##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
 ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Transition Period Fromto
 Commission file number: 001-31375
 WINDROSE MEDICAL PROPERTIES TRUST
 (Exact Name of Registrant as Specified in Its Charter)
 Maryland
    
    35-2166961(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)3502 Woodview Trace, Suite 210, Indianapolis, IN
    
    46268(Address of Principal Executive Offices)
    
    (Zip Code)
 (317) 860-8180
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon
Shares of Beneficial Interest, $0.01 par value per share
    
    New York Stock Exchange7.5% Series A Cumulative Convertible Preferred Shares of
Beneficial Interest, $0.01 par value per share
    
    New York Stock Exchange
 Securities
registered pursuant to Section 12(g) of the Act:
 Title of Class
 o þ
 o þ
 þ o
 o
  o þ o
 o þ
 190,750,393
  DOCUMENTS INCORPORATED BY REFERENCE:




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##### 



PAGECAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
    
    1PART I
    
    1Item 1. Business
    
    1Item 1A. Risk Factors
    
    9Item 1B. Unresolved Staff Comments
    
    21Item 2. Properties
    
    21Item 3. Legal Proceedings
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    24PART II
    
    24Item 5. Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    24Item 6. Selected Financial Data
    
    25Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    26Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    39Item 8. Financial Statements and Supplementary Data
    
    41Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    41Item 9A. Controls and Procedures
    
    41Item 9B. Other Information
    
    41PART III
    
    42Item 10. Trustees and Executive Officers of the Registrant
    
    42Item 11. Executive Compensation
    
    42Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    42Item 13. Certain Relationships and Related Transactions
    
    42Item 14. Principal Accounting Fees and Services
    
    42PART IV
    
    43Item 15. Exhibits and Financial Statement Schedules
    
    43SignaturesIndex to Consolidated Financial Statements and Financial Statement Schedules
    
    F-1Exhibit Index
    
    E-1Ex-10.06 Deferred Compensation PlanEx-12.01  Statement Regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share DividendsEx-21.01 List of Subsidiaries of the RegistrantEx-23.01  Consent of KPMG LLPEx-31.01 Section 302 Certification of the CEOEx-31.02 Section 302 Certification of the COOEx-31.03 Section 302 Certification of the CFOEx-32.01 Section 906 Certification of the CEOEx-32.02 Section 906 Certification of the COOEx-32.03 Section 906 Certification of the CFO




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  
 PART I
 
 ITEM 1. BUSINESS
 Overview
  
    
    Medical Office Buildings.Medical office buildings are office and clinic facilities,
often located near hospitals or on hospital campuses, specifically constructed and designed
for the use of physicians and other health care personnel to provide services to their
patients. Medical office buildings typically contain sole and group physician practices
and may hold laboratory and other patient services, including Ambulatory Surgery Centers. We have not broken out those Medical Office Buildings with Ambulatory Surgery Centers.
    
    Ambulatory Surgery Centers.Ambulatory surgery centers
are used for general or specialty surgical procedures not requiring an overnight
stay in a hospital. In addition to surgery facilities, ambulatory surgery centers typically
include a single group office and/or clinic space.
    
    Outpatient Treatment and Diagnostic Facilities.Outpatient treatment and diagnostic
facilities provide treatments and care not typically provided in physician offices or
clinics, such as gastrointestinal endoscopy care, oncology treatment, kidney dialysis and
other similar services.
    
    Specialty Hospitals.Specialty hospitals focus and specialize in providing care for certain conditions and
performing certain procedures, such as cardiovascular and orthopedic surgery.
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Specialty hospitals may include long-term acute care hospitals that provide care for patients
requiring extended hospital stays and specialized care and observation more efficiently and
economically than traditional acute care hospitals.
    Portfolio Summary
  Number
    
    
    Rentableof
    
    
    SquareProperty Type(1)
    
    Buildings
    
    
    FeetSpecialty Medical Properties:Medical Office Buildings
    
    
    69
    
    
    
    2,472,776Ambulatory Surgery Centers
    
    
    4
    
    
    
    107,099Outpatient
Treatment and Diagnostic Facilities
    
    
    4
    
    
    
    160,855Specialty Hospitals and Treatment Centers
    
    
    1
    
    
    
    126,946Other Properties:Commercial
Office Properties
    
    
    6
    
    
    
    152,837Total
    
    
    84
    
    
    
    3,020,513
 
 (1)
    
    Several properties have multiple specialty medical uses (e.g., medical office buildings and ambulatory surgery center combinations). For purposes of this table,
 property types are listed by their primary functional purpose.   Taxation of the Company
  2




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Segments
  Significant 2005 Developments
 Real Estate Transactions
  
    
    the sale of Morningside Professional Plaza, located in Port St. Lucie, Florida, on
February 2, 2005, for approximately $6.7 million. The Company classified this property as
held for sale in the third quarter of 2004 because the
Companys management believed that this property no longer satisfied the Companys investment criteria;
    
    the acquisition of two medical office buildings in the Atlanta, Georgia metropolitan
area on March 1, 2005, for approximately $9.8 million;
    
    the acquisition of a third medical office building in the Atlanta, Georgia metropolitan
area on May 2, 2005, for approximately $5.5 million. In
connection with this transaction, the Company secured a first mortgage
loan for approximately $3.6 million;
    
    the acquisition of four medical office buildings, two of which are located in Delray
Beach, Florida, one located in the Los Angeles, California metropolitan area and one
located in the San Jose, California metropolitan area, on June 7, 2005, for approximately
$53.5 million. In connection with this transaction, the  Company
assumed $27.7 million of existing mortgage loans and secured a new first
mortgage loan of approximately $6.5 million;
    
    the acquisition of two medical office buildings in the Chicago, Illinois metropolitan
area on June 24, 2005, for approximately $6.9 million. In
connection with this transaction, the Company secured a first mortgage
loan for approximately $1.9 million;
    
    the acquisition of one medical office building, one ambulatory surgery center, and one
partially improved parcel adjacent to the medical office building and
one surgery center in
Union City, Tennessee on July 14, 2005, for approximately
$11.4 million. The Company issued a
promissory note in the amount of $406,000 in connection with this
transaction;
    
    the acquisition of one medical office building in Fayetteville, Georgia on October 5,
2005, for approximately $5.5 million, including approximately $3.6
million of assumed mortgage debt;
    
    the acquisition of a 43.8% general partner ownership interest in a limited partnership
that owns a medical office building located in North Las Vegas, Nevada on October 31, 2005,
for approximately $4.9 million. The Company guaranteed $2.9 million in existing mortgage
debt on the property in connection with this acquisition;
    
    the acquisition of one medical office building and a four-building commercial office
park in Plantation, Florida on November 4, 2005, for
approximately $30.4 million, including the assumption of approximately $20.6 million of debt;
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
    
    the acquisition of three medical office buildings, one of which is located in Edinburg,
Texas, one located in Palm Springs, Florida and one located in Palm Bay, Florida on
November 10, 2005, for approximately $21.1 million, including approximately $11.6
million of assumed mortgage debt;
    
    the acquisition of seven medical office buildings, one
of which is located in Jupiter, Florida, one located in Boynton Beach, Florida, three
located in West Palm Beach, Florida, one located in Dallas, Texas and one located in El Paso, Texas
on November 17, 2005, for approximately $84.1 million, including
approximately $59.1 million of assumed mortgage debt;
    
    the acquisition of one medical office building in Palm Springs, Florida on November 22,
2005, for approximately $6.1 million, including approximately $3.3 million
of assumed mortgage debt;
    
    the acquisition of six medical office buildings, one of
which is in Boynton Beach, Florida, one located in Boca Raton, Florida, one located in
Arcadia, California and three located in West Palm Beach, Florida on
December 2, 2005, for
approximately $69.2 million, including approximately $43.5 million of assumed mortgage debt; and
    
    the acquisition of two medical office buildings, one located in Palm Springs, California and
one located in Wellington, Florida on December 13, 2005, for approximately
$21.4 million, including approximately $14.5 million of
assumed mortgage debt.
  Development Projects
  Financing
Transactions
  
    
    On March 15, 2005, the Company completed an offering of 1,700,000 common shares at an offering
price of $13.91 per share. The net proceeds of this offering, after deducting
underwriting discounts, commissions and other offering expenses, was approximately $22.2
million.
    
    On June 30, 2005, the Company completed an offering of 2,100,000 shares of the Companys 7.5%
Series A cumulative convertible preferred shares of beneficial interest (the Series A preferred
shares) at an offering price of $25.00 per Series A preferred share. The net
proceeds of this offering, after deducting placement agent fees and other offering expenses, was
approximately $51.1 million.
    
    On September 30, 2005, the Company entered into an amended and restated secured revolving
credit facility, which amended and restated its prior secured revolving credit facility, with The
Huntington National Bank. The amended and restated secured revolving credit
facility provides for three loan facilities: (i) a secured revolving credit facility of $50.0
million for the acquisition of real estate assets and for working capital purposes, (ii) a secured
revolving line of credit of $10.0 million to acquire real estate assets and (iii) an unsecured line
of credit in an amount not to exceed $3.0 million for the issuance of letters of credit.
    
    On November 22, 2005, the Company completed an offering of 3,000,000 common shares at an
offering price of $14.10 per share. The net proceeds of this offering, after
placement agent fees and other offering expenses, was approximately $40.7 million.
    
    On December 6, 2005, the Company entered into a $20.0 million senior unsecured bridge loan
agreement with KeyBank National Association. The Company entered into the
bridge loan with KeyBank in order to provide the Company with
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additional flexibility in funding the cash portion of a multi-property portfolio acquired in
the second half of the fourth quarter of 2005 and for working capital purposes.
 Competitive Strengths
  
    
    Unique focus on specialty medical properties providing outpatient services.The Company
is a public real estate company focusing on the ownership, development and management of
specialty medical properties, particularly those offering outpatient care. The Company
believes that recent trends in the healthcare industry have led medical service providers
to provide an increasing amount of outpatient services from specialty medical properties.
The Company believes that through this focus, it can achieve a unique and attractive
profile for cash flow growth and increased portfolio value.
    
    Experienced management team.The Companys senior management team
is experienced in developing, acquiring, operating, managing and financing specialty
medical properties. The
Companys management team has an in-depth understanding of the rapid changes in the
healthcare industry and the ability to execute the Companys opportunistic strategy.
    
    Broad network of relationships with healthcare providers.Through the reputation and
experience of the Companys management, the Company has developed a broad network of
relationships with healthcare providers. The Company believes that it is among a limited
number of companies that have the experience and knowledge to satisfy the complex real
estate needs and demands of medical services providers, particularly during periods of
rapid change.
    
    Broad range of services.The Company is positioned to provide the capital that
medical services providers need to expand their practices, while at the same time offering
the professional management, design and implementation services that their practices
require on an ongoing basis. As medical services providers divest themselves of real
estate in favor of sale/leaseback arrangements, the Company has the capability to purchase
the real estate and subsequently provide the real estate services
typically required by the service providers as lessees.
    
    Strong development capabilities.HADC has been providing facility, design, development,
finance and management services to healthcare systems, physical groups and third-party
medical property owners for over 29 years. Since its inception, HADC has completed over
600 projects totaling in excess of $1.8 billion of construction costs. While HADC expects
to receive fees from third-parties, HADCs primary strategy is to develop properties for
ownership by the Company.
 Business Strategy
   External Growth Strategy
  
    
    Acquiring specialty medical properties in areas with attractive growth characteristics.
The Company seeks to acquire or to develop quality specialty medical properties that meet
the Companys investment criteria and are located in geographic areas where the demand for
specialty medical services is expected to increase over the coming years. The Company also
targets
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properties that are located on or near strategic hospital campuses, in expanding markets with
high occupancy rates and competitive tenant lease terms. The Company believes that such
properties, when efficiently marketed, actively managed and leased, provide attractive
risk-adjusted returns, cash flow growth potential and stable rents.
    
    Providing services through HADC.To better serve the need of the Companys tenants, the
Company will develop through HADC and construct new build-to-suit and multi-tenant
facilities when an acceptable level of pre-construction leasing is achieved. While the
primary objective of HADC is the development of quality specialty medical properties
for the Companys ownership, HADC also provides a select amount of these services for
third-parties, especially those that are expected to be a source of long-term relationships
and potential property acquisitions. HADC earns fees from third-parties by
providing services such as property development, facility planning, medical equipment
planning and implementation services, real estate brokerage, leasing services and property
management.
 Internal Growth Strategy
  
    
    Entering into long-term leases with annual contractual rent increases. The Company
expects to generate internal growth in cash flow through leases that contain provisions for
fixed contractual rental increases or increases that are tied to indices such as the
Consumer Price Index.
    
    Use of net-lease structures. The Company seeks to enter long-term leases primarily
under net lease structures, where the tenant agrees to pay monthly rent and property
operating expenses (taxes, maintenance and insurance) plus, typically, future rent
increases based on stated percentage increases or increases in the Consumer Price Index.
The Company believes that long-term leases, coupled with a tenants responsibility for
property expenses, will produce a more predictable income stream, while continuing to offer
the potential for growth in rental income.
    
    Replacing tenants quickly at the best available market terms and lowest possible leasing
costs.The Company seeks to lease space in a timely manner at the most favorable rates it
can attract, while also reducing leasing costs. The Company believes
that with its
focus on quality properties in desirable locations and its relationships with
medical services providers, it can minimize vacancies in its properties and lease
space at market terms.
    
    Proactive property management to maximize tenant retention.In order to achieve greater
awareness and responsiveness to tenant needs, the Company either directly manages its
properties or provides property management through qualified and
experienced third-parties.
The Company believes that this emphasis on tenant needs will lead to enhanced tenant
satisfaction and retention. The Company recognizes that the renewal of existing tenant
leases, as opposed to tenant replacement, often provides the best operating results by
minimizing transaction costs and avoiding interruptions in rental income during periods of
vacancy.
 Financing Strategy
  
    
    borrow at fixed rates or through instruments that can take on the characteristics of
fixed-rate debt (including the use of interest rate swaps);
    
    have, as its goal, conservative debt service ratios;
    
    balance debt in a fashion that enhances the Companys
ability to access capital markets;
    
    appropriately use its secured revolving credit facility to
finance acquisitions in concert with other debt instruments, which
depending on appropriateness and availability, include, the
assumption of mortgage loans and the placement of stand-
alone non-recourse debt secured by the property (the Company
may cause the Operating Partnership to issue units of limited
partnership in concert with borrowings to finance acquisitions); and
    
    selectively access capital in efficient ways so as to deploy the funds rapidly to
income-producing assets or new development.
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Competition
  Government Regulation
  Fraud
and Abuse Laws
  
    
    The Federal Anti-Kickback Statute,which prohibits, among other things, the offer, payment,
solicitation or receipt of any form of remuneration in return for, or to induce, the referral of
Medicare and Medicaid patients;
    
    The Federal Physician Self-Referral Prohibition (Stark),which restricts physicians from
making referrals for certain designated health services for which payment may be made under
Medicare or Medicaid programs to an entity with which the physician,
or an immediate family member,
has a financial relationship;
    
    The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent
claims for payment to the federal government, including under the
Medicare and Medicaid programs; and
    
    The Civil Monetary Penalties Law, which authorizes the Department of Health and Human
Services to impose monetary penalties for certain fraudulent acts.
 qui tam
 Environmental
Matters
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The
Medicare and Medicaid Programs
  Healthcare
Facilities
  Recent Regulatory Developments
     8




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Availability of Reports
 http://www.windrosempt.com http://www.windrosempt.com
 
 ITEM 1A. RISK FACTORS
 Risks Relating to the Healthcare Industry
 Regulations targeting specific sectors of the healthcare industry could adversely affect our
business.
   Reductions in reimbursement from third party payors, including Medicare and Medicaid, could
adversely affect the profitability of our tenants and hinder their ability to make rent payments
to us.
 . .
 . . .
 The healthcare industry is heavily regulated, and new laws or regulations, changes to existing
laws or regulations, loss of licensure or failure to obtain licensure could result in the
inability of our tenants to make lease payments to us.
 .
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.
 . . .
 Our real estate investments are concentrated in specialty medical properties, making us more
vulnerable economically than if our investments were
diversified.
  Adverse trends in the healthcare industry may negatively affect our tenants ability to make
lease payments and our ability to make distributions to our
shareholders.
  
