Business Context and Reporting Period
This Form 8-K is filed by Grubb & Ellis Healthcare REIT, Inc. (referred to in the text as Healthcare Realty Trust Inc in metadata) for the reporting period ending June 24, 2008. The filing details the entry into a material definitive agreement involving a new secured loan facility and the acquisition of two medical office properties.
Key Financial Metrics and Obligations
- New Debt Facility: Entered into a secured loan ("Wachovia Pool") with Wachovia Financial Services, Inc. in the principal amount of $50,321,500.
- Interest Rate: 30-day LIBOR plus 2.15%, with a floor of 4.65% per annum.
- Maturity: June 30, 2011, with options for two consecutive 12-month extensions subject to conditions and a 0.25% extension fee.
- Payment Terms: Interest-only payments from July 1, 2008, to June 30, 2009; principal and interest payments commence July 1, 2009.
- Acquisition Costs:
- 1722 Ninth Street property (Wichita Falls, TX): $7,200,000 purchase price.
- Academy Medical Center (Tucson, AZ): $8,100,000 purchase price.
- Acquisition Fees: Paid 3% of purchase prices to the advisor ($216,000 for the Texas property; $243,000 for the Arizona property).
Material Changes and Transactions
The registrant executed significant capital deployment and financing activities during the reporting period:
- Financing Structure: The $50.3 million Wachovia Pool is secured by deeds of trust and mortgages on five specific properties, including the newly acquired 1722 Ninth Street property and Academy Medical Center. The parent company provided an unconditional repayment guaranty.
- Property Acquisitions:
- Acquired the 1722 Ninth Street property on June 24, 2008, as part of a larger five-building "Medical Portfolio 2" acquisition totaling $44.8 million. Financing for this specific property included $4,554,000 from the Wachovia Pool and the remainder from IPO proceeds.
- Acquired Academy Medical Center on June 26, 2008. Initial financing was via a LaSalle Bank line of credit, followed by a draw of approximately $5,016,000 from the Wachovia Pool on June 27, 2008.
Outlook, Risks, and Contingencies
- Extension Risk: The loan maturity can be extended for two years, but this is contingent upon satisfying certain conditions and paying an extension fee.
- Default Provisions: The agreement includes a late charge of 4.0% on past-due payments and a default interest rate of 4.0% per annum plus the LIBOR Rate.
- Prepayment: The loan may be prepaid in whole or in part, subject to paying breakage amounts as defined in the agreement.
- Environmental Indemnities: The company entered into multiple environmental indemnity agreements with Wachovia Financial for the benefit of the lender regarding the secured properties.
Investor Verification Checklist
- Verify the current status of the "Medical Portfolio 2" remaining closings, as the filing notes subsequent closings are expected for the $44.8 million total portfolio.
- Confirm the current 30-day LIBOR rate to calculate the actual effective interest rate, noting the 4.65% floor.
- Review the specific conditions required for the two potential 12-month loan extensions.
- Assess the impact of the 3% acquisition fees on the net yield of the newly acquired properties.
- Monitor the utilization of the LaSalle Bank line of credit versus the new Wachovia Pool for future acquisitions.