##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended: December 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period            to
 Commission File Number: 1-11852
 HEALTHCARE REALTY TRUST INCORPORATED
 (Exact name of Registrant as specified in its charter)
 Maryland(State or other jurisdiction of 
Incorporation or organization)
    
    62-1507028(I.R.S. Employer
Identification No.)
 3310 West End Avenue
Suite 700
Nashville, Tennessee 37203  (Address of principal executive offices)
 (615) 269-8175  (Registrants telephone number, including area code)
 Securities Registered Pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon stock, $.01 par value per share
    
    New York Stock Exchange
 Securities Registered Pursuant to Section 12(g) of the Act:
 None
(Title of Class)
 þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PageItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    17Item 1B.
    
    Unresolved Staff Comments
    
    
    21Item 2.
    
    Properties
    
    
    21Item 3.
    
    Legal Proceedings
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    22Item 6.
    
    Selected Financial Data
    
    
    23Item 7.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 8.
    
    Financial Statements and Supplementary Data
    
    
    43Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    80Item 9A.
    
    Controls and Procedures
    
    
    80Item 9B.
    
    Other Information
    
    
    82Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    83Item 11.
    
    Executive Compensation
    
    
    84Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    84Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    84Item 14.
    
    Principal Accountant Fees and Services
    
    
    84Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    84SIGNATURES
    
    
    
    
    87EX-1.1EX-5EX-8EX-10.15EX-10.16EX-10.17EX-21EX-23.2EX-31.1EX-31.2EX-32




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PART I
 
 ITEM 1.
    
    BUSINESS
 Overview
    Number of
    
    
    Gross Investment

    Square Feet(Dollars and Square Feet in thousands)
    
    Investments
    
    
    Amount
    
    
    %
    
    
    Footage
    
    
    %Owned properties:Master leasesMedical office
    
    
    17
    
    
    $
    160,880
    
    
    
    7.1
    %
    
    
    834
    
    
    
    6.7
    %Physician clinics
    
    
    16
    
    
    
    123,611
    
    
    
    5.4
    %
    
    
    688
    
    
    
    5.6
    %Ambulatory care/surgery
    
    
    5
    
    
    
    33,351
    
    
    
    1.4
    %
    
    
    133
    
    
    
    1.1
    %Specialty outpatient
    
    
    3
    
    
    
    8,265
    
    
    
    0.4
    %
    
    
    37
    
    
    
    0.3
    %Specialty inpatient
    
    
    13
    
    
    
    234,624
    
    
    
    10.4
    %
    
    
    916
    
    
    
    7.4
    %Other
    
    
    10
    
    
    
    45,390
    
    
    
    2.0
    %
    
    
    498
    
    
    
    4.0
    %64
    
    
    
    606,121
    
    
    
    26.7
    %
    
    
    3,106
    
    
    
    25.1
    %Property operating agreementsMedical office
    
    
    8
    
    
    
    83,893
    
    
    
    3.7
    %
    
    
    621
    
    
    
    5.0
    %8
    
    
    
    83,893
    
    
    
    3.7
    %
    
    
    621
    
    
    
    5.0
    %Multi-tenanted with occupancy leasesMedical office
    
    
    105
    
    
    
    1,380,176
    
    
    
    61.2
    %
    
    
    7,965
    
    
    
    64.5
    %Physician clinics
    
    
    15
    
    
    
    50,691
    
    
    
    2.3
    %
    
    
    331
    
    
    
    2.7
    %Ambulatory care/surgery
    
    
    5
    
    
    
    67,293
    
    
    
    3.0
    %
    
    
    303
    
    
    
    2.5
    %Specialty outpatient
    
    
    2
    
    
    
    5,221
    
    
    
    0.2
    %
    
    
    22
    
    
    
    0.2
    %127
    
    
    
    1,503,381
    
    
    
    66.7
    %
    
    
    8,621
    
    
    
    69.9
    %Land Held for Development
    
    
    
    
    
    
    17,301
    
    
    
    0.8
    %
    
    
    
    
    
    
    Corporate property
    
    
    
    
    
    
    14,631
    
    
    
    0.6
    %
    
    
    
    
    
    
    
    
    
    
    31,932
    
    
    
    1.4
    %
    
    
    
    
    
    
    Total owned properties
    
    
    199
    
    
    
    2,225,327
    
    
    
    98.5
    %
    
    
    12,348
    
    
    
    100.0
    %Mortgage loans:Medical office
    
    
    2
    
    
    
    14,190
    
    
    
    0.6
    %
    
    
    
    
    
    
    Physician clinics
    
    
    2
    
    
    
    16,818
    
    
    
    0.8
    %
    
    
    
    
    
    
    4
    
    
    
    31,008
    
    
    
    1.4
    %
    
    
    
    
    
    
    Unconsolidated joint venture:Other
    
    
    1
    
    
    
    1,266
    
    
    
    0.1
    %
    
    
    
    
    
    
    1
    
    
    
    1,266
    
    
    
    0.1
    %
    
    
    
    
    
    
    Total real estate investments
    
    
    204
    
    
    $
    2,257,601
    
    
    
    100.0
    %
    
    
    12,348
    
    
    
    100.0
    %
  1




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Percentage of
    
    
    Occupancy (1)Square Feet
    
    
    2009
    
    
    2008Medical office buildings
    
    
    76.2
    %
    
    
    88
    %
    
    
    89
    %Physician clinics
    
    
    8.3
    %
    
    
    92
    %
    
    
    97
    %Ambulatory care/surgery centers
    
    
    3.6
    %
    
    
    87
    %
    
    
    89
    %Specialty outpatient
    
    
    0.5
    %
    
    
    63
    %
    
    
    89
    %Specialty inpatient
    
    
    7.4
    %
    
    
    100
    %
    
    
    100
    %Other
    
    
    4.0
    %
    
    
    94
    %
    
    
    93
    %Total
    
    
    100.0
    %
    
    
    90
    %
    
    
    91
    %
 
 (1)
    
    Occupancy represents the percentage of total rentable square feet leased (including
month-to-month and holdover leases) as of December 31, 2009 and 2008, excluding six properties in
discontinued operations and 10 properties in lease-up. Properties under financial support or
master lease agreements are included at 100% occupancy. Upon expiration of these agreements,
occupancy reflects underlying tenant leases in the building.   Annualized
    
    
    
    
    
    
    
    
    
    
    AverageExpiration
    
    Minimum
    
    
    Number of
    
    
    Percentage
    
    
    Square FeetYear
    
    Rents (1)
    
    
    Leases
    
    
    of Revenues
    
    
    Per Lease2010
    
    $
    29,016
    
    
    
    338
    
    
    
    13.5
    %
    
    
    3,6922011
    
    
    26,946
    
    
    
    278
    
    
    
    12.6
    %
    
    
    3,9282012
    
    
    25,554
    
    
    
    236
    
    
    
    11.9
    %
    
    
    4,4922013
    
    
    31,022
    
    
    
    189
    
    
    
    14.5
    %
    
    
    6,5992014
    
    
    33,001
    
    
    
    245
    
    
    
    15.4
    %
    
    
    5,1402015
    
    
    8,393
    
    
    
    56
    
    
    
    3.9
    %
    
    
    7,1072016
    
    
    10,325
    
    
    
    44
    
    
    
    4.8
    %
    
    
    8,8412017
    
    
    13,532
    
    
    
    35
    
    
    
    6.3
    %
    
    
    20,8552018
    
    
    9,593
    
    
    
    59
    
    
    
    4.5
    %
    
    
    8,6542019
    
    
    9,998
    
    
    
    18
    
    
    
    4.7
    %
    
    
    8,370Thereafter
    
    
    17,146
    
    
    
    54
    
    
    
    7.9
    %
    
    
    14,021
 
 (1)
    
    Represents the annualized minimum rents on leases in-place as of December 31, 2009,
excluding the impact of potential lease renewals, future step-ups in rent, sponsor support
payments under financial support agreements and straight-line rent. Business Strategy
   2




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Acquisitions and Dispositions
 Acquisition Activity
  Dispositions
  2010 Disposition
  Purchase Options
  Construction in Progress and Other Commitments
    3




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Contractual Obligations
  Competition
   Government Regulation
      4




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Legislative Developments
  
    
    comprehensive healthcare reform legislation, currently under consideration in Congress,
seeks to provide universal health insurance coverage through tax subsidies, expanded
federal health insurance programs, individual and employer mandates for coverage, and
health insurance exchanges; to be paid for by cuts to Medicare and Medicaid and increased
taxes; also, to include heightened regulations on insurers and pharmaceutical companies and
various cost containment initiatives;
    
    cost containment, quality control and payment system refinements for Medicaid, Medicare
and other public funding, such as expansion of pay-for-performance criteria and value-based
purchasing programs, bundled provider payments, accountable care organizations, geographic
payment variations, comparative effectiveness research, and lower payments for hospital
readmissions;
    
    reform of the Medicare physician fee-for-service reimbursement formula that dictates
annual updates in payment rates for physician services;
    
    prohibitions on additional types of contractual relationships between physicians and the
healthcare facilities and providers to which they refer, and related information-collection
activities;
    
    efforts to increase transparency with respect to pricing and financial relationships
among healthcare providers and drug/device manufacturers;
    
    heightened health information technology standards for healthcare providers;
    
    increased scrutiny of medical errors and conditions acquired inside health facilities;
    
    patient and drug safety initiatives;
    
    re-importation of pharmaceuticals;
    
    pharmaceutical drug pricing and compliance activities under Medicare part D;
    
    tax law changes affecting non-profit providers;
    
    immigration reform and related healthcare mandates;
    
    modifications to increase requirements for facility accessibility by persons with
disabilities; and
    
    facility requirements related to earthquakes and other disasters, including structural
retrofitting.
  Environmental Matters
  5




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Insurance
  Employees
  Federal Income Tax Information
  Introduction
  6




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Taxation of the Company
   
    
    The Company will be taxed at regular corporate rates on any undistributed real
estate investment trust taxable income, including undistributed net capital gains.
    
    Under certain circumstances, the Company may be subject to the alternative minimum
tax on its items of tax preference, if any.
    
    If the Company has (i) net income from the sale or other disposition of foreclosure
property that is held primarily for sale to customers in the ordinary course of
business, or (ii) other non-qualifying income from foreclosure property, it will be
subject to tax on such income at the highest regular corporate rate.
    
    Any net income that the Company has from prohibited transactions (which are, in
general, certain sales or other dispositions of property, other than foreclosure
property, held primarily for sale to customers in the ordinary course of business) will
be subject to a 100% tax.
    
    If the Company should fail to satisfy either the 75% or 95% gross income test (as
discussed below), and has nonetheless maintained its qualification as a REIT because
certain other requirements have been met, it will be subject to a percentage tax
calculated by the ratio of REIT taxable income to gross income with certain adjustments
multiplied by the gross income attributable to the greater of the amount by which the
Company fails the 75% or 95% gross income test.
    
    If the Company fails to distribute during each year at least the sum of (i) 85% of
its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for
such year, and (iii) any undistributed taxable income from preceding periods, then the
Company will be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed.
    
    In the event of a more than de minimis failure of any of the asset tests, as
described below under Asset Tests, as long as the failure was due to reasonable cause
and not to willful neglect, the Company files a description of each asset that caused
such failure with the Internal Revenue Services (IRS), and disposes of the assets or
otherwise complies with the asset tests within six months after the last day of the
quarter in which the Company identifies such failure, the Company will pay a tax equal
to the greater of $50,000 or 35% of the net income from the nonqualifying assets during
the period in which the Company failed to satisfy the asset tests.
    
    In the event the Company fails to satisfy one or more requirements for REIT
qualification, other than the gross income tests and the asset tests, and such failure
is due to reasonable cause and not to willful neglect, the Company will be required to
pay a penalty of $50,000 for each such failure.
    
    To the extent that the Company recognizes gain from the disposition of an asset with
respect to which there existed built-in gain upon its acquisition by the Company from
a Subchapter C corporation in a carry-over basis transaction and such disposition occurs
within a maximum ten-year recognition period beginning on the date on which it was
acquired by the
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Company, the Company will be subject to federal income tax at the
highest regular corporate rate on the amount of its net recognized built-in gain.
    
    To the extent that the Company has net income from a taxable REIT subsidiary (TRS),
the TRS will be subject to federal corporate income tax in much the same manner as other
non-REIT Subchapter C corporations, with the exceptions that the deductions for interest
expense on debt and rental payments made by the TRS to the Company will be limited and a
100% excise tax may be imposed on transactions between the TRS and the Company or the
Companys tenants that are not conducted on an arms length basis. A TRS is a
corporation in which a REIT owns stock, directly or indirectly, and for which both the
REIT and the corporation have made TRS elections.
 Requirements for Qualification as a REIT
  Organizational Requirements and Share Ownership Tests
  (1)
    
    that is managed by one or more trustees or directors;(2)
    
    the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest;(3)
    
    that would be taxable, but for Sections 856 through 860 of the Code, as a
domestic corporation;(4)
    
    that is neither a financial institution nor an insurance company subject to
certain provisions of the Code;(5)
    
    the beneficial ownership of which is held by 100 or more persons,
determined without reference to any rules of attribution (the share ownership
test);(6)
    
    that during the last half of each taxable year not more than 50% in value
of the outstanding stock of which is owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) (the five or fewer
test); and(7)
    
    that meets certain other tests, described below, regarding the nature of
its income and assets.
    8




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Income Tests
  
    
    First, at least 75% of the Companys gross income (excluding gross income from
certain sales of property held as inventory or primarily for sale in the ordinary course
of business) must be derived from rents from real property; interest on obligations
secured by mortgages on real property or on interests in real property; gain (excluding
gross income from certain sales of property held as inventory or primarily for sale in
the ordinary course of business) from the sale or other disposition of, and certain
other gross income related to, real property (including interests in real property and
in mortgages on real property); and income received or accrued within one year of the
Companys receipt of, and attributable to the temporary investment of, new capital
(any amount received in exchange for stock other than through a dividend reinvestment
plan or in a public offering of debt obligations having maturities of at least five
years).
    
    Second, at least 95% of the Companys gross income (excluding gross income from
certain sales of property held as inventory or primarily for sale in the ordinary course
of business) must be derived from dividends; interest; rents from real property; gain
(excluding gross income from certain sales of property held as inventory or primarily
for sale in the ordinary course of business) from the sale or other disposition of, and
certain other gross income related to, real property (including interests in real
property and in mortgages on real property); and gain from the sale or other disposition
of stock and securities.
     9




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Asset Tests
  
    
    At least 75% of the value of the Companys total assets must consist of real estate
assets (including interests in real property and interests in mortgages on real property
as well as its allocable share of real estate assets held by joint ventures or
partnerships in which the Company participates), cash, cash items and government
securities.
    
    Not more than 25% of the Companys total assets may be represented by securities
other than those includable in the 75% asset class.
    
    Not more than 25% of the Companys total assets may be represented by securities of
one or more TRS.
    
    Of the investments included in the 25% asset class, except for TRS, (i) the value of
any one issuers securities owned by the Company may not exceed 5% of the value of the
Companys total assets, (ii) the Company may not own more than 10% of any one issuers
outstanding voting securities and (iii) the Company may not hold securities having a
value of more than 10% of the total value of the outstanding securities of any one
issuer. Securities issued by affiliated qualified REIT subsidiaries (QRS), which are
corporations wholly owned by the Company, either directly or indirectly, that are not
TRS, are not subject to the 25% of total assets limit, the 5% of total assets limit or
the 10% of a single issuers voting securities limit or the 10% of a single issuers
value limit. Additionally, straight debt and certain other exceptions are not
securities for purposes of the 10% of a single issuers value test. The existence of
QRS are ignored, and the assets, income, gain, loss and other attributes of the QRS are
treated as being owned or generated by the Company, for federal income tax purposes.
The Company currently has 61 subsidiaries and other affiliates that it employs in the
conduct of its business.
  10




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Distribution Requirement
    Federal Income Tax Treatment of Leases
  Other Issues
  11




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Depreciation of Properties
  Failure to Qualify as a REIT
  Taxation of Tax-Exempt Stockholders
    12




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Taxation of Non-U.S. Stockholders
   Ordinary Dividends
  Non-Dividend Distributions
  Capital Gain Dividends
  Disposition of Stock of the Company
  13




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
    
    if the Non-U.S. Stockholders investment in the stock of the Company is effectively
connected with a U.S. trade or business conducted by such Non-U.S. Stockholder, the
Non-U.S. Stockholder will be subject to the same treatment as a U.S. stockholder with
respect to such gain; or
 
    
    if the Non-U.S. Stockholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year and has a tax home in the
United States, the nonresident alien individual will be subject to a 30% tax on the
individuals capital gain.
 Information Reporting Requirements and Backup Withholding Tax
  
    
    is a corporation or falls within certain other exempt categories and, when required,
can demonstrate this fact; or
 
    
    provides a taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the backup
withholding rules.
   14




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State and Local Taxes
  Real Estate Investment Trust Tax Proposals
  Other Legislation
  ERISA Considerations
   Employee Benefit Plans, Tax-Qualified Retirement Plans and IRAs
   15




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Status of the Company under ERISA
     Available Information
 www.healthcarerealty.com
 www.sec.gov
 Corporate Governance Principles
 www.healthcarerealty.com
 16




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Committee Charters
 www.healthcarerealty.com
 Executive Officers
  
 ITEM 1A.
    
    RISK FACTORS
  The unavailability of equity and debt capital, volatility in the credit markets, increases in
interest rates, or changes in the Companys debt ratings could have an adverse effect on the
Companys ability to meet its debt payments, make dividend payments to stockholders or engage in
acquisition and development activity.
  The Company is exposed to increases in interest rates, which could reduce its profitability and
adversely impact its ability to refinance existing debt, sell assets or engage in acquisition
and development activity.
  Covenants in the Companys debt instruments limit its operational flexibility, and a breach of
these covenants could materially affect the Companys financial condition and results of
operations.
  17




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The Companys revenues depend on the ability of its tenants and sponsors under its leases and
financial support agreements to generate sufficient income from their operations to make loan,
rent and support payments to the Company.
  If a healthcare tenant loses its licensure or certification, becomes unable to provide
healthcare services, cannot meet its financial obligations to the Company or otherwise vacates a
facility, the Company would have to obtain another tenant for the affected facility.
  If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the
Companys financial position would be negatively impacted.
  Many of the Companys medical office properties are held under long-term ground leases. These
ground leases contain provisions that may limit the Companys ability to lease, sell, or finance
these properties.
  If the Company is unable to promptly re-let its properties, if the rates upon such re-letting
are significantly lower than expected or if the Company is required to undertake significant
capital expenditures to attract new tenants, then the Companys business and results of
operations would be adversely affected.
  18




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The Company may incur impairment charges on its real estate properties or other assets.
  The Company may be required to sell certain properties to tenants or sponsors whose leases or
financial support agreements provide for options to purchase. The Company may not be able to
reinvest the proceeds from sale at rates of return equal to the return received on the
properties sold. The Company may recognize asset impairment charges as a result of the exercise
of a purchase option.
  Certain of the Companys properties are special purpose healthcare facilities and may not be
easily adaptable to other uses.
  The Company is subject to risks associated with the development of properties.
  
    
    The construction of properties generally requires various government and other
approvals which may not be received when expected, or at all, which could delay or
preclude commencement of construction;
    
    Unsuccessful development opportunities could result in the recognition of direct
expenses which could impact the Companys results of operations;
    
    Construction costs could exceed original estimates, which would impact the buildings
profitability to the Company;
    
    Operating expenses could be higher than forecasted;
    
    Time required to initiate and complete the construction of a property and lease up a
completed development property may be greater than originally anticipated, thereby
adversely affecting the Companys cash flow and liquidity;
    
    Occupancy rates and rents of a completed development property may not be sufficient
to make the property profitable to the Company; and
    
    Favorable capital sources to fund the Companys development activities may not be
available when needed.
 The Company may be unsuccessful in operating new and existing real estate properties.
  
    
    The Companys purchase price for acquired facilities may be based upon a series of
market judgments which may be incorrect;
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
    
    The costs of any improvements required to bring an acquired facility up to standards
necessary to establish the market position intended for that facility might exceed
budgeted costs;
    
    The Company may incur unexpected costs in the acquisition, construction or
maintenance of real estate assets that could impact its expected returns on such assets;
and
    
    Leasing of real estate properties may not occur within expected timeframes or at
expected rental rates.
  The Companys long-term master leases and financial support agreements may expire and not be
extended.
  The market price of the Companys stock may be affected adversely by changes in the Companys
dividend policy.
  Adverse trends in the healthcare service industry may negatively affect the Companys lease
revenues and the values of its investments.
  
