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Although Congress has not yet enacted comprehensive federal legislation to address climate change, numerous states and municipalities have adopted laws and policies on climate change and emission reduction targets. Changes in federal, state and local legislation and regulation based on concerns about climate change could result in increased capital expenditures on our existing properties and our new development properties (for example, to improve their energy efficiency and/or resistance to severe weather) without a corresponding increase in revenue, resulting in adverse impacts to our net income. There can be no assurance that climate change and severe weather will not have a material adverse effect on our properties, operations, or business.
Uninsured losses relating to real estate and lender requirements to obtain insurance may reduce stockholder returns.
There are types of losses relating to real estate,The Company generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, for which we dodoes not intend to obtain insurance unless we are requiredreserve funds to do so by mortgage lenders. If any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, other than any reserves we may establish, we have no source of funding to repair or reconstruct any uninsured damaged property, and we cannot assure our stockholders that any such sources of funding will be available to us for such purposes in the future. Also, to the extent we must pay unexpectedly large amounts for uninsured losses, we could suffer reduced earnings that would result in less cash to be distributed to our stockholders. In cases where we are required by mortgage lenders to obtain casualty loss insurance for catastrophic events or terrorism, such insurance may not be available, or may not be available at a reasonable cost, which could inhibit our ability to finance or refinance our properties. Additionally, if we obtain such insurance, the costs associated with owning a property would increase and could have an adverse effect on the net income from the property and, thus, the cash available for distribution to our stockholders.
We may fail to successfully operate acquired properties.
Our ability to successfully operate any properties is subject to the following risks:
•we may acquire properties that are not initially accretive to our resultsretire existing debt upon acquisition and we may not successfully manage and lease those properties to meet our expectations;
•we may spend more than amounts budgeted to make necessary improvements or renovations to acquired properties;
•we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of properties, into our existing operations and, as a result, our results of operations and financial condition could be adversely affected;
•market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and
•we may acquire properties subject to liabilities, including contingent liabilities, and without any recourse, or with only limited recourse to third-parties, with respect to unknown liabilities for the clean-up of undisclosed environmental contamination, claims by tenants or other persons dealing with former owners of the properties, liabilities, claims, and litigation, including indemnification obligations, whether or not incurred in the ordinary course of business, relating to periods prior to or following our acquisitions, claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties, and liabilities for taxes relating to periods prior to our acquisitions.
If we are unable to successfully operate acquired properties, our financial condition, results of operations, the market price of our common stock, cash flow and ability to satisfy our principal and interest obligations and to make distributions to our stockholders could be adversely affected.
Wematurity. The Company may not be able to control our operating costsrepay, refinance, or our expenses may remain constantextend any or increase, even if our revenue does not increase, which could cause our results of operations to be adversely affected.
Factors that may adversely affect our ability to control operating costs include the need to pay for insurance and other operating costs, including real estate taxes, which could increase over time, the need periodically to repair, renovate and re-let space, the cost of compliance with governmental regulation, including zoning and tax laws, the potential for liability under applicable laws, interest rate levels and the availability of financing. If our operating costs increase as a result of any of the foregoing factors, our results of operations may be adversely affected. The expenses of owning and operating MOBs and other facilities that serve the healthcare industry are not necessarily reduced when circumstances such as market factors and competition cause a reduction in income from the property. As a result, if our revenue declines, we may not be able to reduce our expenses accordingly. Certain costs associated with real estate investments may not be reduced even if a property is not fully occupied or other circumstances cause our revenues to decrease. If one or moreall of our propertiesdebt at maturity or upon any acceleration. If any refinancing is mortgaged and we are unable to meetdone at higher interest rates, the mortgage payments, the lender could foreclose on the mortgage and take possession of the properties, resulting in a further reduction in our net income.
Increases in property taxesincreased interest expense could adversely affect our cash flow.
Our properties are subject to real and personal property taxes that may increase as tax rates change and as the real properties are assessed or reassessed by taxing authorities. Some of our leases generally provide that the property taxes or increases therein are charged to the tenants as an expense related to the real properties that they occupy, while other leases provide that we are generally responsible for such taxes. We are also generally responsible for real property taxes related to any vacant space. In any case, as the owner of the properties, we are ultimately responsible for payment of the taxes to the applicable government authorities. If real property taxes increase, our tenants may be unable to make the required tax payments, ultimately requiring us to pay the taxes even if the tenant is obligated to do so under the terms of the lease. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale.
Our ownership of certain MOB properties and other facilities are subject to ground leases or other similar agreements which limit our uses of these properties and may restrict our ability to sell or otherwise transfer such properties.
As of December 31, 2021, we held interests in certain MOB properties and other facilities that serve the healthcare industry through leasehold interests in the land on which the buildings are located and we may acquire additional properties in the future that are subject to ground leases or other similar agreements. As of December 31, 2021, these properties represented 37% of our total GLA. Many of our ground leases and other similar agreements limit our uses of these properties and may restrict our ability to sell or otherwise transfer such properties without the ground landlord’s consent, which may impair their value.
Our real estate development, redevelopment and construction platform is subject to risks that could adversely impact our results of operations.
A component of our current growth strategy is, when appropriate, to pursue accretive development and redevelopment projects. However, there are inherent risks associated with these development and redevelopment projects, including, but not limited to, the following:
•the development costs of a project may exceed budgeted amounts, causing the project to be unprofitable or to incur a loss;
•we may encounter delays as a result of a variety of factors that are beyond our control, including natural disasters, material shortages, and regulatory requirements;
•the time required to complete the construction of a project or to lease up the completed project may be longer than originally anticipated, thereby adversely affecting our cash flows and liquidity;
•lease rates and rents at newly developed or redeveloped properties may fluctuate based on factors beyond our control, including market and economic conditions as well as the aforementioned budget overages;
•we may be unable to obtain favorable financing terms to fund our development projects;
•financing arrangements may require certain milestones, covenants, and other contractual terms that may be violated if the performance of our development and redevelopment projects differs from our projected income;
•demand from prospective tenants may be reduced due to competition from other developers; and
•tenants who pre-lease a portion of our development projects may fail to occupy the property upon development completion.
