UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

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

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

Commission File Number: 001-11852

 

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)

     Indicate by check mark whether the Registrant (1) has filed all reports required 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 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 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.

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

     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

     As of July 31, 2011, 77,829,189 shares of the Registrant’s Common Stock were outstanding.

 

 

HEALTHCARE REALTY TRUST INCORPORATED

FORM 10-Q

June 30, 2011

TABLE OF CONTENTS

		Page
Part I — Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets			1
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Cash Flows			4
Notes to Condensed Consolidated Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures about Market Risk			39
Item 4. Controls and Procedures			39
Part II — Other Information
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 6. Exhibits			41
Signature			42
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

Part I. FINANCIAL INFORMATION

Item 1.		Financial Statements.

Healthcare Realty Trust Incorporated

Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)

		(Unaudited)
		June 30,				December 31,
		2011				2010
ASSETS
Real estate properties:
Land		$	165,759			$	163,020
Buildings, improvements and lease intangibles			2,326,632				2,310,404
Personal property			18,116				17,919
Construction in progress			104,741				80,262
			2,615,248				2,571,605
Less accumulated depreciation			(486,572	)			(484,641	)
Total real estate properties, net			2,128,676				2,086,964
Cash and cash equivalents			17,776				113,321
Mortgage notes receivable			122,603				36,599
Assets held for sale and discontinued operations, net			16,485				23,915
Other assets, net			100,641				96,510
Total assets		$	2,386,181			$	2,357,309
LIABILITIES AND EQUITY
Liabilities:
Notes and bonds payable		$	1,251,629			$	1,407,855
Accounts payable and accrued liabilities			66,768				62,652
Liabilities of discontinued operations			215				423
Other liabilities			50,741				43,639
Total liabilities			1,369,353				1,514,569
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; 76,467,850 and 66,071,424 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively			765				661
Additional paid-in capital			1,865,441				1,641,379
Accumulated other comprehensive loss			(5,269	)			(5,269	)
Cumulative net income attributable to common stockholders			792,387				796,165
Cumulative dividends			(1,636,496	)			(1,593,926	)
Total stockholders’ equity			1,016,828				839,010
Noncontrolling interests			—				3,730
Total equity			1,016,828				842,740
Total liabilities and equity		$	2,386,181			$	2,357,309

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2010, are an integral part of these financial statements.

Healthcare Realty Trust Incorporated

(Dollars in thousands, except per share data)
(Unaudited)

		2011				2010
REVENUES
Master lease rent		$	14,434			$	13,879
Property operating			53,849				46,760
Straight-line rent			1,110				725
Mortgage interest			1,825				469
Other operating			2,054				2,102
			73,272				63,935
EXPENSES
General and administrative			5,158				3,542
Property operating			28,477				24,237
Bad debt, net			93				(279	)
Depreciation			19,120				16,450
Amortization			1,770				1,332
			54,618				45,282
OTHER INCOME (EXPENSE)
Interest expense			(17,344	)			(15,570	)
Interest and other income, net			203				1,176
			(17,141	)			(14,394	)
INCOME FROM CONTINUING OPERATIONS			1,513				4,259
DISCONTINUED OPERATIONS
Income from discontinued operations			498				730
Gain on sales of real estate properties			—				1,525
INCOME FROM DISCONTINUED OPERATIONS			498				2,255
NET INCOME			2,011				6,514
Less: Net income attributable to noncontrolling interests			—				(40	)
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS		$	2,011			$	6,474
BASIC EARNINGS PER COMMON SHARE:
Income from continuing operations		$	0.02			$	0.07
Discontinued operations			0.01				0.04
Net income attributable to common stockholders		$	0.03			$	0.11
DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations		$	0.02			$	0.07
Discontinued operations			0.01				0.03
Net income attributable to common stockholders		$	0.03			$	0.10
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC			72,035,154				61,340,739
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — DILUTED			73,149,232				62,382,409
DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD		$	0.30			$	0.30

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2010, are an integral part of these financial statements.

Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 2011 and 2010

(Dollars in thousands, except per share data)
(Unaudited)

		2011				2010
REVENUES
Master lease rent		$	29,452			$	27,938
Property operating			106,203				92,290
Straight-line rent			2,396				1,326
Mortgage interest			3,474				1,107
Other operating			4,358				4,272
			145,883				126,933
EXPENSES
General and administrative			10,939				8,270
Property operating			56,572				48,435
Bad debt, net			272				(478	)
Depreciation			38,015				32,654
Amortization			3,540				2,633
			109,338				91,514
OTHER INCOME (EXPENSE)
Loss on extinguishment of debt			(1,986	)			(480	)
Interest expense			(39,618	)			(31,880	)
Interest and other income, net			431				1,612
			(41,173	)			(30,748	)
INCOME (LOSS) FROM CONTINUING OPERATIONS			(4,628	)			4,671
DISCONTINUED OPERATIONS
Income from discontinued operations			988				2,281
Impairment			(147	)			—
Gain on sales of real estate properties			36				4,221
INCOME FROM DISCONTINUED OPERATIONS			877				6,502
NET INCOME (LOSS)			(3,751	)			11,173
Less: Net income attributable to noncontrolling interests			(27	)			(105	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS		$	(3,778	)		$	11,068
BASIC EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations		$	(0.07	)		$	0.08
Discontinued operations			0.02				0.10
Net income (loss) attributable to common stockholders		$	(0.05	)		$	0.18
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations		$	(0.07	)		$	0.08
Discontinued operations			0.02				0.10
Net income (loss) attributable to common stockholders		$	(0.05	)		$	0.18
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC			69,109,543				60,654,907
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — DILUTED			69,109,543				61,690,322
DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE PERIOD		$	0.60			$	0.60

