments hereto made in accordance with the terms hereof, this “Agreement”) is made and entered into as of the 29 day of December, 2010 (the “Agreement Date”), by and among FRISCO SURGERY CENTER LIMITED, a Texas limited partnership (“Seller#1”), FRISCO POB I LIMITED, a Texas limited partnership (“Seller#2”), FRISCO POB II LIMITED, a Texas limited partnership (“Seller#3”), and MEDLAND L.P., a Texas limited partnership (“Seller#4”; together with Seller#1, Seller#2, Seller#3, being collectively referred to hereinafter as the “Sellers”; each of the Sellers being sometimes referred to singularly hereinafter as a “Seller”), and HEALTHCARE REALTY TRUST INCORPORATED, a Maryland corporation (“Purchaser”).

W I T N E S S E T H:

     A. Each of Seller#1, Seller#2, and Seller#3, individually, is the fee simple owner of that certain real property, including all improvements thereon, designated and more particularly described in Exhibit 1.1 attached hereto (which Exhibit 1.1 includes the name of the owner, legal description and street address, where available, of the real property owned by each Seller). Each such Seller operates a medical building and related improvements on its real property. Each such medical building and related improvements are hereinafter referred to as an “MB” and all such medical buildings and related improvements are hereinafter referred to collectively as the “MBs.” The tracts of land on which the MBs are located are referred to herein from time to time, each, as an “MB Site,” and, collectively, as the “MB Sites.” The term “MB Property” shall mean a specific MB together with and including the applicable MB Site. The term “MB Properties” shall mean collectively all of the MBs and the MB Sites described in Exhibit 1.1 attached hereto. When reference to a specific MB, MB Site or MB Property is intended in this Agreement, such MB, MB Site or MB Property shall be identified by “number” in accordance with the applicable Seller (e.g., MB#3, MB Site#3 and MB Property#3 shall mean the MB, MB Site and MB Property owned in fee simple by Seller#3). For the purpose of clarity, all references to “MB#2” shall mean and include that certain medical building and two (2) story parking structure located on MB Site#2.

     B. Seller#4 is the fee simple owner of those certain two (2) tracts of unimproved property more particularly described on Exhibit 1.1 attached hereto. The two tracts of land owned by Seller#4 are individually referred to herein as “Land Site#4” and “Land Site#5”, and collectively referred to herein as the “Land Sites”.

     C. Sellers have agreed to sell to Purchaser, and Purchaser has agreed to purchase from Sellers, the Property (defined in Article 1 below) on the terms and conditions set forth in this Agreement.

     NOW THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE 1
DEFINITIONS

     1.1 Definition of Certain Terms. For purposes of this Agreement, unless the context otherwise requires, the following terms shall have the meanings hereinafter set forth (such meanings to be applicable to the singular and plural forms of such terms and the masculine and feminine forms of such terms):

     (a) “Affiliate” means an entity that controls, is controlled by, or is under common control with another entity. For purposes of this definition and other definitions that use the concept of

1

“control” in this Agreement, “control” shall be deemed to mean the power or authority, directly or indirectly, whether by ownership of legal or beneficial interests, voting rights, proxies, agreement or otherwise, of directing or causing the direction of the business or affairs of the entity.

     (b) “Agreement” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement.

     (c) “Agreement Date” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement.

     (d) “Bankruptcy Code” shall have the meaning ascribed to such term in Section 3.1(l) herein.

     (e) “Broker” shall have the meaning ascribed to such term in Section 10.1 herein.

     (f) “CAM” shall have the meaning ascribed to such term in Section 7.2(d) herein.

     (g) “Centennial Lease” shall mean that certain Medical Office Building Lease dated December 8, 2010, executed by Seller#3, as landlord thereunder, and Centennial Obstetrics & Gynecology, P.A., as tenant thereunder, for certain premises in MB#3.

     (h) “Change Orders” shall have the meaning ascribed to such term in Section 7.2(e)(v) herein.

     (i) “City Abatement Assignment” shall have the meaning ascribed to such term in Exhibit 3.3(g).

     (j) “Closing” shall have the meaning ascribed to such term in Section 7.1 herein.

     (k) “Closing Agent” shall have the meaning ascribed to such term in Section 3.3(g) herein.

     (l) “Closing Certificate” shall have the meaning ascribed to such term in Section 3.1 herein.

     (m) “Closing Date” shall have the meaning ascribed to such term in Section 7.1 herein.

     (n) “Closing Statement” shall have the meaning ascribed to such term in Section 5.2(a) herein.

     (o) “Contracts” shall have the meaning ascribed to such term in Section 2.1(b) herein.

     (p) “County Abatement Assignment” shall have the meaning ascribed to such term in Exhibit 3.3(g).

     (q) “Deed” shall have the meaning ascribed to such term in Section 9.2 herein.

     (r) “Deposit” shall have the meaning ascribed to such term in Section 2.2(b)(i) herein.

     (s) “Developer Assignment” shall have the meaning ascribed to such term in Exhibit 3.3(g).

     (t) “Environmental Law” or “Environmental Laws” shall mean: (i) the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), as amended;

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(ii) the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), and as further amended; (iii) the Emergency Planning and Community Right to Know Act (42 U.S.C. § 11001 et seq.), as amended; (iv) the Clean Air Act (42 U.S.C. § 7401 et seq.), as amended; (v) the Clean Water Act (33 U.S.C. § 1251 et seq.), as amended; (vi) the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), as amended; (vii) the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), as amended; (viii) the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. § 136 et seq.), as amended; (ix) the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), as amended; (x) any state, county, municipal or local statutes, laws or ordinances similar or analogous to the federal statutes listed in clauses (i) — (ix) of this Section 1.1(u); (xi) any amendments to the statutes, laws or ordinances listed in clauses (i) — (x) of this Section 1.1(u)), and (xii) any rules, regulations, guidelines, directive, orders or the like adopted pursuant to or implementing the statutes, laws, ordinances and amendments listed in clauses (i) — (xi) of this Section 1.1(u).

     (u) “Escrow Agent” shall have the meaning ascribed to such term in Section 2.2(b)(i) herein.

     (v) “Estoppel Threshold” shall have the meaning ascribed to such term in Section 5.1(c) herein.

     (w) “Existing Tenant Leases” shall have the meaning ascribed to such term in Section 3.1(c) herein.

     (x) “Existing TI Obligations” shall mean tenant improvement expenses (including all hard and soft construction costs, whether payable to the contractor or tenant) and tenant allowances which are not New TI Obligations and are the obligation of the landlord under any Existing Tenant Leases. For the avoidance of doubt, Existing TI Obligations shall not include any tenant improvement expenses described in any Modification to the Goldstein Lease.

     (y) “FSC Lease” shall mean the Lease Agreement dated April 9, 2001, between Seller#1, as landlord, and Frisco Surgery Center, L.L.P., as tenant, and all amendments thereto, covering certain premises in MB#1.

     (z) “Future Commission Obligations” shall have the meaning ascribed to such term in Section 3.1(f) herein.

     (aa) “Goldstein Credit” shall mean an amount credited to the Purchase Price at Closing equal to $143,000.00.

     (bb) “Goldstein Lease” shall mean that certain Medical Office Building Lease dated May 23, 2008, between Seller#3, as landlord, and Fertility Specialists of Texas, P.L.L.C., as the successor by assignment to Fertility Specialists of Dallas, P.A., as Tenant, covering certain premises in MB#3.

     (cc) “Governmental Authority” shall mean any board, bureau, commission, department or body of any municipal, township, county, city, state or federal governmental unit, or any subdivision thereof, having or acquiring jurisdiction over the Property or the ownership, management, operation, use or improvement thereof. “Governmental Authorities” shall mean more than one Governmental Authority.

     (dd) “Ground Lease” shall mean that certain Ground Lease between Seller#2, as landlord and Seller#1, as tenant with respect to the Parking Garage.

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     (ee) “Hazardous Conditions” shall mean the presence on or in the Property of Hazardous Materials, the concentration, condition, quantity, location or other characteristic of which fails to comply with the standards applicable under Environmental Laws.

     (ff) “Hazardous Materials” shall mean any chemical, substance, waste, material, equipment or fixture defined as or deemed hazardous, toxic, a pollutant, a contaminant, or otherwise regulated under any Environmental Law, including, but not limited to, petroleum and petroleum products, waste oil, halogenated and non-halogenated solvents, PCBs, and asbestos.

     (gg) “Indemnification Obligations” shall have the meaning ascribed to such term in Section 4.1 herein.

     (hh) “Independent Consideration” shall have the meaning ascribed to such term in Section 2.2(b)(iii) herein.

     (ii) “Instructing Party” shall have the meaning ascribed to such term in Section 2.2(b)(i) herein.

     (jj) “Instruction” shall have the meaning ascribed to such term in Section 2.2(b)(i) herein.

     (kk) “Inspections” shall have the meaning ascribed to such term in Section 4.1 herein.

     (ll) “Land Site#4”, “Land Site#5”, and “Land Sites” shall each have the meaning ascribed to such terms in the Recitals. “Land Site” shall mean any one of the Land Sites.

     (mm) “Leases” shall mean, collectively, the Existing Tenant Leases and the New Tenant Leases.

     (nn) “Loan” shall have the meaning ascribed to such term in Section 7.2(h) herein.

     (oo) “Material Tenant Lease Default” shall be deemed to exist with regard to a particular MB (A) (i) if one or more tenants in such MB breach and have not cured the monetary terms of their Leases, (ii) if one or more tenants in such MB files a petition in bankruptcy or take, or consent to any other, action seeking any such judicial decree or are the subject of an involuntary petition in bankruptcy which involuntary petition is not vacated prior to Closing, (iii) if one or more Leases of space in such MB are the subject of litigation regarding a default or an alleged default under said Leases or one or more tenants in such MB sends a demand letter to Sellers regarding a claimed material default by Sellers under such Lease(s), and (B) if such Lease or Leases encompassed by clauses (i), (ii), and/or (iii) in (A) above in this definition cover more than five percent (5%) of the usable space in such MB. Additionally, a “Material Tenant Lease Default” shall be deemed to exist with regard to MB Site#2 if the Ground Lease is encompassed by clauses (i), (ii), and/or (iii) in (A) of this definition, and a “Material Tenant Lease Default” shall be deemed to exist with regard to MB Site#1 if the Parking Space Lease is encompassed by clauses (i), (ii), and/or (iii) in (A) of this definition.

     (pp) “MB Properties” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement. “MB Property” shall mean any one of the MB Properties.

     (qq) “MB Sites” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement. “MB Site” shall mean any one of the MB Sites.

     (rr) “MBs” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement. “MB” shall mean any one of the MBs.

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     (ss) “MOB Development Agreement Assignment” shall have the meaning ascribed to such term in Exhibit 3.3(g).

     (tt) “Modifications” shall have the meaning ascribed to such term in Section 3.3(e) herein.

     (uu) “New Tenant Leases” shall have the meaning ascribed to such term in Section 3.3(e) herein.

     (vv) “New TI Obligations” shall mean tenant improvement expenses (including all hard and soft construction costs, whether payable to the contractor or the tenant) and tenant allowances which are the obligation of (a) the landlord under any Existing Tenant Leases that arise with respect to any renewal or expansion options in effect as of the Agreement Date under such Existing Tenant Leases exercised by a tenant after the Agreement Date, or (b) the landlord under (i) the Centennial Lease, and (ii) any New Tenant Leases or Modifications entered into during the period commencing on the Agreement Date and ending on the Closing Date in compliance with Section 3.3(e) herein. New TI Obligations shall not include, however, any tenant improvement expenses described in any Modification to the Goldstein Lease.

     (ww) “Non-Instructing Party” shall have the meaning ascribed to such term in Section 2.2(b)(i) herein.

     (xx) “OFAC” shall have the meaning ascribed to such term in Section 3.2(g) herein.

     (yy) “Parking Garage” shall mean the approximately 156-space parking garage located on MB Site#2 and which is the subject of the Ground Lease.

     (zz) “Parking Space Lease” shall mean that certain Parking Space Lease dated July 6, 2007 between Seller#1, as the landlord, and Frisco Medical Center, L.L.P., as the tenant, as amended by that certain First Amendment to Parking Space Lease dated December 1, 2007.

     (aaa) “Permits” shall mean all permits, licenses, approvals, entitlements and other governmental, quasi-governmental and non-governmental authorizations, including, without limitation, certificates of occupancy required in connection with the ownership, development, construction, use, operation or maintenance of the Property. As used herein, the term “quasi-governmental” shall include the providers of all utilities services to the Property.

     (bbb) “Permitted Exceptions” shall have the meaning ascribed to such term in Section 9.2 herein.

     (ccc) “Permitted Modification(s)” shall have the meaning ascribed to such term in Section 3.3(e)(i) herein.

     (ddd) “Personal Property” shall mean: (i) all signs, supplies, tools, decorations, furniture, furnishings, fixtures, equipment, machinery, landscaping and other tangible personal property located on the MB Sites and Land Sites and owned and used by Sellers exclusively in connection with the leasing, management, operation, maintenance and repair of the MB Properties and Land Sites; (ii) all of Sellers’ right, title and interest in and to the Contracts; (iii) all of Sellers’ right, title and interest as landlord in and to the Leases; and (iv) all warranties for any portion of the MB Properties and/or the Land Sites that are in effect as of the Closing Date.

     (eee) “Pre-Payment Penalty” shall have the meaning ascribed to such term in Section 7.2(h) herein.

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     (fff) “Property” shall mean, collectively, the fee simple title to be conveyed to Purchaser in the MB Properties and the Land Sites, including Sellers’ interest, if any, in any easements, covenants and other rights appurtenant to such MB Properties and Land Sites, and the Personal Property.

     (ggg) “Purchase Price” shall have the meaning ascribed to such term in Section 2.2(a) herein.

     (hhh) “Purchaser” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement.

     (iii) “Purchaser Closing Documents” shall have the meaning ascribed to such term in Section 3.4(b) herein.

     (jjj) “Sellers” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement, and “Seller#1, Seller#2, Seller#3, and Seller#4” shall have the meaning ascribed to such term in the recital paragraphs of this Agreement. “Seller” shall mean any one of the Sellers.

     (kkk) “Sellers’ Affidavit” shall have the meaning ascribed to such term in Section 9.2 herein.

     (lll) “Sellers Closing Documents” shall have the meaning ascribed to such term in Section 3.3(g) herein.

     (mmm) “Sellers Deliverables” shall have the meaning ascribed to such term in Section 4.1 herein.

     (nnn) “Sign Payment” shall have the meanings ascribed to such term in Section 7.2(c) herein.

     (ooo) “Sign Refurbishment Agreement” shall mean the Letter Agreement Regarding Directional Signage at Baylor Medical Center Campus in Frisco, Texas between Seller#1 and Frisco Medical Center, L.L.P., dated November 20, 2009.

     (ppp) “State” shall mean the State of Texas.

     (qqq) “Study Materials” means all non-privileged, non-proprietary materials (i) delivered to Purchaser by Sellers relating to the physical condition, maintenance, and leasing of the Property, including, without limitation, all Leases, current rent rolls, income and expense statements for each MB Property for the calendar years 2008, 2009 and 2010 (through November), plans and specifications and Sellers Deliverables; and (ii) any title information, surveys, plans, documents, reports, studies and test results developed or prepared by or on behalf of Purchaser related to the Property.

     (rrr) “Study Period” shall have the meaning ascribed to such term in Section 4.1 herein.

      (sss) “Survey(s)” shall have the meaning ascribed to such term in Section 9.1 herein.

      (ttt) “Survival Period” shall have the meaning ascribed to such term in Section 3.1 herein.

     (uuu) “Tenant Estoppel” shall have the meaning ascribed to such term in Section 5.1(c) herein.

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     (vvv) “Title Commitment” shall have the meaning ascribed to such term in Section 9.1 herein.

     (www) “Title Company” shall have the meaning ascribed to such term in Section 2.2(b)(i) herein.

     (xxx) “Title Objections Period” shall have the meaning ascribed to such term in Section 9.2 herein.

     (yyy) “Title Policy” shall have the meaning ascribed to such term in Section 9.1 herein.

     (zzz) “USA Patriot Act” shall have the meaning ascribed to such term in Section 3.2(f) herein.

     (aaaa) “Zoning Requirements” shall mean all applicable zoning statutes, ordinances, regulations and laws applicable to the Property.

ARTICLE 2
PURCHASE AND SALE OF THE PROPERTY

     2.1 Purchase of the Property. On the Closing Date, and subject to the terms and conditions set forth in this Agreement, Sellers shall sell, transfer, assign and convey to Purchaser, and Purchaser shall purchase and accept the sale, transfer, assignment and conveyance from Sellers of, and assume the obligations of Sellers arising from or otherwise relating to, the following:

     (a) fee simple title to the Property, including, without limitation, the Leases and all temporary occupancy agreements affecting the Property; and

     (b) all right, title, and interest of Sellers in and to the contracts, agreements, and warranties set forth on Exhibit 2.1(b) attached hereto under the heading “Contracts to be assigned at Closing,” which are still in effect as of the Closing Date, if any (collectively, the “Contracts”).

     2.2 Purchase Price and Terms of Payment.

     (a) The aggregate price (the “Purchase Price”) to be paid by Purchaser to Sellers for the Property shall be $133,500,000.00, subject to adjustments and prorations as set forth in this Agreement. The Purchase Price shall be allocated among the MB Properties and Land Sites as follows:

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Building	Purchase Price
Frisco Surgery Center (MB #1) 5601 Warren Parkway	$	92,000,000.00
Professional Office Building I (MB #2) 5575 Warren Parkway	$	22,000,000.00
Professional Office Building II(MB #3) 5757 Warren Parkway	$	17,000,000.00
Land Site#1 Lot 1A, Block A	$	1,000,000.00
Land Site#2 Lot 5A, Block A	$	1,500,000.00
Total	$	133,500,000.00

     (b) The Purchase Price shall be paid by Purchaser as follows:

     (i) Deposit. Within three (3) days after the Agreement Date, Purchaser shall deposit with Republic Title of Texas, Inc., a subsidiary of First American Title Insurance Company, at its offices located at 2626 Howell Street, 10^th Floor, Dallas, Texas 75204 (the “Title Company”), in cash or Federal wire funds, the sum of $1,000,000.00 (the “Deposit”), which Deposit shall be held and disbursed by the Title Company in accordance with the terms and provisions of this Agreement. (From time to time in this Agreement, the Title Company is also referred to as the “Escrow Agent.”) The Deposit shall be nonrefundable except as specifically provided herein, but shall be credited against the Purchase Price at Closing. The Deposit shall be deposited in a federally-insured financial institution in an interest-bearing account. All earned interest on the Deposit shall belong to the party entitled to receive the Deposit under this Agreement. If settlement is completed under the Agreement, Escrow Agent shall pay the Deposit to Sellers as part of the Purchase Price, as required by the Agreement. In the event that either Sellers or Purchaser terminates the Agreement pursuant to the exercise of any right of termination as permitted by the provisions of the Agreement, Escrow Agent shall pay the Deposit and any interest earned thereon to the party identified in the Agreement as being the party to receive the Deposit. In the event that Escrow Agent shall receive an instruction (hereinafter the “Instruction”), with respect to the Deposit, or any part thereof, from Sellers but not from Purchaser, or from Purchaser and not from Sellers (the party giving the Instruction being hereinafter referred to as the “Instructing Party” and the party which did not give the Instruction being hereinafter referred to as the “Non-Instructing Party”), Escrow Agent shall deliver or transmit to the Non-Instructing Party a copy of the Instruction received from the Instructing Party. Unless the Non-Instructing Party notifies Escrow Agent in writing within five (5) days after the Non-Instructing Party’s receipt of the Instruction that Escrow Agent is not to comply with the Instruction, Escrow Agent shall act in accordance with the Instruction. If, however, the Non-Instructing Party does notify Escrow Agent within such five (5) day period that Escrow Agent is not to comply with the Instruction, Escrow Agent shall not act in compliance therewith, but may thereafter either:

          (x) act solely in accordance with: (i) a new Instruction signed jointly by Sellers and Purchaser; (ii) a separate Instruction of like tenor from Sellers and Purchaser; or (iii) a

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certified copy of a judgment of a court of competent jurisdiction, as to which Escrow Agent shall have received an opinion of counsel satisfactory to Escrow Agent that such judgment is final and beyond appeal; or

          (y) upon written notice to Sellers and Purchaser, deposit the Deposit with the registry of a Federal District Court of competent jurisdiction, and in such event all liability and responsibility of Escrow Agent with respect to the Deposit shall terminate upon such deposit having been made.

     Escrow Agent may rely upon the genuineness or authenticity of any document tendered to it by Sellers or Purchaser and shall be under no duty of independent inquiry with respect to any facts or circumstances recited therein. Escrow Agent shall not be liable for any damage, liability or loss arising out of or in connection with the services rendered by Escrow Agent pursuant to this Agreement, except for any damage, liability or loss resulting from the willful misconduct or negligent conduct of Escrow Agent or any of its officers or employees.

     (ii) Remainder of Purchase Price. At the Closing, Purchaser shall pay to Sellers the balance of the Purchase Price, with the Deposit being paid over directly to Sellers by the Title Company, on the Closing Date by Federal wire funds. Such amounts shall be received by Sellers no later than 2:00 p.m., Eastern Time, on the Closing Date.

     (iii) Independent Consideration. Purchaser shall pay to Sellers within three (3) days after the Agreement Date, the sum of $1,000.00 which shall be non-refundable independent consideration for Sellers’ willingness to execute this Agreement (the “Independent Consideration”). The Independent Consideration shall be applied to the payment of the Purchase Price; provided, however, if the sale of the Property does not close for any reason, the Independent Consideration shall be retained by Sellers.

ARTICLE 3
REPRESENTATIONS, WARRANTIES, AND COVENANTS

     3.1 Representations and Warranties of Sellers. For all purposes of this Agreement, the phrase “to Sellers’ knowledge and belief” and similar phrases means the actual, conscious knowledge of Jim Williams, Jr. and/or Reed Williams without any duty to investigate or inquire. In accordance with, and subject to the provisions of Section 10.13, each Seller, on its own behalf and not on behalf of the other Sellers, hereby makes the following representations and warranties to Purchaser with respect to itself and to that portion of the Property owned by such Seller, all of which are made as of the Agreement Date and shall be true and correct on the Closing Date, and all of which shall survive Closing for a period of one (1) year only (the “Survival Period”) (provided, however, the foregoing limitation on the period of survival of such representations and warranties shall not apply to any representations and warranties made by Sellers pursuant to the Sellers Closing Documents, the intent of the parties being that the terms, conditions and provisions of the Sellers Closing Documents shall govern in such event):

     (a) Sellers are duly formed, validly existing and, to the extent applicable, in good standing under the laws of the State of Texas, are qualified to do business in, and in good standing in, such state; and have full power, authority, and legal right to execute and deliver, and to perform and observe the provisions of, this Agreement and the Sellers Closing Documents, and otherwise carry out the transactions contemplated hereunder.

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     (b) This Agreement and the Sellers Closing Documents are, or will be when executed and delivered by Sellers, legally binding on, and enforceable against, Sellers in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, receivership and other similar laws affecting the rights and remedies of creditors generally, and by general principles of equity (whether applied by a court of law or equity). The execution by Sellers of this Agreement and the consummation by Sellers of the transactions contemplated hereby do not, and at the Closing will not, result in a breach of any of the terms or provisions of, or constitute a default or a condition which upon notice or lapse of time or both would ripen into a default under any indenture, agreement, instrument or obligation to which any Seller is a party or, to Sellers’ knowledge and belief, by which the Property or any portion thereof is bound, and does not, and at the Closing will not, to Sellers’ knowledge and belief, constitute a violation of any law, order, rule or regulation applicable to Sellers or any portion of the Property of any court or of any federal, state or municipal regulatory body or administrative agency or other governmental body having jurisdiction over Sellers or any portion of the Property.

     (c) Exhibit 3.1(c) attached hereto constitutes a true and complete list, in all material respects, of (i) all leases and temporary occupancy agreements, licenses and the like with third-parties encumbering the Property in existence as of the Agreement Date and to be assigned to Purchaser at Closing (the “Existing Tenant Leases”), and (ii) all amendments and modifications to such Existing Tenant Leases. Sellers shall deliver to Purchaser a true and complete copy of the Existing Tenant Leases (including any amendments thereto), and other revenue generating agreements (such as antenna license agreements and vending agreements) relating to the Property. To Sellers’ knowledge and belief, (y) there are no parties in possession of the Property other than Sellers or Affiliates of Sellers pursuant to leases or occupancy agreements to be terminated on or before Closing and tenants under the Existing Tenant Leases or subtenants of such tenants, and (z) except for Purchaser, no person or entity has the right to purchase or an option to purchase the Property. Each Existing Tenant Lease is in full force and effect and has not been amended, modified or supplemented in any way that has not been disclosed on Exhibit 3.1(c) attached hereto. The Leases furnished to Purchaser pursuant to this Agreement constitute all written and oral agreements of any kind for the leasing, rental or occupancy of any portion of the Property, except for those term sheets, leasing proposals or letters of intent which are also disclosed on Exhibit 3.1(c) attached hereto. To Sellers’ knowledge and belief, (1) no default or breach on the part of landlord or tenant, if any, exists under any of the Existing Tenant Leases, except as shown in Exhibit 3.1(c) attached hereto, (2) all CAM and other operating expense charges payable under the Existing Tenant Leases for all calendar years prior to calendar year 2010 have been billed to and collected from the tenants under the Existing Tenant Leases, except as shown in Exhibit 3.1(c) attached hereto, and (3) as of the Agreement Date there are no disputes, challenges or requests for audits with respect to CAM or other operating expense charges for any calendar year prior to calendar year 2010 from tenants under the Existing Tenant Leases. Sellers have not accepted the payment of rent or other sums due under any of the Existing Tenant Leases for more than one (1) month in advance.

