Business Context and Reporting Period
This Form 8-K Current Report is filed by NNN Healthcare/Office REIT, Inc. (also referred to as Healthcare Realty Trust Inc in metadata) for the reporting period ending November 20, 2007. The filing details the completion of a significant asset acquisition and the establishment of new financing arrangements to fund the purchase and refinance a prior acquisition.
Key Financial Metrics and Transactions
- Asset Acquisition: Acquired the Tucson Medical Office Portfolio (Desert Life Medical Plaza and La Cholla property) for a total purchase price of $21,050,000 plus closing costs.
- Acquisition Fee: Paid an acquisition fee of $632,000 (3.0% of the purchase price) to the Advisor and its affiliate.
- Debt Financing (Tucson): Borrowed $22,000,000 under a secured revolving line of credit with LaSalle Bank National Association to finance the Tucson acquisition.
- Debt Financing (Northmeadow): Entered into a secured loan with Equitrust Life Insurance Company for a principal amount of $8,000,000 to refinance the Northmeadow Medical Center acquisition.
- Cash Proceeds (Northmeadow): Net cash proceeds of approximately $7,882,000 were received after closing costs and prepaid interest.
- Interest Rates: The Northmeadow loan bears interest at 5.99% per annum, with a default rate of the greater of 10.99% or Prime + 5.00%.
Material Changes
The filing reports material changes in the company's asset base and capital structure:
- Portfolio Expansion: Addition of the Tucson Medical Office Portfolio to the company's real estate holdings.
- Debt Increase: Total new debt obligations increased by $30,000,000 ($22,000,000 for Tucson and $8,000,000 for Northmeadow).
- Price Adjustment: The purchase price for the Tucson portfolio was increased by $50,000 via a Third Amendment to the Sale Agreement, allocated to the La Cholla property.
Outlook, Risks, and Contingencies
- Prepayment Restrictions: The Northmeadow loan cannot be prepaid in whole or in part during the first year. After the first year, prepayment is allowed in whole only, subject to a prepayment premium (greater of 1.00% of outstanding balance or Yield Maintenance Premium), unless prepaid within 27 months of maturity.
- Holdback Requirement: A holdback of approximately $27,000 was required for the Tucson acquisition, contingent on certain leases being entered into at the La Cholla property.
- Guaranty Liability: NNN Healthcare/Office REIT, Inc. is personally liable for losses incurred by Equitrust arising from the Northmeadow loan under a Guaranty.
- Financial Statements: The filing states it is not practical to provide required financial statements at this time; they will be filed as an amendment within 71 days of the filing deadline.
Investor Verification Checklist
- Verify the final closing costs and total cash outflow for the Tucson Medical Office Portfolio acquisition.
- Confirm the status of the $27,000 holdback and whether the required leases at the La Cholla property have been executed.
- Review the full terms of the LaSalle revolving line of credit to understand remaining capacity and covenants.
- Monitor the upcoming filing of pro forma financial information to assess the impact of the new debt on leverage ratios.
- Check the lease occupancy and rent rolls for the newly acquired Tucson properties to validate revenue projections.