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2010, are an integral part of these financial statements.

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2011 and 2010
(Dollars in thousands)
(Unaudited)

		2011				2010
OPERATING ACTIVITIES
Net income (loss)		$	(3,751	)		$	11,173
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization			43,919				37,924
Stock-based compensation			1,602				1,320
Straight-line rent receivable			(2,395	)			(1,319	)
Straight-line rent liability			246				206
Gain on sales of real estate properties			(36	)			(4,221	)
Loss on extinguishment of debt			1,986				480
Impairment			147				—
Provision for bad debt, net			287				(457	)
Payment of partial pension settlement			—				(342	)
Changes in operating assets and liabilities:
Other assets			(5,376	)			(162	)
Accounts payable and accrued liabilities			2,649				5,187
Other liabilities			7,217				(248	)
Net cash provided by operating activities			46,495				49,541
INVESTING ACTIVITIES
Acquisition and development of real estate properties			(83,111	)			(54,057	)
Funding of mortgages and notes receivable			(83,141	)			(2,890	)
Proceeds from sales of real estate			3,775				23,623
Proceeds from mortgages and notes receivable repayments			58				69
Net cash used in investing activities			(162,419	)			(33,255	)
FINANCING ACTIVITIES
Net borrowings (repayments) on unsecured credit facility			123,000				(30,000	)
Repayments on notes and bonds payable			(1,616	)			(1,111	)
Repurchase of notes payable			(280,201	)			(8,556	)
Dividends paid			(42,570	)			(37,370	)
Proceeds from issuance of common stock			224,045				59,449
Common stock redemptions			(51	)			—
Capital contributions received from noncontrolling interests			—				670
Distributions to noncontrolling interest holders			(281	)			(249	)
Purchase of noncontrolling interests			(1,591	)			—
Debt issuance costs			(356	)			(515	)
Net cash provided by (used in) financing activities			20,379				(17,682	)
Decrease in cash and cash equivalents			(95,545	)			(1,396	)
Cash and cash equivalents, beginning of year			113,321				5,851
Cash and cash equivalents, end of year		$	17,776			$	4,455
Supplemental Cash Flow Information:
Interest paid		$	33,437			$	24,458
Capitalized interest		$	4,194			$	5,050
Company-financed real estate property sales		$	2,700			$	—
Invoices accrued for construction, tenant improvement and other capitalized costs		$	15,001			$	9,913

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2010, are an integral part of these financial statements.

Healthcare Realty Trust Incorporated

Notes to Condensed Consolidated Financial Statements

June 30, 2011
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Business Overview

     Healthcare Realty Trust Incorporated (the “Company”) is a 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 had investments of approximately $2.7 billion in 216 real estate properties and mortgages as of June 30, 2011, excluding assets classified as held for sale and including an investment in one unconsolidated joint venture. The Company’s 203 owned real estate properties, excluding assets classified as held for sale, are comprised of three facility types, located in 28 states, totaling approximately 13.4 million square feet. As of June 30, 2011, the Company provided property management services to approximately 9.2 million square feet nationwide.

Principles of Consolidation

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

     In accordance with Accounting Standards Codification (“ASC”) No. 810, “Consolidation,” the Company must evaluate each contractual relationship to determine whether or not it creates a variable interest entity (“VIE”). The Company had three construction mortgage loans aggregating approximately $45.9 million at June 30, 2011 in which each borrower has been identified as a VIE. At June 30, 2011, the Company had determined that it was not the primary beneficiary of these VIEs because it does not have the power to direct the activities that most significantly impact the entities’ economic performance nor does it have the obligation to absorb the losses of, or receive the benefit from, the entities. Accordingly, the Company does not consolidate the underlying projects. The Company’s maximum loss exposure loss related to these VIEs at June 30, 2011 equals the Company’s related aggregate loan investment.