    
    Regulatory and government reimbursement uncertainty resulting from comprehensive
healthcare reform efforts;
    
    Changing trends in the method of delivery of healthcare services;
    
    Increased expense for uninsured patients and uncompensated care;
    
    Increased competition among healthcare providers;
    
    Continuing pressure by private and governmental payors to contain costs and
reimbursements while increasing patients access to healthcare services;
    
    Lower pricing, admissions growth and operating profit margins in an uncertain
economy;
    
    Investment losses;
    
    Constrained availability of capital;
    
    Credit downgrades;
    
    Increased liability insurance expense; and
    
    Increased scrutiny and formal investigations by federal and state authorities.
  20




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##### Table of Contents



The Company is exposed to risks associated with entering new geographic markets.
  The Company may experience uninsured or underinsured losses related to casualty or liability.
  The Company owns facilities that are occupied by tenants that may experience regulatory and
legal problems.
  Failure to maintain its status as a REIT, even in one taxable year, could cause the Company to
reduce its dividends dramatically.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
  
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  21




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##### Table of Contents



PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Dividends DeclaredHigh
    
    
    Low
    
    
    and Paid per Share2009First Quarter
    
    $
    23.59
    
    
    $
    12.06
    
    
    $
    0.385Second Quarter
    
    
    18.35
    
    
    
    13.93
    
    
    
    0.385Third Quarter
    
    
    23.26
    
    
    
    15.78
    
    
    
    0.385Fourth Quarter (Payable on March 4, 2010)
    
    
    22.77
    
    
    
    19.75
    
    
    
    0.3002008First Quarter
    
    $
    27.07
    
    
    $
    22.02
    
    
    $
    0.385Second Quarter
    
    
    29.89
    
    
    
    23.55
    
    
    
    0.385Third Quarter
    
    
    32.00
    
    
    
    23.45
    
    
    
    0.385Fourth Quarter
    
    
    29.75
    
    
    
    14.29
    
    
    
    0.385
  Equity Compensation Plan Information
  Number ofSecuritiesRemaining AvailableNumber of
    
    
    
    
    
    
    for Future IssuanceSecurities to be
    
    
    
    
    
    
    Under EquityIssued upon
    
    
    Weighted Average
    
    
    Compensation PlansExercise of
    
    
    Exercise Price of
    
    
    (ExcludingOutstanding
    
    
    Outstanding
    
    
    SecuritiesOptions, Warrants
    
    
    Options, Warrants
    
    
    Reflected in thePlan Category
    
    and Rights (1)
    
    
    and Rights (1)
    
    
    First Column)Equity compensation plans approved by security holders
    
    
    335,608
    
    
    
    
    
    
    
    1,882,074Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    335,608
    
    
    
    
    
    
    
    1,882,074
 
 (1)
    
    The Company is unable to ascertain with specificity the number of securities to be used upon
exercise of outstanding rights under the 2000 Employee Stock Purchase Plan or the weighted
average exercise price of outstanding rights under that plan. The 2000 Employee Stock
Purchase Plan provides that shares of common stock may be purchased at a per share price equal
to 85% of the fair market value of the common stock at the beginning of the offering period or
a purchase date applicable to such offering period, whichever is lower. 22




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##### Table of Contents



ITEM 6.
    
    SELECTED FINANCIAL DATA
  Years Ended December 31,(Dollars in thousands except per share data)
    
    2009
    
    
    2008 (1) (2)
    
    
    2007 (1) (2) (3)
    
    
    2006 (1) (2)
    
    
    2005 (1) (2)Statement of Income Data:Total revenues
    
    $
    253,304
    
    
    $
    213,931
    
    
    $
    197,081
    
    
    $
    197,899
    
    
    $
    191,901Total expenses
    
    $
    185,877
    
    
    $
    160,148
    
    
    $
    139,190
    
    
    $
    137,214
    
    
    $
    133,144Other income (expense)
    
    $
    (39,206
    )
    
    $
    (35,585
    )
    
    $
    (46,848
    )
    
    $
    (49,747
    )
    
    $
    (44,907
    )Income from continuing operations
    
    $
    28,221
    
    
    $
    18,198
    
    
    $
    11,043
    
    
    $
    10,938
    
    
    $
    13,850Discontinued operations
    
    $
    22,927
    
    
    $
    23,562
    
    
    $
    49,037
    
    
    $
    28,858
    
    
    $
    38,900Net income
    
    $
    51,148
    
    
    $
    41,760
    
    
    $
    60,080
    
    
    $
    39,796
    
    
    $
    52,750Less: Net income attributable
to noncontrolling interests
    
    $
    (57
    )
    
    $
    (68
    )
    
    $
    (18
    )
    
    $
    (77
    )
    
    $
    (82
    )Net income attributable to common stockholders
    
    $
    51,091
    
    
    $
    41,692
    
    
    $
    60,062
    
    
    $
    39,719
    
    
    $
    52,668Per Share Data:Basic earnings per common share:Income from continuing operations
    
    $
    0.48
    
    
    $
    0.35
    
    
    $
    0.23
    
    
    $
    0.24
    
    
    $
    0.30Discontinued operations
    
    $
    0.40
    
    
    $
    0.46
    
    
    $
    1.03
    
    
    $
    0.61
    
    
    $
    0.83Net income attributable to common stockholders
    
    $
    0.88
    
    
    $
    0.81
    
    
    $
    1.26
    
    
    $
    0.85
    
    
    $
    1.13Diluted earnings per common share:Income from continuing operations
    
    $
    0.48
    
    
    $
    0.35
    
    
    $
    0.23
    
    
    $
    0.23
    
    
    $
    0.29Discontinued operations
    
    $
    0.39
    
    
    $
    0.44
    
    
    $
    1.01
    
    
    $
    0.61
    
    
    $
    0.82Net income attributable to common stockholders
    
    $
    0.87
    
    
    $
    0.79
    
    
    $
    1.24
    
    
    $
    0.84
    
    
    $
    1.11Weighted average common shares
outstanding  Basic
    
    
    58,199,592
    
    
    
    51,547,279
    
    
    
    47,536,133
    
    
    
    46,527,857
    
    
    
    46,465,215Weighted average common shares
outstanding  Diluted
    
    
    59,047,314
    
    
    
    52,564,944
    
    
    
    48,291,330
    
    
    
    47,498,937
    
    
    
    47,406,798Balance Sheet Data (as of the end of the period):Real estate properties, net
    
    $
    1,791,693
    
    
    $
    1,634,364
    
    
    $
    1,351,173
    
    
    $
    1,554,620
    
    
    $
    1,513,247Mortgage notes receivable
    
    $
    31,008
    
    
    $
    59,001
    
    
    $
    30,117
    
    
    $
    73,856
    
    
    $
    105,795Assets held for sale and discontinued
operations, net
    
    $
    17,745
    
    
    $
    90,233
    
    
    $
    15,639
    
    
    $
    
    
    
    $
    21,415Total assets
    
    $
    1,935,764
    
    
    $
    1,864,780
    
    
    $
    1,495,492
    
    
    $
    1,736,603
    
    
    $
    1,747,652Notes and bonds payable
    
    $
    1,046,422
    
    
    $
    940,186
    
    
    $
    785,289
    
    
    $
    849,982
    
    
    $
    778,446Total stockholders equity
    
    $
    786,766
    
    
    $
    794,820
    
    
    $
    631,995
    
    
    $
    825,672
    
    
    $
    912,468Noncontrolling interests
    
    $
    3,382
    
    
    $
    1,427
    
    
    $
    
    
    
    $
    
    
    
    $
    Total equity
    
    $
    790,148
    
    
    $
    796,247
    
    
    $
    631,995
    
    
    $
    825,672
    
    
    $
    912,468Other Data:Funds from operations  Basic and
Diluted (4)
    
    $
    97,882
    
    
    $
    85,437
    
    
    $
    73,156
    
    
    $
    101,106
    
    
    $
    107,943Funds from
operations per common share  Basic (4)
    
    $
    1.68
    
    
    $
    1.66
    
    
    $
    1.54
    
    
    $
    2.17
    
    
    $
    2.32Funds from
operations per common share 
Diluted (4)
    
    $
    1.66
    
    
    $
    1.63
    
    
    $
    1.51
    
    
    $
    2.13
    
    
    $
    2.28Quarterly dividends declared and paid per
common share
    
    $
    1.54
    
    
    $
    1.54
    
    
    $
    2.09
    
    
    $
    2.64
    
    
    $
    2.63Special dividend declared and paid per
common share
    
    $
    
    
    
    $
    
    
    
    $
    4.75
    
    
    $
    
    
    
    $
    
 
 (1)
    
    The years ended December 31, 2008, 2007, 2006 and 2005 are restated to conform to the
discontinued operations presentation for 2009. See Note 5 to the Consolidated Financial
Statements for more information on the Companys discontinued operations at December 31,
2009.(2)
    
    The years ended December 31, 2008, 2007, 2006 and 2005 are restated to retroactively
apply the provisions of FAS ASC No. 810 (previously SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements.) See Note 1 to the Consolidated Financial
Statements.(3)
    
    The Company completed the sale of its senior living assets in 2007 and paid a $4.75 per
share special dividend with a portion of the proceeds.(4)
    
    See Managements Discussion and Analysis of Financial Condition and Results of
Operations for a discussion of funds from operations (FFO), including why the Company
presents FFO and a reconciliation of net income attributable to common stockholders to FFO. 23




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Disclosure Regarding Forward-Looking Statements
 This report and other materials Healthcare Realty has filed or may file with the Securities
and Exchange Commission, as well as information included in oral statements or other written
statements made, or to be made, by senior management of the Company, contain, or will contain,
disclosures that are forward-looking statements. Forward-looking statements include all
statements that do not relate solely to historical or current facts and can be identified by the
use of words such as may, will, expect, believe, anticipate, target, intend, plan,
estimate, project, continue, should, could and other comparable terms. These
forward-looking statements are based on the current plans and expectations of management and are
subject to a number of risks and uncertainties that could
significantly affect the Companys current plans and expectations and future financial condition
and results.
  
    
    The unavailability of equity and debt capital, volatility in the credit markets,
increases in interest rates, or changes in the Companys debt ratings;
    
    The financial health of the Companys tenants and sponsors and their ability to make
loan and rent payments to the Company;
    
    The ability and willingness of the Companys lenders to make their funding
commitments to the Company;
    
    The Companys long-term master leases and financial support agreements may expire and
not be extended;
    
    Restrictions under ground leases through which the Company holds many of its medical
office properties could limit the Companys ability to lease, sell or finance these
properties;
    
    The ability of the Company to re-let properties on favorable terms as leases expire;
    
    The Company may incur impairment charges on its assets;
    
    The Company may be required to sell certain assets through purchase options held by
tenants or sponsors and may not be able to reinvest the proceeds from such sales at
equal rates of return;
    
    The construction of properties generally requires various government and other
approvals which may not be received;
    
    Unsuccessful development opportunities could result in the recognition of direct
expenses which could impact the Companys results of operations;
    
    Construction costs of a development property may exceed original estimates, which
could impact its profitability to the Company;
    
    Time required to lease up a completed development property may be greater than
originally anticipated, thereby adversely affecting the Companys cash flow and
liquidity;
    
    Occupancy rates and rents of a completed development property may not be sufficient
to make the property profitable to the Company; and
    
    Changes in the Companys dividend policy.
   24




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##### Table of Contents



Overview
 Business Overview
    Executive Overview
    Trends and Matters Impacting Operating Results
   Cost of Capital
  25




---



##### Table of Contents



Acquisition Activity
  Development Activity
    Dispositions
  2010 Disposition
  Purchase Options
  26




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##### Table of Contents



Expiring Leases
    Discontinued Operations
  Funds from Operations
    27




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##### Table of Contents



Year Ended December 31,(Dollars in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Net income attributable to common stockholders
    
    $
    51,091
    
    
    $
    41,692
    
    
    $
    60,062Gain on sales of real estate properties
    
    
    (20,136
    )
    
    
    (10,227
    )
    
    
    (40,405
    )Real estate depreciation and amortization
    
    
    66,927
    
    
    
    53,972
    
    
    
    53,499Total adjustments
    
    
    46,791
    
    
    
    43,745
    
    
    
    13,094Funds from Operations  Basic and Diluted
    
    $
    97,882
    
    
    $
    85,437
    
    
    $
    73,156Funds from Operations per Common Share  Basic
    
    $
    1.68
    
    
    $
    1.66
    
    
    $
    1.54Funds from Operations per Common Share  Diluted
    
    $
    1.66
    
    
    $
    1.63
    
    
    $
    1.51Weighted Average Common Shares Outstanding  Basic
    
    
    58,199,592
    
    
    
    51,547,279
    
    
    
    47,536,133Weighted Average Common Shares Outstanding  Diluted
    
    
    59,047,314
    
    
    
    52,564,944
    
    
    
    48,291,330
 28




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##### Table of Contents



Results of Operations
 2009 Compared to 2008
  Change(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    $
    
    
    %REVENUESMaster lease rent
    
    $
    57,648
    
    
    $
    58,073
    
    
    $
    (425
    )
    
    
    (0.7
    )%Property operating
    
    
    180,024
    
    
    
    136,745
    
    
    
    43,279
    
    
    
    31.6
    %Straight-line rent
    
    
    2,027
    
    
    
    651
    
    
    
    1,376
    
    
    
    211.4
    %Mortgage interest
    
    
    2,646
    
    
    
    2,207
    
    
    
    439
    
    
    
    19.9
    %Other operating
    
    
    10,959
    
    
    
    16,255
    
    
    
    (5,296
    )
    
    
    (32.6
    )%253,304
    
    
    
    213,931
    
    
    
    39,373
    
    
    
    18.4
    %EXPENSESGeneral and administrative
    
    
    22,493
    
    
    
    23,514
    
    
    
    (1,021
    )
    
    
    (4.3
    )%Property operating
    
    
    95,141
    
    
    
    82,223
    
    
    
    12,918
    
    
    
    15.7
    %Impairment
    
    
    
    
    
    
    1,600
    
    
    
    (1,600
    )
    
    
    Bad debts, net of recoveries
    
    
    537
    
    
    
    1,833
    
    
    
    (1,296
    )
    
    
    (70.7
    )%Depreciation
    
    
    62,447
    
    
    
    48,129
    
    
    
    14,318
    
    
    
    29.7
    %Amortization
    
    
    5,259
    
    
    
    2,849
    
    
    
    2,410
    
    
    
    84.6
    %185,877
    
    
    
    160,148
    
    
    
    25,729
    
    
    
    16.1
    %OTHER INCOME (EXPENSE)Gain on extinguishment of debt, net
    
    
    
    
    
    
    4,102
    
    
    
    (4,102
    )
    
    
    Re-measurement gain of equity interest upon acquisition
    
    
    2,701
    
    
    
    
    
    
    
    2,701
    
    
    
    Interest expense
    
    
    (43,080
    )
    
    
    (42,126
    )
    
    
    (954
    )
    
    
    2.3
    %Interest and other income, net
    
    
    1,173
    
    
    
    2,439
    
    
    
    (1,266
    )
    
    
    (51.9
    )%(39,206
    )
    
    
    (35,585
    )
    
    
    (3,621
    )
    
    
    10.2
    %INCOME FROM CONTINUING OPERATIONS
    
    
    28,221
    
    
    
    18,198
    
    
    
    10,023
    
    
    
    55.1
    %DISCONTINUED OPERATIONSIncome from discontinued operations
    
    
    2,813
    
    
    
    14,605
    
    
    
    (11,792
    )
    
    
    (80.7
    )%Impairments
    
    
    (22
    )
    
    
    (886
    )
    
    
    864
    
    
    
    (97.5
    )%Gain on sales of real estate properties
    
    
    20,136
    
    
    
    9,843
    
    
    
    10,293
    
    
    
    104.6
    %INCOME FROM DISCONTINUED OPERATIONS
    
    
    22,927
    
    
    
    23,562
    
    
    
    (635
    )
    
    
    (2.7
    )%NET INCOME
    
    
    51,148
    
    
    
    41,760
    
    
    
    9,388
    
    
    
    22.5
    %Less: Net income attributable to noncontrolling interests
    
    
    (57
    )
    
    
    (68
    )
    
    
    11
    
    
    
    (16.2
    )%NET INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS
    
    $
    51,091
    
    
    $
    41,692
    
    
    $
    9,399
    
    
    
    22.5
    %EARNINGS PER COMMON SHARENet income attributable to common stockholders  Basic
    
    $
    0.88
    
    
    $
    0.81
    
    
    $
    0.07
    
    
    
    8.6
    %Net income attributable to common stockholders  Diluted
    
    $
    0.87
    
    
    $
    0.79
    
    
    $
    0.08
    
    
    
    10.1
    %
  29




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##### Table of Contents




    
    Master lease rental income decreased $0.4 million, or 0.7%, from 2008 to 2009.
Master lease income decreased approximately $4.5 million due to properties whose master
leases have expired and the Company began recognizing the underlying tenant rents in
property operating income. Partially offsetting this decrease, the Company recognized
approximately $2.7 million of additional master lease rental income in 2009 related to
its 2009 acquisitions, with the remaining $1.4 million increase related mainly to annual
contractual rent increases.
    
    Property operating income increased $43.3 million, or 31.6%, from 2008 to 2009. The
Companys acquisitions of real estate properties during 2009 and 2008 resulted in
additional property operating income in 2009 compared to 2008 of approximately $36.4
million. Also, properties previously under construction that commenced operations
during 2008 and 2009 resulted in approximately $1.4 million in additional property
operating income from 2008 to 2009, and for properties whose master leases had expired,
the Company began recognizing the underlying tenant rents totaling approximately $3.2
million. The remaining increase of approximately $2.3 million was mainly related to
annual contractual rent increases, rental increases related to lease renewals and new
leases executed with various tenants.
    
    Straight-line rent increased $1.4 million from 2008 to 2009. Additional
straight-line rent recognized on leases subject to straight-lining from properties
acquired in 2008 and 2009 was approximately $2.6 million, partially offset by reductions
in straight-line rent on leases with contractual rent increases of approximately $1.2
million.
    
    Mortgage interest income increased $0.4 million, or 19.9%, from 2008 to 2009 due
mainly to additional fundings on construction mortgage notes.
    
    Other operating income decreased $5.3 million, or 32.6%, from 2008 to 2009. The
decrease is due primarily to the expirations in 2008 and 2009 of five property operating
agreements totaling approximately $3.7 million with one operator and the expiration of
replacement rent received from an operator of approximately $1.2 million.
  
    
    General and administrative expenses decreased $1.0 million, or 4.3%, from 2008 to
2009. This decrease was mainly attributable to lower pension costs in 2009 of
approximately $1.5 million, net of additional pension expense recorded in 2009 related
to the partial settlement of an officers pension benefit, and a decrease in acquisition
and development costs of approximately $0.7 million. These amounts were partially
offset by an increase in other compensation related items of approximately $1.3 million.
See Note 11 to the Consolidated Financial Statements for more details on the Companys
pension plans.
    
    Property operating expenses increased $12.9 million, or 15.7%, from 2008 to 2009.
The Companys real estate acquisitions during 2008 and 2009 resulted in additional
property operating expense in 2009 of approximately $13.7 million. Also, the Company
recognized additional expense in 2009 of approximately $2.1 million related to
properties that were previously under construction and commenced operations during 2008
and 2009 and approximately $1.6 million related to properties whose master leases have
expired and the Company began incurring the underlying operating expenses. Partially
offsetting these increases were reductions in legal expenses of approximately $3.5
million in 2009 compared to 2008 and in real estate taxes of approximately $0.8 million.
    
    An impairment charge totaling $1.6 million was recognized in 2008 on patient accounts
receivable assigned to the Company as part of a lease termination and debt restructuring
in late 2005 related to a physician clinic owned by the Company.
    
    Bad debt expense decreased $1.3 million from 2008 to 2009 mainly due to a reserve
recorded by the Company in 2008 related to additional rental income due from an operator
on four properties.
    
    Depreciation expense increased $14.3 million, or 29.7%, from 2008 to 2009 mainly due
to increases of approximately $9.8 million related to the Companys real estate
acquisitions, approximately $1.6 million related to the commencement of operations
during 2008 and 2009 of buildings that were previously under construction, as well as
approximately $2.9 million related to additional building and tenant improvement
expenditures during 2008 and 2009.
    