     (d) Sellers have not received written notice from any Governmental Authority of: (i) any pending or threatened condemnation proceedings affecting the Property, or any part thereof; or (ii) any violations of any Zoning Requirements with respect to the Property, or any part thereof, which have not heretofore been cured.

     (e) Exhibit 2.1(b) attached hereto sets forth a list of all Contracts (other than leasing commission agreements) between Sellers (or any managing agent on behalf of Sellers) and third parties relating to the maintenance or operation of the Property. Sellers shall deliver to Purchaser a true and complete copy of the Contracts. The list of Contracts in Exhibit 2.1(b) is segregated into a

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list of all Contracts that will be assigned at Closing and a list of those contracts, agreements, and warranties affecting the Property that will not be assigned at Closing. To Sellers’ knowledge and belief, except as set forth in Exhibit 2.1(e), at Closing there will be no incomplete construction projects or tenant finish work affecting the Property. Seller#1 represents and warrants that it has completed its obligations set forth in the Sign Refurbishment Agreement.

     (f) Exhibit 3.1(f) attached hereto sets forth a list of leasing commission agreements pursuant to which leasing commissions may become due and owing after the Agreement Date (the commissions disclosed on Exhibit 3.1(f) attached hereto are hereinafter collectively referred to as the “Future Commission Obligations”).

     (g) Sellers have received no written notice from any Governmental Authority of any Hazardous Conditions relating to the Property or of any other violation of any federal, state or local law, statute, regulation, order or ordinance.

     (h) There is no pending litigation against Sellers or to which Sellers are a party relating to Sellers’ ownership of the Property or any part thereof or which would prevent Sellers from conveying the Property in accordance with this Agreement.

     (i) Exhibit 3.1(i) attached hereto is a true and complete list of all security deposits held by Sellers under the Existing Tenant Leases.

     (j) To Sellers’ knowledge and belief, Sellers are the current owners of fee simple title to the MB Properties.

     (k) Each Seller is not a “foreign person” which would subject Purchaser to the withholding tax provisions of Section 1445 of the Internal Revenue Code of 1986, as amended.

     (l) Each Seller is not insolvent (as such term is defined in Section 101(32) of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. (the “Bankruptcy Code”)) and will not become insolvent as a result of entering into and consummating this Agreement or the transactions contemplated hereby (including, without limitation, the sale of the Property), nor are the transfers to be made hereunder or obligations incurred in connection herewith made or incurred by Sellers with any intent to hinder, delay or defraud any creditors to which Sellers are or become indebted. Sellers acknowledge that Sellers are receiving new, fair, and reasonably equivalent value in exchange for the transfers and obligations contemplated by this Agreement and affirmatively represent that neither their entry into this Agreement nor their consummation of the transactions contemplated hereby constitutes a fraudulent conveyance or preferential transfer under the Bankruptcy Code or any other federal, state or local laws affecting the rights of creditors generally.

     (m) To Sellers’ knowledge and belief, all of the Study Materials (including property financial reports and data) delivered by Sellers or to be delivered by Sellers to Purchaser are true, complete and accurate in all material respects, and any property financial reports and data comprising a portion of the Study Materials delivered by Sellers were prepared in the normal course of Sellers’ operation and are those used in the day-to-day operation of the Property.

     (n) Except as set forth in Exhibit 2.1(e) attached hereto, all Existing TI Obligations will have been fully performed and funded by Sellers as of the Closing Date.

     Notwithstanding anything contained herein to the contrary, if any representation or warranty of Sellers herein, although true as of the Agreement Date, is no longer true at Closing as a result of a matter, event or circumstance beyond Sellers’ reasonable control, Purchaser may not

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consider same as an event of default hereunder; but rather, in such case, the provisions of this grammatical paragraph shall govern and control. In this regard, if, at or prior to Closing, either party obtains knowledge that any of Sellers’ representations or warranties set forth above relative to any MB Property or Land Site is untrue, inaccurate or incorrect in any material respect, such party shall give the other party written notice thereof within five (5) business days of obtaining such knowledge (but, in any event, prior to Closing). In such an event, Sellers shall have the right to cure such misrepresentation or breach. If Sellers do not cure any such misrepresentation or breach, then Purchaser, as its sole remedy for any and all such untrue, inaccurate or incorrect material representations or warranties, shall elect either (i) to waive such misrepresentation or breach and consummate the transaction contemplated hereby without any reduction of or credit against the Purchase Price, or (ii) to terminate this Agreement as to all of the Property, in which case the parties shall be released of all obligations under this Agreement except those that expressly survive such termination. If Purchaser terminates this Agreement pursuant to the preceding sentence, it shall be entitled to a return of the Deposit and the Title Company shall, subject to the provisions of Section 2.2(b)(i) promptly return the Deposit to Purchaser. Further, if this Agreement is terminated by written notice given as aforesaid, then Purchaser shall, at its election, promptly either return all of the Study Materials to Sellers or destroy all of the Study Materials (including all copies thereof) in the possession of Purchaser and its employees, agents, representatives and consultants and confirm such destruction in writing to Sellers (at no cost to Sellers in either such event). The foregoing obligations of Purchaser shall survive the termination of this Agreement. Notwithstanding any provision herein to the contrary, in the event Closing occurs, Purchaser hereby expressly waives, relinquishes and releases (a) any right or remedy available to it under this Agreement, and (b) any right or remedy available to it at law, in equity, or otherwise, to make a claim against Sellers for damages that Purchaser may incur, or to rescind this Agreement and the transaction contemplated hereby, as the result of any of Sellers’ representations or warranties being untrue, inaccurate or incorrect if Purchaser knew or is deemed to have known that such representation or warranty was untrue, inaccurate or incorrect at the time of Closing. Purchaser shall be deemed to know of any matter contained in any document, report or other writing forwarded to or received by Purchaser at least two (2) business days prior to Closing. Sellers shall deliver to Purchaser at Closing a certificate in the form attached hereto as Exhibit 3.1 (the “Closing Certificate”) wherein Sellers shall confirm that the representations and warranties set forth in this Section 3.1 are true and correct in all material respects as of the Closing Date as if made on and as of the Closing Date, subject to the terms and provisions in this Section 3.1 (including, without limitation, Sellers’ right to cure any materially untrue, inaccurate or incorrect representation or warranty and Purchaser’s waiver of certain of Sellers’ representations and warranties pursuant to this Section 3.1). If, after Closing, Purchaser discovers that any of the representations or warranties of Sellers set forth above is untrue, inaccurate or incorrect in any material respect, then Purchaser may bring a claim for damages during the Survival Period for said misrepresentation or breach, provided that in no event shall an applicable Seller be liable to Purchaser for damages hereunder in an aggregate amount in excess of two percent (2%) of the portion of the Purchase Price allocated to the relevant MB(s) or Land Sites pursuant to Section 2.2(a) herein. Additionally, Purchaser acknowledges that Purchaser shall have no remedy for any misrepresentation or breach by Sellers relative to any of the representations or warranties of Sellers set forth above for claim(s) with respect to which Purchaser initiates a legal proceeding after the expiration of the Survival Period. The provisions of this grammatical paragraph shall survive Closing and/or any termination of this Agreement.

     3.2 Representations and Warranties of Purchaser. Purchaser hereby makes the following representations and warranties to Sellers, all of which are made as of the Agreement Date and shall be true and correct on the Closing Date, and, except as otherwise provided herein, all of which shall survive Closing for a period of one (1) year only (provided, however, the foregoing limitation on the period of survival of such representations and warranties shall not apply to any representations and warranties made by Purchaser pursuant to the Purchaser Closing Documents,

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the intent of the parties being that the terms, conditions and provisions of the Purchaser Closing Documents shall govern in such event):

     (a) Purchaser is duly formed, validly existing and, to the extent applicable, in good standing under the laws of the state of its organization/formation; is, or will be on the Closing Date, duly qualified and authorized to do business in the State, to the extent such qualification is required to perform its obligations hereunder or under any other documents to be executed by Purchaser hereunder; and has, or will have on the Closing Date, full power, authority, and legal right to execute and deliver and to perform and observe the provisions of this Agreement and the Purchaser Closing Documents and otherwise carry out the transactions contemplated hereunder.

     (b) No consent, approval or other authorization of, or registration, declaration or filing with, any governmental authority is required for the due execution and delivery of this Agreement, or for the performance by or the validity or enforceability thereof against Purchaser.

     (c) This Agreement and the Purchaser Closing Documents are, or will be when executed and delivered by Purchaser, legally binding on, and enforceable against, Purchaser in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, receivership and other similar laws affecting the rights and remedies of creditors generally, and by general principles of equity (whether applied by a court of law or equity). The execution by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby do not, and at the Closing will not, result in a breach of any of the terms or provisions of, or constitute a default or a condition which upon notice or lapse of time or both would ripen into a default under any indenture, agreement, instrument or obligation to which Purchaser is a party, and does not, and at the Closing will not, to Purchaser’s knowledge and belief, constitute a violation of any law, order, rule or regulation applicable to Purchaser of any court or of any federal, state or municipal regulatory body or administrative agency or other governmental body having jurisdiction over Purchaser.

     (d) Purchaser is not insolvent (as such term is defined in Section 101(32) of the Bankruptcy Code) and will not become insolvent as a result of entering into and consummating this Agreement or the transactions contemplated hereby (including, without limitation, the purchase of the Property), nor are the transfers to be made hereunder or obligations incurred in connection herewith made or incurred by Purchaser with any intent to hinder, delay or defraud any creditors to which Purchaser is or becomes indebted. Purchaser acknowledges that it is receiving new, fair, and reasonably equivalent value in exchange for the transfers and obligations contemplated by this Agreement and affirmatively represents that neither its entry into this Agreement nor its consummation of the transactions contemplated hereby constitutes a fraudulent conveyance or preferential transfer under the Bankruptcy Code or any other federal, state or local laws affecting the rights of creditors generally.

     (e) There are no actions, proceedings or investigations or tax audits pending or, to Purchaser’s knowledge, threatened, against or affecting Purchaser, seeking to enjoin, challenge or collect damages in connection with the transactions contemplated hereunder or under the Purchaser Closing Documents or which could reasonably be expected to materially and adversely affect the financial condition of Purchaser or the ability of Purchaser to carry out the transactions contemplated hereunder or thereunder.

     (f) The sources of funds for payment by Purchaser of the Purchase Price are not sources of funds which are subject to 18 U.S.C. §§ 1956-1957 (Laundering of Money Instruments), 18 U.S.C. §§ 981-986 (Federal Asset Forfeiture), 21 U.S.C. § 881 (Drug Property Seizure), the United and Strengthening America by Providing Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (the “USA Patriot Act”) or otherwise violate any Federal anti-

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money laundering statute, implementing regulation, or applicable executive order listed at http://www.treasury.gov/resource-center/sanctions/Pages/eolinks.aspx.

     (g) Purchaser is not, and will not become, a person or entity with whom U.S. persons are restricted from doing business with under regulations of the Office of Foreign Asset Contract (the “OFAC”) of the Department of Treasury (including those named on the OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including Executive Order 13224), the USA Patriot Act, or any other governmental action.

     (h) Purchaser is not acquiring the Property with the assets of an employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974.

     Notwithstanding anything to the contrary contained herein, the representations and warranties of Purchaser contained in Sections 3.2(f) through 3.2(h) herein shall survive Closing indefinitely.

     3.3 Additional Obligations, Covenants, and Agreements of Sellers.

     (a) Sellers agree to give full, complete, and actual possession of the Property to Purchaser on the Closing Date, subject only to the rights of tenants under the Existing Tenant Leases and all other matters described in Section 9.2 herein. Sellers agree to cooperate fully with Purchaser to assure that the transfer of possession of the Property takes place with as little disruption as practicable to the normal operation of the Property. In this regard, Sellers and Purchaser shall execute and deliver to the Closing Agent, for further delivery by Purchaser to all tenants under the Leases, a sufficient number of copies of the form Notice to Tenant attached hereto as Exhibit 3.3(a). Purchaser agrees to deliver to each such tenant an executed Notice to Tenant immediately following the Closing.

     (b) All of the Contracts shall be assigned to and assumed by Purchaser at Closing (to the extent assignable). If any third-party consent is required as a condition to the effective assignment of a particular Contract to Purchaser, Sellers shall use its good faith, commercially reasonable efforts to secure such consent prior to Closing.

     (c) On the Closing Date, Sellers shall turn over to Purchaser (either directly or by leaving the same at the Property) (i) executed originals (or true copies if Sellers do not possess the originals) of each Lease, and (ii) to the extent in Sellers possession, copies of all books and records required to be kept in accordance with the Tax Abatement Agreement between Collin County and Seller#4, the Tax Abatement Agreement between The City of Frisco and Seller #4, and the Medical Office Buildings Development Agreement between The City of Frisco and Seller#4.

     (d) Subject to Purchaser’s satisfaction of and compliance with the conditions set forth in Section 4.2 herein, Sellers shall permit Purchaser, and its agents, representatives, and contractors, to have reasonable access to the Property to conduct Inspections during normal business hours from and after the Agreement Date through the Closing Date, subject to the rights of tenants under the Existing Tenant Leases and provided that, if Sellers desire, a representative of Sellers shall accompany Purchaser and its agents, representatives, and contractors onto the Property for all Inspections. In addition, subject to the conditions set forth in Section 4.2 herein, Sellers shall deliver to Purchaser all Study Materials in Sellers’ possession or control.

     (e) The following terms and provisions shall apply from the Agreement Date and until the Closing relative to the execution and delivery of new leases of space relative to the Property (collectively, “New Tenant Leases”) and instruments modifying Existing Tenant Leases (collectively, the “Modifications”):

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     (i) From and after the Agreement Date and prior to the Closing, Sellers (as landlord) shall be entitled to enter into Modifications, without seeking or obtaining any consent or approval of Purchaser, if and only if such Modifications are expressly required by and provided for in any Existing Tenant Lease (such Modifications that do not require Purchaser’s consent are hereinafter referred to singularly as a “Permitted Modification” and collectively as “Permitted Modifications”).

     (ii) From and after the Agreement Date and prior to the Closing, Sellers (as landlord) shall not be entitled to enter into any New Tenant Lease or any Modifications (other than Permitted Modifications), without the prior written consent of Purchaser, which consent shall be in Purchaser’s sole discretion. Purchaser shall deliver its approval or disapproval within five (5) business days after Purchaser’s receipt of a written request for approval of a New Tenant Lease or a Modification (other than Permitted Modifications) from Sellers by providing written notice of Purchaser’s approval or disapproval of the same. If Purchaser shall fail to deliver written notice of Purchaser’s approval or disapproval within said five (5) business-day period, then Purchaser shall be deemed conclusively to have approved such New Tenant Lease or a Modification.

     (f) Sellers agree that from and after the Agreement Date to the Closing Date, Sellers will: (i) at their expense, maintain its usual maintenance program for the Property, reasonable wear and tear and damage by fire or other casualty excepted, it being understood, however, that the Property is being sold in an “AS-IS” condition as provided in Section 6.2 herein; (ii) continue to perform in all material respects its obligations as landlord under the Leases; and (iii) maintain in full force and effect property and casualty insurance policies providing coverage on the same basis with the same terms and conditions that are currently maintained.

     (g) On the Closing Date, Sellers shall execute and deliver to the Title Company or other party mutually agreed to by Purchaser and Sellers (the “Closing Agent”) the documents, affidavits, certificates, and other instruments identified on Exhibit 3.3(g) attached hereto (collectively, the “Sellers Closing Documents”).

     (h) At Purchaser’s sole cost and expense, Sellers agree, upon request of Purchaser, to cooperate and to use their good faith, commercially reasonable efforts to assist Purchaser in its efforts to obtain the issuance to Purchaser of audited financial statements of the Property, with an unqualified opinion of Purchaser’s or Sellers’ independent auditors for the results of operations of the Property, together with any other financial statements or information that can reasonably be expected to be required by Purchaser to fully comply with Regulation S-X promulgated by the Securities and Exchange Commission. In furtherance of the foregoing, at Purchaser’s sole cost and expense, Sellers agree, without limitation, to grant access to all of Sellers’ financial statements, and non-privileged records, information and data relating to the Property to Purchaser’s (or Sellers’, as the case may be) independent auditors and, at Purchaser’s sole cost and expense, hereby undertakes to provide such independent auditors with any customary management letters that such independent auditors might reasonably request in connection with its issuance to Purchaser of audited financial statements and an unqualified opinion for the results of operations of the Property. Sellers’ obligations contained in this Section 3.3(h) shall survive for a period of one year following Closing.

     (i) From and after the Agreement Date and until the Closing Date, Sellers shall not enter into any new Contracts relative to the Property without first obtaining the written consent of Purchaser thereto, which consent shall not be unreasonably withheld, conditioned or delayed so long as such Contract may be terminated by the owner of the Property without penalty on no more than thirty (30) days prior written notice. Purchaser shall give Sellers its written response to any request for Purchaser’s consent to a new Contract within five (5) business days of receipt of such request, and Purchaser’s failure to provide such written response within such five (5) business day period conclusively shall be deemed to be Purchaser’s consent to such new Contract.

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     3.4 Additional Obligations, Covenants, and Agreements of Purchaser.

     (a) Provided that Closing occurs, Purchaser shall pay (or, if previously paid by Sellers, reimburse Sellers for) all leasing commissions payable with respect to (i) any Permitted Modifications entered into by one or more Sellers from the Agreement Date to the Closing Date, (ii) any New Tenant Leases or Modifications (other than Permitted Modifications) entered into by one or more Sellers with Purchaser’s prior written consent from the Agreement Date to the Closing Date, and (iii) the Centennial Lease, which amount in regard to the Centennial Lease is agreed to be $58,070.12. Further, Purchaser shall pay for (or, if previously paid by Sellers, reimburse Sellers for) and perform all tenant improvement work and/or pay (or, if previously paid by Sellers, reimburse Sellers for) all tenant allowances required or provided under (i) any Permitted Modifications entered into by one or more Sellers from the Agreement Date to the Closing Date and (ii) any New Tenant Leases or Modifications (other than Permitted Modifications) entered into by one or more Sellers, with Purchaser’s prior written consent, from the Agreement Date to the Closing Date. Other than the Future Commission Obligations (for all of which Purchaser agrees to be responsible), Sellers shall pay all leasing commissions payable with respect to any Existing Tenant Leases. Purchaser, at its sole cost and expense, shall defend (through counsel reasonably approved by Sellers), indemnify, and hold Sellers harmless from and against all liability or claims arising from or related to the Future Commission Obligations. Sellers, at their sole cost and expense, shall defend (through counsel reasonably approved by Purchaser), indemnify, and hold Purchaser harmless from and against all liability or claims arising from or related to the leasing commissions payable by Seller pursuant to this Agreement. The provisions of this Section 3.4(a) shall survive Closing indefinitely.

     (b) On the Closing Date, Purchaser shall execute and deliver to the Closing Agent the documents, affidavits, certificates, and other instruments identified on Exhibit 3.4(b) attached hereto (collectively, the “Purchaser Closing Documents”).

ARTICLE 4
STUDY PERIOD; PURCHASER’S INSPECTIONS

     4.1 Study Period. Purchaser confirms receipt of the Survey and the Title Commitment and a copy of all exception documents referenced therein. Sellers confirm delivery of those specific due diligence items described in Exhibit 4.1 attached hereto (the items referenced in the first two sentences of this Section 4.1 are collectively referred to herein as the “Sellers Deliverables”). Commencing on the Agreement Date and continuing through 5:00 p.m. Central Time on December 28, 2010 (the “Study Period”), and subject to Purchaser’s satisfaction of the conditions set forth in Section 4.2 herein, Purchaser shall have the right, at its sole cost and expense, to inspect and review the Property, the physical and environmental condition thereof, and such other information as it may desire concerning the Property, including, without limitation, obtaining an engineering report and a so-called “Phase I” environmental report on the Property, inspecting Sellers’ books and records relating to the Property, inspecting Sellers’ accounting information regarding cash flow, billing and real estate taxes, obtaining the approval of Purchaser’s corporate management of the transaction contemplated herein and conducting such other investigations of the Property as Purchaser deems necessary, subject to the terms and provisions of this Agreement (collectively, the “Inspections”). Notwithstanding anything contained herein to the contrary, however, Purchaser shall not conduct any environmental studies of the Property more extensive than a “Phase I” level review without first obtaining Sellers’ prior written consent, which may be given or withheld in Sellers’ sole and absolute discretion. If Purchaser, for any reason in Purchaser’s sole discretion, elects not to purchase the Property, then Purchaser shall be entitled to terminate this Agreement by giving written notice thereof to Sellers and the Title Company on or before the expiration of the Study Period, and receive a return of the Deposit. Further, if this Agreement is terminated by written notice given as aforesaid, then Purchaser shall, at its election, promptly either return the Study Materials to Sellers or destroy all of the Study Materials (including all copies thereof) in the possession of Purchaser and

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its employees, agents, representatives and consultants and confirm such destruction in writing to Sellers (at no cost to Sellers in either such event). The foregoing obligations of Purchaser shall survive the termination of this Agreement. Subject to Section 2.2(b)(i), the Title Company shall return the Deposit to Purchaser within five (5) days after receipt from Purchaser of written confirmation (which confirmation shall be deemed to be an Instruction) that Purchaser has fully complied with all of the requirements imposed on Purchaser under the foregoing provisions in this Section 4.1, and Sellers and Purchaser shall have no further rights, obligations or liabilities to each other hereunder, except for the indemnification obligations of either party contained herein (collectively, the “Indemnification Obligations”) and any other obligations that expressly survive the termination of this Agreement. If Purchaser fails to terminate this Agreement in the manner and within the time period set forth above, then Purchaser shall be deemed to have waived the contingencies set forth in this Section 4.1, and this Agreement shall remain in full force and effect.

     4.2 Conditions of Conducting the Inspections. Purchaser’s right to conduct the Inspections on, at or otherwise with respect to the Property prior to the Closing Date shall be subject to Purchaser’s continuing compliance with each and all of the following conditions: (i) all such Inspections shall be conducted in a manner that is not disruptive to tenants or other temporary occupants at the Property; (ii) any contact or communication with any tenants (present or prospective) of the Property or their home office(s) shall be made only after obtaining Sellers’ consent (which shall not be unreasonably withheld, delayed or denied); and such contacts and communications shall be made in a professional and confidential manner; (iii) Purchaser shall at all times strictly comply with all laws, ordinances, rules, and regulations applicable to the Property and shall not engage in any activities that would violate permits, licenses, or environmental, wetlands or other regulations pertaining to the Property; (iv) promptly after entry onto the Property, Purchaser shall restore or repair, to Sellers’ reasonable satisfaction, any damage thereto caused by or otherwise arising from any act by Purchaser, its agents, representatives or contractors; (v) neither Purchaser nor its agents, representatives or contractors shall engage in any activities that would cause Sellers’ rights, title, interests or obligations in or relating to the Property to be adversely affected in any way, including, without limitation, the assertion of any mechanic’s liens, and Purchaser shall, without limitation, promptly remove and bond over any liens, claims of liens or other matters affecting the Property which are caused by Purchaser, its agents, representatives or contractors; (vi) Purchaser shall bear all costs and expenses of its due diligence with respect to the Property, and Sellers shall have no obligation to pay for and/or reimburse Purchaser for any of such costs and expenses, whether or not the sale of the Property pursuant to this Agreement actually closes; and (vii) Purchaser and its agents, representatives or contractors shall comply with the terms and provisions in Section 3.3(d) herein in connection with entries onto the Property to conduct Inspections (including inviting and allowing Sellers or a representative of Sellers to accompany Purchaser and its agents, representatives, and contractors onto the Property for all Inspections).

     4.3 Indemnification. Purchaser, at its sole cost and expense, shall defend (through counsel reasonably approved by Sellers), indemnify, and hold Sellers harmless from and against all injury, liability or damage, whether to person or property, arising from any entry onto the Property by Purchaser, its agents, representatives or contractors, or a violation by Purchaser or its agents, employees or contractors of any of the provisions of this Article 4. This Article 4 shall survive indefinitely Closing or the termination of this Agreement for any reason and shall be in addition to other obligations of Purchaser under Section 8.2 herein.