Uncertain market conditions relating to the future disposition of properties or other real estate related assets could cause us to sell our properties or real estate assets on unfavorable terms or at a loss in the future.
We intend to hold our various real estate investments until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives. Our Chief Executive Officer and our Board of Directors may exercise their discretion as to whether and when to sell a property and we will have no obligation to sell properties at any particular time. Our Board of Directors may also choose to effect a liquidity event in which we liquidate our investments in other real estate related assets. We generally intend to hold properties for an extended period of time and our mortgage investments until maturity, and we cannot predict with certainty the various market conditions affecting real estate investments that will exist at any particular time in the future. Because of the uncertainty of market conditions that may affect the future disposition of our properties, we may not be able to sell our properties at a profit in the future or at all, and we may incur prepayment penalties in the event we sell a property subject to a mortgage earlier than we otherwise had planned. Additionally, if we liquidate our mortgage investments prior to their maturity, we may be forced to sell those investments on unfavorable terms or at a loss. For instance, if we are required to liquidate mortgage loans at a time when prevailing interest rates are higher than the interest rates of such mortgage loans, we would likely sell such loans at a discount to their stated principal values. Any
inability to sell a property or liquidation of a mortgage investment prior to maturity could adversely impact our business,Company's financial condition and results of operation,operations. Any such refinancing could also impose tighter financial ratios and other covenants that restrict the market price of our common stock andCompany's ability to pay distributions to our stockholders.take actions that could otherwise be in its best interest, such as funding new development activity, making opportunistic acquisitions, or paying dividends.
The mortgage or other real estate-related loans in which we haveCovenants in the past,Company’s debt instruments limit its operational flexibility, and may in the future, invest may be impacted by unfavorable real estate market conditions and delays in liquidation, which could decrease their value.
If we make additional investments in notes secured by real estate or other collateral, we will be at risk of loss on those investments, including losses as a result of borrower defaults on mortgage loans. These losses may be caused by many conditions beyond our control, including economic conditions affecting real estate values, tenant defaults and lease expirations, interest rate levels and the other economic and liability risks associated with real estate as described elsewhere under this heading. Furthermore, if there are borrower defaults under our mortgage loan investments, we may not be able to foreclose on, or obtain a suitable remedy with respect to, such investments. Specifically, we may not be able to repossess and sell the properties under our mortgage loans quickly, which could reduce the value of our investment. For example, an action to foreclose on a property securing a mortgage loan is regulated by state statutes and rules and is subject to many of the delays and expenses of lawsuits if the defendant raises defenses or counterclaims. In the event of a borrower default, these restrictions, among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us on the mortgage loan. Additionally, if we acquire property by foreclosure following a borrower default under our mortgage loan investments, we will have the economic and liability risks as the owner described above. Thus, we do not know whether the values of the property securing any of our investments in real estate related assets will remain at the levels existing on the dates we initially make the related investment. If the values of the underlying properties decline, our risk will increase and the value of our interests may decrease.
Our investments in, or originations of, mezzanine loans will be subject to specific risks relating to the particular property or entity obligated to repay the loan, and our loan assets will involve greater risks of loss than senior loans secured by income-producing properties.
Mezzanine loan investments involve special risks relating to the particular borrower, including its financial condition, liquidity, results of operations, business, and prospects. We may also originate other real estate-related investments which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property or other properties. These types of assets involve a higher degree of risk than long-term senior mortgage lending secured by income producing real property because the loan may become unsecured as a result of foreclosure by the senior lender and because it is in a subordinated position and there may not be adequate equity in the property. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy such loan. If a borrower defaults on a loan or debt senior to our loan, or in the event of a borrower bankruptcy, such loan will be satisfied only after the senior debt. We may be unable to enforce guaranties of payment and/or performance given as security for some loans. As a result, we may not recover some or all of our initial expenditure. Mezzanine and term loans may partially finance the construction of real estate projects and so involve additional risks inherent in the construction process, such as adherence to budgets and construction schedules. In addition, mezzanine and term loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Significant losses related to our mezzanine and term loans would result in operating losses for us and may limit our ability to make distributions to our stockholders.
Lease rates under our long-term leases may be lower than fair market lease rates over time.
We have entered into and may in the future enter into long-term leases with tenants at certain of our properties. Certain of our long-term leases provide for rent to increase over time. However, if we do not accurately judge the potential for future increases in market rental rates, we may set the termsbreach of these long-term leases at levels such that even after contractual rental increases,covenants could materially affect the rent under our long-term leases is less than then-current market rental rates. Further, we may have no ability to terminate those leases or to adjust the rent to then-prevailing market rates. As a result, our income and distributions could be lower than if we did not enter into long-term leases.
Rents associated with new leases for properties in our portfolio may be less than expiring rents (lease roll-down) on existing leases, which may adversely affect our financial condition, results of operations and cash flow.
Our operating results depend upon our ability to maintain and increase rental rates at our properties while also maintaining or increasing occupancy. The rental rates for expiring leases may be higher than starting rental rates for new leases and we may also be required to offer greater rental concessions than we have historically. The rental rate spread between expiring leases and new leases may vary both from property to property and among different leased spaces within a single property. If we are unable to obtain sufficient rental rates across our portfolio, our business,Company’s consolidated financial condition and results of operation, the market price of our common stock and ability to pay distributions to our stockholders could be adversely affected.