    Amortization expense increased $2.4 million, or 84.6% from 2008 to 2009, mainly due
to the amortization of lease intangibles associated with properties acquired during 2008
and 2009, partially offset by a decrease in amortization of lease intangibles becoming
fully amortized on properties acquired during 2003 and 2004.
 30




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##### Table of Contents




    
    The Company recognized a net gain on extinguishment of debt in 2008 of approximately
$4.1 million related to repurchases of the Senior Notes due 2011 and 2014, which is
discussed in more detail in Note 9 to the Consolidated Financial Statements.
    
    The Company recognized a $2.7 million gain in 2009 related to the valuation and
re-measurement of the Companys equity interest in a joint venture in connection with
the Companys acquisition of the remaining equity interests in the joint venture.
    
    Interest expense increased $1.0 million, or 2.3%, from 2008 to 2009. The increase
was mainly attributable to additional interest expense of approximately $3.8 million
related to mortgage notes payable assumed in the 2008 and 2009 real estate acquisitions,
a higher average outstanding balance on the unsecured credit facility of approximately
$0.4 million, as well as interest incurred on the Senior Notes due 2017 of approximately
$1.5 million and interest on the mortgage debt entered into during 2009 of approximately
$0.6 million. These amounts are partially offset by interest savings of approximately
$1.9 million related to the repurchases of the Senior Notes due 2011 and 2014 in 2008,
as well as an increase in capitalized interest of approximately $3.4 million on
development projects during 2009.
    
    Interest and other income decreased $1.3 million, or 51.9%, from 2008 to 2009. The
decrease is primarily a result of additional equity income recognized in 2008 of
approximately $1.0 million related to a joint venture investment that the Company
accounted for under the equity method until it acquired the remaining interests in the
joint venture in 2009, at which time the Company began to consolidate the accounts of
the joint venture.
  31




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##### Table of Contents



2008 Compared to 2007
  Change(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    $
    
    
    %REVENUESMaster lease rent
    
    $
    58,073
    
    
    $
    56,086
    
    
    $
    1,987
    
    
    
    3.5
    %Property operating
    
    
    136,745
    
    
    
    121,644
    
    
    
    15,101
    
    
    
    12.4
    %Straight-line rent
    
    
    651
    
    
    
    959
    
    
    
    (308
    )
    
    
    (32.1
    )%Mortgage interest
    
    
    2,207
    
    
    
    1,752
    
    
    
    455
    
    
    
    26.0
    %Other operating
    
    
    16,255
    
    
    
    16,640
    
    
    
    (385
    )
    
    
    (2.3
    )%213,931
    
    
    
    197,081
    
    
    
    16,850
    
    
    
    8.5
    %EXPENSESGeneral and administrative
    
    
    23,514
    
    
    
    20,619
    
    
    
    2,895
    
    
    
    14.0
    %Property operating
    
    
    82,223
    
    
    
    71,680
    
    
    
    10,543
    
    
    
    14.7
    %Impairment
    
    
    1,600
    
    
    
    
    
    
    
    1,600
    
    
    
    Bad debts, net of recoveries
    
    
    1,833
    
    
    
    222
    
    
    
    1,611
    
    
    
    725.7
    %Depreciation
    
    
    48,129
    
    
    
    42,141
    
    
    
    5,988
    
    
    
    14.2
    %Amortization
    
    
    2,849
    
    
    
    4,528
    
    
    
    (1,679
    )
    
    
    (37.1
    )%160,148
    
    
    
    139,190
    
    
    
    20,958
    
    
    
    15.1
    %OTHER INCOME (EXPENSE)Gain on extinguishment of debt, net
    
    
    4,102
    
    
    
    
    
    
    
    4,102
    
    
    
    Interest expense
    
    
    (42,126
    )
    
    
    (48,307
    )
    
    
    6,181
    
    
    
    (12.8
    )%Interest and other income, net
    
    
    2,439
    
    
    
    1,459
    
    
    
    980
    
    
    
    67.2
    %(35,585
    )
    
    
    (46,848
    )
    
    
    11,263
    
    
    
    (24.0
    )%INCOME FROM CONTINUING OPERATIONS
    
    
    18,198
    
    
    
    11,043
    
    
    
    7,155
    
    
    
    64.8
    %DISCONTINUED OPERATIONSIncome from discontinued operations
    
    
    14,605
    
    
    
    15,721
    
    
    
    (1,116
    )
    
    
    (7.1
    )%Impairments
    
    
    (886
    )
    
    
    (7,089
    )
    
    
    6,203
    
    
    
    (87.5
    )%Gain on sales of real estate properties
    
    
    9,843
    
    
    
    40,405
    
    
    
    (30,562
    )
    
    
    (75.6
    )%INCOME FROM DISCONTINUED OPERATIONS
    
    
    23,562
    
    
    
    49,037
    
    
    
    (25,475
    )
    
    
    (52.0
    )%NET INCOME
    
    
    41,760
    
    
    
    60,080
    
    
    
    (18,320
    )
    
    
    (30.5
    )%Less: Net income attributable to noncontrolling interests
    
    
    (68
    )
    
    
    (18
    )
    
    
    (50
    )
    
    
    277.8
    %NET INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS
    
    $
    41,692
    
    
    $
    60,062
    
    
    $
    (18,370
    )
    
    
    (30.6
    )%EARNINGS PER COMMON SHARENet income attributable to common stockholders  Basic
    
    $
    0.81
    
    
    $
    1.26
    
    
    $
    (0.45
    )
    
    
    (35.7
    )%Net income attributable to common stockholders  Diluted
    
    $
    0.79
    
    
    $
    1.24
    
    
    $
    (0.45
    )
    
    
    (36.3
    )%
  
    
    Master lease rental income increased $2.0 million, or 3.5%, from 2007 to 2008. The
majority of the increase was due to annual contractual rent increases from 2007 to 2008
of approximately $1.3 million. During 2008, the Company also
 32




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##### Table of Contents



recognized additional master lease rental income totaling approximately $0.2 million related to its 2008
acquisitions and a $0.8 million lease termination fee, offset partially by prior year
rental income of the property of approximately $0.3 million.
    
    Property operating income increased $15.1 million, or 12.4%, from 2007 to 2008. The
Companys acquisitions of real estate properties during 2008 and 2007 resulted in
additional property operating income in 2008 compared to 2007 of approximately $6.7
million. Also, properties previously under construction that commenced operations
during 2007 and 2008 resulted in approximately $2.9 million in additional property
operating income from 2007 to 2008. The remaining increase of approximately $5.5
million was related generally to annual contractual rent increases, rental increases
related to lease renewals and new leases executed with various tenants.
    
    Mortgage interest income increased $0.5 million, or 26.0%, from 2007 to 2008 due
mainly to additional fundings on construction mortgage notes.
  
    
    General and administrative expenses increased $2.9 million, or 14.0%, from 2007 to
2008. This increase was attributable mainly to higher compensation-related expenses in
2008 of approximately $1.8 million related to annual salary increases and amortization
of restricted shares, an increase in pension expense recorded of approximately $0.7
million and expenses recognized related to acquisition and development efforts of
approximately $1.8 million. Also, the Company recorded a charge in 2007 of
approximately $1.5 million related to the retirement of an officer and the termination
of five employees.
    
    Property operating expenses increased $10.5 million, or 14.7%, from 2007 to 2008.
The Company recognized expense of approximately $2.7 million related to properties that
were previously under construction and commenced operations during 2007 and 2008. Also,
the Companys acquisitions of real estate properties during 2008 and 2007 resulted in
additional property operating expense in 2008 compared to 2007 of approximately $2.7
million. In addition, legal expense increased approximately $3.5 million in 2008
compared to 2007 mainly due to legal fee reimbursements received in 2007 and a
litigation settlement of $1.0 million in 2008. Also, utility and real estate tax rate
increases in 2008 resulted in additional expenses of approximately $1.3 million and $0.6
million, respectively.
    
    An impairment charge totaling $1.6 million was recognized in 2008 on patient accounts
receivable assigned to the Company as part of a lease termination and debt restructuring
in late 2005 related to a physician clinic owned by the Company. See Note 6 to the
Consolidated Financial Statements.
    
    Bad debt expense increased $1.6 million from 2007 to 2008 mainly due to a reserve
recorded by the Company in 2008 related to additional rental income due from an operator
on four properties.
    
    Depreciation expense increased $6.0 million, or 14.2%, from 2007 to 2008 mainly due
to increases related to the acquisitions of real estate properties of approximately $1.4
million, the commencement of operations of buildings during 2007 and 2008 that were
previously under construction of approximately $1.0 million, as well as approximately
$3.6 million related to additional building and tenant improvement expenditures during
2007 and 2008.
    
    Amortization expense decreased $1.7 million, or 37.1% from 2007 to 2008, mainly due
to a decrease in amortization of lease intangibles associated with properties acquired
during 2003 and 2004 becoming fully amortized, offset partially by amortization of lease
intangibles related to properties acquired during 2007 and 2008.
  
    
    The Company recognized a net gain on extinguishment of debt in 2008 of approximately
$4.1 million related to repurchases of the Companys Senior Notes due 2011 and 2014
which is discussed in more detail in Note 9 to the Consolidated Financial Statements.
    
    Interest expense decreased $6.2 million, or 12.8%, from 2007 to 2008. The decrease
was mainly attributable to an increase in the capitalization of interest of
approximately $2.7 million related to the Companys construction projects, interest
savings of approximately $1.0 million related to repurchases of the Senior Notes due
2011 and 2014 and a reduction of interest expense of approximately $3.1 million related
mainly to a decrease in interest rates in 2008 compared to 2007 on the unsecured credit
facility.
 33




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##### Table of Contents




    
    Interest and other income increased $1.0 million, or 67.2%, from 2007 to 2008. In
connection with the Companys acquisition of the remaining interest in a joint venture
in which it previously had an equity interest and the related transition of accounting
from the joint venture to the Company, the joint venture recorded an adjustment to
straight-line rent on the properties. As such, the Company recognized its portion of
the adjustment through equity income on the joint venture of approximately $1.1 million
(of which $0.8 million was related to prior years). Also, the Company recorded a gain
on the sale of a land parcel of approximately $0.4 million. These amounts are partially offset
by a reduction in income recognized on one joint venture of approximately $0.4 million due
to the partial repurchase of the Companys preferred equity investment.
  Liquidity and Capital Resources
  Cost of Capital
   Key Indicators
  
    
    Debt metrics;
    
    Dividend payout percentage; and
    
    Interest rates, underlying treasury rates, debt market spreads and equity markets.
  34




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##### Table of Contents



Contractual Obligations
  Payments Due by PeriodLess than
    
    
    1 -3
    
    
    3 - 5
    
    
    More than 5(Dollars in thousands)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsLong-term debt obligations,
including interest (1)
    
    $
    1,438,767
    
    
    $
    61,427
    
    
    $
    438,995
    
    
    $
    349,017
    
    
    $
    589,328Operating lease commitments (2)
    
    
    269,104
    
    
    
    4,107
    
    
    
    7,183
    
    
    
    7,235
    
    
    
    250,579Construction in progress (3)
    
    
    100,442
    
    
    
    57,036
    
    
    
    36,577
    
    
    
    6,829
    
    
    
    Tenant improvements (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension obligations (5)
    
    
    2,581
    
    
    
    2,581
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    1,810,894
    
    
    $
    125,151
    
    
    $
    482,755
    
    
    $
    363,081
    
    
    $
    839,907
 
 (1)
    
    The amounts shown include estimated interest on total debt other than the Unsecured
Credit Facility. Excluded from the table above are the premium on the Senior Notes due
2011 of $0.4 million, the discount on the Senior Notes due 2014 of $0.6 million, and the
discount on the Senior Notes due 2017 of $2.0 million which are included in notes and bonds
payable on the Companys Consolidated Balance Sheet as of December 31, 2009. Also excluded
from the table above are discounts on five mortgage notes payable, totaling approximately
$7.7 million. The Companys long-term debt principal obligations are presented in more
detail in the table below. Principal
    
    
    PrincipalBalance at
    
    
    Balance at
    
    
    
    
    Contractual InterestDecember 31,
    
    
    December 31,
    
    
    
    
    Rates at December
    
    Principal
    
    Interest(In thousands)
    
    2009
    
    
    2008
    
    
    Maturity Date
    
    31, 2009
    
    Payments
    
    PaymentsUnsecured Credit Facility due 2010 (a)
    
    $
    
    
    
    $
    329.0
    
    
    1/10
    
    LIBOR + 0.90%
    
    At maturity
    
    QuarterlyUnsecured Credit Facility due 2012 (a)
    
    
    50.0
    
    
    
    
    
    
    9/12
    
    LIBOR + 2.80%
    
    At maturity
    
    QuarterlySenior Notes due 2011
    
    
    286.3
    
    
    
    286.3
    
    
    5/11
    
    8.125%
    
    At maturity
    
    Semi-AnnualSenior Notes due 2014
    
    
    264.7
    
    
    
    264.7
    
    
    4/14
    
    5.125%
    
    At maturity
    
    Semi-AnnualSenior Notes due 2017
    
    
    300.0
    
    
    
    
    
    
    1/17
    
    6.500%
    
    At maturity
    
    Semi-AnnualMortgage Notes Payable
    
    
    155.4
    
    
    
    67.7
    
    
    5/15-10/30
    
    5.000%-7.765%
    
    Monthly
    
    Monthly$
    1,056.4
    
    
    $
    947.7
 (a)
    
    In September 2009, the Company entered into a $550.0 million amended and restated
Unsecured Credit Facility due in 2012 and incurred an annual facility fee of 0.40%. The
new credit facility replaced the Companys $400.0 million Unsecured Credit Facility due
2010 in which it incurred an annual facility fee of 0.20%.
 (2)
    
    Includes primarily the corporate office and ground leases, with expiration dates
through 2101, related to various real estate investments for which the Company is currently
making payments.(3)
    
    Includes cash flow projections related to the construction of two buildings, a portion
of which relates to tenant improvements that will generally be funded after the core and
shell of the building is substantially completed.(4)
    
    The Company has various first-generation tenant improvements budgeted as of December
31, 2009 totaling approximately $31.3 million related to properties that were developed by
the Company that the Company may fund for tenant improvements as leases are signed. The
Company has not included these budgeted amounts in the table above.(5)
    
    At December 31, 2009, one employee, the Companys chief executive officer, was eligible
to retire under the Executive Retirement Plan. If the chief executive officer retired and
received full retirement benefits based upon the terms of the plan, the future benefits to
be paid are estimated to be approximately $29.9 million as of December 31, 2009. In 2008,
the Company froze the maximum annual benefit payable under the Executive Retirement Plan at
$896,000, which resulted in a reduction of benefits payable to the Companys chief
executive officer. In consideration of the curtailment and as a partial settlement of the
plan, the Company made a one-time cash payment of $2.3 million to its chief executive
officer in early 2009. Because the Company does not know when its chief executive officer
will retire, it has not projected when the retirement benefits would be paid in this table.
At December 31, 2009, the Company had recorded a $16.1 million liability, included
in other liabilities, related to its pension plan obligations. Also, in November 2009, the
Company terminated its Retirement Plan for Outside
Directors. As a result, lump sum payments
totaling approximately $2.6 million will be paid in November 2010, or earlier upon
retirement, to the outside directors that participated in the plan, which are included in the
table above. 35




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##### Table of Contents



At-The-Market Equity Offering Program
  Security Deposits and Letters of Credit
  Acquisition Activity
  Dispositions
  2010 Disposition
  36




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##### Table of Contents



Purchase Options
  Construction in Progress and Other Commitments
     Operating Leases
  Dividends
  QuarterlyQuarter
    
    Dividend
    
    Date of Declaration
    
    Date of Record
    
    Date Paid/*Payable4th Quarter 2008
    
    $
    0.385
    
    
    February 3, 2009
    
    February 20, 2009
    
    March 5, 20091st Quarter 2009
    
    $
    0.385
    
    
    May 11, 2009
    
    May 22, 2009
    
    June 5, 20092nd Quarter 2009
    
    $
    0.385
    
    
    August 10, 2009
    
    August 21, 2009
    
    September 4, 20093rd Quarter 2009
    
    $
    0.385
    
    
    November 9, 2009
    
    November 20, 2009
    
    December 4, 20094th Quarter 2009
    
    $
    0.300
    
    
    February 2, 2010
    
    February 18, 2010
    
    *March 4, 2010
  37




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##### Table of Contents



Liquidity
    Impact of Inflation
  New Accounting Pronouncements
  Market Risk
    38




---



##### Table of Contents



Impact on Earnings and Cash FlowsOutstanding
    
    
    
    
    
    
    Assuming 10%
    
    
    Assuming 10%Principal Balance
    
    
    Calculated Annual
    
    
    Increase in Market
    
    
    Decrease in Market(Dollars in thousands)
    
    As of 12/31/09
    
    
    Interest Expense (1)
    
    
    Interest Rates
    
    
    Interest RatesVariable Rate Debt:Unsecured Credit Facility
    
    $
    50,000
    
    
    $
    1,515
    
    
    $
    (12
    )
    
    $
    12Variable Rate Receivables:Mortgage Notes Receivable
    
    $
    4,290
    
    
    $
    267
    
    
    $
    1
    
    
    $
    (1
    )
 Fair ValueAssuming 10%
    
    
    Assuming 10%Carrying Value
    
    
    
    
    
    
    Increase in
    
    
    Decrease inat December 31,
    
    
    December 31,
    
    
    Market Interest
    
    
    Market Interest
    
    
    December 31,(Dollars in thousands)
    
    2009
    
    
    2009
    
    
    Rates
    
    
    Rates
    
    
    2008 (2)Fixed Rate Debt:Senior Notes
due 2011, including premium
    
    $
    286,655
    
    
    $
    307,568
    
    
    $
    307,231
    
    
    $
    307,883
    
    
    $
    320,269Senior Notes
due 2014, net of discount
    
    
    264,090
    
    
    
    282,883
    
    
    
    280,328
    
    
    
    285,497
    
    
    
    298,025Senior Notes due 2017,
net of discount
    
    
    297,988
    
    
    
    297,988
    
    
    
    292,779
    
    
    
    304,680
    
    
    
    Mortgage Notes Payable
    
    
    147,689
    
    
    
    150,115
    
    
    
    146,151
    
    
    
    154,352
    
    
    
    94,590$
    996,422
    
    
    $
    1,038,554
    
    
    $
    1,026,489
    
    
    $
    1,052,412
    
    
    $
    712,884Fixed Rate Receivables:Mortgage Notes Receivable
    
    $
    26,718
    
    
    $
    26,485
    
    
    $
    25,547
    
    
    $
    27,463
    
    
    $
    16,597Other Notes Receivable
    
    
    3,276
    
    
    
    3,276
    
    
    
    3,225
    
    
    
    3,328
    
    
    
    487$
    29,994
    
    
    $
    29,761
    
    
    $
    28,772
    
    
    $
    30,791
    
    
    $
    17,084
 
 (1)
    
    Annual interest expense on the variable rate debt and variable rate receivables was
calculated using a constant principal balance and the December 31, 2009 market rates of 3.03%
and 6.23%, respectively. The increase or decrease in market interest rate is based on the
variable LIBOR portion of the interest rate which is 0.23% as of December 31, 2009.(2)
    
    Fair values as of December 31, 2008 represent fair values of obligations or receivables
that were outstanding as of that date, and do not reflect the effect of any subsequent changes
in principal balances and/or additions or extinguishments of instruments. Mortgage notes
payable for 2008 include four mortgage notes classified as held for sale with an aggregate
fair value at December 31, 2008 of approximately $28.7 million. Off-Balance Sheet Arrangements
  Application of Critical Accounting Policies to Accounting Estimates
    39




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##### Table of Contents



Valuation of Long-Lived and Intangible Assets and Goodwill
   Capitalization of Costs
      40




---



##### Table of Contents



Depreciation of Real Estate Assets and Amortization of Related Intangible Assets
     Allowance for Doubtful Accounts and Credit Losses
  Accounts Receivable
  41




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##### Table of Contents




    
    type of contractual arrangement under which the receivable was recorded, e.g., a
mortgage note, a triple net lease, a gross lease, a sponsor guaranty agreement or some
other type of agreement;
    
    tenants or debtors reason for slow payment;
    
    industry influences and healthcare segment under which the tenant or debtor operates;
    
    evidence of willingness and ability of the tenant or debtor to pay the receivable;
    
    credit-worthiness of the tenant or debtor;
    
    collateral, security deposit, letters of credit or other monies held as security;
    
    tenants or debtors historical payment pattern;
    
    other contractual agreements between the tenant or debtor and the Company;
    
    relationship between the tenant or debtor and the Company;
    
    state in which the tenant or debtor operates; and
    
    existence of a guarantor and the willingness and ability of the guarantor to pay the
receivable.
  Mortgage Notes and Notes Receivable
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  42




