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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (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, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 333-158111 (1933 Act)
 GRUBB & ELLIS HEALTHCARE REIT II, INC.
  Maryland
    
    26-4008719(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1551 N. Tustin Avenue, Suite 300, Santa Ana, California
    
    92705(Address of principal executive offices)
    
    (Zip Code)
 (714) 667-8252
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  None
 o Yes þ No
 o Yes þ No
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
(A Maryland Corporation)
 TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    16Item 1B. Unresolved Staff Comments
    
    
    53Item 2. Properties
    
    
    53Item 3. Legal Proceedings
    
    
    55Item 4. [Removed and Reserved.]
    
    
    55PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    56Item 6. Selected Financial Data
    
    
    60Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    64Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    77Item 8. Financial Statements and Supplementary Data
    
    
    78Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    78Item 9A. Controls and Procedures
    
    
    78Item 9B. Other Information
    
    
    78PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    79Item 11. Executive Compensation
    
    
    79Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    79Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    79Item 14. Principal Accounting Fees and Services
    
    
    79PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    80SIGNATURES
    
    
    117Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I
 
 Item 1.
    
    Business.
 The use of the words we, us or our refers to Grubb & Ellis Healthcare REIT II, Inc. and
its subsidiaries, including Grubb & Ellis Healthcare REIT II Holdings, LP, except where the context
otherwise requires.
 Our Company
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Key Developments during 2010 and 2011
 
    
    On July 19, 2010, we entered into a loan agreement with Bank of America, N.A., to
obtain a secured revolving credit facility in an aggregate maximum principal amount of
$25,000,000, or the line of credit. The line of credit matures on July 19, 2012 and may
be extended by one 12-month period subject to satisfaction of certain conditions,
including payment of an extension fee. The proceeds of loans made under the line of
credit may be used to finance the purchase of properties, for working capital or may be
used for any other lawful purpose.
 
    
    As of March 10, 2011, we had completed 14 acquisitions, 10 of which were acquisitions
of medical office buildings, three of which were acquisitions of hospitals and one of
which was an acquisition of skilled nursing facilities. The aggregate purchase price of
these properties was $205,865,000 and was comprised of 26 buildings and 904,000 square
feet of gross leasable area, or GLA.
 
    
    As of February 28, 2011, we had received and accepted subscriptions in our offering for
18,559,580 shares of our common stock, or $185,142,000, excluding shares of our common
stock issued pursuant to the DRIP.
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Our Structure
  
 www.gbe-reits.com/healthcare2, www.gbe-reits.com/healthcare2
 Investment Objectives
  
    
    to preserve, protect and return our stockholders capital contributions;
 
    
    to pay regular cash distributions; and
 
    
    to realize growth in the value of our investments upon our ultimate sale of such
investments.
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Investment Strategy
     
    
    Quality.We seek to acquire properties that are suitable for their intended use
with a quality of construction that is capable of sustaining the propertys investment
potential for the long-term, assuming funding of budgeted maintenance, repairs and
capital improvements.
 
    
    Location.We seek to acquire properties that are located in established or
otherwise appropriate markets for comparable properties, with access and visibility
suitable to meet the needs of its occupants.
 
    
    Market; Supply and Demand.We focus on local or regional markets that have
potential for stable and growing property level cash flows over the long-term. These
determinations will be based in part on an evaluation of local economic, demographic and
regulatory factors affecting the property. For instance, we favor markets that indicate a
growing population and employment base or markets that exhibit potential limitations on
additions to supply, such as barriers to new construction. Barriers to new construction
include lack of available land and stringent zoning restrictions. In addition, we
generally will seek to limit our investments in areas that have limited potential for
growth.
 
    
    Predictable Capital Needs.We seek to acquire properties where the future expected
capital needs can be reasonably projected in a manner that would enable us to meet our
objectives of growth in cash flows and preservation of capital and stability.
 
    
    Cash Flows.We seek to acquire properties where the current and projected cash
flows, including the potential for appreciation in value, would enable us to meet our
overall investment objectives. We evaluate cash flows as well as expected growth and the
potential for appreciation.
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Real Estate Investments
  
    
    medical office buildings;
 
    
    assisted living facilities;
 
    
    skilled nursing facilities;
 
    
    hospitals;
 
    
    long-term acute care facilities;
 
    
    surgery centers;
 
    
    memory care facilities;
 
    
    specialty medical and diagnostic service facilities;
 
    
    laboratories and research facilities;
 
    
    pharmaceutical and medical supply manufacturing facilities; and
 
    
    offices leased to tenants in healthcare-related industries.
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
    
    plans and specifications;
 
    
    environmental reports (generally a minimum of a Phase I investigation);
 
    
    building condition reports;
 
    
    surveys;
 
    
    evidence of marketable title subject to such liens and encumbrances as are
acceptable to our advisor;
 
    
    audited financial statements covering recent operations of real properties having
operating histories or audited financial statements or summarized financial information
of the lessee or guarantor, unless such statements are not required to be filed with the
SEC and delivered to stockholders;
 
    
    title insurance policies;
 
    
    liability insurance policies; and
 
    
    tenant leases and operating agreements.
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Joint Ventures
    
    
    a majority of our directors, including a majority of our independent directors, not
otherwise interested in such transaction, approves the transaction as being fair and
reasonable to us; and
 
    
    the investment by us and such affiliate are on substantially the same terms and
conditions.
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Real Estate-Related Investments
  Investing In and Originating Loans
  Securities Investments
   
    
    positioning the overall portfolio to achieve an optimal mix of real estate and real
estate-related investments;
 
    
    diversification benefits relative to the rest of the securities assets within our
portfolio;
 
    
    fundamental securities analysis;
 
    
    quality and sustainability of underlying property cash flows;
 
    
    broad assessment of macroeconomic data and regional property level supply and
demand dynamics;
 
    
    potential for delivering high current income and attractive risk-adjusted total
returns; and
 
    
    additional factors considered important to meeting our investment objectives.
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Development Strategy
  Disposition Strategy
  
    
    diversification benefits exist associated with disposing of the investment and
rebalancing our investment portfolio;
 
    
    an opportunity arises to pursue a more attractive investment;
 
    
    in the judgment of our advisor, the value of the investment might decline;
 
    
    with respect to properties, a major tenant involuntarily liquidates or is in
default under its lease;
 
    
    the investment was acquired as part of a portfolio acquisition and does not meet
our general acquisition criteria;
 
    
    an opportunity exists to enhance overall investment returns by raising capital
through sale of the investment; or
 
    
    in the judgment of our advisor, the sale of the investment is in the best interest
of our stockholders.
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Borrowing Policies
       Board Review of Our Investment Policies
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Tax Status
   Distribution Policy
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Competition
  Government Regulations
  Costs of Compliance with the Americans with Disabilities Act.
 Costs of Government Environmental Regulation and Private Litigation.
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Other Federal, State and Local Regulations.
 Significant Tenants
  Percentage ofAnnualized
    
    
    Annualized
    
    
    
    
    GLA
    
    
    Lease ExpirationTenant
    
    Base Rent(1)
    
    
    Base Rent
    
    
    Property
    
    (Square Feet)
    
    
    DateLandmark Holdings of
Missouri, LLC
    
    $
    2,620,000
    
    
    
    14.4
    %
    
    Monument Long-Term Acute Care Hospital Portfolio
    
    
    85,000
    
    
    10/31/25Kissito Healthcare
    
    $
    2,249,000
    
    
    
    12.4
    %
    
    Virginia Skilled Nursing Facility Portfolio
    
    
    144,000
    
    
    01/31/25Laurel Health Care Company
    
    $
    2,034,000
    
    
    
    11.2
    %
    
    Virginia Skilled Nursing Facility Portfolio
    
    
    88,000
    
    
    various - 2016 to 2025
 
 (1)
    
    Annualized base rent is based on contractual base rent from leases in
effect as of December 31, 2010. The loss of any of these tenants or
their inability to pay rent could have a material adverse effect on
our business and results of operations. Geographic Concentration
  Employees
  Financial Information About Industry Segments
 Segment Reporting
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Item 1A.
    
    Risk Factors.
 Investment Risks
 There is no public market for the shares of our common stock. Therefore, it will be difficult for
our stockholders to sell their shares of our common stock and, if our stockholders are able to sell
their shares of our common stock, they will likely sell them at a substantial discount.
  Our offering is considered a blind pool offering because we have not identified all of the real
estate or real estate-related investments to acquire with the net proceeds from our offering.
  We have a limited operating history. Therefore, our stockholders may not be able to adequately
evaluate our ability to achieve our investment objectives, and the prior performance of other Grubb
& Ellis Group programs may not be an accurate predictor of our future results.
  
    
    identify and acquire investments that further our investment strategy;
 
    
    rely on our dealer manager to build, expand and maintain its network of licensed
securities brokers and other agents in order to sell shares of our common stock;
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
    
    respond to competition both for investment opportunities and potential investors in
us; and
 
    
    build and expand our operations structure to support our business.
  We have experienced losses in the past, and we may experience additional losses in the future.
  If we raise substantially less than the maximum offering, we may not be able to invest in a diverse
portfolio of real estate and real estate-related investments, and the value of our stockholders
investments may fluctuate more widely with the performance of specific investments.
  If we are unable to find suitable investments, we may not have sufficient cash flows available
for distributions to our stockholders.
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We face competition for the acquisition of medical office buildings and other healthcare-related
facilities, which may impede our ability to make acquisitions or may increase the cost of these
acquisitions and may reduce our profitability and could cause our stockholders to experience a
lower return on their investment.
  Our stockholders may be unable to sell their shares of our common stock because their ability to
have their shares of our common stock repurchased pursuant to our share repurchase plan is subject
to significant restrictions and limitations.
  Our advisor may be entitled to receive significant compensation in the event of our liquidation or
in connection with a termination of the Advisory Agreement.
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We may not effect a liquidity event within our targeted time frame of five years after the
completion of our offering stage, or at all. If we do not effect a liquidity event, our
stockholders may have to hold their investment in shares of our common stock for an indefinite
period of time.
   Our board of directors may change our investment objectives without seeking our stockholders
approval.
  Risks Related to Our Business
 We have not had sufficient cash available from operations to pay distributions, and, therefore, we
have paid distributions from the net proceeds of our offering, from borrowings in anticipation of
future cash flows or from other sources, such as our sponsor. Any such distributions may reduce the
amount of capital we ultimately invest in assets and negatively impact the value of our
stockholders investment.
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We may suffer from delays in locating suitable investments, which could reduce our ability to pay
distributions to our stockholders and reduce their return on their investment.
  The availability and timing of cash distributions to our stockholders is uncertain. If we fail to
pay distributions, our stockholders investment in shares of our common stock could suffer.
  We are uncertain of all of our sources of debt or equity for funding our capital needs. If we
cannot obtain funding on acceptable terms, our ability to acquire and make necessary capital
improvements to properties may be impaired or delayed.
  We intend to incur mortgage indebtedness and other borrowings, which may increase our business
risks, could hinder our ability to pay distributions and could decrease the value of our
stockholders investment.
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Higher mortgage rates may make it more difficult for us to finance or refinance properties, which
could reduce the number of properties we can acquire and the amount of cash available for
distribution to our stockholders.
  The ongoing market disruptions may adversely affect our operating results and financial condition.
  
    
    Debt and Equity Markets Our results of operations are sensitive to the volatility
of the credit markets. The real estate debt markets have been experiencing volatility as
a result of certain factors, including the tightening of underwriting standards by
lenders and credit rating agencies and the significant inventory of unsold commercial
mortgage-backed securities in the market. Credit spreads for major sources of capital
have widened significantly as investors have demanded a higher risk premium. This is
resulting in lenders increasing the cost for debt financing. Should the overall cost of
borrowings increase, either by increases in the index rates or by increases in lender
spreads, we will need to factor such increases into the economics of our acquisitions,
developments and property contributions. This may result in our property operations
generating lower overall economic returns and a reduced level of cash flows, which could potentially
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impact our ability to pay distributions to our stockholders. In addition, the
ongoing dislocations in the debt markets have reduced the amount of capital that is
available to finance real estate, which, in turn: (1) limits the ability of real estate
investors to benefit from reduced real estate values or to realize enhanced returns on
real estate investments; (2) has slowed real estate transaction activity; and (3) may
result in an inability to refinance debt as it becomes due, all of which may reasonably
be expected to have a material impact, favorable or unfavorable, on revenues, income
and/or cash flows from the acquisition and operations of real estate and mortgage loans.
In addition, the state of the debt markets could have an impact on the overall amount of
capital being invested in real estate, which may result in price or value decreases of
real estate assets and impact our ability to raise equity capital.
 
    
    Valuations The ongoing market volatility will likely make the valuation of our
properties more difficult. There may be significant uncertainty in the valuation, or in
the stability of the value, of our properties that could result in a substantial decrease
in the value of our properties. As a result, we may not be able to
recover the carrying amount of our properties, which may require us to recognize an
impairment charge in earnings.
 
    
    Government Intervention The pervasive and fundamental disruptions that the global
financial markets have been undergoing have led to extensive and unprecedented
governmental intervention. Although the government intervention is intended to stimulate
the flow of capital and to undergird the U.S. economy in the short term, it is impossible
to predict the actual effect of the government intervention and what effect, if any,
additional interim or permanent governmental intervention may have on the financial
markets and/or the effect of such intervention on us and our results of operations. In
addition, there is a high likelihood that regulation of the financial markets will be
significantly increased in the future, which could have a material impact on our
operating results and financial condition.
 Our results of operations, our ability to pay distributions to our stockholders and our ability to
dispose of our investments are subject to international, national and local economic factors we
cannot control or predict.
  
    
    poor economic times may result in defaults by tenants of our properties due to
bankruptcy, lack of liquidity, or operational failures. We may also be required to
provide rent concessions or reduced rental rates to maintain or increase occupancy
levels;
 
    
    reduced values of our properties may limit our ability to dispose of assets at
attractive prices or to obtain debt financing secured by our properties and may reduce
the availability of unsecured loans;
 
    
    the value and liquidity of our short-term investments and cash deposits could be
reduced as a result of a deterioration of the financial condition of the institutions
that hold our cash deposits or the institutions or assets in which we have made
short-term investments, the dislocation of the markets for our short-term investments,
increased volatility in market rates for such investment or other factors;
 
    
    our lender under our line of credit could refuse to fund their financing commitment to
us or could fail and we may not be able to replace the financing commitment of such
lender on favorable terms, or at all;
 
    
    one or more counterparties to our interest rate swaps could default on their
obligations to us or could fail, increasing the risk that we may not realize the benefits
of these instruments;
 
    
    increases in supply of competing properties or decreases in demand for our properties
may impact our ability to maintain or increase occupancy levels and rents;
 
    
    constricted access to credit may result in tenant defaults or non-renewals under
leases;
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
    
    job transfers and layoffs may cause vacancies to increase and a lack of future
population and job growth may make it difficult to maintain or increase occupancy levels;
and
 
    
    increased insurance premiums, real estate taxes or utilities or other expenses may
reduce funds available for distribution or, to the extent such increases are passed
through to tenants, may lead to tenant defaults. Also,
any such increased expenses may make it difficult to increase rents to tenants on turnover,
which may limit our ability to increase our returns.
  Increasing vacancy rates for commercial real estate resulting from ongoing disruptions in the
financial markets and deteriorating economic conditions could reduce revenue and the resale value
of our properties.
  We are dependent on tenants for our revenue, and lease terminations could reduce our distributions
to our stockholders.
  If a tenant declares bankruptcy, we may be unable to collect balances due under relevant leases.
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Long-term leases may not result in fair market lease rates over time; therefore, our income and our
distributions could be lower than if we did not enter into long-term leases.
  We may incur additional costs in acquiring or re-leasing properties, which could adversely affect
the cash available for distribution to our stockholders.
  We may be unable to secure funds for future tenant or other capital improvements, which could limit
our ability to attract, or replace or retain tenants and decrease our stockholders return on their
investment.
  Our success is dependent on the performance of our advisor and certain key personnel.
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The fees we will pay our advisor under the Advisory Agreement and the distributions payable to our
advisor under our operating partnership agreement were not determined on an arms-length basis, and
therefore, may not be on the same terms as those we could negotiate with an unrelated party.
  Our advisor may terminate the Advisory Agreement, which could require us to pay substantial fees
and may require us to find a new advisor.
   If we internalize our management functions, we could incur significant costs associated with
being self-managed.
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Our success is dependent on the performance of our sponsor.
  Our advisor and its affiliates have no obligation to defer or forgive fees or loans or advance any
funds to us, which could reduce our ability to acquire investments or pay distributions.
  We may structure acquisitions of property in exchange for limited partnership units in our
operating partnership on terms that could limit our liquidity or our flexibility.
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The failure of any bank in which we deposit our funds could reduce the amount of cash we have
available to pay distributions and acquire investments.
  Risks Related to Conflicts of Interest
  We may compete with other Grubb & Ellis Group programs for investment opportunities. As a result,
our advisor may not cause us to invest in favorable investment opportunities, which may reduce our
returns on our investments.
  The conflicts of interest faced by our officers may cause us not to be managed solely in our
stockholders best interest, which may adversely affect our results of operations and the value of
our stockholders investment.
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Our advisors officers face conflicts of interest relating to the allocation of their time and
other resources among the various entities that they serve or have interests in, and such conflicts
may not be resolved in our favor.
  Our advisor faces conflicts of interest relating to its compensation structure, which could result
in actions that are not necessarily in our stockholders long-term best interest.
  Our advisor may receive economic benefits from its status as a limited partner without bearing any
of the investment risk.
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The distribution payable to our advisor may influence our decisions about listing the shares of
our common stock on a national securities exchange, merging our company with another company and
acquisition or disposition of our investments.
  We may acquire assets from, or dispose of assets to, affiliates of our advisor, which could result
in us entering into transactions on less favorable terms than we would receive from a third party
or that negatively affect the publics perception of us.
  If we enter into joint ventures with affiliates, we may face conflicts of interest or disagreements
with our joint venture partners that may not be resolved as quickly or on terms as advantageous to
us as would be the case if the joint venture had been negotiated at arms length with an
independent joint venture partner.
  Risks Related to Our Organizational Structure
 Several potential events could cause our stockholders investment in us to be diluted, which may
reduce the overall value of their investment.
  
    
    future offerings of our securities, including issuances pursuant to the DRIP and up to
200,000,000 shares of any preferred stock that our board of directors may authorize;
 
    
    private issuances of our securities to other investors, including institutional
investors;
 
    
    issuances of our securities pursuant to our incentive plan; or
 
    
    redemptions of units of limited partnership interest in our operating partnership in
exchange for shares of our common stock.
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Our ability to issue preferred stock may include a preference in distributions superior to our
common stock and also may deter or prevent a sale of shares of our common stock in which our
stockholders could profit.
  
    
    a merger, tender offer or proxy contest;
 
    
    assumption of control by a holder of a large block of our securities; or
 
    
    removal of incumbent management.
 The limit on the percentage of shares of our common stock that any person may own may discourage a
takeover or business combination that may have benefited our stockholders.
  Our stockholders ability to control our operations is severely limited.
  
    
    the election or removal of directors;
 
    
    any amendment of our charter, except that our board of directors may amend our charter
without stockholder approval to change our name or the name of other designation or the
par value of any class or series of our stock and the aggregate par value of our stock,
increase or decrease the aggregate number of our shares of stock, increase or decrease
the number of our shares of any class or series that we have the authority to issue,
effect certain reverse stock splits, or qualify as a REIT under the Code;
 
    
    our dissolution; and
 
    
    certain mergers, consolidations and sales or other dispositions of all or
substantially all of our assets.
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Limitations on share ownership and transfer may deter a sale of our common stock in which our
stockholders could profit.
  Maryland takeover statutes may deter others from seeking to acquire us and prevent our stockholders
from making a profit in such transaction.
  The MGCL and our organizational documents limit our stockholders right to bring claims against our
officers and directors.
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Maryland law prohibits certain business combinations, which may make it more difficult for us to be
acquired and may limit our stockholders ability to dispose of their shares of our common stock.
  
    
    any person who beneficially owns 10.0% or more of the voting power of the
corporations outstanding voting stock; or
 
    
    an affiliate or associate of the corporation who, at any time within the two-year
period prior to the date in question, was the beneficial owner of 10.0% or more of the
voting power of the then outstanding stock of the corporation.
   