    
    changes in the demand for and methods of delivering healthcare services;
    
    changes in third-party reimbursement policies;
    
    significant unused capacity in certain areas, which has created substantial competition
for patients among healthcare providers in those areas;
    
    continuing pressure by private and governmental payors to reduce payments to providers of services; and
    
    increased scrutiny of billing, referral and other practices by federal and state authorities.
  Our tenants are subject to fraud and abuse laws, the violation of which by a tenant may
jeopardize the tenants ability to make rent payments to
us.
   
    
    the Federal Anti-Kickback Statute, which prohibits, among other things, the offer,
payment, solicitation or receipt of any form of remuneration in return for, or to induce,
the referral of Medicare and Medicaid patients;
    
    the Federal Physician Self-Referral Prohibition, which, subject to specific exceptions,
restricts physicians who have financial relationships with healthcare providers from making
referrals for specifically designated health services for which payment
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may be made under Medicare or Medicaid programs to an entity with which the physician, or an
immediate family member, has a financial relationship;
    
    the False Claims Act, which prohibits any person from knowingly presenting false or
fraudulent claims for payment to the federal government, including under the Medicare and
Medicaid programs; and
    
    the Civil Monetary Penalties Law, which authorizes the Department of Health and Human
Services to impose monetary penalties for certain fraudulent acts.
 qui tam
 Risks Relating to Our Business, Growth Strategy and Organizational Structure
 We
may be unable to acquire or may be delayed in acquiring specialty
medical properties.
 .
 Dependence on our tenants for lease payments may adversely impact our ability to make
distributions to our shareholders.
   We do not know if our tenants will renew their existing leases, and if they do not, we may be
unable to lease the properties on as favorable terms, or at
all.
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Failure to properly manage our rapid growth could distract our management or increase our
expenses.
  Certain of our properties may not have efficient alternative uses.
  Our business is highly competitive and we may be unable to compete successfully.
  
    
    private investors;
    
    healthcare providers, including physicians;
    
    healthcare-related REITs;
    
    real estate partnerships;
    
    financial institutions; and
    
    local developers.
 . . . . . . .
 Our use of debt financing subjects us to significant risks, including refinancing risk and the
risk of insufficient cash available for distribution.
 . .
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. . . . . . .
  Conflicts of interest could result in an executive officer or a trustee acting other than in our
best interest.
  
    
    the formation transactions at the time of our initial public offering;
    
    their duties to our shareholders and the limited partners of our operating partnership; and
    
    allocation of their time between our business and affairs and their other business interests.
 Conflicts of interest resulting from certain transactions in connection with our initial
public offering may lead to decisions that are not in our shareholders best interest
 Our trustees may have conflicting duties
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Our executive officers performing other activities may limit the amount of time available to
be spent on our business
 Holders of our outstanding Series A preferred shares have dividend, liquidation, and other
rights that are senior to the rights of the holders of our common shares.
 . . . . . .
 Provisions of Maryland law, our Declaration of Trust and our Bylaws may deter changes in
management and third-party acquisition proposals or cause dilution.
 Our ownership limitations may restrict business combination opportunities. . . . . . . .
 The Declaration of Trust contains a provision that creates staggered terms for our board of
trustees. . . . . .
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The
Maryland Business Combination Act may discourage a third-party from acquiring us. . .
 Our board of trustees may issue additional shares that may cause dilution.
 
    
    amend the Declaration of Trust to increase or decrease the aggregate number of shares
of beneficial interest or the number of shares of beneficial interest of any class or
series that we have the authority to issue;
    
    cause us to issue additional authorized but unissued common shares or preferred
shares; and
    
    classify or reclassify any unissued common or preferred shares and to set the
preferences, rights and other terms of such classified or reclassified shares, including
the issuance of additional common shares or preferred shares that have preference rights
over the common shares with respect to dividends, liquidation, voting and other matters.
  Our board of trustees may issue additional preferred shares with terms that may discourage a
third-party from acquiring us. . . .
  Three of our executive officers have agreements that provide them with benefits in the event
their employment is terminated following a change in control of our company, which could deter a
change in control that could be beneficial to our shareholders.
 . .
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Our board of trustees may change our investment and operational policies without a vote of our
shareholders.
 . .
 A
significant number of our properties are located in two geographic locations, making us
vulnerable to changes in economic conditions in that particular
market.
  We depend on key personnel, the loss of which may threaten our ability to operate our business
successfully.
 . . .
 Our board of trustees and management make decisions on our behalf, and shareholders have limited
management rights.
 . .
 Shares available for future sale may have an adverse effect on the price of our common shares.
 . . . . . .
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We are the sole general partner of our operating partnership and may become liable for the debts
and other obligations of this partnership beyond the amount of our investment.
 . . .
 The market value of our common shares could decrease based on our performance, market perception
and condition and rising interest rates.
 . . .
 Tax-Related Risks
 Loss of our tax status as a REIT would have significant adverse consequences to us and the value
of our common shares.
 . . . .
  
    
    we would not be allowed a deduction for distributions to shareholders in computing
our taxable income;
    
    we would be subject to federal income tax at regular corporate rates and we might
need to borrow money or sell assets in order to pay any such tax;
    
    we also could be subject to the federal alternative minimum tax and possibly
increased state and local taxes; and
    
    unless we are entitled to relief under statutory provisions, we also would be
disqualified from taxation as a REIT for the four taxable years following the year
during which we ceased to qualify.
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Failure to make required distributions would subject us to tax.
 . .
 
    
    85% of our REIT ordinary income for that year;
    
    95% of our REIT capital gain net income for that year; and
    
    100% of our undistributed taxable income from prior years.
 . . .
 Risks Relating to Real Estate Investments
 Illiquidity of real estate investments could significantly impede our ability to respond to
adverse changes in the performance of our properties and harm our financial condition.
 . . .
 Our acquisitions and development properties may under perform forecasted results or we may be
limited in our ability to finance future acquisitions, which may harm our financial condition
and operating results, and we may not be able to make the distributions required to maintain our
REIT status.
 . . . .
 Properties with limited operating history may not achieve forecasted results, which could hinder
our ability to make distributions to our shareholders.
 .
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If we suffer losses that are not covered by insurance or that are in excess of our insurance
coverage limits, we could lose investment capital and anticipated profits.
 . .
 Capital expenditures for property renovation may be greater than forecasted and may adversely
impact our ability to make distributions to shareholders.
  All of our medical properties are subject to property taxes that may increase in the future and
adversely affect our business.
  Our financial performance and the price of our common shares will be affected by risks
associated with the real estate industry.
  
    
    changes in the national, regional and local economic climate;
    
    local conditions such as an oversupply of, or a reduction in demand for, medical
office space, outpatient treatment and diagnostic facilities, physician practice group
clinics, ambulatory surgery centers and specialty hospitals and treatment centers;
    
    attractiveness of our properties to physicians and other types of tenants;
    
    competition from other medical office buildings, outpatient treatment facilities,
physician practice group clinics, ambulatory surgery centers and specialty hospitals and
treatment centers; and
    
    as the owner and lessor of real estate, we are subject to risks under environmental
laws, compliance with which and any violation of which could materially adversely affect
us.
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Costs associated with complying with the Americans with Disabilities Act may adversely affect
our financial condition and operating results.
  Our ownership of properties through ground leases exposes us to the loss of such properties upon
breach or termination of the ground leases.
  Risks Related to Development
 Development and construction risks could adversely affect our profitability.
  
    
    we may be unable to obtain, or suffer delays in obtaining, necessary zoning,
land-use, building, occupancy and other required governmental permits and
authorizations, which could result in increased costs or our abandonment of these
projects;
    
    we may incur construction costs for property that exceed our original estimates due
to increased costs for materials or labor or other costs that we did not anticipate;
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
    
    we may not be able to obtain financing on favorable terms, which may render us unable
to proceed with our development activities; and
    
    we may be unable to complete construction and lease-up of a property on schedule,
which could result in increased debt service expense or construction costs.
   
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
   Mortgages

    Rentable
    
    OccupancyProperty
    
    Location
    

($000)

    Square Feet
    

Rate(1)310 Building(2)
    
    Nashville, TN
    
    $
    

    
    
    48,360
    
    
    
    96.8
    %Aberdeen I
    
    Boynton Beach, FL
    
    
    4,975

    
    
    25,565
    
    
    
    100.0
    %Aberdeen II
    
    Boynton Beach, FL
    
    
    4,463

    
    
    25,565
    
    
    
    100.0
    %Atrium Office Park (4 Buildings)
    
    Plantation, FL
    
    
    10,652

    
    
    98,511
    
    
    
    100.0
    %Biltmore Medical Mall
    
    Phoenix, AZ
    
    
    31,854

    
    
    152,600
    
    
    
    99.7
    %Central Medical Park (9 Buildings)
    
    Durham, NC
    
    
    8,137

    
    
    120,930
    
    
    
    89.3
    %Columbia Medical Plaza
    
    West Palm Beach, FL
    
    
    6,585

    
    
    43,797
    
    
    
    100.0
    %Congress Professional Center II
    
    Palm Springs, FL
    
    
    3,303

    
    
    26,849
    
    
    
    100.0
    %Cooper Voorhees Medical Mall (3
Buildings)
    
    Voorhees,  NJ
    
    
    22,100

    
    
    116,451
    
    
    
    86.5
    %Coral Springs Surgical Center
    
    Coral Springs, FL
    
    
    3,298

    
    
    43,728
    
    
    
    95.4
    %
 21




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##### Table of Contents



Mortgages
    
    Rentable
    
    OccupancyProperty
    
    Location
    
    ($000)
    
    Square Feet
    

Rate (1)Desert Professional Plaza
    
    Palm Springs, CA
    
    
    6,808
    
    
    
    44,304
    
    
    
    80.1
    %Edinburg Regional Medical Plaza
    
    Edinburg, TX
    
    
    6,479
    
    
    
    52,068
    
    
    
    74.1
    %Elm Street Professional Plaza
    
    Reno, NV
    
    
    9,002
    
    
    
    66,606
    
    
    
    90.5
    %Foundation
Medical Tower (3)
    
    Bellaire, TX
    
    
    
    
    
    
    99,768
    
    
    
    89.7
    %Foundation
Surgical Hospital (3)
    
    Bellaire, TX
    
    
    
    
    
    
    126,946
    
    
    
    100.0
    %G & L Raines Childrens Pavilion
(Northside)
    
    West Palm Beach, FL
    
    
    8,020
    
    
    
    35,409
    
    
    
    100.0
    %Gateway East Medical Office
Buildings (3 Buildings)
    
    El Paso, TX
    
    
    5,801
    
    
    
    69,927
    
    
    
    84.1
    %JFK Medical Pavilion I at Palm
Springs
    
    Palm Springs, FL
    
    
    3,000
    
    
    
    17,738
    
    
    
    100.0
    %Johns Creek I (3 Buildings)
    
    Suwanee, GA
    
    
    3,590
    
    
    
    27,000
    
    
    
    100.0
    %Johns Creek II (3 Buildings)
    
    Suwanee, GA
    
    
    
    
    
    
    24,896
    
    
    
    100.0
    %Johns Creek III (2 Buildings)
    
    Suwanee, GA
    
    
    
    
    
    
    20,508
    
    
    
    100.0
    %Lake Mead Medical Arts Pavilion
    
    North Las Vegas, NV
    
    
    6,586
    
    
    
    43,921
    
    
    
    100.0
    %Lakewood Medical Pavilion
    
    Lakewood, CA
    
    
    6,500
    
    
    
    36,480
    
    
    
    100.0
    %Los Gatos Medical Pavilion
    
    Los Gatos, CA
    
    
    12,571
    
    
    
    55,927
    
    
    
    100.0
    %Medical Arts Center (Fayetteville)
    
    Fayetteville, GA
    
    
    3,576
    
    
    
    30,716
    
    
    
    90.6
    %Methodist Medical Building
    
    Sacramento, CA
    
    
    5,296
    
    
    
    46,440
    
    
    
    98.7
    %Mount Vernon Medical Center
    
    Atlanta, GA
    
    
    14,569
    
    
    
    85,121
    
    
    
    84.3
    %OrthoLink  East/West Medical Center
    
    Austell, GA
    
    
    4,607
    
    
    
    41,402
    
    
    
    100.0
    %OrthoLink  Gwinnett Center for
Specialty Medicine I
    
    Lawrenceville, GA
    
    
    4,894
    
    
    
    41,161
    
    
    
    100.0
    %OrthoLink  Gwinnett Center for
Specialty Medicine II
    
    Lawrenceville, GA
    
    
    2,546
    
    
    
    18,462
    
    
    
    100.0
    %Osler Medical Arts Pavilion
    
    Palm Bay, FL
    
    
    2,091
    
    
    
    17,790
    
    
    
    89.8
    %Palm Court Plaza and Professional
Center (2 Buildings)
    
    Delray Beach, FL
    
    
    14,835
    
    
    
    137,760
    
    
    
    95.1
    %Park Medical Center
    
    Charlotte, NC
    
    
    3,772
    
    
    
    34,000
    
    
    
    93.6
    %Partell Medical Center
    
    Las Vegas, NV
    
    
    4,841
    
    
    
    32,118
    
    
    
    66.8
    %Professional Center III
    
    West Palm Beach, FL
    
    
    3,573
    
    
    
    23,300
    
    
    
    100.0
    %Professional Center IV
    
    West Palm Beach, FL
    
    
    2,927
    
    
    
    17,738
    
    
    
    100.0
    %Professional Center V
    
    West Palm Beach, FL
    
    
    2,757
    
    
    
    17,790
    
    
    
    100.0
    %Rush Copley Medical Office Building
    
    Aurora, IL
    
    
    4,000
    
    
    
    31,244
    
    
    
    100.0
    %Rush Copley Medical Office Center
at Fox Valley
    
    Aurora, IL
    
    
    
    
    
    
    20,216
    
    
    
    100.0
    %Saint Marys Pavilion (Southside)
    
    West Palm Beach, FL
    
    
    7,397
    
    
    
    35,431
    
    
    
    100.0
    %Santa Anita Medical Plaza
    
    Arcadia, CA
    
    
    10,975
    
    
    
    86,762
    
    
    
    100.0
    %
 22




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##### Table of Contents



Mortgages
    
    Rentable
    
    OccupancyProperty
    
    Location
    

(000s)
    
    Square Feet
    

Rate (1)Sierra Health Services (4 Buildings)
    
    Las Vegas, NV
    
    
    8,643
    
    
    
    160,855
    
    
    
    100.0
    %Sierra Providence Eastside Center
    
    El Paso, TX
    
    
    11,237
    
    
    
    77,870
    
    
    
    86.8
    %Southpointe Medical Center
    
    Plantation, FL
    
    
    9,953
    
    
    
    47,020
    
    
    
    100.0
    %Stone Oak Physicians Plaza (2
Buildings)
    
    San Antonio, TX
    
    
    6,960
    
    
    
    65,652
    
    
    
    67.6
    %Tomball Professional Atrium Building
    
    Tomball, TX
    
    
    3,151
    
    
    
    53,617
    
    
    
    82.3
    %Trinity West Medical Plaza
    
    Lewisville, TX
    
    
    
    
    
    
    40,686
    
    
    
    100.0
    %Union City Medical Center
    
    Union City, TN
    
    
    
    
    
    
    35,000
    
    
    
    100
    %Union City Surgery Center
    
    Union City, TN
    
    
    406
    
    
    
    12,600
    
    
    
    0.0
    %Urology Center of Florida
    
    Ocala, FL
    
    
    
    
    
    
    19,561
    
    
    
    100.0
    %Urology Center of the South
    
    Germantown, TN
    
    
    
    
    
    
    33,777
    
    
    
    100.0
    %Wellington Medical Arts Pavilion
    
    Wellington, FL
    
    
    7,686
    
    
    
    48,000
    
    
    
    100.0
    %West Boca Medical Arts Pavilion II
    
    Boca Raton, FL
    
    
    14,926
    
    
    
    70,235
    
    
    
    82.9
    %West Pearland Professional Center I
    
    Pearland, TX
    
    
    2,576
    
    
    
    20,800
    
    
    
    100.0
    %West Pearland Professional Center II
    
    Pearland, TX
    
    
    1,832
    
    
    
    19,126
    
    
    