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Noncontrolling Interests
in Consolidated Financial Statements
 Internal Control 
Integrated Framework
 /s/   BDO Seidman, LLP 
 43




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##### Table of Contents



Consolidated
 BALANCE SHEETS
 December 31,(Dollars in thousands, except per share amounts)
    
    2009
    
    
    2008ASSETSReal estate properties:Land
    
    $
    135,495
    
    
    $
    107,555Buildings, improvements and lease intangibles
    
    
    1,977,264
    
    
    
    1,792,402Personal property
    
    
    17,509
    
    
    
    16,985Construction in progress
    
    
    95,059
    
    
    
    84,7822,225,327
    
    
    
    2,001,724Less accumulated depreciation
    
    
    (433,634
    )
    
    
    (367,360
    )Total real estate properties, net
    
    
    1,791,693
    
    
    
    1,634,364Cash and cash equivalents
    
    
    5,851
    
    
    
    4,138Mortgage notes receivable
    
    
    31,008
    
    
    
    59,001Assets held for sale and discontinued operations, net
    
    
    17,745
    
    
    
    90,233Other assets, net
    
    
    89,467
    
    
    
    77,044Total assets
    
    $
    1,935,764
    
    
    $
    1,864,780LIABILITIES AND EQUITYLiabilities:Notes and bonds payable
    
    $
    1,046,422
    
    
    $
    940,186Accounts payable and accrued liabilities
    
    
    55,043
    
    
    
    45,937Liabilities held for sale and discontinued operations
    
    
    251
    
    
    
    32,821Other liabilities
    
    
    43,900
    
    
    
    49,589Total liabilities
    
    
    1,145,616
    
    
    
    1,068,533Commitments and contingenciesEquity:Preferred stock, $.01 par value; 50,000,000 shares authorized;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 150,000,000 shares authorized; 60,614,931
and 59,264,284 shares issued and outstanding at
December 31, 2009 and December 31, 2008, respectively
    
    
    606
    
    
    
    592Additional paid-in capital
    
    
    1,520,893
    
    
    
    1,490,535Accumulated other comprehensive loss
    
    
    (4,593
    )
    
    
    (6,461
    )Cumulative net income attributable to common stockholders
    
    
    787,965
    
    
    
    736,874Cumulative dividends
    
    
    (1,518,105
    )
    
    
    (1,426,720
    )Total stockholders equity
    
    
    786,766
    
    
    
    794,820Noncontrolling interests
    
    
    3,382
    
    
    
    1,427Total equity
    
    
    790,148
    
    
    
    796,247Total liabilities and equity
    
    $
    1,935,764
    
    
    $
    1,864,780
  44




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##### Table of Contents



Consolidated
 STATEMENTS OF INCOME
 Year Ended December 31,(Dollars in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007REVENUESMaster lease rent
    
    $
    57,648
    
    
    $
    58,073
    
    
    $
    56,086Property operating
    
    
    180,024
    
    
    
    136,745
    
    
    
    121,644Straight-line rent
    
    
    2,027
    
    
    
    651
    
    
    
    959Mortgage interest
    
    
    2,646
    
    
    
    2,207
    
    
    
    1,752Other operating
    
    
    10,959
    
    
    
    16,255
    
    
    
    16,640253,304
    
    
    
    213,931
    
    
    
    197,081EXPENSESGeneral and administrative
    
    
    22,493
    
    
    
    23,514
    
    
    
    20,619Property operating
    
    
    95,141
    
    
    
    82,223
    
    
    
    71,680Impairment
    
    
    
    
    
    
    1,600
    
    
    
    Bad debts, net of recoveries
    
    
    537
    
    
    
    1,833
    
    
    
    222Depreciation
    
    
    62,447
    
    
    
    48,129
    
    
    
    42,141Amortization
    
    
    5,259
    
    
    
    2,849
    
    
    
    4,528185,877
    
    
    
    160,148
    
    
    
    139,190OTHER INCOME (EXPENSE)Gain on extinguishment of debt, net
    
    
    
    
    
    
    4,102
    
    
    
    Re-measurement gain of equity interest upon acquisition
    
    
    2,701
    
    
    
    
    
    
    
    Interest expense
    
    
    (43,080
    )
    
    
    (42,126
    )
    
    
    (48,307
    )Interest and other income, net
    
    
    1,173
    
    
    
    2,439
    
    
    
    1,459(39,206
    )
    
    
    (35,585
    )
    
    
    (46,848
    )INCOME FROM CONTINUING OPERATIONS
    
    
    28,221
    
    
    
    18,198
    
    
    
    11,043DISCONTINUED OPERATIONSIncome from discontinued operations
    
    
    2,813
    
    
    
    14,605
    
    
    
    15,721Impairments
    
    
    (22
    )
    
    
    (886
    )
    
    
    (7,089
    )Gain on sales of real estate properties
    
    
    20,136
    
    
    
    9,843
    
    
    
    40,405INCOME FROM DISCONTINUED OPERATIONS
    
    
    22,927
    
    
    
    23,562
    
    
    
    49,037NET INCOME
    
    
    51,148
    
    
    
    41,760
    
    
    
    60,080Less: Net income attributable to noncontrolling interests
    
    
    (57
    )
    
    
    (68
    )
    
    
    (18
    )NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    51,091
    
    
    $
    41,692
    
    
    $
    60,062BASIC EARNINGS PER COMMON SHARE:Income from continuing operations
    
    $
    0.48
    
    
    $
    0.35
    
    
    $
    0.23Discontinued operations
    
    
    0.40
    
    
    
    0.46
    
    
    
    1.03Net income attributable to common stockholders
    
    $
    0.88
    
    
    $
    0.81
    
    
    $
    1.26DILUTED EARNINGS PER COMMON SHARE:Income from continuing operations
    
    $
    0.48
    
    
    $
    0.35
    
    
    $
    0.23Discontinued operations
    
    
    0.39
    
    
    
    0.44
    
    
    
    1.01Net income attributable to common stockholders
    
    $
    0.87
    
    
    $
    0.79
    
    
    $
    1.24WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  BASIC
    
    
    58,199,592
    
    
    
    51,547,279
    
    
    
    47,536,133WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  DILUTED
    
    
    59,047,314
    
    
    
    52,564,944
    
    
    
    48,291,330
  45




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##### Table of Contents



Consolidated  STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    
    Other
    
    
    Cumulative
    
    
    
    
    
    
    Total
    
    
    Non-Preferred
    
    
    Common
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Net
    
    
    Cumulative
    
    
    Stockholders
    
    
    controlling
    
    
    Total(Dollars in thousands, except per share data)
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Loss
    
    
    Income
    
    
    Dividends
    
    
    Equity
    
    
    Interests
    
    
    EquityBalance at December 31, 2006
    
    $
    
    
    
    $
    478
    
    
    $
    1,211,234
    
    
    $
    (4,035
    )
    
    $
    635,120
    
    
    $
    (1,017,125
    )
    
    $
    825,672
    
    
    $
    
    
    
    $
    825,672Issuance of stock, net of costs
    
    
    
    
    
    
    29
    
    
    
    70,545
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,574
    
    
    
    
    
    
    
    70,574Common stock redemption
    
    
    
    
    
    
    
    
    
    
    (386
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (386
    )
    
    
    
    
    
    
    (386
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    4,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,678
    
    
    
    
    
    
    
    4,678Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,062
    
    
    
    
    
    
    
    60,062
    
    
    
    18
    
    
    
    60,080Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (311
    )
    
    
    
    
    
    
    
    
    
    
    (311
    )
    
    
    
    
    
    
    (311
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,769Special dividend to common stockholders ($4.75 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (227,157
    )
    
    
    (227,157
    )
    
    
    
    
    
    
    (227,157
    )Dividends to common stockholders ($2.09 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (101,137
    )
    
    
    (101,137
    )
    
    
    
    
    
    
    (101,137
    )Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    (18
    )Balance at December 31, 2007
    
    
    
    
    
    
    507
    
    
    
    1,286,071
    
    
    
    (4,346
    )
    
    
    695,182
    
    
    
    (1,345,419
    )
    
    
    631,995
    
    
    
    
    
    
    
    631,995Issuance of stock, net of costs
    
    
    
    
    
    
    83
    
    
    
    201,966
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    202,049
    
    
    
    
    
    
    
    202,049Common stock redemption
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Stock-based compensation
    
    
    
    
    
    
    2
    
    
    
    2,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,782
    
    
    
    
    
    
    
    2,782Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,692
    
    
    
    
    
    
    
    41,692
    
    
    
    68
    
    
    
    41,760Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,115
    )
    
    
    
    
    
    
    
    
    
    
    (2,115
    )
    
    
    
    
    
    
    (2,115
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,645Dividends to common stockholders ($1.54 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,301
    )
    
    
    (81,301
    )
    
    
    
    
    
    
    (81,301
    )Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (110
    )Proceeds from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,469
    
    
    
    1,469Balance at December 31, 2008
    
    
    
    
    
    
    592
    
    
    
    1,490,535
    
    
    
    (6,461
    )
    
    
    736,874
    
    
    
    (1,426,720
    )
    
    
    794,820
    
    
    
    1,427
    
    
    
    796,247Issuance of stock, net of costs
    
    
    
    
    
    
    13
    
    
    
    26,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,668
    
    
    
    
    
    
    
    26,668Common stock redemption
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    (8
    )Stock-based compensation
    
    
    
    
    
    
    1
    
    
    
    3,711
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,712
    
    
    
    
    
    
    
    3,712Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,091
    
    
    
    
    
    
    
    51,091
    
    
    
    57
    
    
    
    51,148Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,868
    
    
    
    
    
    
    
    
    
    
    
    1,868
    
    
    
    
    
    
    
    1,868Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,016Dividends to common stockholders ($1.54 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91,385
    )
    
    
    (91,385
    )
    
    
    
    
    
    
    (91,385
    )Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (330
    )
    
    
    (330
    )Proceeds from noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,228
    
    
    
    2,228Balance at December 31, 2009
    
    $
    
    
    
    $
    606
    
    
    $
    1,520,893
    
    
    $
    (4,593
    )
    
    $
    787,965
    
    
    $
    (1,518,105
    )
    
    $
    786,766
    
    
    $
    3,382
    
    
    $
    790,148
  46




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##### Table of Contents



Consolidated  STATEMENTS OF CASH FLOWS
 Year Ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007OPERATING ACTIVITIESNet income
    
    $
    51,148
    
    
    $
    41,760
    
    
    $
    60,080Adjustments to reconcile net income to cash provided by operating activities:Depreciation and amortization
    
    
    70,921
    
    
    
    54,748
    
    
    
    53,924Stock-based compensation
    
    
    3,711
    
    
    
    2,780
    
    
    
    4,678Straight-line rent receivable
    
    
    (1,925
    )
    
    
    (643
    )
    
    
    (1,043
    )Straight-line rent liability
    
    
    444
    
    
    
    423
    
    
    
    954Gain on sales of real estate properties
    
    
    (20,136
    )
    
    
    (9,843
    )
    
    
    (40,405
    )Gain on sales of land
    
    
    
    
    
    
    (384
    )
    
    
    Gain on extinguishment of debt
    
    
    
    
    
    
    (4,102
    )
    
    
    Re-measurement gain of equity interest upon acquisition
    
    
    (2,701
    )
    
    
    
    
    
    
    Impairments
    
    
    22
    
    
    
    2,486
    
    
    
    7,089Equity in (income) losses from unconsolidated joint ventures
    
    
    2
    
    
    
    (1,021
    )
    
    
    309Provision for bad debts, net of recoveries
    
    
    517
    
    
    
    1,904
    
    
    
    198State income taxes paid, net of refunds
    
    
    (674
    )
    
    
    (612
    )
    
    
    (137
    )Payment of partial pension settlement
    
    
    (2,300
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities:Other assets
    
    
    (1,017
    )
    
    
    6,794
    
    
    
    (94
    )Accounts payable and accrued liabilities
    
    
    5,127
    
    
    
    3,097
    
    
    
    (2,065
    )Other liabilities
    
    
    75
    
    
    
    7,864
    
    
    
    7,450Net cash provided by operating activities
    
    
    103,214
    
    
    
    105,251
    
    
    
    90,938INVESTING ACTIVITIESAcquisition and development of real estate properties
    
    
    (170,520
    )
    
    
    (383,702
    )
    
    
    (130,799
    )Funding of mortgages and notes receivable
    
    
    (23,391
    )
    
    
    (36,970
    )
    
    
    (14,759
    )Investments in unconsolidated joint venture
    
    
    (184
    )
    
    
    
    
    
    
    Distributions from unconsolidated joint ventures
    
    
    
    
    
    
    882
    
    
    
    1,414Partial redemption of preferred equity investment in an unconsolidated joint venture
    
    
    
    
    
    
    5,546
    
    
    
    Proceeds from sales of real estate
    
    
    83,441
    
    
    
    37,133
    
    
    
    311,927Proceeds from mortgages and notes receivable repayments
    
    
    12,893
    
    
    
    8,236
    
    
    
    65,572Net cash provided by (used in) investing activities
    
    
    (97,761
    )
    
    
    (368,875
    )
    
    
    233,355FINANCING ACTIVITIESNet borrowings (repayments) on unsecured credit facilities
    
    
    (279,000
    )
    
    
    193,000
    
    
    
    (54,000
    )Borrowings on notes and bonds payable
    
    
    377,969
    
    
    
    
    
    
    
    1,840Repayments on notes and bonds payable
    
    
    (28,433
    )
    
    
    (3,813
    )
    
    
    (7,440
    )Repurchase of notes payable
    
    
    
    
    
    
    (45,460
    )
    
    
    Special dividend paid
    
    
    
    
    
    
    
    
    
    
    (227,157
    )Quarterly dividends paid
    
    
    (91,385
    )
    
    
    (81,301
    )
    
    
    (101,137
    )Proceeds from issuance of common stock
    
    
    26,467
    
    
    
    197,255
    
    
    
    70,780Common stock redemptions
    
    
    (8
    )
    
    
    (282
    )
    
    
    (386
    )Capital contributions received from noncontrolling interests
    
    
    2,228
    
    
    
    1,469
    
    
    
    Distributions to noncontrolling interest holders
    
    
    (282
    )
    
    
    (110
    )
    
    
    (18
    )Credit facility amendment and extension fees
    
    
    
    
    
    
    (1,126
    )
    
    
    Equity issuance costs
    
    
    (3
    )
    
    
    (389
    )
    
    
    (206
    )Debt issuance costs
    
    
    (11,293
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (3,740
    )
    
    
    259,243
    
    
    
    (317,724
    )Increase (decrease) in cash and cash equivalents
    
    
    1,713
    
    
    
    (4,381
    )
    
    
    6,569Cash and cash equivalents, beginning of year
    
    
    4,138
    
    
    
    8,519
    
    
    
    1,950Cash and cash equivalents, end of year
    
    $
    5,851
    
    
    $
    4,138
    
    
    $
    8,519Supplemental Cash Flow Information:Interest paid
    
    $
    50,052
    
    
    $
    49,997
    
    
    $
    53,233Capitalized interest
    
    $
    10,087
    
    
    $
    6,679
    
    
    $
    4,022Capital expenditures included in accounts payable and accrued liabilities
    
    $
    16,266
    
    
    $
    12,500
    
    
    $
    6,699Mortgage notes payable assumed upon acquisition of a joint venture interest (adjusted to fair value)
    
    $
    11,716
    
    
    $
    50,825
    
    
    $
    Mortgage note payable disposed of upon sale of joint venture interest
    
    $
    5,425
    
    
    $
    
    
    
    $
    Forgiveness of notes receivable upon sale of certain senior living assets
    
    $
    
    
    
    $
    
    
    
    $
    2,640
  47




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Business Overview
  Principles of Consolidation
    Use of Estimates in the Consolidated Financial Statements
  Segment Reporting
  Reclassifications
  Discontinued Operations
  48




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Noncontrolling interests
  Real Estate Properties
   Land improvements
    
    
    9.5 to 15      yearsBuildings and improvements
    
    
    3.0 to 39      yearsLease intangibles (including ground lease intangibles)
    
    
    1.3 to 93      yearsPersonal property
    
    
    3 to 15        years
 Land Held for Development
  Accounting for Acquisitions of Real Estate Properties with In-Place Leases
   
    
    First, the Company considers whether any of the in-place lease rental rates are
above- or below-market. An asset (if the actual rental rate is above-market) or a
liability (if the actual rental rate is below-market) is calculated and recorded in an
amount equal to the present value of the future cash flows that represent the difference
between the actual lease rate and the average market rate.
    
    Second, the Company estimates an absorption period assuming the building is vacant
and must be leased up to the actual level of occupancy when acquired. During that
absorption period the owner would incur direct costs, such as tenant improvements, and
would suffer lost rental income. Likewise, the owner would have acquired a measurable
asset in that, assuming the building was vacant, certain fixed costs would be avoided
because the actual in-place lessees would reimburse a certain portion of fixed costs
through expense reimbursements during the absorption period. All of these assets
(tenant improvement costs avoided, rental income lost, and fixed costs recovered through
in-place lessee reimbursements) are estimated and recorded in amounts equal to the
present value of future cash flows.
    
    Third, the Company estimates the value of the building as if vacant. The Company
uses the same absorption period and occupancy assumptions used in step two, adding to
those the future cash flows expected in a fully occupied building. The net present
value of these future cash flows, discounted at a market rate of return, becomes the
estimated as if vacant value of the building.
 49




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 
    
    Fourth, the actual purchase price is allocated based on the various asset fair values
described above. The building and tenant improvement components of the purchase price
are depreciated over the useful life of the building or the average remaining term of
the in-places leases. The above- or below-market rental rate assets or
liabilities are amortized to rental income or property operating expense over the
remaining term of the leases. The at-market, in-place leases are amortized to
amortization expense over the average remaining term of the leases, customer
relationship assets are amortized to amortization expense over terms applicable to each
acquisition, and any goodwill recorded would be reviewed for impairment at least
annually.
  Fair Value Measurements
   
    
    Level 1 quoted prices for identical instruments in active markets;
    
    Level 2 quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations in which significant inputs and significant value drivers are observable in
active markets; and
    
    Level 3 fair value measurements derived from valuation techniques in which one or
more significant inputs or significant value drivers are unobservable.
  Cash and Cash Equivalents
  Allowance for Doubtful Accounts and Credit Losses
 Accounts Receivable
   50




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Mortgage Notes and Notes Receivable
     Goodwill and Other Intangible Assets
   Contingent Liabilities
    51




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Accounting for Defined Benefit Pension Plans
  Incentive Plans
   Accumulated Other Comprehensive Loss
  Revenue Recognition
    Rental Income
  52




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Mortgage Interest Income
  Other Operating Income
     Year Ended December 31,(Dollars in millions)
    
    2009
    
    2008
    
    2007Property lease guaranty revenue
    
    $
    8.2
    
    
    $
    12.8
    
    
    $
    13.2Interest income on notes receivable
    
    
    0.6
    
    
    
    0.6
    
    
    
    0.3Management fee income
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.3Replacement rent
    
    
    1.3
    
    
    
    2.5
    
    
    
    2.5Other
    
    
    0.7
    
    
    
    0.2
    
    
    
    0.3$
    11.0
    
    
    $
    16.3
    
    
    $
    16.6
 Federal Income Taxes
    State Income Taxes
  53




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Sales and Use Taxes
  Discontinued Operations
    Earnings per Share
  New Pronouncements
 Business Combinations and Noncontrolling Interests in Consolidated Financial Statements
  Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities
  54




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  The Codification
  55




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2. Real Estate and Mortgage Notes Receivable Investments
  Buildings,Improvements,Number of
    
    
    
    
    
    
    Lease Intangibles
    
    
    Personal
    
    
    
    
    
    
    Accumulated(Dollars in thousands)
    
    Facilities (1)
    
    
    Land
    
    
    and CIP
    
    
    Property
    
    
    Total
    
    
    DepreciationMedical Office:Arizona
    
    
    8
    
    
    $
    3,320
    
    
    $
    66,295
    
    
    $
    54
    
    
    $
    69,669
    
    
    $
    (10,567
    )Florida
    
    
    14
    
    
    
    8,671
    
    
    
    125,789
    
    
    
    157
    
    
    
    134,617
    
    
    
    (44,806
    )Hawaii
    
    
    3
    
    
    
    
    
    
    
    91,581
    
    
    
    5
    
    
    
    91,586
    
    
    
    (5,994
    )North Carolina
    
    
    14
    
    
    
    
    
    
    
    141,414
    
    
    
    66
    
    
    
    141,480
    
    
    
    (6,308
    )Tennessee
    
    
    15
    
    
    