ARTICLE 5
CONDITIONS PRECEDENT

     5.1 Conditions Precedent to Purchaser’s Obligation to Purchase. The obligation of Purchaser to acquire the Property and to perform the other covenants and obligations to be performed by it on the Closing Date shall be subject to the following conditions precedent (which

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conditions precedent shall inure solely to the benefit of Purchaser, and no other person or entity, including, without limitation, Sellers, shall have any right to waive or defer any of such conditions):

     (a) All of Sellers’ representations and warranties set forth in Section 3.1 herein shall be true and correct in all material respects as of the Closing Date subject to Sellers’ right to cure any materially untrue, inaccurate or incorrect representation or warranty as set forth in Section 3.1 herein.

     (b) Sellers shall have delivered to Closing Agent each and all of the Sellers Closing Documents fully executed and acknowledged, where appropriate.

     (c) Sellers shall have delivered to Purchaser on or prior to the Closing Date (1) a tenant estoppel in the form and content attached hereto as Exhibit 5.1(c)-2, with respect to the Parking Space Lease, unmodified in any material respect by the tenant, (2) a tenant estoppel in the form and content attached hereto as Exhibit 5.1(c)-3 with respect to the FSC Lease, unmodified in any material respect by the tenant, and (3) tenant estoppels in the form attached hereto as Exhibit 5.1(c)-1 for (y) all other Leases for tenant spaces containing more than ten thousand (10,000) square feet of usable space, and (z) at least eighty percent (80%) of all Leases in each MB (such 80% threshold being measured on an MB by MB basis) for tenant spaces containing less than ten thousand (10,000) square feet of usable space individually (the “Estoppel Threshold”), provided, however, in order to meet the Estoppel Threshold, Sellers may provide estoppel certificates executed by Sellers in the form of the tenant estoppels approved by Purchaser as referenced below (modified as necessary to reflect its execution by Sellers instead of the applicable tenants) for not more than twenty percent (20%) of all Leases in each MB, excluding the FSC Lease and the Parking Space Lease. Thus, the Estoppel Threshold will not be met unless Sellers deliver estoppel certificates for at least sixty percent (60%) of all other Leases in each of MB#2 and MB#3 certified by the tenants in the leases to which such estoppel certificates relate. In order to count toward the Estoppel Threshold, each such estoppel certificate must (i) be approved in writing by Purchaser prior to delivery to the applicable tenant, (ii) be certified by the applicable tenant as of a date within thirty (30) days of the Closing Date, and (iii) be returned unmodified in any material respect by the tenant.

     (d) Prior to the Closing, no casualty damage shall have occurred to any MB Property.

     (e) Prior to the Closing, no Property shall be subject to a pending or threatened claim of condemnation or public taking from a Governmental Authority with the power of eminent domain.

     (f) Prior to the Closing, no Material Tenant Lease Defaults shall have occurred with respect to any MB Property.

     (g) The City of Frisco, Texas and Collin County, Texas must have executed and delivered the Sellers Closing Documents to which they are a party and delivered the same to the Closing Agent for disbursement at Closing.

     (h) The Title Company shall have confirmed in writing to Purchaser its unconditional obligation to issue the Title Policy to Purchaser insuring Purchaser’s fee simple interest in the Property subject only to the Permitted Exceptions.

     5.2 Conditions Precedent to Sellers’ Obligation to Sell. The obligation of Sellers to sell the Property and to perform the other covenants and obligations to be performed by them on the Closing Date shall be subject to the following conditions precedent (which conditions precedent shall inure solely to the benefit of Sellers, and no other person or entity, including, without limitation, Purchaser, shall have any right to waive or defer any of such conditions):

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     (a) On or before the Closing Date, Purchaser shall have delivered to Closing Agent the full amount of the Purchase Price (taking into consideration the prior delivery of the Deposit and all prorations, credits and adjustments made pursuant to this Agreement), together with any and all other sums that are to be paid by Purchaser in connection with the closing of its purchase of the Property, and any other amounts shown as payable by Purchaser on a settlement statement to be prepared in connection with the transactions contemplated hereby (the “Closing Statement”).

     (b) All of Purchaser’s representations and warranties set forth in Section 3.2 herein shall be true and correct in all material respects as of the Closing Date.

     (c) Purchaser shall have delivered to Closing Agent each and all of the Purchaser Closing Documents fully executed and acknowledged, where appropriate.

     5.3 Failure to Satisfy Conditions. If any of Sellers’ or Purchaser’s respective conditions precedent are not fully or timely satisfied on or before the Closing Date and such satisfaction is not the result of a party’s failure to perform its covenants or agreements in this Agreement (in which case, the provision of Article 8 shall control), then the party whose conditions precedent are not satisfied shall have the option to: (i) waive any or all of its conditions precedent and proceed to close the transactions contemplated hereby; or (ii) terminate this Agreement by giving written notice thereof to the other party on or before the Closing Date. In the event Sellers or Purchaser gives such notice as aforesaid, Sellers’ obligation to sell and Purchaser’s obligation to purchase the Property shall be deemed, without notice or further act of any party, to be automatically null and void and of no force or effect, and neither Sellers nor Purchaser shall have any further rights or obligations hereunder, except for the Indemnification Obligations and such other obligations that expressly survive the termination of this Agreement. Further, if this Agreement is terminated by written notice given as aforesaid, then Purchaser shall, at its election, promptly either return the Study Materials to Sellers or destroy all of the Study Materials (including all copies thereof) in the possession of Purchaser and its employees, agents, representatives and consultants and confirm such destruction in writing to Sellers (at no cost to Sellers in either such event). The foregoing obligations of Purchaser shall survive the termination of this Agreement. If and only if such termination occurred due to the failure of any of the conditions precedent described in Section 5.1 herein, then Purchaser shall be entitled to a return of the Deposit, and subject to Section 2.2(b)(i), the Title Company shall return the Deposit to Purchaser within five (5) days after receipt from Purchaser of written confirmation (which confirmation shall be deemed to be an Instruction) that Purchaser has fully complied with all of the requirements imposed on Purchaser under the foregoing provisions in this Section 5.3.

ARTICLE 6
SELLERS’ DISCLAIMER

     6.1 Purchaser’s Independent Investigation. PURCHASER HEREBY ACKNOWLEDGES AND AGREES THAT, IN ALL CASES, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN SECTION 3.1 HEREIN, SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE ADEQUACY, ACCURACY, COMPLETENESS OR CONTENT OF ANY OF THE STUDY MATERIALS OR THE SUITABILITY OF THE SAME FOR ANY PURPOSE, AND, EXCEPT FOR LIABILITY FOR THE BREACH OF THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN SECTION 3.1 HEREIN, SELLERS SHALL HAVE NO LIABILITY TO PURCHASER, OR ANY PERSON OR ENTITY CLAIMING BY, THROUGH OR UNDER PURCHASER, ARISING OUT OF THE STUDY MATERIALS OR TO ANY PERSON OR ENTITY TO WHOM ANY OF THE STUDY MATERIALS WERE DISCLOSED. FURTHER, EXCEPT AS MAY BE EXPRESSLY PROVIDED IN SECTION 3.1 HEREIN, NEITHER PURCHASER, ANY PERSON OR ENTITY CLAIMING BY, THROUGH OR UNDER PURCHASER, NOR ANY OTHER

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PERSON OR ENTITY TO WHOM ANY OF THE STUDY MATERIALS WERE DISCLOSED SHALL HAVE OR MAKE ANY CLAIMS AGAINST SELLERS BASED ON THE STUDY MATERIALS, INCLUDING, WITHOUT LIMITATION, THE ADEQUACY, ACCURACY, COMPLETENESS OR CONTENT THEREOF OR THE SUITABILITY OF THE SAME FOR ANY PURPOSE. PURCHASER HEREBY FURTHER ACKNOWLEDGES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.1 HEREIN, AS OF THE CLOSING DATE, PURCHASER SHALL BE DEEMED TO HAVE RELIED SOLELY ON ITS OWN INDEPENDENT INVESTIGATION, EXAMINATION, AND INSPECTIONS OF THE PROPERTY IN CONSUMMATING THE PURCHASE THEREOF IN ACCORDANCE WITH THIS AGREEMENT, THAT PURCHASER IS ASSUMING THE RISK OF FUTURE CHANGES IN APPLICABLE LAWS, AND THAT, EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.1 HEREIN, PURCHASER HAS NOT RELIED ON, IS NOT ENTITLED TO RELY ON, AND SHALL NOT RELY ON, AND SELLERS ARE NOT LIABLE FOR OR BOUND BY (EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.1 HEREIN), ANY REPRESENTATIONS OR WARRANTIES (NONE BEING IMPLIED HEREBY), STATEMENTS (VERBAL OR WRITTEN), DOCUMENTS, REPORTS, STUDIES, STUDY MATERIALS OR ANY OTHER MATERIALS MADE AVAILABLE OR PROVIDED BY SELLERS OR ANY OTHER PERSON OR ENTITY PURPORTING TO ACT ON BEHALF OF SELLERS.

     6.2 Property Conveyed “As-Is”. IN THE EVENT PURCHASER PROCEEDS TO CLOSE THE TRANSACTION CONTEMPLATED HEREBY, PURCHASER SHALL BE DEEMED TO BE SATISFIED WITH AND/OR TO HAVE WAIVED THE RESULTS OF ITS DUE DILIGENCE AND TO HAVE ACCEPTED THE PROPERTY, AND EACH AND EVERY PORTION THEREOF, “AS-IS,” “WHERE IS,” AND “WITH ALL FAULTS,” INCLUDING, WITHOUT LIMITATION, LATENT DEFECTS AND OTHER MATTERS NOT DETECTED IN PURCHASER’S INSPECTIONS, WITHOUT RECOURSE TO, AND WITHOUT REPRESENTATION OR WARRANTY BY, SELLERS (EXCEPT AS EXPRESSLY SET FORTH IN SECTION 3.1 HEREIN AND IN THE SELLERS CLOSING DOCUMENTS), EXPRESS OR IMPLIED, WHETHER STATUTORY OR OTHERWISE, AND WITHOUT ANY WARRANTIES OF TRANSFER, QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, INCLUDING, WITHOUT LIMITATION, PURCHASER’S INTENDED USES OR PURPOSES. SPECIFICALLY, PURCHASER AGREES THAT SELLERS WILL NOT BE RESPONSIBLE OR LIABLE TO PURCHASER FOR ANY CONSTRUCTION DEFECTS, ERRORS, OMISSIONS, OR ON ACCOUNT OF ANY OTHER CONDITIONS AFFECTING THE PROPERTY. PURCHASER, OR ANYONE CLAIMING BY, THROUGH OR UNDER PURCHASER, HEREBY FULLY RELEASES SELLER, ITS EMPLOYEES, OFFICERS, MANAGERS, PARTNERS, REPRESENTATIVES, ATTORNEYS, AND AGENTS FROM ANY CLAIM, COST, LOSS, LIABILITY, DAMAGE, EXPENSE, DEMAND, ACTION OR CAUSE OF ACTION ARISING FROM OR RELATED TO ANY CONSTRUCTION DEFECTS, ERRORS, OMISSIONS, OR OTHER CONDITIONS AFFECTING THE PROPERTY. THIS COVENANT RELEASING SELLERS SHALL BE BINDING UPON PURCHASER, ITS SUCCESSORS AND ASSIGNS. THIS WAIVER AND RELEASE OF CLAIMS SHALL SURVIVE THE CLOSING.

ARTICLE 7
CLOSING

     7.1 Closing. Assuming this Agreement has not been terminated by Purchaser pursuant to Section 4.1 above and that the conditions precedent to each parties’ obligations hereunder have either been satisfied or waived in accordance with Section 5.3 above, then the closing of the purchase and sale of the Property (the “Closing”), shall be conducted by the Closing Agent, on December 30, 2010, or on such other date as Purchaser and Sellers may agree in writing (the “Closing Date”). Time is of the essence with respect to the Closing Date, it being understood that the provisions of

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this Agreement regarding the Closing Date are a material inducement to Sellers’ entry into this Agreement.

     7.2 Closing Adjustments and Prorations. The following items of expense shall be adjusted as of midnight of the day immediately preceding the Closing Date (such that Sellers shall be responsible for all days prior to the Closing Date, and Purchaser shall be responsible for all days from and after the Closing Date, including, without limitation, the Closing Date):

     (a) Real Estate Taxes.

     (i) Real estate taxes that are due and payable with respect to the Property on the basis of the most current bills or other current information available shall be prorated as set forth above. Real estate taxes due and payable for any calendar or tax year prior to the year in which the Closing occurs shall be paid by Sellers.

     (ii) The tenant occupying MB Property#1 is obligated under the terms of the FSC Lease to pay all real estate taxes with respect to MB Property#1 and under the terms of the Parking Space Lease to pay all real estate taxes with respect to the parking structure located on MB Site#2. In prior years, Seller#1 would normally collect from such tenant checks in the amount of the real estate taxes owed with respect to MB Property#1 and the parking structure located on MB Site#2 around the middle of January following the year for which such taxes are due. Seller#1 would deposit those checks and then deliver its own checks in a like amount to Seller#4, who would in turn pay such amounts to the applicable taxing authorities, and would obtain a receipt for the taxes paid. Seller#4 would then deliver the receipts (along with the paid tax receipts for the remaining portion of the Property) to the City of Frisco, and by no later than the end of March would expect to receive from the City of Frisco a check representing the tax reimbursement receivable under the Medical Office Buildings Development Agreement between Seller#4 and the City of Frisco covering the Property. Seller#4 would deliver to Seller#1 the portion of the tax reimbursement applicable to MB Property#1 and the parking structure located on MB Site#2. Seller#1 would then deliver to the tenant its check for a like amount. If the Closing occurs, taxes owed with respect to MB Property#1 and the parking structure located on MB Site#2 for calendar year 2010 will be charged to Seller#1 as set forth in Section 7.2(a)(i), collected by the Title Company and paid to the appropriate taxing authorities. Purchaser shall, promptly after the Closing, collect from the tenant in MB Property#1 an amount equal to such real estate taxes for calendar year 2010, and shall pay to Seller#1, promptly after receiving such payment, the amount so collected. Because the rights of Seller#4 under the Medical Office Buildings Development Agreement will have been assigned to Purchaser, Purchaser should receive the tax reimbursement payable by the City of Frisco with respect to such real estate taxes for calendar year 2010, and will disburse it as provided in Sections 7.2(a)(ii) and (iii). Purchaser will pay the tenant in MB Property#1 its share of such reimbursement in the manner described in this Section 7.2(a)(ii) for calendar year 2010. Sellers agree that they will, to the extent reasonably required, following the Closing cooperate with Purchaser and participate in the process of collecting and disbursing the tax reimbursement from the City of Frisco for calendar year 2010.

     (iii) The portion of the real estate tax reimbursement described in Section 7.2(a)(ii) that is not paid to the tenant in MB Property#1 shall be disbursed as described in this Section 7.2(a)(iii). Purchaser shall pay the portion thereof attributable to MB Property#2 to Seller#2, the portion thereof attributable to MB Property#3 to Seller#3, and the portion thereof attributable to Land Site#4 and Land Site#5 to Seller#4, promptly after receiving such reimbursement.

     (iv) Rollback taxes, if any, shall be estimated by the Title Company and an amount equal to 150% of such estimate shall be deposited out of Seller’s proceeds at Closing with the Title Company, to be held in escrow and paid to the taxing authority when the amount of such rollback taxes are assessed and payable. If such rollback taxes are less than the amount escrowed, the

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difference will be refunded to Seller. If such rollback taxes are more than the amount escrowed, Purchaser shall pay the difference.

     (v) The provisions of this Section 7.2(a) shall survive Closing indefinitely.

     (b) Utility Charges. Fuel (to the extent applicable), water and sewer service charges and charges for gas, electricity, telephone (to the extent applicable) and all other public utilities shall be prorated as set forth above. If there are meters on the Property measuring the consumption of utilities, Sellers shall use their good faith efforts to cause such meters (for utilities for which Sellers, and not tenants, are responsible) to be read not more than one (1) day prior to the Closing Date and shall pay promptly all utility bills for which Sellers are liable upon receipt of a statement therefor. Purchaser shall be liable for and shall pay all utility bills for services rendered after such meter readings. In the event such utility readings cannot be accomplished within the one (1) day period prior to the Closing Date, another fair and equitable manner of adjustment of utilities, such as an adjustment based on historical estimates of the utility charges, shall be undertaken. At Closing, Purchaser shall reimburse Sellers for all utility deposits (if any) relating to the Property which are transferred to Purchaser.

     (c) Contracts. Except as set forth in the following sentence, all charges payable with respect to the Contracts remaining in effect after Closing, if any, and all other costs and expenses (if any) of managing, operating, maintaining and repairing the Property shall be prorated as set forth above. Specifically with respect to the Sign Refurbishment Agreement, the parties acknowledge and agree that notwithstanding the provisions of the Sign Refurbishment Agreement, Seller#1 performed its obligations thereunder at its cost and expense, and has invoiced the Tenant (as defined in the Sign Refurbishment Agreement) for $18,280.11, being the Tenant’s financial obligation contained in the Sign Refurbishment Agreement (herein, the “Sign Payment”). Purchaser understands and agrees that the Sign Payment is the property of Seller#1 and waives any and all interest it has in Sign Payment, and agrees that if it receives the Sign Payment or any portion thereof, it will immediately remit the same to Seller#1. Purchaser’s obligations contained in this Section 7.2(c) will survive the Closing indefinitely.

     The adjustments described in Sections 7.2(a) through 7.2(b) herein shall be paid on the Closing Date by adjustments to the Purchase Price. If the amount of any of the adjustments described in Sections 7.2(a) through 7.2(b) herein cannot be determined on the Closing Date, then the adjustments therefor (and corresponding payments between Sellers and Purchaser) shall be made within thirty (30) days after the Closing Date. In making the adjustments required by Sections 7.2(a) through 7.2(b), Sellers shall be given credit for all amounts prepaid for the Closing Date and any period thereafter, and Sellers shall be charged with any unpaid charges for the period prior to the Closing Date.

     (d) Leases. The monthly rent and other tenant charges payable by tenants under the Leases shall be adjusted as of midnight of the day immediately preceding the Closing Date (such that Sellers are entitled to receive/retain all amounts allocable to the period prior to the Closing Date and Purchaser is entitled to receive/retain all amounts allocable to the period from and after the Closing Date (including the Closing Date)), and any such rent and other charges prepaid to Sellers (including a pro rata portion of the rent paid to and received by Sellers for the month in which Closing occurs) shall be paid to Purchaser at Closing in the form of a credit against the Purchase Price. Rent and other charges which are due but uncollected as of the Closing Date shall not be adjusted, but Purchaser shall cause the rent for the period prior to the Closing Date to be remitted to Sellers if, as and when collected, in accordance with the provisions of this Section 7.2(d). On the Closing Date, Sellers shall deliver to Purchaser a schedule of all such past due but uncollected rent and other amounts owed by tenants. Purchaser agrees to cause the amount of such rental arrears to be included in the first bills thereafter submitted by Purchaser to such tenants after the Closing

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Date (but in no event shall such bills first be sent by Purchaser later than thirty (30) days after the Closing Date) and to use commercially reasonable efforts for up to ninety (90) days following the Closing Date to collect such amounts on behalf of Sellers. All rent (including, without limitation, base rent, common area maintenance (“CAM”) charges, and real estate tax reimbursements), when collected, shall be applied first to Purchaser’s reasonable, third-party collection costs, then to current or delinquent rent due Purchaser as landlord under the Leases for any time after the month in which the Closing Date occurs, then to delinquent rents owed for the month in which the Closing Date occurs (which amounts shall be adjusted between Sellers and Purchaser as aforesaid), and the excess, if any, to Sellers on account of rental arrearages due to Sellers (for periods prior to the month in which the Closing Date occurs). Purchaser and Purchaser alone shall have the right to pursue any such arrearages by action against the tenant, including, without limitation, the right to file, with respect to any tenant that is the subject of a bankruptcy proceeding under the Bankruptcy Code or otherwise, a proof of claim or other requisite pleadings or documentation, and/or to take, with respect to any such tenant, such other actions as may be necessary or appropriate in any such bankruptcy or similar proceedings. At the Closing, Sellers shall assign to Purchaser any rights Sellers may have to pursue any such arrearages against any tenants under Existing Tenant Leases. Periodic tenant charges which are not paid by tenants as a part of monthly rental payments (such as, in some cases, CAM charges and real estate tax reimbursements) shall be apportioned as of the Closing Date between Sellers and Purchaser (in the manner set forth above) upon receipt of the payment from the subject tenant subsequent to the Closing Date, based on the number of days in the lease year (or other period) before and after the Closing Date, respectively. Further, with respect to reconciliation of CAM charges and real estate tax reimbursements for the calendar year in which Closing occurs, Sellers shall deliver to Purchaser at Closing a schedule(s) showing the CAM and real estate tax reimbursements received from tenants prior to the Closing Date and the operating and real estate tax expenses of the Property actually incurred prior to the Closing Date.

     (e) Tenant Improvement Expenses. Tenant improvement expenses (including all hard and soft construction costs, whether payable to the contractor or the tenant), and tenant allowances which are the obligation of the landlord under Leases shall be allocated between the parties according to whether such obligations are Existing TI Obligations or New TI Obligations as follows:

     (i) Existing TI Obligations. If, by Closing, Sellers have not paid in full the Existing TI Obligations, then the costs attributable thereto shall be credited against the Purchase Price at Closing and Purchaser shall be responsible for payment of the costs and expenses incurred to complete such Existing TI Obligations. If such credit exceeds the actual costs of completing such Existing TI Obligations, then Purchaser shall promptly pay such excess to Sellers when such excess is determined after Closing. If such credit is insufficient for such purpose, then Sellers shall promptly reimburse Purchaser for such deficiency after Closing upon receipt of an invoice therefor, together with reasonable supporting documentation. The parties’ obligations under this provision shall survive Closing.

     (ii) New TI Obligations. Purchaser shall be fully responsible for (y) all costs associated with New TI Obligations and (z) except as contemplated in clause (b) in the immediately following sentence, performing all obligations of landlord under the Leases relative to New TI Obligations. Provided, however, to the extent (a) Purchaser requests Sellers to commence the performance of New TI Obligations prior to Closing and Sellers are willing to do so or (b) Sellers are obligated under Leases to commence the performance of New TI Obligations prior to Closing pursuant to renewals or expansion rights properly exercised after the Agreement Date (which Sellers shall do), Sellers shall receive a credit at Closing for the cost of New TI Obligations so performed and paid for by Sellers.

     (iii) Evidence of Payment and Performance. At Closing, Sellers shall provide lien waivers, payment affidavits, certificates of completion, and other evidence reasonably necessary to confirm Sellers’ performance and payment of the Existing TI Obligations and the New TI

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Obligations, if any, and shall provide a Sellers’ Affidavit to the Title Company for the purpose of inducing the Title Company to insure against any claims against the Property arising from any such work performed before Closing.

     (iv) Assignment of Contracts. If Purchaser is responsible for completing any tenant improvement work pursuant to the foregoing provisions, Sellers shall, at Closing and only if requested by Purchaser, assign (if and to the extent assignable) the architect, contractor and other agreements relating to such improvements to Purchaser. Such assignment shall be in form and substance reasonably acceptable to both Sellers and Purchaser and shall be accompanied by consents to such assignment from the parties obligated under such agreements, to the extent required by such agreements and to the extent obtainable by Sellers.

     (v) Change Orders. Unless expressly required by the terms of an Existing Tenant Lease, Sellers shall not agree to any change orders or additions to tenant improvements or material changes in the scope of work or specifications with respect to the Existing TI Obligations or New TI Obligations (collectively, the “Change Orders”) without Purchaser’s prior written approval, such approval not to be unreasonably withheld, conditioned or delayed.

     (vi) Goldstein Credit. Purchaser shall be entitled to the Goldstein Credit at Closing. The Goldstein Credit was specifically negotiated between the parties and shall not be subject to any post-closing adjustments or “true ups”, whether described in this Section 7.2 or otherwise. The Goldstein Credit shall be credited to Purchaser at Closing regardless of whether Seller#3 enters into a Modification with respect to the Goldstein Lease in accordance with Section 3.3(e)(ii).

     (f) Security Deposits. Sellers shall deliver to Purchaser at Closing a schedule of all security deposits held by Sellers on the Closing Date which have been deposited by tenants under the Leases. At Closing, Sellers shall give Purchaser a credit therefor against the Purchase Price. Purchaser shall indemnify Sellers, to the extent of the security deposits credited to Purchaser as aforesaid, against any claims by tenants on account of such security deposits. Sellers shall indemnify Purchaser against any claims by tenants on account of any portion of any security deposit which should have been credited to Purchaser as aforesaid but which was not credited to Purchaser as aforesaid.

     (g) Closing Costs. Purchaser shall pay (i) all charges and fees in connection with Purchaser’s Inspections of the Property as provided in Article 4 herein, (ii) all recording charges due and payable in connection with the recordation of the Deeds, (iii) except as provided in the following sentence, all costs and expenses of examination of title, title insurance, and all title policy endorsements requested by Purchaser up to $350,000, (iv) costs and expenses of obtaining the Survey in accordance with Section 9.1 herein, (v) all escrow fees in connection with the closing of the transaction contemplated hereby and (vi) the lesser of the Pre-Payment Penalty or $500,000 as specified in Section 7.2(h). If Purchaser elects to obtain separate title insurance policies for one or more of the MB Properties instead of a single policy for all of the Property, the Purchaser shall pay for all endorsements to all title insurance policies and the $350,000 limit in (iii) above shall only apply to title insurance costs and expenses other than the endorsements. Seller shall pay its own attorneys’ fees and other professional fees incurred by it in connection with the transaction contemplated by this Agreement. All other Closing costs shall be paid by the party for whose benefit such costs were incurred.