Costs associated with complying with the Americans with Disabilities Act of 1990 may result in unanticipated expenses.
Under the ADA, all places of public accommodation are required to meet certain U.S. federal requirements related to access and use by disabled persons. A number of additional U.S. federal, state and local laws may also require modifications to our properties, or restrict certain further renovations of the properties, with respect to access thereto by disabled persons. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants and/or an order to correct any non-complying feature, which could result in substantial capital expenditures. We have not conducted an audit or investigation of all of our properties to determine our compliance and we cannot predict the ultimate cost of compliance with the ADA or other legislation. If one or more of our properties is not in compliance with the ADA or other related legislation, then we would be required to incur additional costs to bring the facility into compliance. If we incur substantial costs to comply with the ADA or other related legislation, our business, financial condition and results of operations, the market price of our common stock and ability to make distributions to our stockholders may be adversely affected.
Risks Related to the Healthcare Industry
New laws or regulations affecting the heavily regulated healthcare industry, 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.
The healthcare industry is heavily regulated by federal, state and local governmental agencies. Our tenants generally are subject to laws and regulations covering, among other things, licensure, certification for participation in government programs, and relationships with physicians and other referral sources. Changes in these laws and regulations could negatively affect the ability of our tenants to make lease payments to us and our ability to make distributions to our stockholders.
Many of our medical properties and our tenants may require a license or multiple licenses or a CON to operate. Failure to obtain a license or a CON or loss of a required license or a CON would prevent a facility from operating in the manner intended by the tenant. These events could adversely affect our tenants’ ability to make rent payments to us. State and local laws also may regulate expansion, including the addition of new beds or services, or acquisition of medical equipment, and the construction of facilities that serve the healthcare industry, by requiring a CON or other similar approval. State CON laws are not uniform throughout the U.S. and are subject to change. We cannot predict the impact of state CON laws on our facilities or the operations of our tenants.
In limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in the loss of authority to operate the facility and require a new CON authorization to re-institute operations. As a result, a portion of the value of the facility may be reduced, which would adversely impact our business, financial condition and results of operations, the market price of our common stock and our ability to make distributions to our stockholders.
Comprehensive healthcare reform legislation could adversely affect our business, financial condition and results of operations, the market price of our common stock and our ability to pay distributions to stockholders.
In March 2010, then President Obama signed the Affordable Care Act (the “ACA”). The ACA, along with other healthcare reform efforts, has resulted in comprehensive healthcare reform in the U.S. through a phased approach, which began in 2010 and concluded in 2018. It remains difficult to predict the impact of these laws on us due to their complexity, lack of implementing regulations or interpretive guidance, and the gradual implementation of the laws over a multi-year period. During the 2016 Presidential and Congressional campaigns, Republicans promised they would seek the repeal of the ACA. On January 20, 2017, then newly-sworn-in President Trump issued an executive order aimed at seeking the prompt repeal of the ACA, and directed the heads of all executive departments and agencies to minimize the economic and regulatory burdens of the ACA to the maximum extent permitted by law. In addition, there have been and continue to be numerous Congressional attempts to amend and repeal the law. While no full repeal bills have passed both chambers of Congress, the 2017 Tax Cuts and Jobs Act eliminated the tax penalty associated with a key provision of the ACA known as the “individual mandate” beginning January 1, 2019. On December 14, 2018, a Texas federal district court judge, in the case of Texas v. Azar, declared the ACA unconstitutional, reasoning that the individual mandate tax penalty was essential to and not severable from the remainder of the ACA. The case was appealed to the U.S. Court of Appeals for the Fifth Circuit. On December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit ruled that the ACA’s “individual mandate” was unconstitutional but sent the case back to the
District Court for further analysis of whether the entire ACA is also rendered unconstitutional. In November 2020, Joseph Biden was elected President, and in January 2021, the Democratic Party obtained control of the Senate. As a result of these electoral developments, we believe it is unlikely that continued legislative efforts will be pursued to repeal the ACA. Instead, we believe it is possible that legislation will be pursued in order to enhance or reform the ACA. At this time, we are unable to state with certainty what the impact of any potential legislation may have on our business. Both we and our tenants may be adversely affected by new laws, or any modification and/or replacement of existing law.
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.
Sources of revenue for our tenants may include the federal Medicare program, state Medicaid programs, private insurance carriers, health maintenance organizations, preferred provider arrangements and self-insured employers, among others. Changes in the reimbursement rate or methods of payment from third-party payors, including Medicare and Medicaid, could impact the revenue of our tenants.
The healthcare industry also faces various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs. A focus on controlling costs could have an adverse effect on the financial condition of some or all of our tenants. The financial impact on our tenants could restrict their ability to make rent payments to us, which would have an adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Government budget deficits could lead to a reduction in Medicaid and Medicare reimbursement, which could adversely affect the financial condition of our tenants.
Adverse U.S. economic conditions have negatively affected state budgets, which may put pressure on states to decrease reimbursement rates with the goal of decreasing state expenditures under state Medicaid programs. The need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in state Medicaid programs due to unemployment, declines in family incomes and eligibility expansions required by the recently enacted healthcare reform law. These potential reductions could be compounded by the potential for federal cost-cutting efforts that could lead to reductions in reimbursement rates under both the federal Medicare program and state Medicaid programs. Potential reductions in reimbursements under these programs could negatively impact the ability of our tenants and their ability to meet their obligations to us, which could, in turn, have an adverse effect on our business, financial condition and results of operations, the market price of our common stock and our ability to make distributions to our stockholders.
Some tenants at our MOBs and our other facilities that serve the healthcare industry are subject to fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s ability to make rent payments to us.