    6,782
    
    
    
    160,497
    
    
    
    157
    
    
    
    167,436
    
    
    
    (41,201
    )Texas
    
    
    30
    
    
    
    27,522
    
    
    
    447,529
    
    
    
    1,061
    
    
    
    476,112
    
    
    
    (77,178
    )Washington
    
    
    5
    
    
    
    2,200
    
    
    
    67,822
    
    
    
    1
    
    
    
    70,023
    
    
    
    (2,311
    )Other states
    
    
    41
    
    
    
    39,995
    
    
    
    433,785
    
    
    
    246
    
    
    
    474,026
    
    
    
    (77,703
    )130
    
    
    
    88,490
    
    
    
    1,534,712
    
    
    
    1,747
    
    
    
    1,624,949
    
    
    
    (266,068
    )Physician Clinics:Florida
    
    
    8
    
    
    
    10,639
    
    
    
    44,668
    
    
    
    
    
    
    
    55,307
    
    
    
    (14,794
    )Virginia
    
    
    3
    
    
    
    1,623
    
    
    
    29,169
    
    
    
    127
    
    
    
    30,919
    
    
    
    (10,060
    )Other states
    
    
    20
    
    
    
    5,812
    
    
    
    82,000
    
    
    
    264
    
    
    
    88,076
    
    
    
    (21,667
    )31
    
    
    
    18,074
    
    
    
    155,837
    
    
    
    391
    
    
    
    174,302
    
    
    
    (46,521
    )Ambulatory care/surgery:California
    
    
    2
    
    
    
    4,898
    
    
    
    33,530
    
    
    
    23
    
    
    
    38,451
    
    
    
    (12,439
    )Texas
    
    
    3
    
    
    
    6,882
    
    
    
    35,392
    
    
    
    81
    
    
    
    42,355
    
    
    
    (14,490
    )Other states
    
    
    5
    
    
    
    5,897
    
    
    
    13,941
    
    
    
    
    
    
    
    19,838
    
    
    
    (5,308
    )10
    
    
    
    17,677
    
    
    
    82,863
    
    
    
    104
    
    
    
    100,644
    
    
    
    (32,237
    )Specialty outpatient:Arkansas
    
    
    1
    
    
    
    647
    
    
    
    2,408
    
    
    
    
    
    
    
    3,055
    
    
    
    (979
    )Florida
    
    
    1
    
    
    
    911
    
    
    
    2,500
    
    
    
    
    
    
    
    3,411
    
    
    
    (943
    )Other states
    
    
    3
    
    
    
    246
    
    
    
    6,774
    
    
    
    
    
    
    
    7,020
    
    
    
    (1,844
    )5
    
    
    
    1,804
    
    
    
    11,682
    
    
    
    
    
    
    
    13,486
    
    
    
    (3,766
    )Specialty inpatient:Indiana
    
    
    1
    
    
    
    1,071
    
    
    
    42,335
    
    
    
    
    
    
    
    43,406
    
    
    
    (3,799
    )Pennsylvania
    
    
    6
    
    
    
    1,214
    
    
    
    112,653
    
    
    
    
    
    
    
    113,867
    
    
    
    (37,315
    )Other states
    
    
    6
    
    
    
    5,265
    
    
    
    72,086
    
    
    
    
    
    
    
    77,351
    
    
    
    (19,894
    )13
    
    
    
    7,550
    
    
    
    227,074
    
    
    
    
    
    
    
    234,624
    
    
    
    (61,008
    )Other:Michigan
    
    
    5
    
    
    
    193
    
    
    
    12,728
    
    
    
    183
    
    
    
    13,104
    
    
    
    (6,395
    )Virginia
    
    
    2
    
    
    
    1,178
    
    
    
    10,084
    
    
    
    5
    
    
    
    11,267
    
    
    
    (3,479
    )Other states
    
    
    3
    
    
    
    529
    
    
    
    20,042
    
    
    
    448
    
    
    
    21,019
    
    
    
    (7,492
    )10
    
    
    
    1,900
    
    
    
    42,854
    
    
    
    636
    
    
    
    45,390
    
    
    
    (17,366
    )Land held for development
    
    
    
    
    
    
    
    
    
    
    17,301
    
    
    
    
    
    
    
    17,301
    
    
    
    Corporate Property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,631
    
    
    
    14,631
    
    
    
    (6,668
    )Total owned properties
    
    
    199
    
    
    
    135,495
    
    
    
    2,072,323
    
    
    
    17,509
    
    
    
    2,225,327
    
    
    
    (433,634
    )Mortgage notes receivable
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,008
    
    
    
    Unconsolidated joint venture
investment
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,266
    
    
    
    Total real estate investments
    
    
    204
    
    
    $
    135,495
    
    
    $
    2,072,323
    
    
    $
    17,509
    
    
    $
    2,257,601
    
    
    $
    (433,634
    )
 
 (1)
    
    Includes two properties under construction. 56




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 3. Real Estate Property Leases
   2010
    
    $
    196,5252011
    
    
    172,4142012
    
    
    146,0032013
    
    
    119,8082014
    
    
    90,2722015 and thereafter
    
    
    289,742$
    1,014,764
 Customer Concentrations
  Purchase Option Provisions
  4. Acquisitions and Dispositions and Mortgage Repayments
 2009 Real Estate Acquisitions
  
    
    the remaining 50% equity interest in a joint venture (Unico 2006 MOB), which owns a
62,246 square foot on-campus medical office building in Oregon, for approximately $4.4
million in cash consideration. The building was approximately 97% occupied with lease
maturities through 2025. In connection with the acquisition, the Company assumed an
outstanding mortgage note payable held by the joint venture totaling $12.8 million
($11.7 million including a $1.1 fair value adjustment) which bears an effective interest
rate of 6.43% and matures in 2021. Prior to the acquisition, the Company had a 50%
equity investment in the joint venture totaling approximately $1.7 million which it
accounted for under the equity method. In connection with the acquisition, the Company
re-measured its previously held equity interest at the acquisition-date fair value and
recognized a gain on the re-measurement of approximately $2.7 million which was
recognized as income;
    
    a 51,903 square foot specialty inpatient facility in Arizona for a purchase price of
approximately $15.5 million. The building was 100% occupied by one tenant whose lease
expires in 2024;
 57




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 
    
    a medical office building with 146,097 square feet in Indiana for a purchase price of
approximately $25.8 million. The building was 100% occupied with lease expiration dates
ranging from 2011 to 2021;
    
    four medical office buildings in Iowa, aggregating 155,189 square feet, were
acquired by a joint venture (HR Ladco Holdings, LLC), in which the Company has an 80%
controlling interest, for a total purchase price of approximately $44.6 million.
All four buildings were 100% leased upon acquisition with lease expirations ranging from
2010 through 2029. Three of the buildings were constructed by the Companys joint
venture partner, and the construction was funded by the Company through a construction
loan. Upon acquisition of the buildings by the joint venture, $30.8 million of the
Companys construction loan was converted to a permanent mortgage note payable to the
Company, which is eliminated in consolidation, with the remaining balance of the
construction loan of $5.0 million added to the Companys equity investment in the joint
venture; and
    
    a mortgage note receivable was originated for $9.9 million in connection with a
medical office building in Iowa.
  Mortgage
    
    
    MortgageDates
    
    
    Cash
    
    
    Real
    
    
    Note
    
    
    Notes Payable
    
    
    
    
    
    
    Square(Dollars in millions)
    
    
    Acquired
    
    
    Consideration
    
    
    Estate
    
    
    Financing
    
    
    Assumed
    
    
    Other
    
    
    FootageReal estate acquisitionsOregon (1)
    
    
    01/16/09
    
    
    $
    4.4
    
    
    $
    20.5
    
    
    $
    
    
    
    $
    (11.7
    )
    
    $
    (4.4
    )
    
    
    62,246Arizona
    
    
    10/20/09
    
    
    
    16.0
    
    
    
    16.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,903Indiana
    
    
    12/18/09
    
    
    
    28.2
    
    
    
    26.0
    
    
    
    
    
    
    
    
    
    
    
    2.2
    
    
    
    146,097Iowa
    
    
    2/23/09, 7/16/09
    
    
    
    6.8
    
    
    
    43.9
    
    
    
    (35.7
    )
    
    
    
    
    
    
    (1.4
    )
    
    
    155,1897/23/09, 12/08/0955.4
    
    
    
    106.4
    
    
    
    (35.7
    )
    
    
    (11.7
    )
    
    
    (3.6
    )
    
    
    415,435Mortgage note financingsIowa
    
    
    12/30/2009
    
    
    
    9.9
    
    
    
    
    
    
    
    9.9
    
    
    
    
    
    
    
    
    
    
    
    Total 2009 Acquisitions
    
    
    
    
    
    $
    65.3
    
    
    $
    106.4
    
    
    $
    (25.8
    )
    
    $
    (11.7
    )
    
    $
    (3.6
    )
    
    
    415,435
 
 (1)
    
    The mortgage note payable assumed in the Oregon acquisition reflects a fair value
adjustment of $1.1 million recorded by the Company upon acquisition.  2008 Real Estate Acquisitions
  
    
    two fully-leased, six-story office buildings each containing approximately 146,000
square feet, and a six-level parking structure, containing 977 parking spaces, in
Dallas, Texas for purchase price of approximately $59.2 million;
    
    a medical office building and surgery center with 102,566 square feet in Indiana for
a purchase price of approximately $28.2 million. The building is 100% occupied by three
tenants with lease expiration dates ranging from 2017 to 2024;
    
    a portfolio of 15 medical office buildings from The Charlotte-Mecklenburg Hospital
Authority and certain of its affiliates (collectively, CHS) for a purchase price of
approximately $162.1 million, including ground lease prepayments of $8.3 million. The
portfolio includes 764,092 square feet of on- and off-campus properties which are
located in or around Charlotte, North Carolina and are approximately 90% occupied. CHS
leases approximately 71% of the total square feet of the portfolio with lease terms
averaging approximately 10 years. CHS is the third largest public health system in the
United States and owns, leases and manages 23 hospitals, and operates approximately
5,000 patient beds. The weighted average
 58




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Estimated
    
    
    EstimatedFair Value
    
    
    Useful Life(In millions)
    
    
    (In years)Buildings
    
    $
    140.4
    
    
    
    20.0-39.0Prepaid ground lease
    
    
    8.3
    
    
    
    75.0Intangibles:At-market lease intangibles
    
    
    11.1
    
    
    
    0.9-15.0Below-market lease intangibles
    
    
    (0.1
    )
    
    
    3.4Above-market ground lease intangibles
    
    
    (0.1
    )
    
    
    75.0Below-market ground lease intangibles
    
    
    2.5
    
    
    
    75.0Total intangibles
    
    
    13.4
    
    
    
    22.5$
    162.1
 
    
    the remaining equity membership interest in a joint venture, which owns five
on-campus medical office buildings in Washington, for a purchase price of approximately
$14.5 million plus the assumption of outstanding debt of approximately $42.2 million,
net of fair value adjustments. At the time of the acquisition, the Company had a $9.2
million net equity investment in the joint venture which it accounted for under the
equity method. The debt assumed has a weighted average interest rate of 5.8% with
maturities beginning in 2015. In connection with the Companys acquisition and related
transition of accounting from the joint venture to the Company, the joint venture
recorded an adjustment to straight-line rent on the properties. As such, the Company
recognized its portion of the adjustment through equity income of the joint venture of
approximately $1.1 million (of which $0.8 million, or $0.02 per diluted share, is
related to prior years);
    
    an 80% interest in a joint venture that concurrently acquired two medical office
buildings, a specialty outpatient facility and a physician clinic in Iowa for cash
consideration of approximately $25.8 million, plus the assumption of outstanding debt of
approximately $1.2 million, net of a fair value adjustment. The debt assumed has an
interest rate of 5.8% which matures in 2016. The accounts of the joint venture are
included in the Companys Consolidated Financial Statements; and
    
    a mortgage note receivable was originated for $8.0 million in connection with the
construction of an ambulatory care/surgery center in Iowa.
  Mortgage
    
    
    MortgageDate
    
    
    Cash
    
    
    Real
    
    
    Note
    
    
    Notes Payable
    
    
    
    
    
    
    Square(Dollars in millions)
    
    Acquired
    
    
    Consideration
    
    
    Estate
    
    
    Financing
    
    
    Assumed
    
    
    Other
    
    
    FootgageReal estate acquisitionsTexas
    
    
    7/25/08
    
    
    $
    56.0
    
    
    $
    57.9
    
    
    $
    
    
    
    $
    
    
    
    $
    (1.9
    )
    
    
    291,389Indiana
    
    
    12/19/08
    
    
    
    28.1
    
    
    
    27.7
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    102,566North and South
Carolina
    
    
    12/29/08
    
    
    
    162.1
    
    
    
    151.5
    
    
    
    
    
    
    
    
    
    
    
    10.6
    
    
    
    764,092Washington (1)
    
    
    11/26/08
    
    
    
    14.5
    
    
    
    69.7
    
    
    
    
    
    
    
    (42.2
    )
    
    
    (13.0
    )
    
    
    319,561Iowa (1)
    
    
    9/30/08, 10/31/08
    
    
    
    25.8
    
    
    
    28.8
    
    
    
    
    
    
    
    (1.2
    )
    
    
    (1.8
    )
    
    
    145,457286.5
    
    
    
    335.6
    
    
    
    
    
    
    
    (43.4
    )
    
    
    (5.7
    )
    
    
    1,623,065Mortgage note financingsIowa
    
    
    10/30/08
    
    
    
    8.0
    
    
    
    
    
    
    
    8.0
    
    
    
    
    
    
    
    
    
    
    
    Total 2008 Acquisitions
    
    
    
    
    
    $
    294.5
    
    
    $
    335.6
    
    
    $
    8.0
    
    
    $
    (43.4
    )
    
    $
    (5.7
    )
    
    
    1,623,065
 
 (1)
    
    The mortgage notes payable assumed in the Washington and Iowa acquisitions reflect fair value
adjustments of $7.2 million and $0.2 million, respectively, recorded by the Company upon
acquisition. 59




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Intangibles
    
    
    AmortizationAssigned
    
    
    Periods(In thousands)
    
    
    (In years)Above-market lease intangibles
    
    $
    1,297
    
    
    
    2.0-16.5Below-market lease intangibles
    
    
    (6,615
    )
    
    
    4.3-12.3At-market lease intangibles
    
    
    25,277
    
    
    
    2.0-16.5Above-market ground lease intangibles
    
    
    (128
    )
    
    
    75Below-market ground lease intangibles
    
    
    3,850
    
    
    
    56.5-93.1$
    23,681
    
    
    
    17.7
 2009 Real Estate Dispositions
  
    
    an 11,538 square foot medical office building in Florida in which the Company had a
total gross investment of approximately $1.4 million ($1.0 million, net) was sold for
approximately $1.4 million in net proceeds, and the Company recognized a $0.4 million
net gain on the sale;
    
    a 139,647 square foot medical office building in Wyoming to the sponsor for $21.4
million. During 2008, the Company received a $2.4 million deposit from the sponsor on
the sale and received a $7.2 million termination fee from the sponsor in accordance with
its financial support agreement with the Company. In 2009, the Company received the
remaining consideration of approximately $19.0 million (plus $0.2 million of interest).
The Company had an aggregate investment of approximately $20.0 million ($15.8 million,
net) in the medical office building and recognized a gain on sale of approximately $5.6
million;
    
    the Companys membership interests in an entity which owns an 86,942 square foot
medical office building in Washington. The Company acquired the entity in December 2008
and had an aggregate and net investment of approximately $10.7 million. The Company
received approximately $5.3 million in net proceeds, and the purchaser assumed the
mortgage note secured by the property of approximately $5.4 million. The Company
recognized an insignificant impairment charge on the disposition related to closing
costs;
    
    a 198,064 square foot medical office building in Nevada in which the Company had a
gross investment of approximately $46.8 million ($32.7 million, net) was sold for
approximately $38.0 million in net proceeds, and the Company concurrently paid off a
$19.5 million mortgage note secured by the property. The Company recognized a gain on
sale of approximately $6.5 million, net of liabilities of $1.2 million;
    
    a 113,555 square foot specialty inpatient facility in Michigan in which the Company
had a gross investment of approximately $13.9 million ($10.8 million, net) was sold for
approximately $18.5 million in net proceeds, and the Company recognized a gain on sale
of approximately $7.5 million, net of liabilities of $0.2 million;
    
    a 10,255 square foot ambulatory surgery center in Florida in which the Company had a
gross investment of approximately $3.4 million ($2.0 million, net) was sold for
approximately $0.5 million in net cash proceeds and title to a land parcel adjoining
another medical office building owned by the Company valued at $1.5 million. The
Company recognized no gain on the transaction; and
    
    an 8,243 square foot physician clinic in Virginia in which the Company had a gross
investment of approximately $0.7 million ($0.5 million, net) was sold for approximately
$0.6 million in net proceeds, and the Company recognized a gain on sale of approximately
$0.1 million.
 2009 Mortgage Note Repayment
  60




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Net Real
    
    
    Other
    
    
    MortgageNet
    
    
    Estate
    
    
    (Including
    
    
    Note
    
    
    Gain/
    
    
    Square(Dollars in millions)
    
    Proceeds
    
    
    Investment
    
    
    Receivables)
    
    
    Receivable
    
    
    (Loss)
    
    
    FootageReal estate dispositionsFlorida
    
    $
    1.4
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    
    
    
    $
    0.4
    
    
    
    11,538Wyoming (1)
    
    
    21.4
    
    
    
    15.8
    
    
    
    
    
    
    
    
    
    
    
    5.6
    
    
    
    139,647Washington
    
    
    5.3
    
    
    
    10.7
    
    
    
    (5.4
    )
    
    
    
    
    
    
    0.0
    
    
    
    86,942Nevada
    
    
    38.0
    
    
    
    32.7
    
    
    
    (1.2
    )
    
    
    
    
    
    
    6.5
    
    
    
    198,064Michigan
    
    
    18.5
    
    
    
    10.8
    
    
    
    0.2
    
    
    
    
    
    
    
    7.5
    
    
    
    113,555Florida
    
    
    0.5
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,255Virginia
    
    
    0.6
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    8,24385.7
    
    
    
    72.0
    
    
    
    (6.4
    )
    
    
    
    
    
    
    20.1
    
    
    
    568,244Mortgage note repayments
    
    
    12.6
    
    
    
    
    
    
    
    
    
    
    
    12.6
    
    
    
    
    
    
    
    Total 2009 Dispositions
    
    $
    98.3
    
    
    $
    72.0
    
    
    $
    (6.4
    )
    
    $
    12.6
    
    
    $
    20.1
    
    
    
    568,244
 
 (1)
    
    Net proceeds include $2.4 million in proceeds received in 2008 as a deposit for the Wyoming
property sale. 2008 Real Estate Dispositions
  
    
    a 10,818 square foot physician clinic in Texas in which the Company had a gross
investment of approximately $1.5 million ($1.3 million, net) was sold for $1.6 million
in net proceeds, and the Company recognized a $0.3 million net gain from the sale;
    
    a 4,913 square foot ambulatory surgery center in California in which the Company had
a gross investment of approximately $1.0 million ($0.6 million, net) was sold for $1.0
million in net proceeds, and the Company recognized a $0.4 million net gain from the
sale;
    
    a 36,951 square foot building in Mississippi in which the Company had a gross
investment of approximately $2.9 million ($1.6 million, net) was sold for $1.9 million
in net proceeds, and the Company recognized a $0.3 million net gain from the sale;
    
    a 7,500 square foot physician clinic in Texas in which the Company had a total gross
investment of approximately $0.5 million ($0.4 million, net) was sold for $0.5 million
in net proceeds, and the Company recognized a $0.1 million net gain from the sale;
    
    pursuant to a purchase option exercised by a tenant in the third quarter of 2008, a
25,456 square foot physician clinic in Tennessee in which the Company had a gross
investment of approximately $3.3 million ($2.3 million, net) was sold for $3.0 million
in net proceeds, and the Company recognized a $0.7 million net gain from the sale;
    
    a parcel of land in Pennsylvania was sold for approximately $0.8 million in net
proceeds, which approximated the Companys net book value;
    
    pursuant to a purchase option exercised by a tenant in 2007, an 83,718 square foot
medical office building in Texas in which the Company had a gross investment of
approximately $18.5 million ($10.4 million, net) was sold for net proceeds of $18.7
million. The Company recognized an $8.0 million net gain from the sale, net of
receivables of $0.3 million;
    
    a parcel of land held for development in Illinois was sold for $9.0 million in net
proceeds. The Companys investment in the land was $8.6 million and it recognized $0.4
million net gain from the sale, which is recorded in other income (expense) on the
Companys Consolidated Statement of Income; and
    
    a 7,093 square foot building in Virginia in which the Company had a gross investment
of approximately $1.0 million ($0.5 million, net) was sold for $0.4 million in net
proceeds, resulting in a $0.1 million impairment.
 61