     (h) Pre-Payment Penalty. As of the Agreement Date, MB Property#1 secures that certain loan evidenced by a Promissory Note dated on or around September 23, 2003, in the original principal amount of $12,800,000 in favor of American National Insurance Company, as amended from time to time (the “Loan”). The documents evidencing the Loan allow the sale of MB Property#1 securing the Loan and the pre-payment of the Loan conditioned on the payment of a Pre-Payment

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Penalty (herein so called). The parties agree that the Pre-Payment Penalty will be a Closing cost for which Purchaser will be responsible up to the lesser of (i) the Pre-payment Penalty, and (ii) $500,000.00. Seller will then pay the Loan (using Purchaser’s proceeds to pay the Pre-Payment Penalty) in full at Closing and cause the release of the deed of trust securing the Loan.

     (i) Final Reconciliation. Purchaser and Sellers agree to make any and all final adjustments for any items being prorated or adjusted under this Section 7.2 after year-end reconciliations have been completed with all tenants and final tax bills and other relevant bills have been received, all such adjustments to be completed on or before March 1, 2011. Without limiting the generality of the foregoing, (i) if and to the extent that the real estate tax proration between the parties at Closing requires adjustment once final tax bills are issued, amounts shall be appropriately adjusted by Sellers and Purchaser so that the party owing any such reconciled amount shall pay the other party the amount so owed, and (ii) if and to the extent that the pass-throughs and related prorations between the parties at Closing require adjustment once amounts payable by tenants for pass-throughs of taxes, insurance costs and CAM costs are finally determined, such amounts shall be appropriately adjusted by Sellers and Purchaser so that the party owing any such reconciled amount shall pay the other party the amount so owed. Payments in connection with the final adjustments shall be made on or before April 30, 2011, and the parties shall cooperate with one another with respect to such adjustments.

     (j) Survival. Each and all of the provisions of this Section 7.2 (including, without limitation, the indemnities in Section 7.2(f) herein) shall survive Closing indefinitely.

ARTICLE 8
BREACH; TERMINATION

     8.1 Breach by Sellers. If Sellers shall fail to perform its covenants or agreements hereunder on or before the Closing Date Purchaser’s sole and exclusive remedy shall be either to (i) terminate this Agreement or (ii) obtain specific performance of Sellers’ obligation to sell the Property to Purchaser. Further, if this Agreement is terminated as aforesaid, then Purchaser shall, at its election, promptly either return the Study Materials to Sellers or destroy all of the Study Materials (including all copies thereof) in the possession of Purchaser and its employees, agents, representatives and consultants and confirm such destruction in writing to Sellers (at no cost to Sellers in either such event). The foregoing obligations of Purchaser shall survive the termination of this Agreement. In the event that Purchaser terminates this Agreement under this Section 8.1, then subject to Section 2.2(b)(i), the Title Company shall return the Deposit to Purchaser within five (5) days after receipt from Purchaser of written confirmation (which confirmation shall be deemed to be an Instruction) that Purchaser has fully complied with all of the requirements imposed on Purchaser under the foregoing provisions in this Section 8.1. Furthermore, in the event that Purchaser terminates this Agreement under this Section 8.1, all claims for losses, damages, costs and expenses (other than the right to recover losses, damages, costs or expenses pursuant to any Indemnification Obligation) by either party are waived hereby. In the event Purchaser is successful in obtaining specific performance of Sellers’ obligation to sell the Property to Purchaser, then Sellers shall pay Purchaser’s reasonable attorneys’ fees incurred in respect thereof. In no event shall Purchaser be entitled to make a claim for, or recover against Sellers (or any of them), any consequential, exemplary or punitive damages for any breach by Sellers (or any of them) of this Agreement or pursuant to any Indemnification Obligation hereunder.

     8.2 Breach by Purchaser. If Purchaser shall fail to perform any of the covenants or agreements to be performed by it under this Agreement on or before the Closing Date, Sellers’ sole and exclusive remedy shall be to terminate this Agreement and receive the Deposit as liquidated damages for Purchaser’s default (with the Title Company to, subject to Section 2.2(b)(i), pay the Deposit to Sellers upon Sellers’ request, which request shall be deemed to be an Instruction), all

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other claims for losses, damages, costs and expenses (other than the right to recover losses, damages, costs or expenses pursuant to any Indemnification Obligation) being waived hereby. Purchaser and Sellers hereby acknowledge and agree that the actual damages suffered by Sellers as a result of such breach by Purchaser would be impracticable, extremely difficult or impossible to determine and Purchaser agrees that the amount of the Deposit shall be the amount of damages to which Sellers are entitled in such event, and that the amount of such liquidated damages is reasonable and does not constitute a penalty. Notwithstanding the foregoing, in no event shall Sellers’ ability to recover from Purchaser any loss, cost, damage or expense pursuant to any Indemnification Obligation be deemed limited in any respect by Sellers’ receipt of the Deposit as aforesaid. In the event Seller is obligated to engage attorneys to collect the Deposit, and Seller is thereafter successful in collecting the Deposit, then Purchaser shall pay Sellers’ reasonable attorneys’ fees incurred in respect thereof. Further, if this Agreement is terminated as aforesaid, then Purchaser shall, at its election, promptly either return the Study Materials to Sellers or destroy all of the Study Materials (including all copies thereof) in the possession of Purchaser and its employees, agents, representatives and consultants and confirm such destruction in writing to Sellers (at no cost to Sellers in either such event). The foregoing obligations of Purchaser shall survive the termination of this Agreement. In no event shall Sellers be entitled to make a claim for, or recover against Purchaser, any consequential, exemplary or punitive damages for any breach by Purchaser of this Agreement or pursuant to any Indemnification Obligation hereunder.

ARTICLE 9
TITLE EXAMINATION

     9.1 Title Commitment. Sellers hereby agree that Sellers shall not, after the Agreement Date and prior to Closing, take any action affecting title to the Property (except for (i) the New Tenant Leases and Modifications and memoranda thereof, and (ii) actions effectuating the release of liens or encumbrances) unless consented to by Purchaser. Purchaser acknowledges that Sellers have (a) caused the Title Company to issue to Purchaser a current commitment for a Texas standard form policy of owner’s title insurance (the “Title Commitment”) setting forth the state of title to the Property (other than the Personal Property) and committing the Title Company to issue to Purchaser an owner’s policy of title insurance insuring Purchaser’s fee simple interest in the Property (other than the Personal Property) in the amount of the Purchase Price and with such endorsements as Purchaser desires (the “Title Policy”), (b) delivered a copy of the Title Commitment to Purchaser and caused the Title Company to deliver to Purchaser a copy of all title documents that are referred to in the Title Commitment, and (c) delivered to Purchaser a current “as-built” survey of each of the MB Properties and Land Sites, dated not earlier than sixty (60) days prior to Closing, which surveys comply with Purchaser’s survey requirements in Exhibit 9.1 attached hereto, prepared by a licensed land surveyor in the State, and be keyed to the Title Commitment (collectively, the “Survey”). Notwithstanding anything to the contrary herein, at the request of Purchaser, Sellers shall execute and deliver to Purchaser a quit claim deed using the metes and bounds legal description created by the surveyor.

     9.2 Title Objections; Permitted Exceptions. Purchaser delivered to Sellers written notice of Purchaser’s objection to the condition of title to the Property, as reflected by the Title Commitment and the Survey, on December 16, 2010. The applicable Seller shall convey title to the MB Properties and Land Sites, as the case may be, by special warranty deed in the forms attached hereto as Exhibit 9.2-A-1 (with respect to MB Property#1), Exhibit 9.2-A-2 (with respect to MB Property#2), Exhibit 9.2-A-3 (with respect to MB Property#3), and Exhibit 9.2-A-4 (with respect to the Land Sites) (each a “Deed” and collectively, the “Deeds”), subject only to the items shown on Exhibit B to each Deed (such items being the “Permitted Exceptions”). The applicable Seller shall convey title to the Personal Property by the General Assignments and Bill of Sale attached hereto as Exhibit 9.2-B-1, (with respect to MB Property#1), Exhibit 9.2-B-2 (with respect to MB Property#2), Exhibit 9.2-B-3 (with respect to MB Property#3), and Exhibit 9.2-B-4 (with respect to the Land Sites). Sellers agree

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to provide to the Title Company at Closing an affidavit (the “Sellers’ Affidavit”) in the form attached hereto as Exhibit 9.2-C in order to cause the Title Company to delete the so-called standard exceptions for mechanics liens and parties in possession.

ARTICLE 10
MISCELLANEOUS PROVISIONS

     10.1 Brokers.

          (a) Each Seller represents and warrants to the Purchaser that no broker or other person or entity, including the Possible Claimants (as defined below) is entitled to a commission, finders and/or other fee, or other compensation in connection with the sale to and acquisition of the Property by Purchaser, and each Seller hereby indemnifies and holds the Purchaser harmless from and against any claims, losses, damages, costs, and expenses that the Purchaser may suffer or incur in the event that any broker or other person or entity, including the Possible Claimants, asserts a claim through the Sellers for such a commission, fee, or other compensation.

          (b) Purchaser discloses that it is aware that the following persons and entities may claim a commission, finders and/or other fee, or other compensation in connection with the sale to and acquisition of the Property by Purchaser: Rainier Medical Investments, Mr. Jim Murphy, and Mr. Reed Williams (such persons and entity, together with any entity(s) affiliated with any of them are referred to herein as the “Possible Claimants”). Purchaser represents and warrants to Sellers that it has not entered into a written agreement with any of the Possible Claimants, nor has it agreed to pay a commission, fee, or other compensation to any Possible Claimants. Purchaser hereby indemnifies and holds the Sellers harmless from and against any claims, losses, damages, costs, and expenses that the Seller may suffer or incur as a result of Purchaser’s breach of the foregoing representations and warranties. Purchaser further indemnifies and holds Sellers harmless from and against any claims, losses, damages, costs, and expenses that the Seller may suffer or incur in the event any broker, person or entity other than the Possible Claimants asserts a claim through the Purchaser for a commission, fee, or other compensation in connection with the acquisition of the Property by Purchaser.

     The provisions of this Section 10.1 shall survive Closing or termination of this Agreement indefinitely.

     10.2 Entire Agreement; Modification. This Agreement, the Sellers Closing Documents, and the Purchaser Closing Documents contain the entire agreement between the parties relating to the conveyance of the Property, all prior negotiations between the parties are of no force or effect, and there are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, between them other than as set forth in this Agreement, the Sellers Closing Documents, and the Purchaser Closing Documents. No change or modification of this Agreement or any of the Sellers Closing Documents or the Purchaser Closing Documents shall be valid unless the same is in writing and signed by each of the parties hereto or thereto. No waiver of any of the provisions of this Agreement, the Sellers Closing Documents, or the Purchaser Closing Documents executed or to be executed in connection herewith shall be valid unless in writing and signed by the party against whom it is sought to be enforced.

     10.3 Survival of Covenants and Agreements. Except as otherwise expressly set forth in this Agreement, the covenants and agreements of the parties set forth in this Agreement shall remain operative and shall survive Closing indefinitely.

     10.4 Binding Upon Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of and be enforceable by, the respective personal representatives, successors, and permitted assigns of the parties hereto. Except as set forth in this Section 10.4, neither Purchaser

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nor Sellers shall have any right to assign this Agreement and/or its rights and obligations hereunder without the prior written consent of the other (which consent may be granted or withheld in a party’s sole and absolute discretion). Any assignment or other transfer of this Agreement without the written consent of the other party shall be null and void and of no force or effect. Notwithstanding the foregoing to the contrary, Purchaser shall have the right to assign this Agreement and/or its rights and obligations hereunder to one or more Affiliates of Purchaser without the prior written consent of Sellers; provided, however, Purchaser shall deliver to Sellers promptly after any such assignment written notice of such assignment, together with a copy of the relevant assignment document. In the event of any such assignment pursuant to the immediately preceding sentence, however, Purchaser shall not be released or discharged from any liability under this Agreement and shall remain liable for the performance of all obligations of Purchaser hereunder.

     10.5 Governing Law. The provisions of this Agreement shall be governed by the laws of the State, without regard to the conflicts of laws provisions thereof.

     10.6 Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given/received: (1) on the date delivered if delivered personally; (2) the next business day after deposit with a nationally recognized overnight courier service when marked for delivery on the next business day; (3) upon acceptance or rejection if sent by registered or certified United States mail, properly addressed and postage pre-paid; or (4) upon completion of transmission (which is confirmed by telephone or a statement generated by the transmitting machine) if sent by facsimile to compatible equipment in the possession of the recipient, and addressed to the party for whom it is intended, at the address hereinafter set forth:

If to Purchaser:	Healthcare Realty Trust Incorporated
	3310 West End Avenue, Suite 700
	Nashville, Tennessee 37203
	Attention: Stephen E. Cox, Jr., Assistant General Counsel
	Phone: (615) 269-8175
	Fax: (615) 463-7739
With a copy to:	Healthcare Realty Trust Incorporated
	3310 West End Avenue, Suite 700
	Nashville, Tennessee 37203
	Attention: Brince Wilford
	Phone: (615) 269-8175
	Fax: (615) 690-8410
If to Sellers:	Frisco Surgery Center Limited
	Frisco POB I Limited
	Frisco POB II Limited
	Medland L.P.
	c/o Texas Land Management, L.L.C.
	5400 Dallas Parkway
	Frisco, Texas 75034
	Attention: Jim Williams, Jr.
	and Jessica Schwarz-Zik, Esq.
	Phone: (214) 618-3800
	Fax: (214) 618-3830
With a copy to:	Scott Drablos, Esq.
	Haynes and Boone, LLP
	2323 Victory Avenue, Suite 700
	Dallas, Texas 75219
	Phone: (214) 651-5421
	Fax: (214) 200-0759

28

     Any party may designate a change of address by written notice to the other in accordance with the provisions set forth above, which notice shall be given at least five (5) days before such change of address is to become effective.

     10.7 Exhibits. Each and all of the exhibits attached hereto are hereby incorporated into this Agreement by reference.

     10.8 Confidentiality. From and after the Agreement Date and continuing until the earlier of Closing or the termination of this Agreement, Seller will not solicit, entertain or accept any offers to sell, restrict, or lease all or substantially all, of the Property. Additionally, from and after the Agreement Date and continuing until the earlier of Closing or the termination of this Agreement, Seller and Purchaser agree that (a) all negotiations regarding the sale and purchase of the Property, (b) Purchaser’s identity and interest in the Property, and (c) the existence of this Agreement, shall remain strictly confidential and that no press or other publicity release or communication to the general public in connection with the sale or purchase of the Property will be issued without the other party’s prior written consent, except for disclosures to the party’s partners, lenders, advisors, third party due diligence providers, or as necessary to provide the Sellers’ Deliverables, or in accordance with the terms of the formal documents or as required by law or the rules of any regulatory agency, or as may be advisable by Purchaser’s counsel. Neither this Agreement nor any memorandum thereof may be recorded in any real property records without the express written consent of both Purchaser and Sellers. This provision replaces and supersedes the similar provision in the letter of intent executed by Purchaser and Sellers dated December 2, 2010, and any binding provisions contained in such letter of intent shall be of no further force or effect from and after the Agreement Date.

     10.9 Study Materials. Sellers agree to deliver (i.e., by uploading the same to a website to which Purchaser has access or by delivering or causing to be delivered to Purchaser a hard copy of the same) to Purchaser true and correct copies of all Study Materials which are in Sellers’ possession or readily available to Sellers.

     10.10 No Offer. The parties agree that the submission of this Agreement for review or execution by one party to the other does not constitute an offer to sell or purchase the Property and that this Agreement shall not be valid, binding or enforceable until duly and fully executed by all parties hereto.

     10.11 Rules of Construction. Section captions used in this Agreement are for convenience only and shall not affect the construction of this Agreement. All references to “Sections,” without reference to a document other than this Agreement, are intended to designate articles and sections of this Agreement, and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, unless specifically designated otherwise. The use of the term “including” shall mean in all cases “including, but not limited to,” unless specifically designated otherwise. No rules of construction against the drafter of this Agreement shall apply in any interpretation or enforcement of this Agreement, any documents or certificates executed pursuant hereto, or any provisions of any of the foregoing.

     10.12 Time of the Essence. TIME IS OF THE ESSENCE in this Agreement. In addition, if the final day of any period of time set out in any provision of this Agreement, including, without limitation, the Closing Date and the Study Period, falls on a Saturday, Sunday or legal holiday, then

29

in such case, such period shall be deemed extended to the next day which is not a Saturday, Sunday or legal holiday.

     10.13 Severability of MB Owners’ Interests. Notwithstanding any term or provision in this Agreement to the contrary, the warranties, representations, agreements and covenants made by Sellers herein are made by each of the entities that compose Sellers only with respect to the specific MB or Land Sites owned by each such entity, and liability for any breach or failure to perform under this Agreement shall be several and not joint among the entities that compose Sellers.

     10.14 Notice Regarding Aboveground Storage Tanks. The aboveground storage tank(s) which are located on the Property are presumed to be regulated by the Texas Commission on Environmental Quality and may be subject to certain registration, delivery prohibition, installation notification, and other requirements found in Title 30 Texas Administrative Code, Chapter 334.

     10.15 Waiver of Consumer Rights. Purchaser, after consultation with an attorney of its own selection (which counsel was not directly or indirectly identified, suggested or selected by Sellers or any agent of Sellers), hereby voluntarily waives its rights under the Texas Deceptive Trade Practices — Consumer Protection Act (Section 17.41, et seq., Texas Business and Commerce Code), a law that gives consumers special rights and protections. Purchaser hereby acknowledges to Sellers that Purchaser and Sellers are not in a significantly disparate bargaining position.

[Signatures appear on the following pages]

30

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above stated.

SELLER#1: FRISCO SURGERY CENTER LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:	/s/ Jim Williams, Jr.
	Name:	Jim Williams, Jr.
	Title:	President

SELLER#2: FRISCO POB I LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:	/s/ Jim Williams, Jr.
	Name:	Jim Williams, Jr.
	Title:	President

SELLER#3: FRISCO POB II LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:	/s/ Jim Williams, Jr.
	Name:	Jim Williams, Jr.
	Title:	President

SELLER#4: MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:	/s/ Jim Williams, Jr.
	Name:	Jim Williams, Jr.
	Title:	President

31

PURCHASER: HEALTHCARE REALTY TRUST INCORPORATED, a Maryland corporation
By:	/s/ Brince Wilford
	Name:	Brince Wilford
	Title:	Senior Vice President Real Estate Investments

32

     Escrow Agent executes this Agreement for the sole purpose of confirming its agreement to act in accordance with the provisions of Section 2.2(b) hereof.

ESCROW AGENT: REPUBLIC TITLE OF TEXAS, INC.
By:	/s/ Nancy Colaluca
	Name:	NANCY COLALUCA
	Title:	SR. VICE PRESIDENT

33

Exhibit 1.1

Description of the MB Properties and Land Sites

SITE	ADDRESS	OWNER (“SELLER”)
Frisco Surgery Center (MB #1) Lot 3A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	5601 Warren Parkway Frisco, Texas	Frisco Surgery Center Limited
Professional Office Building I (MB #2) Lot 2A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	5575 Warren Parkway Frisco, Texas	Frisco POB I Limited
Professional Office Building II (MB #3) Lot 4A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	5757 Warren Parkway Frisco, Texas	Frisco POB II Limited
Lot 1A, Block A (Land Site #4) Lot 1A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	No street address	Medland, L.P.
Lot 5A, Block A (Land Site #5) Lot 5A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	No street address	Medland, L.P.

Exhibit 1.1-1

Exhibit 2.1(b)

List of Contracts

Contracts to be assigned at Closing

1. Settlement Agreement by and among Seller#1, MEDCO Construction, L.L.C., Baylor Health Enterprises, L.P., and Frisco Medical Center, L.L.P.

2. The Sign Refurbishment Agreement.

3. Partial assignment of Project Management Services Agreement between Seller#3, as the “Client”, and William David Ransom, AIA, as the “Consultant”, dated February 5, 2010. Seller#3 shall only assign, and Purchaser shall only assume, the foregoing agreement as pertains to the Project (defined in the Project Management Services Agreement) signed by Seller#3 and Consultant with respect to the Centennial Lease.

4. Status of Commission Agreement by and among SRS Real Estate Partners Holding, Inc., Revere Commercial Realty, L.L.C., Seller#2, Seller#3, and LandPlan Development Corp. dated December 20, 2010.

5. Status of Commission Agreement by and among Lincoln Property Company Commercial Services Enterprises, Inc., Seller#1, Seller#2, and Seller#3 dated December 20, 2010.

6. Architects Agreement dated December 17, 2010 by and between Seller#3 and Apropos Interior Architecture, Inc. for work to be performed in respect of the Centennial Lease.

Contracts, agreements, and warranties not to be assigned at Closing

7. HVAC maintenance agreement between Entech and Lincoln Harris

8. Exterior landscaping agreement between Taylor Landscape and Lincoln Harris

9. Janitorial services agreement between DFW Facility Maintenance and Lincoln Harris

10. Property Management and Leasing Agreement dated July 29, 2010 by and between Seller#2 and Lincoln Harris Property Company Commercial Services Enterprises, Inc.

11. Property Management and Leasing Agreement dated July 29, 2010 by and between Seller#3 and Lincoln Harris Property Company Commercial Services Enterprises, Inc.

12. Property Management Agreement dated August 10, 2010 by and between Seller#1 and Lincoln Harris Property Company Commercial Services Enterprises, Inc.

* For the avoidance of doubt, Sellers will not assign, and Purchaser will not assume, any agreement regarding the payment of any commission, finders or other fee, or other compensation in connection with the sale to and purchase of the Property by Purchaser.

Exhibit 2.1(b)-1

Exhibit 2.1(e)

Schedule of Incomplete Construction Projects and Tenant Improvement Work

1. Tenant improvement work to be performed by the landlord pursuant to the Centennial Lease

Exhibit 2.1(e)-1

Exhibit 3.1

Closing Certificate

Each of the undersigned, FRISCO SURGERY CENTER LIMITED, a Texas limited partnership, FRISCO POB I LIMITED, a Texas limited partnership, FRISCO POB II LIMITED, a Texas limited partnership, and MEDLAND, L.P., a Texas limited partnership (collectively, the “Sellers”), hereby certifies to HEALTHCARE REALTY TRUST INCORPORATED, a Maryland corporation (“Purchaser”), and its permitted successors and assigns, that all of the representations and warranties of such Seller contained in Section 3.1 of that certain Purchase Agreement dated as of December ____, 2010, between Sellers and Purchaser (the “Agreement”) remain true and correct in all material respects as of the date hereof relative to the MB Properties identified on Exhibit A attached hereto, except with respect to those matters set forth in Exhibit B attached hereto.

Sellers are making this certification for Purchaser’s benefit pursuant to Section 3.1 of the Agreement, and the relevant terms, provisions and limitations in Section 3.1 of the Agreement, including, without limitation, the Survival Period and the limitations described in the last paragraph of Section 3.1 of the Agreement, are incorporated in and applicable to this Closing Certificate as if set forth herein in full.

[Remaining portion of page left intentionally blank]

IN WITNESS WHEREOF, the undersigned have caused this Closing Certificate to be executed as of the ______ day of December ____, 2010.

SELLERS: FRISCO SURGERY CENTER LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., a Texas limited liability company, its general partner

By:
	Name:
	Title:

FRISCO POB I LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., a Texas limited liability company, its general partner

By:
	Name:
	Title:

FRISCO POB II LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., a Texas limited liability company, its general partner

By:
	Name:
	Title:

MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., a Texas limited liability company, its general partner

By:
	Name:
	Title:

Exhibit 3.1-B-1

EXHIBIT A

Description of the MB Properties

SITE	ADDRESS	OWNER (“SELLER”)
Frisco Surgery Center (MB #1) Lot 3A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	5601 Warren Parkway Frisco, Texas	Frisco Surgery Center Limited
Professional Office Building I (MB #2) Lot 2A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	5575 Warren Parkway Frisco, Texas	Frisco POB I Limited
Professional Office Building II (MB #3) Lot 4A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	5757 Warren Parkway Frisco, Texas	Frisco POB II Limited
Lot 1A, Block A (Land Site #4) Lot 1A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	No street address	Medland, L.P.
Lot 5A, Block A (Land Site #5) Lot 5A, Block A, in FRISCO MEDICAL CENTER, an Addition to the City of Frisco, Collin County, Texas, according to the Map thereof recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.	No street address	Medland, L.P.

Exhibit 3.1-B-2

EXHIBIT B

Exhibit 3.1-B-3

Exhibit 3.1(c)

List of Existing Tenant Leases

MB Property#1 — 5601 Warren Parkway, Frisco, Texas 75034

1. Lease Agreement between Frisco Surgery Center Limited (successor by assignment to FRH JV, LP) as Landlord and Frisco Medical Center, LLP as Tenant for the premises at 5601 Warren Parkway, Frisco, Texas 75034, dated April 9, 2001 and amended as follows: First Amendment dated May 16, 2003, Second Amendment dated October 28, 2005, Third Amendment dated September 8, 2006, and Amendment 3A dated October 17, 2006.