    100.0
    %West Tower at Doctors Hospital
    
    Dallas, TX
    
    
    16,798
    
    
    
    92,391
    
    
    
    100.0
    %Winn Way
    
    Decatur, GA
    
    
    1,252
    
    
    
    21,737
    
    
    
    95.1
    %Workplace Professional Center I
    
    Jupiter, FL
    
    
    7,846
    
    
    
    40,396
    
    
    
    100.0
    %Yorkville Medical Office Building
    
    Yorkville, IL
    
    
    
    
    
    
    19,885
    
    
    
    100.0
    %Total / Average
    
    
    
    
    
    $
    349,649
    
    
    
    3,020,513
    
    
    
    94.2
    %
 
 (1)
    
    Reflects rentable square feet occupied as of December 31, 2005, adjusted to reflect
leases for approximately 45,000 rentable square feet that had been executed prior to December 31, 2005 but had not yet been occupied. If the 45,000 were excluded, the
occupancy rate would be 92.4%.(2)
    
    This property secures the $4.0 million credit facility with Regions Bank.(3)
    
    Construction loans in the amounts of $15.5 million and $19.5 million are secured by
Foundation Medical Tower and Foundation Surgical Hospital, respectively.  
 ITEM 3. LEGAL PROCEEDINGS
  23




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
  Price Range
    
    
    DividendsHigh
    
    
    Low
    
    
    Per Share2005Fourth Quarter
    
    $
    15.31
    
    
    $
    14.10
    
    
    $
    0.225Third Quarter
    
    
    15.59
    
    
    
    14.11
    
    
    
    0.225Second Quarter
    
    
    14.16
    
    
    
    13.10
    
    
    
    0.225First Quarter
    
    
    14.67
    
    
    
    13.51
    
    
    
    0.2252004Fourth Quarter
    
    $
    14.65
    
    
    $
    12.98
    
    
    
    0.225Third Quarter
    
    
    13.32
    
    
    
    10.96
    
    
    
    0.220Second Quarter
    
    
    12.57
    
    
    
    10.45
    
    
    
    0.220First Quarter
    
    
    12.87
    
    
    
    12.25
    
    
    
    0.220
     Common Shares:Percent taxable as Ordinary Income
    
    
    24.1
    %Percent non-taxable as Return of Capital
    
    
    68.3
    %Percentage taxable as Capital Gains
    
    
    7.6
    %
 24




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##### Table of Contents



Preferred Shares:Percent taxable as Ordinary Income
    
    
    75.9
    %Percent non-taxable as Return of Capital
    
    
    0.0
    %Percentage taxable as Capital Gains
    
    
    24.1
    %
  Securities Authorized for Issuance Under Equity Compensation Plans
 Equity Compensation Plan Information
 Number of Securities to
    
    
    Weighted averagebe issued upon exercise
    
    
    exercise price ofof outstanding options,
    
    
    outstanding options,
    
    
    Number of securities remainingPlan
    
    warrants and rights
    
    
    warrants and rights
    
    
    available for future issuanceEquity Compensation
Plans Approved by
Security Holders
    
    
    643,616
    
    
    $
    13.55
    
    
    
    156,384Equity Compensation
Plans Not Approved
by Security Holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    643,616
    
    
    $
    13.55
    
    
    $
    156,384
 Recent Sales of Unregistered Securities
  
 ITEM 6. SELECTED FINANCIAL DATA
   25




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##### Table of Contents



8/16/2002
    
    
    1/1/2002Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Through
    
    
    ThroughDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    12/31/2002
    
    
    8/15/2002
    
    
    20022005
    
    
    2004
    
    
    2003
    
    
    (Company)
    
    
    (Predecessor)
    
    
    (Combined)Results of Operations:Revenues:Rental operations from Continuing Operations
    
    $
    47,720
    
    
    $
    30,074
    
    
    $
    13,653
    
    
    $
    2,274
    
    
    $
    
    
    
    $
    2,274Service operations (HADC)
    
    
    2,134
    
    
    
    1,849
    
    
    
    3,661
    
    
    
    7,559
    
    
    
    4,145
    
    
    
    11,704Total revenues from Continuing Operations
    
    $
    49,854
    
    
    $
    31,923
    
    
    $
    17,690
    
    
    
    9,833
    
    
    
    4,145
    
    
    
    13,978Net Income (loss) from Continuing Operations
    
    $
    4,778
    
    
    $
    3,651
    
    
    $
    1,106
    
    
    $
    43
    
    
    $
    (1,015
    )
    
    $
    (972
    )Net income (loss) available for Common Shareholders
    
    $
    4,018
    
    
    $
    4,053
    
    
    $
    1,248
    
    
    
    43
    
    
    
    (1,015
    )
    
    
    (972
    )Per Share Data:Net Income per common share (basic
and diluted):Continuing operations
    
    $
    0.20
    
    
    $
    0.35
    
    
    $
    0.19
    
    
    $
    0.01
    
    
    $
    
    
    
    $
    Discontinued operations
    
    $
    0.09
    
    
    $
    0.04
    
    
    $
    0.02
    
    
    $
    
    
    
    $
    
    
    
    $
    Weighted average common shares
outstanding
    
    
    13,620
    
    
    
    10,370
    
    
    
    5,808
    
    
    
    5,692
    
    
    $
    
    
    
    $
    Weighted average common and dilutive
potential common shares
    
    
    14,016
    
    
    
    10,740
    
    
    
    6,169
    
    
    
    6,054
    
    
    
    
    
    
    
    Cash dividends declared
    
    $
    0.90
    
    
    $
    0.89
    
    
    $
    0.70
    
    
    $
    0.13
    
    
    $
    
    
    
    $
    Balance Sheet Data (at December 31):Total assets
    
    $
    702,436
    
    
    $
    324,974
    
    
    $
    187,893
    
    
    $
    75,265
    
    
    $
    
    
    
    $
    75,265Total debt
    
    $
    435,147
    
    
    $
    187,134
    
    
    $
    76,893
    
    
    $
    9,664
    
    
    $
    
    
    
    $
    9,664Total liabilities (including
minority interest)
    
    $
    464,271
    
    
    $
    204,924
    
    
    $
    85,735
    
    
    $
    17,888
    
    
    $
    
    
    
    $
    17,888Total shareholders/owners equity
    
    $
    238,165
    
    
    $
    119,406
    
    
    $
    102,158
    
    
    $
    57,377
    
    
    $
    
    
    
    $
    57,377Total common shares outstanding
    
    
    17,398
    
    
    
    11,639
    
    
    
    9,947
    
    
    
    5,692
    
    
    
    
    
    
    
    5,692
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the financial statements and notes thereto appearing
elsewhere in this Form 10-K. This discussion and analysis is derived from the
consolidated operating results and activities of the Company and highlights selected information in
this document and may not contain all of the information that is important to you. For a more
complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources
and critical accounting estimates which have an impact on our financial condition and results of
operations, you should read this entire Form 10-K.
 Business Overview
  26




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##### Table of Contents



Number
    
    
    Rentableof
    
    
    SquareProperty Type(1)
    
    Buildings
    
    
    FeetSpecialty Medical Properties:Medical Office Buildings
    
    
    69
    
    
    
    2,472,776Ambulatory Surgery Centers
    
    
    4
    
    
    
    107,099Outpatient
Treatment and Diagnostic Facilities
    
    
    4
    
    
    
    160,855Specialty Hospitals and Treatment Centers
    
    
    1
    
    
    
    126,946Other Properties:Commercial
Office Properties
    
    
    6
    
    
    
    152,837Total
    
    
    84
    
    
    
    3,020,513
 
 (1)
    
    Several properties have multiple specialty medical uses (e.g., medical office buildings and ambulatory surgery center combinations). For purposes of this table,
 property types are listed by their primary functional purpose.
    
    
    maintaining and improving the occupancy rates for each of the Companys properties;
    
    acquiring additional quality specialty medical properties;
    
    providing property management services that maintain and improve the desirability of
space at each of the Companys properties in order to retain existing tenants or attract
new tenants at higher rental rates;
    
    maintaining and improving tenant relationships; and
    
    escalating rental rates at each location.
    27




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##### Table of Contents



2005 Acquisitions
 Acquisition
    
    RentableProperty
    
    Property Type
    
    Date
    
    Square FeetAberdeen I
    
    Medical Office Building
    
    
    11/17/2005
    
    
    
    25,565Aberdeen II
    
    Medical Office Building
    
    
    11/29/2005
    
    
    
    25,565Atrium
Office Park (four buildings)
    
    Commercial Office Park
    
    
    11/4/2005
    
    
    
    98,511Columbia Medical Plaza
    
    Medical Office Building
    
    
    12/2/2005
    
    
    
    43,797Congress Professional Center II
    
    Medical Office Building
    
    
    11/22/2005
    
    
    
    26,849Desert Professional Plaza
    
    Medical Office Building
    
    
    12/8/2005
    
    
    
    44,304Edinburg Regional Medical Plaza
    
    Medical Office Building
    
    
    11/10/2005
    
    
    
    52,068Foundation Medical Tower*
    
    Medical Office Building
    
    
    12/19/2005
    
    
    
    99,768Foundation Surgical Hospital*
    
    Hospital
    
    
    12/19/2005
    
    
    
    126,946G & L Raines Childrens Pavilion (Northside)
    
    Medical Office Building
    
    
    11/17/2005
    
    
    
    35,409JFK Medical Pavilion I at Palm Springs
    
    Medical Office Building
    
    
    11/10/2005
    
    
    
    17,738Johns Creek I
    
    Medical Office Building
    
    
    5/2/2005
    
    
    
    27,000Johns Creek II
    
    Medical Office Building
    
    
    3/1/2005
    
    
    
    24,896Johns Creek III
    
    Medical Office Building
    
    
    3/1/2005
    
    
    
    20,508Lake Mead Medical Arts Pavilion
    
    Medical Office Building
    
    
    10/31/2005
    
    
    
    43,921Lakewood Medical Pavilion
    
    Medical Office Building
    
    
    6/7/2005
    
    
    
    36,480Los Gatos Medical Pavilion
    
    Medical Office Building
    
    
    6/7/2005
    
    
    
    55,927Medical Arts Center (Fayetteville)
    
    Medical Office Building
    
    
    10/5/2005
    
    
    
    30,716Osler Medical Arts Pavilion
    
    Medical Office Building
    
    
    11/10/2005
    
    
    
    17,790Palm Court Plaza and Professional Center
    
    Medical Office Building
    
    
    6/7/2005
    
    
    
    137,760Professional Center III
    
    Medical Office Building
    
    
    12/2/2005
    
    
    
    23,300Professional Center IV
    
    Medical Office Building
    
    
    12/2/2005
    
    
    
    17,738Professional Center V
    
    Medical Office Building
    
    
    11/17/2005
    
    
    
    17,790Rush Copley Medical Office Center at Fox Valley
    
    Medical Office Building
    
    
    6/24/2005
    
    
    
    20,216Saint Marys Pavilion (Southside)
    
    Medical Office Building
    
    
    11/17/2005
    
    
    
    35,431Santa Anita Medical Plaza
    
    Medical Office Building
    
    
    12/2/2005
    
    
    
    86,762Sierra Providence Eastside Center
    
    Medical Office Building
    
    
    11/17/2005
    
    
    
    77,870Southpointe Medical Center
    
    Medical Office Building
    
    
    11/4/2005
    
    
    
    47,020Union City Medical Center
    
    Medical Office Building
    
    
    7/14/2005
    
    
    
    35,000Union City Surgery Center
    
    Ambulatory Surgery Center
    
    
    7/14/2005
    
    
    
    12,600Wellington Medical Arts Pavilion
    
    Medical Office Building
    
    
    12/12/2005
    
    
    
    48,000West Boca Medical Arts Pavilion II
    
    Medical Office Building and Ambulatory Surgery Center
    
    
    12/2/2005
    
    
    
    70,235West Tower at Doctors Hospital
    
    Medical Office Building and Ambulatory Surgery Center
    
    
    11/17/2005
    
    
    
    92,391Medical Office Building andWorkplace Professional Center I
    
    Professional Office Building
    
    
    11/17/2005
    
    
    
    40,396Yorkville Medical Office Building
    
    Medical Office Building
    
    
    6/24/2005
    
    
    
    19,885Total
    
    
    
    
    
    
    
    
    
    
    1,636,152
 
 *
    
    Developed by HADC. In addition, the Company through a separate subsidiary owns a 51% interest in an entity which owns the land underlying the hospital. As part of the term of the lease with the hospital, the
tenant is responsible for payment of the ground lease obligation to this entity.  28




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##### Table of Contents



Rental Operations
  Occupancy Analysis
  Year Ended December 31,2005(1)
    
    2004
    
    2003Total Rentable Square Feet
    
    
    3,021
    
    
    
    1,429
    
    
    
    831Occupancy Rate
    
    
    94.2
    %
    
    
    95.2
    %
    
    
    94.0
    %
 
 (1)
    
    Reflects rentable square feet occupied as of December 31, 2005, adjusted to reflect
leases for approximately 45,000 rentable square feet that had been executed prior to December 31, 2005 but had not yet been occupied. If the 45,000 were excluded, the
occupancy rate would be 92.4%.  Lease Expiration and Renewals
  29




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##### Table of Contents



Lease Expiration Analysis by Year(as
of December 31, 2005)Percentage of TotalYear of
    
    Number
    
    Square
    
    Percentage of
    
    Annualized Base
    
    AnnualizedLease
    
    of Leases
    
    Footage of Leases
    
    Total Rentable
    
    Rent of
    
    Base Rent ofExpiration
    
    Expiring
    
    Expiring (1)
    
    Square Feet (1)
    
    Expiring Leases (2)
    

Expiring
Leases2006
    
    
    87
    
    
    
    260,290
    
    
    
    8.62
    %
    
    $
    6,744,276
    
    
    
    8.50
    %2007
    
    
    101
    
    
    
    474,103
    
    
    
    15.70
    %
    
    
    13,686,288
    
    
    
    17.25
    %2008
    
    
    102
    
    
    
    480,965
    
    
    
    15.92
    %
    
    
    14,930,016
    
    
    
    18.82
    %2009
    
    
    65
    
    
    
    202,879
    
    
    
    6.72
    %
    
    
    5,904,828
    
    
    
    7.44
    %2010
    
    
    80
    
    
    
    308,544
    
    
    
    10.22
    %
    
    
    7,954,788
    
    
    
    10.03
    %Thereafter
    
    
    145
    
    
    
    1,118,578
    
    
    
    37.03
    %
    
    
    30,117,168
    
    
    
    37.96
    %Total
    
    
    580
    
    
    
    2,845,359
    
    
    
    94.2
    %
    
    $
    79,337,364
    
    
    
    100.00
    %
 
 (1)
    
    Total rentable square footage was 3,020,513 as of
December 31, 2005, at an occupancy level of 94.2%, these are expiring leases based on current
occupancy.(2)
    
    Calculated as actual December 2005 base rent and expense reimbursement billings multiplied by 12.  Acquisition Activity
  Service Operations
  Funds From Operations (FFO)
   30




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##### Table of Contents



Year Ended December 31,(in thousands)2005
    
    
    2004
    
    
    2003Net income
available to common shareholders
    
    $
    4,018
    
    
    $
    4,053
    
    
    $
    1,248Add back (deduct):Gain on sale
of rental property
    
    
    (1,250
    )
    
    
    
    
    
    
    Depreciation and amortization
    
    
    11,362
    
    
    
    6,790
    
    
    
    3,327Minority interest share of depreciation &
amortization
    
    
    (299
    )
    
    
    (247
    )
    
    
    (216
    )FUNDS FROM OPERATIONS
    
    $
    13,831
    
    
    $
    10,596
    
    
    $
    4,359
 Critical Accounting Policies
 Impairment
of Real Estate Assets
 Acquisitions of Real Estate Assets.
 31




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##### Table of Contents



Valuation
of Receivables.
 Revenue and Cost Recognition.
 Audit Committee Review.
 
    
    criteria for identifying and selecting;
    
    methodology in applying; and
    
    impact on the financial statements.
  Results of Operations  Comparison of Year Ended December 31, 2005 to Year Ended December 31, 2004
 Rental Operations from Continuing Operations
 Rental
Income
 Property Operating Expenses and Real Estate Taxes.
 Depreciation and Amortization.
 Service Operations
    32