    
    80.0% of the votes entitled to be cast by holders of outstanding shares of voting
stock of the corporation; and
 
    
    two-thirds of the votes entitled to be cast by holders of voting stock of the
corporation other than shares of stock held by the interested stockholder with whom or
with whose affiliate the business combination is to be effected or held by an affiliate
or associate of the interested stockholder.
  Our charter includes a provision that may discourage a stockholder from launching a tender offer
for shares of our common stock.
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Our stockholders investment return may be reduced if we are required to register as an investment
company under the Investment Company Act. To avoid registration as an investment company, we may
not be able to operate our business successfully. If we become subject to registration under the
Investment Company Act, we may not be able to continue our business.
  
    
    limitations on capital structure;
 
    
    restrictions on specified investments;
 
    
    prohibitions on transactions with affiliates; and
 
    
    compliance with reporting, record keeping, voting, proxy disclosure and other rules
and regulations that would significantly change our operations.
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Risks Related to Investments in Real Estate
 Changes in national, regional or local economic, demographic or real estate market conditions may
adversely affect our results of operations and our ability to pay distributions to our stockholders
or reduce the value of their investment.
  If we acquire real estate at a time when the real estate market is experiencing substantial
influxes of capital investment and competition for income-producing properties, such real estate
investments may not appreciate or may decrease in value.
  We may obtain only limited warranties when we purchase a property and would have only limited
recourse in the event our due diligence did not identify any issues that lower the value of our
property.
  Acquiring or attempting to acquire multiple properties in a single transaction may adversely affect
our operations.
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Uninsured losses relating to real estate and lender requirements to obtain insurance may reduce our
stockholders returns.
  Terrorist attacks and other acts of violence or war may affect the markets in which we operate and
have a material adverse effect on our financial condition, results of operations and ability to pay
distributions to our stockholders.
   Dramatic increases in insurance rates could adversely affect our cash flows and our ability to pay
distributions to our stockholders.
  Delays in the acquisition, development and construction of real properties may have adverse effects
on our results of operations and our ability to pay distributions to our stockholders.
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If we contract with a development company for newly developed property, our earnest money deposit
made to the development company may not be fully refunded.
  
    
    the development company fails to develop the property;
 
    
    all or a specified portion of the pre-leased tenants fail to take possession under
their leases for any reason; or
 
    
    we are unable to raise sufficient proceeds from our offering to pay the purchase price
at closing.
  Uncertain market conditions relating to the future disposition of properties could cause us to sell
our properties at a loss in the future.
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Our inability to sell a property when we desire to do so could adversely impact our ability to pay
cash distributions to our stockholders.
  If we sell properties by providing financing to purchasers, defaults by the purchasers would
adversely affect our cash flows from operations.
  Our stockholders may not receive any profits resulting from the sale of one of our properties, or
receive such profits in a timely manner, because we may provide financing to the purchaser of such
property.
  We face possible liability for environmental cleanup costs and damages for contamination related to
properties we acquire, which could substantially increase our costs and reduce our liquidity and
cash distributions to our stockholders.
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Our real estate investments may be concentrated in medical office buildings or other
healthcare-related facilities, making us more vulnerable economically than if our investments were
diversified.
   A high concentration of our properties in a particular geographic area would magnify the effects of
downturns in that geographic area.
  Certain of our properties may not have efficient alternative uses, so the loss of a tenant may
cause us not to be able to find a replacement or cause us to spend considerable capital to adapt
the property to an alternative use.
  Our medical office buildings, healthcare-related facilities and tenants may be unable to compete
successfully.
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A proposed change in U.S. accounting standards for leases could reduce the overall demand to lease
our properties.
    Our costs associated with complying with the Americans with Disabilities Act may reduce our cash
available for distributions.
  Increased operating expenses could reduce cash flows from operations and funds available to acquire
investments or pay distributions.
   40




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##### Table of Contents



Our operating properties will be subject to real and personal property taxes that may increase in
the future, which could adversely affect our cash flows.
  Costs of complying with governmental laws and regulations related to environmental protection and
human health and safety may be high.
   Risks Related to the Healthcare Industry
 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 rent payments to us.
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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.
   Some tenants of our medical office buildings and healthcare-related facilities will be 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.
   42




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##### Table of Contents




    
    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 any item or service reimbursed by Medicare or Medicaid;
 
    
    the Federal Physician Self-Referral Prohibition, which, subject to specific
exceptions, restricts physicians from making referrals for specifically 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 claims paid by the
Medicare and Medicaid programs; and
 
    
    the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and
Human Services to impose monetary penalties for certain fraudulent acts.
  Adverse trends in healthcare provider operations may negatively affect our lease revenues and our
ability to pay distributions to our stockholders.
  
    
    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;
 
    
    increased expense for uninsured patients;
 
    
    increased competition among healthcare providers;
 
    
    increased liability insurance expense;
 
    
    continued pressure by private and governmental payors to reduce payments to providers
of services;
 
    
    increased scrutiny of billing, referral and other practices by federal and state
authorities;
 
    
    changes in federal and state healthcare program payment models; and
 
    
    increased emphasis on compliance with privacy and security requirements related to
personal health information.
   43




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Our healthcare-related tenants may be subject to significant legal actions that could subject them
to increased operating costs and substantial uninsured liabilities, which may affect their ability
to pay their rent payments to us.
  Recently enacted comprehensive healthcare reform legislation, the effects of which are not yet
known, could materially adversely affect our business, financial condition and results of
operations and our ability to pay distributions to our stockholders.
  Risks Related to Debt Financing
 Increases in interest rates could increase the amount of our debt payments, and therefore,
negatively impact our operating results.
   44




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To the extent we borrow at fixed rates or enter into fixed interest rate swaps, we will not benefit
from reduced interest expense if interest rates decrease.
  Hedging activity may expose us to risks.
  Lenders may require us to enter into restrictive covenants relating to our operations, which could
limit our ability to pay distributions to our stockholders.
  Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds
available for distribution to our stockholders.
  If we enter into financing arrangements involving balloon payment obligations, it may
adversely affect our ability to refinance or sell properties on favorable terms, and to pay
distributions to our stockholders.
   45




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Risks Related to Real Estate-Related Investments
 The mortgage loans in which we may invest and the mortgage loans underlying the mortgage-backed
securities in which we may invest may be impacted by unfavorable real estate market conditions,
which could decrease their value.
  Delays in liquidating defaulted mortgage loan investments could reduce our investment returns.
  The commercial mortgage-backed securities in which we may invest are subject to several types of
risks.
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The mezzanine loans in which we may invest would involve greater risks of loss than senior loans
secured by income-producing real estate.
  Real estate-related equity securities in which we may invest are subject to specific risks relating
to the particular issuer of the securities and may be subject to the general risks of investing in
real estate or real estate-related assets.
  We expect a portion of our real estate-related investments to be illiquid and we may not be able to
adjust our portfolio in response to changes in economic and other conditions.
  Interest rate and related risks may cause the value of our real estate-related investments to be
reduced.
   If we liquidate prior to the maturity of our real estate-related investments, we may be forced
to sell those investments on unfavorable terms or at a loss.
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Risks Related to Joint Ventures
 The terms of joint venture agreements or other joint ownership arrangements into which we have and
may enter could impair our operating flexibility and our results of operations.
  
    
    a venture partner may at any time have economic or other business interests or goals
which become inconsistent with our business interests or goals, including inconsistent
goals relating to the sale of properties held in a joint venture or the timing of the
termination and liquidation of the venture;
 
    
    a venture partner might become bankrupt and such proceedings could have an adverse
impact on the operation of the partnership or joint venture;
 
    
    actions taken by a venture partner might have the result of subjecting the property to
liabilities in excess of those contemplated; and
 
    
    a venture partner may be in a position to take action contrary to our instructions or
requests or contrary to our policies or objectives, including our policy with respect to
qualifying and maintaining our qualification as a REIT.
  We may structure our joint venture relationships in a manner which may limit the amount we
participate in the cash flows or appreciation of an investment.
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Federal Income Tax Risks
 Failure to qualify or maintain our qualification as a REIT for federal income tax purposes would
subject us to federal income tax on our taxable income at regular corporate rates, which would
substantially reduce our ability to pay distributions to our stockholders.
    To qualify or maintain our qualification as a REIT and to avoid the payment of federal income and
excise taxes, we may be forced to borrow funds, use proceeds from the issuance of securities
(including our offering), or sell assets to pay distributions, which may result in our distributing
amounts that may otherwise be used for our operations.
  Our investment strategy may cause us to incur penalty taxes, lose our REIT status, or own and sell
properties through taxable REIT subsidiaries, each of which would diminish the return to our
stockholders.
   49




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50




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Our stockholders may have a current tax liability on distributions they elect to reinvest in shares
of our common stock.
  Legislative or regulatory action with respect to taxes could adversely affect the returns to our
investors.
     In certain circumstances, we may be subject to federal and state income taxes as a REIT, which
would reduce our cash available for distribution to our stockholders.
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Distributions to tax-exempt stockholders may be classified as UBTI.
  
    
    part of the income and gain recognized by certain qualified employee pension trusts
with respect to our common stock may be treated as UBTI if the shares of our common stock
are predominately held by qualified employee pension trusts, and we are required to rely
on a special look-through rule for purposes of meeting one of the REIT share ownership
tests, and we are not operated in a manner to avoid treatment of such income or gain as
UBTI;
 
    
    part of the income and gain recognized by a tax exempt stockholder with respect to the shares
of our common stock would constitute UBTI if the stockholder incurs debt in order
to acquire the shares of our common stock; and
 
    
    part or all of the income or gain recognized with respect to the shares of our common
stock by social clubs, voluntary employee benefit associations, supplemental unemployment
benefit trusts and qualified group legal services plans which are exempt from federal
income taxation under Sections 501(c)(7), (9), (17) or (20) of the Internal Revenue Code
may be treated as UBTI.
 Complying with the REIT requirements may cause us to forego otherwise attractive opportunities.
  Foreign purchasers of shares of our common stock may be subject to FIRPTA tax upon the sale of
their shares of our common stock.
  Foreign stockholders may be subject to FIRPTA tax upon the payment of a capital gains dividend.
   52




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Employee Benefit Plan, IRA, and Other Tax-Exempt Investor Risks
  If our stockholders fail to meet the fiduciary and other standards under ERISA or the Code as a
result of an investment in shares of our common stock, our stockholders could be subject to
criminal and civil penalties.
  
    
    whether their investment is consistent with the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, or ERISA, and the Code, or any other
applicable governing authority in the case of a government plan;
 
    
    whether their investment is made in accordance with the documents and instruments
governing their Benefit Plan or IRA, including their Benefit Plan or IRAs investment
policy;
 
    
    whether their investment satisfies the prudence, diversification and other
requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA;
 
    
    whether their investment will impair the liquidity needs and distribution requirements
of the Benefit Plan or IRA;
 
    
    whether their investment will constitute a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code;
 
    
    whether their investment will produce or result in UBTI, as defined in Sections 511
through 514 of the Code, to the Benefit Plan or IRA; and
 
    
    their need to value the assets of the Benefit Plan or IRA annually in accordance with
ERISA and the Code.
  
 Item 1B.
    
    Unresolved Staff Comments.
  
 Item 2.
    
    Properties.
   53




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Real Estate Investments
   Annual Rent% of
    
    
    
    
    
    
    Per LeasedGLA
    
    
    % of
    
    
    Ownership
    
    
    Date
    
    
    Purchase
    
    
    Annualized
    
    
    Annualized
    
    
    Occupancy
    
    
    Sq FtProperty
    
    Property Location
    
    (Sq Ft)
    
    
    GLA
    
    
    Percentage
    
    
    Acquired
    
    
    Price
    
    
    Base Rent (1)
    
    
    Base Rent
    
    
    (2)
    
    
    (3)Lacombe Medical Office Building
    
    Lacombe, LA
    
    
    34,000
    
    
    
    3.9
    %
    
    
    100
    %
    
    
    03/05/10
    
    
    $
    6,970,000
    
    
    $
    502,000
    
    
    
    2.8
    %
    
    
    100
    %
    
    $
    14.69Center for Neurosurgery and Spine
    
    Sartell, MN
    
    
    37,000
    
    
    
    4.2
    
    
    
    100
    %
    
    
    03/31/10
    
    
    
    6,500,000
    
    
    
    562,000
    
    
    
    3.1
    
    
    
    100
    %
    
    $
    15.37Parkway Medical Center
    
    Beachwood, OH
    
    
    88,000
    
    
    
    10.1
    
    
    
    100
    %
    
    
    04/12/10
    
    
    
    10,900,000
    
    
    
    1,598,000
    
    
    
    8.8
    
    
    
    88.0
    %
    
    $
    20.70Highlands Ranch Medical Pavilion
    
    Highlands Ranch, CO
    
    
    37,000
    
    
    
    4.2
    
    
    
    100
    %
    
    
    04/30/10
    
    
    
    8,400,000
    
    
    
    740,000
    
    
    
    4.1
    
    
    
    100
    %
    
    $
    20.06Muskogee Long-Term Acute Care Hospital
    
    Muskogee, OK
    
    
    37,000
    
    
    
    4.2
    
    
    
    100
    %
    
    
    05/27/10
    
    
    
    11,000,000
    
    
    
    997,000
    
    
    
    5.5
    
    
    
    100
    %
    
    $
    26.61St. Vincent Medical Office Building
    
    Cleveland, OH
    
    
    51,000
    
    
    
    5.8
    
    
    
    100
    %
    
    
    06/25/10
    
    
    
    10,100,000
    
    
    
    1,315,000
    
    
    
    7.2
    
    
    
    93.9
    %
    
    $
    27.19Livingston Medical Arts Pavilion
    
    Livingston, TX
    
    
    29,000
    
    
    
    3.3
    
    
    
    100
    %
    
    
    06/28/10
    
    
    
    6,350,000
    
    
    
    576,000
    
    
    
    3.2
    
    
    
    100
    %
    
    $
    20.04Pocatello East Medical Office Building
    
    Pocatello, ID
    
    
    76,000
    
    
    
    8.7
    
    
    
    98.75
    %
    
    
    07/27/10
    
    
    
    15,800,000
    
    
    
    1,308,000
    
    
    
    7.2
    
    
    
    100
    %
    
    $
    17.12Monument Long-Term Acute Care Hospital Portfolio
    
    Cape Girardeau and Joplin, MO and Athens, GA
    
    
    85,000
    
    
    
    9.7
    
    
    
    100
    %
    
    Various
    
    
    
    29,272,000
    
    
    
    2,620,000
    
    
    
    14.4
    
    
    
    100
    %
    
    $
    31.17Virginia Skilled Nursing Facility Portfolio
    
    Charlottesville, Bastian, Lebanon, Fincastle, Low Moor, Midlothian and Hot Springs, VA
    
    
    232,000
    
    
    
    26.6
    
    
    
    100
    %
    
    
    09/16/10
    
    
    
    45,000,000
    
    
    
    4,283,000
    
    
    
    23.6
    
    
    
    100
    %
    
    $
    18.47Sylva Medical Office Building
    
    Sylva, NC
    
    
    45,000
    
    
    
    5.2
    
    
    
    100
    %
    
    
    11/15/10
    
    
    
    11,400,000
    
    
    
    929,000
    
    
    
    5.1
    
    
    
    100
    %
    
    $
    20.55Surgical Hospital of Humble
    
    Humble, TX
    
    
    30,000
    
    
    
    3.4
    
    
    
    100
    %
    
    
    12/10/10
    
    
    
    13,100,000
    
    
    
    1,190,000
    
    
    
    6.6
    
    
    
    100
    %
    
    $
    39.18Lawton Medical Office Building
Portfolio
    
    Lawton, OK
    
    
    62,000
    
    
    
    7.1
    
    
    
    100
    %
    
    
    12/22/10
    
    
    
    11,550,000
    
    
    
    937,000
    
    
    
    5.2
    
    
    
    100
    %
    
    $
    15.03Ennis Medical Office Building
    
    Ennis, TX
    
    
    30,000
    
    
    
    3.4
    
    
    
    100
    %
    
    
    12/22/10
    
    
    
    7,100,000
    
    
    
    599,000
    
    
    
    3.3
    
    
    
    94.8
    %
    
    $
    21.15Total/Weighted Average
    
    
    
    
    873,000
    
    
    
    100
    %
    
    
    
    
    
    
    
    
    
    $
    193,442,000
    
    
    $
    18,156,000
    
    
    
    100
    %
    
    
    98.3
    %
    
    $
    20.79
 
 (1)
    
    Annualized base rent is based on contractual base rent from leases in effect as of December
31, 2010.(2)
    
    Occupancy includes all leased space of the respective acquisition including master leases.(3)
    
    Average annual rent per leased square foot based on leases in effect as of December 31, 2010.   
    
    we believe all of our properties are adequately covered by insurance and are
suitable for their intended purposes;
 
    
    we have no plans for any material renovations, improvements or development with
respect to any of our properties, except in accordance with planned budgets;
 
    
    our properties are located in markets where we are subject to competition for
attracting new tenants and retaining current tenants; and
 
    
    depreciation is provided on a straight-line basis over the estimated useful lives
of the buildings, 39 years, and over the shorter of the lease term or useful lives of the
tenant improvements.
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Lease Expirations
  % of Leased Area
    
    
    
    
    
    
    % of Total Annual RentNumber of Expiring
    
    
    Total Sq. Ft. of
    
    
    Represented by Expiring
    
    
    Annual Rent Under
    
    
    Represented by ExpiringLeases
    
    
    Expiring Leases
    
    
    Leases
    
    
    Expiring Leases
    
    
    Leases(1)2011
    
    
    19
    
    
    
    37,000
    
    
    
    4.3
    %
    
    $
    801,000
    
    
    
    3.8
    %2012
    
    
    11
    
    
    
    34,000
    
    
    
    4.0
    
    
    
    763,000
    
    
    
    3.62013
    
    
    8
    
    
    
    19,000
    
    
    