As described in the Item 1 - Business, there are various federal and state laws prohibiting fraudulent and abusive business practices by healthcare providers who participate in, receive payments from, or are in a position to make referrals in connection with, government-sponsored healthcare programs, including the Medicare and Medicaid programs. In the ordinary course of their business, our tenants may be subject to inquiries, investigations and audits by federal and state agencies as well as whistleblower suits under the False Claims Act from private individuals. An investigation by a federal or state governmental agency for violation of fraud and abuse laws, a whistleblower suit, or the imposition of criminal/civil penalties upon one of our tenants could jeopardize that tenant’s ability to operate or to make rent payments. In turn, this may have an adverse effect on our business, financial condition and results of operations and our ability to make distributions to our stockholders.
Risks Related to Debt Financing
We have and intend to incur indebtedness, which may increase our business risks, could hinder our ability to make distributions and could decrease the value of our Company.
As of December 31, 2021, we had total debt outstanding of $3.0 billion. We intend to continue to finance a portion of the purchase price of our investments in real estate and other real estate related assets by borrowing funds. In addition, we may incur mortgage debt and pledge some or all of our real properties as security for that debt to obtain funds to acquire additional real properties or for working capital. We may also borrow funds to satisfy the REIT tax qualification requirement that we distribute at least 90% of our annual ordinary taxable income to our stockholders. Furthermore, we may borrow if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for U.S. federal income tax purposes. We have historically maintained a low leveraged balance sheet and intend to continue to maintain this structure over the long term. However, our total leverage may fluctuate on a short term basis as we execute our business strategy.
High debt levels will cause us to incur higher interest charges, which would result in higher debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, then the amount available for distributions to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of the Company. For tax purposes, a foreclosure of any of our properties will be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds related thereto. We may give full or partial guarantees to lenders of mortgage debt to our affiliated entities that own our properties. When we give a guaranty on behalf of an affiliated entity that owns one of our properties, we will be responsible to the lender for satisfaction of the debt if it is not paid by our affiliated entity. If any mortgage contains cross-collateralization or cross-default provisions, a default by us on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default by us, our ability to pay cash distributions to our stockholders could be adversely affected.
The elimination of LIBOR may adversely affect interest expense related to our indebtedness.
Current borrowings under our unsecured term loans, which are hedged, and our unsecured revolving credit facility is based on LIBOR. On March 5, 2021, the United Kingdom Financial Conduct Authority (“FCA”), a regulator of financial services firms and financial markets in the United Kingdom, formally announced the cessation of LIBOR as of June 30, 2023. The Alternative Reference Rates Committee, a group of private-market participant convened by the U.S. Federal Reserve Board and the New York Federal Reserve, has recommended Secured Overnight Financing Rate (“SOFR”) as a more robust reference rate alternative to U.S. dollar LIBOR. Concurrent with the FCA’s announcement, the International Swaps and Derivatives Association (“ISDA”) determined that the announcement constituted an index cessation event and consequently the fallback spread adjustments were fixed and published, with the spread adjustment between U.S. dollar 1-Month LIBOR and SOFR at 0.11%. If we intend to hedge our LIBOR denominated debt, we cannot predict whether hedging opportunities will exist on acceptable terms.
Covenants in the instruments governing our existing indebtedness limit our operational flexibility and a covenant breach could adversely affect our operations.
The terms of the Unsecured Credit Facility, the indentures governing the OP’s outstanding senior notes (which are fully and unconditionally guaranteed by Healthcare Realty Trust) and other debt instruments governing our existing indebtedness require usthat the Company may enter into in the future are subject to comply with a number of customary financial and otheroperational covenants. These provisions include, among other things: a limitation on the incurrence of additional indebtedness; limitations on mergers; investments; acquisitions;mergers, investments, acquisitions, redemptions of capital stock;stock, and transactions with affiliates; and maintenance of specified financial ratios. OurThe Company’s continued ability to incur debt and operate ourits business is subject to compliance with these covenants, which limit our operational flexibility. Breaches of these covenants could result in defaults by us under applicable debt instruments, even if payment obligations are satisfied. Financial and other covenants that limit ourthe Company’s operational flexibility, as well as defaults resulting from oura breach of any of these covenants in ourits debt instruments, could have a material adverse effect on the Company’s consolidated financial condition and results of operations.
If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company’s operations and consolidated financial position would be negatively impacted.
Access to external capital on favorable terms is critical to the Company’s success in growing and maintaining its portfolio. If financial institutions within the Unsecured Credit Facility were unwilling or unable to meet their respective funding commitments to the Company, any such failure would have a negative impact on the Company’s operations, consolidated financial condition and ability to meet its obligations, including the payment of dividends to stockholders.
The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings could have an adverse effect on our financial conditionthe Company’s ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and resultsdevelopment activity.
A REIT is required by the Internal Revenue Code of operations.1986, as amended (the “Internal Revenue Code”), to make dividend distributions, thereby retaining less of its capital for growth. As a result, a REIT typically requires new capital to invest in real estate assets. However, there may be times when the Company will have limited access to capital from the equity and/or debt markets. Changes in the Company’s debt ratings could have a material adverse effect on its interest costs and financing sources. The Company’s debt rating can be materially influenced by a number of factors including, but not limited to, acquisitions, investment decisions, and capital management activities. In recent years, the capital and credit markets have experienced volatility and at times have limited the availability of funds. The Company’s ability to access the capital and credit markets may be limited by these or other factors, which could have an impact on its ability to refinance maturing debt, fund dividend payments and operations, acquire healthcare properties and complete development and redevelopment projects. If the Company is unable to refinance or extend principal payments due at maturity of its various debt instruments, its cash flow may not be sufficient to repay maturing debt or make dividend payments to stockholders. If the Company defaults in paying any of its debts or satisfying its debt covenants, it could experience cross-defaults among debt instruments, the debts could be accelerated, and the Company could be forced to liquidate assets for less than the values it would otherwise receive.