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##### Table of Contents



General and Administrative Expense
  Other Income and Expense
   
    
    assumed approximately $197.0 million of debt as part of property acquisitions in 2005;
    
    borrowed approximately $52.2 million under its revolving credit facilities,
leaving approximately $31.9 million
 of availability as of December 31, 2005, to fund
acquisitions and for working capital purposes; and
    
    repaid approximately $4.9 million of indebtedness as scheduled amortization of principal
on mortgages.
 Discontinued Operations
  Results of Operations  Comparison of Year Ended December 31, 2004 to Year Ended December 31, 2003
 Rental Operations
 Rental Income
 Property Operating Expenses and Real Estate Taxes.
 33




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##### Table of Contents



Depreciation and Amortization.
 Service Operations
   General and Administrative Expense
  Other Income and Expense
   
    
    assumed approximately $81.5 million of debt as part of property acquisitions in 2004;
    
    incurred approximately $25.4 million of indebtedness as of December 31, 2004 to fund
acquisitions and for working capital purposes; and
    
    repaid approximately $1.7 million of indebtedness as scheduled amortization of principal
on mortgages.
 Discontinued Operations
  34




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##### Table of Contents



Liquidity and Capital Resources
 Sources of Liquidity
 Rental Operations
  Secured and Unsecured Credit Facilities
  AmountsOutstanding asofBorrowing
    
    
    
    
    
    December 31,Description
    
    Capacity
    
    Maturity Date
    
    Interest Rate
    
    2005Secured Revolving Credit Facility
    
    $50.0 million
    
    September 30, 2007
    
    Prime or LIBOR (+1.5 - 2.5%)
    
    $39.2 millionSecondary Revolving Credit Facility
    
    $10.0 million
    
    June 30, 2006
    
    LIBOR + 2.75%
    
    Secured Working Capital Line of
Credit Facility
    
    $4.0 million
    
    October 31, 2006
    
    Prime  0.75%
    
    $3.0 millionSenior
Unsecured Bridge Loan
    
    $20.0 million
    
    June 30, 2006
    
    Prime + 3.0%
    
    $10.0 million
 Secured Revolving Credit Facility, Secondary Revolving Credit Facility, Unsecured Line of
Credit
  35




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##### Table of Contents



Secured Working Capital Line of Credit
  Construction Loan Facility
  Senior Unsecured Bridge Loan
    Equity Securities
  36




---



##### Table of Contents



Uses of Liquidity
 Short-Term Uses.
 Long-Term Uses.
 Historical Cash Flows
 Operating Activities
  37




---



##### Table of Contents



Investing Activities
  Equity
Financing Activities
  Off Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by PeriodContractual Obligations
    
    Total
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    ThereafterLong-term debt (1)(4)(5)
    
    $
    451,820
    
    
    $
    56,127
    
    
    $
    24,798
    
    
    $
    63,047
    
    
    $
    46,260
    
    
    $
    47,807
    
    
    $
    213,781Line of credit (5)
    
    
    56,747
    
    
    
    15,842
    
    
    
    40,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction Debt (5)
    
    
    37,173
    
    
    
    37,173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Lease Obligations (2)
    
    
    21,555
    
    
    
    935
    
    
    
    922
    
    
    
    907
    
    
    
    806
    
    
    
    641
    
    
    
    17,344Other Contractual Obligations (3)
    
    
    342
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    567,637
    
    
    $
    110,419
    
    
    $
    66,625
    
    
    $
    63,954
    
    
    $
    47,066
    
    
    $
    48,448
    
    
    $
    231,125
 
 (1)
    
    Includes principal and interest.(2)
    
    Includes leases for land, office space and equipment.(3)
    
    Includes agreements for human resources services, investor relations services and the overhead sharing agreement.(4)
    
    The long-term debt at Cooper Voorhees Medical Mall, Professional Center V, Rush Copley Medical Office Building and the Union City Land loan expire in 2006.(5)
    
    Interest expense for variable rate debt was calculated using the interest rate at December 31, 2005. Recent Accounting Pronouncements
  Accounting for Conditional Asset
Retirement Obligations, Accounting for Asset Retirement
Obligations.
 Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain
Rights
 38




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Variable Rate Debt
  Secured Revolving Credit Facility, Secondary Revolving Credit Facility, Unsecured Line of
Credit
  Secured Working Capital Line of Credit
  Construction Loan Facility
  39




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##### Table of Contents



Senior Unsecured Bridge Loan
     Derivative Instruments
    40




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
  Internal Control  Integrated Framework
  Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  41




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##### Table of Contents



PART III
 
 ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 The
Companys Relationship with Klipsch Audio, Inc.
   HADC
   Certain
Other Relationships
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  42




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS FORM 10-K:
 1. CONSOLIDATED FINANCIAL STATEMENTS
 PageIndex to Financial statements
    
    
    F-1Reports of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets, December 31, 2005 and 2004
    
    
    F-4Consolidated Statements of Operations, Years Ended December 31, 2005, 2004, and 2003
    
    
    F-5Consolidated Statements of Cash Flows, Years Ended December 31, 2005, 2004 and 2003
    
    
    F-6Consolidated Statements of Shareholders Equity, Years
Ended December 31, 2005, 2004 and 2003
    
    
    F-7Notes to Consolidated Financial Statements
    
 
 F-8Selected Quarterly Information
    
    
    F-25Schedule
IIIReal Estate and Accumulated Depreciation
    
    
    F-26
 2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
  43




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##### Table of Contents



3. EXHIBITS
  ExhibitNumber
    
    Exhibit Description3.01
    
    Amended and Restated Declaration of Trust of the Registrant
(incorporated by reference to Exhibit 3.2 to the Registrants
Registration Statement on Form S-11/A (File No. 333-89186) filed on
July 23, 2002).3.02
    
    Articles Supplementary of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrants Form 8-A12B filed on June 29, 2005).3.03
    
    Amended and Restated Bylaws of the Registrant (incorporated by
reference to Exhibit 3.2 to the Registrants Registration Statement on
Form S-11/A (File No. 333-89186) filed on July 23, 2002).3.04
    
    Form of First Amended and Restated Agreement of Limited Partnership of
Windrose Medical Properties, L.P. (incorporated by reference to
Exhibit 10.1 to the Registrants Registration Statement on Form S-11/A
(File No. 333-89186) filed on July 23, 2002).3.05
    
    Schedule 4.02-1 to the First Amended and Restated Agreement of Limited
Partnership of Windrose Medical Properties, L.P. Designating the 7.5%
Series A Cumulative Convertible Preferred Units (incorporated by
reference to Exhibit 10.01 to the Registrants Quarterly Report on
Form 10-Q filed on August 9, 2005).4.01
    
    Form of Common Share Certificate (incorporated by reference to Exhibit
4.1 to the Registrants Registration Statement on Form S-11/A
(Registration No. 333-89186) filed on August 8, 2002).4.02
    
    Form of 7.5% Series A Cumulative Convertible Preferred Share
Certificate (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K filed on July 1, 2005).4.03
    
    Form of Warrant (incorporated by reference to Exhibit 4.02 to the
Registrants Registration Statement on Form S-3 (File No. 333-108659)
filed on September 10, 2003).10.01
    
    Purchase Agreement, dated as of March 2, 2006, by and between Medistar
Herman Drive Medical Center, Ltd. and Windrose Genesis Park, L.P.
(incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed on March 7, 2006).10.02
    
    Purchase Agreement, dated as of March 2, 2006, by and between E1-PV,
L.P. and Rose Hill Meadows, Ltd., and Windrose Pecan Valley, L.P.
(incorporated by reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K filed on March 7, 2006).10.03
    
    Purchase Agreement dated March 2, 2006 between Medistar Webster
Medical Center, Ltd. and Windrose Webster Medical Center, L.P.
(incorporated by reference to Exhibit 10.3 to the Registrants Current
Report on Form 8-K filed on March 7, 2006).10.05
    
    Change in Control Severance Agreement dated February 3, 2006 between
the Registrant, Windrose Medical Properties, L.P. and Daniel R. Loftus
(incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed on February 7, 2006).
 44




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.06
    
    Deferred Compensation Plan dated January 1, 2006 of the Registrant.*10.07
    
    Bridge Loan Agreement dated December 6, 2005 by and among Windrose
Medical Properties, L.P., the Registrant, KeyBank National
Association, individually and as agent, and the other lending
institutions that may become parties thereto (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form
8-K filed on December 9, 2005).10.08
    
    Unconditional Guaranty of Payment and Performance dated December 6,
2005, by and between Windrose Medical Properties Trust and KeyBank
National Association, as agent (incorporated by reference to Exhibit
10.2 to the Registrants Current Report on Form 8-K filed on December
9, 2005).10.09
    
    Second Amended and Restated Secured Revolving Credit Agreement, dated
as of September 30, 2005, by and between Windrose Medical Properties,
L.P. and The Huntington National Bank (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on
October 6, 2005).10.10
    
    Second Amended and Restated Guaranty, dated as of September 30, 2005,
made by the Registrant to and for the benefit of The Huntington
National Bank (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed on October 6, 2005).10.11
    
    Amended and Restated Secured Construction Loan Facility with the
Huntington National Bank, LaSalle Bank National Association and
KeyBank National Association, dated July 11, 2005 (WMPT Bellaire,
L.P.) (incorporated by reference to Exhibit 10.02 to the Registrants
Quarterly Report on Form 10-Q filed on July 9, 2005).10.12
    
    Amended and Restated Secured Construction Loan Facility with the
Huntington National Bank, LaSalle Bank National Association and
KeyBank National Association, dated July 11, 2005 (WMPT Bellaire POB,
L.P.) (incorporated by reference to Exhibit 10.03 to the Registrants
Quarterly Report on Form 10-Q filed on July 9, 2005).10.13
    
    Employment Agreement dated February 21, 2005 between Windrose Medical
Properties L.P., the Registrant and Fred S. Klipsch (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form
8-K filed on February 22, 2005).10.14
    
    Employment Agreement dated February 21, 2005 between Windrose Medical
Properties L.P., the Registrant and Frederick L. Farrar (incorporated
by reference to Exhibit 10.2 to the Registrants Current Report on
Form 8-K filed on February 22, 2005).10.15
    
    2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.2
to the Registrants Registration Statement on Form S-11/A (File No.
333-89186) filed on July 23, 2002).10.16
    
    Form of Overhead Sharing Agreement between Windrose Medical
Properties, L.P. and Klipsch Audio, Inc. (incorporated by reference to
Exhibit 10.3 to the Registrants Registration Statement on Form S-11/A
(File 333-89186) filed on July 3, 2002).10.17
    
    Form of Change in Control Severance Agreement between the Registrant,
Windrose Medical Properties, L.P. and Fred S. Klipsch (incorporated by
reference to Exhibit 10.30 to the Registrants Registration Statement
on Form S-11/A (File No. 333-89186) filed on July 23, 2002).
 45




---



##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.18
    
    Form of Change in Control Severance Agreement between the Registrant,
Windrose Medical Properties, L.P. and Frederick L. Farrar
(incorporated by reference to Exhibit 10.31 to the Registrants
Registration Statement on Form S-11/A (File No. 333-89186) filed on
July 23, 2002).10.19
    
    Subordinated Promissory Note dated June 28, 2002 from Windrose
International, L.L.C. to Fred S. Klipsch (incorporated by reference to
Exhibit 10.33 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002).10.20
    
    Subordinated Promissory Note dated May 11, 2002 from Windrose
International, L.L.C. to Klipsch Audio, Inc. (incorporated by
reference to Exhibit 10.34 to the Registrants Registration Statement
on Form S-11/A (File No. 333-89186) filed on July 25, 2002).10.21
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development
Corporation to Robin P. Barksdale (incorporated by reference to
Exhibit 10.35 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002).10.22
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development
Corporation to Frederick L. Farrar (incorporated by reference to
Exhibit 10.36 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002). 10.23
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development
Corporation to Fred S. Klipsch (incorporated by reference to Exhibit
10.37 to the Registrants Registration Statement on Form S-11/A (File
No. 333-89186) filed on July 25, 2002).10.24
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development
Corporation to Athena Development (incorporated by reference to
Exhibit 10.38 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002).10.25
    
    Subordinated Promissory Note dated May 11, 2002 from Windrose
International L.L.C. to Charles Lanham (incorporated by reference to
Exhibit 10.39 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002).10.26
    
    Promissory Note payable by Alliance Design Group to Hospital
Affiliates Development Corporation (incorporated by reference to
Exhibit 10.40 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002).11.01
    
    Statement Regarding Computation of Per Share Earnings (the calculation
of per share earnings is in Part II, Item 8, Note 2 to the
Consolidated Financial Statements and is omitted pursuant to Item
601(b)(11) of Regulation S-K).12.01
    
    Statement Regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Share
Dividends.*
 46




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##### Table of Contents



ExhibitNumber
    
    Exhibit Description21.01
    
    List of Subsidiaries of the Registrant.*23.01
    
    Consent of KPMG LLP.*31.01
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.*31.02
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Operating Officer.*31.03
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.*32.01
    
    Section 1350 Certification of the Chief Executive Officer.*32.02
    
    Section 1350 Certification of the Chief Operating Officer.*32.03
    
    Section 1350 Certification of the Chief Financial Officer.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan. (b) EXHIBITS
  (c) FINANCIAL STATEMENT SCHEDULE
  47




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##### Table of Contents



(Registrant)
  By:
    /s/ PAULA J. CONROYPAULA J. CONROYSENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)  SIGNATURE
    
    TITLE
    
    DATEChairman, Chief Executive Officerand Trustee/s/ FRED S. KLIPSCH
    
    (Principal Executive Officer)
    
    March 17, 2006FRED S. KLIPSCHPresident, Chief Operating Officer/s/ FREDERICK L. FARRAR
    
    and Treasurer
    
    March 17, 2006FREDERICK L. FARRARSenior Vice President,Chief Financial Officer/s/ PAULA J. CONROY
    
    (Principal Financial and Accounting Officer)
    
    March 17, 2006PAULA J. CONROY/s/ BRYAN MILLSBRYAN MILLS
    
    Trustee
    
    March 17, 2006/s/ BRUCE M. JACOBSONBRUCE M. JACOBSON
    
    Trustee
    
    March 17, 2006/s/ ROBERT L. BOWENROBERT L. BOWEN
    
    Trustee
    
    March 17, 2006/s/ JEAN L. WOJTOWICZJEAN L. WOJTOWICZ
    
    Trustee
    
    March 17, 2006
 48




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##### Table of Contents



SIGNATURE
    
    TITLE
    
    DATE/s/ DAVID L. MARAMANDAVID L. MARAMAN
    
    Trustee
    
    March 17, 2006/s/ DARELL E. ZINK, JR.DARELL E. ZINK, JR.
    