     During the first quarter of 2011, the Company purchased the remaining noncontrolling interest in its two consolidated joint ventures: (1) HR Ladco Holdings, LLC in which the Company held an 80% interest and (2) Lakewood MOB, LLC in which the Company held a 98.75% interest. The noncontrolling interest holder in both joint ventures was Ladco MPF I, LLC (“Ladco”). Prior to the purchase, the noncontrolling interests were reported as equity and the related net income (loss) attributable to the noncontrolling interests as part of consolidated net income in the Company’s Condensed Consolidated Financial Statements. The Company’s investment in its one unconsolidated joint venture, which is carried at cost, is included in other assets with its related income recognized in other income (expense) in the Company’s Condensed Consolidated Financial Statements.

     The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Management believes, however, that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. All material intercompany transactions and balances have been eliminated in consolidation.

     This interim financial information should be read in conjunction with the financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2011 for many reasons including, but not limited to, acquisitions, dispositions, capital financing transactions, changes in interest rates and the effects of other trends and uncertainties.

Use of Estimates in the Condensed Consolidated Financial Statements

     Preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates.

Segment Reporting

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

Reclassifications

     Certain amounts in the Company’s Condensed Consolidated Financial Statements for prior periods have been reclassified to conform to the current period presentation. Assets sold or held for sale, and related liabilities, have been reclassified in the Company’s Condensed Consolidated Balance Sheets, and the operating results of those assets have been reclassified from continuing to discontinued operations for all periods presented.

Revenue Recognition

   General

     The Company recognizes revenue when it is realized or realizable and earned. There are four criteria that must be met before a company may recognize revenue, including: persuasive evidence that 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 collectability is reasonably assured. Income received but not yet earned is deferred until such time it is earned. Deferred revenue is included in other liabilities in the Company’s Condensed Consolidated Balance Sheets.

     The Company derives most of its revenues from its real estate 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 generally 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 rent, property operating income, or mortgage interest income in the Company’s Condensed Consolidated Statements of Operations, based on the type of contractual agreement.

   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. The Company’s lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index. The Company’s multi-tenant office lease arrangements also generally allow for operating expense recoveries which the Company calculates and bills to its tenants. Rental income from properties under master lease arrangements with tenants is included in master lease rent and rental income from properties with multi-tenant office lease arrangements is included in property operating income in the Company’s Condensed Consolidated Statements of Operations.

   Interest Income

     Mortgage interest income and notes receivable interest income are recognized based on the interest rates and maturity date or amortization period specific to each note. Loan origination fees received are deferred and are recognized in mortgage interest income over the estimated life of the loan.

   Property Operating Income

     The Company has eight real estate properties subject to property operating agreements that 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 sponsor is responsible to the Company for the shortfall under the terms of these agreements. The Company recognizes any shortfall income in other operating income in the Company’s Condensed Consolidated Statements of Operations.

Notes to Condensed Consolidated Financial Statements-Continued

Accumulated Other Comprehensive Loss

     A company must include certain items in comprehensive income (loss), 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 pension liability adjustments, which are generally recognized in the fourth quarter of each year.

Income Taxes

     The Company intends at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. Accordingly, no provision has been made for federal income taxes. The Company must distribute at least 90% per annum of its REIT taxable income to its stockholders and meet other requirements to continue to qualify as a REIT.

     The Company must pay certain state income taxes which are generally included in general and administrative expense in the Company’s Condensed Consolidated Statements of Operations.

     The Company classifies interest and penalties related to uncertain tax positions, if any, in its Condensed Consolidated Financial Statements as a component of general and administrative expense.

Incentive Plans

     The Company has various outstanding employee and non-employee stock-based awards, including restricted stock issued under its incentive plans, and options granted to employees pursuant to its employee stock purchase plan (the “Employee Stock Purchase Plan”). The Company recognizes compensation expense for these awards based on the grant date fair value of the awards ratably over the requisite service period.

Accounting for Defined Benefit Pension Plans

     The Company has a retirement plan (the “Executive Retirement Plan”) under which three of the Company’s founding officers may receive certain benefits upon retirement. The plan is unfunded and benefits will be paid from cash flows of the Company. The maximum annual benefits payable to each individual under the Executive Retirement Plan have been frozen at $896,000, subject to cost-of-living adjustments. 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 also had a pension plan under which the Company’s non-employee directors would receive certain retirement benefits. That plan was terminated in 2009 and during 2010 lump sum payments totaling $2.6 million were made to those directors who participated in the plan.

Operating Leases

     As described in more detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, the Company is obligated under operating lease agreements consisting primarily of its corporate office lease and various ground leases related to the Company’s real estate investments where the Company is the lessee.

Discontinued Operations and Assets Held for Sale

     The Company sells properties from time to time due to a variety of factors, including among other things, 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 Condensed Consolidated Statements of Operations. 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 classified as held for sale in the Company’s Condensed Consolidated Balance Sheets are reported at the lower of their carrying amount or their estimated 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 or anticipated sale of such properties are characterized as impairment losses

Notes to Condensed Consolidated Financial Statements-Continued

relating to discontinued operations in the Company’s Condensed Consolidated Statements of Operations. See Note 3 for a detail of the Company’s assets held for sale and discontinued operations.