Adverse changes in ourFurther, the Company obtains credit ratings could impair our ability to obtain additional debt and equity financingfrom various credit-rating agencies based on favorable terms, if at all, and negatively impacttheir evaluation of the market price of our securities, including our common stock.
Our creditCompany's credit. These agencies' ratings are based on our operatinga number of factors, some of which are not within the Company's control. In addition to factors specific to the Company's financial strength and performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analysis of us. Ouralso consider conditions affecting REITs generally. The Company's credit ratings can affectcould be downgraded. If the amount and type of capital we can access, as well as the terms of any financings we may obtain. There can be no assurance that we will be able to maintain our currentCompany's credit ratings and, in the event that our current credit ratings deteriorate, we would likely incur higher borrowing costs and it may be more difficult or expensive for us to obtain additional financing or refinance existing obligations and commitments. Also, a downgrade in our credit ratings would trigger additional costsare downgraded or other potentially negative consequences for usaction is taken, the Company could be required, among other things, to pay additional interest and fees on borrowings under our current and future credit facilities and debt instruments.the Unsecured Credit Facility.
Risks RelatedIncreases in interest rates could have a material adverse effect on the Company's cost of capital.
During 2023, the Federal Reserve continued to Joint Venturesraise interest rates in an effort to curb inflation. Further increases in interest rates will increase interest costs on any new debt and existing variable rate debt. Such increases in the cost of capital could adversely impact our ability to finance operations, acquire and develop properties, and refinance existing debt. Additionally, increased interest rates may also result in less liquid property markets, limiting our ability to sell existing assets.
The termsCompany's swap agreements may not effectively reduce its exposure to changes in interest rates.
The Company enters into swap agreements from time to time to manage some of its exposure to interest rate volatility. These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing the Company’s exposure to changes in interest rates. When the Company uses forward-starting interest rate swaps, there is a risk that it will not complete the long-term borrowing against which the swap is intended to hedge. If such events occur, the Company’s consolidated financial condition and results of operations may be adversely affected. See Note 11 to the Consolidated Financial Statements for additional information on the Company's interest rate swaps.
The Company has entered into joint venture agreements or other joint ownership arrangements into which we have enteredthat limit its flexibility with respect to jointly owned properties and may enter could impair our cash flow, our operating flexibility and our results of operations.
In connection with the purchase of real estate, we have entered and may continueexpects to enter into additional such agreements in the future.
As of December 31, 2023, the Company had investments of $311.5 million in unconsolidated joint ventures with unrelated third parties comprised of 33 properties and two parking garages. In addition, the Company had an investment of $30.1 million in one operating consolidated joint venture, as well as investments of $58.1 million in three consolidated joint ventures with developments in various stages of construction. The Company may acquire, develop, or redevelop additional properties in joint ventures with unrelated third parties. WeIn such investments, the Company is subject to risks that may also purchase or develop propertiesnot be present in co-ownership arrangements with the sellersits other forms of the properties, developers or other persons. Our ownership, including:
•joint venture partners may alsocould have rights to take actions over which we have no controlfinancing and may take actions contrary to our interests. Joint ownership of an investment in real estate may involve risks not associated with direct ownership of real estate, including the following:
•a venture partner may at any time have economicgoals or other business interests or goals whichstrategies that are or become inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in a joint venture or the timingdifferent than those of the terminationCompany, including terms and liquidationstrategies for such investment and what levels of debt place on the venture;
•the parties to a joint venture partner might become bankrupt and such proceedings could havereach an adverse impactimpasse on the operation of the partnershipcertain decisions, which could result in unexpected costs, including costs associated with litigation or joint venture;arbitration;
•a joint venture partner’spartner's actions might have the result of subjecting the property or the Company to liabilities in excess of those contemplated;
•joint venture partners could have investments that are competitive with the Company's properties in certain markets;
•interests in joint ventures are often illiquid and the Company may have difficulty exiting such an investment, or may have to exit at less than fair market value;
•joint venture partners may be structured differently than the Company for tax purposes and there could be conflicts relating to the Company's REIT status; and
•ajoint venture partner may be in a positionpartners could become insolvent, fail to take action contraryfund capital contributions, or otherwise fail to our instructions or requests, or contrary to our policies or objectives, including our policy with respect to qualifying and maintaining our qualificationfulfill their obligations as a REIT.
Under certain joint venture arrangements, neither venture partner, may havewhich could require the powerCompany to control the venture and, thus, an impasse could occur, which might adversely affect the joint venture and decrease potential returns to our stockholders. If we have a right of first refusal or buy/sell right to buy-out a venture partner, we may be unable to financeinvest more capital into such a buy-out or we may be forced to exercise those rights at a time when it would not otherwise be in our best interest to do so. If our interest is subject to a buy/sell right in favor of us, we may not have sufficient cash, available borrowing capacity or other capital resources to allow us to purchase an interest of a venture partner subject to the buy/sell right, in which case we may be forced to sell our interest when we would otherwise prefer to retain our interest. In addition, we may not be able to sell our interest in a joint venture on a timely basis or on acceptable terms if we desire to exit the venture for any reason, particularly if our interest is subject to a right of first refusal in favor of our venture partner.
Federal Income Tax Risks
Failure to qualify as a REIT for U.S. 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 make distributions to our stockholders.