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2008 Mortgage Note Repayment
  2008 Joint Venture Equity Interest Disposition
   Net Real
    
    
    Other
    
    
    MortgageNet
    
    
    Estate
    
    
    (Including
    
    
    Note
    
    
    Gain/
    
    
    Square(Dollars in millions)
    
    Proceeds
    
    
    Investment
    
    
    Receivables)
    
    
    Receivable
    
    
    (Loss)
    
    
    FootageReal estate dispositionsTexas
    
    $
    1.6
    
    
    $
    1.3
    
    
    $
    
    
    
    $
    
    
    
    $
    0.3
    
    
    
    10,818California
    
    
    1.0
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    4,913Mississippi
    
    
    1.9
    
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    0.3
    
    
    
    36,951Texas
    
    
    0.5
    
    
    
    0.4
    
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    7,500Tennessee
    
    
    3.0
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    25,456Pennsylvania (land)
    
    
    0.8
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Texas
    
    
    18.7
    
    
    
    10.4
    
    
    
    0.3
    
    
    
    
    
    
    
    8.0
    
    
    
    83,718Illinois (land held for development) (1)
    
    
    9.0
    
    
    
    8.6
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    Virginia
    
    
    0.4
    
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    7,09336.9
    
    
    
    26.5
    
    
    
    0.3
    
    
    
    
    
    
    
    10.1
    
    
    
    176,449Mortgage note repayments
    
    
    2.5
    
    
    
    
    
    
    
    
    
    
    
    2.5
    
    
    
    
    
    
    
    Joint venture preferred equity interestUtah
    
    
    5.5
    
    
    
    
    
    
    
    5.5
    
    
    
    
    
    
    
    
    
    
    
    Total 2008 Dispositions
    
    $
    44.9
    
    
    $
    26.5
    
    
    $
    5.8
    
    
    $
    2.5
    
    
    $
    10.1
    
    
    
    176,449
 
 (1)
    
    The gain related to the sale of this land parcel is recognized in other income (expense) on the
Companys Consolidated Statement of Income. 2010 Disposition
  5. Discontinued Operations
   62




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 December 31,(Dollars in thousands)
    
    2009
    
    
    2008Balance Sheet data (as of the period ended):Land
    
    $
    3,374
    
    
    $
    9,503Buildings, improvements and lease intangibles
    
    
    22,178
    
    
    
    109,596Personal property
    
    
    
    
    
    
    3025,552
    
    
    
    119,129Accumulated depreciation
    
    
    (8,697
    )
    
    
    (29,905
    )Assets held for sale, net
    
    
    16,855
    
    
    
    89,224Other assets, net (including receivables)
    
    
    890
    
    
    
    1,009Assets of discontinued operations, net
    
    
    890
    
    
    
    1,009Assets held for sale and discontinued operations, net
    
    $
    17,745
    
    
    $
    90,233Notes and bonds payable
    
    $
    
    
    
    $
    5,452Liabilities held for sale
    
    
    
    
    
    
    5,452Notes and bonds payable
    
    
    
    
    
    
    23,281Accounts payable and accrued liabilities
    
    
    
    
    
    
    409Other liabilities
    
    
    251
    
    
    
    3,679Liabilities of discontinued operations
    
    
    251
    
    
    
    27,369Liabilities held for sale and discontinued operations
    
    $
    251
    
    
    $
    32,821
 63




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended December 31,(Dollars in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Statements of Income data (for the period ended):Revenues (1)Master lease rent
    
    $
    4,242
    
    
    $
    6,887
    
    
    $
    15,691Property operating
    
    
    828
    
    
    
    7,999
    
    
    
    8,125Straight-line rent
    
    
    (102
    )
    
    
    (9
    )
    
    
    84Mortgage interest
    
    
    
    
    
    
    
    
    
    
    1,841Other operating
    
    
    216
    
    
    
    8,014
    
    
    
    18,8135,184
    
    
    
    22,891
    
    
    
    44,554Expenses (2)General and administrative
    
    
    
    
    
    
    (26
    )
    
    
    Property operating
    
    
    969
    
    
    
    3,902
    
    
    
    4,134Other operating
    
    
    
    
    
    
    
    
    
    
    16,688Bad debts, net of recoveries
    
    
    (20
    )
    
    
    71
    
    
    
    (24
    )Depreciation
    
    
    1,039
    
    
    
    2,331
    
    
    
    5,897Amortization
    
    
    
    
    
    
    25
    
    
    
    381,988
    
    
    
    6,303
    
    
    
    26,733Other Income (Expense) (3)Interest expense
    
    
    (667
    )
    
    
    (2,008
    )
    
    
    (2,378
    )Interest and other income, net
    
    
    284
    
    
    
    25
    
    
    
    278(383
    )
    
    
    (1,983
    )
    
    
    (2,100
    )Income from Discontinued Operations
    
    
    2,813
    
    
    
    14,605
    
    
    
    15,721Impairments (4)
    
    
    (22
    )
    
    
    (886
    )
    
    
    (7,089
    )Gain on sales of real estate properties (5)
    
    
    20,136
    
    
    
    9,843
    
    
    
    40,405Discontinued Operations
    
    $
    22,927
    
    
    $
    23,562
    
    
    $
    49,037Income from Discontinued Operations per common share  basic
    
    $
    0.40
    
    
    $
    0.46
    
    
    $
    1.03Income from Discontinued Operations per common share  diluted
    
    $
    0.39
    
    
    $
    0.44
    
    
    $
    1.01
 
 (1)
    
    Total revenues for the years ended December 31, 2009, 2008 and 2007 include $0, $0 and $27.4
million, respectively, related to the sale of the senior living assets; $1.9 million, $19.6
million (including a $7.2 million fee received from an operator to terminate its financial
support agreement with the Company) and $13.9 million, respectively, related to other
properties sold; and $3.3 million, $3.3 million and $3.3 million, respectively, related to
six properties held for sale at December 31, 2009.(2)
    
    Total expenses for the years ended December 31, 2009, 2008 and 2007 include $0, $0 and $19.0
million, respectively, related to the sale of the senior living assets; $0.9 million, $6.0
million and $7.1 million, respectively, related to other properties sold; and $1.1 million,
$0.3 million and $0.6 million, respectively, related to six properties held for sale at
December 31, 2009.(3)
    
    Other income (expense) for the years ended December 31, 2009, 2008 and 2007 include ($0.2)
million, ($0.3) million and ($0.4) million related to properties held for sale; ($0.5)
million, ($1.7) million and ($1.7) million related to other properties sold; and December 31,
2009 also includes $0.3 million related to the sale of the senior living assets.(4)
    
    Impairments for the year ended December 31, 2009 includes $0.02 million related to one
property sold; December 31, 2008 includes approximately $0.6 million related to one property
held for sale and $0.3 million related to three properties sold; December 31, 2007 includes
$6.6 million related to four properties sold and $0.5 million related to one property held for
sale.(5)
    
    Gain on sales of real estate properties for the year ended December 31, 2009 includes $20.1
million related to six properties sold; December 31, 2008 includes $9.8 million related to six
properties sold; December 31, 2007 includes $40.2 million related to the sale of senior living
assets during 2007 and $0.2 million related to the sale of a property pursuant to a purchase
option exercised by the operator. 6. Impairment Charges
  64




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    7. Other Assets
  December 31,(Dollars in millions)
    

2009
    
    

2008Straight-line rent receivables
    
    $
    25.2
    
    
    $
    23.2Prepaid assets
    
    
    24.7
    
    
    
    21.0Deferred financing costs, net
    
    
    12.1
    
    
    
    3.1Above-market intangible assets, net
    
    
    12.0
    
    
    
    11.7Accounts receivable
    
    
    9.0
    
    
    
    10.3Goodwill
    
    
    3.5
    
    
    
    3.5Notes receivable
    
    
    3.3
    
    
    
    0.5Equity investments in joint ventures
    
    
    1.3
    
    
    
    2.8Customer relationship intangible assets, net
    
    
    1.2
    
    
    
    1.2Allowance for uncollectible accounts
    
    
    (3.7
    )
    
    
    (3.3
    )Other
    
    
    0.9
    
    
    
    3.0$
    89.5
    
    
    $
    77.0
 Equity Investments in Joint Ventures
   December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Net joint venture investments, beginning of year
    
    $
    2,784
    
    
    $
    18,356
    
    
    $
    20,079Equity in income (losses) recognized during the year
    
    
    (2
    )
    
    
    1,021
    
    
    
    (309
    )Acquisition of remaining equity interest in a joint venture
    
    
    (1,700
    )
    
    
    (10,165
    )
    
    
    Partial redemption of preferred equity investment in an
unconsolidated joint venture
    
    
    
    
    
    
    (5,546
    )
    
    
    Additional investment in a joint venture
    
    
    184
    
    
    
    
    
    
    
    Distributions received during the year
    
    
    
    
    
    
    (882
    )
    
    
    (1,414
    )Net joint venture investments, end of year
    
    $
    1,266
    
    
    $
    2,784
    
    
    $
    18,356
 65




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Intangible Assets and Liabilities
  Gross
    
    
    AccumulatedBalance at
    
    
    Amortization
    
    
    WeightedDecember 31,
    
    
    at December 31,
    
    
    Avg. Life
    
    
    Balance Sheet(Dollars in millions)
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    (Years)
    
    
    ClassificationGoodwill
    
    $
    3.5
    
    
    $
    3.5
    
    
    $
    
    
    
    $
    
    
    
    
    N/A
    
    
    Other assetsDeferred financing costs
    
    
    17.1
    
    
    
    11.4
    
    
    
    5.0
    
    
    
    8.3
    
    
    
    4.1
    
    
    Other assetsAbove-market lease intangibles
    
    
    12.8
    
    
    
    12.2
    
    
    
    0.8
    
    
    
    0.5
    
    
    
    49.1
    
    
    Other assetsCustomer relationship intangibles
    
    
    1.4
    
    
    
    1.4
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    33.6
    
    
    Other assetsBelow-market lease intangibles
    
    
    (7.2
    )
    
    
    (7.2
    )
    
    
    (1.8
    )
    
    
    (0.7
    )
    
    
    9.8
    
    
    Other liabilitiesAt-market lease intangibles
    
    
    72.9
    
    
    
    65.3
    
    
    
    43.7
    
    
    
    38.5
    
    
    
    9.4
    
    
    Real estate properties$
    100.5
    
    
    $
    86.6
    
    
    $
    47.9
    
    
    $
    46.8
    
    
    
    18.7
  9. Notes and Bonds Payable
  December
31,(Dollars in thousands)
    

2009
    
    

2008Unsecured Credit Facility due 2012
    
    $
    50,000
    
    
    $
    Unsecured Credit Facility due 2010
    
    
    
    
    
    
    329,000Senior Notes due 2011, including premium
    
    
    286,655
    
    
    
    286,898Senior Notes due 2014, net of discount
    
    
    264,090
    
    
    
    263,961Senior Notes due 2017, net of discount
    
    
    297,988
    
    
    
    Mortgage notes payable, net of discount
    
    
    147,689
    
    
    
    60,327$
    1,046,422
    
    
    $
    940,186
  Unsecured Credit Facility due 2012
  66




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Unsecured Credit Facility due 2010
  Senior Notes due 2011
  December
31,(Dollars in thousands)
    
2009
    
    

2008Senior Notes due 2011 face value
    
    $
    286,300
    
    
    $
    286,300Unamortized net gain (net of
discount)
    
    
    355
    
    
    
    598Senior Notes due 2011 carrying amount
    
    $
    286,655
    
    
    $
    286,898
 Senior Notes due 2014
  December 31,(Dollars in thousands)
    
    2009
    
    
    2008Senior Notes due 2014 face value
    
    $
    264,737
    
    
    $
    264,737Unaccreted discount
    
    
    (647
    )
    
    
    (776
    )Senior Notes due 2014 carrying amount
    
    $
    264,090
    
    
    $
    263,961
 Senior Notes due 2017
  67




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  December 31,(Dollars in thousands)
    
    2009Senior Notes due 2017 face value
    
    $
    300,000Unaccreted discount
    
    
    (2,012
    )Senior Notes due 2017 carrying amount
    
    $
    297,988
 Senior Note Repurchases
  Mortgage Notes Payable
  Investment inEffective
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Collateral at
    
    
    Balance atOriginal
    
    
    Interest
    
    
    Maturity
    
    
    of Notes
    
    
    
    
    
    
    December 31,
    
    
    December 31,(Dollars in millions)
    
    Balance
    
    
    Rate (11)
    
    
    Date
    
    
    Payable (12)
    
    
    Collateral (13)
    
    
    2009
    
    
    2009
    
    
    2008Life Insurance Co.
(1)
    
    $
    4.7
    
    
    
    7.765
    %
    
    
    1/17
    
    
    
    1
    
    
    MOB
    
    $
    11.4
    
    
    $
    2.5
    
    
    $
    2.7Commercial Bank (2)
    
    
    11.7
    
    
    
    7.220
    %
    
    
    5/11
    
    
    
    
    
    
    2 MOBs/1 ASC
    
    
    
    
    
    
    
    
    
    
    3.7Commercial Bank (3)
    
    
    1.8
    
    
    
    5.550
    %
    
    
    10/30
    
    
    
    1
    
    
    OTH
    
    
    7.7
    
    
    
    1.7
    
    
    
    1.8Life Insurance Co.
(4)
    
    
    15.1
    
    
    
    5.490
    %
    
    
    1/16
    
    
    
    1
    
    
    ASC
    
    
    32.5
    
    
    
    13.9
    
    
    
    14.2Commercial Bank (5)
    
    
    17.4
    
    
    
    6.480
    %
    
    
    5/15
    
    
    
    1
    
    
    MOB
    
    
    19.9
    
    
    
    14.4
    
    
    
    14.3Commercial Bank (6)
    
    
    12.0
    
    
    
    6.110
    %
    
    
    7/15
    
    
    
    1
    
    
    2 MOBs
    
    
    19.5
    
    
    
    9.7
    
    
    
    9.6Commercial Bank (7)
    
    
    15.2
    
    
    
    7.650
    %
    
    
    7/20
    
    
    
    1
    
    
    MOB
    
    
    20.2
    
    
    
    12.8
    
    
    
    12.8Life Insurance Co.
(8)
    
    
    1.5
    
    
    
    6.810
    %
    
    
    7/16
    
    
    
    1
    
    
    SOP
    
    
    2.2
    
    
    
    1.2
    
    
    
    1.2Commercial Bank (9)
    
    
    12.8
    
    
    
    6.430
    %
    
    
    2/21
    
    
    
    1
    
    
    MOB
    
    
    20.5
    
    
    
    11.6
    
    
    
    Investment Fund (10)
    
    
    80.0
    
    
    
    7.250
    %
    
    
    12/16
    
    
    
    1
    
    
    15 MOBs
    
    
    152.4
    
    
    
    79.9
    
    
    
    9
    
    
    
    
    
    
    $
    286.3
    
    
    $
    147.7
    
    
    $
    60.3
 
 (1)
    
    Payable in monthly installments of principal and interest based on a 20-year amortization
with the final payment due at maturity.(2)
    
    Three mortgage notes totaling $3.7 million at December 31, 2008 were defeased and repaid in
full in December 2009.(3)
    
    Payable in monthly installments of principal and interest based on a 27-year amortization
with the final payment due at maturity.(4)
    
    Payable in monthly installments of principal and interest based on a 10-year amortization
with the final payment due at maturity.(5)
    
    Payable in monthly installments of principal and interest based on a 10-year amortization
with the final payment due at maturity. The Company acquired this mortgage note in an
acquisition during 2008 and recorded the note at its fair value, resulting in a $2.7 million
discount which is included in the balance above.(6)
    
    Payable in monthly installments of principal and interest based on a 10-year amortization
with the final payment due at maturity. The Company acquired this mortgage note in an
acquisition during 2008 and recorded the note at its fair value, resulting in a $2.1 million
discount which is included in the balance above.(7)
    
    Payable in monthly installments of interest only for 24 months and then installments of
principal and interest based on an 11-year amortization with the final payment due at
maturity. The Company acquired this mortgage note in an acquisition during 2008 and recorded
the note at its fair value, resulting in a $2.4 million discount which is included in the
balance above.(8)
    
    Payable in monthly installments of principal and interest based on a 9-year amortization with
the final payment due at maturity. The Company acquired this mortgage note in an acquisition
during 2008 and recorded the note at its fair value, resulting in a $0.2 million discount
which is included in the balance above.(9)
    
    Payable in monthly installments of principal and interest based on a 12-year amortization
with the final payment due at maturity. The Company acquired this mortgage note in an
acquisition during 2009 and recorded the note at its fair value, resulting in a $1.0 million
discount which is included in the balance above. 68




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (10)
    
    Payable in monthly installments of principal and interest based on a 30-year
amortization with a 7-year initial term (maturity 12/01/16) and the option to extend the
initial term for two, one-year floating rate extension terms.(11)
    
    The contractual interest rates for the nine outstanding mortgage notes ranged from 5.00% to
7.625% at December 31, 2009.(12)
    
    Number of mortgage notes payable outstanding at December 31, 2009.(13)
    
    MOB-Medical office building; ASC-Ambulatory care/surgery;
SOP-Specialty outpatient;
OTH-Other.
  Investment in
    
    
    ContractualEffective
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Collateral at
    
    
    Balance atOriginal
    
    
    Interest
    
    
    Maturity
    
    
    of Notes
    
    
    
    
    
    
    December 31,
    
    
    December 31,(Dollars in millions)
    
    Balance
    
    
    Rate (4)
    
    
    Date
    
    
    Payable
    
    
    Collateral (5)
    
    
    2008
    
    
    2008Life Insurance Co.
(1)
    
    $
    23.3
    
    
    
    7.765
    %
    
    
    7/26
    
    
    
    1
    
    
    MOB
    
    $
    46.8
    
    
    $
    19.5Commercial Bank (2)
    
    
    11.7
    
    
    
    7.220
    %
    
    
    5/11
    
    
    
    2
    
    
    3 MOBs
    
    
    23.0
    
    
    
    3.7Commercial Bank (3)
    
    
    5.5
    
    
    
    6.500
    %
    
    
    1/27
    
    
    
    1
    
    
    MOB
    
    
    10.7
    
    
    
    5.54
    
    
    
    
    
    
    $
    80.5
    
    
    $
    28.7
 
 (1)
    
    Payable in monthly installments of principal and interest based on a 30-year amortization
with the final payment due at maturity. The mortgage note was assumed by the buyer upon sale
of the property in March 2009.(2)
    
    Payable in fully amortizing monthly installments of principal and interest due at maturity.
Defeased and repaid in full in December 2009.(3)
    
    Payable in fully amortizing monthly installments of principal and interest due at maturity.
The mortgage note was assumed by the buyer upon sale of the property in February 2009.(4)
    
    The contractual interest rates for the four outstanding mortgage notes included in
liabilities held for sale and discontinued operations ranged from 6.5% to 8.5% at December 31,
2008.(5)
    
    MOB-Medical office building Other Long-Term Debt Information
  Discount/
    
    
    TotalPrincipal
    
    
    Premium
    
    
    Notes and(Dollars in thousands)
    
    Maturities
    
    
    Amortization (2)
    
    
    Bonds Payable
    
    
    %2010
    
    $
    2,386
    
    
    $
    (1,013
    )
    
    $
    1,373
    
    
    
    0.1
    %2011
    
    
    288,843
    
    
    
    (1,260
    )
    
    
    287,583
    
    
    
    27.5
    %2012 (1)
    
    
    52,707
    
    
    
    (1,434
    )
    
    
    51,273
    
    
    
    4.9
    %2013
    
    
    2,889
    
    
    
    (1,520
    )
    
    
    1,369
    
    
    
    0.1
    %2014
    
    
    267,818
    
    
    
    (1,499
    )
    
    
    266,319
    
    
    
    25.5
    %2015 and thereafter
    
    
    441,748
    
    
    
    (3,243
    )
    
    
    438,505
    
    
    
    41.9
    %$
    1,056,391
    
    
    $
    (9,969
    )
    
    $
    1,046,422
    
    
    
    100.0
    %
 
 (1)
    
    Includes $50.0 million outstanding on the Unsecured Credit Facility.(2)
    