Land Held for Development

     Land held for development, which is included in construction in progress in the Company’s Condensed Consolidated Balance Sheets, includes parcels of land owned by the Company, upon which the Company intends to develop and own outpatient healthcare facilities.

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.

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.

     Periodically, the Company will eliminate fully-depreciated real estate lease intangible assets that were initially recorded as part of the Company’s real estate acquisition accounting against accumulated depreciation. During the second quarter of 2011, the Company eliminated approximately $40.0 million of its fully amortized real estate lease intangibles against accumulated depreciation.

     The Company also capitalizes direct construction and development costs, including interest, to all consolidated real estate properties that are under construction and substantive activities are ongoing to prepare the asset for its intended use. The Company considers a building as substantially complete and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity. Costs incurred after a project is substantially complete and ready for its intended use, or after development activities have ceased, are expensed as incurred.

Mortgage Loans

     Loans receivable may be classified as held-for-investment or held-for-sale based on a lender’s intent and ability to hold the loans. Loans held-for-investment are carried at amortized cost and are reduced by valuation allowances for estimated credit losses as necessary. Loans held-for-sale are carried at the lower of cost or fair value. All of the Company’s loans receivable are classified as held-for-investment.

Allowance for Doubtful Accounts and Credit Losses

     Management monitors the aging and collectibility of its accounts receivable balances on an ongoing basis. Whenever deterioration in the timeliness of payment from a tenant or sponsor is noted, management investigates and

Notes to Condensed Consolidated Financial Statements-Continued

determines the reason(s) for the delay. 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 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 also evaluates collectibility of its mortgage notes and notes receivable and records an allowance 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. Loans placed on non-accrual status will be accounted for either on a cash basis, in which income is recognized only upon receipt of cash, or on a cost-recovery basis, in which all cash receipts reduce the carrying value of the loan, based on the Company’s expectation of future collectability.

New Pronouncements

     In June 2011, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2011-05, “Presentation of Comprehensive Income.” ASU 2011-05 requires companies to retrospectively present comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and eliminates the current option of presenting components of comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 also will require companies to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income. ASU 2011-05 will be effective for the Company on January 1, 2012 although early adoption is permitted. The adoption of ASU 2011-05 will not have a material impact on the Company’s results of operations or financial position.

Note 2. Real Estate and Mortgage Notes Receivable Investments

     The Company had investments of approximately $2.7 billion in 216 real estate properties and mortgage notes receivable as of June 30, 2011, excluding assets classified as held for sale and including an investment in one unconsolidated joint venture. The Company’s 203 owned real estate properties, excluding assets classified as held for sale, are located in 28 states and comprise approximately 13.4 million total square feet. The table below details the Company’s investments.

Notes to Condensed Consolidated Financial Statements-Continued

		Number of				Gross Investment								Square Feet
(Dollars and Square Feet in thousands)		Investments				Amount				%				Footage				%
Owned properties:
Master leases
Medical office/outpatient			27			$	220,777				7.9	%			1,204				9.0	%
Inpatient			14				328,788				12.0	%			1,072				7.9	%
Other			2				9,545				0.3	%			92				0.7	%
			43				559,110				20.2	%			2,368				17.6	%
Property operating agreements
Medical office/outpatient			8				83,065				3.0	%			624				4.7	%
			8				83,065				3.0	%			624				4.7	%
Multi-tenanted with occupancy leases
Medical office/outpatient			139				1,598,621				58.5	%			8,954				66.9	%
Medical office/outpatient - stabilization in progress			8				235,026				8.6	%			808				6.0	%
Other			2				19,648				0.7	%			256				1.9	%
			149				1,853,295				67.8	%			10,018				74.8	%
Construction in progress
Medical office/outpatient			3				83,968				3.1	%			378				2.9	%
Land held for development			—				20,773				0.8	%			—				—
			3				104,741				3.9	%			378				2.9	%
Corporate property			—				15,037				0.5	%			—				—
Total owned properties			203				2,615,248				95.4	%			13,388				100.0	%
Mortgage loans:
Medical office/outpatient			9				49,714				1.8	%
Inpatient			2				32,889				1.2	%
Other			1				40,000				1.5	%
			12				122,603				4.5	%
Unconsolidated joint venture:
Other			1				1,266				0.1	%
			1				1,266				0.1	%
Total real estate investments			216			$	2,739,117				100.0	%

Mortgage loans

     A summary of the Company’s mortgage loans is shown in the table below:

		June 30, 2011												December 31, 2010
		Principal				Unamortized								Principal				Unamortized
(Dollars in thousands)		Balance				Fees				Total				Balance				Fees				Total
Construction mortgage loans		$	61,551			$	246			$	61,305			$	18,409			$	430			$	17,979
Other mortgage loans			61,298				—				61,298				18,620				—				18,620
		$	122,849			$	246			$	122,603			$	37,029			$	430			$	36,599

     All of the Company’s mortgage notes receivable are classified as held-for-investment based on management’s intent and ability to hold the loans until maturity. As such, the loans are carried at amortized cost. At June 30, 2011, the Company has recorded allowances on interest receivables totaling $0.2 million on two construction mortgage notes receivable with principal balances totaling $4.4 million as of June 30, 2011 and has placed those mortgages on non-accrual status. Also, at June 30, 2011, approximately $72.9 million, or 59.5%, and $24.0 million, or 19.6%, respectively, of the

Notes to Condensed Consolidated Financial Statements-Continued

Company’s mortgage notes receivable were due from affiliates of Ladco and United Trust Fund which is developing the two build-to-suit facilities affiliated with Mercy Health.