    2.2
    
    
    
    456,000
    
    
    
    2.22014
    
    
    13
    
    
    
    36,000
    
    
    
    4.2
    
    
    
    762,000
    
    
    
    3.62015
    
    
    12
    
    
    
    34,000
    
    
    
    4.0
    
    
    
    823,000
    
    
    
    3.92016
    
    
    11
    
    
    
    103,000
    
    
    
    12.0
    
    
    
    1,965,000
    
    
    
    9.32017
    
    
    1
    
    
    
    2,000
    
    
    
    0.2
    
    
    
    32,000
    
    
    
    0.22018
    
    
    2
    
    
    
    15,000
    
    
    
    1.8
    
    
    
    352,000
    
    
    
    1.72019
    
    
    6
    
    
    
    106,000
    
    
    
    12.4
    
    
    
    2,317,000
    
    
    
    10.92020
    
    
    2
    
    
    
    9,000
    
    
    
    1.1
    
    
    
    215,000
    
    
    
    1.0Thereafter
    
    
    18
    
    
    
    462,000
    
    
    
    53.9
    
    
    
    12,694,000
    
    
    
    59.9Total
    
    
    103
    
    
    
    857,000
    
    
    
    100
    %
    
    $
    21,180,000
    
    
    
    100
    %
 
 (1)
    
    The annual rent percentage is based on the total annual contractual base rent based on leases
in effect as of December 31, 2010. Geographic Diversification/Concentration Table
  Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    % of AnnualizedState
    
    Buildings
    
    
    GLA (Square Feet)
    
    
    % of GLA
    
    
    Annualized Base Rent(1)
    
    
    Base RentColorado
    
    
    1
    
    
    
    37,000
    
    
    
    4.2
    %
    
    $
    740,000
    
    
    
    4.1
    %Georgia
    
    
    1
    
    
    
    31,000
    
    
    
    3.6
    
    
    
    1,098,000
    
    
    
    6.0Idaho
    
    
    1
    
    
    
    76,000
    
    
    
    8.7
    
    
    
    1,308,000
    
    
    
    7.2Louisiana
    
    
    1
    
    
    
    34,000
    
    
    
    3.9
    
    
    
    502,000
    
    
    
    2.8Minnesota
    
    
    2
    
    
    
    37,000
    
    
    
    4.2
    
    
    
    562,000
    
    
    
    3.1Missouri
    
    
    2
    
    
    
    54,000
    
    
    
    6.2
    
    
    
    1,522,000
    
    
    
    8.4North Carolina
    
    
    1
    
    
    
    45,000
    
    
    
    5.2
    
    
    
    929,000
    
    
    
    5.1Ohio
    
    
    3
    
    
    
    139,000
    
    
    
    15.9
    
    
    
    2,912,000
    
    
    
    16.0Oklahoma
    
    
    3
    
    
    
    99,000
    
    
    
    11.3
    
    
    
    1,934,000
    
    
    
    10.7Texas
    
    
    3
    
    
    
    89,000
    
    
    
    10.2
    
    
    
    2,366,000
    
    
    
    13.0Virginia
    
    
    7
    
    
    
    232,000
    
    
    
    26.5
    
    
    
    4,283,000
    
    
    
    23.6Total
    
    
    25
    
    
    
    873,000
    
    
    
    100
    %
    
    $
    18,156,000
    
    
    
    100
    %
 
 (1)
    
    Annualized base rent is based on contractual base rent from leases in effect as of December
31, 2010. Indebtedness
  
 Item 3.
    
    Legal Proceedings.
  
 Item 4.
    
    [Removed and Reserved.]
  55




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##### Table of Contents



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 Market Information
   Stockholders
  Distributions
    56




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##### Table of Contents



Securities Authorized for Issuance under Equity Compensation Plans
   57




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##### Table of Contents



Number of Securitiesto be Issued upon
    
    
    Weighted Average
    
    
    Number of SecuritiesExercise of
    
    
    Exercise Price of
    
    
    RemainingOutstanding Options,
    
    
    Outstanding Options,
    
    
    Available forPlan Category
    
    Warrants and Rights
    
    
    Warrants and Rights
    
    
    Future IssuanceEquity
compensation plans
approved by
security holders(1)
    
    
    
    
    
    
    
    
    
    
    1,977,500Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    1,977,500
 
 (1)
    
    On October 21, 2009, we granted an aggregate of 15,000 shares of
restricted common stock, as defined in our incentive plan, to our
independent directors in connection with their initial election to our
board of directors, of which 20.0% vested on the grant date and 20.0%
will vest on each of the first four anniversaries of the date of
grant. On June 8, 2010, in connection with their re-election, we
granted an aggregate of 7,500 shares of our restricted common stock,
as defined in our incentive plan, to our independent directors, which
will vest over the same period described above. The fair value of each
share of our restricted common stock was estimated at the date of
grant at $10.00 per share, the per share price of shares of our common
stock in our offering, and with respect to the initial 20.0% of shares
that vested on the date of grant, expensed as compensation
immediately, and with respect to the remaining shares, amortized on a
straight-line basis over the vesting period. Shares of restricted
common stock may not be sold, transferred, exchanged, assigned,
pledged, hypothecated or otherwise encumbered. Such restrictions
expire upon vesting. Shares of our restricted common stock have full
voting rights and rights to dividends. Such shares are not shown in
the chart above as they are deemed outstanding shares of our common
stock; however, such grants reduce the number of securities remaining
available for future issuance. Use of Public Offering Proceeds
       58




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##### Table of Contents



Purchase of Equity Securities by the Issuer and Affiliated Purchasers
    (d)Maximum Approximate(c)
    
    
    Dollar ValueTotal Number of Shares
    
    
    of Shares that May(a)
    
    
    (b)
    
    
    Purchased As Part of
    
    
    Yet Be PurchasedTotal Number of
    
    
    Average Price
    
    
    Publicly Announced
    
    
    Under thePeriod
    
    Shares Purchased
    
    
    Paid per Share
    
    
    Plan or Program(1)
    
    
    Plans or ProgramsOctober 1, 2010 to October 31, 2010
    
    
    10,000
    
    
    $
    10.00
    
    
    
    100,000
    
    
    
    (2)November 1, 2010 to November 30,
2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    (2)December 1, 2010 to December 31,
2010
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    (2)Total
    
    
    10,000
    
    
    
    
    
    
    
    100,000
 
 (1)
    
    Our board of directors adopted a share repurchase plan effective August 24, 2009.(2)
    
    Subject to funds being available, we will limit the number of shares of our common stock
repurchased during any calendar year to 5.0% of the weighted average number of shares of our
common stock outstanding during
the prior calendar year; provided however, shares of our common stock subject to a repurchase
requested upon the death of a stockholder will not be subject to this cap.  59




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Item 6.
    
    Selected Financial Data.
   December 31,Selected Financial Data
    
    2010
    
    
    2009BALANCE SHEET DATA:Total assets
    
    $
    203,996,000
    
    
    $
    13,809,000Mortgage loans payable, net
    
    $
    58,331,000
    
    
    $
    Line of credit
    
    $
    11,800,000
    
    
    $
    Stockholders equity
    
    $
    125,240,000
    
    
    $
    13,283,000
 Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009STATEMENT OF OPERATIONS DATA:Total revenues
    
    $
    8,682,000
    
    
    $
    Loss from continuing operations
    
    $
    (7,423,000
    )
    
    $
    (282,000
    )Net loss attributable to controlling interest
    
    $
    (7,424,000
    )
    
    $
    (281,000
    )Net loss per common share  basic and diluted (1):Net loss from continuing operations
    
    $
    (0.99
    )
    
    $
    (1.51
    )Net loss attributable to controlling interest
    
    $
    (0.99
    )
    
    $
    (1.51
    )STATEMENT OF CASH FLOWS DATA:Net cash used in operating activities
    
    $
    (2,881,000
    )
    
    $
    (40,000
    )Net cash used in investing activities
    
    $
    (186,342,000
    )
    
    $
    Net cash provided by financing activities
    
    $
    181,468,000
    
    
    $
    13,813,000OTHER DATA:Distributions declared
    
    $
    4,866,000
    
    
    $
    Distributions declared per share
    
    $
    0.65
    
    
    $
    Funds from operations (2)
    
    $
    (3,837,000
    )
    
    $
    (281,000
    )Modified funds from operations (2)
    
    $
    2,909,000
    
    
    $
    Net operating income (3)
    
    $
    6,481,000
    
    
    $
    
 
 (1)
    
    Net loss per common share is based upon the weighted average number of shares of our common
stock outstanding. Distributions by us of our current and accumulated earnings and profits for
federal income tax purposes are taxable to stockholders as ordinary income. Distributions in
excess of these earnings and profits generally are treated as a non-taxable reduction of the
stockholders basis in the shares of our common stock to the extent thereof (a return of
capital for tax purposes) and, thereafter, as taxable gain. These distributions in excess of
earnings and profits will have the effect of deferring taxation of the distributions until the
sale of the stockholders common stock.(2)
    
    Funds from Operations and Modified Funds from Operations:Due to certain unique operating characteristics of real estate companies, the
National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has
promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure
to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT
industry as a supplemental performance measure. FFO is not equivalent to our net income or loss
as determined under GAAP.  60




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We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper
on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White
Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP,
excluding gains or losses from sales of property but including asset impairment writedowns, plus
depreciation and amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to
reflect FFO. Our FFO calculation complies with NAREITs policy described above.The historical accounting convention used for real estate assets requires straight-line
depreciation of buildings and improvements, which implies that the value of real estate assets
diminishes predictably over time. Since real estate values historically rise and fall with
market conditions, presentations of operating results for a REIT, using historical accounting
for depreciation, we believe, may be less informative. As a result, we believe that the use of
FFO, which excludes the impact of real estate related depreciation and amortization, provides a
more complete understanding of our performance to investors and to our management, and when
compared year over year, reflects the impact on our operations from trends in occupancy rates,
rental rates, operating costs, general and administrative expenses, and interest costs, which is
not immediately apparent from net income.However, changes in the accounting and reporting rules under GAAP (for acquisition fees and
expenses from a capitalization/depreciation model to an expensed-as-incurred model) that have
been put into effect since the establishment of NAREITs definition of FFO have prompted an
increase in the non-cash and non-operating items included in FFO. In addition, we view fair
value adjustments of derivatives, and impairment charges and gains and losses from dispositions
of assets as items which are typically adjusted for when assessing operating performance.
Lastly, publicly registered, non-listed REITs typically have a significant amount of acquisition
activity and are substantially more dynamic during their initial years of investment and
operation and therefore require additional adjustments to FFO in evaluating performance. Due to
these and other unique features of publicly registered, non-listed REITs, the Investment Program
Association, or the IPA, an industry trade group, has standardized a measure known as modified
funds from operations, or MFFO, which we believe to be another appropriate supplemental measure
to reflect the operating performance of a REIT. The use of MFFO is recommended by the IPA as a
supplemental performance measure for publicly registered, non-listed REITs. MFFO is a metric
used by management to evaluate sustainable performance and dividend policy. MFFO is not
equivalent to our net income or loss as determined under GAAP.We define MFFO, a non-GAAP measure, consistent with the IPAs Guideline 2010-01, Supplemental
Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations,
or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines
MFFO as FFO further adjusted for the following items included in the determination of GAAP net
income: acquisition fees and expenses; amounts relating to deferred rent receivables and
amortization of above and below market leases and liabilities; accretion of discounts and
amortization of premiums on debt investments; nonrecurring impairments of real estate-related
investments; mark-to-market adjustments included in net income; nonrecurring gains or losses
included in net income from the extinguishment or sale of debt, hedges, foreign exchange,
derivatives or securities holdings where trading of such holdings is not a fundamental attribute
of the business plan, unrealized gains or losses resulting from consolidation from, or
deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated
partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same
basis. Our MFFO calculation complies with the IPAs Practice Guideline described above. In
calculating MFFO, we exclude acquisition related expenses, amortization of above and below
market leases, fair value adjustments of derivative financial instruments, deferred rent
receivables and the adjustments of such items related to noncontrolling interests. The other
adjustments included in the IPAs Practice Guideline are not applicable to us for the year ended
December 31, 2010 and for the period from January 7, 2009 (Date of Inception) through December
31, 2009.Presentation of this information is intended to assist in comparing the operating performance of
different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same
way, so comparisons with other REITs may not be meaningful. Furthermore, FFO and MFFO are not
necessarily indicative of cash flow available to fund cash needs and should not be considered as
an alternative to net income (loss) as an indication of our performance, as an indication of our
liquidity, or indicative of funds available to fund our cash needs including our ability to make
distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with other
measurements as an indication of our performance.  61




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Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009Net loss
    
    $
    (7,423,000
    )
    
    $
    (282,000
    )Add:Depreciation and amortization
 consolidated properties
    
    
    3,591,000
    
    
    
    Less:Net (income) loss attributable to
noncontrolling interests
    
    
    (1,000
    )
    
    
    1,000Depreciation and amortization related to
noncontrolling interests
    
    
    (4,000
    )
    
    
    FFO
    
    $
    (3,837,000
    )
    
    $
    (281,000
    )Add:Acquisition related expenses
    
    $
    7,099,000
    
    
    $
    18,000Amortization of above and below market leases
    
    
    79,000
    
    
    
    Loss in fair value of derivative financial instruments
    
    
    143,000
    
    
    
    Deferred rent receivables related to noncontrolling interests
    
    
    1,000
    
    
    
    Less:Deferred rent receivables
    
    
    (576,000
    )
    
    
    MFFO
    
    $
    2,909,000
    
    
    $
    (263,000
    )Weighted average common shares
outstanding  basic and diluted
    
    
    7,471,184
    
    
    
    186,330FFO per common share  basic and diluted
    
    $
    (0.51
    )
    
    $
    (1.51
    )MFFO per common share  basic and diluted
    
    $
    0.39
    
    
    $
    (1.41
    )
 (3)
    
    Net Operating Income:Net operating income is a non-GAAP financial measure that is defined as net income, computed in
accordance with GAAP, generated from properties before general and administrative expenses,
acquisition related expenses, depreciation and amortization, interest expense and interest
income. We believe that net operating income is useful for investors as it provides an accurate
measure of the operating performance of our operating assets because net operating income
excludes certain items that are not associated with the management of the properties.
Additionally, we believe that net operating income is a widely accepted measure of comparative
operating performance in the real estate community. However, our use of the term net operating
income may not be comparable to that of other real estate companies as they may have different
methodologies for computing this amount.  62




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Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009Net loss
    
    $
    (7,423,000
    )
    
    $
    (282,000
    )Add:General and administrative
    
    
    1,670,000
    
    
    
    268,000Acquisition related expenses
    
    
    7,099,000
    
    
    
    18,000Depreciation and amortization
    
    
    3,591,000
    
    
    
    Interest expense
    
    
    1,559,000
    
    
    
    Less:Interest income
    
    
    (15,000
    )
    
    
    (4,000
    )Net operating income
    
    $
    6,481,000
    
    
    $
    
  63




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Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The use of the words we, us or our refers to Grubb & Ellis Healthcare REIT II, Inc. and
its subsidiaries, including Grubb & Ellis Healthcare REIT II Holdings, LP, except where the context
otherwise requires.
  Forward-Looking Statements
  Overview and Background
    64




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Investment Strategy
     
    
    Quality.We seek to acquire properties that are suitable for their intended use
with a quality of construction that is capable of sustaining the propertys investment
potential for the long-term, assuming funding of budgeted maintenance, repairs and
capital improvements.
    
    Location.We seek to acquire properties that are located in established or
otherwise appropriate markets for comparable properties, with access and visibility
suitable to meet the needs of its occupants.
    
    Market; Supply and Demand.We focus on local or regional markets that have
potential for stable and growing property level cash flows over the long-term. These
determinations are based in part on an evaluation of local economic, demographic and
regulatory factors affecting the property. For instance, we favor markets that indicate a
growing population and employment base or markets that exhibit potential limitations on
additions to supply, such as barriers to new construction. Barriers to new construction
include lack of available land and stringent zoning restrictions. In addition, we generally
seek to limit our investments in areas that have limited potential for growth.
  65




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##### Table of Contents




    
    Predictable Capital Needs.We seek to acquire properties where the future expected
capital needs can be reasonably projected in a manner that would enable us to meet our
objectives of growth in cash flows and preservation of capital and stability.
    
