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Relationship with Universal Health Realty Income Trust and Related Party Transactions
 6 Months Ended
Jun. 30, 2011
Relationship with Universal Health Realty Income Trust and Related Party Transactions  
Relationship with Universal Health Realty Income Trust and Related Party Transactions

(2) Relationship with Universal Health Realty Income Trust and Related Party Transactions

Relationship with Universal Health Realty Income Trust:

At June 30, 2011, we held approximately 6.2% of the outstanding shares of Universal Health Realty Income Trust (the "Trust"). We serve as Advisor to the Trust under an annually renewable advisory agreement pursuant to the terms of which we conduct the Trust's day-to-day affairs, provide administrative services and present investment opportunities. In addition, certain of our officers and directors are also officers and/or directors of the Trust. Management believes that it has the ability to exercise significant influence over the Trust, therefore we account for our investment in the Trust using the equity method of accounting. We earned an advisory fee from the Trust, which is included in net revenues in the accompanying condensed consolidated statements of income, of $480,000 and $465,000 during the three-month periods ended June 30, 2011 and 2010, respectively and $951,000 and $903,000 during the six-month periods ended June 30, 2011 and 2010, respectively. Our pre-tax share of income from the Trust was $260,000 and $300,000 for the three-month periods ended June 30, 2011 and 2010, respectively, and $560,000 and $600,000 for the six-month periods ended June 30, 2011 and 2010, respectively. The carrying value of this investment was $6.3 million and $7.3 million at June 30, 2011 and December 31, 2010, respectively, and is included in other assets in the accompanying condensed consolidated balance sheets. The market value of this investment, based on the closing price of the Trust's stock on the respective dates, was $31.5 million at June 30, 2011 and $28.8 million at December 31, 2010.

Total rent expense under the operating leases on the hospital facilities with the Trust was $4.1 million and $4.0 million during the three-month periods ended June 30, 2011 and 2010, respectively, and $8.3 million and $8.2 million for the six-month periods ended June 30, 2011 and 2010, respectively. In addition, certain of our subsidiaries are tenants in several medical office buildings owned by limited liability companies in which the Trust holds non-controlling ownership interests.

On May 19, 2011, certain of our subsidiaries provided the required notice to the Trust exercising the 5-year renewal options on McAllen Medical Center, Wellington Regional Medical Center and Southwest Healthcare System, Inland Valley Campus which extended the lease terms to December, 2016.

The table below details the renewal options and terms for each of our four hospital facilities leased from the Trust, giving effect to the above-mentioned renewals:

 

Hospital Name

    Type of Facility    Annual
Minimum
Rent		      End of Lease Term      Renewal
Term
(years)		  

McAllen Medical Center

    Acute Care    $ 5,485,000         December, 2016         15 (a) 

Wellington Regional Medical Center

    Acute Care    $ 3,030,000         December, 2016         15 (b) 

Southwest Healthcare System, Inland Valley Campus

    Acute Care    $ 2,648,000         December, 2016         15 (b) 

The Bridgeway

    Behavioral Health    $ 930,000         December, 2014         10 (c) 

 

(a) We have three 5-year renewal options at existing lease rates (through 2031).
(b) We have one 5-year renewal options at existing lease rates (through 2021) and two 5-year renewal options at fair market value lease rates (2022 through 2031).
(c) We have two 5-year renewal options at fair market value lease rates (2015 through 2024).

Other Related Party Transactions:

A member of our Board of Directors and member of the Executive Committee is Of Counsel to the law firm used by us as our principal outside counsel. This Board member is also the trustee of certain trusts for the benefit of our Chief Executive Officer ("CEO") and his family. This law firm also provides personal legal services to our CEO.