We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2007 and we believe that our current and intended manner of operation will enable us to continue to meet the requirements to be taxed as a REIT. To qualify as a REIT, we must meet various requirements set forth in the Code concerning, among other things, the ownership of our outstanding common stock, the nature of our assets, the sources of our income and the amount of our distributions to our stockholders. The REIT qualification requirements are extremely complex and interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that we will be successful in operating so as to qualify as a REIT. At any time, new laws, interpretations or court decisions may change the federal tax laws relating to, or the federal income tax consequences of, qualification as a REIT. It is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors to revoke our REIT election, which it may do without stockholder approval.
If we were to fail to qualify as a REIT for any taxable year, we would not be able to deduct distributions to stockholders in computing our taxable income and we would be subject to U.S. federal income tax on our taxable income at corporate rates. We could also be subject to the federal alternative minimum tax and increased state and local taxes. Losing our qualification as a REIT would reduce our net earnings available for investment or distribution to stockholders due to the additional tax liability and we would no longer be required to make distributions. To the extent that distributions had been made in anticipation of our qualifying as a REIT, we might be required to borrow funds or liquidate some investments in order to pay the applicable corporate income tax. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we lose our qualification as a REIT.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and would substantially reduce our ability to make distributions to our stockholders.
37ventures than anticipated.
To continue to qualify as a REIT and to avoid the payment of U.S. federal income and excise taxes, we may be forced to borrow funds, use proceeds from the issuance of securities or sell assets to pay distributions, which may result in our distributing amounts that may otherwise be used for our operations or cause us to forgo otherwise attractive opportunities.
To obtain the favorable tax treatment accorded to REITs, we normally will be required each year to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and by excluding net capital gains. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of: (a) 85% of our ordinary income; (b) 95% of our capital gain net income; and (c) 100% of our undistributed income from prior years. These requirements could cause us to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution, or we may be required to liquidate otherwise attractive investments. These requirements could additionally cause us to distribute amounts that otherwise would be spent on acquisitions of properties and it is possible that we might be required to borrow funds, use proceeds from the issuance of securities or sell assets in order to distribute enough of our taxable income to maintain our qualification as a REIT and to avoid the payment of federal income and excise taxes. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To preserve our qualification as a REIT, our charter contains ownership limits with respect to our capital stock that may delay, defer or prevent a change of control of HTA or other transaction that may benefit our stockholders.
To assist us in preserving our qualification as a REIT, among other purposes, our charter contains a limitation on ownership that prohibits any individual, entity or group, unless exempted prospectively or retroactively by our Board of Directors, from directly acquiring beneficial ownership of more than 9.8% of the value of HTA’s then outstanding capital stock (which includes common stock and any preferred stock HTA may issue) or more than 9.8% of the value or number of shares, whichever is more restrictive, of HTA’s then outstanding common stock.
Any attempted transfer of HTA’s stock which, if effective, would result in HTA’s stock being beneficially owned by fewer than 100 persons will be null and void. Any attempted transfer of HTA’s stock which, if effective, would result in violation of the ownership limits discussed above or in HTA being “closely held” under Section 856(h) of the Code or otherwise failing to qualify as a REIT, will cause the number of shares causing the violation (rounded up to the nearest whole share) to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries and the proposed transferee will not acquire any rights in the shares.
Risks Related to Our Common Stock
The price of our common stock has and may continue to fluctuate significantly, which may make it difficult for you to sell our common stock when you want or at prices you find attractive.
The price of our common stock on the NYSE constantly changes and has been subject to significant price fluctuations. We expect that the market price of our common stock will continue to fluctuate significantly. Our stock price can fluctuate as a result of a variety of factors, many of which are beyond our control. These factors may include:
•actual or anticipated variations in our quarterly operating results;
•changes in our earnings estimates or publication of research reports about us or the real estate industry, although no assurance can be given that any research reports about us will be published;
•future sales of substantial amounts of our common stock by our existing or future stockholders;
•increases in market interest rates, which may lead purchasers of our stock to demand a higher yield;
•changes in market valuations of similar companies;
•adverse market reaction to any increased indebtedness we incur in the future;
•additions or departures of key personnel;
•actions by institutional stockholders;
•speculation in the press or investment community; and
•general market and economic conditions.
In addition, the stock market in general may experience extreme volatility that may be unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of our common stock.
Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect the market price of our common stock.
In the future, we may issue debt or equity securities, including medium term notes, senior or subordinated notes and classes of preferred or common stock. Debt securities or shares of preferred stock will generally be entitled to receive dividends, both current and in connection with any liquidation or sale, prior to the holders of our common stock. Our Board of Directors may issue such securities without stockholder approval and under Maryland law may amend our charter to increase the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series without stockholder approval. We are not required to offer any such additional debt or equity securities to existing common stockholders on a preemptive basis. Therefore, offerings of our common stock or other equity securities may dilute the percentage ownership interest of our existing stockholders. To the extent we issue additional equity interests, our stockholders’ percentage ownership interest in us will be diluted. Depending upon the terms and pricing of any additional offerings and the value of our real properties and other real estate related assets, our stockholders may also experience dilution in both the book value and fair market value of their shares. As a result, future offerings of debt or equity securities, or the perception that such offerings may occur, may reduce the market price of our common stock and/or the dividends that we pay with respect to our common stock.
Our dividends to stockholders may change, which could adversely affect the market price of our common stock.
All dividends on our common stock will be at the sole discretion of our Board of Directors and will depend upon our actual and projected financial condition, results of operations, cash flows, liquidity and funds from operations, maintenance of our REIT qualification, applicable law and such other matters as our Board of Directors may deem relevant from time to time. We may not be able to make dividends in the future or may need to fund such dividends from external sources, as to which no assurances can be given. In addition, we may choose to retain operating cash flow for investment purposes, working capital reserves or other purposes, and these retained funds, although increasing the value of our underlying assets, may not correspondingly increase the market price of our common stock. Our failure to meet the market’s expectations with regard to future cash dividends likely would adversely affect the market price of our common stock.