    Cash Flows.We seek to acquire properties where the current and projected cash
flows, including the potential for appreciation in value, would enable us to meet our
overall investment objectives. We evaluate cash flows as well as expected growth and the
potential for appreciation.
    Critical Accounting Policies
  Use of Estimates
  Revenue Recognition, Tenant Receivables and Allowance for Uncollectible Accounts
 Revenue Recognition
  66




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##### Table of Contents



Leases Revenue
Recognition  Principal Agent Consideration
  Capitalization of Expenditures and Depreciation of Assets
    67




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##### Table of Contents



Impairment
  
    
    significant negative industry or economic trends;
    
    a significant underperformance relative to historical or projected future operating
results; and
    
    a significant change in the extent or manner in which the asset is used or
significant physical change in the asset.
  Properties Held for Sale
 , Property,
Plant, and Equipment,
 ,
 
    
    management, having the authority to approve the action, commits to a plan to sell
the asset;
    
    the asset is available for immediate sale in its present condition subject only to
terms that are usual and customary for sales of such assets;
    
    an active program to locate a buyer and other actions required to complete the plan
to sell the asset has been initiated;
    
    the sale of the asset is probable and the transfer of the asset is expected to
qualify for recognition as a completed sale within one year;
    
    the asset is being actively marketed for sale at a price that is reasonable in
relation to its current fair value; and
    
    given the actions required to complete the plan to sell the asset, it is unlikely
that significant changes to the plan would be made or that the plan would be withdrawn.
 Purchase Price Allocation
 Business Combinations
  68




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Fair Value Measurements and Disclosures
  Qualification as a REIT
    69




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Recently Issued Accounting Pronouncements
  Acquisitions in 2011 and 2010
  Factors Which May Influence Results of Operations
  Rental Income
  Offering Proceeds
  Scheduled Lease Expirations
   Sarbanes-Oxley Act
   70




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##### Table of Contents



Results of Operations
    Rental Income
   Rental Expenses
    71




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##### Table of Contents



General and Administrative
  Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009Asset management fees
    
    $
    612,000
    
    
    $
    Professional and legal fees
    
    
    442,000
    
    
    
    50,000Directors and officers liability insurance
    
    
    177,000
    
    
    
    64,000Board of directors fees
    
    
    163,000
    
    
    
    55,000Transfer agent services
    
    
    111,000
    
    
    
    59,000Restricted stock compensation
    
    
    54,000
    
    
    
    35,000Other
    
    
    111,000
    
    
    
    5,000$
    1,670,000
    
    
    $
    268,000
  Acquisition Related Expenses
  Depreciation and Amortization
  Interest Expense
  Interest Income
  Liquidity and Capital Resources
   72




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##### Table of Contents



Other Liquidity Needs
    73




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##### Table of Contents



Cash Flows
    Distributions
  Year EndedDecember 31, 2010Ordinary income
    
    $
    941,000
    
    
    
    23.2
    %Capital gain
    
    
    
    
    
    
    Return of capital
    
    
    3,122,000
    
    
    
    76.8$
    4,063,000
    
    
    
    100
    %
   74




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##### Table of Contents



Financing
   Mortgage Loans Payable, Net
  Line of Credit
  REIT Requirements
  Commitments and Contingencies
  Debt Service Requirements
   75




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##### Table of Contents



Contractual Obligations
  Payments Due by PeriodLess than 1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    More than 5 Years(2011)
    
    
    (2012-2013)
    
    
    (2014-2015)
    
    
    (after 2015)
    
    
    TotalPrincipal payments 
fixed rate debt
    
    $
    263,000
    
    
    $
    4,626,000
    
    
    $
    338,000
    
    
    $
    7,127,000
    
    
    $
    12,354,000Interest payments 
fixed rate debt
    
    
    745,000
    
    
    
    1,208,000
    
    
    
    974,000
    
    
    
    2,355,000
    
    
    
    5,282,000Principal payments 
variable rate debt
    
    
    12,342,000
    (1)
    
    
    38,953,000
    
    
    
    344,000
    
    
    
    6,455,000
    
    
    
    58,094,000Interest payments 
variable rate debt (based
on rates in effect as of
December 31, 2010)
    
    
    2,757,000
    
    
    
    1,397,000
    
    
    
    593,000
    
    
    
    25,000
    
    
    
    4,772,000Interest payments 
fixed rate interest rate swap (based
on rate in effect as of
December 31, 2010)
    
    
    84,000
    
    
    
    177,000
    
    
    
    168,000
    
    
    
    7,000
    
    
    
    436,000Total
    
    $
    16,191,000
    
    
    $
    46,361,000
    
    
    $
    2,417,000
    
    
    $
    15,969,000
    
    
    $
    80,938,000
 
 (1)
    
    Our variable rate mortgage loan payable in the outstanding principal amount of $3,184,000
($2,889,000, net of discount) secured by Center for Neurosurgery and Spine as of December 31,
2010, had a fixed rate interest rate swap, thereby effectively fixing our interest rate on
this mortgage loan payable to an effective interest rate of 6.00% per annum. This mortgage
loan payable is due August 15, 2021; however, the principal balance is immediately due upon
written request from the seller confirming that the seller agrees to pay the interest rate
swap termination amount, if any, and as such, the $3,184,000 principal balance is reflected in
the 2011 column above. Assuming the seller does not exercise such right, interest payments,
using the 6.00% per annum effective interest rate, would be $186,000, $321,000, $250,000 and
$310,000 in 2011, 2012-2013, 2014-2015 and thereafter, respectively. Off-Balance Sheet Arrangements
  Inflation
   76




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##### Table of Contents



Subsequent Events
  
 Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
      Expected Maturity Date2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    Total
    
    
    Fair ValueFixed rate debt  principal
payments
    
    $
    263,000
    
    
    $
    4,457,000
    
    
    $
    169,000
    
    
    $
    169,000
    
    
    $
    169,000
    
    
    $
    7,127,000
    
    
    $
    12,354,000
    
    
    $
    12,496,000Weighted average interest
rate on maturing debt
    
    
    5.96
    %
    
    
    5.88
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    6.00
    %
    
    
    5.96
    %
    
    
    Variable rate debt 
principal payments
    
    $
    12,342,000
    
    
    $
    38,781,000
    
    
    $
    172,000
    
    
    $
    172,000
    
    
    $
    172,000
    
    
    $
    6,455,000
    
    
    $
    58,094,000
    
    
    $
    58,820,000Weighted average interest
rate on maturing debt
(based on rates in effect
as of December 31, 2010)
    
    
    4.58
    %
    
    
    5.34
    %
    
    
    3.16
    %
    
    
    3.16
    %
    
    
    3.16
    %
    
    
    3.16
    %
    
    
    4.92
    %
    
    
    
   77




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##### 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 Annual Report on Internal Control over Financial Reporting.
  Changes in internal control over financial reporting.
 
 Item 9B.
    
    Other Information.
   78




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
  
 Item 11.
    
    Executive Compensation.
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14.
    
    Principal Accounting Fees and Services.
   79




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits, Financial Statement Schedules.
 Financial Statements:
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageReport of Independent Registered Public Accounting Firm
    
    
    81Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    82Consolidated Statements of Operations for the Year Ended December 31, 2010 and for the Period from
January 7, 2009 (Date of Inception) through December 31, 2009
    
    
    83Consolidated Statements of Equity for the Year Ended December 31, 2010 and for the Period from
January 7, 2009 (Date of Inception) through December 31, 2009
    
    
    84Consolidated Statements of Cash Flows for the Year Ended December 31, 2010 and for the Period from
January 7, 2009 (Date of Inception) through December 31, 2009
    
    
    85Notes to Consolidated Financial Statements
    
    
    86(a)(2) Financial Statement Schedule:The following financial statement schedule for the year ended December 31, 2010 is submitted herewith:PageReal Estate and Accumulated Depreciation (Schedule III)
    
    
    115All schedules other than the one listed above have been omitted as the required information is
inapplicable or the information is presented in our consolidated financial statements or
related notes.(a)(3) Exhibits:The exhibits listed on the Exhibit Index (following the signatures section of this report) are
included, or incorporated by reference, in this annual report.(b) Exhibits:See Item 15(a)(3) above.(c) Financial Statement Schedule:PageReal Estate and Accumulated Depreciation (Schedule III)
    
    
    115
  80




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  81




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 
 CONSOLIDATED BALANCE SHEETS

As of December 31, 2010 and 2009
 December 31,2010
    
    
    2009ASSETSReal estate investments:Operating properties, net
    
    $
    163,335,000
    
    
    $
    Cash and cash equivalents
    
    
    6,018,000
    
    
    
    13,773,000Accounts and other receivables, net
    
    
    241,000
    
    
    
    Restricted cash
    
    
    2,816,000
    
    
    
    Real estate and escrow deposits
    
    
    649,000
    
    
    
    Identified intangible assets, net
    
    
    28,568,000
    
    
    
    Other assets, net
    
    
    2,369,000
    
    
    
    36,000Total assets
    
    $
    203,996,000
    
    
    $
    13,809,000LIABILITIES AND EQUITYLiabilities:Mortgage loans payable, net
    
    $
    58,331,000
    
    
    $
    Line of credit
    
    
    11,800,000
    
    
    
    Accounts payable and accrued liabilities
    
    
    3,356,000
    
    
    
    178,000Accounts payable due to affiliates
    
    
    840,000
    
    
    
    347,000Derivative financial instruments
    
    
    453,000
    
    
    
    Identified intangible liabilities, net
    
    
    502,000
    
    
    
    Security deposits, prepaid rent and other liabilities
    
    
    3,352,000
    
    
    
    Total liabilities
    
    
    78,634,000
    
    
    
    525,000Commitments and contingencies (Note 10)Equity:Stockholders equity:Preferred stock, $0.01 par value; 200,000,000 shares authorized;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value; 1,000,000,000 shares authorized;
15,452,668 and 1,532,268 shares issued and outstanding
as of December 31, 2010 and 2009, respectively
    
    
    154,000
    
    
    
    15,000Additional paid-in capital
    
    
    137,657,000
    
    
    
    13,549,000Accumulated deficit
    
    
    (12,571,000
    )
    
    
    (281,000
    )Total stockholders equity
    
    
    125,240,000
    
    
    
    13,283,000Noncontrolling interests (Note 12)
    
    
    122,000
    
    
    
    1,000Total equity
    
    
    125,362,000
    
    
    
    13,284,000Total liabilities and equity
    
    $
    203,996,000
    
    
    $
    13,809,000
   82




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2010 and for the Period from
January 7, 2009 (Date of Inception) through December 31, 2009
 Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009Revenue:Rental income
    
    $
    8,682,000
    
    
    $
    Expenses:Rental expenses
    
    
    2,201,000
    
    
    
    General and administrative
    
    
    1,670,000
    
    
    
    268,000Acquisition related expenses
    
    
    7,099,000
    
    
    
    18,000Depreciation and amortization
    
    
    3,591,000
    
    
    
    Total expenses
    
    
    14,561,000
    
    
    
    286,000Loss from operations
    
    
    (5,879,000
    )
    
    
    (286,000
    )Other income (expense):Interest expense (including amortization of deferred
financing costs and debt discount):Interest expense
    
    
    (1,416,000
    )
    
    
    Loss in fair value of derivative financial
instruments
    
    
    (143,000
    )
    
    
    Interest income
    
    
    15,000
    
    
    
    4,000Net loss
    
    
    (7,423,000
    )
    
    
    (282,000
    )Less: Net (income) loss attributable to
noncontrolling interests
    
    
    (1,000
    )
    
    
    1,000Net loss attributable to controlling interest
    
    $
    (7,424,000
    )
    
    $
    (281,000
    )Net loss per common share attributable to controlling
interest  basic and diluted
    
    $
    (0.99
    )
    
    $
    (1.51
    )Weighted average number of common shares
outstanding  basic and diluted
    
    
    7,471,184
    
    
    
    186,330
   83




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 
 CONSOLIDATED STATEMENTS OF EQUITY

For the Year Ended December 31, 2010 and for the Period from
January 7, 2009 (Date of Inception) through December 31, 2009
 Stockholders EquityCommon StockNumber of
    
    
    
    
    
    
    Additional
    
    
    Preferred
    
    
    Accumulated
    
    
    NoncontrollingShares
    
    
    Amount
    
    
    Paid-In Capital
    
    
    Stock
    
    
    Deficit
    
    
    Interests
    
    
    Total EquityBALANCE  January 7, 2009 (Date of Inception)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock
    
    
    1,517,268
    
    
    
    15,000
    
    
    
    15,103,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,118,000Issuance of vested and nonvested
restricted common stock
    
    
    15,000
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,000Offering costs
    
    
    
    
    
    
    
    
    
    
    (1,589,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,589,000
    )Amortization of nonvested common
stock compensation
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Noncontrolling interest contribution to operating
partnership
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (281,000
    )
    
    
    (1,000
    )
    
    
    (282,000
    )BALANCE  December 31, 2009
    
    
    1,532,268
    
    
    
    15,000
    
    
    
    13,549,000
    
    
    
    
    
    
    
    (281,000
    )
    
    
    1,000
    
    
    
    13,284,000Issuance of common stock
    
    
    13,724,945
    
    
    
    137,000
    
    
    
    136,807,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,944,000Offering costs
    
    
    
    
    
    
    
    
    
    
    (14,785,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,785,000
    )Issuance of vested and nonvested
restricted common stock
    
    
    7,500
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Issuance of common stock under the
DRIP
    
    
    208,955
    
    
    
    2,000
    
    
    
    1,983,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,985,000Repurchase of common
stock
    
    
    (21,000
    )
    
    
    
    
    
    
    (210,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210,000
    )Amortization of nonvested common
stock compensation
    
    
    
    
    
    
    
    
    
    
    39,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,000Contribution from sponsor
    
    
    
    
    
    
    
    
    
    
    259,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    259,000Contribution from noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    200,000Distribution to noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (80,000
    )
    
    
    (80,000
    )Distributions declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,866,000
    )
    
    
    
    
    
    
    (4,866,000
    )Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,424,000
    )
    
    
    1,000
    
    
    
    (7,423,000
    )BALANCE  December 31, 2010
    
    
    15,452,668
    
    
    $
    154,000
    
    
    $
    137,657,000
    
    
    $
    
    
    
    $
    (12,571,000
    )
    
    $
    122,000
    
    
    $
    125,362,000
   84




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended December 31, 2010 and for the Period from
January 7, 2009 (Date of Inception) through December 31, 2009
 Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (7,423,000
    )
    
    $
    (282,000
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization (including deferred financing costs,
lease commissions, above/below market, leases, leasehold interests,
debt discount and deferred rent receivable)
    
    
    3,349,000
    
    
    
    Stock based compensation
    
    
    54,000
    
    
    
    35,000Bad debt expense
    
    
    5,000
    
    
    
    Change in fair value of derivative financial instruments
    
    
    143,000
    
    
    
    Changes in operating assets and liabilities:Accounts and other receivables, net
    
    
    (246,000
    )
    
    
    Other assets, net
    
    
    (235,000
    )
    
    
    (36,000
    )Accounts payable and accrued liabilities
    
    
    1,735,000
    
    
    
    178,000Accounts payable due to affiliates
    
    
    129,000
    
    
    
    65,000Prepaid rent and other liabilities
    
    
    (392,000
    )
    
    
    Net cash used in operating activities
    
    
    (2,881,000
    )
    
    
    (40,000
    )CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of real estate operating properties
    
    
    (182,818,000
    )
    
    
    Capital expenditures
    
    
    (59,000
    )
    
    
    Restricted cash
    
    
    (2,816,000
    )
    
    
    Real estate and escrow deposits
    
    
    (649,000
    )
    
    
    Net cash used in investing activities
    
    
    (186,342,000
    )
    
    
    CASH FLOWS FROM FINANCING ACTIVITIESBorrowings on mortgage loans payable
    
    
    51,110,000
    
    
    
    Payments on mortgage loans payable
    
    
    (245,000
    )
    
    
    Borrowings under the line of credit
    
    
    76,850,000
    
    
    
    Payments under the line of credit
    
    
    (65,050,000
    )
    
    
    Proceeds from issuance of common stock
    
    
    136,944,000
    
    
    
    15,118,000Deferred financing costs
    
    
    (1,587,000
    )
    
    
    Repurchase of common stock
    
    
    (210,000
    )
    
    
    Contribution from sponsor
    
    
    259,000
    
    
    
    Contribution from noncontrolling interest to our operating partnership
    
    
    
    
    
    
    2,000Distribution to noncontrolling interest
    
    
    (80,000
    )
    
    
    Security deposits
    
    
    6,000
    
    
    
    Payment of offering costs
    
    
    (14,442,000
    )
    
    
    (1,307,000
    )Distributions paid
    
    
    (2,087,000
    )
    
    
    Net cash provided by financing activities
    
    
    181,468,000
    
    
    
    13,813,000NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (7,755,000
    )
    
    
    13,773,000CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    13,773,000
    
    
    
    CASH AND CASH EQUIVALENTS  End of period
    
    $
    6,018,000
    
    
    $
    13,773,000SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    898,000
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:Investing Activities:Accrued capital expenditures
    
    $
    407,000
    
    
    $
    The
following represents the increase in certain assets and liabilities in connection with our acquisitions of operating properties:Other assets
    
    $
    153,000
    
    
    $
    Mortgage loans payable, net
    
    $
    7,439,000
    
    
    $
    Derivative financial instruments
    
    $
    310,000
    
    
    $
    Accounts payable and accrued liabilities
    
    $
    233,000
    
    
    $
    Security deposits, prepaid rent and other liabilities
    
    $
    3,738,000
    
    
    $
    Financing Activities:Issuance of common stock under the DRIP
    
    $
    1,985,000
    
    
    $
    Distributions declared but not paid
    
    $
    794,000
    
    
    $
    Accrued offering costs
    
    $
    625,000
    
    
    $
    282,000Contribution from noncontrolling interest
    
    $
    200,000
    
    
    $
    Accrued deferred financing costs
    
    $
    28,000
    
    
    $
    
   85




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the Year Ended December 31, 2010 and for the Period from  January 7, 2009 (Date of Inception) through December 31, 2009
 The use of the words we, us or our refers to Grubb & Ellis Healthcare REIT II, Inc. and
its subsidiaries, including Grubb & Ellis Healthcare REIT II Holdings, LP, except where the context
otherwise requires.
 1. Organization and Description of Business
     2. Summary of Significant Accounting Policies
   86




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Basis of Presentation
 Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  Restricted Cash
  Restricted Cash Held in Escrow
    87




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Revenue Recognition, Tenant Receivables and Allowance for Uncollectible Accounts
 Revenue Recognition
 Leases Revenue Recognition  Principal
Agent Consideration
  Operating Properties, Net
    88




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Property Acquisitions
 Business Combinations
    Fair Value Measurements and Disclosures
  89




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Derivative Financial Instruments
  Derivatives and
Hedging,
 Fair Value Measurements
      90




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Real Estate and Escrow Deposits
  Other Assets, Net
  Stock Compensation
 Compensation  Stock Compensation
 Income Taxes
   Income Taxes
 Segment Disclosure
 Segment Reporting
  91




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Reclassifications
  Recently Issued Accounting Pronouncements
 Accounting for Transfers of Financial Assets  an amendment of FASB Statement No. 140 Transfers and Servicing Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities Transfers and
Servicing Consolidation of Variable Interest Entities, an Interpretation
of Accounting Research Bulletin No. 51, Consolidation
 Amendments to FASB Interpretation No. 46(R) Consolidation
 Improving
Disclosures about Fair Value Measurements
 Accounting for Technical Amendments to Various
SEC Rules and Schedules,
  92




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Accounting for Various Topics  Technical
Corrections to SEC Paragraphs,
 Business Combinations (Topic 805),
 3. Real Estate Investments
  December 31,2010
    
    
    2009Land
    
    $
    14,592,000
    
    
    $
    Building and improvements
    
    
    150,813,000
    
    
    
    165,405,000
    
    
    
    Less: accumulated depreciation
    
    
    (2,070,000
    )
    
    
    $
    163,335,000
    
    
    $
    
   93




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Acquisitions in 2010
  Mortgage
    
    
    
    
    
    
    Acquisition FeeOwnership
    
    
    
    
    
    
    Loans
    
    
    Line of
    
    
    to our AdvisorProperty
    
    Property Location
    
    Date Acquired
    
    
    Percentage
    
    
    Purchase Price
    
    
    Payable(1)
    
    
    Credit(2)
    
    
    or its Affiliate(3)Lacombe Medical
Office Building
    
    Lacombe, LA
    
    
    03/05/10
    
    
    
    100
    %
    
    $
    6,970,000
    
    
    $
    
    
    
    $
    
    
    
    $
    192,000Center for Neurosurgery
and Spine
    
    Sartell, MN
    
    
    03/31/10
    
    
    
    100
    %
    
    
    6,500,000
    
    
    
    3,341,000
    
    
    
    
    
    
    
    179,000Parkway Medical Center
    
    Beachwood, OH
    
    
    04/12/10
    
    
    
    100
    %
    
    
    10,900,000
    
    
    
    
    
    
    
    
    
    
    
    300,000Highlands Ranch
Medical Pavilion
    
    Highlands Ranch, CO
    
    
    04/30/10
    
    
    
    100
    %
    
    
    8,400,000
    
    
    
    4,443,000
    
    
    
    
    
    
    
    231,000Muskogee
Long-Term
Acute Care Hospital
    
    Muskogee, OK
    
    
    05/27/10
    
    
    
    100
    %
    
    
    11,000,000
    
    
    
    
    
    
    
    
    
    
    
    303,000St. Vincent Medical
Office Building
    
    Cleveland, OH
    
    
    06/25/10
    
    
    
    100
    %
    
    
    10,100,000
    
    
    
    
    
    
    
    
    
    
    
    278,000Livingston Medical
Arts Pavilion
    
    Livingston, TX
    
    
    06/28/10
    
    
    