    Trustee
    
    March 17, 2006
 49




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 PAGEReports of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets, December 31, 2005 and 2004
    
    
    F-4Consolidated Statements of Operations, Years Ended December 31, 2005, 2004 and 2003
    
    
    F-5Consolidated Statements of Cash Flows, Years Ended December 31, 2005, 2004 and 2003
    
    
    F-6Consolidated Statements of Shareholders Equity,
Years Ended December 31, 2005, 2004 and 2003
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8Selected Quarterly Financial Information
    
    
    F-25Schedule
IIIReal Estate and Accumulated Depreciation
    
    
    F-26
 F-1




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
       KPMG LLP
 F-2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
         KPMG LLP
 F-3




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##### Table of Contents



WINDROSE MEDICAL PROPERTIES TRUST AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 as of December 31, 2005 and 2004
 (in thousands, except
per share amounts)
 December 31,
    
    
    December 31,2005
    
    
    2004ASSETSREAL ESTATE INVESTMENTS:Land and Land Improvements
    
    $
    46,927
    
    
    $
    24,356Buildings and Tenant Improvements
    
    
    605,559
    
    
    
    254,411Construction in Progress
    
    
    1,610
    
    
    
    16,453Acquired Lease Intangibles
    
    
    36,841
    
    
    
    13,823Gross Real Estate Investments
    
    
    690,937
    
    
    
    309,043Accumulated Depreciation
    
    
    (16,238
    )
    
    
    (7,635
    )Accumulated Lease Intangible Amortization
    
    
    (6,858
    )
    
    
    (3,172
    )Accumulated Depreciation and Amortization
    
    
    (23,096
    )
    
    
    (10,807
    )Net Real Estate Investments Held for Sale
    
    
    
    
    
    
    4,892NET REAL ESTATE INVESTMENTS
    
    
    667,841
    
    
    
    303,128Cash and Cash Equivalents
    
    
    12,014
    
    
    
    9,013Prepaid Expenses
    
    
    979
    
    
    
    464Receivables on Construction and Consulting Contracts
    
    
    181
    
    
    
    245Receivables
from Tenants, Net of Allowance of $597 and $97
    
    
    2,057
    
    
    
    1,496Revenues in Excess of Billings
    
    
    18
    
    
    
    2Straight-line
Rent Receivable, Net of Allowance of $16 and $4
    
    
    5,071
    
    
    
    2,869Deferred Financing Fees, Net of Accumulated Amortization of
$2,120 and $929
    
    
    2,383
    
    
    
    1,402Escrow Deposits and Other Assets
    
    
    11,892
    
    
    
    6,355TOTAL ASSETS
    
    $
    702,436
    
    
    $
    324,974LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIESSecured Debt
    
    $
    425,147
    
    
    $
    187,134Unsecured
debt
    
    
    10,000
    
    
    
    Billings in Excess of Revenues Earned
    
    
    23
    
    
    
    91Accounts Payable and Accrued Expenses
    
    
    8,545
    
    
    
    4,982Consulting and Construction Payables
    
    
    3,360
    
    
    
    2,174Tenant Security Deposits and Prepaid Rents
    
    
    6,900
    
    
    
    3,920Other Liabilities
    
    
    4,483
    
    
    
    1,652TOTAL LIABILITIES
    
    
    458,458
    
    
    
    199,953Minority Interest
    
    
    5,813
    
    
    
    5,615SHAREHOLDERS EQUITYPreferred Shares of Beneficial Interest, $.01 par value, 20,000,000
shares authorized,
2,100,000 issued and outstanding (Liquidation preference $52,500)
    
    
    21
    
    
    
    Common Shares of Beneficial Interest, $.01 par value, 100,000,000
shares authorized,
17,397,612 shares and 11,638,513 shares issued and outstanding
    
    
    174
    
    
    
    116Additional Paid In Capital
    
    
    253,460
    
    
    
    125,659Accumulated
Other Comprehensive Income (Loss)
    
    
    (12
    )
    
    
    153Deferred Stock Compensation
    
    
    (1,182
    )
    
    
    (207
    )Distributions in Excess of Net Income
    
    
    (14,296
    )
    
    
    (6,315
    )TOTAL SHAREHOLDERS EQUITY
    
    
    238,165
    
    
    
    119,406TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    702,436
    
    
    $
    324,974
  F-4




---



##### Table of Contents



WINDROSE MEDICAL PROPERTIES TRUST AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 For the Years Ended December 31, 2005, 2004 and 2003
 (in thousands, except per share data)
 Years Ended December 31,2005
    
    
    2004
    
    
    2003RENTAL OPERATIONS:Rental revenues from continuing operations
    
    $
    47,720
    
    
    $
    30,074
    
    
    $
    13,653Operating expenses:Property taxes
    
    
    4,345
    
    
    
    2,630
    
    
    
    751Property operating expenses
    
    
    10,077
    
    
    
    5,823
    
    
    
    1,858Depreciation and amortization
    
    
    11,362
    
    
    
    6,673
    
    
    
    3,234Total operating expenses
    
    
    25,784
    
    
    
    15,126
    
    
    
    5,843Income from
continuing rental operations
    
    
    21,936
    
    
    
    14,948
    
    
    
    7,810SERVICE OPERATIONS (HADC):Revenues:Development and project management fees
    
    
    2,134
    
    
    
    1,849
    
    
    
    3,661Expenses:Cost of sales and project costs
    
    
    1,327
    
    
    
    1,279
    
    
    
    3,296General and administrative expenses
    
    
    684
    
    
    
    430
    
    
    
    824Income (loss) from service operations
    
    
    123
    
    
    
    140
    
    
    
    (459
    )GENERAL AND ADMINISTRATIVE EXPENSES:Corporate and rental operations
    
    
    4,275
    
    
    
    3,276
    
    
    
    2,694Operating income
    
    
    17,784
    
    
    
    11,812
    
    
    
    4,657OTHER INCOME (EXPENSES):Interest income
    
    
    203
    
    
    
    30
    
    
    
    29Interest (expense)
    
    
    (12,877
    )
    
    
    (8,167
    )
    
    
    (3,306
    )Gain (loss) on interest rate swap
    
    
    65
    
    
    
    308
    
    
    
    142(Loss) on abandoned due diligence costs
    
    
    
    
    
    
    
    
    
    
    (209
    )Other income (expense)
    
    
    (178
    )
    
    
    (129
    )
    
    
    (250
    )Total other income (expense)
    
    
    (12,787
    )
    
    
    (7,958
    )
    
    
    (3,594
    )Income before income taxes and minority interest
    
    
    4,997
    
    
    
    3,854
    
    
    
    1,062Income tax (expense) benefit
    
    
    (49
    )
    
    
    (56
    )
    
    
    144Income before minority interest
    
    
    4,948
    
    
    
    3,798
    
    
    
    1,206Minority interest in income of common unit holders and
other subsidiaries
    
    
    (170
    )
    
    
    (147
    )
    
    
    (100
    )Net income from continuing operations
    
    
    4,778
    
    
    
    3,651
    
    
    
    1,106Net income from discontinued operations, net of minority interest
    
    
    20
    
    
    
    402
    
    
    
    142Net gain on sale of discontinued operations, net of minority interest
    
    
    1,215
    
    
    
    
    
    
    
    Income from discontinued operations
    
    
    1,235
    
    
    
    402
    
    
    
    142Net income
    
    
    6,013
    
    
    
    4,053
    
    
    
    1,248Dividends on preferred shares
    
    
    (1,995
    )
    
    
    
    
    
    
    Net income available to common shareholders
    
    $
    4,018
    
    
    $
    4,053
    
    
    $
    1,248Net income
from continuing operations (less preferred dividend) per common share:Basic and diluted
    
    $
    0.20
    
    
    $
    0.35
    
    
    $
    0.19Net income from discontinued operations per common share:Basic and diluted
    
    
    0.09
    
    
    
    0.04
    
    
    
    0.02Net income per common share:Basic and diluted
    
    $
    0.29
    
    
    $
    0.39
    
    
    $
    0.21Weighted average number of common shares
outstanding
    
    
    13,620
    
    
    
    10,370
    
    
    
    5,808Weighted average number of common and
dilutive potential common shares
    
    
    14,016
    
    
    
    10,740
    
    
    
    6,169
  F-5




---



##### Table of Contents



WINDROSE MEDICAL PROPERTIES TRUST AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 For the Years Ended December 31, 2005, 2004 and 2003
 (in thousands)
 Years Ended December 31,2005
    
    
    2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:NET INCOME
    
    $
    6,013
    
    
    $
    4,053
    
    
    $
    1,248ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES:Depreciation and amortization
    
    
    11,362
    
    
    
    6,790
    
    
    
    3,327Rental income associated with above (below) market leases
    
    
    639
    
    
    
    94
    
    
    
    70Deferred income taxes
    
    
    45
    
    
    
    56
    
    
    
    (144
    )Deferred compensation expense
    
    
    231
    
    
    
    22
    
    
    
    (Gain) loss on interest rate swap
    
    
    (65
    )
    
    
    (308
    )
    
    
    (142
    )Amortization of deferred financing fees
    
    
    673
    
    
    
    674
    
    
    
    165Amortization of fair value of debt adjustment
    
    
    (785
    )
    
    
    (773
    )
    
    
    (469
    )Minority interest in earnings
    
    
    205
    
    
    
    161
    
    
    
    109Gain on sale of real estate
    
    
    (1,250
    )
    
    
    
    
    
    
    Increase (decrease) in cash due to changes in:Construction receivables (payables), net
    
    
    (24
    )
    
    
    76
    
    
    
    (921
    )Straight line rent receivable
    
    
    (2,199
    )
    
    
    (1,586
    )
    
    
    (1,062
    )Receivables from tenants
    
    
    (492
    )
    
    
    (981
    )
    
    
    (378
    )Interest rate swap liability
    
    
    (162
    )
    
    
    
    
    
    
    Revenue earned in excess of billings
    
    
    (15
    )
    
    
    (2
    )
    
    
    1,269Billings in excess of revenues earned
    
    
    (68
    )
    
    
    (61
    )
    
    
    (252
    )Other accrued revenue and expenses
    
    
    389
    
    
    
    1,356
    
    
    
    (371
    )Other current assets
    
    
    1,364
    
    
    
    218
    
    
    
    NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    15,861
    
    
    
    9,789
    
    
    
    2,449CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (3,077
    )
    
    
    (1,715
    )
    
    
    (570
    )Deposits on potential acquisitions
    
    
    (426
    )
    
    
    (209
    )
    
    
    (523
    )Acquisition of real estate investments
    
    
    (142,764
    )
    
    
    (46,946
    )
    
    
    (44,666
    )Development projects
    
    
    (41,711
    )
    
    
    (8,889
    )
    
    
    Deferred leasing costs
    
    
    (499
    )
    
    
    (115
    )
    
    
    (23
    )Other deferred costs and other assets
    
    
    149
    
    
    
    (438
    )
    
    
    (512
    )Proceeds from sale of real estate
    
    
    6,385
    
    
    
    
    
    
    
    (27
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (181,943
    )
    
    
    (58,312
    )
    
    
    (46,321
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments on indebtedness
    
    
    (4,853
    )
    
    
    (1,703
    )
    
    
    (3,450
    )Draws on line of credit
    
    
    102,185
    
    
    
    43,670
    
    
    
    28,233Paydowns on line of credit
    
    
    (75,470
    )
    
    
    (18,235
    )
    
    
    (28,233
    )Proceeds from mezzanine debt
    
    
    656
    
    
    
    5,844
    
    
    
    Paydowns on mezzanine debt
    
    
    (6,500
    )
    
    
    
    
    
    
    Proceeds from construction debt
    
    
    35,033
    
    
    
    
    
    
    
    Proceeds from mortgage debt
    
    
    6,500
    
    
    
    
    
    
    
    13,000Cash dividends to common shareholders
    
    
    (11,999
    )
    
    
    (8,188
    )
    
    
    (3,472
    )Cash dividends to preferred shareholders
    
    
    (1,392
    )
    
    
    
    
    
    
    Cash distributions to minority interest
    
    
    (328
    )
    
    
    (327
    )
    
    
    (268
    )Deferred financing costs
    
    
    (1,989
    )
    
    
    (932
    )
    
    
    (1,091
    )Proceeds from issuance of preferred shares, net
    
    
    51,016
    
    
    
    
    
    
    
    Proceeds from issuance of common shares, net
    
    
    76,224
    
    
    
    20,020
    
    
    
    48,302NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    169,083
    
    
    
    40,149
    
    
    
    53,021NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    3,001
    
    
    
    (8,374
    )
    
    
    9,149CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    9,013
    
    
    
    17,387
    
    
    
    8,238CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    12,014
    
    
    $
    9,013
    
    
    $
    17,387SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Interest
paid, including capitalized interest of $3,204 in 2005 and $63 in 2004
    
    $
    15,089
    
    
    $
    7,268
    
    
    $
    3,125Income taxes paid
    
    $
    4
    
    
    $
    
    
    
    $
    Net liabilities (including secured debt) assumed in
acquisition of real estate investments
    
    $
    194,535
    
    
    $
    82,039
    
    
    $
    59,415Offering costs included in accounts payable
    
    $
    249
    
    
    $
    
    
    
    $
    587Reallocation of minority interest
    
    $
    391
    
    
    $
    230
    
    
    $
    199Minority interest share of joint venture acquisition
    
    $
    
    
    
    $
    1,886
    
    
    $
    Conversion of units to common shares
    
    $
    78
    
    
    $
    165
    
    
    $
    
  F-6




---



##### Table of Contents



WINDROSE MEDICAL PROPERTIES TRUST AND SUBSIDIARIES
 
 Consolidated Statements of Changes in Shareholders Equity
 (in thousands)
 ADDITIONAL
    
    DISTRIBUTIONS
    
    OTHER
    
    DEFERRED
    
    TOTALPREFERRED SHARES
    
    COMMON STOCK
    
    PAID-IN
    
    IN EXCESS OF
    
    COMPREHENSIVE
    
    STOCK
    
    SHAREHOLDERS'SHARES
    
    AMOUNT
    
    SHARES
    
    AMOUNT
    
    CAPITAL
    
    NET INCOME
    
    INCOME (LOSS)
    
    COMPENSATION
    
    EQUITY (DEFICIT)BALANCES AT DECEMBER 31, 2002
    
    
    
    
    
    $
    
    
    
    
    5,692
    
    
    $
    57
    
    
    $
    58,017
    
    
    $
    (697
    )
    
    $
    
    
    
    $
    
    
    
    $
    57,377Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,248
    
    
    
    
    
    
    
    
    
    
    
    1,248Reallocation of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )Issuance of common shares, net of underwriting discount
    
    
    
    
    
    
    
    
    
    
    4,255
    
    
    
    43
    
    
    
    47,673
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,716Distributions to common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,984
    )
    
    
    
    
    
    
    
    
    
    
    (3,984
    )BALANCES AT DECEMBER 31, 2003
    
    
    
    
    
    
    
    
    
    
    9,947
    
    
    $
    100
    
    
    $
    105,491
    
    
    $
    (3,433
    )
    
    $
    
    
    
    $
    
    
    
    $
    102,158Comprehensive income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,053
    
    
    
    
    
    
    
    
    
    
    
    4,053Gain on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153
    
    
    
    
    
    
    
    153Comprehensive income available for common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,206Reallocation of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )Issuance of common shares, net of underwriting discount
    
    
    
    
    
    
    
    
    
    
    1,674
    
    
    
    16
    
    
    
    20,168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,185Deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    (207
    )
    
    
    23Distributions to common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,935
    )
    
    
    
    
    
    
    
    
    
    
    (6,935
    )BALANCES AT DECEMBER 31, 2004
    
    
    
    
    
    
    
    
    
    
    11,639
    
    
    $
    116
    
    
    $
    125,659
    
    
    $
    (6,315
    )
    
    $
    153
    
    
    $
    (207
    )
    
    $
    119,406Comprehensive income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,013
    
    
    
    
    
    
    
    
    
    
    
    6,013Distributions to preferred shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,995
    )
    
    
    
    
    
    
    
    
    
    
    (1,995
    )Loss on interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    (165
    )Comprehensive income available for common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,853Reallocation of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (391
    )Issuance of
preferred shares, net of offering costs
    
    
    2,100
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    50,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,016Issuance of
common shares, net of offering costs
    
    
    
    
    
    
    
    
    
    
    5,659
    
    
    
    58
    
    
    
    75,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,053Deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    1,202
    
    
    
    
    
    
    
    
    
    
    
    (975
    )
    
    
    227Distributions to common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,999
    )
    
    
    
    
    
    
    
    
    
    
    (11,999
    )BALANCES AT DECEMBER 31, 2005
    
    
    2,100
    
    
    $
    21
    
    
    
    17,379
    
    
    $
    174
    
    
    $
    253,460
    
    
    $
    (14,296
    )
    
    $
    (12
    )
    
    $
    (1,182
    )
    
    $
    238,165
  F-7




---



##### Table of Contents



WINDROSE MEDICAL PROPERTIES TRUST AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (All
amounts in thousands except per share data)
 1. THE COMPANY
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 PRINCIPLES OF CONSOLIDATION
  REAL ESTATE INVESTMENTS
    Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain
Rights
   F-8




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##### Table of Contents



Lease Intangible Amortization
 Year
    
    Expense2006
    
    $
    5,0712007
    
    
    3,8372008
    
    
    2,5642009
    
    
    1,8632010
    
    
    1,540
 CASH EQUIVALENTS
  ALLOWANCE FOR DOUBTFUL ACCOUNTS
  DEFERRED COSTS
  RENTAL OPERATIONS
   SERVICE OPERATIONS
  F-9