2. Ground Lease between Frisco POB I Limited, as Landlord and Frisco Surgery Center Limited, as Tenant, July 6, 2007 for certain land on which a parking garage is located.

3. Parking Lease between Frisco Surgery Center Limited, as Lessor, and Frisco Medical Center, L.L.P., as Lessee, dated July 6, 2007.

MB Property#2 — Professional Office Building I — 5575 Warren Parkway, Frisco, Texas 75034

1. Lease Agreement between Frisco POB I Limited as Landlord and Robert P. Taylor, DPM as Tenant, dated August 12, 2002 for Suite 101.

2. Lease Agreement between Frisco POB I Limited as Landlord and Pinnacle Anesthesia Consultants PA as Tenant, dated December 31, 2008 for Suite 102.

3. Lease Agreement between Frisco POB I Limited as Landlord and Roger Skiles, M.D. as Tenant, dated June 13, 2002 for Suite 104 and as amended as follows: First Amendment dated September 23, 2002, Consent to Sublease (Texas Colon and Rectal Surgeons) dated September 1, 2008, additional Consent to Sublease (North Dallas Urology) dated September 1, 2008.

4. Lease Agreement between Frisco POB I Limited as Landlord and Greenhill Clinic, PA and Perpetuon, Inc. as Tenant, dated March 15, 2010 for Suite 106-108 and as amended as follows: First Amendment dated July 12, 2010, Second Amendment dated July 16, 2010.

5. Lease Agreement between Frisco POB I Limited as Landlord and HealthTexas Provider Network as Tenant, dated December 20, 2001 for Suite 115 and as amended as follows: First Amendment dated February 1, 2002, Second Amendment dated September 4, 2002, Third Amendment dated July 1, 2003, Fourth Amendment dated July 23, 2009.

6. Lease Agreement between Frisco POB I Limited as Landlord and Jonathan Weinstein, M.D. as Tenant, dated June 9, 2010 for Suite 116.

7. Lease Agreement between Frisco POB I Limited as Landlord and Urgent Care Partners, LLC as Tenant, dated March 1, 2003 for Suite 120 and as amended as follows: First Amendment dated January 23, 2007, Amended and Restated Lease Assignment and Mutual Release dated December 3, 2006.

8. Lease Agreement between Frisco POB I Limited as Landlord and Frisco Medical Center, LLP as Tenant, dated June 13, 2001 for Suite 201 and as amended as follows: First Amendment dated October 3, 2002, Second Amendment dated September 5, 2003.

Exhibit 3.1(c)-1

9. Lease Agreement between Frisco POB I Limited as Landlord and Frisco Medical Center, LLP as Tenant, dated September 23, 2002 for Suite 203 and as amended as follows: First Amendment dated September 5, 2003.

10. Lease Agreement between Frisco POB I Limited as Landlord and Footcare, P.A. as Tenant, dated October 29, 2001 for Suite 204 and as amended as follows: First Amendment dated September 11, 2002, Sublease Agreement dated August 8, 2005.

11. Lease Agreement between Frisco POB I Limited as Landlord and Kirk Scott, M.D. (d/b/a/ Stonebriar Facial & Oral Surgery) as Tenant, dated June 7, 2002 for Suite 206.

12. Lease Agreement between Frisco POB I Limited as Landlord and Kathryn J. Wood, M.D., P.A. as Tenant, dated October 5, 2001 for Suite 208-209.

13. Lease Agreement between Frisco POB I Limited as Landlord and Vista Ophthalmology Associates, P.A. as Tenant, dated August 20, 2002 for Suite 210.

14. Lease Agreement between Frisco POB I Limited as Landlord and Frisco Medical Center, LLP as Tenant, dated August 27, 2003 for Suite 221.

15. Lease Agreement between Frisco POB I Limited as Landlord and MetWest, Inc. (d/b/a Quest Diagnostics) as Tenant, dated June 12, 2003 for Suite 303 and as amended as follows: First Amendment dated September 30, 2008.

16. Lease Agreement between Frisco POB I Limited as Landlord and Mickey Morgan, M.D. as Tenant, dated June 30, 2002 for Suite 304 and as amended as follows: First Amendment dated June 30, 2002, Second Amendment dated July 29, 2002.

17. Lease Agreement between Frisco POB I Limited as Landlord and Kimble Jett, M.D. as Tenant, dated August 31, 2004 for Suite 306.

18. Lease Agreement between Frisco POB I Limited as Landlord and Pinnacle Consultants Limited Partnership (d/b/a/ Pinnacle Anesthesia) as Tenant, dated April 22, 2002 for Suite 310 and as amended as follows: First Amendment dated May 30, 2002.

19. Lease Agreement between Frisco POB I Limited as Landlord and Suzette Boyd, M.D. as Tenant, dated October 11, 2002 for Suite 314 and as amended as follows: First Amendment dated January 21, 2003.

20. Lease Agreement between Frisco POB I Limited as Landlord and Jon T. Ricks, M.D. P.A. as Tenant, dated September 9, 2009 for Suite 316-317.

21. Lease Agreement between Frisco POB I Limited as Landlord and Seth D. Kaplan, M.D., P.A. (d/b/a TC Pediatrics of Frisco) as Tenant, dated January 28, 2005 for Suite 318.

22. Lease Agreement between Frisco POB I Limited as Landlord and Gerald Moore, M.D., P.A. as Tenant, dated March 24, 2005 for Suite 324.

23. Ground Lease between Frisco POB I Limited, as Landlord and Frisco Surgery Center Limited, as Tenant, July 6, 2007 for certain land on which a parking garage is located.

Exhibit 3.1(c)-2

MB Property#3 — Professional Office Building II — 5757 Warren Parkway, Frisco, Texas 75034

1. Lease Agreement between Frisco POB II Limited as Landlord and Pinnacle Anesthesia Consultants PA as Tenant, dated June 6, 2007 for Suite 110.

2. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated May 13, 2009 for Suite 120.

3. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated December 3, 2007 for Suite 130 — 140 and amended as follows: First Amendment dated January 1, 2008.

4. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated March 12, 2008 for Suite 150.

5. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated December 3, 2007 for Suite 160 and amended as follows: First Amendment dated January 1, 2008.

6. Lease Agreement between Frisco POB II Limited as Landlord and Associated Orthopedics & Sports Medicine, PA as Tenant, dated June 23, 2009 for Suite 180 and amended as follows: First Amendment dated December 14, 2010.

7. Lease Agreement between Frisco POB II Limited as Landlord and Northlake Obstetrics & Gynecology, PA as Tenant, dated February 25, 2010 for Suite 200.

8. Lease Agreement between Frisco POB II Limited as Landlord and Centennial Obstetrics & Gynecology, PA as Tenant, dated December 8, 2010 for Suite 210.

9. Lease Agreement between Frisco POB II Limited as Landlord and Fertility Specialists of Dallas, PA as Tenant, dated May 23, 2008 for Suite 300 and amended as follows: Assignment of Lease from Fertility Specialists of Dallas, PA to Fertility Specialists of Texas, PLLC dated October 13, 2009.

10. Lease Agreement between Frisco POB II Limited as Landlord and Texas Obstetrics and Gynecology Associates, LLP as Tenant, dated May 1, 2008 for Suite 310 and amended as follows: First Amendment dated September 15, 2008 and Second Amendment dated May 28, 2009.

Seller has delivered, and Purchaser acknowledges receipt of, the Aged Delinquencies Report generated by Lincoln Harris CSG, dated December 28, 2010, Time Index 02:01 PM, Period: 12/10 with respect to MB Property#2 and MB Property#3. The matters set forth in such report constitute all known defaults under the Existing Tenant Leases.

Exhibit 3.1(c)-3

Exhibit 3.1(f)

Leasing Commission Agreements

1. Property Management and Leasing Agreement dated July 29, 2010 by and between Seller#2 and Lincoln Harris Property Company Commercial Services Enterprises, Inc.

2. Property Management and Leasing Agreement dated July 29, 2010 by and between Seller#3 and Lincoln Harris Property Company Commercial Services Enterprises, Inc.

Exhibit 3.1(f)-1

Exhibit 3.1(i)

List of Security Deposits

(See attached)

Exhibit 3.1(i)-1

Exhibit 3.1(i)

List of Tenant Security Deposits

Frisco Professional Office Building I—5575 Warren Parkway, Frisco, Texas 75034

Lessee	Suite		Security Deposit
Robert P. Taylor, DPM		101	$	4,896.06
Pinnacle Anesthesia Consultants, PA		102		964.00
Roger Skiles, MD		104		6,725.20
Greenhill Clinic, PA & Perpetuon, Inc.		106-108		4,000.00
Health Texas Provider Network		115		0.00
Jonathan Weinstein, MD		116		4,340.63
Urgent Care Partners, LLC		120		14,798.00
Frisco Medical Center, LLP		201		0.00
Frisco Medical Center, LLP		203		0.00
Footcare, PA		204		6,552.13
Kirk Scott, MD (d/b/a Stonebriar Facial & Oral Surgery)		206		4,996.81
Kathryn J. Wood, MD, PA		208-209		6,402.16
Vista Ophthalmology Associates, PA		210		5,818.31
Frisco Medical Center, LLP		221		0.00
MetWest, Inc. (d/b/a Quest Diagnostics)		303		0.00
Mickey Morgan, MD		304		6,628.19
Kimble Jett, MD		306		2,926.67
Pinnacle Consultants Limited Partnership (d/b/a Pinnacle Anesthesia)		310		12,258.56+ 40.00 Parking Deposit
Suzette Boyd, MD		314		5,815.88
Jon T. Ricks, MD, PA		316-317		5,185.08
Seth D. Kaplan, MD PA (d/b/a TC Pediatrics of Frisco)		318		4,493.33
Gerald Moore, MD, PA		324		8,128.25
Frisco Surgery Center Limited	Garage land			0.00
Frisco Professional Office Building II—5757 Warren Parkway, Frisco, Texas 75034
Lessee	Suite		Security Deposit
Pinnacle Anesthesia Consultants, PA		110	$	8,402.71
Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco)		120		0.00
Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco)		130-140		0.00
Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco)		150		0.00
Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco)		160		0.00
Associated Orthopedics & Sports Medicine, PA		180		0.00
Northlake Obstetrics & Gynecology, PA		200		0.00
Centennial Obstetrics & Gynecology, PA		210		11,691.75
Fertility Specialists of Texas, PLLC		300		0.00
Texas Obsterics and Gynecology Associates, LLP		310		0.00
Frisco Surgery Center—5601 Warren Parkway, Frisco, Texas 75034
Tenant	Suite		Security Deposit
Frisco Medical Center, LLP	Hospital			0.00
Frisco Medical Center, LLP	Parking Spaces			0.00

Exhibit 3.3(a)

Notice to Tenant

[Insert name and address of tenant]            

__________________________________

__________________________________

__________________________________

RE:      Lease for space known as Suite _____ at ___________________,
Frisco, ___________ County, Texas (“Lease”)

Please be advised that, as of ____________________, 2010, all of the landlord’s interest in your Lease (including any security deposit thereunder in the amount of $____________) has been sold and assigned to ___________________ ________________________, and that such assignee has assumed all of landlord’s obligations arising under your Lease from and after such date, including, without limitation, obligations relating to any security deposit. All rental payments after such date should be made payable to ____________________ and sent to the following address:

__________________________________

__________________________________

__________________________________

__________________________________

[INSERT NAME OF SELLER] [INSERT NAME OF PURCHASER]

By:		By:
	Name:		Name:
	Title:		Title:

Exhibit 3.3(a)-1

Exhibit 3.3(g)

Sellers Closing Documents

1. Closing Statement

2. Sellers’ Affidavit (in the form of Exhibit 9.2-C attached to the Agreement)

3. Non-Foreign Status Certificate (see Section 3.1(k) of the Agreement)

4. Deeds (in the form of Exhibit 9.2-A attached to the Agreement)

5. General Assignments and Bills of Sale (in the form of Exhibit 9.2-B attached to the Agreement)

6. Notices to all Tenants (in the form of Exhibit 3.3(a) attached to the Agreement)

7. Form 1099-S

8. Certified, current rent roll

9. Closing Certificate

10. Reserved.

11. Reserved.

12. The Assignment and Assumption of Medical Office Buildings Development Agreement to be entered into between Seller#4 and Purchaser or its designated assignee at Closing in the form of the attached Exhibit 3.3(g)(12) (the “MOB Development Agreement Assignment”).

13. The Assignment and Assumption of Tax Abatement Agreement between Collin County and Medland, L.P. to be entered into among Collin County, Texas, Seller#4 and Purchaser or its designated assignee at Closing in the form of the attached Exhibit 3.3(g)(13) (the “County Abatement Assignment”).

14. The Assignment and Assumption of Tax Abatement Agreement between The City of Frisco, Texas and Medland, L.P. to be entered into among The City of Frisco, Texas, Seller#4 and Purchaser or its designated assignee at Closing in the form of the attached Exhibit 3.3(g)(14) (the “City Abatement Assignment”).

15. The Assignment and Assumption of the Developer’s Interest in the rights and obligations of the “Developer” under the Construction, Operation and Reciprocal Easement Agreement of record in Book 4945, page 1998, Real Property records, Collin County, Texas, as amended by the First Amendment to Construction, Operation and Reciprocal Easement Agreement of record in Volume 6048, page 3517, Real Property records, Collin County, Texas, to be entered into between Seller#4 and Purchaser or its designated assignee at Closing and recorded following the recordation of the Deed in the form of the attached Exhibit 3.3(g)(15) (the “Developer Assignment”).

16. Such other documents in form reasonably acceptable to Sellers as are customary and necessary to cause the Title Company to issue to Purchaser an owner’s policy of title insurance insuring a fee interest in the Property.

Exhibit 3.3(g)-1

Exhibit 3.3(g)(10)

Reserved

Exhibit 3.3(g)(10)-1

Exhibit 3.3(g)(11)

Reserved

Exhibit 3.3(g)(11)-1

Exhibit 3.3(g)(12)

Form of MOB Development Agreement Assignment

(See Attached)

Exhibit 3.3(g)(12)-1

ASSIGNMENT AND ASSUMPTION OF MEDICAL OFFICE BUILDINGS
DEVELOPMENT AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION OF MEDICAL OFFICE BUILDINGS DEVELOPMENT AGREEMENT (this “Assignment”) is made as of December ___, 2010 (the “Effective Date”) by and among the CITY OF FRISCO, TEXAS, a home rule city and municipal corporation of Collin and Denton Counties, Texas (the “City”), MEDLAND, L.P., a Texas limited partnership (“Assignor”), HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership (“Assignee#1”) and HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership (“Assignee#2”).

Recitals

     A. Assignor, as the “Company”, and the City are parties to that certain Medical Office Buildings Development Agreement, having an effective date of February 2, 2001 and filed of record in Volume 5214, Page 2175, Real Property Records, Collin County, Texas (the “Agreement”). Any capitalized terms not defined in this Assignment have the meanings ascribed to such terms in the Agreement.

     B. Pursuant to the Agreement, Assignor received and continues to receive the benefit of certain development incentives and tax abatements from the City in exchange for the development of the Project Site in accordance with the terms of the Agreement.

     C. This Assignment is entered into among the parties in connection the sale of the Project Site to Assignee#1 and Assignee#2.

     NOW THEREFORE, for and in consideration of $10.00, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

     1. Recitals. The recitals above are incorporated into this Agreement.

     2. Definition of “Project Site”; Interests of Assignees. The Project Site is defined in the Agreement pursuant to a metes and bounds description. The Project Site has since been re-platted in its entirety, and now consists of Lots 1A, 2A, 3A, 4A, and 5A of Block A, as shown on the Plat (herein so called) entitled “Frisco Medical Center Lots 1A-5A, Block A” filed on August 20, 2007, and recorded in Cabinet 2007, Slide 426, Plat Records of Collin County, Texas. Following the sale

1

referenced in the recitals above, Assignee#1 will own Lot 3A as shown on the Plat, and Assignee#2 will own Lots 1A, 2A, 4A, and 5A as shown on the Plat. For the avoidance of doubt, the overall property covered by the Agreement has not changed, as the property shown on the Plat is the same as the “Property” described in the Agreement.

     3. Assignment and Assumption; Books and Records.

          (a) To Assignee#1. Assignor hereby assigns its right, title and interest in and to the Agreement as pertains to Lot 3A as shown on the Plat (herein, the “Lot 3A Interest”) to Assignee#1. Assignee#1 accepts the foregoing assignment, and assumes all of Assignor’s obligations and duties with respect to the Lot 3A Interest. Assignor will indemnify, defend, and hold Assignee#1 harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Lot 3A Interest prior to the Effective Date. Assignee#1 will indemnify, defend, and hold Assignor harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Lot 3A Interest on or after the Effective Date.

          (b) To Assignee#2. Assignor hereby assigns its right, title and interest in and to the Agreement as pertains to Lots 1A, 2A, 4A, and 5A as shown on the Plat (herein, the “Remaining Property Interest”) to Assignee#2. Assignee#2 accepts the foregoing assignment, and assumes all of Assignor’s obligations and duties with respect to the Remaining Property Interest. Assignor will indemnify, defend, and hold Assignee#2 harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Remaining Property Interest prior to the Effective Date. Assignee#2 will indemnify, defend, and hold Assignor harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Remaining Property Interest on or after the Effective Date.

          (c) Section 5(a) of the Agreement obligates the Company to maintain a permanent and accurate set of books and records of costs related to the Medical Facilities. Assignor will deliver a complete copy of all such books and records as they relate to the Lot 3 Interest and the Remaining Property Interest to

2

Assignee#1 and Assignee#2, respectively, concurrent with the execution of this Assignment.

     4. Joinder of City. The City joins in this Assignment for the sole purpose of consenting to and confirming receipt of this Assignment, and confirming that (a) Assignor has timely performed, completed and fulfilled its obligations contained in the Agreement, specifically including those contained in Section 3 of the Agreement, (b) the development incentives contained in Section 4(a) and Section 4(b) of the Agreement remain in effect, (c) given the timely completion of the Medical Facilities in accordance with Section 3 of the Agreement, there is further obligation on the part of the Company to provide Acceptable Security pursuant to Section 4(e) of the Agreement, (d) as of the Effective Date and without giving effect to any reimbursement which may be due for calendar year 2010, the total amount of reimbursement paid by the City is $1,191,055, and (e) to its actual knowledge, the Agreement is in full force and effect and there is no Event of Default thereunder, nor does any circumstance exist which with the giving of notice or passage of time, or both, would ripen into an Event of Default under the Agreement.

     5. Change of Notice. From and after the Effective Date, the notice address for the “Company” shall be:

HRT Properties of Texas, Ltd.
HR Acquisition of San Antonio, Ltd.
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: General Counsel

With a copy to:

HRT Properties of Texas, Ltd.
HR Acquisition of San Antonio, Ltd.
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: Chief Operating Officer

     6. Counterparts. This Agreement may be executed in two or more counterparts.

(Signatures on the following pages)

3

     IN WITNESS WHEREOF, Assignor has executed this Assignment as of the Effective Date.

MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:  

Its: 

STATE OF _________________
COUNTY OF _______________

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ of TEXAS LAND MANAGEMENT, L.L.C., a Texas limited liability company, as general partner of MEDLAND, L.P., a Texas limited partnership, on behalf of said limited partnership.

Notary Public in and for Said County and State
 

(SEAL)

4

     IN WITNESS WHEREOF, Assignee#1 has executed this Assignment as of the Effective Date.

HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

STATE OF TENNESSEE
COUNTY OF DAVIDSON

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ of HEALTHCARE ACQUISITION OF TEXAS, INC., an Alabama corporation, as general partner of HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership, on behalf of said limited partnership.

Notary Public in and for Said County and State
 

(SEAL)

5

     IN WITNESS WHEREOF, Assignee#2 has executed this Assignment as of the Effective Date.

HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

STATE OF TENNESSEE
COUNTY OF DAVIDSON

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ of HEALTHCARE ACQUISITION OF TEXAS, INC., an Alabama corporation, as general partner of HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership, on behalf of said limited partnership.

Notary Public in and for Said County and State
 

(SEAL)

6

     IN WITNESS WHEREOF, the City has executed this Assignment as of the Effective Date.

THE CITY OF FRISCO, TEXAS
 

By:  

Its: 

STATE OF _________________
COUNTY OF _______________

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ the _______________ of the CITY OF FRISCO, TEXAS, a municipal corporation, on behalf of said municipal corporation.

Notary Public in and for Said County and State
 

(SEAL)

7

Exhibit 3.3(g)(13)

Form of County Abatement Assignment

(See Attached)

Exhibit 3.3(g)(13)-1

ASSIGNMENT AND ASSUMPTION OF TAX ABATEMENT AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION OF TAX ABATEMENT AGREEMENT (this “Assignment”) is made as of December ___, 2010 (the “Effective Date”) by and among COLLIN COUNTY, TEXAS (the “County”), MEDLAND, L.P., a Texas limited partnership (“Assignor”), HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership (“Assignee#1”) and HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership (“Assignee#2”).

Recitals

     A. Assignor, as the “Developer”, and the County are parties to that certain Tax Abatement Agreement between The City of Frisco and Medland, L.P. dated December 9, 2002 (the “Agreement”). Any capitalized terms not defined in this Assignment have the meanings ascribed to such terms in the Agreement.

     B. Pursuant to the Agreement, Assignor received and continues to receive the benefit of certain tax abatements from the County in exchange for the development of the Property in accordance with the terms of the Agreement.

     C. This Assignment is entered into among the parties in connection the sale of the Property to Assignee#1 and Assignee#2.

     NOW THEREFORE, for and in consideration of $10.00, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

     1. Recitals. The recitals above are incorporated into this Agreement.

     2. Definition of “Property”; Interests of Assignees. The Property is defined in the Agreement pursuant to a metes and bounds description. The Property has since been re-platted in its entirety, and now consists of Lots 1A, 2A, 3A, 4A, and 5A of Block A, as shown on the Plat (herein so called) entitled “Frisco Medical Center Lots 1A-5A, Block A” filed on August 20, 2007, and recorded in Cabinet 2007, Slide 426, Plat Records of Collin County, Texas. Following the sale referenced in the recitals above, Assignee#1 will own Lot 3A as shown on the Plat, and Assignee#2 will own Lots 1A, 2A, 4A, and 5A as shown on the Plat. For the avoidance of doubt, the overall property covered by the Agreement has not changed, as the property shown on the Plat is the same as the “Property” described in the Agreement.

1

     3. Assignment and Assumption.

          (a) To Assignee#1. Assignor hereby assigns its right, title and interest in and to the Agreement as pertains to Lot 3A as shown on the Plat (herein, the “Lot 3A Interest”) to Assignee#1. Assignee#1 accepts the foregoing assignment, and assumes all of Assignor’s obligations and duties with respect to the Lot 3A Interest. Assignor will indemnify, defend, and hold Assignee#1 harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Lot 3A Interest prior to the Effective Date. Assignee#1 will indemnify, defend, and hold Assignor harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Lot 3A Interest on or after the Effective Date.

          (b) To Assignee#2. Assignor hereby assigns its right, title and interest in and to the Agreement as pertains to Lots 1A, 2A, 4A, and 5A as shown on the Plat (herein, the “Remaining Property Interest”) to Assignee#2. Assignee#2 accepts the foregoing assignment, and assumes all of Assignor’s obligations and duties with respect to the Remaining Property Interest. Assignor will indemnify, defend, and hold Assignee#2 harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Remaining Property Interest prior to the Effective Date. Assignee#2 will indemnify, defend, and hold Assignor harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Remaining Property Interest on or after the Effective Date.

          (c) Section 3 of the Agreement obligates the Company to maintain a permanent and accurate set of books and records of costs related to the Medical Facilities. Assignor will deliver a complete copy of all such books and records as they relate to the Lot 3 Interest and the Remaining Property Interest to Assignee#1 and Assignee#2, respectively, concurrent with the execution of this Assignment.

     4. Joinder of County. The County joins in this Assignment for the sole purpose of consenting to and confirming receipt of this Assignment and confirming that (a) Assignor has timely performed, completed and fulfilled its obligations

2

contained in the Agreement, specifically including those contained in Section 2 of the Agreement, and (b) to its actual knowledge, the Agreement is in full force and effect and there is no Event of Default thereunder, nor does any circumstance exist which with the giving of notice or passage of time, or both, would ripen into an Event of Default under the Agreement.

     5. Change of Notice. From and after the Effective Date, the notice address for the “Developer” shall be:

HRT Properties of Texas, Ltd.
HR Acquisition of San Antonio, Ltd.
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: General Counsel

With a copy to:

HRT Properties of Texas, Ltd.
HR Acquisition of San Antonio, Ltd.
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: Chief Operating Officer

     6. Counterparts. This Agreement may be executed in two or more counterparts.

(Signatures on the following pages)

3

     IN WITNESS WHEREOF, Assignor has executed this Assignment as of the Effective Date.

MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:  

Its: 

4

     IN WITNESS WHEREOF, Assignee#1 has executed this Assignment as of the Effective Date.

HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

5

     IN WITNESS WHEREOF, Assignee#2 has executed this Assignment as of the Effective Date.

HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

6

     IN WITNESS WHEREOF, the County has executed this Assignment as of the Effective Date.

COLLIN COUNTY, TEXAS
 

By:  

Its: 

7

Exhibit 3.3(g)(14)

Form of City Abatement Assignment

(See Attached)

Exhibit 3.3(g)(14)-1

ASSIGNMENT AND ASSUMPTION OF TAX ABATEMENT AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION OF TAX ABATEMENT AGREEMENT (this “Assignment”) is made as of December ___, 2010 (the “Effective Date”) by and among the CITY OF FRISCO, TEXAS, a home rule city and municipal corporation of Collin and Denton Counties, Texas (the “City”), MEDLAND, L.P., a Texas limited partnership (“Assignor”), HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership (“Assignee#1”) and HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership (“Assignee#2”).

Recitals

     A. Assignor, as the “Developer”, and the City are parties to that certain Tax Abatement Agreement between The City of Frisco and Medland, L.P. dated November 19, 2002, as amended by that certain Amendment to Tax Abatement Agreement between The City of Frisco and Medland, L.P. dated as of June 7, 2005 (as amended, the “Agreement”). Any capitalized terms not defined in this Assignment have the meanings ascribed to such terms in the Agreement.

     B. Pursuant to the Agreement, Assignor received and continues to receive the benefit of certain tax abatements from the City in exchange for the development of the Property in accordance with the terms of the Agreement.

     C. This Assignment is entered into among the parties in connection the sale of the Property to Assignee#1 and Assignee#2.

     NOW THEREFORE, for and in consideration of $10.00, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

     1. Recitals. The recitals above are incorporated into this Agreement.

     2. Definition of “Property”; Interests of Assignees. The Property is defined in the Agreement pursuant to a metes and bounds description. The Property has since been re-platted in its entirety, and now consists of Lots 1A, 2A, 3A, 4A, and 5A of Block A, as shown on the Plat (herein so called) entitled “Frisco Medical Center Lots 1A-5A, Block A” filed on August 20, 2007, and recorded in Cabinet 2007, Slide 426, Plat Records of Collin County, Texas. Following the sale referenced in the recitals above, Assignee#1 will own Lot 3A as shown on the Plat, and Assignee#2 will own Lots 1A, 2A, 4A, and 5A as shown on the Plat. For the

1

avoidance of doubt, the overall property covered by the Agreement has not changed, as the property shown on the Plat is the same as the “Property” described in the Agreement.

     3. Assignment and Assumption.

          (a) To Assignee#1. Assignor hereby assigns its right, title and interest in and to the Agreement as pertains to Lot 3A as shown on the Plat (herein, the “Lot 3A Interest”) to Assignee#1. Assignee#1 accepts the foregoing assignment, and assumes all of Assignor’s obligations and duties with respect to the Lot 3A Interest. Assignor will indemnify, defend, and hold Assignee#1 harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Lot 3A Interest prior to the Effective Date. Assignee#1 will indemnify, defend, and hold Assignor harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Lot 3A Interest on or after the Effective Date.

          (b) To Assignee#2. Assignor hereby assigns its right, title and interest in and to the Agreement as pertains to Lots 1A, 2A, 4A, and 5A as shown on the Plat (herein, the “Remaining Property Interest”) to Assignee#2. Assignee#2 accepts the foregoing assignment, and assumes all of Assignor’s obligations and duties with respect to the Remaining Property Interest. Assignor will indemnify, defend, and hold Assignee#2 harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Remaining Property Interest prior to the Effective Date. Assignee#2 will indemnify, defend, and hold Assignor harmless from any and all claims, damages, losses, suits, proceedings, costs and expenses (including, but not limited to, reasonable attorneys’ fees) which first arose or accrued with respect to the Remaining Property Interest on or after the Effective Date.

          (c) Section 3 of the Agreement obligates the Company to maintain a permanent and accurate set of books and records of costs related to the Medical Facilities. Assignor will deliver a complete copy of all such books and records as they relate to the Lot 3 Interest and the Remaining Property Interest to Assignee#1 and Assignee#2, respectively, concurrent with the execution of this Assignment.

2

     4. Joinder of City. The City joins in this Assignment for the sole purpose of consenting to and confirming receipt of this Assignment and confirming that (a) Assignor has timely performed, completed and fulfilled its obligations contained in the Agreement, specifically including those contained in Section 2 of the Agreement, and (b) to its actual knowledge, the Agreement is in full force and effect and there is no Event of Default thereunder, nor does any circumstance exist which with the giving of notice or passage of time, or both, would ripen into an Event of Default under the Agreement.

     5. Change of Notice. From and after the Effective Date, the notice address for the “Developer” shall be:

HRT Properties of Texas, Ltd.
HR Acquisition of San Antonio, Ltd.
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: General Counsel

With a copy to:

HRT Properties of Texas, Ltd.
HR Acquisition of San Antonio, Ltd.
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: Chief Operating Officer

     6. Counterparts. This Agreement may be executed in two or more counterparts.

(Signatures on the following pages)

3

     IN WITNESS WHEREOF, Assignor has executed this Assignment as of the Effective Date.

MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:  

Its: 

4

     IN WITNESS WHEREOF, Assignee#1 has executed this Assignment as of the Effective Date.

HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

5

     IN WITNESS WHEREOF, Assignee#2 has executed this Assignment as of the Effective Date.

HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

6

     IN WITNESS WHEREOF, the City has executed this Assignment as of the Effective Date.

THE CITY OF FRISCO, TEXAS
 

By:  

Its:

7

Exhibit 3.3(g)(15)

Form of Developer Assignment

(See Attached)

Exhibit 3.3(g)(15)-1

ASSIGNMENT AND ASSUMPTION OF DEVELOPER’S INTEREST IN CONSTRUCTION, OPERATION AND
RECIPROCAL EASEMENT AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION OF DEVELOPER’S INTEREST IN CONSTRUCTION, OPERATION, AND RECIPROCAL AGREEMENT (this “Assignment”) is made as of December ___, 2010 (the “Effective Date”) by and between MEDLAND, L.P., a Texas limited partnership (“Assignor”), HR ACQUISITION OF SAN ANTONIO, LTD. (“Assignee”), and HRT PROPERTIES OF TEXAS, LTD. (“HR”).

Recitals

     A. Assignor, Frisco Surgery Center Limited and Frisco POB I Limited are parties to the certain Construction, Operation and Reciprocal Easement Agreement dated as of June 20, 2001, recorded in Volume 4945, Page 1998, Real Property Records, Collin County, Texas, as amended by the First Amendment to Construction, Operation and Easement Agreement dated November 15, 2005, recorded in Volume 6048, Page 3517, Real Property Records, Collin County, Texas (as amended by the First Amendment, the “REA”). Any capitalized terms not defined in this Assignment have the meanings ascribed to such terms in the REA.

     B. Assignor, as the Future Development Owner, is the Developer under the REA.

     C. Assignor, together with Frisco Surgery Center Limited, Frisco POB I Limited, and Frisco POB II Limited have sold the entirety of the Site to Assignee and HR. Specifically, Assignee is the Owner of the Future Development Tract, the MOB I Tract, and the MOB II Tract, while HR is the Owner of the SC Tract. Assignor and Assignee now enter into this Assignment in order to assign the rights and obligations of the Developer to Assignee. HR joins in this Assignment to evidence its agreement to the notice address changes below.

1

     NOW THEREFORE, for and in consideration of $10.00, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

     1. Recitals. The recitals above are incorporated into this Assignment.

     2. Assignment and Assumption. The parties acknowledge and agree that Assignee is now the Future Development Owner, and that Assignor hereby assigns the rights and obligations of the Developer under the REA to Assignee. Assignee hereby assumes the same.

     3. Change of Notice. From and after the Effective Date, the notice address for the Owners shall be as follows:

In the case of SC Owner to:	HRT Properties of Texas, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: Chief Operating Officer Telephone: (615) 269-8175 Facsimile: (615) 269-8461
With a copy to:	HRT Properties of Texas, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: General Counsel Telephone: (615) 269-8175 Facsimile: (615) 463-7739
In the case of MOB I Owner to:	HR Acquisition of San Antonio, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: Chief Operating Officer Telephone: (615) 269-8175 Facsimile: (615) 269-8461
With a copy to:	HR Acquisition of San Antonio, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: General Counsel Telephone: (615) 269-8175 Facsimile: (615) 463-7739

2

In the case of MOB II Owner to:	HR Acquisition of San Antonio, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: Chief Operating Officer Telephone: (615) 269-8175 Facsimile: (615) 269-8461
With a copy to:	HR Acquisition of San Antonio, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: General Counsel Telephone: (615) 269-8175 Facsimile: (615) 463-7739
In the case of Future Development Owner or Developer to:	HR Acquisition of San Antonio, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: Chief Operating Officer Telephone: (615) 269-8175 Facsimile: (615) 269-8461
With a copy to:	HR Acquisition of San Antonio, Ltd. 3310 West End Avenue, Suite 700 Nashville, Tennessee 37203 Attn: General Counsel Telephone: (615) 269-8175 Facsimile: (615) 463-7739

     4. Counterparts. This Agreement may be executed in two or more counterparts.

(Signatures on the following pages)

3

     IN WITNESS WHEREOF, Assignor has executed this Assignment as of the Effective Date.

MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:  

Its: 

STATE OF _________________
COUNTY OF _______________

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ of TEXAS LAND MANAGEMENT, L.L.C., a Texas limited liability company, as general partner of MEDLAND, L.P., a Texas limited partnership, on behalf of said limited partnership.

Notary Public in and for Said County and
State 

(SEAL)

4

     IN WITNESS WHEREOF, HR has executed this Assignment as of the Effective Date.

HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

STATE OF TENNESSEE
COUNTY OF DAVIDSON

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ of HEALTHCARE ACQUISITION OF TEXAS, INC., an Alabama corporation, as general partner of HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership, on behalf of said limited partnership.

Notary Public in and for Said County and
State 

(SEAL)

5

     IN WITNESS WHEREOF, Assignee has executed this Assignment as of the Effective Date.

HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership
By:	Healthcare Acquisition of Texas, Inc., an Alabama corporation

By:  

Its: 

STATE OF TENNESSEE
COUNTY OF DAVIDSON

     This instrument was acknowledged before me on _______________, 2010, by _________________, _________________ of HEALTHCARE ACQUISITION OF TEXAS, INC., an Alabama corporation, as general partner of HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership, on behalf of said limited partnership.

Notary Public in and for Said County and
State 

(SEAL)

6

Exhibit 3.4(b)

Purchaser Closing Documents

1.	Closing Statement
2.	General Assignments and Bills of Sale (in the form of Exhibit 9.2-B attached to the Agreement)
3.	Notices to all Tenants (in the form of Exhibit 3.3(a) attached to the Agreement)
4.	The MOB Development Agreement Assignment
5.	The County Abatement Assignment
6.	The City Abatement Assignment
7.	The Developer Assignment

Exhibit 3.4(b)-1

Exhibit 4.1

Sellers Deliverables

Complete, correct, and legible copies of the following:

          (a) All Existing Leases and other agreements that grant a possessory interest in and to any portion of the Property or that otherwise have rights with regard to the use of the Property .

          (b) All Contracts.

          (c) A complete, itemized and detailed inventory of the Personal Property.

          (d) All warranties (construction or otherwise), geotechnical and other engineering studies and/or reports, title policies, “As Built” plans of the improvements, surveys, environmental studies and/or reports, and all other instruments, studies, and reports pertaining to the Property in Seller’s possession.

          (e) Financial Statements for the Property for 2008, 2009 and YTD 2010.

          (f) Operating Expense Recovery Statements for the 2008 and 2009, as well as corresponding back-up (e.g., utility bills, maintenance invoices);

          (g) Capital budgets for the Property for 2008, 2009 and YTD 2010.

          (h) A breakdown of the personnel employed in managing the Property, or, if the Property or any portion thereof is managed by a third party manager, a copy of the management agreement.

          (i) The Title Commitment and all exception documents.

          (j) The Surveys.

          (k) Sellers’ most recent Phase I Environmental Report and any other environmental reports or studies in Seller’s possession.

          (l) All Leasing Commission Agreements.

          (m) A copy of the partnership or operating agreement for the tenant of MB Property#1, if in Seller’s possession.

Exhibit 4.1-1

Exhibit 5.1(c)-1

Tenant Estoppel

FORM AGREED UPON BY THE PARTIES OUTSIDE OF AGREEMENT

Exhibit 5.1(c)-1

Exhibit 5.1(c)-2

Parking Space Lease Estoppel

DELIVERED TO AND ACCEPTED BY PURCHASER AS OF THE AGREEMENT DATE

Exhibit 5.1(c)-2

Exhibit 5.1(c)-3

FSC Lease Estoppel

DELIVERED TO AND ACCEPTED BY PURCHASER AS OF THE AGREEMENT DATE

Exhibit 5.1(c)-3

Exhibit 9.1

Purchaser’s Survey Requirements

SURVEYOR’S CERTIFICATION

TO: _____________________ (the “Title Company”); ________________________ and ________________ (collectively “Seller”); Healthcare Realty Trust Incorporated, a Maryland corporation and _____________________ (collectively “Buyer”).

This is to certify that this map or plat and the survey on which it is based were made in accordance with the “2005 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys” as adopted by American Land Title Association (“ALTA”) and National Society of Professional Surveyors (“NSPS”; a member organization of the American Congress on Surveying and Mapping), and includes Items 1, 2, 3, 4, 6, 7(a), (b) and (c), 8, 9, 10, 11(a) and (b), 13 and 14 of Table A thereof. Pursuant to the Accuracy Standards as adopted by ALTA and NSPS and in effect on the date of this certification, the undersigned further certifies that in my professional opinion, as a land surveyor registered in the State of T, the Relative Positional Accuracy of this survey does not exceed that which is specified therein.

Date:________________________

(Signature of surveyor)

____________________________

Registration No._______________

(Seal of surveyor)

Exhibit 9.1-1

Exhibit 9.2-A-1

Texas Special Warranty Deed

(MB Property#1)

See Attached

Exhibit 9.2-B-4

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

SPECIAL WARRANTY DEED

STATE OF TEXAS	§
	§	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF COLLIN	§

     FRISCO SURGERY CENTER LIMITED, a Texas limited partnership (“Grantor”), for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration in hand paid by HRT PROPERTIES OF TEXAS, LTD., a Texas limited partnership (“Grantee”), whose mailing address is 3310 West End Avenue, Suite 700, Nashville, Tennessee 37203, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD AND CONVEYED and by these presents does hereby GRANT, BARGAIN, SELL AND CONVEY unto Grantee that certain tract or parcel of land situated in Collin County, Texas, and more particularly described on Exhibit A attached hereto and made a part hereof for all purposes (the “Land”), together with all improvements, rights, appurtenances, and hereditaments located thereon or pertaining thereto, including all rights, title and interest of Grantor in and to all adjacent streets, alleys, strips, gores or rights-of-way pertaining thereto (the Land, together with all of the above-described properties, being hereinafter collectively referred to as the “Property”).

     The conveyance of the Property is made and accepted subject to the matters set forth on Exhibit B attached hereto and made a part hereof for all purposes (the “Permitted Exceptions”).

     TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in anywise belonging unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise, subject, however, to the Permitted Exceptions.

     IN WITNESS WHEREOF, this Special Warranty Deed is executed by Grantor to be effective for all purposes as of December ___, 2010.

GRANTOR: FRISCO SURGERY CENTER LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:
	Name:
	Title:

STATE OF TEXAS	§
	§
COUNTY OF _______________	§

     This instrument was acknowledged before me on December ____, 2010, by _________________, _________________ of TEXAS LAND MANAGEMENT, L.L.C., a Texas limited liability company, as general partner of FRISCO SURGERY CENTER LIMITED, a Texas limited partnership, on behalf of said limited partnership.

(SEAL) Notary Public in and for Said County and State

EXHIBIT A
TO
SPECIAL WARRANTY DEED

LEGAL DESCRIPTION

Being Lot 3A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

EXHIBIT B
TO
SPECIAL WARRANTY DEED

PERMITTED EXCEPTIONS

1. Real property taxes and assessments for 2011 and subsequent years.

2. Easement granted by Noel A. Smith and wife, Susie Smith to Denton County Electric Cooperative, Inc., filed 03/18/1953, recorded in Volume 468, Page 205, Real Property Records of Collin County, Texas.

3. The following easements as shown on the plat filed 08/20/2007, recorded in Cabinet 2007, Slide 426, Plat Records of Collin County, Texas:

Variable width water easements

15’ drainage easements

15’ water well easement

18’ X 25’ electrical easement

24’ fire lane, utility, mutual access and drainage easement

10’ X 15’ water easement

24’ fire lane, utility and mutual access easement

10’ TXU easement

15’ water easement

visibility and street easement

street easement (deceleration lane)

10’ x 10’ water easements, 10’ water easement

4. Rights of tenants under any unrecorded leases or rental agreements assigned by Grantor and assumed by Grantee of even date herewith.

5. Terms, conditions and easements set forth in Construction, Operation and Reciprocal Easement Agreement by and between Frisco Surgery Center Limited, a Texas limited partnership; Frisco POB I Limited, a Texas limited partnership and Medland, L.P., a Texas limited partnership, filed June 22, 2001, recorded in Volume 4945, Page 1993, Real Property Records, Collin County, Texas, as amended by the First Amendment filed November 17, 2005, recorded in Volume 6048, Page 3517, Real Property Records, Collin County, Texas.

6. Terms, provisions, and conditions of Medical Office Buildings Development Agreement filed 07/19/2002, recorded in Volume 5214, Page 2175, Real Property Records of Collin County, Texas.

7. Terms, provisions, and conditions of Maintenance Agreement for Detention Facility (Frisco Medical Center — Stonebriar Park) filed 02/14/2008, cc# 20080124000176410, Real Property Records of Collin County, Texas.

Exhibit 9.2-A-2

Texas Special Warranty Deed

(MB Property#2)

See Attached

Exhibit 9.2-B-4

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

SPECIAL WARRANTY DEED

STATE OF TEXAS	§ §	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF COLLIN	§

     FRISCO POB I LIMITED, a Texas limited partnership (“Grantor”), for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration in hand paid by HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership (“Grantee”), whose mailing address is 3310 West End Avenue, Suite 700, Nashville, Tennessee 37203, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD AND CONVEYED and by these presents does hereby GRANT, BARGAIN, SELL AND CONVEY unto Grantee that certain tract or parcel of land situated in Collin County, Texas, and more particularly described on Exhibit A attached hereto and made a part hereof for all purposes (the “Land”), together with all improvements, rights, appurtenances, and hereditaments located thereon or pertaining thereto, including all rights, title and interest of Grantor in and to all adjacent streets, alleys, strips, gores or rights-of-way pertaining thereto (the Land, together with all of the above-described properties, being hereinafter collectively referred to as the “Property”).

     The conveyance of the Property is made and accepted subject to the matters set forth on Exhibit B attached hereto and made a part hereof for all purposes (the “Permitted Exceptions”).

     TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in anywise belonging unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise, subject, however, to the Permitted Exceptions.

     IN WITNESS WHEREOF, this Special Warranty Deed is executed by Grantor to be effective for all purposes as of December ___, 2010.

GRANTOR: FRISCO POB I LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:
	Name:
	Title:

STATE OF TEXAS	§ §
COUNTY OF ____________	§

     This instrument was acknowledged before me on December ____, 2010, by _________________, _________________ of TEXAS LAND MANAGEMENT, L.L.C., a Texas limited liability company, as general partner of FRISCO POB I LIMITED, a Texas limited partnership, on behalf of said limited partnership.

(SEAL) Notary Public in and for Said County and State 

EXHIBIT A
TO
SPECIAL WARRANTY DEED

LEGAL DESCRIPTION

Being Lot 2A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

EXHIBIT B TO SPECIAL WARRANTY DEED

PERMITTED EXCEPTIONS

1. Real property taxes and assessments for 2011 and subsequent years.

2. Easement granted by Noel A. Smith and wife, Susie Smith to Denton County Electric Cooperative, Inc., filed 03/18/1953, recorded in Volume 468, Page 205, Real Property Records of Collin County, Texas.

3. Rights of tenants under any unrecorded leases or rental agreements assigned by Grantor and assumed by Grantee of even date herewith.

4. Terms, conditions and easements set forth in Construction, Operation and Reciprocal Easement Agreement by and between Frisco Surgery Center Limited, a Texas limited partnership; Frisco POB I Limited, a Texas limited partnership and Medland, L.P., a Texas limited partnership, filed June 22, 2001, recorded in Volume 4945, Page 1993, Real Property Records, Collin County, Texas, as amended by the First Amendment filed November 17, 2005, recorded in Volume 6048, Page 3517, Real Property Records, Collin County, Texas.

5. Terms, provisions, and conditions of Medical Office Buildings Development Agreement filed 07/19/2002, recorded in Volume 5214, Page 2175, Real Property Records of Collin County, Texas.

6. Terms, provisions, and conditions of Maintenance Agreement for Detention Facility (Frisco Medical Center — Stonebriar Park) filed 02/14/2008, cc# 20080124000176410, Real Property Records of Collin County, Texas.

7. Terms, provisions, conditions, and easements contained in Water Agreement, Access Easement and Maintenance Agreement filed 02/14/2008, cc# 20080214000176390, Real Property Records of Collin County, Texas.

8. Terms, provisions, and conditions of Sublease between Frisco Surgery Center Limited, as Lessor and Frisco Medical Center, L.L.P., as Lessee, as evidenced and affected by Subordination, Non Disturbance and Attornment Agreement filed 08/15/2007, cc# 20070815001133560, Real Property Records of Collin County, Texas.

9. Terms, provisions, and conditions of (1) Ground Lease between Frisco POB I Limited, as landlord, and Frisco Surgery Center Limited, as tenant, as evidenced by the Memorandum of Lease filed on 08/07/2007, and recorded as instrument number 20070807001096440, Real Property Records, Collin County, Texas, and (2) the Subordination, Non-Disturbance and Attornment Agreement filed on 08/15/2007, and recorded as instrument number 20070815001133560, Real Property Records, Collin County, Texas.

10. 24’ fire lane, utility and mutual access easement throughout; visibility and street easement(s) along North line; 10’ TXU easement along North line; 10’ water easement along North line; water easement(s) throughout; 15’ drainage easement at Eastern mid portion of property; 15’ drainage easement at West line of property; and 15’ water well easement along South line of property as shown on plat recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

11. Access Easement contained in Memorandum of Lease by and between Frisco POB I Limited, a Texas limited partnership and Frisco Surgery Center Limited, a Texas limited partnership filed 08/07/2007, recorded under cc# 20070807001096440, Real Property Records, Collin County, Texas.

Exhibit 9.2-A-3

Texas Special Warranty Deed

(MB Property#3)

See Attached

Exhibit 9.2-B-4

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

SPECIAL WARRANTY DEED

STATE OF TEXAS	§ §	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF COLLIN	§

     FRISCO POB II LIMITED, a Texas limited partnership (“Grantor”), for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration in hand paid by HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership (“Grantee”), whose mailing address is 3310 West End Avenue, Suite 700, Nashville, Tennessee 37203, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD AND CONVEYED and by these presents does hereby GRANT, BARGAIN, SELL AND CONVEY unto Grantee that certain tract or parcel of land situated in Collin County, Texas, and more particularly described on Exhibit A attached hereto and made a part hereof for all purposes (the “Land”), together with all improvements, rights, appurtenances, and hereditaments located thereon or pertaining thereto, including all rights, title and interest of Grantor in and to all adjacent streets, alleys, strips, gores or rights-of-way pertaining thereto (the Land, together with all of the above-described properties, being hereinafter collectively referred to as the “Property”).

     The conveyance of the Property is made and accepted subject to the matters set forth on Exhibit B attached hereto and made a part hereof for all purposes (the “Permitted Exceptions”).

     TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in anywise belonging unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise, subject, however, to the Permitted Exceptions.

     IN WITNESS WHEREOF, this Special Warranty Deed is executed by Grantor to be effective for all purposes as of December ___, 2010.

GRANTOR: FRISCO POB II LIMITED, a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner

By:
	Name:
	Title:

STATE OF TEXAS	§ §
COUNTY OF _______________	§

     This instrument was acknowledged before me on December ____, 2010, by _________________, _________________ of TEXAS LAND MANAGEMENT, L.L.C., a Texas limited liability company, as general partner of FRISCO POB II LIMITED, a Texas limited partnership, on behalf of said limited partnership.

(SEAL) Notary Public in and for Said County and State

EXHIBIT A
TO
SPECIAL WARRANTY DEED

LEGAL DESCRIPTION

Being Lot 4A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

EXHIBIT B
TO
SPECIAL WARRANTY DEED

PERMITTED EXCEPTIONS

1. Real property taxes and assessments for 2011 and subsequent years.

2. Easement granted by Noel A. Smith and wife, Susie Smith to Denton County Electric Cooperative, Inc., filed 03/18/1953, recorded in Volume 468, Page 205, Real Property Records of Collin County, Texas.