    100
    %
    
    
    6,350,000
    
    
    
    
    
    
    
    
    
    
    
    175,000Pocatello East Medical
Office Building
    
    Pocatello, ID
    
    
    07/27/10
    
    
    
    98.75
    %
    
    
    15,800,000
    
    
    
    
    
    
    
    5,000,000
    
    
    
    435,000Monument
Long-Term Acute Care Hospital Portfolio (4)
    
    Cape Girardeau and Joplin, MOand Athens, GA
    
    Various
    
    
    
    100
    %
    
    
    29,272,000
    
    
    
    
    
    
    
    26,800,000
    
    
    
    811,000Virginia Skilled Nursing Facility Portfolio
    
    Charlottesville, Bastian, Lebanon, Fincastle, Low Moor, Midlothian and Hot Springs, VA
    
    
    09/16/10
    
    
    
    100
    %
    
    
    45,000,000
    
    
    
    26,810,000
    
    
    
    12,900,000
    
    
    
    1,238,000Sylva Medical
Office Building
    
    Sylva, NC
    
    
    11/15/10
    
    
    
    100
    %
    
    
    11,400,000
    
    
    
    
    
    
    
    11,400,000
    
    
    
    314,000Surgical Hospital
of Humble
    
    Humble, TX
    
    
    12/10/10
    
    
    
    100
    %
    
    
    13,100,000
    
    
    
    9,000,000
    
    
    
    3,600,000
    
    
    
    360,000Lawton Medical Office
Building Portfolio
    
    Lawton, OK
    
    
    12/22/10
    
    
    
    100
    %
    
    
    11,550,000
    
    
    
    
    
    
    
    9,800,000
    
    
    
    318,000Ennis Medical
Office Building
    
    Ennis, TX
    
    
    12/22/10
    
    
    
    100
    %
    
    
    7,100,000
    
    
    
    
    
    
    
    7,350,000
    
    
    
    195,000Total
    
    
    
    
    
    
    
    
    
    
    
    $
    193,442,000
    
    
    $
    43,594,000
    
    
    $
    76,850,000
    
    
    $
    5,329,000
 
 (1)
    
    Represents the balance of the mortgage loans payable assumed by us or newly placed on the
property at the time of acquisition.(2)
    
    Represents borrowings under our secured revolving line of credit as defined in Note 8, with
Bank of America, N.A., or Bank of America, at the time of acquisition. We periodically advance
funds and pay down our secured revolving line of credit with Bank of America as needed. See
Note 8, Line of Credit, for a further discussion.(3)
    
    Our advisor or its affiliates were paid, as compensation for services rendered in connection
with the investigation, selection and acquisition of our properties, an acquisition fee of
2.75% of the contract purchase price for each property acquired.(4)
    
    The Monument Long-Term Acute Care Hospital Portfolio, or the Monument LTACH Portfolio,
consists of four long-term acute care hospitals. As of December 31, 2010, we had acquired
three of the four hospitals. The difference in the purchase price of $29,272,000 noted above
and the contract purchase price of $29,486,000 is due to the allocation of $214,000 to real
estate and escrow deposits as such payments are related to the purchase of the remaining
hospital of the Monument LTACH Portfolio. We purchased the remaining hospital of the Monument
LTACH Portfolio on January 31, 2011. See Note 20, Subsequent Events  Property Acquisition,
for a further discussion.   94




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Acquisitions in 2009
  Proposed Acquisition
  4. Identified Intangible Assets, Net
  December 31,2010
    
    
    2009In-place leases, net of accumulated amortization of $1,028,000 and $0 as of
December 31, 2010 and 2009, respectively (with a
weighted average remaining life of 11.3 years and 0 years as of
December 31, 2010 and 2009, respectively)
    
    $
    13,245,000
    
    
    $
    Above market leases, net of accumulated amortization of $121,000 and $0 as of
December 31, 2010 and 2009, respectively (with a
weighted average remaining life of 9.6 years and 0 years as of
December 31, 2010 and 2009, respectively)
    
    
    1,795,000
    
    
    
    Tenant relationships, net of accumulated amortization of $377,000 and $0 as of
December 31, 2010 and 2009, respectively (with a
weighted average remaining life of 21.8 years and 0 years as of
December 31, 2010 and 2009, respectively)
    
    
    11,912,000
    
    
    
    Leasehold interests, net of accumulated amortization of $2,000 and $0 as of
December 31, 2010 and 2009, respectively (with a
weighted average remaining life of 62.4 years and 0 years as of
December 31, 2010 and 2009, respectively)
    
    
    1,256,000
    
    
    
    Master lease, net of accumulated amortization of $95,000 and $0 as of
December 31, 2010 and 2009, respectively (with a
weighted average remaining life of 1.6 years and 0 years as of
December 31, 2010 and 2009, respectively)
    
    
    360,000
    
    
    
    $
    28,568,000
    
    
    $
    
   95




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year
    
    Amount2011
    
    $
    3,042,0002012
    
    
    2,664,0002013
    
    
    2,293,0002014
    
    
    2,155,0002015
    
    
    1,949,000Thereafter
    
    
    16,465,000$
    28,568,000
 5. Other Assets, Net
  December 31,2010
    
    
    2009Deferred financing costs, net of accumulated amortization of $225,000 and $0 as of
December 31, 2010 and 2009, respectively
    
    $
    1,390,000
    
    
    $
    Lease commissions, net of accumulated amortization of $1,000 and $0 as of
December 31, 2010 and 2009, respectively
    
    
    58,000
    
    
    
    Deferred rent receivable
    
    
    576,000
    
    
    
    Prepaid expenses and deposits
    
    
    345,000
    
    
    
    36,000$
    2,369,000
    
    
    $
    36,000
   Year
    
    Amount2011
    
    $
    798,0002012
    
    
    349,0002013
    
    
    68,0002014
    
    
    64,0002015
    
    
    63,000Thereafter
    
    
    106,000$
    1,448,000
 6. Mortgage Loans Payable, Net
   96




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Interest
    
    
    
    
    
    
    December 31,Property
    
    Rate(1)
    
    
    Maturity Date
    
    
    2010
    
    
    2009Fixed Rate Debt:Highlands Ranch Medical Pavilion
    
    
    5.88
    %
    
    
    11/11/12
    
    
    $
    4,383,000
    
    
    $
    Pocatello East Medical Office Building
    
    
    6.00
    %
    
    
    10/01/20
    
    
    
    7,971,000
    
    
    
    12,354,000
    
    
    
    Variable Rate Debt:Center for Neurosurgery and Spine (2)
    
    
    1.36
    %
    
    08/15/21 (callable)
    
    
    3,184,000
    
    
    
    Virginia Skilled Nursing Facility Portfolio (3)
    
    
    5.50
    %
    
    
    03/14/12
    
    
    
    26,810,000
    
    
    
    Surgical Hospital of Humble
    
    
    5.75
    %
    
    
    12/09/11
    
    
    
    9,000,000
    
    
    
    Lawton Medical Office Building Portfolio (4)
    
    
    3.16
    %
    
    
    01/01/16
    
    
    
    7,300,000
    
    
    
    46,294,000
    
    
    
    Total fixed and variable rate debt
    
    
    
    
    
    
    
    
    
    
    58,648,000
    
    
    
    Less: discount
    
    
    
    
    
    
    
    
    
    
    (317,000
    )
    
    
    Mortgage loans payable, net
    
    
    
    
    
    
    
    
    
    $
    58,331,000
    
    
    $
    
 
 (1)
    
    Represents the per annum interest rate in effect as of December 31, 2010.(2)
    
    As of December 31, 2010, we had a fixed rate interest rate swap of 6.00% per annum on such
variable rate mortgage loan payable, thereby effectively fixing our interest rate over the
term of the mortgage loan payable. See Note 7, Derivative Financial Instruments, for a further
discussion. The mortgage loan payable requires monthly principal and interest payments and is
due August 15, 2021; however, the principal balance is immediately due upon written request
from the seller confirming that the seller agrees to pay the interest rate swap termination
amount, if any. Additionally, the seller guarantors agreed to retain their guaranty
obligations with respect to the mortgage loan and the interest rate swap agreement. We, the
seller and the seller guarantors have also agreed to indemnify the other parties for any
liability caused by a partys breach or nonperformance of obligations under the loan.(3)
    
    Represents a bridge loan we secured from KeyBank National Association which matures on March
14, 2012 or until such time that we are able to pay such bridge loan in full by obtaining a
Federal Housing Association Mortgage loan. The maturity date may be extended by one six-month
period subject to satisfaction of certain conditions.(4)
    
    As of December 31, 2010, we had a fixed rate interest rate swap of 4.41% per annum on such
variable rate mortgage loan payable, thereby effectively fixing our interest rate from January
1, 2011 through January 1, 2014. See Note 7, Derivative Financial Instruments, for a further
discussion. The mortgage loan payable requires monthly principal and interest payments.  97




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year
    
    Amount2011
    
    $
    12,605,0002012
    
    
    31,438,0002013
    
    
    341,0002014
    
    
    341,0002015
    
    
    341,000Thereafter
    
    
    13,582,000$
    58,648,000
 7. Derivative Financial Instruments
    Interest
    
    
    
    
    
    
    
    
    
    
    MaturityNotional Amount
    
    
    Index
    
    Rate
    
    
    Fair Value
    
    
    Instrument
    
    
    Date$
    3,184,000
    
    
    one month LIBOR
    
    
    6.00
    %
    
    $
    (372,000
    )
    
    Swap
    
    
    08/15/217,300,000
    
    
    one month LIBOR
    
    
    4.41
    %
    
    
    (81,000
    )
    
    Swap
    
    
    01/01/14$
    10,484,000
    
    
    
    
    
    
    
    
    $
    (453,000
    )
   8. Line of Credit
    98




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    9. Identified Intangible Liabilities, Net
  December 31,2010
    
    
    2009Below market leases, net of accumulated amortization of $42,000 and $0 as of
December 31, 2010 and 2009, respectively (with a
weighted average remaining life of 16.9 years and 0 years as of
December 31, 2010 and 2009, respectively)
    
    $
    502,000
    
    
    $
    
   99




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year
    
    Amount2011
    
    $
    82,0002012
    
    
    72,0002013
    
    
    25,0002014
    
    
    17,0002015
    
    
    17,000Thereafter
    
    
    289,000$
    502,000
 10. Commitments and Contingencies
 Litigation
  Environmental Matters
  Other Organizational and Offering Expenses
   Other
   100




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Related Party Transactions
 Fees and Expenses Paid to Affiliates
  Offering Stage
 Selling Commissions
  Dealer Manager Fee
  Other Organizational and Offering Expenses
  Acquisition and Development Stage
 Acquisition Fee
    101




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Development Fee
   Reimbursement of Acquisition Expenses
   Operational Stage
 Asset Management Fee
   Property Management Fee
   102




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  On-site Personnel and Engineering Payroll
  Lease Fees
   Construction Management Fee
  Operating Expenses
   103




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Related Party Services Agreement
    Compensation for Additional Services
  Liquidity Stage
 Disposition Fees
   104




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Subordinated Participation Interest
     Subordinated Distribution Upon Termination
   Fees Payable Upon Internalization of the Advisor
   105




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Accounts Payable Due to Affiliates
  December 31,Fee
    
    2010
    
    
    2009Selling commissions and dealer manager fees
    
    $
    539,000
    
    
    $
    132,000Asset and property management fees
    
    
    166,000
    
    
    
    Offering costs
    
    
    86,000
    
    
    
    150,000Construction management fees
    
    
    21,000
    
    
    
    Operating expenses
    
    
    16,000
    
    
    
    65,000On-site personnel and engineering payroll
    
    
    7,000
    
    
    
    Lease commissions
    
    
    5,000
    
    
    
    $
    840,000
    
    
    $
    347,000
 12. Equity
 Preferred Stock
  Common Stock
    Noncontrolling Interests
     106




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Distribution Reinvestment Plan
  Share Repurchase Plan
    2009 Incentive Plan
    107




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   WeightedRestricted
    
    
    Average GrantCommon Stock
    
    
    Date Fair ValueBalance
 January 7, 2009 (Date of Inception)
    
    
    
    
    
    $
    Granted
    
    
    15,000
    
    
    
    10.00Vested
    
    
    (3,000
    )
    
    
    10.00Forfeited
    
    
    
    
    
    
    Balance  December 31, 2009
    
    
    12,000
    
    
    
    10.00Granted
    
    
    7,500
    
    
    
    10.00Vested
    
    
    (4,500
    )
    
    
    10.00Forfeited
    
    
    
    
    
    
    Balance  December 31, 2010
    
    
    15,000
    
    
    $
    10.00Expected to vest  December 31, 2010
    
    
    15,000
    
    
    $
    10.00
 13. Fair Value of Financial Instruments
 Financial Instruments Reported at Fair Value
 Derivative Financial Instruments
    108




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Assets and liabilities at fair value
  Quoted Prices inActive Markets forIdentical Assets and
    
    
    Significant Other
    
    
    SignificantLiabilities
    
    
    Observable Inputs
    
    
    Unobservable Inputs(Level 1 )
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalLiabilities:Derivative financial
instruments
    
    $
    
    
    
    $
    453,000
    
    
    $
    
    
    
    $
    453,000Total liabilities at fair value
    
    $
    
    
    
    $
    453,000
    
    
    $
    
    
    
    $
    453,000
  Financial Instruments Disclosed at Fair Value
 Financial Instruments,
     109




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 14. Tax Treatment of Distributions
  Year EndedDecember 31, 2010Ordinary income
    
    $
    941,000
    
    
    
    23.2
    %Capital gain
    
    
    
    
    
    
    Return of capital
    
    
    3,122,000
    
    
    
    76.8$
    4,063,000
    
    
    
    100
    %
  15. Future Minimum Rent
 Rental Income
  Year
    
    Amount2011
    
    $
    17,894,0002012
    
    
    17,519,0002013
    
    
    17,043,0002014
    
    
    16,664,0002015
    
    
    16,050,000Thereafter
    
    
    117,802,000$
    202,972,000
 16. Business Combinations
   Property
    
    Revenues
    
    
    Net income (loss)Lacombe Medical Office Building
    
    $
    675,000
    
    
    $
    200,000Center for Neurosurgery and Spine
    
    $
    625,000
    
    
    $
    (194,000
    )Parkway Medical Center
    
    $
    1,270,000
    
    
    $
    48,000Highlands Ranch Medical Pavilion
    
    $
    810,000
    
    
    $
    (56,000
    )Muskogee Long-Term Acute Care Hospital
    
    $
    646,000
    
    
    $
    331,000St. Vincent Medical Office Building
    
    $
    750,000
    
    
    $
    (31,000
    )Livingston Medical Arts Pavilion
    
    $
    446,000
    
    
    $
    143,000Pocatello East Medical Office Building
    
    $
    850,000
    
    
    $
    150,000Monument Long-Term Acute Care Hospital
Portfolio
    
    $
    966,000
    
    
    $
    557,000Virginia Skilled Nursing Facility Portfolio
    
    $
    1,363,000
    
    
    $
    277,000Sylva Medical Office Building
    
    $
    152,000
    
    
    $
    46,000Surgical Hospital of Humble
    
    $
    73,000
    
    
    $
    (11,000
    )Lawton Medical Office Building Portfolio
    
    $
    33,000
    
    
    $
    (54,000
    )Ennis Medical Office Building
    
    $
    23,000
    
    
    $
    9,000
  110




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Center for
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    St. Vincent
    
    
    LivingstonLacombe Medical
    
    
    Neurosurgery and
    
    
    Parkway Medical
    
    
    Highlands Ranch
    
    
    Muskogee Long-Term
    
    
    Medical Office
    
    
    Medical ArtsOffice Building
    
    
    Spine
    
    
    Center
    
    
    Medical Pavilion
    
    
    Acute Care Hospital
    
    
    Building
    
    
    PavilionLand
    
    $
    409,000
    
    
    $
    319,000
    
    
    $
    1,320,000
    
    
    $
    1,234,000
    
    
    $
    379,000
    
    
    $
    1,568,000
    
    
    $
    Building and improvements
    
    
    5,438,000
    
    
    
    4,689,000
    
    
    
    7,192,000
    
    
    
    5,444,000
    
    
    
    8,314,000
    
    
    
    6,746,000
    
    
    
    4,976,000In-place leases
    
    
    512,000
    
    
    
    575,000
    
    
    
    969,000
    
    
    
    668,000
    
    
    
    897,000
    
    
    
    741,000
    
    
    
    519,000Tenant relationships
    
    
    458,000
    
    
    
    585,000
    
    
    
    1,318,000
    
    
    
    999,000
    
    
    
    1,395,000
    
    
    
    964,000
    
    
    
    312,000Leasehold interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149,000Master lease
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Above market leases
    
    
    
    
    
    
    327,000
    
    
    
    97,000
    
    
    
    27,000
    
    
    
    
    
    
    
    106,000
    
    
    
    473,000Total assets acquired
    
    
    6,817,000
    
    
    
    6,495,000
    
    
    
    10,896,000
    
    
    
    8,372,000
    
    
    
    10,985,000
    
    
    
    10,125,000
    
    
    
    6,429,000Mortgage loans payable, net
    
    
    
    
    
    
    (3,025,000
    )
    
    
    
    
    
    
    (4,414,000
    )
    
    
    
    
    
    
    
    
    
    
    Below market leases
    
    
    
    
    
    
    
    
    
    
    (41,000
    )
    
    
    
    
    
    
    
    
    
    
    (50,000
    )
    
    
    (80,000
    )Derivative financial instrument
    
    
    
    
    
    
    (310,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities assumed
    
    
    
    
    
    
    (3,335,000
    )
    
    
    (41,000
    )
    
    
    (4,414,000
    )
    
    
    
    
    
    
    (50,000
    )
    
    
    (80,000
    )Net assets acquired
    
    $
    6,817,000
    
    
    $
    3,160,000
    
    
    $
    10,855,000
    
    
    $
    3,958,000
    
    
    $
    10,985,000
    
    
    $
    10,075,000
    
    
    $
    6,349,000
 Pocatello East
    
    
    Monument Long-
    
    
    Virginia Skilled
    
    
    
    
    
    
    
    
    
    
    Lawton MedicalMedical Office
    
    
    Term Acute Care
    
    
    Nursing Facility
    
    
    Sylva Medical Office
    
    
    Surgical Hospital of
    
    
    Office Building
    
    
    Ennis MedicalBuilding
    
    
    Hospital Portfolio
    
    
    Portfolio
    
    
    Building
    
    
    Humble
    
    
    Portfolio
    
    
    Office BuildingLand
    
    $
    
    
    
    $
    3,772,000
    
    
    $
    4,405,000
    
    
    $
    
    
    
    $
    719,000
    
    
    $
    
    
    
    $
    467,000Building and improvements
    
    
    14,319,000
    
    
    
    22,065,000
    
    
    
    37,709,000
    
    
    
    9,116,000
    
    
    
    10,413,000
    
    
    
    8,440,000
    
    
    
    5,486,000In-place leases
    
    
    672,000
    
    
    
    2,351,000
    
    
    
    2,837,000
    
    
    
    845,000
    
    
    
    1,287,000
    
    
    
