HR

Business Context and Reporting Period

Company: NNN Healthcare/Office REIT, Inc. (Healthcare Realty Trust Inc)

Filing Type: Form 10-Q (Quarterly Report)

Period Ended: March 31, 2007

Business Overview: The Company is an externally advised REIT focused on acquiring medical office buildings, healthcare-related facilities, and commercial office properties. As of the reporting date, the Company was in the active stage of its Initial Public Offering (IPO) and had acquired four properties totaling approximately 329,000 square feet of gross leasable area. The Company intends to qualify as a REIT for federal income tax purposes for the taxable year ending December 31, 2007.

Key Financial Metrics

Material Changes vs. Prior Period

The Company was initially capitalized on April 28, 2006. Consequently, there is no comparative financial data for the three months ended March 31, 2006. The reporting period represents the Company's first full quarter of operations following the acquisition of its initial portfolio.

• Asset Growth: Total assets increased from $385,000 at December 31, 2006, to $57,617,000 at March 31, 2007, driven by the acquisition of four operating properties.
• Debt Assumption: Mortgage loan payables increased from $0 to $31,410,000 following the assumption of existing mortgages on acquired properties.
• Equity Position: Stockholders' equity shifted from a deficit of $(189,000) to a positive balance of $22,743,000 due to the issuance of common stock during the IPO.
• Revenue Generation: The Company generated $742,000 in rental income, whereas no such revenue existed in the prior period.

Guidance, Outlook, and Risks

Management Commentary and Outlook: The Company is actively conducting a best efforts IPO, having raised approximately $52.5 million in subscriptions as of April 30, 2007. Management expects revenues and expenses to increase significantly as the portfolio expands and the Company achieves a full year of operations. The Company plans to maintain a monthly distribution rate of 7.25% per annum.

Risks and Contingencies:

• Leverage: At the time of acquisition, leverage exceeded the 300% limit set in the Company's charter. This was approved by independent directors to facilitate early-stage acquisitions. As of May 14, 2007, leverage was reported to be within guidelines.
• Related Party Transactions: All four properties acquired in Q1 2007 were purchased from affiliates. Acquisition fees of 3.0% were paid to the Advisor and affiliates.
• SEC Investigation: The filing notes an ongoing investigation by the SEC into Triple Net Properties, LLC (an affiliate of the Advisor), as a potential risk factor.
• Offering Expenses: Approximately $1.79 million in organizational and offering expenses incurred by affiliates exceeded the 11.5% cap on gross proceeds and are not currently recorded as liabilities but may become so if additional proceeds are raised.
• Concentration Risk: One tenant (Pfizer, Inc.) accounted for 41.5% of total annualized rental revenue as of March 31, 2007.

Investor Verification Checklist

• Verify the status of the SEC investigation into Triple Net Properties, LLC and its potential impact on the Advisor relationship.
• Confirm the final terms of the IPO and the total capital raised to ensure the ability to diversify the portfolio beyond the current four properties.
• Review the lease expiration schedule, noting that 8.1% of leased space expires in 2007, and assess renewal risks for the major tenant (Pfizer).
• Monitor the Company's leverage ratio to ensure it remains compliant with the 300% charter limit as new properties are acquired.
• Assess the sustainability of the 7.25% distribution rate given the current negative Funds from Operations (FFO) of $(190,000).