Increases in market interest rates may result in a decrease in the value of our common stock.
One of the factors that may influence the price of our common stock will be the dividend distribution rate on our common stock (as a percentage of the price of our common stock) relative to market interest rates. If market interest rates rise, prospective purchasers of common stock may expect a higher dividend distribution rate. Higher interest rates would not, however, result in more funds being available for dividends and, in fact, would likely increase our borrowing costs and might decrease our funds available for dividends. We therefore may not be able, or we may not choose, to provide a higher dividend distribution rate. As a result, prospective purchasers may decide to purchase other securities rather than our common stock, which would reduce the demand for, and result in a decline in the market price of, our common stock.
If securities analysts do not publish research or reports about our business or if they downgrade our common stock or the healthcare-related real estate sector, the price of our common stock could decline.
The trading market for our common stock will rely in part upon the research and reports that industry or financial analysts publish about us or our business. We have no control over these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our stock or our industry, or the stock of any of our competitors, the price of our common stock could decline. If one or more of these analysts ceases coverage of our Company, we could lose attention in the market, which in turn could cause the price of our common stock to decline.
Risks Related to Forward Sale Agreements
Settlement provisions contained in a forward sale agreement could result in substantial dilution to our earnings per share and return on equity or result in substantial cash payment obligations.
If we enter into one or more forward sale agreements, the relevant forward purchaser will have the right to accelerate that particular forward sale agreement (with respect to all or any portion of the transaction under that particular forward sale agreement that the relevant forward purchaser determines is affected by such event) and require us to settle on a date specified by the relevant forward purchaser if:
•the relevant forward purchaser is unable to, or would incur a materially increased cost to, establish, maintain or unwind its hedge position with respect to that particular forward sale agreement;
•the relevant forward purchaser determines that it is unable, after using commercially reasonable efforts, to continue to borrow an amount of common stock equal to the amount of common stock underlying that particular forward sale agreement or that, with respect to borrowing such amount of common stock, it would incur a cost that is greater than the initial stock borrow cost specified in that particular forward sale agreement, subject to a prior notice requirement;
•a termination event occurs as a result of us declaring a dividend or distribution on our common stock with a cash value in excess of a specified amount per calendar quarter, or with an ex-dividend date prior to the anticipated ex-dividend date for such cash dividend;
•an extraordinary event (as such term is defined in that particular forward sale agreement and which includes certain mergers and tender offers and the delisting of our common stock) occurs or our Board of Directors votes to approve or there is a public announcement of, in either case, any action that, if consummated, would constitute such an extraordinary event; or
•certain other events of default, termination events or other specified events occur, including, among other things, any material misrepresentation made by us in connection with entering into that particular forward sale agreement, or a nationalization, a bankruptcy termination event or a change in law (as such terms are defined in that particular forward sale agreement).
A forward purchaser’s decision to exercise its right to accelerate the settlement of a particular forward sale agreement will be made irrespective of our need for capital. In such cases, we could be required to issue and deliver common stock under the physical settlement provisions of that particular forward sale agreement or, if we so elect and the forward purchaser so permits our election, net share settlement provisions of that particular forward sale agreement irrespective of our capital needs, which would result in dilution to our earnings per share and return on equity.
We expect that settlement of any forward sale agreement will generally occur no later than the date specified in the particular forward sale agreement, which will be no later than twelve months following the trade date of that forward sale agreement. However, any forward sale agreement may be settled earlier than that specified date in whole or in part at our option. We expect that each forward sale agreement will be physically settled by delivery of our common stock unless we elect to cash settle or net share settle a particular forward sale agreement. Upon physical settlement or, if we so elect, net share settlement of a particular forward sale agreement, delivery of shares of our common stock in connection with such physical settlement or, to the extent we are obligated to deliver common stock, net share settlement, will result in dilution to our earnings per share and return on equity. If we elect cash settlement or net share settlement with respect to all or a portion of our common stock underlying a particular forward sale agreement, we expect that the relevant forward purchaser (or an affiliate thereof) will purchase a number of common stock necessary to satisfy its or its affiliate’s obligation to return the common stock borrowed from third parties in connection with sales of common stock under that forward sale agreement, adjusted in the case of net share settlement by any shares deliverable by or to us under the forward sale agreement. In addition, the purchase of common stock in connection with the relevant forward purchaser or its affiliate unwinding its hedge positions could cause the price of our common stock to increase over such time (or prevent a decrease over such time), thereby increasing the amount of cash we would owe to the relevant forward purchaser (or decreasing the amount of cash that the relevant forward purchaser would owe us) upon a cash settlement of the relevant forward sale agreement or increasing the number of common stock we would deliver to the relevant forward purchaser (or decreasing the number of common stock that the relevant forward purchaser would deliver to us) upon net share settlement of the relevant forward sale agreement.
The forward sale price that we expect to receive upon physical settlement of a particular forward sale agreement will be subject to adjustment on a daily basis based on a floating interest rate factor equal to a specified daily rate less a spread and will be decreased based on amounts related to expected dividends on our common stock during the term of the particular forward sale agreement. If the specified daily rate is less than the spread on any day, the interest factor will result in a daily reduction of the applicable forward sale price. If the market value of our common stock, determined in accordance with the terms of the relevant forward sale agreement, during the relevant valuation period under the particular forward sale agreement is above the applicable forward sale price, in the case of cash settlement, we would pay the relevant forward purchaser under that particular forward sale agreement an amount in cash equal to the difference or, in the case of net share settlement, we would deliver to the relevant forward purchaser a number of common stock having a value, determined in accordance with the terms of the relevant forward sale agreement, equal to the difference. Thus, we could be responsible for a potentially substantial cash payment in the case of cash settlement of a particular forward sale agreement. If the market value of our common stock, determined in accordance with the terms of the relevant forward sale agreement, during the relevant valuation period under that particular forward sale agreement is below the applicable forward sale price, in the case of cash settlement, we would be paid the difference in cash by the relevant forward purchaser under that particular forward sale agreement or, in the case of net share settlement, we would receive from the relevant forward purchaser a number of common stock having a value equal to the difference.