    834,000
    
    
    
    586,000Tenant relationships
    
    
    554,000
    
    
    
    1,083,000
    
    
    
    2,449,000
    
    
    
    528,000
    
    
    
    681,000
    
    
    
    460,000
    
    
    
    503,000Leasehold interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347,000
    
    
    
    
    
    
    
    762,000
    
    
    
    Master lease
    
    
    455,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Above market leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    830,000
    
    
    
    56,000Total assets acquired
    
    
    16,000,000
    
    
    
    29,271,000
    
    
    
    47,400,000
    
    
    
    10,836,000
    
    
    
    13,100,000
    
    
    
    11,326,000
    
    
    
    7,098,000Mortgage loans payable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Below market leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (373,000
    )
    
    
    Derivative financial instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other liabilities
    
    
    
    
    
    
    
    
    
    
    (2,400,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total liabilities assumed
    
    
    
    
    
    
    
    
    
    
    (2,400,000
    )
    
    
    
    
    
    
    
    
    
    
    (373,000
    )
    
    
    Net assets acquired
    
    $
    16,000,000
    
    
    $
    29,271,000
    
    
    $
    45,000,000
    
    
    $
    10,836,000
    
    
    $
    13,100,000
    
    
    $
    10,953,000
    
    
    $
    7,098,000
  Period fromJanuary 7, 2009(Date of Inception)Year Ended
    
    
    throughDecember 31, 2010
    
    
    December 31, 2009Revenues
    
    $
    22,200,000
    
    
    $
    20,893,000Net loss
    
    $
    2,143,000
    
    
    $
    894,000Net loss attributable to controlling interest
    
    $
    2,142,000
    
    
    $
    891,000Net loss per common share
attributable to
controlling interest
 basic and diluted
    
    $
    0.15
    
    
    $
    0.06
  17. Concentration of Credit Risk
    111




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Percentage of
    
    
    
    
    GLAAnnualized
    
    
    Annualized
    
    
    
    
    (Square Feet)
    
    
    Lease ExpirationTenant
    
    Base Rent(1)
    
    
    Base Rent
    
    
    Property
    
    (unaudited)
    
    
    DateLandmark Holdings of  Missouri, LLC
    
    $
    2,620,000
    
    
    
    14.4
    %
    
    Monument Long-Term Acute Care Hospital Portfolio
    
    
    85,000
    
    
    
    10/31/25Kissito Healthcare
    
    $
    2,249,000
    
    
    
    12.4
    %
    
    Virginia Skilled Nursing Facility Portfolio
    
    
    144,000
    
    
    01/31/25Laurel Health Care Company
    
    $
    2,034,000
    
    
    
    11.2
    %
    
    Virginia Skilled Nursing Facility  Portfolio
    
    
    88,000
    
    
    
    various - 2016 to 2025
 
 (1)
    
    Annualized base rent is based on contractual base rent from leases in
effect as of December 31, 2010. The loss of any of these tenants or
their inability to pay rent could have a material adverse effect on
our business and results of operations.  18. Per Share Data
 Earnings per Share
 19. Selected Quarterly Financial Data (Unaudited)
   112




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GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Quarters EndedDecember 31, 2010
    
    
    September 30, 2010
    
    
    June 30, 2010
    
    
    March 31, 2010Revenues
    
    $
    4,672,000
    
    
    $
    2,807,000
    
    
    $
    1,142,000
    
    
    $
    61,000Expenses
    
    
    (5,371,000
    )
    
    
    (5,341,000
    )
    
    
    (2,981,000
    )
    
    
    (868,000
    )Loss from operations
    
    
    (699,000
    )
    
    
    (2,534,000
    )
    
    
    (1,839,000
    )
    
    
    (807,000
    )Other income (expense)
    
    
    (932,000
    )
    
    
    (396,000
    )
    
    
    (220,000
    )
    
    
    4,000Net loss
    
    
    (1,631,000
    )
    
    
    (2,930,000
    )
    
    
    (2,059,000
    )
    
    
    (803,000
    )Less: Net income attributable
to noncontrolling interests
    
    
    
    
    
    
    (1,000
    )
    
    
    
    
    
    
    Net loss attributable to
controlling interest
    
    $
    (1,631,000
    )
    
    $
    (2,931,000
    )
    
    $
    (2,059,000
    )
    
    $
    (803,000
    )Net loss per common share
attributable to controlling
interest  basic and
diluted
    
    $
    (0.13
    )
    
    $
    (0.34
    )
    
    $
    (0.37
    )
    
    $
    (0.30
    )Weighted average number of
common shares outstanding
 basic and diluted
    
    
    12,765,174
    
    
    
    8,745,255
    
    
    
    5,558,762
    
    
    
    2,690,794
 Period fromJanuary 7, 2009(Date of Inception)Quarters Ended
    
    
    throughDecember 31, 2009
    
    
    September 30, 2009
    
    
    June 30, 2009
    
    
    March 31, 2009Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Expenses
    
    
    (224,000
    )
    
    
    (62,000
    )
    
    
    
    
    
    
    Loss from operations
    
    
    (224,000
    )
    
    
    (62,000
    )
    
    
    
    
    
    
    Other income
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (220,000
    )
    
    
    (62,000
    )
    
    
    
    
    
    
    Less: Net loss attributable to
noncontrolling interest
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to
controlling interest
    
    $
    (219,000
    )
    
    $
    (62,000
    )
    
    $
    
    
    
    $
    Net loss per common share
attributable to controlling
interest  basic and
diluted
    
    $
    (0.32
    )
    
    $
    (3.10
    )
    
    $
    
    
    
    $
    Weighted average number of
common shares outstanding
 basic and diluted
    
    
    675,136
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    13,333
  113




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 20. Subsequent Events
 Status of our Offering
   Line of Credit
  Share Repurchases
  Property Acquisition
    114




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 
 SCHEDULE III  REAL ESTATE AND

ACCUMULATED DEPRECIATION
December 31, 2010
 Initial Cost to Company
    
    
    
    
    
    
    Gross Amount of Which Carried at Close of Period(d)Cost Capitalized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedBuildings and
    
    
    Subsequent to
    
    
    
    
    
    
    Buildings and
    
    
    Total
    
    
    Depreciation
    
    
    Date ofDescription
    
    Encumbrances
    
    
    Land
    
    
    Improvements
    
    
    Acquisition
    
    
    Land
    
    
    Improvements
    
    
    (c)
    
    
    (e)(f)
    
    
    Construction
    
    
    Date AcquiredLacombe Medical
Office Building (Medical Office)
    
    Lacombe, LA
    
    $
    (a
    )
    
    $
    409,000
    
    
    $
    5,438,000
    
    
    $
    20,000
    
    
    $
    409,000
    
    
    $
    5,458,000
    
    
    $
    5,867,000
    
    
    $
    (165,000
    )
    
    
    2004
    
    
    
    03/05/10Center for Neurosurgery
and Spine (Medical Office)
    
    Sartell, MN
    
    
    3,184,000
    
    
    
    319,000
    
    
    
    4,689,000
    
    
    
    6,000
    
    
    
    319,000
    
    
    
    4,695,000
    
    
    
    5,014,000
    
    
    
    (177,000
    )
    
    
    2006
    
    
    
    03/31/10Parkway Medical
Center (Medical Office)
    
    Beachwood, OH
    
    
    (a
    )
    
    
    1,320,000
    
    
    
    7,192,000
    
    
    
    28,000
    
    
    
    1,320,000
    
    
    
    7,220,000
    
    
    
    8,540,000
    
    
    
    (289,000
    )
    
    
    1972,1987
    
    
    
    04/12/10Highlands Ranch
Medical Pavilion (Medical Office)
    
    Highlands Ranch, CO
    
    
    4,383,000
    
    
    
    1,234,000
    
    
    
    5,444,000
    
    
    
    83,000
    
    
    
    1,234,000
    
    
    
    5,527,000
    
    
    
    6,761,000
    
    
    
    (167,000
    )
    
    
    1999
    
    
    
    04/30/10Muskogee Long-Term
Acute Care Hospital (Hospital)
    
    Muskogee, OK
    
    
    
    
    
    
    379,000
    
    
    
    8,314,000
    
    
    
    
    
    
    
    379,000
    
    
    
    8,314,000
    
    
    
    8,693,000
    
    
    
    (178,000
    )
    
    
    2006
    
    
    
    05/27/10St. Vincent Medical
Office Building (Medical Office)
    
    Cleveland, OH
    
    
    (a
    )
    
    
    1,568,000
    
    
    
    6,746,000
    
    
    
    10,000
    
    
    
    1,568,000
    
    
    
    6,756,000
    
    
    
    8,324,000
    
    
    
    (190,000
    )
    
    
    1985
    
    
    
    06/25/10Livingston Medical
Arts Pavilion (Medical Office)
    
    Livingston, TX
    
    
    (a
    )
    
    
    
    
    
    
    4,976,000
    
    
    
    
    
    
    
    
    
    
    
    4,976,000
    
    
    
    4,976,000
    
    
    
    (105,000
    )
    
    
    2007
    
    
    
    06/28/10Pocatello East Medical
Office Building (Medical Office)
    
    Pocatello, ID
    
    
    7,971,000
    
    
    
    
    
    
    
    14,319,000
    
    
    
    
    
    
    
    
    
    
    
    14,319,000
    
    
    
    14,319,000
    
    
    
    (168,000
    )
    
    
    2007
    
    
    
    07/27/10Monument Long-Term Acute
Care Hospital PortfolioCape Girardeau, MO
    
    
    
    
    
    
    799,000
    
    
    
    6,268,000
    
    
    
    
    
    
    
    799,000
    
    
    
    6,268,000
    
    
    
    7,067,000
    
    
    
    (91,000
    )
    
    
    2006
    
    
    
    08/12/10Joplin, MO
    
    
    
    
    
    
    995,000
    
    
    
    6,908,000
    
    
    
    
    
    
    
    995,000
    
    
    
    6,908,000
    
    
    
    7,903,000
    
    
    
    (86,000
    )
    
    
    2007
    
    
    
    08/31/10Athens, GA
    
    
    
    
    
    
    1,978,000
    
    
    
    8,889,000
    
    
    
    
    
    
    
    1,978,000
    
    
    
    8,889,000
    
    
    
    10,867,000
    
    
    
    (52,000
    )
    
    
    2008
    
    
    
    10/29/10Virginia Skilled Nursing
Facility Portfolio (Skilled Nursing)
    
    
    
    
    26,810,000Charlottesville, VA
    
    
    (b
    )
    
    
    829,000
    
    
    
    9,175,000
    
    
    
    
    
    
    
    829,000
    
    
    
    9,175,000
    
    
    
    10,004,000
    
    
    
    (78,000
    )
    
    
    2004
    
    
    
    09/16/10Bastian, VA
    
    
    (b
    )
    
    
    217,000
    
    
    
    2,546,000
    
    
    
    
    
    
    
    217,000
    
    
    
    2,546,000
    
    
    
    2,763,000
    
    
    
    (28,000
    )
    
    
    1989
    
    
    
    09/16/10Lebanon, VA
    
    
    (b
    )
    
    
    359,000
    
    
    
    3,917,000
    
    
    
    
    
    
    
    359,000
    
    
    
    3,917,000
    
    
    
    4,276,000
    
    
    
    (35,000
    )
    
    
    1990
    
    
    
    09/16/10Fincastle, VA
    
    
    
    
    
    
    302,000
    
    
    
    3,147,000
    
    
    
    
    
    
    
    302,000
    
    
    
    3,147,000
    
    
    
    3,449,000
    
    
    
    (34,000
    )
    
    
    1990
    
    
    
    09/16/10Low Moor, VA
    
    
    (b
    )
    
    
    655,000
    
    
    
    6,817,000
    
    
    
    
    
    
    
    655,000
    
    
    
    6,817,000
    
    
    
    7,472,000
    
    
    
    (53,000
    )
    
    
    1989
    
    
    
    09/16/10Midlothian, VA
    
    
    (b
    )
    
    
    1,840,000
    
    
    
    9,991,000
    
    
    
    
    
    
    
    1,840,000
    
    
    
    9,991,000
    
    
    
    11,831,000
    
    
    
    (82,000
    )
    
    
    1991
    
    
    
    09/16/10Hot Springs, VA
    
    
    
    
    
    
    203,000
    
    
    
    2,116,000
    
    
    
    
    
    
    
    203,000
    
    
    
    2,116,000
    
    
    
    2,319,000
    
    
    
    (24,000
    )
    
    
    1990
    
    
    
    09/16/10Sylva Medical
Office Building (Medical Office)
    
    Sylva, NC
    
    
    (a
    )
    
    
    
    
    
    
    9,116,000
    
    
    
    196,000
    
    
    
    
    
    
    
    9,312,000
    
    
    
    9,312,000
    
    
    
    (43,000
    )
    
    
    2010
    
    
    
    11/15/10Surgical Hospital
of Humble (Hospital)
    
    Humble, TX
    
    
    9,000,000
    
    
    
    719,000
    
    
    
    10,413,000
    
    
    
    
    
    
    
    719,000
    
    
    
    10,413,000
    
    
    
    11,132,000
    
    
    
    (25,000
    )
    
    
    2000/2010
    
    
    
    12/10/10Lawton Medical Office
Building Portfolio (Medical Office)
    
    Lawton, OK
    
    
    7,300,000
    
    
    
    
    
    
    
    8,440,000
    
    
    
    123,000
    
    
    
    
    
    
    
    8,563,000
    
    
    
    8,563,000
    
    
    
    
    
    
    
    1985/2008
    
    
    
    12/22/10Ennis Medical
Office Building (Medical Office)
    
    Ennis, TX
    
    
    
    
    
    
    467,000
    
    
    
    5,486,000
    
    
    
    
    
    
    
    467,000
    
    
    
    5,486,000
    
    
    
    5,953,000
    
    
    
    
    
    
    
    2008
    
    
    
    12/22/10$
    58,648,000
    
    
    $
    14,592,000
    
    
    $
    150,347,000
    
    
    $
    466,000
    
    
    $
    14,592,000
    
    
    $
    150,813,000
    
    
    $
    165,405,000
    
    
    $
    (2,070,000
    )
 (a)
    
    As of December 31, 2010, our secured revolving line of credit with Bank of America, N.A.
with an aggregate maximum principal amount of $25,000,000 is secured by Lacombe Medical Office
Building, Parkway Medical Center, St. Vincent Medical Office Building, Livingston Medical Arts
Pavilion and Sylva Medical Office Building. As of December 31, 2010, our borrowing capacity was
$22,600,000 and borrowings totaled $11,800,000.(b)
    
    Virginia Skilled Nursing Facility Portfolio consists of seven skilled nursing facilities.
As of December 31, 2010, a mortgage loan payable in the amount of $26,810,000 was secured by five
of the skilled nursing facilities.  115




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##### Table of Contents



GRUBB & ELLIS HEALTHCARE REIT II, INC.
 SCHEDULE III  REAL ESTATE AND
ACCUMULATED DEPRECIATION  (Continued)
December 31, 2010
 
 (c)
    
    The changes in total real estate for the year ended December 31, 2010 and for the period
from January 7, 2009 (Date of Inception) through December 31, 2009 are as follows: AmountBalance as of January 7, 2009 (Date of Inception)
    
    $
    Acquisitions
    
    
    Additions
    
    
    Dispositions
    
    
    Balance as of December 31, 2009
    
    
    Acquisitions
    
    
    164,939,000Additions
    
    
    466,000Dispositions
    
    
    Balance as of December 31, 2010
    
    $
    165,405,000
 (d)
    
    For federal income tax purposes, the aggregate cost of our properties is $199,026,000.(e)
    
    The changes in accumulated depreciation for the year ended December 31, 2010 and for the
period from January 7, 2009 (Date of Inception) through December 31, 2009 are as follows: AmountBalance as of January 7, 2009 (Date of Inception)
    
    $
    Additions
    
    
    Dispositions
    
    
    Balance as of December 31, 2009
    
    
    Additions
    
    
    (2,070,000
    )Dispositions
    
    
    Balance as of December 31, 2010
    
    $
    (2,070,000
    )
 (f)
    
    The cost of buildings and capital improvements is depreciated on a straight-line basis
over the estimated useful lives of the buildings and capital improvements, up to 39 years, and the
cost for tenant improvements is depreciated over the shorter of the lease term or useful life,
ranging from five months to 22.0 years.  116




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##### Table of Contents



SIGNATURES
  Grubb & Ellis Healthcare REIT II, Inc.