    Includes discount and premium amortization related to the Companys Senior Notes due 2011,
Senior Notes due 2014, and Senior Notes due 2017 and discount amortization related to five
mortgage notes payable. 10. Stockholders Equity
 Common Stock
  69




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Balance, beginning of year
    
    
    59,246,284
    
    
    
    50,691,331
    
    
    
    47,805,448Issuance of stock
    
    
    1,244,914
    
    
    
    8,373,014
    
    
    
    2,833,434Restricted stock-based awards, net of forfeitures
    
    
    123,733
    
    
    
    181,939
    
    
    
    52,449Balance, end of year
    
    
    60,614,931
    
    
    
    59,246,284
    
    
    
    50,691,331
 At-The-Market Equity Offering Program
  Equity Offerings
   Dividends Declared
   Authorization to Repurchase Common Stock
  Accumulated Other Comprehensive Loss
  70




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Benefit Plans
 Executive Retirement Plan
     Retirement Plan for Outside Directors
  Retirement Plan Information
  (Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Service cost
    
    $
    286
    
    
    $
    1,288
    
    
    $
    1,022Interest cost
    
    
    926
    
    
    
    1,190
    
    
    
    943Effect of settlement
    
    
    1,005
    
    
    
    1,143
    
    
    
    Amortization of net gain/loss
    
    
    669
    
    
    
    758
    
    
    
    442$
    2,886
    
    
    $
    4,379
    
    
    $
    2,407Net loss (gain) recognized in other comprehensive income
    
    
    (1,868
    )
    
    
    2,115
    
    
    
    311Total recognized in net periodic benefit cost and accumulated other comprehensive loss
    
    $
    1,018
    
    
    $
    6,494
    
    
    $
    2,718
  71




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  (Dollars in thousands)
    
    2009
    
    
    2008Benefit obligation at beginning of year
    
    $
    17,488
    
    
    $
    15,642Service cost
    
    
    286
    
    
    
    1,288Interest cost
    
    
    926
    
    
    
    1,190Benefits paid
    
    
    (2,384
    )
    
    
    (4,648
    )Curtailment gain
    
    
    (14
    )
    
    
    (342
    )Settlement loss
    
    
    1,005
    
    
    
    1,461Actuarial gain/loss, net
    
    
    (1,185
    )
    
    
    2,897Benefit obligation at end of year
    
    $
    16,122
    
    
    $
    17,488
  (Dollars in thousands)
    
    2009
    
    
    2008Net liabilities included in accrued liabilities
    
    $
    (11,529
    )
    
    $
    (11,027
    )Amounts recognized in accumulated other comprehensive loss
    
    
    (4,593
    )
    
    
    (6,461
    )
   12. Stock and Other Incentive Plans
 2007 Employees Stock Incentive Plan
    72




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Non-Employee Directors Stock Plan
   2009
    
    
    2008
    
    
    2007Stock-based awards, beginning of year
    
    
    1,111,728
    
    
    
    1,289,646
    
    
    
    1,261,613Granted
    
    
    124,587
    
    
    
    812,654
    
    
    
    65,706Vested
    
    
    (11,536
    )
    
    
    (657,888
    )
    
    
    (35,974
    )Forfeited
    
    
    
    
    
    
    (332,684
    )
    
    
    (1,699
    )Stock-based awards, end of year
    
    
    1,224,779
    
    
    
    1,111,728
    
    
    
    1,289,646Weighted-average grant date fair value of:Stock-based awards, beginning of year
    
    $
    25.71
    
    
    $
    25.12
    
    
    $
    24.85Stock-based awards granted during the year
    
    $
    21.01
    
    
    $
    18.18
    
    
    $
    34.99Stock-based awards vested during the year
    
    $
    32.80
    
    
    $
    16.54
    
    
    $
    33.17Stock-based awards forfeited during the year
    
    $
    
    
    
    $
    24.06
    
    
    $
    34.89Stock-based awards, end of year
    
    $
    25.16
    
    
    $
    25.71
    
    
    $
    25.12Grant date fair value of shares granted during the year
    
    $
    2,617,678
    
    
    $
    14,773,448
    
    
    $
    2,298,787
   4 01(k) Plan
  Dividend Reinvestment Plan
  73




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Employee Stock Purchase Plan
   2009
    
    
    2008
    
    
    2007Outstanding, beginning of year
    
    
    250,868
    
    
    
    179,603
    
    
    
    171,481Granted
    
    
    219,184
    
    
    
    194,832
    
    
    
    128,928Exercised
    
    
    (9,803
    )
    
    
    (10,948
    )
    
    
    (9,947
    )Forfeited
    
    
    (42,032
    )
    
    
    (38,325
    )
    
    
    (43,948
    )Expired
    
    
    (82,609
    )
    
    
    (74,294
    )
    
    
    (66,911
    )Outstanding and exercisable, end of year
    
    
    335,608
    
    
    
    250,868
    
    
    
    179,603Weighted-average exercise price of:Options outstanding, beginning of year
    
    $
    19.96
    
    
    $
    21.58
    
    
    $
    30.55Options granted during the year
    
    $
    19.96
    
    
    $
    21.58
    
    
    $
    33.61Options exercised during the year
    
    $
    15.43
    
    
    $
    21.24
    
    
    $
    26.11Options forfeited during the year
    
    $
    16.87
    
    
    $
    21.02
    
    
    $
    26.38Options expired during the year
    
    $
    12.74
    
    
    $
    20.20
    
    
    $
    23.61Options outstanding, end of year
    
    $
    18.24
    
    
    $
    19.96
    
    
    $
    21.58Weighted-average fair value of options granted during the year
(calculated as of the grant date)
    
    $
    7.75
    
    
    $
    5.82
    
    
    $
    8.69Intrinsic value of options exercised during the year
    
    $
    31,566
    
    
    $
    38,537
    
    
    $
    37,898Intrinsic value of options outstanding and exercisable
(calculated as of December 31)
    
    $
    1,080,658
    
    
    $
    883,055
    
    
    $
    684,287Exercise prices of options outstanding
(calculated as of December 31)
    
    $
    18.24
    
    
    $
    19.96
    
    
    $
    21.58Weighted-average contractual life of outstanding options
(calculated as of December 31, in years)
    
    
    0.8
    
    
    
    0.9
    
    
    
    0.8
  74




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2009
    
    
    2008
    
    
    2007Risk-free interest rates
    
    
    0.76
    %
    
    
    3.05
    %
    
    
    4.82
    %Expected dividend yields
    
    
    6.05
    %
    
    
    5.92
    %
    
    
    4.50
    %Expected life (in years)
    
    
    1.50
    
    
    
    1.43
    
    
    
    1.59Expected volatility
    
    
    58.2
    %
    
    
    26.2
    %
    
    
    22.3
    %Expected forfeiture rates
    
    
    84
    %
    
    
    82
    %
    
    
    79
    %
 13. Earnings Per Share
  Year Ended December 31,(Dollars in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Weighted average Common SharesWeighted average Common Shares outstanding
    
    
    59,385,018
    
    
    
    52,846,988
    
    
    
    48,595,003Unvested restricted stock
    
    
    (1,185,426
    )
    
    
    (1,299,709
    )
    
    
    (1,058,870
    )Weighted average Common Shares  Basic
    
    
    58,199,592
    
    
    
    51,547,279
    
    
    
    47,536,133Weighted average Common Shares  Basic
    
    
    58,199,592
    
    
    
    51,547,279
    
    
    
    47,536,133Dilutive effect of restricted stock
    
    
    790,291
    
    
    
    973,353
    
    
    
    723,195Dilutive effect of employee stock purchase plan
    
    
    57,431
    
    
    
    44,312
    
    
    
    32,002Weighted average Common Shares  Diluted
    
    
    59,047,314
    
    
    
    52,564,944
    
    
    
    48,291,330Net incomeIncome from continuing operations
    
    $
    28,221
    
    
    $
    18,198
    
    
    $
    11,043Noncontrolling interests share in earnings
    
    
    (57
    )
    
    
    (68
    )
    
    
    (18
    )Income from continuing operations attributable to common stockholders
    
    
    28,164
    
    
    
    18,130
    
    
    
    11,025Discontinued operations
    
    
    22,927
    
    
    
    23,562
    
    
    
    49,037Net income attributable to common stockholders
    
    $
    51,091
    
    
    $
    41,692
    
    
    $
    60,062Basic Earnings Per Common ShareIncome from continuing operations
    
    $
    0.48
    
    
    $
    0.35
    
    
    $
    0.23Discontinued operations
    
    
    0.40
    
    
    
    0.46
    
    
    
    1.03Net income attributable to common stockholders
    
    $
    0.88
    
    
    $
    0.81
    
    
    $
    1.26Diluted Earnings Per Common ShareIncome from continuing operations
    
    $
    0.48
    
    
    $
    0.35
    
    
    $
    0.23Discontinued operations
    
    
    0.39
    
    
    
    0.44
    
    
    
    1.01Net income attributable to common stockholders
    
    $
    0.87
    
    
    $
    0.79
    
    
    $
    1.24
 14. Commitments and Contingencies
 Construction in Progress
   75




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Estimated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    CIP at
    
    
    Estimated
    
    
    EstimatedCompletion
    
    
    Property
    
    
    
    
    
    
    Approximate
    
    
    Dec. 31,
    
    
    Remaining
    
    
    TotalState
    
    Date
    
    
    Type (1)
    
    
    Properties
    
    
    Square Feet
    
    
    2009
    
    
    Fundings
    
    
    Investment(Dollars in thousands)Under construction:Hawaii
    
    
    2Q 2010
    
    
    MOB
    
    
    1
    
    
    
    133,000
    
    
    $
    67,244
    
    
    $
    18,756
    
    
    $
    86,000Washington
    
    
    3Q 2011
    
    
    MOB
    
    
    1
    
    
    
    206,000
    
    
    
    10,514
    
    
    
    81,686
    
    
    
    92,200Land held for development:Texas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,184Texas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,1172
    
    
    
    339,000
    
    
    $
    95,059
    
    
    $
    100,442
    
    
    $
    178,200
 
 (1)
    
    MOB-Medical office building Other Construction
  Operating Leases
  2010
    
    $
    4,1072011
    
    
    3,5842012
    
    
    3,5992013
    
    
    3,5892014
    
    
    3,6462015 and thereafter
    
    
    250,579$
    269,104
 Legal Proceedings
  76




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 15. Other Data
 Taxable Income (unaudited)
      Year Ended December 31,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Net income attributable to common stockholders
    
    $
    51,091
    
    
    $
    41,692
    
    
    $
    60,062Reconciling items to taxable income:Depreciation and amortization
    
    
    17,196
    
    
    
    12,667
    
    
    
    13,733Gain or loss on disposition of depreciable assets
    
    
    8,549
    
    
    
    (3,762
    )
    
    
    30,548Straight-line rent
    
    
    (1,623
    )
    
    
    528
    
    
    
    (1,043
    )VIE consolidation
    
    
    
    
    
    
    
    
    
    
    767Receivable allowances
    
    
    523
    
    
    
    2,713
    
    
    
    (4,625
    )Stock-based compensation
    
    
    9,323
    
    
    
    7,651
    
    
    
    7,353Other
    
    
    (4,104
    )
    
    
    (5,206
    )
    
    
    7,06229,864
    
    
    
    14,591
    
    
    
    53,795Taxable income (1)
    
    $
    80,955
    
    
    $
    56,283
    
    
    $
    113,857Dividends paid
    
    $
    91,385
    
    
    $
    81,301
    
    
    $
    328,294
 
 (1) Before REIT dividend paid deduction. Characterization of Distributions (unaudited)
  77




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2009
    
    
    2008
    
    
    2007Per Share
    
    
    %
    
    
    Per Share
    
    
    %
    
    
    Per Share
    
    
    %Common stock:Ordinary income
    
    $
    0.90
    
    
    
    58.7
    %
    
    $
    1.05
    
    
    
    68.4
    %
    
    $
    1.11
    
    
    
    16.3
    %Return of capital
    
    
    0.16
    
    
    
    10.1
    %
    
    
    0.41
    
    
    
    26.5
    %
    
    
    4.44
    
    
    
    64.9
    %Unrecaptured section 1250 gain
    
    
    0.48
    
    
    
    31.2
    %
    
    
    0.08
    
    
    
    5.1
    %
    
    
    1.29
    
    
    
    18.8
    %Common stock distributions
    
    $
    1.54
    
    
    
    100.0
    %
    
    $
    1.54
    
    
    
    100.0
    %
    
    $
    6.84
    
    
    
    100.0
    %
 State Income Taxes
    (Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007State income tax expense:Texas gross margins tax (1)
    
    $
    464
    
    
    $
    686
    
    
    $
    391Michigan gross receipts deferred tax liability
    
    
    45
    
    
    
    
    
    
    
    215Other
    
    
    57
    
    
    
    123
    
    
    
    88Total state income tax expense
    
    $
    566
    
    
    $
    809
    
    
    $
    694State income tax payments, net of refunds and collections
    
    $
    674
    
    
    $
    612
    
    
    $
    137
 
 (1)
    
    In the table above, income tax expense for 2009 and 2008 includes $0.1 million and $0.3
million, respectively, that was recorded to the gain on sale of real estate properties sold,
which is included in discontinued operations rather than general and administrative expenses
on the Companys Consolidated Statements of Income. 16. Fair Value of Financial Instruments
  December 31, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(Dollars in millions)
    
    Value
    
    
    Value
    
    
    Value
    
    
    ValueNotes and bonds payable
    
    $
    1,046.4
    
    
    $
    1,088.6
    
    
    $
    968.9
    
    
    $
    1,041.9Mortgage notes receivable
    
    $
    31.0
    
    
    $
    30.8
    
    
    $
    59.0
    
    
    $
    58.8Notes receivable, net of allowances
    
    $
    3.3
    
    
    $
    3.3
    
    
    $
    0.5
    
    
    $
    0.5
 17. Retirement and Termination Benefits in 2007
  78




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 18. Selected Quarterly Financial Data (unaudited)
  Quarter Ended(Dollars in thousands, except per share data)
    
    March 31
    
    
    June 30
    
    
    September 30
    
    
    December 312009Revenues from continuing operations
    
    $
    62,093
    
    
    $
    64,311
    
    
    $
    63,236
    
    
    $
    63,664Income from continuing operations
    
    $
    7,536
    
    
    $
    8,737
    
    
    $
    8,040
    
    
    $
    3,908Discontinued operations
    
    
    13,344
    
    
    
    8,077
    
    
    
    999
    
    
    
    507Net income
    
    
    20,880
    
    
    
    16,814
    
    
    
    9,039
    
    
    
    4,415Less:
(Income) loss from noncontrolling interests
    
    
    (15
    )
    
    
    (62
    )
    
    
    65
    
    
    
    (45
    )Net income atrributable to common stockholders
    
    $
    20,865
    
    
    $
    16,752
    
    
    $
    9,104
    
    
    $
    4,370Basic earnings per common shareIncome from continuing operations
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    0.07Discontinued operations
    
    
    0.23
    
    
    
    0.14
    
    
    
    0.02
    
    
    
    Net income attributable to common stockholders
    
    $
    0.36
    
    
    $
    0.29
    
    
    $
    0.16
    
    
    $
    0.07Diluted earnings per common shareIncome from continuing operations
    
    $
    0.13
    
    
    $
    0.15
    
    
    $
    0.14
    
    
    $
    0.07Discontinued operations
    
    
    0.22
    
    
    
    0.13
    
    
    
    0.01
    
    
    
    Net income attributable to common stockholders
    
    $
    0.35
    
    
    $
    0.28
    
    
    $
    0.15
    
    
    $
    0.072008Revenues from continuing operations
    
    $
    51,289
    
    
    $
    51,806
    
    
    $
    53,839
    
    
    $
    56,997Income from continuing operations
    
    $
    4,296
    
    
    $
    4,034
    
    
    $
    2,984
    
    
    $
    6,884Discontinued operations
    
    
    2,506
    
    
    
    9,732
    
    
    
    2,592
    
    
    
    8,732Net income
    
    
    6,802
    
    
    
    13,766
    
    
    
    5,576
    
    
    
    15,616Less: Income from noncontrolling interests
    
    
    (3
    )
    
    
    
    
    
    
    (49
    )
    
    
    (16
    )Net income atrributable to common stockholders
    
    $
    6,799
    
    
    $
    13,766
    
    
    $
    5,527
    
    
    $
    15,600Basic earnings per common shareIncome from continuing operations
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.12Discontinued operations
    
    
    0.05
    
    
    
    0.20
    
    
    
    0.05
    
    
    
    0.15Net income attributable to common stockholders
    
    $
    0.14
    
    
    $
    0.28
    
    
    $
    0.11
    
    
    $
    0.27Diluted earnings per common shareIncome from continuing operations
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.06
    
    
    $
    0.12Discontinued operations
    
    
    0.04
    
    
    
    0.19
    
    
    
    0.05
    
    
    
    0.15Net income attributable to common stockholders
    
    $
    0.13
    
    
    $
    0.27
    
    
    $
    0.11
    
    
    $
    0.27
 79




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in the Companys Internal Control over Financial Reporting
  Managements Annual Report on Internal Control Over Financial Reporting
    80




---



##### Table of Contents



Report of  INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control-Integrated
Framework
      /s/  BDO Seidman, LLP 
 81




---



##### Table of Contents



ITEM 9B.
    
    OTHER INFORMATION
  82




---



##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Directors
  Executive Officers
  Name
    
    Age
    
    PositionDavid R. Emery
    
    
    65
    
    
    Chairman of the Board & Chief Executive OfficerScott W. Holmes
    
    
    55
    
    
    Executive Vice President & Chief Financial OfficerJohn M. Bryant, Jr.
    
    
    43
    
    
    Executive Vice President & General CounselB. Douglas Whitman, II
    
    
    41
    
    
    Executive Vice President & Chief Operating Officer
     Code of Ethics
 www.healthcarerealty.com
 Section 16(a) Compliance
  83




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##### Table of Contents



Stockholder Recommendation of Director Candidates
  Audit Committee
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Index to Historical Financial Statements, Financial Statement Schedules and Exhibits
 Financial Statements:
  
    
    Consolidated Balance Sheets  December 31, 2009 and 2008.
    
    Consolidated Statements of Income for the years ended December 31, 2009, December 31,
2008 and December 31, 2007.
    
    Consolidated Statements of Stockholders Equity for the years ended December 31, 2009,
December 31, 2008 and December 31, 2007.
    
    Consolidated Statements of Cash Flows for the years ended December 31, 2009, December
31, 2008 and December 31, 2007.
    