3. Rights of tenants under any unrecorded leases or rental agreements assigned by Grantor and assumed by Grantee of even date herewith.

4. Terms, conditions and easements set forth in Construction, Operation and Reciprocal Easement Agreement by and between Frisco Surgery Center Limited, a Texas limited partnership; Frisco POB I Limited, a Texas limited partnership and Medland, L.P., a Texas limited partnership, filed June 22, 2001, recorded in Volume 4945, Page 1993, Real Property Records, Collin County, Texas, as amended by the First Amendment filed November 17, 2005, recorded in Volume 6048, Page 3517, Real Property Records, Collin County, Texas.

5. Terms, provisions, and conditions of Medical Office Buildings Development Agreement filed 07/19/2002, recorded in Volume 5214, Page 2175, Real Property Records of Collin County, Texas.

6. Terms, provisions, and conditions of Maintenance Agreement for Detention Facility (Frisco Medical Center — Stonebriar Park) filed 02/14/2008, cc# 20080124000176410, Real Property Records of Collin County, Texas.

7. 20’ drainage easement; 15’ drainage easements; 7.5’ x 15’ drainage easement; 10’ x 20’ water easement; 10’ electrical easement; 10’ sanitary sewer easement; 10’ x 10’ water easements; variable width water easements; 24’ fire lane, utility & mutual access easement; visibility and street easement; 20’ x 30’ TXU easement; street easement (deceleration Lane); 10’ TXU easement; 15’ water easement; and 15’ water well easement as shown on the plat recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

Exhibit 9.2-A-4

Texas Special Warranty Deed

(Land Sites)

See Attached

Exhibit 9.2-B-4

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

SPECIAL WARRANTY DEED

STATE OF TEXAS	§ §	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF COLLIN	§

     MEDLAND, L.P., a Texas limited partnership (“Grantor”), for and in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00) and other good and valuable consideration in hand paid by HR ACQUISITION OF SAN ANTONIO, LTD., an Alabama limited partnership (“Grantee”), whose mailing address is 3310 West End Avenue, Suite 700, Nashville, Tennessee 37203, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD AND CONVEYED and by these presents does hereby GRANT, BARGAIN, SELL AND CONVEY unto Grantee that certain tract or parcel of land situated in Collin County, Texas, and more particularly described on Exhibit A attached hereto and made a part hereof for all purposes (the “Land”), together with all improvements, rights, appurtenances, and hereditaments located thereon or pertaining thereto, including all rights, title and interest of Grantor in and to all adjacent streets, alleys, strips, gores or rights-of-way pertaining thereto (the Land, together with all of the above-described properties, being hereinafter collectively referred to as the “Property”).

     The conveyance of the Property is made and accepted subject to the matters set forth on Exhibit B attached hereto and made a part hereof for all purposes (the “Permitted Exceptions”).

     TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereto in anywise belonging unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee, its successors and assigns, against every person whomsoever lawfully claiming or to claim the same or any part thereof, by, through or under Grantor, but not otherwise, subject, however, to the Permitted Exceptions.

     IN WITNESS WHEREOF, this Special Warranty Deed is executed by Grantor to be effective for all purposes as of December ___, 2010.

GRANTOR: MEDLAND, L.P., a Texas limited partnership
By:	Texas Land Management, L.L.C., its general partner
By:
	Name:
	Title:

STATE OF TEXAS

COUNTY OF _______________ §
§
§

     This instrument was acknowledged before me on December ____, 2010, by _________________, _________________ of TEXAS LAND MANAGEMENT, L.L.C., a Texas limited liability company, as general partner of MEDLAND, L.P., a Texas limited partnership, on behalf of said limited partnership.

(SEAL) Notary Public in and for
Said County and State

EXHIBIT A
TO
SPECIAL WARRANTY DEED

LEGAL DESCRIPTION

Being Lot 1A and Lot 5A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

EXHIBIT B
TO
SPECIAL WARRANTY DEED

PERMITTED EXCEPTIONS

1. Real property taxes and assessments for 2011 and subsequent years.

2. Easement granted by Noel A. Smith and wife, Susie Smith to Denton County Electric Cooperative, Inc., filed 03/18/1953, recorded in Volume 468, Page 205, Real Property Records of Collin County, Texas.

3. Rights of tenants under any unrecorded leases or rental agreements assigned by Grantor and assumed by Grantee of even date herewith.

4. Terms, conditions and easements set forth in Construction, Operation and Reciprocal Easement Agreement by and between Frisco Surgery Center Limited, a Texas limited partnership; Frisco POB I Limited, a Texas limited partnership and Medland, L.P., a Texas limited partnership, filed June 22, 2001, recorded in Volume 4945, Page 1993, Real Property Records, Collin County, Texas, as amended by the First Amendment filed November 17, 2005, recorded in Volume 6048, Page 3517, Real Property Records, Collin County, Texas.

5. Terms, provisions, and conditions of Medical Office Buildings Development Agreement filed 07/19/2002, recorded in Volume 5214, Page 2175, Real Property Records of Collin County, Texas.

6. As affecting Lot 1A only: 24’ fire lane, utility and mutual access easement; 10’ x 10’ water easement; 10’ x 20’ water easement; visibility and street easement; street easement (deceleration lane); 10’ TXU easement; and 10’ water easement as shown on plat recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

7. Terms, provisions, and conditions of Maintenance Agreement for Detention Facility (Frisco Medical Center — Stonebriar Park) filed 02/14/2008, cc# 20080124000176410, Real Property Records of Collin County, Texas.

8. As affecting Lot 5A only: 24’ fire lane, utility & mutual access easement along West line; water easement(s); visibility and street easement at Northwest portion of property; 10’ water easement along North line; 10’ TXU easement along North line; 20’ drainage easement; and 15’ water well easement at most Southerly line of property as shown on plat recorded in Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

Exhibit 9.2-B-1

(Form of General Assignment and Bill of Sale — MB Property#1)

See Attached

Exhibit 9.2-B-1

General Assignment and Bill Of Sale
(Frisco Surgery Center)

     THIS GENERAL ASSIGNMENT AND BILL OF SALE (this “Assignment”) is executed this ____ day of December, 2010, by and between FRISCO SURGERY CENTER LIMITED (herein referred to as “Assignor”), and HRT PROPERTIES OF TEXAS, LTD. (herein referred to as “Assignee”).

RECITALS:

A. Pursuant to that certain Purchase Agreement dated December ___, 2010, between Assignor, as Seller#1, and Assignee (as the successor by assignment to Healthcare Realty Trust Incorporated), as Purchaser (the “Purchase Agreement”), Assignor has agreed to convey to Assignee all of Assignor’s right, title and interest in and to the MB Site#1 (as defined in the Purchase Agreement) more particularly described in Exhibit A attached hereto and related improvements located on MB Site#1 (the “Improvements”; together with MB Site#1 being referred to hereinafter collectively as the “Real Property”).

B. In connection with the conveyance of the Real Property to Assignee, Assignor intends that all its right, title and interest in, to and under all leases, contracts, guaranties, warranties, licenses, permits, personalty and other matters stated herein be assigned and transferred to Assignee.

     NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in hand paid to Assignor, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Assignment. Assignor does hereby grant, bargain, sell, assign, transfer, and convey unto Assignee, its successors and assigns, to the extent assignable, and without any warranty or representation of any kind, except as expressly provided herein or in the Purchase Agreement, all of Assignor’s right, title and interest as of the date hereof, in, to and under the following:

(a) all of the Real Property;

(b) all leases listed on Exhibit B attached hereto (including all amendments or other modifications to such leases), together with all security deposits thereunder (collectively, the “Leases”);

(c) all contracts and agreements identified on Exhibit C attached hereto (the “Contracts”);

(d) all those: (i) guaranties, warranties and agreements, if any, from any contractors, subcontractors, vendors or suppliers regarding their performance, quality of workmanship and quality of materials supplied in connection with the construction, manufacture, development, installation and operation of any and all fixtures, equipment, items of personal property and improvements located in or used in connection with the Real Property, and any other guaranties, warranties and agreements related to the ownership and operation of the Real Property or the Personal Property (as hereinafter defined); and (ii) use, occupancy and operating permits, and all other permits, licenses, approvals and certificates relating to the ownership and operation of the Real Property and/or the Personal Property (the items described in this Section 1(d) being collectively referred to herein as the “Intangibles”); and

(e) if any, all signs, supplies, tools, decorations, furniture, furnishings, fixtures, equipment, machinery, landscaping and any other tangible personal property owned by Assignor and used by Assignor exclusively in connection with the leasing, management, operation, maintenance and repair

of the Real Property (collectively, the “Personal Property”), excluding the items listed on Exhibit D attached hereto.

THE PERSONAL PROPERTY IS HEREBY CONVEYED TO ASSIGNEE IN AN “AS IS,” “WHERE IS,” “WITH ALL FAULTS” CONDITION, AND ASSIGNOR DOES NOT WARRANT, AND HEREBY EXPRESSLY DISCLAIMS, ANY AND ALL WARRANTIES OF QUALITY, FITNESS AND MERCHANTABILITY RELATING TO ANY OF THE LEASES, CONTRACTS, INTANGIBLES OR PERSONAL PROPERTY, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE PERSONAL PROPERTY OR THE FITNESS OF ANY OF THE PROPERTY CONVEYED HEREBY FOR A PARTICULAR USE OR PURPOSE OR FOR ASSIGNEE’S INTENDED USE OR PURPOSE. Assignor does represent and warrant, however, that the Personal Property and the Real Property are being conveyed free and clear of any monetary liens. Further, Assignor makes no representation or warranty with respect to the assignability of any of the items assigned hereby (except for the Leases), nor shall Assignor be deemed in any event to be a warrantor, guarantor, or surety for the obligations of any maker of any warranties or guaranties assigned hereunder. Except as otherwise expressly provided herein or in the Purchase Agreement, the assignment of the property conveyed hereby from Assignor to Assignee shall be without recourse to Assignor.

2. Acceptance and Assumption. Assignee hereby accepts the foregoing grants and assignments of the Leases, Contracts, Personal Property and Intangibles and agrees that it accepts such items without any warranty or representation of any kind (except as expressly provided herein or in the Purchase Agreement) and otherwise on the terms and conditions set forth herein. From and after the date hereof, Assignee hereby assumes and agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignee Obligations”) arising on or after the date hereof. Except as otherwise provided in the Purchase Agreement, Assignor hereby agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignor Obligations”) arising prior to the date hereof. Each of Assignor and Assignee hereby agrees to defend (through counsel reasonably approved by the other), indemnify and hold the other harmless from and against all claims, liabilities and damages arising from its breach of any of the provisions of this Section 2. This Section 2 shall survive the execution and delivery of this Assignment.

3. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties hereto.

4. Governing Law. This Assignment shall be construed under and enforced in accordance with the laws of the State of Texas, without regard to conflict of law principles.

5. Purchase Agreement. This Assignment is made pursuant to the Purchase Agreement and is subject to the terms thereof.

[Signatures appear on the following pages]

     IN WITNESS WHEREOF, the parties have executed this Assignment as of the date set forth above.

ASSIGNOR:

FRISCO SURGERY CENTER LIMITED

By:	Texas Land Management, L.L.C., its general partner
	By:
	Name:
	Title:

[Signatures continue on the following page]

ASSIGNEE:

HRT PROPERTIES OF TEXAS, LTD.

By:	Healthcare Acquisition of Texas, Ltd.
Its:	General Partner
	By:
	Name:
	Title:

EXHIBITS:

Exhibit A	— Description of the MB Site#1
Exhibit B	— List of Leases
Exhibit C	— List of Contracts
Exhibit D	— List of Excluded Personal Property

Exhibit A
to
General Assignment and Bill of Sale

Description of MB Site#1

Being Lot 3A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

Exhibit-B-A-1

Exhibit B
to
General Assignment and Bill of Sale

List of Leases

1. Lease Agreement between Frisco Surgery Center Limited (successor by assignment to FRH JV, LP) as Landlord and Frisco Medical Center, LLP as Tenant for the premises at 5601 Warren Parkway, Frisco, Texas 75034, dated April 9, 2001 and amended as follows: First Amendment dated May 16, 2003, Second Amendment dated October 28, 2005, Third Amendment dated September 8, 2006, and Amendment 3A dated October 17, 2006.

2. Ground Lease between Frisco POB I Limited, as Landlord and Frisco Surgery Center Limited, as Tenant, July 6, 2007 for certain land on which a parking garage is located.

3. Parking Lease between Frisco Surgery Center Limited, as Lessor, and Frisco Medical Center, L.L.P., as Lessee, dated July 6, 2007, as amended by that certain First Amendment to Parking Space Lease effective December 1, 2007.

Exhibit C
to
General Assignment and Bill of Sale

List of Contracts

1. Settlement Agreement by and among Assignor, MEDCO Construction, L.L.C., Baylor Health Enterprises, L.P., and Frisco Medical Center, L.L.P.

2. The Sign Refurbishment Agreement.

3. Status of Commission Agreement by and among Lincoln Property Company Commercial Services Enterprises, Inc., Assignor, Frisco POB I Limited, and Frisco POB II Limited dated December 20, 2010.

* For the avoidance of doubt, Assignor does not assign, and Assignee does not assume, any agreement regarding the payment of any commission, finders or other fee, or other compensation in connection with the sale to and purchase of the Real Property and Personal Property by Assignee.

Exhibit D
to
General Assignment and Bill of Sale

List of Excluded Personal Property
NONE

Exhibit 9.2-B-2

(Form of General Assignment and Bill of Sale — MB Property#2)

See Attached

Exhibit 9.2-B-2

General Assignment and Bill Of Sale
(POB I)

THIS GENERAL ASSIGNMENT AND BILL OF SALE (this “Assignment”) is executed this _____ day of December, 2010, by and between FRISCO POB I LIMITED (herein referred to as “Assignor”), and HR ACQUISITION OF SAN ANTONIO, LTD. (herein referred to as “Assignee”).

RECITALS:

A. Pursuant to that certain Purchase Agreement dated December ___, 2010, between Assignor, as Seller#2, and Assignee (as the successor by assignment to Healthcare Realty Trust Incorporated), as Purchaser (the “Purchase Agreement”), Assignor has agreed to convey to Assignee all of Assignor’s right, title and interest in and to the MB Site#2 (as defined in the Purchase Agreement) more particularly described in Exhibit A attached hereto and related improvements located on MB Site#2 (the “Improvements”; together with MB Site#2 being referred to hereinafter collectively as the “Real Property”).

B. In connection with the conveyance of the Real Property to Assignee, Assignor intends that all its right, title and interest in, to and under all leases, contracts, guaranties, warranties, licenses, permits, personalty and other matters stated herein be assigned and transferred to Assignee.

NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in hand paid to Assignor, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Assignment. Assignor does hereby grant, bargain, sell, assign, transfer, and convey unto Assignee, its successors and assigns, to the extent assignable, and without any warranty or representation of any kind, except as expressly provided herein or in the Purchase Agreement, all of Assignor’s right, title and interest as of the date hereof, in, to and under the following:

(a) all of the Real Property;

(b) all leases listed on Exhibit B attached hereto (including all amendments or other modifications to such leases), together with all security deposits thereunder (collectively, the “Leases”);

(c) all contracts and agreements identified on Exhibit C attached hereto (the “Contracts”);

(d) all those: (i) guaranties, warranties and agreements, if any, from any contractors, subcontractors, vendors or suppliers regarding their performance, quality of workmanship and quality of materials supplied in connection with the construction, manufacture, development, installation and operation of any and all fixtures, equipment, items of personal property and improvements located in or used in connection with the Real Property, and any other guaranties, warranties and agreements related to the ownership and operation of the Real Property or the Personal Property (as hereinafter defined); and (ii) use, occupancy and operating permits, and all other permits, licenses, approvals and certificates relating to the ownership and operation of the Real Property and/or the Personal Property (the items described in this Section 1(d) being collectively referred to herein as the “Intangibles”); and

(e) if any, all signs, supplies, tools, decorations, furniture, furnishings, fixtures, equipment, machinery, landscaping and any other tangible personal property owned by Assignor and used by Assignor exclusively in connection with the leasing, management, operation, maintenance and repair

of the Real Property (collectively, the “Personal Property”), excluding the items listed on Exhibit D attached hereto.

THE PERSONAL PROPERTY IS HEREBY CONVEYED TO ASSIGNEE IN AN “AS IS,” “WHERE IS,” “WITH ALL FAULTS” CONDITION, AND ASSIGNOR DOES NOT WARRANT, AND HEREBY EXPRESSLY DISCLAIMS, ANY AND ALL WARRANTIES OF QUALITY, FITNESS AND MERCHANTABILITY RELATING TO ANY OF THE LEASES, CONTRACTS, INTANGIBLES OR PERSONAL PROPERTY, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE PERSONAL PROPERTY OR THE FITNESS OF ANY OF THE PROPERTY CONVEYED HEREBY FOR A PARTICULAR USE OR PURPOSE OR FOR ASSIGNEE’S INTENDED USE OR PURPOSE. Assignor does represent and warrant, however, that the Personal Property and the Real Property are being conveyed free and clear of any monetary liens. Further, Assignor makes no representation or warranty with respect to the assignability of any of the items assigned hereby (except for the Leases), nor shall Assignor be deemed in any event to be a warrantor, guarantor, or surety for the obligations of any maker of any warranties or guaranties assigned hereunder. Except as otherwise expressly provided herein or in the Purchase Agreement, the assignment of the property conveyed hereby from Assignor to Assignee shall be without recourse to Assignor.

2. Acceptance and Assumption. Assignee hereby accepts the foregoing grants and assignments of the Leases, Contracts, Personal Property and Intangibles and agrees that it accepts such items without any warranty or representation of any kind (except as expressly provided herein or in the Purchase Agreement) and otherwise on the terms and conditions set forth herein. From and after the date hereof, Assignee hereby assumes and agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignee Obligations”) arising on or after the date hereof. Except as otherwise provided in the Purchase Agreement, Assignor hereby agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignor Obligations”) arising prior to the date hereof. Each of Assignor and Assignee hereby agrees to defend (through counsel reasonably approved by the other), indemnify and hold the other harmless from and against all claims, liabilities and damages arising from its breach of any of the provisions of this Section 2. This Section 2 shall survive the execution and delivery of this Assignment.

3. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties hereto.

4. Governing Law. This Assignment shall be construed under and enforced in accordance with the laws of the State of Texas, without regard to conflict of law principles.

5. Purchase Agreement. This Assignment is made pursuant to the Purchase Agreement and is subject to the terms thereof.

[Signatures appear on the following pages]

IN WITNESS WHEREOF, the parties have executed this Assignment as of the date set forth above.

ASSIGNOR:

FRISCO POB I LIMITED

By:   Texas Land Management, L.L.C., its general partner

By:
	Name:
	Title:

[Signatures continue on the following page]

ASSIGNEE:

HR ACQUISITION OF SAN ANTONIO, LTD.
By:	Healthcare Acquisition of Texas, Ltd.
Its:	General Partner

By:
	Name:
	Title:

EXHIBITS:

Exhibit A —	Description of the MB Site#2
Exhibit B —	List of Leases
Exhibit C —	List of Contracts
Exhibit D —	List of Excluded Personal Property

Exhibit A
to
General Assignment and Bill of Sale

Description of MB Site#2

Being Lot 2A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

Exhibit-B-A-1

Exhibit B
to
General Assignment and Bill of Sale

List of Leases

1. Lease Agreement between Frisco POB I Limited as Landlord and Robert P. Taylor, DPM as Tenant, dated August 12, 2002 for Suite 101.

2. Lease Agreement between Frisco POB I Limited as Landlord and Pinnacle Anesthesia Consultants PA as Tenant, dated December 31, 2008 for Suite 102.

3. Lease Agreement between Frisco POB I Limited as Landlord and Roger Skiles, M.D. as Tenant, dated June 13, 2002 for Suite 104 and as amended as follows: First Amendment dated September 23, 2002, Consent to Sublease (Texas Colon and Rectal Surgeons) dated September 1, 2008, additional Consent to Sublease (North Dallas Urology) dated September 1, 2008.

4. Lease Agreement between Frisco POB I Limited as Landlord and Greenhill Clinic, PA and Perpetuon, Inc. as Tenant, dated March 15, 2010 for Suite 106-108 and as amended as follows: First Amendment dated July 12, 2010, Second Amendment dated July 16, 2010.

5. Lease Agreement between Frisco POB I Limited as Landlord and HealthTexas Provider Network as Tenant, dated December 20, 2001 for Suite 115 and as amended as follows: First Amendment dated February 1, 2002, Second Amendment dated September 4, 2002, Third Amendment dated July 1, 2003, Fourth Amendment dated July 23, 2009.

6. Lease Agreement between Frisco POB I Limited as Landlord and Jonathan Weinstein, M.D. as Tenant, dated June 9, 2010 for Suite 116.

7. Lease Agreement between Frisco POB I Limited as Landlord and Urgent Care Partners, LLC as Tenant, dated March 1, 2003 for Suite 120 and as amended as follows: First Amendment dated January 23, 2007, Amended and Restated Lease Assignment and Mutual Release dated December 3, 2006.

8. Lease Agreement between Frisco POB I Limited as Landlord and Frisco Medical Center, LLP as Tenant, dated June 13, 2001 for Suite 201 and as amended as follows: First Amendment dated October 3, 2002, Second Amendment dated September 5, 2003.

9. Lease Agreement between Frisco POB I Limited as Landlord and Frisco Medical Center, LLP as Tenant, dated September 23, 2002 for Suite 203 and as amended as follows: First Amendment dated September 5, 2003.

10. Lease Agreement between Frisco POB I Limited as Landlord and Footcare, P.A. as Tenant, dated October 29, 2001 for Suite 204 and as amended as follows: First Amendment dated September 11, 2002, Sublease Agreement dated August 8, 2005.

11. Lease Agreement between Frisco POB I Limited as Landlord and Kirk Scott, M.D. (d/b/a/ Stonebriar Facial & Oral Surgery) as Tenant, dated June 7, 2002 for Suite 206.

12. Lease Agreement between Frisco POB I Limited as Landlord and Kathryn J. Wood, M.D., P.A. as Tenant, dated October 5, 2001 for Suite 208-209.

13. Lease Agreement between Frisco POB I Limited as Landlord and Vista Ophthalmology Associates, P.A. as Tenant, dated August 20, 2002 for Suite 210.

14. Lease Agreement between Frisco POB I Limited as Landlord and Frisco Medical Center, LLP as Tenant, dated August 27, 2003 for Suite 221.

15. Lease Agreement between Frisco POB I Limited as Landlord and MetWest, Inc. (d/b/a Quest Diagnostics) as Tenant, dated June 12, 2003 for Suite 303 and as amended as follows: First Amendment dated September 30, 2008.

16. Lease Agreement between Frisco POB I Limited as Landlord and Mickey Morgan, M.D. as Tenant, dated June 30, 2002 for Suite 304 and as amended as follows: First Amendment dated June 30, 2002, Second Amendment dated July 29, 2002.

17. Lease Agreement between Frisco POB I Limited as Landlord and Kimble Jett, M.D. as Tenant, dated August 31, 2004 for Suite 306.

18. Lease Agreement between Frisco POB I Limited as Landlord and Pinnacle Consultants Limited Partnership (d/b/a/ Pinnacle Anesthesia) as Tenant, dated April 22, 2002 for Suite 310 and as amended as follows: First Amendment dated May 30, 2002.

19. Lease Agreement between Frisco POB I Limited as Landlord and Suzette Boyd, M.D. as Tenant, dated October 11, 2002 for Suite 314 and as amended as follows: First Amendment dated January 21, 2003.

20. Lease Agreement between Frisco POB I Limited as Landlord and Jon T. Ricks, M.D. P.A. as Tenant, dated September 9, 2009 for Suite 316-317.

21. Lease Agreement between Frisco POB I Limited as Landlord and Seth D. Kaplan, M.D., P.A. (d/b/a TC Pediatrics of Frisco) as Tenant, dated January 28, 2005 for Suite 318.

22. Lease Agreement between Frisco POB I Limited as Landlord and Gerald Moore, M.D., P.A. as Tenant, dated March 24, 2005 for Suite 324.

23. Ground Lease between Frisco POB I Limited, as Landlord and Frisco Surgery Center Limited, as Tenant, July 6, 2007 for certain land on which a parking garage is located.

Exhibit C
to
General Assignment and Bill of Sale

List of Contracts

1. Status of Commission Agreement by and among SRS Real Estate Partners Holding, Inc., Revere Commercial Realty, L.L.C., Assignor, Frisco POB II Limited, and LandPlan Development Corp. dated December 20, 2010.

2. Status of Commission Agreement by and among Lincoln Property Company Commercial Services Enterprises, Inc., Assignor, Frisco POB II Limited, and Frisco Surgery Center Limited.

* For the avoidance of doubt, Assignor does not assign, and Assignee does not assume, any agreement regarding the payment of any commission, finders or other fee, or other compensation in connection with the sale to and purchase of the Real Property and Personal Property by Assignee.