(Registrant)By
    
    /s/ Jeffrey T. Hanson
    
    Chief Executive Officer and Chairman of the BoardJeffrey T. Hanson
   By
    
    /s/ Jeffrey T. Hanson

Jeffrey T. Hanson
    
    Chief Executive Officer and Chairman of the Board
(principal executive officer)Date: March 10, 2011By
    
    /s/ Shannon KS Johnson

Shannon K S Johnson
    
    Chief Financial Officer
(principal financial officer and principal
accounting officer)Date: March 10, 2011By
    
    /s/ Danny Prosky

Danny Prosky
    
    President, Chief Operating Officer and DirectorDate: March 10, 2011By
    
    /s/ Patrick R. Leardo

Patrick R. Leardo
    
    DirectorDate: March 10, 2011By
    
    /s/ Gerald W. Robinson

Gerald W. Robinson
    
    DirectorDate: March 10, 2011By
    
    /s/ Gary E. Stark

Gary E. Stark
    
    DirectorDate: March 10, 2011
  117




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##### Table of Contents



EXHIBIT INDEX
   3.1
    
    
    Second Articles of Amendment and Restatement of Grubb & Ellis Healthcare REIT II, Inc. dated
July 30, 2009 (included as Exhibit 3.1 to Pre-Effective Amendment No. 3 to our Registration
Statement on Form S-11 (File No. 333-158111) filed August 5, 2009 and incorporated herein by
reference)3.2
    
    
    Articles of Amendment to the Second Articles of Amendment and Restatement of Grubb & Ellis
Healthcare REIT II, Inc. dated September 1, 2009 (included as Exhibit 3.1 to our Current
Report on Form 8-K filed September 3, 2009 and incorporated herein by reference)3.3
    
    
    Second Articles of Amendment to the Second Articles of Amendment and Restatement of Grubb &
Ellis Healthcare REIT II, Inc. dated September 18, 2009 (included as Exhibit 3.1 to our
Current Report on Form 8-K filed September 21, 2009 and incorporated herein by reference)3.4
    
    
    Bylaws of Grubb & Ellis Healthcare REIT II, Inc. (included as Exhibit 3.2 to our Registration
Statement on Form S-11 (File No. 333-158111) filed March 19, 2009 and incorporated herein by
reference)4.1
    
    
    Third Amended and Restated Escrow Agreement between Grubb & Ellis Healthcare REIT II, Inc.,
Grubb & Ellis Securities, Inc. and CommerceWest Bank, N.A., dated November 24, 2010 (included
as Exhibit 4.1 to our Current Report on Form 8-K filed November 30, 2010 and incorporated
herein by reference)4.2
    
    
    Form of Subscription Agreement of Grubb & Ellis Healthcare REIT II, Inc. (included as Exhibit
B to Post-Effective Amendment No. 7 to our Registration Statement on Form S-11 (File No.
333-158111) filed December 1, 2010 and incorporated herein by reference)4.3
    
    
    Distribution Reinvestment Plan of Grubb & Ellis Healthcare REIT II, Inc. effective as of
August 24, 2009 (included as Exhibit C to Post-Effective Amendment No. 7 to our Registration
Statement on Form S-11 (File No. 333-158111) filed December 1, 2010 and incorporated herein by
reference)4.4
    
    
    Share Repurchase Plan of Grubb & Ellis Healthcare REIT II, Inc. (included as Exhibit D to
Post-Effective Amendment No. 7 to our Registration Statement on Form S-11 (File No.
333-158111) filed December 1, 2010 and incorporated herein by reference)10.1
    
    
    Agreement of Limited Partnership of Grubb & Ellis Healthcare REIT II Holdings, LP (included
as Exhibit 10.2 to our Registration Statement on Form S-11 (File No. 333-158111) filed March 19, 2009 and incorporated herein by reference)10.2
    
    
    Amended and Restated Advisory Agreement by and among Grubb & Ellis Healthcare REIT II, Inc.,
Grubb & Ellis Healthcare REIT II Holdings, LP and Grubb & Ellis Healthcare REIT II Advisor,
LLC, dated June 1, 2010 (included as Exhibit 10.4 to our Current Report on Form 8-K filed June
1, 2010 and incorporated herein by reference)10.3
    
    
    Form of Indemnification Agreement between Grubb & Ellis Healthcare REIT II, Inc. and
Indemnitee made effective as of August 24, 2009 (included as Exhibit 10.1 to our Current
Report on Form 8-K filed September 3, 2009 and incorporated herein by reference)10.4
    
    
    Grubb & Ellis Healthcare REIT II, Inc. 2009 Incentive Plan (included as Exhibit 10.3 to
Pre-Effective Amendment No. 1 to our Registration Statement on Form S-11 (File No. 333-158111)
filed May 8, 2009 and incorporated herein by reference)10.5
    
    
    Form of Restricted Stock Award Agreement of Grubb & Ellis Healthcare REIT II, Inc. (included
as Exhibit 10.1 to our Current Report on Form 8-K filed October 26, 2009 and incorporated
herein by reference)10.6
    
    
    Real Estate Purchase Agreement and Escrow Instructions between Grubb & Ellis Equity Advisors,
LLC and Stingray Properties, LLC and Crystal Blue Properties, LLC, Sylvan Holdings, LLC and
Dr. Samuel Elghoran, dated January 7, 2010 (included as Exhibit 10.1 to our Current Report on
Form 8-K filed January 8, 2010 and incorporated herein by reference)10.7
    
    
    Assignment and Assumption of Real Estate Purchase and Sale Agreement between Grubb & Ellis
Equity Advisors, LLC and G&E Healthcare REIT II Sartell MOB, LLC, dated January 7, 2010
(included as Exhibit 10.2 to our Current Report on Form 8-K filed January 8, 2010 and
incorporated herein by reference)




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##### Table of Contents



10.8
    
    
    Purchase and Sale Agreement between G&E HC REIT II Highlands Ranch Medical Pavilion, LLC and
Highlands Ranch Medical Pavilion, LLC, dated January 28, 2010 (included as Exhibit 10.1 to our
Current Report on Form 8-K filed January 28, 2010 and incorporated herein by reference)10.9
    
    
    Purchase and Sale Agreement between G&E HC REIT II Parkway Medical Center, LLC and Parkway
Medical Center, LLC, dated January 28, 2010 (included as Exhibit 10.1 to our Current Report on
Form 8-K filed February 3, 2010 and incorporated herein by reference)10.10
    
    
    Real Estate Purchase Agreement between G&E HC REIT II Lacombe MOB, LLC and CC Lacombe, LLC,
dated February 8, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed
February 12, 2010 and incorporated herein by reference)10.11
    
    
    First Amendment to Real Estate Purchase Agreement and Escrow Instructions by and between G&E
Healthcare REIT II Sartell MOB, LLC, Stingray Properties, LLC, Crystal Blue Properties, LLC,
Sylvan Holdings, LLC, Dr. Samuel Elghor and First American Title Insurance Company, dated
February 8, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed February
12, 2010 and incorporated herein by reference)10.12
    
    
    First Amendment to Real Estate Purchase Agreement and Escrow Instructions between G&E HC
REIT II Lacombe MOB, LLC and CC Lacombe, LLC and First American Title Insurance Company, dated
February 19, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed February
24, 2010 and incorporated herein by reference)10.13
    
    
    First Amendment to Purchase Agreement and Escrow Instructions between G&E HC REIT II Parkway
Medical Center, LLC and Parkway Medical Center, LLC and Resource Title Agency, dated February
23, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed March 1, 2010 and
incorporated herein by reference)10.14
    
    
    Second Amendment to Real Estate Purchase Agreement and Escrow Instructions between G&E HC
REIT II Lacombe MOB, LLC and CC Lacombe, LLC and First American Title Insurance Company, dated
February 26, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed March 4,
2010 and incorporated herein by reference)10.15
    
    
    Second Amendment to Real Estate Purchase Agreement and Escrow Instructions by and between
G&E Healthcare REIT II Sartell MOB, LLC, Stingray Properties, LLC, Crystal Blue Properties,
LLC, Sylvan Holdings, LLC, Dr. Samuel Elghor and First American Title Insurance Company, dated
March 1, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed March 4, 2010
and incorporated herein by reference)10.16
    
    
    Third Amendment to Real Estate Purchase Agreement and Escrow Instructions by and between G&E
Healthcare REIT II Sartell MOB, LLC, Stingray Properties, LLC, Crystal Blue Properties, LLC,
Sylvan Holdings, LLC, Dr. Samuel Elghor and First American Title Insurance Company, dated
March 5, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed March 11, 2010
and incorporated herein by reference)10.17
    
    
    Second Amendment to Purchase Agreement and Escrow Instructions between G&E HC REIT II
Parkway Medical Center, LLC and Parkway Medical Center, LLC and Resource Title Agency, dated
March 16, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed March 16,
2010 and incorporated herein by reference)10.18
    
    
    Fourth Amendment to Real Estate Purchase Agreement and Escrow Instructions by and between
G&E Healthcare REIT II Sartell MOB, LLC, Stingray Properties, LLC, Crystal Blue Properties,
LLC, Sylvan Holdings, LLC, Dr. Samuel Elghor and First American Title Insurance Company, dated
March 19, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed March 25,
2010 and incorporated herein by reference)10.19
    
    
    Performance of Loan Obligations and Indemnity Agreement between G&E Healthcare REIT II
Sartell MOB, LLC, G&E Healthcare REIT II, Inc., Stingray Properties, LLC, Crystal Blue
Properties, LLC, Sylvan Holdings, LLC, and Dr. Samuel Elghor, dated March 31, 2010 (included
as Exhibit 10.1 to our Current Report on Form 8-K filed April 6, 2010 and incorporated herein
by reference)10.20
    
    
    Replacement Reserve Agreement between G&E Healthcare REIT II Sartell MOB, LLC and Wells
Fargo Bank, N.A., dated March 31, 2010 (included as Exhibit 10.2 to our Current Report on Form
8-K filed April 6, 2010 and incorporated herein by reference)10.21
    
    
    Mortgage, Security Agreement and Assignment of Rents and Leases between G&E Healthcare REIT
II Sartell MOB, LLC and Stingray Properties, LLC, dated March 31, 2010 (included as Exhibit
10.3 to our Current Report on Form 8-K filed April 6, 2010 and incorporated herein by
reference)




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##### Table of Contents



10.22
    
    
    Subordination Agreement (Mortgage) between G&E Healthcare REIT II Sartell MOB, LLC, Stingray
Properties, LLC, and Wells Fargo Bank, N.A., dated March 31, 2010 (included as Exhibit 10.4 to
our Current Report on Form 8-K filed April 6, 2010 and incorporated herein by reference)10.23
    
    
    Modification of Third-Party Mortgage, Security Agreement, Fixture Financing Statement and
Assignment of Leases and Rents, between ) G&E Healthcare REIT II Sartell MOB, LLC, and Wells
Fargo Bank, N.A., dated March 31, 2010 (included as Exhibit 10.5 to our Current Report on Form
8-K filed April 6, 2010 and incorporated herein by reference)10.24
    
    
    Consent and Assumption Agreement between G&E Healthcare REIT II Sartell MOB, LLC, Stingray
Properties, LLC, and Wells Fargo Bank, N.A., dated March 31, 2010 (included as Exhibit 10.6 to
our Current Report on Form 8-K filed April 6, 2010 and incorporated herein by reference)10.25
    
    
    Bill of Sale, Assignment and Assumption of Leases and Contracts between G&E Healthcare REIT
II Sartell MOB, LLC and Stingray Properties, LLC, dated March 31, 2010 (included as Exhibit
10.7 to our Current Report on Form 8-K filed April 6, 2010 and incorporated herein by
reference)10.26
    
    
    Construction Loan Note of Stingray Properties, LLC in favor of Wells Fargo Bank, N.A., dated
September 16, 2005 (included as Exhibit 10.8 to our Current Report on Form 8-K filed April 6,
2010 and incorporated herein by reference)10.27
    
    
    Construction Term Loan Agreement between Stingray Properties, LLC and Wells Fargo Bank,
N.A., effective September 16, 2005 (included as Exhibit 10.9 to our Current Report on Form 8-K
filed April 6, 2010 and incorporated herein by reference)10.28
    
    
    Note Modification Agreement between Stingray Properties, LLC, Crystal Blue Properties, LLC,
Sylvan Holdings, LLC, Dr. Samuel Elghor, Gary Verkinnes, Dr. Hector Ho, Dr. Jeffrey Gerdes,
Ronald Berg and Wells Fargo Bank, N.A., effective July 1, 2006 (included as Exhibit 10.10 to
our Current Report on Form 8-K filed April 6, 2010 and incorporated herein by reference)10.29
    
    
    Second Note Modification Agreement between Stingray Properties, LLC, Crystal Blue
Properties, LLC, Sylvan Holdings, LLC, Dr. Samuel Elghor, Gary Verkinnes, Dr. Hector Ho, Dr.
Jeffrey Gerdes, Ronald Berg and Wells Fargo Bank, N.A., effective August 15, 2006 (included as
Exhibit 10.11 to our Current Report on Form 8-K filed April 6, 2010 and incorporated herein by
reference)10.30
    
    
    Interest Rate Master Agreement between Stingray Properties LLC and Wells Fargo Bank, N.A.,
dated August 26, 2005 (included as Exhibit 10.12 to our Current Report on Form 8-K filed April
6, 2010 and incorporated herein by reference)10.31
    
    
    Confirmation between Stingray Properties, LLC and Wells Fargo Bank, N.A., dated August 26,
2005 (included as Exhibit 10.13 to our Current Report on Form 8-K filed April 6, 2010 and
incorporated herein by reference)10.32
    
    
    Amended and Restated Confirmation between Stingray Properties, LLC and Wells Fargo Bank,
N.A., dated July 28, 2006 (included as Exhibit 10.14 to our Current Report on Form 8-K filed
April 6, 2010 and incorporated herein by reference)10.33
    
    
    Third-Party Mortgage, Security Agreement, Fixture Financing Statement and Assignment of
Leases and Rents between Sylvan Holdings, LLC and Wells Fargo Bank, N.A., dated September 16,
2005 (included as Exhibit 10.15 to our Current Report on Form 8-K filed April 6, 2010 and
incorporated herein by reference)10.34
    
    
    Third Amendment to Purchase Agreement and Escrow Instructions between G&E HC REIT II Parkway
Medical Center, LLC and Parkway Medical Center, LLC and Resource Title Agency, dated April 7,
2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed April 13, 2010 and
incorporated herein by reference)10.35
    
    
    First Amendment to Purchase and Sale Agreement between G&E HC REIT II Highlands Ranch
Medical Pavilion, LLC and HRMED, LLC, dated April 28, 2010 (included as Exhibit 10.1 to our
Current Report on Form 8-K filed May 4, 2010 and incorporated herein by reference)10.36
    
    
    Consent and Assumption Agreement between G&E HC REIT II Highlands Ranch Medical Pavilion,
LLC, Grubb & Ellis Healthcare REIT II, Inc., HRMED, LLC, William Scott Reichenberg, Neil
Littmann and Wells Fargo Bank, N.A. (f/k/a Wells Fargo Bank Minnesota, N.A.), as Trustee for
the Registered Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial
Mortgage Pass-Through Certificates, Series 2003-CPN1, whose master servicer is Midland Loan
Services, Inc., dated April 30, 2010 (included as Exhibit 10.1 to our Current Report on Form
8-K filed May 6, 2010 and incorporated herein by reference)10.37
    
    
    Assignment of Management Agreement and Subordination of Management Fees between G&E HC REIT
II Highlands Ranch Medical Pavilion, LLC, Grubb & Ellis Healthcare REIT II, Inc., to Wells
Fargo Bank, N.A. (f/k/a Wells Fargo Bank Minnesota, N.A.), as Trustee for the Registered
Holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage
Pass-Through Certificates, Series 2003-CPN1, whose master servicer is Midland Loan Services,
Inc., and consented to by Grubb & Ellis Equity Advisors, Property Management, Inc., dated
April 30, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed May 6, 2010
and incorporated herein by reference)




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##### Table of Contents



10.38
    
    
    Promissory Note between HRMED, LLC and Column Financial, Inc., dated as of October 18, 2002
(included as Exhibit 10.3 to our Current Report on Form 8-K filed May 6, 2010 and incorporated
herein by reference)10.39
    
    
    Deed of Trust and Security Agreement entered into by HRMED, LLC for the benefit of Column
Financial, Inc., dated October 18, 2002 (included as Exhibit 10.4 to our Current Report on
Form 8-K filed May 6, 2010 and incorporated herein by reference)10.40
    
    
    Assignment of Leases and Rents by HRMED, LLC and Column Financial, Inc., dated October 17,
2002 and effective as of October 18, 2002 (included as Exhibit 10.5 to our Current Report on
Form 8-K filed May 6, 2010 and incorporated herein by reference)10.41
    
    
    Indemnity and Guaranty Agreement between William Scott Reichenberg and Neil Littmann and
Column Financial, Inc., dated as of October 18, 2002 (included as Exhibit 10.6 to our Current
Report on Form 8-K filed May 6, 2010 and incorporated herein by reference)10.42
    
    
    Hazardous Substances Indemnity Agreement between HRMED, LLC between William Scott
Reichenberg and Neil Littmann and Column Financial, Inc., dated as of October 18, 2002
(included as Exhibit 10.7 to our Current Report on Form 8-K filed May 6, 2010 and incorporated
herein by reference)10.43
    
    
    Contract of Purchase and Sale entered into by Grubb & Ellis Equity Advisors, LLC and
Muskogee LTACH, LLC, dated April 16, 2010 (included as Exhibit 10.1 to our Current Report on
Form 8-K filed June 1, 2010 and incorporated herein by reference)10.44
    
    
    First Amendment to Contract of Purchase and Sale entered into by Grubb & Ellis Equity
Advisors, LLC and Muskogee LTACH, LLC, dated May 17, 2010 (included as Exhibit 10.2 to our
Current Report on Form 8-K filed June 1, 2010 and incorporated herein by reference)10.45
    
    
    Assignment and Assumption of Contract of Purchase and Sale entered into by Grubb & Ellis
Equity Advisors, LLC and G&E HC REIT II Muskogee LTACH, LLC, dated May 27, 2010 (included as
Exhibit 10.3 to our Current Report on Form 8-K filed June 1, 2010 and incorporated herein by
reference)10.46
    
    
    Purchase and Sale Agreement and Joint Escrow Instructions entered into by Grubb & Ellis
Equity Advisors, LLC, and Vincent MBL Investors, LP and First American Title Insurance
Company, dated May 25, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed
June 29, 2010 and incorporated herein by reference)10.47
    
    
    First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions entered into by
Grubb & Ellis Equity Advisors, LLC, and Vincent MBL Investors, LP and First American Title
Insurance Company, dated June 21, 2010 (included as Exhibit 10.2 to our Current Report on Form
8-K filed June 29, 2010 and incorporated herein by reference)10.48
    
    
    Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions entered into
by Grubb & Ellis Equity Advisors, LLC, and Vincent MBL Investors, LP, dated June 22, 2010
(included as Exhibit 10.3 to our Current Report on Form 8-K filed June 29, 2010 and
incorporated herein by reference)10.49
    
    
    Assignment and Assumption of Purchase Agreement and Escrow Instructions entered into by
Grubb & Ellis Equity Advisors, LLC and G&E HC REIT II St. Vincent MOB, LLC, dated June 25,
2010 (included as Exhibit 10.4 to our Current Report on Form 8-K filed June 29, 2010 and
incorporated herein by reference)10.50
    
    
    Purchase and Sale Agreement and Joint Escrow Instructions entered into by Grubb & Ellis
Equity Advisors, LLC, and CNL Retirement DAS Pocatello ID, LP, dated April 27, 2010 (included
as Exhibit 10.1 to our Current Report on Form 8-K filed July 7, 2010 and incorporated herein
by reference)10.51
    
    
    First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions entered into by
Grubb & Ellis Equity Advisors, LLC, and CNL Retirement DAS Pocatello ID, LP, dated May 27,
2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed July 7, 2010 and
incorporated herein by reference)10.52
    
    
    Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions entered into
by Grubb & Ellis Equity Advisors, LLC, and CNL Retirement DAS Pocatello ID, LP, dated June 8,
2010 (included as Exhibit 10.3 to our Current Report on Form 8-K filed July 7, 2010 and
incorporated herein by reference)10.53
    
    
    Assignment and Assumption of Purchase Agreement and Escrow Instructions entered into by
Grubb & Ellis Equity Advisors, LLC and G&E HC REIT II Pocatello MOB, LLC, dated June 30, 2010
(included as Exhibit 10.4 to our Current Report on Form 8-K filed July 7, 2010 and
incorporated herein by reference)




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##### Table of Contents



10.54
    
    
    Promissory Note between Grubb & Ellis Healthcare REIT II Holdings, LP, G&E HC REIT II
Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC and Bank of America, N.A., dated
July 19, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed July 23, 2010
and incorporated herein by reference)10.55
    
    
    Credit Agreement between Grubb & Ellis Healthcare REIT II Holdings, LP, G&E HC REIT II
Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC and Bank of America, N.A., dated
July 19, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed July 23, 2010
and incorporated herein by reference)10.56
    
    
    Guaranty Agreement between Grubb & Ellis Healthcare REIT II, Inc. and Bank of America, N.A.,
dated July 19, 2010 (included as Exhibit 10.3 to our Current Report on Form 8-K filed July 23,
2010 and incorporated herein by reference)10.57
    
    
    Ownership Interests Pledge and Security Agreement by Grubb & Ellis Healthcare REIT II
Holdings, LP in favor of Bank of America, N.A. (included as Exhibit 10.4 to our Current Report
on Form 8-K filed July 23, 2010 and incorporated herein by reference)10.58
    