Note 3. Acquisitions and Dispositions

Real Estate Acquisitions

     On June 29, 2011, the Company entered into an agreement to purchase a portfolio of eight outpatient buildings in Virginia from affiliates of Woolfolk Medical Group, LLC for an aggregate purchase price of approximately $160.7 million, including the assumption of debt of approximately $58.4 million. Concurrent with the acquisitions, the Company will also prepay ground rent of approximately $12.8 million. Bon Secours Health System (“BSHS”) and its affiliates lease approximately 40% of the total square footage of the portfolio. BSHS is a not-for-profit, “A-” rated, health system, based in Marriottsville, Maryland, that generates $2.8 billion in revenue and operates 18 acute care hospitals with approximately 2,938 beds throughout 15 markets in seven states. The seven properties on BSHS hospital campuses and the one off-campus property comprise 595,000 square feet and were approximately 96% leased at June 30, 2011. On June 30, 2011, the Company acquired one of the eight buildings for cash consideration of approximately $34.8 million, including prepaid ground rent of approximately $2.9 million, and also made earnest money deposits totaling approximately $2.4 million for the remaining seven buildings. The Company expects that the acquisitions of the remaining buildings, for additional cash consideration of approximately $78.5 million, will occur in a series of closings through the end of the third quarter of 2011, subject to customary closing conditions.

     The Company has expensed a total of approximately $0.9 million in project costs related to the acquisition of this portfolio, including approximately $0.3 million and $0.6 million, respectively, expensed during the three and six months ended June 30, 2011. The purchase price allocation reflected in the Company’s Condensed Consolidated Financial Statements for the building acquired on June 30, 2011 is preliminary and is pending information necessary to complete the valuation of real estate and intangible assets, which may result in a change from the initial estimate. The Company expects that the allocation of the purchase price will be finalized during the third quarter of 2011.

Mortgage Note Financings

     On June 30, 2011, the Company entered into two construction mortgage loans to fund the development of two build-to-suit facilities affiliated with Mercy Health. The two projects include a 200,000 square foot medical office building in Oklahoma with a construction budget of approximately $91.2 million and a 186,000 square foot orthopedic surgical facility in Missouri with a construction budget of approximately $111.4 million. The loans have stated interest rates of 6.75% and are scheduled to mature upon substantial completion which is estimated to be in the latter half of 2013. The Company has agreed to acquire the facilities upon substantial completion of construction at a price equal to the amount outstanding under the mortgage notes. The facilities are leased by affiliates of Mercy Health under 14-year absolute net leases with options to purchase the buildings contingent on certain provisions in the lease agreements. Mercy Health, based in St. Louis, Missouri is the eighth largest Catholic healthcare system in the U.S., has a net worth of more than $2 billion, and maintains a “AA-” credit rating. Mercy Health operates 26 acute care hospitals and two heart hospitals in a seven-state area. On June 30, 2011, the Company funded approximately $24.0 million toward the development of the two facilities, with the remaining $178.6 million expected to be funded over a 28-month period.

     During the first quarter of 2011, the Company originated the following mortgage notes receivable:

•

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 of 7.7% and matures in January 2014;

•

a $2.7 million mortgage note receivable with the purchaser in conjunction with the disposal of a medical office building located in Florida as discussed below. The loan has a stated fixed interest rate of 7.0% and matures in March 2016; and

•

a $3.7 million loan for the construction of a medical office building located in Missouri. The loan has a stated interest rate of 11.0% and matures in 2012. The Company had funded $1.4 million on the loan as of June 30, 2011.

     Also, during the three and six months ended June 30, 2011, the Company funded approximately $10.4 million and $17.8 million, respectively, on existing construction mortgage loans.

Notes to Condensed Consolidated Financial Statements-Continued

Purchase of Noncontrolling Interests

     In March 2011, the Company purchased from the noncontrolling interest holder the remaining 20% equity interest in its HR Ladco Holdings, LLC joint venture and the remaining 1.25% equity interest in its Lakewood MOB, LLC joint venture, for a total aggregate purchase price of $5.1 million. The book value of the noncontrolling interests prior to the equity purchase was $3.6 million. Concurrent with these purchases, the noncontrolling interest holder repaid a loan receivable to the Company totaling $3.5 million. The loan receivable had been secured by the noncontrolling joint venture interests. The Company had previously consolidated these joint ventures in its financial statements. HR Ladco Holdings, LLC at March 31, 2011 owned nine 100% leased outpatient facilities located in Iowa with an aggregate investment of approximately $87.6 million and 369,000 square feet. Lakewood MOB, LLC is constructing two medical office buildings and a parking garage located in Colorado with an aggregate budget of approximately $54.9 million.

