Business Context and Reporting Period
This Form 8-K is filed by NNN Healthcare/Office REIT, Inc. (the "Company") on March 20, 2007, with the earliest event reported on that date. The filing details the acquisition of a healthcare/office property in Memphis, Tennessee, and the assumption of related debt. The Company is a Maryland corporation operating as a REIT.
Key Financial Metrics and Transaction Details
- Acquisition Price: $18,500,000 for 100% membership interest in entities owning Lenox Office Park Building G and two vacant land parcels.
- Financing Structure:
- Debt Assumption: $12,000,000 secured loan with LaSalle Bank National Association.
- Equity/Other: Balance funded by proceeds from the Company's initial public offering.
- Transaction Costs: $555,000 (3.0% of purchase price) paid as an acquisition fee to the advisor and an affiliate.
- Debt Terms:
- Principal: $12,000,000.
- Interest Rate: 5.88% per annum.
- Maturity Date: February 1, 2017.
- Payment Schedule: Interest-only through February 1, 2011; principal and interest thereafter.
Material Changes and Related Party Transactions
The Company acquired the property from NNN Lenox Medical Member, LLC and Triple Net Properties, LLC, which are affiliates and subsidiaries of the Company's Sponsor, NNN Realty Advisors, Inc. This constitutes a related-party transaction. The transaction closed on March 23, 2007. The Company's independent directors approved the transaction, determining it was fair and reasonable, with a price no greater than the cost to the sellers or the appraised value.
Outlook, Risks, and Contingencies
The filing does not provide specific forward-looking guidance or revenue projections for the Company as a whole. However, the transaction introduces the following specific terms and risks:
- Default Provisions: The loan agreement includes a default interest rate of 10.88% per annum and late charges of 3% of past due amounts.
- Valuation Verification: An independent appraiser was engaged to value the property to ensure the related-party transaction price was appropriate.
- Regulatory Disclosure: A press release regarding the acquisition was issued on March 26, 2007, under Regulation FD.
Investor Verification Checklist
- Verify the independent appraisal report value compared to the $18.5 million purchase price.
- Confirm the status of the "interest-only" period ending February 1, 2011, and the impact on future cash flow requirements.
- Review the full text of the Membership Interest Purchase and Sale Agreement (Exhibit 10.1) for any undisclosed covenants.
- Assess the impact of the $555,000 acquisition fee on the Company's initial capital deployment efficiency.
- Confirm the occupancy status and lease terms of Lenox Office Park Building G to validate revenue assumptions.