Exhibit D
to
General Assignment and Bill of Sale

List of Excluded Personal Property

NONE

Exhibit 9.2-B-3

(Form of General Assignment and Bill of Sale — MB Property#3)

See Attached

Exhibit 9.2-B-4

General Assignment and Bill Of Sale
(POB II)

THIS GENERAL ASSIGNMENT AND BILL OF SALE (this “Assignment”) is executed this _____ day of December, 2010, by and between FRISCO POB II LIMITED (herein referred to as “Assignor”), and HR ACQUISITION OF SAN ANTONIO, LTD. (herein referred to as “Assignee”).

RECITALS:

A. Pursuant to that certain Purchase Agreement dated December ___, 2010, between Assignor, as Seller#3, and Assignee (as the successor by assignment to Healthcare Realty Trust Incorporated), as Purchaser (the “Purchase Agreement”), Assignor has agreed to convey to Assignee all of Assignor’s right, title and interest in and to the MB Site#3 (as defined in the Purchase Agreement) more particularly described in Exhibit A attached hereto and related improvements located on MB Site#3 (the “Improvements”; together with MB Site#3 being referred to hereinafter collectively as the “Real Property”).

B. In connection with the conveyance of the Real Property to Assignee, Assignor intends that all its right, title and interest in, to and under all leases, contracts, guaranties, warranties, licenses, permits, personalty and other matters stated herein be assigned and transferred to Assignee.

NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in hand paid to Assignor, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Assignment. Assignor does hereby grant, bargain, sell, assign, transfer, and convey unto Assignee, its successors and assigns, to the extent assignable, and without any warranty or representation of any kind, except as expressly provided herein or in the Purchase Agreement, all of Assignor’s right, title and interest as of the date hereof, in, to and under the following:

(a) all of the Real Property;

(b) all leases listed on Exhibit B attached hereto (including all amendments or other modifications to such leases), together with all security deposits thereunder (collectively, the “Leases”);

(c) all contracts and agreements identified on Exhibit C attached hereto (the “Contracts”);

(d) all those: (i) guaranties, warranties and agreements, if any, from any contractors, subcontractors, vendors or suppliers regarding their performance, quality of workmanship and quality of materials supplied in connection with the construction, manufacture, development, installation and operation of any and all fixtures, equipment, items of personal property and improvements located in or used in connection with the Real Property, and any other guaranties, warranties and agreements related to the ownership and operation of the Real Property or the Personal Property (as hereinafter defined); and (ii) use, occupancy and operating permits, and all other permits, licenses, approvals and certificates relating to the ownership and operation of the Real Property and/or the Personal Property (the items described in this Section 1(d) being collectively referred to herein as the “Intangibles”); and

(e) if any, all signs, supplies, tools, decorations, furniture, furnishings, fixtures, equipment, machinery, landscaping and any other tangible personal property owned by Assignor and used by Assignor exclusively in connection with the leasing, management, operation, maintenance and repair

of the Real Property (collectively, the “Personal Property”), excluding the items listed on Exhibit D attached hereto.

THE PERSONAL PROPERTY IS HEREBY CONVEYED TO ASSIGNEE IN AN “AS IS,” “WHERE IS,” “WITH ALL FAULTS” CONDITION, AND ASSIGNOR DOES NOT WARRANT, AND HEREBY EXPRESSLY DISCLAIMS, ANY AND ALL WARRANTIES OF QUALITY, FITNESS AND MERCHANTABILITY RELATING TO ANY OF THE LEASES, CONTRACTS, INTANGIBLES OR PERSONAL PROPERTY, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE PERSONAL PROPERTY OR THE FITNESS OF ANY OF THE PROPERTY CONVEYED HEREBY FOR A PARTICULAR USE OR PURPOSE OR FOR ASSIGNEE’S INTENDED USE OR PURPOSE. Assignor does represent and warrant, however, that the Personal Property and the Real Property are being conveyed free and clear of any monetary liens. Further, Assignor makes no representation or warranty with respect to the assignability of any of the items assigned hereby (except for the Leases), nor shall Assignor be deemed in any event to be a warrantor, guarantor, or surety for the obligations of any maker of any warranties or guaranties assigned hereunder. Except as otherwise expressly provided herein or in the Purchase Agreement, the assignment of the property conveyed hereby from Assignor to Assignee shall be without recourse to Assignor.

2. Acceptance and Assumption. Assignee hereby accepts the foregoing grants and assignments of the Leases, Contracts, Personal Property and Intangibles and agrees that it accepts such items without any warranty or representation of any kind (except as expressly provided herein or in the Purchase Agreement) and otherwise on the terms and conditions set forth herein. From and after the date hereof, Assignee hereby assumes and agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignee Obligations”) arising on or after the date hereof. Except as otherwise provided in the Purchase Agreement, Assignor hereby agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignor Obligations”) arising prior to the date hereof. Each of Assignor and Assignee hereby agrees to defend (through counsel reasonably approved by the other), indemnify and hold the other harmless from and against all claims, liabilities and damages arising from its breach of any of the provisions of this Section 2. This Section 2 shall survive the execution and delivery of this Assignment.

3. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties hereto.

4. Governing Law. This Assignment shall be construed under and enforced in accordance with the laws of the State of Texas, without regard to conflict of law principles.

5. Purchase Agreement. This Assignment is made pursuant to the Purchase Agreement and is subject to the terms thereof.

[Signatures appear on the following pages]

IN WITNESS WHEREOF, the parties have executed this Assignment as of the date set forth above.

ASSIGNOR:

FRISCO POB II LIMITED
By:	Texas Land Management, L.L.C., its general partner

By:
	Name:
	Title:

[Signatures continue on the following page]

ASSIGNEE:

HR ACQUISITION OF SAN ANTONIO, LTD.
By:	Healthcare Acquisition of Texas, Ltd.
Its:	General Partner

By:
	Name:
	Title:

EXHIBITS:

Exhibit A — Description of the MB Site#3
Exhibit B — List of Leases
Exhibit C — List of Contracts
Exhibit D — List of Excluded Personal Property

Exhibit A
to
General Assignment and Bill of Sale

Description of MB Site#3

Being Lot 4A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

Exhibit B
to
General Assignment and Bill of Sale

List of Leases

1. Lease Agreement between Frisco POB II Limited as Landlord and Pinnacle Anesthesia Consultants PA as Tenant, dated June 6, 2007 for Suite 110.

2. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated May 13, 2009 for Suite 120.

3. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated December 3, 2007 for Suite 130 — 140 and amended as follows: First Amendment dated January 1, 2008.

4. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated March 12, 2008 for Suite 150.

5. Lease Agreement between Frisco POB II Limited as Landlord and Frisco Medical Center, LLP (d/b/a Baylor Medical Center at Frisco) as Tenant, dated December 3, 2007 for Suite 160 and amended as follows: First Amendment dated January 1, 2008.

6. Lease Agreement between Frisco POB II Limited as Landlord and Associated Orthopedics & Sports Medicine, PA as Tenant, dated June 23, 2009 for Suite 180 and amended as follows: First Amendment dated December 14, 2010.

7. Lease Agreement between Frisco POB II Limited as Landlord and Northlake Obstetrics & Gynecology, PA as Tenant, dated February 25, 2010 for Suite 200.

8. Lease Agreement between Frisco POB II Limited as Landlord and Centennial Obstetrics & Gynecology, PA as Tenant, dated December 8, 2010 for Suite 210.

9. Lease Agreement between Frisco POB II Limited as Landlord and Fertility Specialists of Dallas, PA as Tenant, dated May 23, 2008 for Suite 300 and amended as follows: Assignment of Lease from Fertility Specialists of Dallas, PA to Fertility Specialists of Texas, PLLC dated October 13, 2009.

10. Lease Agreement between Frisco POB II Limited as Landlord and Texas Obstetrics and Gynecology Associates, LLP as Tenant, dated May 1, 2008 for Suite 310 and amended as follows: First Amendment dated September 15, 2008 and Second Amendment dated May 28, 2009.

Exhibit C
to
General Assignment and Bill of Sale

List of Contracts

1. Project Management Services Agreement between Assignor, as the “Client”, and William David Ransom, AIA, as the “Consultant”, dated February 5, 2010, solely as pertains to the Project (defined in the Project Management Services Agreement) identified in the Project letter between Assignor and Consultant as respects that certain Medical Office Building Lease dated December 8, 2010, executed by Assignor, as landlord thereunder, and Centennial Obstetrics & Gynecology, P.A., as tenant thereunder, for certain premises in MB Site#3.

2. Status of Commission Agreement by and among SRS Real Estate Partners Holding, Inc., Revere Commercial Realty, L.L.C., Frisco POB I Limited, Assignor, and LandPlan Development Corp. dated December 20, 2010.

3. Status of Commission Agreement by and among Lincoln Property Company Commercial Services Enterprises, Inc., Frisco Surgery Center Limited, Frisco POB I Limited, and Assignor dated December 20, 2010.

4. AIA Document B101-2007 Standard Form of Agreement Between Owner and Architect, dated December 17, 2010 by and between Assignor and Apropos Interior Architecture, Inc. working with Acanthus Architecture Design Group, LLP, Limited Liability Partnership for work to be performed in respect of that certain Medical Office Building Lease dated December 8, 2010, executed by Assignor, as landlord thereunder, and Centennial Obstetrics & Gynecology, P.A., as tenant thereunder, for certain premises in MB Site#3.

* For the avoidance of doubt, Assignor does not assign, and Assignee does not assume, any agreement regarding the payment of any commission, finders or other fee, or other compensation in connection with the sale to and purchase of the Real Property and Personal Property by Assignee.

Exhibit D
to
General Assignment and Bill of Sale

List of Excluded Personal Property

NONE

Exhibit 9.2-B-4

(Form of General Assignment and Bill of Sale — Land Sites)

See Attached

Exhibit 9.2-B-4

General Assignment and Bill Of Sale
(Lot 1A and Lot 5A)

THIS GENERAL ASSIGNMENT AND BILL OF SALE (this “Assignment”) is executed this _____ day of December, 2010, by and between MEDLAND, L.P. (herein referred to as “Assignor”), and HR ACQUISITION OF SAN ANTONIO, LTD. (herein referred to as “Assignee”).

RECITALS:

A. Pursuant to that certain Purchase Agreement dated December ___, 2010, between Assignor, as Seller#4, and Assignee (as the successor by assignment to Healthcare Realty Trust Incorporated), as Purchaser (the “Purchase Agreement”), Assignor has agreed to convey to Assignee all of Assignor’s right, title and interest in and to the Land Sites (as defined in the Purchase Agreement) more particularly described in Exhibit A attached hereto and related improvements, if any, located on Land Sites (the “Improvements”; together with Land Sites being referred to hereinafter collectively as the “Real Property”).

B. In connection with the conveyance of the Real Property to Assignee, Assignor intends that all its right, title and interest in, to and under all leases, contracts, guaranties, warranties, licenses, permits, personalty and other matters stated herein be assigned and transferred to Assignee.

NOW THEREFORE, in consideration of the sum of Ten Dollars ($10.00) in hand paid to Assignor, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Assignment. Assignor does hereby grant, bargain, sell, assign, transfer, and convey unto Assignee, its successors and assigns, to the extent assignable, and without any warranty or representation of any kind, except as expressly provided herein or in the Purchase Agreement, all of Assignor’s right, title and interest as of the date hereof, in, to and under the following:

(a) all of the Real Property;

(b) all leases listed on Exhibit B attached hereto (including all amendments or other modifications to such leases), together with all security deposits thereunder (collectively, the “Leases”);

(c) all contracts and agreements identified on Exhibit C attached hereto (the “Contracts”);

(d) all those: (i) guaranties, warranties and agreements, if any, from any contractors, subcontractors, vendors or suppliers regarding their performance, quality of workmanship and quality of materials supplied in connection with the construction, manufacture, development, installation and operation of any and all fixtures, equipment, items of personal property and improvements located in or used in connection with the Real Property, and any other guaranties, warranties and agreements related to the ownership and operation of the Real Property or the Personal Property (as hereinafter defined); and (ii) use, occupancy and operating permits, and all other permits, licenses, approvals and certificates relating to the ownership and operation of the Real Property and/or the Personal Property (the items described in this Section 1(d) being collectively referred to herein as the “Intangibles”); and

(e) if any, all signs, supplies, tools, decorations, furniture, furnishings, fixtures, equipment, machinery, landscaping and any other tangible personal property owned by Assignor and used by Assignor exclusively in connection with the leasing, management, operation, maintenance and repair

of the Real Property (collectively, the “Personal Property”), excluding the items listed on Exhibit D attached hereto.

THE PERSONAL PROPERTY IS HEREBY CONVEYED TO ASSIGNEE IN AN “AS IS,” “WHERE IS,” “WITH ALL FAULTS” CONDITION, AND ASSIGNOR DOES NOT WARRANT, AND HEREBY EXPRESSLY DISCLAIMS, ANY AND ALL WARRANTIES OF QUALITY, FITNESS AND MERCHANTABILITY RELATING TO ANY OF THE LEASES, CONTRACTS, INTANGIBLES OR PERSONAL PROPERTY, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF THE PERSONAL PROPERTY OR THE FITNESS OF ANY OF THE PROPERTY CONVEYED HEREBY FOR A PARTICULAR USE OR PURPOSE OR FOR ASSIGNEE’S INTENDED USE OR PURPOSE. Assignor does represent and warrant, however, that the Personal Property and the Real Property are being conveyed free and clear of any monetary liens. Further, Assignor makes no representation or warranty with respect to the assignability of any of the items assigned hereby (except for the Leases), nor shall Assignor be deemed in any event to be a warrantor, guarantor, or surety for the obligations of any maker of any warranties or guaranties assigned hereunder. Except as otherwise expressly provided herein or in the Purchase Agreement, the assignment of the property conveyed hereby from Assignor to Assignee shall be without recourse to Assignor.

2. Acceptance and Assumption. Assignee hereby accepts the foregoing grants and assignments of the Leases, Contracts, Personal Property and Intangibles and agrees that it accepts such items without any warranty or representation of any kind (except as expressly provided herein or in the Purchase Agreement) and otherwise on the terms and conditions set forth herein. From and after the date hereof, Assignee hereby assumes and agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignee Obligations”) arising on or after the date hereof. Except as otherwise provided in the Purchase Agreement, Assignor hereby agrees to fulfill, perform and discharge all the various liabilities, duties, covenants, obligations and agreements under or with respect to any of the Leases, Contracts, Personal Property and Intangibles (collectively, “Assignor Obligations”) arising prior to the date hereof. Each of Assignor and Assignee hereby agrees to defend (through counsel reasonably approved by the other), indemnify and hold the other harmless from and against all claims, liabilities and damages arising from its breach of any of the provisions of this Section 2. This Section 2 shall survive the execution and delivery of this Assignment.

3. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties hereto.

4. Governing Law. This Assignment shall be construed under and enforced in accordance with the laws of the State of Texas, without regard to conflict of law principles.

5. Purchase Agreement. This Assignment is made pursuant to the Purchase Agreement and is subject to the terms thereof.

[Signatures appear on the following pages]

IN WITNESS WHEREOF, the parties have executed this Assignment as of the date set forth above.

ASSIGNOR:

MEDLAND, L.P.

By:	Texas Land Management, L.L.C., its general partner
	By:
		Name:
		Title:

[Signatures continue on the following page]

ASSIGNEE:

HR ACQUISITION OF SAN ANTONIO, LTD.

By:	Healthcare Acquisition of Texas, Ltd.
Its:	General Partner
	By:
		Name:
		Title:

EXHIBITS:

Exhibit A — Description of the Land Sites
Exhibit B — List of Leases
Exhibit C — List of Contracts
Exhibit D — List of Excluded Personal Property

Exhibit A
to
General Assignment and Bill of Sale

Description of Land Sites

Being Lot 1A and Lot 5A, in Block A, of FRISCO MEDICAL CENTER, LOTS 1A-5A, BLOCK A, an Addition to the City of Frisco, Collin County, Texas, according to the Plat thereof recorded Cabinet 2007, Page 426, Plat Records, Collin County, Texas.

Exhibit-B-A-1

Exhibit B
to
General Assignment and Bill of Sale

List of Leases

NONE

Exhibit C
to
General Assignment and Bill of Sale

List of Contracts

NONE

* For the avoidance of doubt, Assignor does not assign, and Assignee does not assume, any agreement regarding the payment of any commission, finders or other fee, or other compensation in connection with the sale to and purchase of the Real Property and Personal Property by Assignee.

Exhibit D
to
General Assignment and Bill of Sale

List of Excluded Personal Property

NONE

Exhibit 9.2-C

Sellers’ Affidavit

AFFIDAVIT AS TO DEBTS AND LIENS AND PARTIES IN POSSESSION
(ENTITY OWNER)

GF#: ___________________ SJ2

SUBJECT PROPERTY: ...... and being the same land described in the commitment issued under the above referenced GF number.

SELLER:
PURCHASER:

STATE OF TEXAS
COUNTY OF COLLIN

BEFORE ME, the undersigned authority, on this day personally appeared the undersigned Affiant, personally known to me to be the person whose name is subscribed hereto and upon oath deposes and says that:

1. To the best knowledge and belief of Affiant:

a.	The charges for all labor and materials that may have been furnished to the property or to the improvements thereon have been fully paid.
b.	All contracts for the furnishing of labor or materials to the property or for improvements thereon have been completed and fully paid.
c.	There are no security agreements or leases affecting any goods or chattels that have become attached, or that will at any later date become attached, to the property or improvements thereon as fixtures that have not been fully performed and satisfied, which are not shown on the referenced title commitment.
d.	There are no loans of any kind on the property, which are not shown on the referenced title commitment.
e.	There are no brokers that have a signed commission agreement with Seller under which a commission is claimed or earned and has not been paid, which are not shown on the settlement statements.

2.	Affiant has no knowledge of a notice of change of use nor has Seller received a notice of change of use by the appraisal district.
3.	The property is currently being used for the following purposes, and to the best knowledge and belief of Affiant, the improvements, if any, and such use do not violate any restrictive covenants affecting the property:
4.	There are no proceedings involving Seller, or notice to Seller of any proceedings, by any agency or authority, public or private, that levies taxes or assessments, which may result in taxes or assessments affecting the property and which are not shown by the referenced title commitment.
5.	There are no Judgments, Federal Tax Liens, or State Tax Liens against Seller and/or the property; Seller is not indebted to the State of Texas for any penalties or wages pursuant to a

Exhibit 9.2-C-1

	final order of the Texas Work Force Commission; and neither Seller nor the property is subject to a claim under the Medicaid Estate Recovery Program.
6.	(a) All ad valorem and personal property taxes (if any), all “use” type business taxes (if any), including but not limited to hotel use and occupancy taxes, and all association/ maintenance type taxes or assessments (if any) that are currently due and payable have been paid or will be paid at closing and are shown on the settlement statements. (b) Any of the above referenced taxes which are the obligation of Seller and which have been prorated on the settlement statements are based on information approved by Seller.
7.	Seller is the only occupant of the property, except (list any leases):
8.	The property has curb cut(s) and driveway(s) providing actual vehicular and pedestrian access to __________________________which is/are open and in use.
9.	There are no unrecorded contracts; deeds; mortgages; mechanic’s liens; options of any kind, including but not limited to options to purchase or lease; rights of first refusal or requirements of prior approval of a future purchaser or occupant; rights of reentry; rights of reverter; or rights of forfeiture affecting the property or improvements thereon, which are not shown on the referenced title commitment.
10.	No proceedings in bankruptcy or receivership have ever been instituted by or against Seller, and Seller has never made an assignment for the benefit of creditors.

          THIS affidavit is made only to Republic Title of Texas, Inc., as an inducement to it to complete the above referenced transaction, and Affiant realizes that Republic Title of Texas, Inc., is relying upon the representations contained herein; and Affiant does hereby swear under the penalties of perjury that the foregoing information is true and correct in all respects, to the best knowledge and belief of Affiant, and that Affiant is authorized to make this affidavit on behalf of Seller. No party other than Republic Title of Texas, Inc. is entitled to rely upon the representations contained herein for any purpose.

EXECUTED effective as of _______________________, 2010.

STATE OF TEXAS	§
COUNTY OF	§

     This instrument was acknowledged before me on _______________________, 2010, by _____________________________.

Notary Public, State of Texas 

Exhibit 9.2-C-2

EX-21

EXHIBIT 21

Subsidiaries of the Registrant

Subsidiary	State of Incorporation
5901 Westown Parkway MOB, LLC	DE
593HR, Inc.	TN
Allenmore C, LLC	DE
Ankeny North MOB, LLC	DE
Bellaire Medical Plaza SPE, LLC	DE
Clive Wellness Campus Building Five, LLC	DE
Clive Wellness Campus Building One, LLC	DE
Clive Wellness Campus Building Two, LLC	DE
Dallas County MOB, LLC	DE
Des Moines South Medical Building II, LLC	DE
Des Moines South Medical Building, LLC	DE
Durham Medical Office Building, Inc.	TX
Healthcare Acquisition of Texas, Inc.	AL
Healthcare Realty Services Incorporated	TN
HR 9191 Pinecroft Manager, LLC	DE
HR 9191 Pinecroft SPE, LLC	DE
HR Acquisition I Corporation	MD
HR Acquisition of Alabama, Inc.	AL
HR Acquisition of Pennsylvania, Inc.	PA
HR Acquisition of San Antonio, Ltd.	AL
HR Acquisition of Virginia Limited Partnership	AL
HR Assets, LLC	DE
HR Briargate, LLC	DE
HR Carolinas Holdings, LLC	DE
HR Interests, Inc.	TX
HR Ladco Holdings, LLC	DE
HR Lowry Medical Center SPE, LLC	DE
HR MAC II, LLC	DE
HR McNaughten SPE, LLC	DE
HR of Bonita Bay, Ltd.	AL
HR of California, Inc.	AL
HR of Carolinas, LLC	DE
HR of Indiana, LLC	DE
HR of Iowa, LLC	DE
HR of Kingsport, Inc.	AL
HR of Los Angeles, Inc.	AL
HR of Los Angeles, Ltd.	AL
HR of Massachusetts, Inc.	AL
HR of Nashville, LLC	DE
HR of San Antonio, Inc.	TX
HR of Sarasota, Ltd.	AL
HR Oregon MOB Venture, LLC	DE

93

Subsidiary	State of Incorporation
HR Washington MOB Venture, LLC	DE
HR-Pima, LLC	DE
HRT Holdings, Inc.	DE
HRT of Alabama, Inc.	AL
HRT of Delaware, Inc.	DE
HRT of Illinois, Inc.	DE
HRT of Louisiana, Inc.	LA
HRT of Mississippi, Inc.	DE
HRT of Roanoke, Inc.	VA
HRT of Tennessee, Inc.	TN
HRT of Virginia, Inc.	VA
HRT Properties of Texas, Ltd.	TX
K-S Building SPE, LLC	DE
Lakewood MOB, LLC	DE
Pasadena Medical Plaza SSJ Ltd.	FL
Pennsylvania HRT, Inc.	PA
Property Technology Services, Inc.	TN
Roseburg Surgery Center, LLC	DE
Southwest General Medical Building (TX) SPE, LLC	DE
Stevens Pavilion Parent, LLC	DE
Stevens Pavilion, LLC	DE
Yakima Valley Parent, LLC	DE
Yakima Valley Subsidiary, LLC	DE

94

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

Healthcare Realty Trust Incorporated
Nashville, Tennessee

     We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-172368 and No. 033-79452) and Form S-8 (No. 333-145184 and No. 033-97240) of Healthcare Realty Trust Incorporated of our reports dated February 22, 2011, relating to the consolidated financial statements and financial statement schedules, and the effectiveness of Healthcare Realty Trust Incorporated’s internal control over financial reporting, which appear in this Annual Report on Form 10-K.

/s/ BDO USA, LLP  

Nashville, Tennessee
February 22, 2011

95

EX-31.1

EXHIBIT 31.1

HEALTHCARE REALTY TRUST INCORPORATED
ANNUAL CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. Emery, certify that:

1.	I have reviewed this annual report on Form 10-K of Healthcare Realty Trust Incorporated;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ David R. Emery  

David R. Emery 

Chairman of the Board and Chief Executive Officer 

Date: February 22, 2011

96

EX-31.2

EXHIBIT 31.2

HEALTHCARE REALTY TRUST INCORPORATED
ANNUAL CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott W. Homes, certify that:

1.	I have reviewed this annual report on Form 10-K of Healthcare Realty Trust Incorporated;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Scott W. Holmes  

Scott W. Holmes 

Executive Vice President and Chief Financial Officer 

Date: February 22, 2011

97

EX-32

EXHIBIT 32

HEALTHCARE REALTY TRUST INCORPORATED
ANNUAL CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Healthcare Realty Trust Incorporated (the “Company”) on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David R. Emery, Chairman of the Board and Chief Executive Officer of the Company, and I, Scott W. Holmes, Executive Vice President and Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David R. Emery  

David R. Emery 

Chairman of the Board and Chief Executive Officer 

/s/ Scott W. Holmes  

Scott W. Holmes 

Executive Vice President and Chief Financial Officer 

Date: February 22, 2011

98