     The following table details the Company’s acquisitions for the six months ended June 30, 2011.

														Note Receivable				Mortgage Note				Noncontrolling
(Dollars in millions)		Date Acquired				Cash Consideration				Real Estate				Repayment				Financing				interests				APIC				Other				Square Footage
Real estate acquisitions
Virginia			06/30/2011			$	34.8			$	32.0			$	—			$	—			$	—			$	—			$	2.8				142,000
Purchase of noncontrolling interests
Lakewood MOB, LLC			03/15/2011			$	0.5			$	—			$	—			$	—			$	0.2			$	—			$	0.3				—
HR Ladco Holdings, LLC			03/31/2011				0.8				—				(3.5	)			—				3.4				1.5				(0.6	)			—
							1.3				—				(3.5	)			—				3.6				1.5				(0.3	)			—
Mortgage note financings (1)
Iowa			01/03/2011				40.0				—				—				40.0				—				—				—				—
Florida			02/03/2011				2.7				—				—				2.7				—				—				—				—
Missouri			03/24/2011				1.4				—				—				1.4				—				—				—				—
Missouri			06/30/2011				11.0				—				—				11.0				—				—				—				—
Oklahoma			06/30/2011				13.0				—				—				13.0				—				—				—				—
							68.1				—				—				68.1				—				—				—				—
						$	104.2			$	32.0			$	(3.5	)		$	68.1			$	3.6			$	1.5			$	2.5				142,000

Asset Dispositions

     During the first quarter of 2011, the Company disposed of the following properties:

•

a 35,761 square foot medical office building in Maryland in which the Company had a net investment of approximately $3.5 million. The Company received approximately $3.4 million in net proceeds and recorded a $0.1 million impairment charge on the disposal.

•

a 28,861 square foot physician clinic in Florida in which the Company had a net investment of approximately $3.1 million. The Company received approximately $0.4 million in net cash proceeds, originated a $2.7 million mortgage note receivable with the purchaser as discussed above, and recognized an immaterial gain on the disposition.

Notes to Condensed Consolidated Financial Statements-Continued

     The following table details the Company’s dispositions for the three and six months ended June 30, 2011.

										Net Real Estate				Mortgage Note				Gain/
(Dollars in millions)		Date Disposed				Net Proceeds				Investment				Receivable				(Loss)				Square Footage
Real estate dispositions
Maryland			01/19/2011			$	3.4			$	3.5			$	—			$	(0.1	)			35,761
Florida			02/03/2011				0.4				3.1				(2.7	)			—				28,861
Total dispositions						$	3.8			$	6.6			$	(2.7	)		$	(0.1	)			64,622

Potential Dispositions

     In the fourth quarter of 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 are classified as held for sale, was approximately $8.2 million at June 30, 2011. The aggregate purchase price for the properties is expected to be approximately $17.3 million, resulting in an expected net gain of approximately $9.1 million. The Company expects the sale to close during the third quarter of 2011.

Discontinued Operations and Assets Held for Sale

     During the first quarter of 2011, the Company sold one property in Florida and one property in Maryland and reclassified one property located in Tennessee that was previously classified as held for sale to held for use upon execution of a long-term lease. The Company’s gross investment in the Tennessee property was approximately $1.1 million ($0.5 million, net) at June 30, 2011.

     The tables below detail the assets, liabilities, and results of operations included in discontinued operations on the Company’s Condensed Consolidated Statements of Operations and in assets and liabilities of discontinued operations on the Company’s Condensed Consolidated Balance Sheets. At June 30, 2011 and December 31, 2010, the Company had eight and 11 properties, respectively, classified as held for sale, including the six properties discussed above in “Potential Dispositions.” Of the 11 properties classified as held for sale at December 31, 2010, two of the properties were sold and one was reclassified to held for use during the first quarter of 2011.

		June 30,				December 31,
(Dollars in thousands)		2011				2010
Balance Sheet data (as of the period ended):
Land		$	4,766			$	7,099
Buildings, improvements and lease intangibles			27,117				35,424
Personal property			425				429
			32,308				42,952
Accumulated depreciation			(15,883	)			(19,447	)
Assets held for sale, net			16,425				23,505
Other assets, net (including receivables)			60				410
Assets of discontinued operations, net			60				410
Assets held for sale and discontinued operations, net		$	16,485			$	23,915
Accounts payable and accrued liabilities		$	107			$	229
Other liabilities			108				194
Liabilities of discontinued operations		$	215			$	423