---



##### Table of Contents



NET INCOME PER COMMON SHARE
   For the years ended December 31,2005
    
    
    2004
    
    
    2003Basic net income available for common shares
    
    $
    4,018
    
    
    $
    4,053
    
    
    $
    1,248Minority interest in earnings of common
unit holders
    
    
    107
    
    
    
    147
    
    
    
    100Diluted net income available for common shares
    
    $
    4,125
    
    
    $
    4,200
    
    
    $
    1,348Weighted average number of common shares
outstanding
    
    
    13,620
    
    
    
    10,370
    
    
    
    5,808Weighted average common units outstanding (1)
    
    
    343
    
    
    
    358
    
    
    
    361Dilutive common shares for stock based compensation plans
    
    
    53
    
    
    
    12
    
    
    
    Weighted average number of common shares and
dilutive potential shares
    
    
    14,016
    
    
    
    10,740
    
    
    
    6,169
 
 (1)
    
    The outstanding limited partners common units in the Operating Partnership
included in the diluted earnings per common share calculation have no effect on
the earnings per share amounts since the income allocated to the minority
interest holder is added back to net income. In calculating earnings per
diluted share, the number of shares would increase by the weighted average
common units outstanding and net income would also increase at a proportionate
rate, thus there would be no change to diluted earnings per share. FEDERAL INCOME TAXES
  F-10




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##### Table of Contents



For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Net income
    
    $
    6,013
    
    
    $
    4,053
    
    
    $
    1,248Book/tax differences
    
    
    (827
    )
    
    
    (696
    )
    
    
    (249
    )Adjustable taxable
income subject to 90%
dividend requirement
    
    $
    5,186
    
    
    $
    3,357
    
    
    $
    999
  For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Dividends declared
    
    $
    13,993
    
    
    $
    6,935
    
    
    $
    3,984Less: Return of capital
    
    
    (8,807
    )
    
    
    (3,578
    )
    
    
    (2,985
    )Total dividends paid
deduction attributable
to adjusted taxable
income
    
    $
    5,186
    
    
    $
    3,357
    
    
    $
    999
  For the Years Ended December 31,Common Shares
    
    2005
    
    
    2004
    
    
    2003Total dividends declared per share
    
    $
    0.90
    
    
    $
    0.66
    
    
    $
    0.70Ordinary income
    
    
    24.10
    %
    
    
    48.40
    %
    
    
    25.08
    %Return of capital
    
    
    68.30
    %
    
    
    51.60
    %
    
    
    74.92
    %Capital gain
    
    
    7.60
    %
    
    
    
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 F-11




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##### Table of Contents



For the Years Ended December 31,Preferred Shares
    
    2005
    
    
    2004
    
    
    2003Total dividends declared per share
    
    $
    0.66
    
    
    
    
    
    
    
    Ordinary income
    
    
    75.90
    %
    
    
    
    
    
    
    Return of capital
    
    
    
    
    
    
    
    
    
    
    Capital gain
    
    
    24.10
    %
    
    
    
    
    
    
    100.00
    %
    
    
    
    
    
    
    
   STOCK BASED COMPENSATION
  For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Net income
available to common shareholders as reported
    
    $
    4,018
    
    
    $
    4,053
    
    
    $
    1,248Deduct: Total stock based compensation expense determined
under the fair value method for all awards
    
    
    (128
    )
    
    
    (137
    )
    
    
    (175
    )Pro forma net income per share
    
    $
    3,890
    
    
    $
    3,916
    
    
    $
    1,073Basic and
diluted per share amounts:As reported
    
    $
    0.29
    
    
    $
    0.39
    
    
    $
    0.21Pro forma
    
    $
    0.29
    
    
    $
    0.38
    
    
    $
    0.18
  F-12




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##### Table of Contents



For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Dividend yield
    
    
    8
    %
    
    
    8
    %
    
    
    8
    %Volatility
    
    
    19.09
    %
    
    
    22.26
    %
    
    
    42.47
    %Risk-free interest rate of options
granted on 3/19/03 with expected life of seven years
    
    
    
    
    
    
    
    
    
    
    3.52
    %Risk-free interest rate of options
granted on 8/5/03 with expected life of seven years
    
    
    
    
    
    
    
    
    
    
    3.84
    %Risk-free interest rate of options
granted on 7/27/04 with expected life of seven years
    
    
    
    
    
    
    4.19
    %
    
    
    Risk-free interest rate of options
granted on 7/26/05 with expected life of seven years
    
    
    4.15
    %
    
    
    
    
    
    
    Risk-free interest rate of options
granted on 12/20/05 with expected life of seven years
    
    
    4.41
    %
    
    
    
    
    
    
    Expected life of options with one year vesting period
    
    
    5 years
    
    
    
    5 years
    
    
    
    N/AExpected life of options with four year vesting period
    
    
    7 years
    
    
    
    7 years
    
    
    
    7 yearsWeighted-average fair value per share of options granted
    
    $
    1.48
    
    
    $
    1.79
    
    
    $
    2.21
 DERIVATIVE FINANCIAL INSTRUMENTS
 Accounting for Derivative Instruments and Hedging Activities,
   FAIR VALUE OF FINANCIAL INSTRUMENTS
  USE OF ESTIMATES
  RECLASSIFICATIONS
  3.
FINANCIAL INSTRUMENTS
  F-13




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##### Table of Contents



Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity
 4. DISCONTINUED OPERATIONS
    For the Years Ended December 31,2005
    
    
    2004
    
    2003Statement of Operations:Revenues
    
    $
    51
    
    
    $
    766
    
    $
    376Expenses:Operating
    
    
    31
    
    
    
    233
    
    
    107Interest
    
    
    
    
    
    
    
    
    
    24Depreciation and Amortization
    
    
    
    
    
    
    117
    
    
    94Operating Income
    
    
    20
    
    
    
    416
    
    
    151Minority Interest expense
-operating and
other income
    
    
    
    
    
    
    14
    
    
    9Income from discontinued Operations
    
    $
    20
    
    
    $
    402
    
    $
    142
 F-14




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##### Table of Contents



5. RELATED PARTIES AND OTHER TRANSACTIONS
      6. ACCOUNTS RECEIVABLE, REVENUE EARNED IN EXCESS OF BILLINGS AND BILLINGS IN
 EXCESS OF REVENUES EARNED
  For
the Years Ended December 31,2005
    
    
    2004
    
    
    2003Costs incurred on
Uncompleted Contracts
    
    $
    1,022
    
    
    $
    770
    
    
    $
    1,632Estimated Earnings
    
    
    647
    
    
    
    269
    
    
    
    7841,669
    
    
    
    1,039
    
    
    
    2,416Less Billings to Date
    
    
    1,674
    
    
    
    1,128
    
    
    
    2,568$
    (5
    )
    
    $
    (89
    )
    
    $
    (152
    )
 F-15




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##### Table of Contents



December 31,2005
    
    
    2004Revenues in Excess of Billings
    
    $
    18
    
    
    $
    2Billings in Excess of Revenue Earned
    
    
    (23
    )
    
    
    (91
    )$
    (5
    )
    
    $
    (89
    )
 7. CONCENTRATION OF CREDIT RISK
  8. INDEBTEDNESS




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##### Table of Contents



December 31,2005
    
    
    2004Fixed rate secured
debt, weighted average
interest rate of 6.23% at
December 31, 2005, and
6.90% at December 31,
2004, maturity dates
ranging from 2006 to 2027
    
    $
    286,886
    
    
    $
    129,236Variable rate secured
debt, interest
rate of 7.38% at
December 31, 2005 and
5.38% at December 31,
2004, maturity date of
2006(1)
    
    
    22,100
    
    
    
    22,618Variable rate secured
swapped debt, interest
rate of 6.80% at December
31, 2005, maturity date of June 2010
    
    
    6,500
    
    
    
    Variable rate secured
debt, weighted average
interest of 7.01% at
December 31, 2005
maturity dates ranging from
2006-2010
    
    
    34,163
    
    
    
    4,000Total
    
    $
    349,649
    
    
    $
    155,854
 
 (1)
    
    The variable rate secured debt had an interest rate swap contract to effectively fix the rate at 5.4% from February 2004 until the swap
matured in October 2005. F-17




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##### Table of Contents



Total ScheduledYear of Maturity
    
    Payments2006
    
    $
    82,0002007
    
    
    44,2672008
    
    
    43,9322009
    
    
    29,7612010
    
    
    37,195Thereafter
    
    
    199,677$
    436,832
  9. INCOME TAXES
   For
the Years Ended December 31,2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred:Federal
    
    $
    43
    
    
    $
    49
    
    
    $
    (126
    )State
    
    
    6
    
    
    
    7
    
    
    
    (18
    )49
    
    
    
    56
    
    
    
    (144
    )Net tax expense
(benefit)
    
    $
    49
    
    
    $
    56
    
    
    $
    (144
    )
  F-18




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##### Table of Contents



December 31,2005
    
    
    2004Deferred tax asset
    
    $
    219
    
    
    $
    409Less Valuation Allowance
    
    
    (23
    )
    
    
    (114
    )Total Deferred Tax Asset
    
    
    196
    
    
    
    295Deferred tax liability
    
    
    
    
    
    
    (53
    )Net deferred tax asset
    
    $
    196
    
    
    $
    242
    10. STOCK BASED COMPENSATION
    For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, beginning of year
    
    
    376,800
    
    
    $
    12.00
    
    
    
    256,500
    
    
    $
    12.00
    
    
    
    139,500
    
    
    $
    12.00Granted
    
    
    258,100
    
    
    
    14.91
    
    
    
    129,000
    
    
    
    12.00
    
    
    
    129,000
    
    
    
    12.00Exercised
    
    
    (67,934
    )
    
    
    12.00
    
    
    
    
    
    
    
    12.00
    
    
    
    
    
    
    
    12.00Forfeited
    
    
    (22,600
    )
    
    
    12.00
    
    
    
    (8,700
    )
    
    
    12.00
    
    
    
    (12,000
    )
    
    
    12.00Outstanding, end of year
    
    
    544,366
    
    
    $
    13.38
    
    
    
    376,800
    
    
    $
    12.00
    
    
    
    256,500
    
    
    $
    12.00Options Exercisable, end of year
    
    
    236,207
    
    
    
    
    
    
    
    223,000
    
    
    
    
    
    
    
    145,000Weighted-Average fair value of
options granted during the year
    
    $
    1.48
    
    
    
    
    
    
    $
    1.79
    
    
    
    
    
    
    $
    2.21
 F-19




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##### Table of Contents



11. RETIREMENT PLAN
  12. LEASING
   2006
    
    $
    61,8362007
    
    
    56,3672008
    
    
    45,3312009
    
    
    37,8912010
    
    
    33,748Thereafter
    
    
    186,313$
    421,486
   2006
    
    $
    9352007
    
    
    9222008
    
    
    9072009
    
    
    8062010
    
    
    641Thereafter
    
    
    17,344$
    21,555
  F-20




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##### Table of Contents



13. SEGMENT REPORTING
    REVENUES FOR SEGMENTS
 For the Years Ended December 31,2005
    
    
    2004
    
    
    2003REVENUESRental Operations:Rental Income
    
    $
    47,720
    
    
    $
    30,074
    
    
    $
    13,653Service Operations:Development and Project
Management Fees
    
    
    2,134
    
    
    
    1,849
    
    
    
    3,661Consolidated Revenue from
Continuing Operations
    
    
    49,854
    
    
    
    31,923
    
    
    
    17,314Consolidated Revenue from
Discontinued Operations
    
    
    51
    
    
    
    766
    
    
    
    376Consolidated Revenue
    
    $
    49,905
    
    
    $
    32,689
    
    
    $
    17,690
 F-21




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##### Table of Contents



FFO FOR SEGMENTS
 For the Year Ended December 31,2005
    
    
    2004
    
    
    2003FUNDS FROM OPERATIONSRental Operations
    
    $
    33,318
    
    
    $
    21,154
    
    
    $
    11,312Service Operations
    
    
    123
    
    
    
    140
    
    
    
    (459
    )Total Segment FFO
    
    
    33,441
    
    
    
    22,294
    
    
    
    10,853Non Segment FFO:Interest Income (Expense), net
    
    
    (12,674
    )
    
    
    (8,137
    )
    
    
    (3,302
    )General and Administrative Expenses
    
    
    (4,275
    )
    
    
    (3,276
    )
    
    
    (2,694
    )Other Expenses
    
    
    (178
    )
    
    
    (129
    )
    
    
    (250
    )Loss on abandoned Due Diligence
    
    
    
    
    
    
    
    
    
    
    (209
    )Interest Rate Swap
    
    
    65
    
    
    
    308
    
    
    
    142Income Tax (Expense) Benefit
    
    
    (49
    )
    
    
    (56
    )
    
    
    144Minority Interest in Net Income
    
    
    (205
    )
    
    
    (161
    )
    
    
    (109
    )Minority Interest Share of Depreciation and Amortization
    
    
    (299
    )
    
    
    (247
    )
    
    
    (216
    )Dividends on Preferred Shares
    
    
    (1,995
    )
    
    
    
    
    
    
    Consolidated FFO
    
    
    13,831
    
    
    
    10,596
    
    
    
    4,359Depreciation and Amortization
    
    
    (11,362
    )
    
    
    (6,790
    )
    
    
    (3,327
    )Minority Interest Share of Depreciation and Amortization
    
    
    299
    
    
    
    247
    
    
    
    216Net gain on sale of discontinued operations
    
    
    1,250
    
    
    
    
    
    
    
    Net Income Available for Common Shareholders
    
    $
    4,018
    
    
    $
    4,053
    
    
    $
    1,248
 ASSETS FOR SEGMENTS
 (All amounts in thousands)
    
    December 31,2005
    
    
    2004AssetsRental Operations
    
    $
    686,906
    
    
    $
    313,168Service Operations
    
    
    694
    
    
    
    991Total Segment Assets
    
    
    687,600
    
    
    
    314,159Non-Segment Assets
    
    
    14,836
    
    
    
    10,815Consolidated Assets
    
    $
    702,436
    
    
    $
    324,974
 F-22




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##### Table of Contents



14. Shareholders Equity
       15. RECENT ACCOUNTING PRONOUNCEMENTS
  Accounting for Conditional Asset
Retirement Obligations, Accounting for Asset Retirement
Obligations and is effective.
 Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain
Rights
 16. SUBSEQUENT EVENTS
  F-23




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##### Table of Contents



F-24




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##### Table of Contents



SELECTED QUARTERLY FINANCIAL INFORMATION
 (All amounts in thousands except per share data)
(Unaudited)
Quarter Ended
 December
    
    
    September
    
    
    June
    
    
    March
    
    
    December
    
    
    September
    
    
    June
    
    
    March31, 2005
    
    
    30, 2005
    
    
    30, 2005
    
    
    31, 2005
    
    
    31, 2004
    
    
    30, 2004
    
    
    30, 2004
    
    
    31, 2004Corporate and
Rental Operations:Revenues
    
    $
    16,310
    
    
    $
    11,950
    
    
    $
    10,060
    
    
    $
    9,400
    
    
    $
    9,359
    
    
    $
    7,549
    
    
    $
    6,836
    
    
    $
    6,330General and
administrative
expense
    
    
    1,199
    
    
    
    1,056
    
    
    
    1,031
    
    
    
    989
    
    
    
    971
    
    
    
    839
    
    
    
    765
    
    
    
    701Income from
corporate and
rental operations (before dividends and discontinued operations)
    
    
    1,085
    
    
    
    1,529
    
    
    
    1,185
    
    
    
    1,050
    
    
    
    1,319
    
    
    
    942
    
    
    
    1,122
    
    
    
    809Service Operations
(HADC):Revenues
    
    
    366
    
    
    
    523
    
    
    
    608
    
    
    
    637
    
    
    
    617
    
    
    
    246
    
    
    
    465
    
    
    
    520General and
administrative
expense
    
    
    178
    
    
    
    158
    
    
    
    221
    
    
    
    128
    
    
    
    184
    
    
    
    36
    
    
    
    122
    
    
    
    89Income (Loss) from
service operations (after taxes)
    
    
    (34
    )
    
    
    26
    
    
    
    14
    
    
    
    68
    
    
    
    68
    
    
    
    52
    
    
    
    (17
    )
    
