Business Context and Reporting Period
This Form 8-K is a current report filed by Grubb & Ellis Healthcare REIT, Inc. (also referred to as Healthcare Realty Trust Inc in metadata) on December 5, 2007. The filing discloses the entry into a material definitive agreement and the creation of a direct financial obligation related to the financing of a specific property acquisition.
Key Financial Metrics and Obligations
- Principal Amount: $8,300,000 secured loan (Kokomo Loan).
- Net Proceeds: Approximately $8,249,000 (after closing costs).
- Interest Rate: Fixed at 5.86% per annum via an interest rate swap agreement.
- Maturity Date: November 30, 2010.
- Extension Options: Two consecutive 12-month periods available subject to conditions and a 0.125% extension fee.
- Payment Terms: Monthly interest-only payments; no prepayment premium.
- Collateral: Secured by a mortgage on the Kokomo Medical Office Park in Kokomo, Indiana.
Material Changes and Transactions
On December 5, 2007, the company's subsidiary, NNN Healthcare/Office REIT Kokomo Medical Office Park, LLC, entered into a loan agreement with Wachovia Financial Services, Inc. The proceeds were used to reimburse the company for funds originally used to acquire the Kokomo property on August 30, 2007. Concurrently, the company entered into an ISDA interest rate swap agreement with Wachovia Bank, National Association, to convert the loan's variable interest rate (LIBOR + 1.40% or Prime Rate) to a fixed rate of 5.86%.
Management Commentary, Risks, and Contingencies
- Guarantees: The parent company, Grubb & Ellis Healthcare REIT, Inc., unconditionally and irrevocably guarantees the repayment obligations under the loan and the ISDA agreement.
- Default Provisions: Late payments incur a 4.0% charge on the installment. Default triggers an interest rate of 4.0% per annum plus the greater of LIBOR or the Prime Rate.
- Environmental Indemnity: An Environmental Indemnity Agreement was executed for the benefit of the lender.
- Extension Conditions: Loan extensions require satisfaction of certain conditions and payment of fees.
Investor Verification Checklist
- Verify the current occupancy and lease status of the Kokomo Medical Office Park to ensure cash flow supports the new debt service.
- Review the specific conditions required for the two 12-month loan extensions to assess refinancing risk at maturity.
- Confirm the company's overall leverage ratio post-transaction to evaluate liquidity impact.
- Examine the Environmental Indemnity Agreement for potential liabilities related to the Kokomo property.