Notes to Condensed Consolidated Financial Statements-Continued

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Dollars in thousands, except per share data)		2011				2010				2011				2010
Statements of Operations data (for the period ended):
Revenues
Master lease rent		$	669			$	888			$	1,337			$	2,749
Property operating			135				592				375				1,206
Straight-line rent			(1	)			9				(1	)			(7	)
Other operating			—				—				—				1
			803				1,489				1,711				3,949
Expenses
General and administrative			2				4				3				6
Property operating			303				543				705				1,104
Bad debt, net			—				21				15				21
Depreciation			—				374				—				761
			305				942				723				1,892
Other Income (Expense)
Interest and other income, net			—				183				—				224
			—				183				—				224
Discontinued Operations
Income from discontinued operations			498				730				988				2,281
Impairment			—				—				(147	)			—
Gain on sales of real estate properties			—				1,525				36				4,221
Income from Discontinued Operations		$	498			$	2,255			$	877			$	6,502
Income from Discontinued Operations per Common Share — Basic		$	0.01			$	0.04			$	0.02			$	0.10
Income from Discontinued Operations per Common Share — Diluted		$	0.01			$	0.03			$	0.02			$	0.10

Note 4. Notes and Bonds Payable

     The table below details the Company’s notes and bonds payable as of June 30, 2011 and December 31, 2010.

		June 30,				Dec. 31,				Maturity				Contractual				Principal				Interest
(Dollars in thousands)		2011				2010				Dates				Interest Rates				Payments				Payments
Unsecured Credit Facility due 2012		$	123,000			$	—				9/12			LIBOR + 2.80%				At maturity				Quarterly
Senior Notes due 2011, including premium			—				278,311				—				8.125	%		At maturity				Semi-Annual
Senior Notes due 2014, net of discount			264,298				264,227				4/14				5.125	%		At maturity				Semi-Annual
Senior Notes due 2017, net of discount			298,340				298,218				1/17				6.500	%		At maturity				Semi-Annual
Senior Notes due 2021, net of discount			396,930				396,812				1/21				5.750	%		At maturity				Semi-Annual
Mortgage notes payable, net of discount and including premiums			169,061				170,287				4/13-10/30				5.000%-7.625	%		Monthly				Monthly
		$	1,251,629			$	1,407,855

     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 June 30, 2011, the Company was in compliance with the financial covenant provisions under all of its various debt instruments.

Unsecured Credit Facility due 2012

     In 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

Notes to Condensed Consolidated Financial Statements-Continued

2.15% to 3.20% (2.80% at June 30, 2011) for LIBOR-based loans and 0.90% to 1.95% for base rate loans (1.55% at June 30, 2011), 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 June 30, 2011, the Company had $123.0 million outstanding under the Unsecured Credit Facility with a weighted average interest rate of approximately 2.99% and had borrowing capacity remaining, under its financial covenants, of approximately $427.0 million.

Senior Notes due 2011

     On March 28, 2011, the Company redeemed its unsecured senior notes due 2011 (the “Senior Notes due 2011”) at a redemption price equal to an aggregate of $289.4 million, consisting of outstanding principal of $278.2 million, accrued interest as of the redemption date of $9.2 million, and a “make-whole” amount of approximately $2.0 million for the early extinguishment of the debt, which was approximately equal to the interest that would have been paid between the redemption date and the maturity date. The Senior Notes due 2011, issued in 2001, bore interest at 8.125% per annum, payable semi-annually on May 1 and November 1, and were due to mature on May 1, 2011. The unamortized net gain on these notes was fully amortized upon redemption.

Senior Notes due 2014

     In 2004, the Company issued $300.0 million of unsecured senior notes due 2014 (the “Senior Notes due 2014”) that bear interest at 5.125% per annum, payable semi-annually on April 1 and October 1, and are due on April 1, 2014, unless redeemed earlier by the Company. The Senior Notes due 2014 were issued at a discount of approximately $1.5 million, yielding an effective interest rate of 5.19% per annum. In previous years, the Company repurchased approximately $35.3 million of the Senior Notes due 2014 and amortized a pro-rata portion of the discount upon the repurchases. The following table reconciles the balance of the Senior Notes due 2014 on the Company’s Condensed Consolidated Balance Sheets.

		June 30,				December 31,
(Dollars in thousands)		2011				2010
Senior Notes due 2014 face value		$	264,737			$	264,737
Unaccreted discount			(439	)			(510	)
Senior Notes due 2014 carrying amount		$	264,298			$	264,227

Senior Notes due 2017

     In 2009, the Company issued $300.0 million of unsecured senior notes due 2017 (the “Senior Notes due 2017”) that bear interest at 6.50% per annum, payable semi-annually on January 17 and July 17, and are due on January 17, 2017, unless redeemed earlier by the Company. The Senior Notes due 2017 were issued at a discount of approximately $2.0 million, yielding an effective interest rate of 6.618% per annum. For the quarter ended June 30, 2011, the Company amortized approximately $0.1 million of the discount which is included in interest expense on the Company’s Condensed Consolidated Statements of Operations. The following table reconciles the balance of the Senior Notes due 2017 on the Company’s Condensed Consolidated Balance Sheets.