    
    (20
    )Consolidated net
income available for
common shares
    
    $
    85
    
    
    $
    524
    
    
    $
    1,148
    
    
    $
    2,261
    
    
    $
    1,280
    
    
    $
    909
    
    
    $
    1,083
    
    
    $
    781Basic and diluted
income per
common share
    
    $
    0.01
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.19
    
    
    $
    0.11
    
    
    $
    0.09
    
    
    $
    0.11
    
    
    $
    0.08Weighted average
common shares
    
    
    15,159
    
    
    
    13,771
    
    
    
    13,666
    
    
    
    11,885
    
    
    
    11,608
    
    
    
    9,965
    
    
    
    9,948
    
    
    
    9,948Weighted average
common shares diluted
    
    
    15,561
    
    
    
    14,175
    
    
    
    14,054
    
    
    
    12,288
    
    
    
    12,013
    
    
    
    10,332
    
    
    
    10,307
    
    
    
    10,307
 F-25




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##### Table of Contents



(All amounts in thousands)
    
    
    
    
    
    
    
    Initial Cost
    
    
    
    
    
    
    Gross Book Value as of December 31, 2005Mortgage
    
    
    
    
    
    
    
    
    
    
    CostBalances as of
    
    
    
    
    
    
    
    
    
    
    CapitalizedDecember 31,
    
    
    
    
    
    
    
    
    
    
    Subsequent to
    
    
    Land/Land
    
    
    BuildingProperty
    
    Type
    
    2005 (1)
    
    
    Land
    
    
    Building
    
    
    Acquisition
    
    
    Improvements
    
    
    Value
    
    
    Total310 Building (1)
    
    Medical Office Building
    
    $
    
    
    
    $
    591
    
    
    $
    5,246
    
    
    $
    290
    
    
    $
    591
    
    
    $
    5,536
    
    
    $
    6,127Aberdeen I
    
    Medical Office Building
    
    
    4,975
    
    
    
    713
    
    
    
    6,423
    
    
    
    
    
    
    
    713
    
    
    
    6,423
    
    
    
    7,136Aberdeen II
    
    Medical Office Building
    
    
    4,463
    
    
    
    810
    
    
    
    7,291
    
    
    
    
    
    
    
    810
    
    
    
    7,291
    
    
    
    8,101Atrium Office Park (4 Buildings)
    
    Commercial Office Park
    
    
    10,652
    
    
    
    1,436
    
    
    
    12,923
    
    
    
    
    
    
    
    1,436
    
    
    
    12,923
    
    
    
    14,359Biltmore Medical Mall
    
    Medical Office Building and Ambulatory Surgery Center
    
    
    31,854
    
    
    
    
    
    
    
    42,566
    
    
    
    227
    
    
    
    
    
    
    
    42,793
    
    
    
    42,793Central Medical Park (9 Buildings)
    
    Medical Office Building
    
    
    8,138
    
    
    
    1,509
    
    
    
    12,374
    
    
    
    98
    
    
    
    1,509
    
    
    
    12,472
    
    
    
    13,981Columbia Medical Plaza
    
    Medical Office Building
    
    
    6,585
    
    
    
    
    
    
    
    10,540
    
    
    
    
    
    
    
    
    
    
    
    10,540
    
    
    
    10,540Congress Professional Center II
    
    Medical Office Building
    
    
    3,303
    
    
    
    623
    
    
    
    5,609
    
    
    
    
    
    
    
    623
    
    
    
    5,609
    
    
    
    6,232Cooper Voorhees Medical Mall (3 Buildings)
    
    Medical Office Building and Ambulatory Surgery Center
    
    
    22,100
    
    
    
    3,217
    
    
    
    28,603
    
    
    
    
    
    
    
    3,217
    
    
    
    28,603
    
    
    
    31,820Coral Springs Surgical Center
    
    Medical Office Building
    
    
    3,298
    
    
    
    757
    
    
    
    6,850
    
    
    
    
    
    
    
    757
    
    
    
    6,850
    
    
    
    7,607Desert Professional Plaza
    
    Medical Office Building
    
    
    6,808
    
    
    
    
    
    
    
    9,530
    
    
    
    
    
    
    
    
    
    
    
    9,530
    
    
    
    9,530Edinburg Regional Medical Plaza
    
    Medical Office Building
    
    
    6,479
    
    
    
    1,102
    
    
    
    9,924
    
    
    
    
    
    
    
    1,102
    
    
    
    9,924
    
    
    
    11,026Elm Street Professional Plaza
    
    Medical Office Building
    
    
    9,002
    
    
    
    1,298
    
    
    
    10,974
    
    
    
    404
    
    
    
    1,298
    
    
    
    11,378
    
    
    
    12,676Foundation Medical Tower (2)
    
    Medical Office Building
    
    
    15,502
    
    
    
    3,808
    
    
    
    20,060
    
    
    
    
    
    
    
    3,808
    
    
    
    20,060
    
    
    
    23,868Foundation Surgical Hospital and Land (2)
    
    Specialty Hospital
    
    
    19,532
    
    
    
    3,848
    
    
    
    32,547
    
    
    
    
    
    
    
    3,848
    
    
    
    32,547
    
    
    
    36,395G & L Raines Childrens Pavilion (Northside)
    
    Medical Office Building
    
    
    8,020
    
    
    
    
    
    
    
    7,220
    
    
    
    
    
    
    
    
    
    
    
    7,220
    
    
    
    7,220Gateway East Medical Office Buildings (3 Buildings)
    
    Medical Office Building
    
    
    5,801
    
    
    
    796
    
    
    
    7,627
    
    
    
    125
    
    
    
    827
    
    
    
    7,752
    
    
    
    8,579JFK Medical Pavilion I at Palm Springs
    
    Medical Office Building
    
    
    3,000
    
    
    
    445
    
    
    
    4,012
    
    
    
    
    
    
    
    445
    
    
    
    4,012
    
    
    
    4,457Johns Creek I (3 Buildings)
    
    Medical Office Building
    
    
    3,590
    
    
    
    549
    
    
    
    5,020
    
    
    
    
    
    
    
    549
    
    
    
    5,020
    
    
    
    5,569Johns Creek II (3 Buildings)
    
    Medical Office Building
    
    
    
    
    
    
    548
    
    
    
    4,637
    
    
    
    
    
    
    
    548
    
    
    
    4,637
    
    
    
    5,185Johns Creek III (2 Buildings)
    
    Medical Office Building
    
    
    
    
    
    
    423
    
    
    
    3,626
    
    
    
    
    
    
    
    423
    
    
    
    3,626
    
    
    
    4,049Lake Mead Medical Arts Pavilion
    
    Medical Office Building
    
    
    6,586
    
    
    
    
    
    
    
    8,289
    
    
    
    
    
    
    
    
    
    
    
    8,289
    
    
    
    8,289Lakewood Medical Pavilion
    
    Medical Office Building
    
    
    6,500
    
    
    
    
    
    
    
    9,949
    
    
    
    
    
    
    
    
    
    
    
    9,949
    
    
    
    9,949Los Gatos Medical Pavilion
    
    Medical Office Building
    
    
    12,571
    
    
    
    
    
    
    
    17,632
    
    
    
    
    
    
    
    
    
    
    
    17,632
    
    
    
    17,632Medical Arts Center (Fayetteville)
    
    Medical Office Building
    
    
    3,576
    
    
    
    554
    
    
    
    4,607
    
    
    
    
    
    
    
    554
    
    
    
    4,607
    
    
    
    5,161Methodist Medical Building
    
    Medical Office Building
    
    
    5,296
    
    
    
    
    
    
    
    9,225
    
    
    
    125
    
    
    
    
    
    
    
    9,350
    
    
    
    9,350Mount Vernon Medical Center
    
    Medical Office Building
    
    
    14,569
    
    
    
    2,228
    
    
    
    21,585
    
    
    
    268
    
    
    
    2,232
    
    
    
    21,853
    
    
    
    24,085OrthoLink  East/West Medical Center
    
    Medical Office Building andAmbulatory Surgery Center
    
    
    4,607
    
    
    
    658
    
    
    
    5,979
    
    
    
    
    
    
    
    658
    
    
    
    5,979
    
    
    
    6,637OrthoLink  Gwinnett Center for Specialty Medicine I
    
    Ambulatory Surgery Center
    
    
    4,894
    
    
    
    743
    
    
    
    6,318
    
    
    
    
    
    
    
    743
    
    
    
    6,318
    
    
    
    7,061OrthoLink  Gwinnett Center for Specialty Medicine II
    
    Medical Office Building
    
    
    2,546
    
    
    
    342
    
    
    
    2,825
    
    
    
    
    
    
    
    342
    
    
    
    2,825
    
    
    
    3,167Osler Medical Arts Pavilion
    
    Medical Office Building
    
    
    2,091
    
    
    
    376
    
    
    
    3,390
    
    
    
    
    
    
    
    376
    
    
    
    3,390
    
    
    
    3,766Palm Court Plaza and Professional Center (2 Buildings)
    
    Medical Office Building
    
    
    14,835
    
    
    
    
    
    
    
    24,416
    
    
    
    
    
    
    
    
    
    
    
    24,416
    
    
    
    24,416Park Medical Center
    
    Medical Office Building
    
    
    3,772
    
    
    
    559
    
    
    
    5,223
    
    
    
    188
    
    
    
    559
    
    
    
    5,411
    
    
    
    5,970Partell Medical Center
    
    Medical Office Building
    
    
    4,841
    
    
    
    1,333
    
    
    
    6,318
    
    
    
    100
    
    
    
    1,333
    
    
    
    6,418
    
    
    
    7,751Professional Center III
    
    Medical Office Building
    
    
    3,573
    
    
    
    537
    
    
    
    4,837
    
    
    
    
    
    
    
    537
    
    
    
    4,837
    
    
    
    5,374Professional Center IV
    
    Medical Office Building
    
    
    2,927
    
    
    
    465
    
    
    
    4,185
    
    
    
    
    
    
    
    465
    
    
    
    4,185
    
    
    
    4,650Professional Center V
    
    Medical Office Building
    
    
    2,757
    
    
    
    
    
    
    
    5,790
    
    
    
    
    
    
    
    
    
    
    
    5,790
    
    
    
    5,790Rush Copley Medical Office Building (3)
    
    Medical Office Building
    
    
    
    
    
    
    661
    
    
    
    5,226
    
    
    
    
    
    
    
    661
    
    
    
    5,226
    
    
    
    5,887Rush Copley Medical Office Center at Fox Valley
    
    Medical Office Building
    
    
    
    
    
    
    380
    
    
    
    3,434
    
    
    
    
    
    
    
    380
    
    
    
    3,434
    
    
    
    3,814Saint Marys Pavilion (Southside)
    
    Medical Office Building
    
    
    7,397
    
    
    
    
    
    
    
    8,354
    
    
    
    
    
    
    
    
    
    
    
    8,354
    
    
    
    8,354Santa Anita Medical Plaza
    
    Medical Office Building
    
    
    10,975
    
    
    
    2,054
    
    
    
    18,498
    
    
    
    
    
    
    
    2,054
    
    
    
    18,498
    
    
    
    20,552Sierra Health Services (4 Buildings)
    
    Outpatient Treatment and Diagnostic
 Facility
    
    
    8,643
    
    
    
    3,924
    
    
    
    33,464
    
    
    
    10
    
    
    
    3,924
    
    
    
    33,474
    
    
    
    37,398Sierra Providence Eastside Center
    
    Medical Office Building and Ambulatory Surgery Center
    
    
    11,237
    
    
    
    
    
    
    
    16,210
    
    
    
    
    
    
    
    
    
    
    
    16,210
    
    
    
    16,210Southpointe Medical Center
    
    Medical Office Building and Ambulatory Surgery Center
    
    
    9,953
    
    
    
    1,207
    
    
    
    10,864
    
    
    
    
    
    
    
    1,207
    
    
    
    10,864
    
    
    
    12,071Stone Oak Physicians Plaza (2 Buildings)
    
    Medical Office Building
    
    
    6,960
    
    
    
    1,102
    
    
    
    10,512
    
    
    
    10
    
    
    
    1,236
    
    
    
    10,522
    
    
    
    11,758Tomball Professional Atrium Building
    
    Medical Office Building
    
    
    3,151
    
    
    
    513
    
    
    
    4,403
    
    
    
    418
    
    
    
    539
    
    
    
    4,821
    
    
    
    5,360Trinity West Medical Plaza
    
    Medical Office Building
    
    
    
    
    
    
    
    
    
    
    7,021
    
    
    
    2
    
    
    
    
    
    
    
    7,023
    
    
    
    7,023Union City Medical & Surgery Center
    
    Medical Office Building
    
    
    
    
    
    
    840
    
    
    
    9,878
    
    
    
    
    
    
    
    840
    
    
    
    9,878
    
    
    
    10,718Union City Land
    
    Ambulatory Surgery
Center
    
    
    406
    
    
    
    409
    
    
    
    
    
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    409Urology Center of Florida
    
    Ambulatory Surgery Center/Physician Group Clinic
    
    
    
    
    
    
    486
    
    
    
    4,212
    
    
    
    
    
    
    
    486
    
    
    
    4,212
    
    
    
    4,698Urology Center of the South
    
    Ambulatory Surgery Center/Physician Group Clinic
    
    
    
    
    
    
    2,640
    
    
    
    7,625
    
    
    
    222
    
    
    
    2,640
    
    
    
    7,847
    
    
    
    10,487Wellington Medical Arts Pavilion
    
    Medical Office Building
    
    
    7,686
    
    
    
    
    
    
    
    11,083
    
    
    
    
    
    
    
    
    
    
    
    11,083
    
    
    
    11,083West Boca Medical Arts Pavilion II
    
    Medical Office Building
    
    
    14,926
    
    
    
    
    
    
    
    17,876
    
    
    
    
    
    
    
    
    
    
    
    17,876
    
    
    
    17,876West Pearland Professional Center I
    
    Medical Office Building
    
    
    2,576
    
    
    
    381
    
    
    
    3,637
    
    
    
    
    
    
    
    382
    
    
    
    3,637
    
    
    
    4,019West Pearland Professional Center II
    
    Medical Office Building
    
    
    1,832
    
    
    
    438
    
    
    
    3,804
    
    
    
    5
    
    
    
    438
    
    
    
    3,809
    
    
    
    4,247West Tower at Doctors Hospital
    
    Medical Office Building
    
    
    16,798
    
    
    
    
    
    
    
    20,160
    
    
    
    
    
    
    
    
    
    
    
    20,160
    
    
    
    20,160Winn Way
    
    Medical Office Building
    
    
    1,252
    
    
    
    180
    
    
    
    1,419
    
    
    
    118
    
    
    
    180
    
    
    
    1,537
    
    
    
    1,717Workplace Professional Center I
    
    Medical Office
 Building Building and
Professional Office
    
    
    7,846
    
    
    
    977
    
    
    
    8,798
    
    
    
    
    
    
    
    977
    
    
    
    8,798
    
    
    
    9,775Yorkville Medical Office Building
    
    Medical Office Building
    
    
    
    
    
    
    271
    
    
    
    2,301
    
    
    
    
    
    
    
    271
    
    
    
    2,301
    
    
    
    2,572$
    380,681
    
    
    $
    46,731
    
    
    $
    602,949
    
    
    $
    2,610
    
    
    $
    46,927
    
    
    $
    605,559
    
    
    $
    652,486
 
 (1)
    
    This property secures a $3 million line of credit.(2)
    
    Includes FSA Land and Construction balance in Mortgage column(3)
    
    This property secures a $4 million line of credit.