    
    Environmental Indemnity Agreement between Grubb & Ellis Healthcare REIT II Holdings, LP, G&E
HC REIT II Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC, Grubb & Ellis
Healthcare REIT II, Inc. and Bank of America, N.A., dated July 19, 2010 (included as Exhibit
10.5 to our Current Report on Form 8-K filed July 23, 2010 and incorporated herein by
reference)10.59
    
    
    Collateral Assignment of Management Contract between G&E HC REIT II Lacombe MOB, LLC, Grubb
& Ellis Equity Advisors, Property Management, Inc., Property One, Inc. and Bank of America,
N.A., dated July 19, 2010 (included as Exhibit 10.6 to our Current Report on Form 8-K filed
July 23, 2010 and incorporated herein by reference)10.60
    
    
    Collateral Assignment of Management Contract between G&E HC REIT II Parkway Medical Center,
LLC, Grubb & Ellis Equity Advisors, Property Management, Inc., The King Group Realty, Inc. and
Bank of America, N.A., dated July 19, 2010 (included as Exhibit 10.7 to our Current Report on
Form 8-K filed July 23, 2010 and incorporated herein by reference)10.61
    
    
    Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by G&E HC
REIT II Parkway Medical Center, LLC in favor of Bank of America, N.A., dated July 19, 2010
(included as Exhibit 10.8 to our Current Report on Form 8-K filed July 23, 2010 and
incorporated herein by reference)10.62
    
    
    Multiple Indebtedness Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing by G&E HC REIT II Lacombe MOB, LLC in favor of Bank of America, N.A., dated
July 19, 2010 (included as Exhibit 10.9 to our Current Report on Form 8-K filed July 23, 2010
and incorporated herein by reference)10.63
    
    
    Third Amendment to Agreement for the Purchase and Sale of Real Property between G&E HC REIT
II Pocatello MOB, LLC and CBL Retirement DAS Pocatello ID, LP, dated July 27, 2010 (included
as Exhibit 10.1 to our Current Report on Form 8-K filed August 2, 2010 and incorporated herein
by reference)10.64
    
    
    Amended and Restated Limited Liability Company Agreement of G&E HC REIT II Pocatello MOB JV,
LLC between Pocatello Medical Office Partners, LLC and Grubb & Ellis Healthcare REIT II
Holdings, LP, dated July 27, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K
filed August 2, 2010 and incorporated herein by reference)10.65
    
    
    Agreement for Purchase and Sale of Real Property by and between Grubb & Ellis Equity
Advisors, LLC and White Oaks Real Estate Investments of Cape Girardeau, LLC, White Oaks Real
Estate Investments of Joplin, LLC, White Oaks Real Estate Investments of Columbia, LLC and
White Oaks Real Estate Investments of Georgia, LLC, dated June 18, 2010 (included as Exhibit
10.1 to our Current Report on Form 8-K filed August 18, 2010 and incorporated herein by
reference)10.66
    
    
    First Amendment to Purchase and Sale Agreement by and between Grubb & Ellis Equity Advisors,
LLC and White Oaks Real Estate Investments, LLC, White Oaks Real Estate Investments of Joplin,
LLC, White Oaks Real Estate Investments of Columbia, LLC and White Oaks Real Estate
Investments of Georgia, LLC, dated July 22, 2010 (included as Exhibit 10.2 to our Current
Report on Form 8-K filed August 18, 2010 and incorporated herein by reference)10.67
    
    
    Second Amendment to Purchase and Sale Agreement by and between Grubb & Ellis Equity
Advisors, LLC and White Oaks Real Estate Investments, LLC, White Oaks Real Estate Investments
of Joplin, LLC, White Oaks Real Estate Investments of Columbia, LLC and White Oaks Real Estate
Investments of Georgia, LLC, dated July 28, 2010 (included as Exhibit 10.3 to our Current
Report on Form 8-K filed August 18, 2010 and incorporated herein by reference)




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##### Table of Contents



10.68
    
    
    Assignment and Assumption of Purchase Agreement by and between Grubb & Ellis Equity
Advisors, LLC and G&E HC REIT II Monument LTACH Portfolio, LLC, dated August 12, 2010
(included as Exhibit 10.4 to our Current Report on Form 8-K filed August 18, 2010 and
incorporated herein by reference)10.69
    
    
    Assignment and Assumption of Purchase Agreement by and between G&E HC REIT II Monument LTACH
Portfolio, LLC and G&E HC REIT II Cape Girardeau LTACH, LLC, dated August 12, 2010
(included as Exhibit 10.5 to our Current Report on Form 8-K filed August 18, 2010 and
incorporated herein by reference)10.70
    
    
    Assignment and Assumption of Purchase Agreement by and between G&E HC REIT II Monument LTACH
Portfolio, LLC and G&E HC REIT II Joplin LTACH, LLC, dated August 31, 2010 (included as
Exhibit 10.1 to our Current Report on Form 8-K filed September 7, 2010 and incorporated herein
by reference)10.71
    
    
    Purchase and Sale Agreement by and between Grubb & Ellis Equity Advisors, LLC, CLC RE, LLC,
Alembarle Health Investors, LLC, James R. Smith and James R. Pietrzak, dated June 28, 2010
(included as Exhibit 10.1 to our Current Report on Form 8-K filed September 20, 2010 and
incorporated herein by reference)10.72
    
    
    First Amendment to Purchase and Sale Agreement by and between Grubb & Ellis Equity Advisors,
LLC, CLC RE, LLC, Alembarle Health Investors, LLC, James R. Smith and James R. Pietrzak, dated
July 21, 2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed September 20,
2010 and incorporated herein by reference)10.73
    
    
    Second Amendment to Purchase and Sale Agreement by and between Grubb & Ellis Equity
Advisors, LLC, CLC RE, LLC, Alembarle Health Investors, LLC, James R. Smith and James R.
Pietrzak, dated July 28, 2010 (included as Exhibit 10.3 to our Current Report on Form 8-K
filed September 20, 2010 and incorporated herein by reference)10.74
    
    
    Third Amendment to Purchase and Sale Agreement by and between Grubb & Ellis Equity Advisors,
LLC, CLC RE, LLC, Alembarle Health Investors, LLC, James R. Smith and James R. Pietrzak, dated
August 27, 2010 (included as Exhibit 10.4 to our Current Report on Form 8-K filed September
20, 2010 and incorporated herein by reference)10.75
    
    
    Form of Assignment and Assumption of Purchase Agreement by and between Grubb & Ellis Equity
Advisors, LLC and G&E HC REIT II Bastian SNF, LLC, dated September 16, 2010 (included as
Exhibit 10.5 to our Current Report on Form 8-K filed September 20, 2010 and incorporated
herein by reference)10.76
    
    
    Promissory Note by and between Grubb & Ellis Healthcare REIT II, Inc., G&E HC REIT II
Charlottesville SNF, LLC, G&E HC REIT II Bastian SNF, LLC, G&E HC REIT II Lebanon SNF, LLC,
G&E HC REIT II Midlothian SNF, LLC, G&E HC REIT II Low Moor SNF, LLC, G&E HC REIT II Fincastle
SNF, LLC, G&E HC REIT II Hot Springs SNF, LLC and KeyBank National Association, dated
September 16, 2010 (included as Exhibit 10.6 to our Current Report on Form 8-K filed September
20, 2010 and incorporated herein by reference)10.77
    
    
    Loan Agreement by and between Grubb & Ellis Healthcare REIT II, Inc., G&E HC REIT II
Charlottesville SNF, LLC, G&E HC REIT II Bastian SNF, LLC, G&E HC REIT II Lebanon SNF, LLC,
G&E HC REIT II Midlothian SNF, LLC, G&E HC REIT II Low Moor SNF, LLC, G&E HC REIT II Fincastle
SNF, LLC, G&E HC REIT II Hot Springs SNF, LLC and KeyBank National Association, dated
September 16, 2010 (included as Exhibit 10.7 to our Current Report on Form 8-K filed September
20, 2010 and incorporated herein by reference)10.78
    
    
    Environmental and Hazardous Substances Indemnity Agreement by and between Grubb & Ellis
Healthcare REIT II, Inc., G&E HC REIT II Charlottesville SNF, LLC, G&E HC REIT II Bastian SNF,
LLC, G&E HC REIT II Lebanon SNF, LLC, G&E HC REIT II Midlothian SNF, LLC, G&E HC REIT II Low
Moor SNF, LLC, G&E HC REIT II Fincastle SNF, LLC, G&E HC REIT II Hot Springs SNF, LLC and
KeyBank National Association, dated September 16, 2010 (included as Exhibit 10.8 to our
Current Report on Form 8-K filed September 20, 2010 and incorporated herein by reference)10.79
    
    
    Form of Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing by G&E HC
REIT II Bastian SNF, LLC in favor of KeyBank National Association, dated September 16, 2010
(included as Exhibit 10.9 to our Current Report on Form 8-K filed September 20, 2010 and
incorporated herein by reference)10.80
    
    
    Form of Assignment of Rents and Leases by and between G&E HC REIT II Bastian SNF, LLC and
KeyBank National Association, dated September 16, 2010 (included as Exhibit 10.10 to our
Current Report on Form 8-K filed September 20, 2010 and incorporated herein by reference)




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##### Table of Contents



10.81
    
    
    Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing
and Financing Statement by G&E HC REIT II Livingston MOB, LLC in favor of Bank of America,
N.A., dated September 15, 2010 (included as Exhibit 10.1 to our Current Report on Form 8-K
filed September 20, 2010 and incorporated herein by reference)10.82
    
    
    Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing by
G&E HC REIT II St. Vincent Cleveland MOB, LLC in favor of Bank of America, N.A., dated
September 15, 2010
(included as Exhibit 10.2 to our Current Report on Form 8-K filed September 20, 2010 and
incorporated herein by reference)10.83
    
    
    Collateral Assignment of Management Contract between G&E HC REIT II Livingston MOB, LLC,
Grubb & Ellis Equity Advisors, Property Management, Inc., Promed Management Services, Inc. and
Bank of America, N.A., dated September 15, 2010 (included as Exhibit 10.3 to our Current
Report on Form 8-K filed September 20, 2010 and incorporated herein by reference)10.84
    
    
    Collateral Assignment of Management Contract between G&E HC REIT II St. Vincent Cleveland
MOB, LLC, Grubb & Ellis Equity Advisors, Property Management, Inc. and Bank of America, N.A.,
dated September 15, 2010 (included as Exhibit 10.4 to our Current Report on Form 8-K filed
September 20, 2010 and incorporated herein by reference)10.85
    
    
    Joinder to Promissory Note between Grubb & Ellis Healthcare REIT II Holdings, LP, G&E HC
REIT II Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC, G&E HC REIT II
Livingston MOB, LLC, G&E HC REIT II St. Vincent Cleveland MOB, LLC and Bank of America, N.A.,
dated September 15, 2010 (included as Exhibit 10.5 to our Current Report on Form 8-K filed
September 20, 2010 and incorporated herein by reference)10.86
    
    
    Joinder to Credit Agreement and Other Loan Documents between Grubb & Ellis Healthcare REIT
II Holdings, LP, G&E HC REIT II Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC,
G&E HC REIT II Livingston MOB, LLC, G&E HC REIT II St. Vincent Cleveland MOB, LLC and Bank of
America, N.A., dated September 15, 2010 (included as Exhibit 10.6 to our Current Report on
Form 8-K filed September 20, 2010 and incorporated herein by reference)10.87
    
    
    Promissory Note by G&E HC REIT II Pocatello MOB, LLC, in favor of Sun Life Assurance Company
of Canada, dated September 16, 2010 (included as Exhibit 10.1 to our Current Report on Form
8-K filed September 20, 2010 and incorporated herein by reference)10.88
    
    
    Environmental Indemnity Agreement by and between G&E HC REIT II Pocatello MOB, LLC and Sun
Life Assurance Company of Canada, dated September 16, 2010 (included as Exhibit 10.2 to our
Current Report on Form 8-K filed September 20, 2010 and incorporated herein by reference)10.89
    
    
    Guaranty of Non-Recourse Carve Outs by Grubb & Ellis Healthcare REIT II, Inc. in favor of
Sun Life Assurance Company of Canada, dated September 16, 2010 (included as Exhibit 10.3 to
our Current Report on Form 8-K filed September 20, 2010 and incorporated herein by reference)10.90
    
    
    Escrow and Pledge Agreement by and between G&E HC REIT II Pocatello MOB, LLC, Sun Life
Assurance Company of Canada and Westcap Corporation, dated September 16, 2010 (included as
Exhibit 10.4 to our Current Report on Form 8-K filed September 20, 2010 and incorporated
herein by reference)10.91
    
    
    Assignment of Leases and Rents by Grubb & Ellis Healthcare REIT II, Inc. in favor of Sun
Life Assurance Company of Canada, dated September 16, 2010 (included as Exhibit 10.5 to our
Current Report on Form 8-K filed September 20, 2010 and incorporated herein by reference)10.92
    
    
    Leasehold Deed of Trust, Security Agreement and Fixture Filing by Grubb & Ellis Healthcare
REIT II, Inc. in favor of Sun Life Assurance Company of Canada, dated September 16, 2010
(included as Exhibit 10.6 to our Current Report on Form 8-K filed September 20, 2010 and
incorporated herein by reference)10.93
    
    
    Assignment and Assumption of Purchase Agreement by and between G&E HC REIT II Monument LTACH
Portfolio, LLC and G&E HC REIT II Athens LTACH, LLC, dated October 29, 2010 (included as
Exhibit 10.1 to our Current Report on Form 8-K filed November 4, 2010 and incorporated herein
by reference)10.94
    
    
    Leasehold Deed Of Trust, Assignment Of Leases And Rents, Security Agreement and Fixture
Filing by G&E HC REIT II Sylva MOB, LLC in favor of Bank of America, N.A., dated November 15,
2010 (included as Exhibit 10.1 to our Current Report on Form 8-K filed November 19, 2010 and
incorporated herein by reference)10.95
    
    
    Collateral Assignment of Management Contract between G&E HC REIT II Sylva MOB, LLC, Grubb &
Ellis Equity Advisors, Property Management, Inc. and Bank of America, N.A., dated November 15,
2010 (included as Exhibit 10.2 to our Current Report on Form 8-K filed November 19, 2010 and
incorporated herein by reference)




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##### Table of Contents



10.96
    
    
    Joinder to Promissory Note between Grubb & Ellis Healthcare REIT II Holdings, LP, G&E HC
REIT II Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC, G&E HC REIT II
Livingston MOB, LLC, G&E HC REIT II St. Vincent Cleveland MOB, LLC, G&E HC REIT II Sylva MOB,
LLC and Bank of America, N.A., dated November 15, 2010 (included as Exhibit 10.3 to our
Current Report on Form 8-K filed November 19, 2010 and incorporated herein by reference)10.97
    
    
    Joinder to Credit Agreement and Other Loan Documents between Grubb & Ellis Healthcare REIT
II Holdings, LP, G&E HC REIT II Lacombe MOB, LLC, G&E HC REIT II Parkway Medical Center, LLC,
G&E HC REIT II Livingston MOB, LLC, G&E HC REIT II St. Vincent Cleveland MOB, LLC, G&E HC REIT
II Sylva MOB, LLC and Bank of America, N.A., dated November 15, 2010 (included as Exhibit 10.4
to our Current Report on Form 8-K filed November 19, 2010 and incorporated herein by
reference)10.98
    
    
    Promissory Note by G&E HC REIT II Surgical Hospital of Humble, LLC in favor of American
Momentum Bank, dated December 9, 2010 (included as Exhibit 10.1 to our Current Report on Form
8-K filed December 15, 2010 and incorporated herein by reference)10.99
    
    
    Loan Agreement by and between G&E HC REIT II Surgical Hospital of Humble, LLC, Grubb & Ellis
Healthcare REIT II, Inc. and American Momentum Bank, dated December 9, 2010 (included as
Exhibit 10.2 to our Current Report on Form 8-K filed December 15, 2010 and incorporated herein
by reference)10.100
    
    
    Guaranty Agreement by and between Grubb & Ellis Healthcare REIT II, Inc. and American
Momentum Bank, dated December 9, 2010 (included as Exhibit 10.3 to our Current Report on Form
8-K filed December 15, 2010 and incorporated herein by reference)10.101
    
    
    Assignment of Rents, Leases and Other Benefits by G&E HC REIT II Surgical Hospital of
Humble, LLC in favor of American Momentum Bank, dated December 9, 2010 (included as Exhibit
10.4 to our Current Report on Form 8-K filed December 15, 2010 and incorporated herein by
reference)10.102
    
    
    Deed of Trust by Grubb & Ellis Healthcare REIT II, Inc. in favor of American Momentum Bank,
dated December 9, 2010 (included as Exhibit 10.5 to our Current Report on Form 8-K filed
December 15, 2010 and incorporated herein by reference)10.103
    
    
    Secured Promissory Note by G&E HC REIT II Lawton MOB Portfolio, LLC in favor of U.S. Bank
National Association, dated December 23, 2010 and effective as of December 28, 2010 (included
as Exhibit 10.1 to our Current Report on Form 8-K filed January 4, 2011 and incorporated
herein by reference)10.104
    
    
    Loan Agreement by and between
G&E HC REIT II Lawton MOB Portfolio, LLC and U.S. Bank
National Association, dated December 23, 2010 and effective as
of December 28, 2010 (included
as Exhibit 10.2 to our Current Report on Form 8-K filed January 4, 2011 and incorporated
herein by reference)10.105
    
    
    Unsecured Environmental Indemnity Agreement by and between G&E HC REIT II Lawton MOB
Portfolio, LLC, Grubb & Ellis Healthcare REIT II, Inc. and U.S. Bank National Association,
dated December 23, 2010 and effective as of December 28, 2010 (included as Exhibit 10.3 to our
Current Report on Form 8-K filed January 4, 2011 and incorporated herein by reference)10.106
    
    
    Repayment Guaranty Agreement by and between Grubb & Ellis Healthcare REIT II, Inc. and U.S.
Bank National Association, dated December 23, 2010 and effective as of December 28, 2010
(included as Exhibit 10.4 to our Current Report on Form 8-K filed January 4, 2011 and
incorporated herein by reference)10.107
    
    
    Mortgage with Assignment of Leases and Rents, Security Agreement and Fixture Filing in favor
of in favor of U.S. Bank National Association, dated December 23, 2010 and effective as of
December 28, 2010 (included as Exhibit 10.5 to our Current Report on Form 8-K filed January 4,
2011 and incorporated herein by reference)10.108
    
    
    International Swap Dealers Association, Inc. Master Agreement by and between by G&E HC REIT
II Lawton MOB Portfolio, LLC and U.S. Bank National Association, dated December 17, 2010 and
effective as of December 28, 2010 (included as Exhibit 10.6 to our Current Report on Form 8-K
filed January 4, 2011 and incorporated herein by reference)21.1
    *
    
    Subsidiaries of Grubb & Ellis Healthcare REIT II, Inc.31.1
    *
    
    Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    *
    
    Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    **
    
    Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by
Section 906 of the Sarbanes-Oxley Act of 200232.2
    **
    
    Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith.**
    
    Furnished herewith.