		June 30,				December 31,
(Dollars in thousands)		2011				2010
Senior Notes due 2017 face value		$	300,000			$	300,000
Unaccreted discount			(1,660	)			(1,782	)
Senior Notes due 2017 carrying amount		$	298,340			$	298,218

Senior Notes due 2021

     In December 2010, the Company issued $400.0 million of unsecured senior notes due 2021 (the “Senior Notes due 2021”) that 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 Senior Notes due 2021 were issued at a discount of approximately $3.2 million, which yielded a 5.855% interest rate per annum upon issuance. For the quarter ended June 30, 2011, the Company amortized approximately $0.1 million of the discount which is included in interest expense on the Company’s Condensed Consolidated Statements of Operations. The following table reconciles the balance of the Senior Notes due 2021 on the Company’s Condensed Consolidated Balance Sheets.

Notes to Condensed Consolidated Financial Statements-Continued

		June 30,				December 31,
(Dollars in thousands)		2011				2010
Senior Notes due 2021 face value		$	400,000			$	400,000
Unaccreted discount			(3,070	)			(3,188	)
Senior Notes due 2021 carrying amount		$	396,930			$	396,812

Mortgage Notes Payable

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

		June 30,				December 31,
(Dollars in thousands)		2011				2010
Mortgage notes payable principal balance		$	175,023			$	176,638
Unaccreted discount, net of premium			(5,962	)			(6,351	)
Mortgage notes payable carrying amount		$	169,061			$	170,287

Notes to Condensed Consolidated Financial Statements-Continued

     The following table further details the Company’s mortgage notes payable, with related collateral, at June 30, 2011.

																		Investment in
						Effective												Collateral at				Balance at
		Original				Interest				Maturity								June 30,				June 30,				Dec. 31,
(Dollars in millions)		Balance				Rate (13)				Date				Collateral (14)				2011				2011				2010
Life Insurance Co. (1)		$	4.7				7.765	%			1/17			MOB				$	11.5			$	2.1			$	2.2
Commercial Bank (2)			1.8				5.550	%			10/30			OTH					7.9				1.7				1.7
Life Insurance Co. (3)			15.1				5.490	%			1/16			MOB					32.7				13.3				13.5
Commercial Bank (4)			17.4				6.480	%			5/15			MOB					19.9				14.5				14.5
Commercial Bank (5)			12.0				6.110	%			7/15			2 MOBs					19.4				9.8				9.7
Commercial Bank (6)			15.2				7.650	%			7/20			MOB					20.2				12.8				12.8
Life Insurance Co. (7)			1.5				6.810	%			7/16			MOB					2.2				1.1				1.2
Commercial Bank (8)			12.9				6.430	%			2/21			MOB					20.5				11.4				11.5
Investment Fund (9)			80.0				7.250	%			12/16			15 MOBs					154.0				78.8				79.2
Life Insurance Co. (10)			7.0				5.530	%			1/18			MOB					14.5				3.8				4.0
Investment Co. (11)			15.9				6.550	%			4/13			MOB					23.3				15.4				15.6
Investment Co. (12)			4.6				5.250	%			9/15			MOB					6.9				4.4				4.4
																		$	333.0			$	169.1			$	170.3

Notes to Condensed Consolidated Financial Statements-Continued

Long-Term Debt Maturities

     Future maturities of the Company’s notes and bonds payable as of June 30, 2011 were:

		Principal				Net Accretion/				Notes and
(Dollars in thousands)		Maturities				Amortization (1)				Bonds Payable				%
2011 (remaining)		$	1,665			$	(720	)		$	945				0.1	%
2012 (2)			126,491				(1,508	)			124,983				10.0	%
2013			18,284				(1,738	)			16,546				1.3	%
2014			268,460				(1,786	)			266,674				21.3	%
2015			32,632				(1,443	)			31,189				2.5	%
2016 and thereafter			815,228				(3,936	)			811,292				64.8	%
		$	1,262,760			$	(11,131	)		$	1,251,629				100.0	%

Note 5. Other Assets

     Other assets consist primarily of prepaid assets, straight-line rent receivables, intangible assets and receivables. Items included in other assets on the Company’s Condensed Consolidated Balance Sheets are detailed in the table below.

		June 30,				December 31,
(Dollars in millions)		2011				2010
Prepaid assets		$	31.3			$	27.9
Straight-line rent receivables			29.5				27.0
Above-market intangible assets, net			13.2				13.4
Deferred financing costs, net			10.0				12.0
Accounts receivable			6.3				6.1
Goodwill			3.5				3.5
Equity investment in joint venture — cost method			1.3				1.3
Customer relationship intangible assets, net			1.1				1.2
Notes receivable			0.3				3.8
Allowance for uncollectible accounts			(1.3	)			(1.2	)
Other			5.4				1.5
		$	100.6			$	96.5