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##### Table of Contents





(Accumulated Depreciation in thousands) YearAccumulated
    
    Constructed/
    
    Year
    
    DepreciableDevelopment
    
    Depreciation
    
    Renovated
    
    Acquired
    
    Life310 Building
    
    $
    362
    
    
    
    1986
    
    
    
    2003
    
    
    40 YearsAberdeen I
    
    
    19
    
    
    
    1993
    
    
    
    2005
    
    
    40 YearsAberdeen II
    
    
    16
    
    
    
    1995
    
    
    
    2005
    
    
    40 YearsAtrium Office Park (4 Buildings)
    
    
    50
    
    
    
    1996
    
    
    
    2005
    
    
    40 YearsBiltmore Medical Mall
    
    
    1,386
    
    
    
    1998
    
    
    
    2004
    
    
    40 YearsCentral Medical Park (9 Buildings)
    
    
    430
    
    
    
    1980-1998
    
    
    
    2004
    
    
    40 YearsColumbia Medical Plaza
    
    
    21
    
    
    
    1995
    
    
    
    2005
    
    
    40 YearsCongress Professional Center II
    
    
    15
    
    
    
    1997
    
    
    
    2005
    
    
    40 YearsCooper Voorhees Medical Mall (3 Buildings)
    
    
    1,369
    
    
    
    1997
    
    
    
    2004
    
    
    40 YearsCoral Springs Surgical Center
    
    
    330
    
    
    
    1993
    
    
    
    2004
    
    
    40 YearsDesert Professional Plaza
    
    
    15
    
    
    
    1998
    
    
    
    2005
    
    
    40 YearsEdinburg Regional Medical Plaza
    
    
    34
    
    
    
    1996
    
    
    
    2005
    
    
    40 YearsElm Street Professional Plaza
    
    
    560
    
    
    
    1991
    
    
    
    2003
    
    
    40 YearsFoundation Medical Tower
    
    
    94
    
    
    
    2005
    
    
    
    2005
    
    
    40 YearsFoundation Surgical Hospital
    
    
    37
    
    
    
    2005
    
    
    
    2005
    
    
    40 YearsG & L Raines Childrens Pavilion (Northside)
    
    
    22
    
    
    
    1993
    
    
    
    2005
    
    
    40 YearsGateway East Medical Office Buildings (3
Buildings)
    
    
    524
    
    
    
    1982
    
    
    
    2003
    
    
    40 YearsJFK Medical Pavilion I at Palm Springs
    
    
    14
    
    
    
    1993
    
    
    
    2005
    
    
    40 YearsJohns Creek I (3 Buildings)
    
    
    83
    
    
    
    1998
    
    
    
    2005
    
    
    40 YearsJohns Creek II (3 Buildings)
    
    
    97
    
    
    
    2001
    
    
    
    2005
    
    
    40 YearsJohns Creek III (2 Buildings)
    
    
    76
    
    
    
    2003
    
    
    
    2005
    
    
    40 YearsLake Mead Medical Arts Pavilion
    
    
    39
    
    
    
    2000
    
    
    
    2005
    
    
    40 YearsLakewood Medical Pavilion
    
    
    140
    
    
    
    1993-1994
    
    
    
    2005
    
    
    40 YearsLos Gatos Medical Pavilion
    
    
    249
    
    
    
    1993-1994
    
    
    
    2005
    
    
    40 YearsMedical Arts Center (Fayetteville)
    
    
    27
    
    
    
    1999
    
    
    
    2005
    
    
    40 YearsMethodist Medical Building
    
    
    475
    
    
    
    1990
    
    
    
    2003
    
    
    40 Years
 F-27




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##### Table of Contents



YearAccumulated
    
    Constructed/
    
    Year
    
    DepreciableDevelopment
    
    Depreciation
    
    Renovated
    
    Acquired
    
    LifeMount Vernon Medical Center
    
    $
    1,415
    
    
    
    1992
    
    
    
    2003
    
    
    40 YearsOrthoLink  East/West Medical Center
    
    
    222
    
    
    
    1999
    
    
    
    2004
    
    
    40 YearsOrthoLink  Gwinnett Center for Specialty
Medicine I
    
    
    239
    
    
    
    2001
    
    
    
    2004
    
    
    40 YearsOrthoLink  Gwinnett Center for Specialty
Medicine II
    
    
    106
    
    
    
    2002
    
    
    
    2004
    
    
    40 YearsOsler Medical Arts Pavilion
    
    
    12
    
    
    
    1997
    
    
    
    2005
    
    
    40 YearsPalm Court Plaza and Professional Center (2
Buildings)
    
    
    344
    
    
    
    1983-1985
    
    
    
    2005
    
    
    40 YearsPark Medical Center
    
    
    448
    
    
    
    1988
    
    
    
    2002
    
    
    40 YearsPartell Medical Center
    
    
    499
    
    
    
    1991
    
    
    
    2002
    
    
    40 YearsProfessional Center III
    
    
    9
    
    
    
    1993
    
    
    
    2005
    
    
    40 YearsProfessional Center IV
    
    
    8
    
    
    
    1996
    
    
    
    2005
    
    
    40 YearsProfessional Center V
    
    
    17
    
    
    
    1996
    
    
    
    2005
    
    
    40 YearsRush Copley Medical Office Building
    
    
    314
    
    
    
    1996
    
    
    
    2003
    
    
    40 YearsRush Copley Medical Office Center at Fox Valley
    
    
    45
    
    
    
    1989
    
    
    
    2005
    
    
    40 YearsSaint Marys Pavilion (Southside)
    
    
    25
    
    
    
    1991
    
    
    
    2005
    
    
    40 YearsSanta Anita Medical Plaza
    
    
    40
    
    
    
    1984
    
    
    
    2005
    
    
    40 YearsSierra Health Services (4 Buildings)
    
    
    2,810
    
    
    
    1982/1985/1998
    
    
    
    2002
    
    
    40 YearsSierra Providence Eastside Center
    
    
    82
    
    
    
    1997
    
    
    
    2005
    
    
    40 YearsSouthpointe Medical Center
    
    
    42
    
    
    
    1995
    
    
    
    2005
    
    
    40 YearsStone Oak Physicians Plaza (2 Buildings)
    
    
    686
    
    
    
    1999/2000
    
    
    
    2003
    
    
    40 YearsTomball Professional Atrium Building
    
    
    368
    
    
    
    1982
    
    
    
    2003
    
    
    40 YearsTrinity West Medical Plaza
    
    
    337
    
    
    
    1997
    
    
    
    2004
    
    
    40 YearsUnion City Medical & Surgery Center
    
    
    115
    
    
    
    1998-2000
    
    
    
    2005
    
    
    40 YearsUrology Center of Florida
    
    
    277
    
    
    
    1991
    
    
    
    2003
    
    
    40 YearsUrology Center of the South
    
    
    653
    
    
    
    2002
    
    
    
    2002
    
    
    40 YearsWellington Medical Arts Pavilion
    
    
    14
    
    
    
    2002
    
    
    
    2005
    
    
    40 YearsWest Boca Medical Arts Pavilion II
    
    
    35
    
    
    
    1995
    
    
    
    2005
    
    
    40 YearsWest Pearland Professional Center I
    
    
    235
    
    
    
    2000
    
    
    
    2003
    
    
    40 YearsWest Pearland Professional Center II
    
    
    119
    
    
    
    2002
    
    
    
    2004
    
    
    40 Years
 F-28




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##### Table of Contents



YearAccumulated
    
    Constructed/
    
    Year
    
    DepreciableDevelopment
    
    Depreciation
    
    Renovated
    
    Acquired
    
    LifeWest Tower at Doctors Hospital
    
    $
    60
    
    
    
    1995
    
    
    
    2005
    
    
    40 YearsWinn Way
    
    
    122
    
    
    
    1971/1998
    
    
    
    2003
    
    
    40 YearsWorkplace Professional Center I
    
    
    26
    
    
    
    2001
    
    
    
    2005
    
    
    40 YearsYorkville Medical Office Building
    
    
    30
    
    
    
    1980
    
    
    
    2005
    
    
    40 YearsTOTAL PORTFOLIO
    
    $

    16,238
 Gross Real Estate Asset
    
    
    Accumulated Depreciation2005
    
    
    2004
    
    2003


    
    2005
    
    
    2004
    
    
    2003Balance at beginning of year
    
    $
    283,659
    
    
    $
    158,219
    (1)
    $
    61,086
    
    
    $
    7,741
    
    
    $
    2,740
    
    $
    407Acquisitions/Buildings & Land
    
    
    373,719
    
    
    
    125,440
    
    
    97,133
    
    
    
    
    
    
    
    
    
    
    Dispositions/Retirements (1)
    
    
    (4,892
    )
    
    
    
    
   
   
    
   
    
    
    
    
    
    
    
    
   Depreciation/Amortization Expense
    
    
    
    
    
    
    
    
   
   
    
   
    
    8,497
    
    
    
    5,001
    
    
   2,333Balance at end of year
    
    $
    652,486
    
    
    $
    283,659
    
    $
    158,219
    
    
    $
    16,238
    
    
    $
    7,741
    
    $
    2,740
  (1)
    
    Includes property held for sale of $4,892. F-29




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit Description3.01
    
    Amended and Restated Declaration of Trust of the Registrant (incorporated by reference to
Exhibit 3.2 to the Registrants Registration Statement on Form S-11/A (File No. 333-89186)
filed on July 23, 2002).3.02
    
    Articles Supplementary of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Form 8-A12B filed on June 29, 2005).3.03
    
    Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrants Registration Statement on Form S-11/A (File No. 333-89186) filed on July 23, 2002).3.04
    
    Form of First Amended and Restated Agreement of Limited Partnership of Windrose Medical
Properties, L.P. (incorporated by reference to Exhibit 10.1 to the Registrants Registration
Statement on Form S-11/A (File No. 333-89186) filed on July 23, 2002).3.05
    
    Schedule 4.02-1 to the First Amended and Restated Agreement of Limited Partnership of Windrose
Medical Properties, L.P. Designating the 7.5% Series A Cumulative Convertible Preferred Units
(incorporated by reference to Exhibit 10.01 to the Registrants Quarterly Report on Form 10-Q
filed on August 9, 2005).4.01
    
    Form of Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Registrants
Registration Statement on Form S-11/A (Registration No. 333-89186) filed on August 8, 2002).4.02
    
    Form of 7.5% Series A Cumulative Convertible Preferred Share Certificate (incorporated by
reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on July 1, 2005).4.03
    
    Form of Warrant (incorporated by reference to Exhibit 4.02 to the Registrants Registration
Statement on Form S-3 (File No. 333-108659) filed on September 10, 2003).10.01
    
    Purchase Agreement, dated as of March 2, 2006, by and between Medistar Herman Drive Medical
Center, Ltd. and Windrose Genesis Park, L.P. (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on March 7, 2006).10.02
    
    Purchase Agreement, dated as of March 2, 2006, by and between E1-PV, L.P. and Rose Hill
Meadows, Ltd., and Windrose Pecan Valley, L.P. (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on Form 8-K filed on March 7, 2006).10.03
    
    Purchase Agreement dated March 2, 2006 between Medistar Webster Medical Center, Ltd. and
Windrose Webster Medical Center, L.P. (incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K filed on March 7, 2006).10.05
    
    Change in Control Severance Agreement dated February 3, 2006 between the Registrant, Windrose
Medical Properties, L.P. and Daniel R. Loftus (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on February 7, 2006).10.06
    
    Deferred Compensation Plan dated January 1, 2006 of the Registrant.*10.07
    
    Bridge Loan Agreement dated December 6, 2005 by and among Windrose Medical Properties, L.P.,
the Registrant, KeyBank National Association, individually and as agent, and the other lending
institutions that may become parties thereto (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on December 9, 2005).
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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.08
    
    Unconditional Guaranty of Payment and Performance dated December 6, 2005, by and between
Windrose Medical Properties Trust and KeyBank National Association, as agent (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on December 9,
2005).10.09
    
    Second Amended and Restated Secured Revolving Credit Agreement, dated as of September 30, 2005,
by and between Windrose Medical Properties, L.P. and The Huntington National Bank (incorporated
by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on October 6,
2005).10.10
    
    Second Amended and Restated Guaranty, dated as of September 30, 2005, made by the Registrant to
and for the benefit of The Huntington National Bank (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K filed on October 6, 2005).10.11
    
    Amended and Restated Secured Construction Loan Facility with the Huntington National Bank,
LaSalle Bank National Association and KeyBank National Association, dated July 11, 2005 (WMPT
Bellaire, L.P.) (incorporated by reference to Exhibit 10.02 to the Registrants Quarterly
Report on Form 10-Q filed on July 9, 2005).10.12
    
    Amended and Restated Secured Construction Loan Facility with the Huntington National Bank,
LaSalle Bank National Association and KeyBank National Association, dated July 11, 2005 (WMPT
Bellaire POB, L.P.) (incorporated by reference to Exhibit 10.03 to the Registrants Quarterly
Report on Form 10-Q filed on July 9, 2005).10.13
    
    Employment Agreement dated February 21, 2005 between Windrose Medical Properties L.P., the
Registrant and Fred S. Klipsch (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed on February 22, 2005).10.14
    
    Employment Agreement dated February 21, 2005 between Windrose Medical Properties L.P., the
Registrant and Frederick L. Farrar (incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on Form 8-K filed on February 22, 2005).10.15
    
    2002 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrants
Registration Statement on Form S-11/A (File No. 333-89186) filed on July 23, 2002).10.16
    
    Form of Overhead Sharing Agreement between Windrose Medical Properties, L.P. and Klipsch Audio,
Inc. (incorporated by reference to Exhibit 10.3 to the Registrants Registration Statement on
Form S-11/A (File 333-89186) filed on July 3, 2002).10.17
    
    Form of Change in Control Severance Agreement between the Registrant, Windrose Medical
Properties, L.P. and Fred S. Klipsch (incorporated by reference to Exhibit 10.30 to the
Registrants Registration Statement on Form S-11/A (File No. 333-89186) filed on July 23,
2002).10.18
    
    Form of Change in Control Severance Agreement between the Registrant, Windrose Medical
Properties, L.P. and Frederick L. Farrar (incorporated by reference to Exhibit 10.31 to the
Registrants Registration Statement on Form S-11/A (File No. 333-89186) filed on July 23,
2002).10.19
    
    Subordinated Promissory Note dated June 28, 2002 from Windrose International, L.L.C. to Fred S.
Klipsch (incorporated by reference to Exhibit 10.33 to the Registrants Registration Statement
on Form S-11/A (File No. 333-89186) filed on July 25, 2002).
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##### Table of Contents



ExhibitNumber
    
    Exhibit Description10.20
    
    Subordinated Promissory Note dated May 11, 2002 from Windrose International, L.L.C. to Klipsch
Audio, Inc. (incorporated by reference to Exhibit 10.34 to the Registrants Registration
Statement on Form S-11/A (File No. 333-89186) filed on July 25, 2002).10.21
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development Corporation to Robin P.
Barksdale (incorporated by reference to Exhibit 10.35 to the Registrants Registration
Statement on Form S-11/A (File No. 333-89186) filed on July 25, 2002).10.22
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development Corporation to Frederick
L. Farrar (incorporated by reference to Exhibit 10.36 to the Registrants Registration
Statement on Form S-11/A (File No. 333-89186) filed on July 25, 2002). 10.23
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development Corporation to Fred S.
Klipsch (incorporated by reference to Exhibit 10.37 to the Registrants Registration Statement
on Form S-11/A (File No. 333-89186) filed on July 25, 2002).10.24
    
    Promissory Note dated May 1, 1999 from Hospital Affiliates Development Corporation to Athena
Development (incorporated by reference to Exhibit 10.38 to the Registrants Registration
Statement on Form S-11/A (File No. 333-89186) filed on July 25, 2002).10.25
    
    Subordinated Promissory Note dated May 11, 2002 from Windrose International L.L.C. to Charles
Lanham (incorporated by reference to Exhibit 10.39 to the Registrants Registration Statement
on Form S-11/A (File No. 333-89186) filed on July 25, 2002).10.26
    
    Promissory Note payable by Alliance Design Group to Hospital Affiliates Development Corporation
(incorporated by reference to Exhibit 10.40 to the Registrants Registration Statement on Form
S-11/A (File No. 333-89186) filed on July 25, 2002).11.01
    
    Statement Regarding Computation of Per Share Earnings (the calculation of per share earnings is
in Part II, Item 8, Note 2 to the Consolidated Financial Statements and is omitted pursuant to
Item 601(b)(11) of Regulation S-K).12.01
    
    Statement Regarding Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Share Dividends.*21.01
    
    List of Subsidiaries of the Registrant.*23.01
    
    Consent of KPMG LLP.*31.01
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.*
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##### Table of Contents



ExhibitNumber
    
    Exhibit Description31.02
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Operating Officer.*31.03
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.*32.01
    
    Section 1350 Certification of the Chief Executive Officer.*32.02
    
    Section 1350 Certification of the Chief Operating Officer.*32.03
    
    Section 1350 Certification of the Chief Financial Officer.
 
 *
    
    Filed herewith.
    
    Management contract or compensatory plan. E-4