    Notes to Consolidated Financial Statements.
 84




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##### Table of Contents



Financial Statement Schedules:
 Schedule II
    
    Valuation and Qualifying Accounts at December 31, 2009
    
    
    91Schedule III
    
    Real Estate and Accumulated Depreciation at December 31, 2009
    
    
    92Schedule IV
    
    Mortage Loans on Real Estate at December 31, 2009
    
    
    93
  Exhibits:
 Exhibit Index
 ExhibitNumber


    
    
    Description of Exhibits1.1
    

    
    
    Controlled Equity Offering Sales
Agreement, dated as of February 22, 2010, between the Company and Cantor
Fitzgerald & Co. (filed herewith)1.2
    

    
    
    Controlled Equity Offering Sales Agreement, dated as of December 31, 2008, between the Company and Cantor
Fitzgerald & Co. This agreement was terminated on
February 22, 2010 and superseded by Exhibit 1.1 hereto. (1)1.3
    

    
    
    Underwriting Agreement, dated as of December 1, 2009, by and among the Company and Banc of America Securities
LLC and J.P. Morgan Securities Inc., as representatives of the
several underwriters named herein. (2)3.1
    

    
    
    Second Articles of Amendment and
Restatement of the Company. (3)3.2
    

    
    
    Amended and Restated Bylaws of the
Company. (4)4.1
    

    
    
    Specimen stock certificate. (3)4.2
    

    
    
    Indenture, dated as of May 15, 2001, by and between the Company and Regions Bank, as trustee (as successor to
the trustee named therein). (5)4.3
    

    
    
    First Supplemental Indenture, dated as of May 15, 2001, by the Company to HSBC Bank USA, National Association,
as Trustee (formerly First Union National Bank, as Trustee). (5)4.4
    

    
    
    Form of 8.125% Senior Note Due
2011. (5)4.5
    

    
    
    Second Supplemental Indenture, dated as of March 30, 2004, by the Company to HSBC Bank USA, National
Association, as Trustee (formerly Wachovia Bank, National
Association, as Trustee). (6)4.6
    

    
    
    Form of 5.125% Senior Note Due
2014. (6)4.7
    

    
    
    Third Supplemental Indenture, dated
December 4, 2009, by and between the Company and Regions Bank as trustee. (2)4.8
    

    
    
    Form of 6.50% Senior Note due 2017 (set forth in Exhibit B to the Third Supplemental Indenture filed as Exhibit
4.7 thereto). (2)5
    

    
    
    Opinion of Waller Lansden Dortch & Davis LLP. (filed herewith)8
    

    
    
    Tax opinion of Waller Lansden Dortch & Davis LLP. (filed herewith)10.1
    

    
    
    1995 Restricted Stock Plan for
Non-Employee Directors of the Company. (7)10.2
    

    
    
    Amendment to 1995 Restricted Stock
Plan for Non-Employee Directors of the Company. (1)10.3
    

    
    
    Second Amended and Restated
Executive Retirement Plan. (1)10.4
    

    
    
    Amended and Restated Retirement
Plan for Outside Directors. (1)10.5
    

    
    
    2000 Employee Stock Purchase Plan. (8)10.6
    

    
    
    Dividend Reinvestment Plan, as Amended. (9)10.7
    

    
    
    Amended and Restated Employment Agreement by and between David R. Emery and the Company. (10)10.8
    

    
    
    Employment Agreement by and between John M. Bryant, Jr. and the Company. (11)10.9
    

    
    
    Employment Agreement by and between Scott W. Holmes and the Company. (12)10.10
    

    
    
    Employment Agreement by and between B. Douglas Whitman, II and the Company. (13)10.11
    

    
    
    Amended and Restated Credit Agreement, dated as of September 30, 2009, by and among the Company, Bank of
America, N.A., as Administrative Agent, and the other lenders named herein. (14)10.12
    

    
    
    2007 Employees Stock Incentive Plan. (15)10.13
    

    
    
    The Companys Long-Term Incentive Program. (16)10.14
    

    
    
    Amendment, dated December 21, 2007, to 2007 Employees Stock Incentive Plan. (17)10.15
    

    
    
    Loan Application and Commitment Letter, dated as of July 20, 2009, by the Company and Teachers Insurance and
Annuity Association of America (Charlotte properties) (filed herewith). (18)10.16
    

    
    
    Loan Application and Commitment Letter, dated as of July 20, 2009, by the Company and Teachers Insurance and
Annuity Association of America (Nashville properties) (filed herewith). (18)
 85




---



##### Table of Contents



ExhibitNumber


    
    
    Description of Exhibits10.17
    

    
    
    Loan Application and Commitment Letter, dated as of July 20, 2009, by the Company and Teachers Insurance and
Annuity Association of America (Dallas properties). (filed herewith) (18)11
    

    
    
    Statement re: computation of per share earnings (contained in Note 13 to the Notes to the Consolidated Financial
Statements for the year ended December 31, 2009 in Item 8 to this Annual Report on Form 10-K).21
    

    
    
    Subsidiaries of the Registrant. (filed herewith)23.1
    

    
    
    Consent of Waller Lansden Dortch & Davis, LLP. (included in Exhibit 5)23.2
    

    
    
    Consent of BDO Seidman, LLP,
independent registered public accounting firm. (filed herewith)31.1
    

    
    
    Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934, as amended, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. (filed herewith)31.2
    

    
    
    Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14 of the Securities Exchange
Act of 1934, as amended, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002. (filed herewith)32
    

    
    
    Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (filed herewith)
 
 (1)
    
    Filed as an exhibit to the Companys Form 8-K filed December 31, 2008 and hereby incorporated by reference.(2)
    
    Filed as an exhibit to the Companys Form 8-K filed December 4, 2009 and hereby incorporated
by reference.(3)
    
    Filed as an exhibit to the Companys Registration Statement on Form S-11 (Registration No.
33-60506) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by
reference.(4)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 2007 and hereby incorporated by reference.(5)
    
    Filed as an exhibit to the Companys Form 8-K filed May 17, 2001 and hereby incorporated by reference.(6)
    
    Filed as an exhibit to the Companys Form 8-K filed March 29, 2004 and hereby incorporated by reference.(7)
    
    Filed as an exhibit to the Companys Form 10-K for the year ended December 31, 1995 and hereby incorporated by reference.(8)
    
    Filed as an exhibit to the Companys Form 10-K for the year ended December 31, 1999 and hereby incorporated by reference.(9)
    
    Filed as an exhibit to the Companys Registration Statement on Form S-3 (Registration No.
33-79452) previously filed on September 26, 2003 pursuant to the Securities Act of 1933 and
hereby incorporated by reference.(10)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 2004 and
hereby incorporated by reference.(11)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 2003 and hereby incorporated by reference.(12)
    
    Filed as an exhibit to the Companys Form 10-K for the year ended December 31, 2002 and hereby incorporated by reference.(13)
    
    Filed as an exhibit to the Companys Form 10-K filed March 1, 2007 and hereby incorporated by reference.(14)
    
    Filed as an exhibit to the Companys Form 10-Q for the quarter ended September 30, 2009 and
hereby incorporated by reference.(15)
    
    Filed as an exhibit to the Companys Form 8-K filed May 21, 2007 and hereby incorporated by reference.(16)
    
    Filed as an exhibit to the Companys Form 8-K filed December 14, 2007 and hereby incorporated by reference.(17)
    
    Filed as an exhibit to the Companys Form 10-K for the year ended December 31, 2007 and hereby incorporated by reference.(18)
    
    Certain information has been omitted pursuant to a confidential treatment request filed with
the Securities and Exchange Commission. The exhibit was originally filed as an exhibit to the
Companys Form 10-Q for the quarter ended September 30, 2009. The exhibit has been revised in
response to comments received from the Securities and Exchange Commission. Executive Compensation Plans and Arrangements
  1.
    
    1995 Restricted Stock Plan for Non-Employee Directors of the Company (filed as
Exhibit 10.1)2.
    
    Amendment to 1995 Restricted Stock Plan for Non-Employee Directors of the
Company (filed as Exhibit 10.2)3.
    
    Second Amended and Restated Executive Retirement Plan (filed as Exhibit 10.3)4.
    
    Amended and Restated Retirement Plan for Outside Directors (filed as Exhibit 10.4)5.
    
    2000 Employee Stock Purchase Plan (filed as Exhibit 10.5)6.
    
    Amended and Restated Employment Agreement by and between David R. Emery and the
Company (filed as Exhibit 10.7)7.
    
    Employment Agreement by and between John M. Bryant, Jr. and the Company (filed
as Exhibit 10.8)8.
    
    Employment Agreement by and between Scott W. Holmes and the Company (filed as
Exhibit 10.9)9.
    
    Employment Agreement by and between B. Douglas Whitman, II and the Company
(filed as Exhibit 10.10)10.
    
    2007 Employees Stock Incentive Plan (filed as Exhibit 10.12)11.
    
    The Companys Long-Term Incentive Program (filed as Exhibit 10.13)12.
    
    Amendment, dated December 21, 2007, to 2007 Employees Stock Incentive Plan (filed
as Exhibit 10.14)
 86




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##### Table of Contents



SIGNATURES
  HEALTHCARE REALTY TRUST INCORPORATEDBy:
    /s/  David R. EmeryDavid R. EmeryChairman of the Board and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ David R. Emery

David R. Emery
    
    Chairman of the Board and Chief Executive 
Officer (Principal Executive Officer)
    
    February 22, 2010/s/ Scott W. Holmes

Scott W. Holmes
    
    Executive Vice President and Chief Financial 
Officer (Principal Financial Officer)
    
    February 22, 2010/s/ David L. Travis

David L. Travis
    
    Senior Vice President and Chief Accounting 
Officer (Principal Accounting Officer)
    
    February 22, 2010/s/ Errol L. Biggs, Ph.D.
    
    Director
    
    February 22, 2010Errol L. Biggs, Ph.D./s/ Charles Raymond Fernandez, M.D.
    
    Director
    
    February 22, 2010Charles Raymond Fernandez, M.D./s/ Batey M. Gresham, Jr.
    
    Director
    
    February 22, 2010Batey M. Gresham, Jr./s/ Marliese E. Mooney
    
    Director
    
    February 22, 2010Marliese E. Mooney/s/ Edwin B. Morris, III
    
    Director
    
    February 22, 2010Edwin B. Morris, III/s/ John Knox Singleton
    
    Director
    
    February 22, 2010John Knox Singleton/s/ Bruce D. Sullivan
    
    Director
    
    February 22, 2010Bruce D. Sullivan/s/ Dan S. Wilford
    
    Director
    
    February 22, 2010Dan S. Wilford
 87




---



##### Table of Contents



Schedule II
 Valuation and Qualifying Accounts at December 31, 2009  (Dollars in thousands)
 Balance at
    
    
    Additions
    
    
    UncollectibleBeginning
    
    
    Charged to Costs
    
    
    Charged to Other
    
    
    Accounts
    
    
    Balance at EndDescription
    
    of Period
    
    
    and Expenses
    
    
    Accounts
    
    
    Written-off
    
    
    of Period2009
    
    
    Accounts and notes receivable allowance
    
    $
    3,323
    
    
    $
    517
    
    
    $
    
    
    
    $
    166
    
    
    $
    3,674$
    3,323
    
    
    $
    517
    
    
    $
    
    
    
    $
    166
    
    
    $
    3,6742008
    
    
    Accounts and notes receivable allowance
    
    $
    1,499
    
    
    $
    1,904
    
    
    $
    
    
    
    $
    80
    
    
    $
    3,323Preferred stock investment reserve
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    $
    2,499
    
    
    $
    1,904
    
    
    $
    
    
    
    $
    1,080
    
    
    $
    3,3232007
    
    
    Accounts and notes receivable allowance
    
    $
    2,522
    
    
    $
    986
    
    
    $
    
    
    
    $
    2,009
    
    
    $
    1,499Preferred stock investment reserve
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000$
    3,522
    
    
    $
    986
    
    
    $
    
    
    
    $
    2,009
    
    
    $
    2,499
 88




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##### Table of Contents



Schedule III  Real Estate and Accumulated Depreciation at December 31, 2009
 Buildings, Improvements,Land
    
        Lease Intangibles and CIPCost
    
    
    
    
    
    
    
    
    

    CostCapitalized
    
    
    
    
    
    
    
    
    
    Capitalized
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1) (4)Number of
    
    
    
    
    
    Initial
    
    Subsequent to
    
    
    
    
    
    Initial
    
    Subsequent to
    
    
    
    
    
    Personal
    
    (1) (3) (4)
    
    Accumulated
    
    (5)
    
    DateProperty Type
    
    Properties
    
    State
    
    Investment
    
    Acquisition
    
    Total
    
    Investment
    
    Acquisition
    
    Total
    
    Property
    
    Total Assets
    
    Depreciation
    
    Encumbrances
    
    Acquired
    
    Date ConstructedMedical Office
    
    
    135
    
    
    AZ, CA, CO, DC, FL, GA, HI, IA, IL, IN, KS, LA, MD, MI, MO, MS, NC, NV, OR, SC, PA, TN, TX, VA, WA
    
    $
    89,604
    
    
    $
    1,674
    
    
    $
    91,278
    
    
    $
    1,402,292
    
    
    $
    153,576
    
    
    $
    1,555,868
    
    
    $
    1,747
    
    
    $
    1,648,893
    
    
    $
    274,057
    
    
    $
    130,927
    
    
    
    1993-2009
    
    
    1905 - 2009 2 Under Const. (2)Physician Clinics
    
    
    32
    
    
    AL, AZ, CA, FL, GA, IA, IN, MA, TN,  TX, VA
    
    
    18,145
    
    
    
    515
    
    
    
    18,660
    
    
    
    150,685
    
    
    
    6,174
    
    
    
    156,859
    
    
    
    391
    
    
    
    175,910
    
    
    
    47,229
    
    
    
    
    
    
    
    1993-2008
    
    
    
    1968-2003Ambulatory Care/Surgery
    
    
    10
    
    
    CA, FL, GA, IL, MO, NV, TX
    
    
    17,243
    
    
    
    434
    
    
    
    17,677
    
    
    
    75,123
    
    
    
    7,740
    
    
    
    82,863
    
    
    
    104
    
    
    
    100,644
    
    
    
    32,237
    
    
    
    13,868
    
    
    
    1993-2001
    
    
    
    1985-1998Specialty Outpatient
    
    
    5
    
    
    AL, AR, FL, IA, VA
    
    
    1,313
    
    
    
    491
    
    
    
    1,804
    
    
    
    11,682
    
    
    
    
    
    
    
    11,682
    
    
    
    
    
    
    
    13,486
    
    
    
    3,766
    
    
    
    1,173
    
    
    
    1998-2008
    
    
    
    1986-2006Specialty Inpatient
    
    
    13
    
    
    AL, AZ, CA, FL, IN, PA, TX
    
    
    7,399
    
    
    
    151
    
    
    
    7,550
    
    
    
    227,074
    
    
    
    
    
    
    
    227,074
    
    
    
    
    
    
    
    234,624
    
    
    
    61,008
    
    
    
    
    
    
    
    1994-2009
    
    
    
    1983-2009Other
    
    
    10
    
    
    AL, IN, MI, TN, VA
    
    
    1,827
    
    
    
    73
    
    
    
    1,900
    
    
    
    36,323
    
    
    
    6,531
    
    
    
    42,854
    
    
    
    636
    
    
    
    45,390
    
    
    
    17,366
    
    
    
    1,721
    
    
    
    1993-2007
    
    
    
    1967-1995Total Real Estate
    
    
    205
    
    
    
    
    
    
    
    135,531
    
    
    
    3,338
    
    
    
    138,869
    
    
    
    1,903,179
    
    
    
    174,021
    
    
    
    2,077,200
    
    
    
    2,878
    
    
    
    2,218,947
    
    
    
    435,663
    
    
    
    147,689Land Held for
Development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,301
    
    
    
    
    
    
    
    17,301
    
    
    
    
    
    
    
    17,301
    
    
    
    
    
    
    
    Corporate Property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,631
    
    
    
    14,631
    
    
    
    6,668
    
    
    
    Total Property
    
    
    205
    
    
    
    
    
    
    $
    135,531
    
    
    $
    3,338
    
    
    $
    138,869
    
    
    $
    1,920,480
    
    
    $
    174,021
    
    
    $
    2,094,501
    
    
    $
    17,509
    
    
    $
    2,250,879
    
    
    $
    442,331
    
    
    $
    147,689
 
 (1)
    
    Includes six assets held for sale at December 31, 2009 of approximately $25.6 million (gross)
and accumulated depreciation of $8.7 million; twelve assets at December 31, 2008 of $119.1
million (gross) and accumulated depreciation of $29.9 million; and six assets at December 31,
2007 of $25.9 million (gross) and accumulated depreciation of $10.5 million.(2)
    
    Development at December 31, 2009.(3)
    
    Total assets at December 31, 2009 have an estimated aggregate total cost of $2.1 billion for
federal income tax purposes.(4)
    
    Depreciation is provided for on a straight-line basis on buildings and improvements over 3.0
to 39.0 years, lease intangibles over 1.3 to 93.0 years,
personal property over 3.0 to 15.0 years,
and land improvements over 9.5 to 15.0 years.(5)
    
    Includes discounts totaling $7.7 million as of December 31, 2009.(6)
    
    Reconciliation of Total Property and Accumulated Depreciation for the twelve months ended
December 31, 2009, 2008 and 2007: Year to Date
    
    
    Year to Date
    
    
    Year to DateEnding 12/31/09 (1)
    
    
    Ending 12/31/08 (1)
    
    
    Ending 12/31/07 (1)Total
    
    
    Accumulated
    
    
    Total
    
    
    Accumulated
    
    
    Total
    
    
    Accumulated(Dollars in thousands)
    
    Property
    
    
    Depreciation
    
    
    Property
    
    
    Depreciation
    
    
    Property
    
    
    DepreciationBeginning Balance
    
    $
    2,120,853
    
    
    $
    397,265
    
    
    $
    1,722,491
    
    
    $
    355,919
    
    
    $
    1,928,326
    
    
    $
    373,706Additions during the period:Real Estate
    
    
    141,579
    
    
    
    67,680
    
    
    
    362,073
    
    
    
    52,451
    
    
    
    58,615
    
    
    
    51,901Corporate Property
    
    
    284
    
    
    
    784
    
    
    
    320
    
    
    
    651
    
    
    
    765
    
    
    
    184Construction in Progress
    
    
    85,120
    
    
    
    
    
    
    
    74,085
    
    
    
    
    
    
    
    74,955
    
    
    
    Retirement/dispositions:Real Estate
    
    
    (96,954
    )
    
    
    (23,395
    )
    
    
    (38,103
    )
    
    
    (11,746
    )
    
    
    (339,060
    )
    
    
    (69,523
    )Corporate Property
    
    
    (3
    )
    
    
    (3
    )
    
    
    (13
    )
    
    
    (10
    )
    
    
    (1,110
    )
    
    
    (349
    )Ending Balance
    
    $
    2,250,879
    
    
    $
    442,331
    
    
    $
    2,120,853
    
    
    $
    397,265
    
    
    $
    1,722,491
    
    
    $
    355,919
 89




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##### Table of Contents



Schedule IV
 Mortgage Loans on Real Estate at December 31, 2009  (Dollars in thousands)
 Periodic
    
    
    OriginalInterest
    
    
    Maturity
    
    
    Payment
    
    
    Face
    
    
    CarryingDescription
    
    Rate
    
    
    Date
    
    
    Terms
    
    
    Amount
    
    
    Amount
    
    
    BalloonPhysician clinic facility located in California
    
    
    8.30
    %
    
    
    05/12/2016
    
    
    
    (1
    )
    
    $
    14,920
    
    
    $
    14,920
    
    
    $
    13,895
    (4)Physician clinic facility located in Texas
    
    
    8.50
    %
    
    
    09/01/2031
    
    
    
    (2
    )
    
    
    1,986
    
    
    
    1,898
    
    
    
    
    (5)Medical office building located in Iowa
(construction loan)
    
    
    6.23
    %(7)
    
    
    03/31/2010
    
    
    
    (3
    )
    
    
    43,764
    
    
    
    4,290
    
    
    
    4,290
    (6)Medical office building located in Iowa
    
    
    8.50
    %
    
    
    01/01/2011
    
    
    
    (3
    )
    
    
    9,900
    
    
    
    9,900
    
    
    
    9,900
    (6)Total Mortgage Note Receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    31,008
 
 (1)
    
    Interest only until May 12, 2011, then principal and interest amortized monthly based on a
25-year amortization schedule.(2)
    
    Paid in monthly installments of principal and interest. Fully amortized over 300 months.(3)
    
    Interest only until maturity. Principal payments may be made during term without penalty
with remaining principal balance due at maturity.(4)
    
    Prepayment of all or part of the principal, with premium, may be made anytime after May 12,
2008. The balloon amount above represents the principal amount due at maturity.(5)
    
    Prepayment may be made at anytime after July 5, 2010.(6)
    
    Prepayment may be made at anytime.(7)
    
    Interest rate at December 31, 2009 based on LIBOR + 6.00%.(8)
    
    A rollforward of Mortgage loans on real estate for the three years ended December 31, 2009: Years Ended December 31,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    59,001
    
    
    $
    30,117
    
    
    $
    73,856Additions during period:New or acquired mortgages
    
    
    9,900
    
    
    
    7,996
    
    
    
    14,150Increased funding on existing mortgages
    
    
    10,616
    
    
    
    28,974
    
    
    
    20,516
    
    
    
    36,970
    
    
    
    14,150Deductions during period:Scheduled principal payments
    
    
    (26
    )
    
    
    (29
    )
    
    
    (84
    )Principal repayments and reductions (9)
    
    
    (12,747
    )
    
    
    (8,057
    )
    
    
    (57,805
    )Principal reductions due to
acquisitions (10)
    
    
    (35,736
    )
    
    
    
    
    
    
    (48,509
    )
    
    
    (8,086
    )
    
    
    (57,889
    )Balance at end of period
    
    $
    31,008
    
    
    $
    59,001
    
    
    $
    30,117
 
 (9)
    
    Principal repayments for the years ended December 31, 2009, 2008 and 2007 includes
unscheduled principal reductions on mortgage notes of $0.1 million, $5.6 million and $0.9
million, respectively.(10)
    
    During 2009, a consolidated joint venture, in which the Company owns an 80% controlling
interest, purchased three medical office buildings located in Iowa. The noncontrolling
interest holder constructed the medical office buildings which were funded by the Company
through a construction loan. Upon acquisition of the buildings by the joint venture, the
construction loan was partially converted to additional equity investment in the joint venture
by the Company with the amount remaining converting to a permanent mortgage note payable to
the Company, which is eliminated in consolidation in the Companys Consolidated Financial
Statements. 90