The U.S. federal income tax treatment of the cash that wethe Company might receive from cash settlement of a forward saleequity agreement is unclear and could jeopardize ourthe Company's ability to meet the REIT qualification requirements.
InThe Company has utilized and, in the future, may utilize forward equity agreements to secure pricing for equity capital needed at a later time. The Company currently has no forward equity agreements outstanding. In the event that we enter into forward equity agreements in the future and elect to settle any such forward saleequity agreement for cash and the settlement price is below the applicable forward saleequity price, we would be entitled to receive a cash payment from the relevant forward purchaser. Under Section 1032 of the Internal Revenue Code, of 1986, as amended (the “Code”), generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities"securities futures contract,” ascontract" (as defined in the Internal Revenue Code, by reference to the Exchange Act.Act). Although we believe that any amount received by us in exchange for our common stock would qualify for the exemption under Section 1032 of the Internal Revenue Code, because it is not entirely clear whether a forward saleequity agreement qualifies as a “securities"securities futures contract,”" the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event
that we recognize a significant gain from the cash settlement of a forward saleequity agreement, we might not be ableunable to satisfy the gross income requirements applicable to REITs under the Internal Revenue Code. In that case, we may be able to rely upon the relief provisions under the Internal Revenue Code in order to avoid the loss of our REIT status. Even if the relief provisions apply, we will be subject to a 100% tax on the greater of (i) the excess of 75% of our gross income (excluding gross income from prohibited transactions) over the amount of such income attributable to sources that qualify under the 75% test or (ii) the excess of 95% of our gross income (excluding gross income from prohibited transactions) over the amount of such gross income attributable to sources that qualify under the 95% test, as multiplied in either case by a fraction intended to reflect our profitability. In the event that these relief provisions were not available, we could lose our REIT status under the Internal Revenue Code.
In case of our bankruptcy or insolvency, any forward saleequity agreements will automatically terminate, and wethe Company would not receive the expected proceeds from any forward salessale of ourshares of its common stock.
If we file for or consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or we or a regulatory authority with jurisdiction over us presents a petition for our winding-up or liquidation, and we consent to such a petition, any forward saleequity agreements that are then in effect will automatically terminate. If any such forward saleequity agreement so terminates under these circumstances, we would not be obligated to deliver to the relevant forward purchaser any shares of our common stock not previously delivered, and the relevant forward purchaser would be discharged from its obligation to pay the applicable forward saleequity price per share in respect of any shares of our common stock not previously settled under the applicable forward saleequity agreement. Therefore, to the extent that there are any shares of our common stock with respect to which any forward saleequity agreement has not been settled at the time of the commencement of any such bankruptcy or insolvency proceedings, we would not receive the relevant forward saleequity price per share in respect of those shares of common stock.
Risks Relatedrelating to the Mergergovernment regulations
The announcementCompany's property taxes could increase due to reassessment or property tax rate changes.
Real property taxes on the Company's properties may increase as its properties are reassessed by taxing authorities or as property tax rates change. For example, a current California law commonly referred to as Proposition13 generally limits annual real estate tax increases on California properties to 2% of assessed value at the date of acquisition. Accordingly, the assessed value and pendencyresulting property tax the Company pays is less than it would be if the properties were assessed at current values. The Company owns 36 properties in California, representing 7.1% of its total revenue. From time to time, proposals have been made to reduce the Merger Agreementbeneficial impact of Proposition13, particularly with respect to commercial property, which would include medical office buildings. Most recently, an initiative qualified for California’s November 2020 statewide ballot that would generally limit Proposition 13’s protections to residential real estate. If this initiative had passed, it would have ended the beneficial effect of Proposition13 for the Company's properties, and property tax expense could have an adverse effect on our business.
On February 28, 2022, Healthcare Trust of America, Inc. (the “Company”), a Maryland corporation, Healthcare Trust of America Holdings, LP, a Delaware limited partnership (the “Company OP”) of whichincrease substantially, adversely affecting the Company's cash flow from operations and net income. While this initiative did not pass, the Company is the sole general partner, HR Acquisition 2, LLC, a Maryland limited liability company and a direct, wholly owned subsidiary of the Company (“Merger Sub”), and Healthcare Realty Trust Incorporated, a Maryland corporation (“HR”),cannot predict whether other changes to entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). Upon the terms and subject to the conditions set forthProposition13 may be proposed or adopted in the Merger Agreement, Merger Sub will merge withfuture.
Trends in the healthcare service industry may negatively affect the demand for the Company’s properties, lease revenues and into HR, with HR surviving the merger (the “Merger”).values of its investments.
The healthcare service industry may be affected by the following:
•transition to value-based care and reimbursement of providers;
The announcement and pendency of the Merger could cause disruption in our business, including the potential loss or disruption of commercial relationships prior to the completion of the Merger. For example, some of our tenants, prospective tenants or vendors may delay or defer decisions, which could negatively affect our revenues, earnings, cash flows and expenses, regardless of whether the Merger is completed. Similarly, our current and prospective employees may experience uncertainty about their future roles with the combined company following the Merger, which may adversely affect our ability to attract and retain key personnel during the pendency of the Merger.•competition among healthcare providers;
The Merger Agreement generally requires us to use commercially reasonable efforts to operate our business in the ordinary course of business pending consummation of the Merger, but includes certain contractual restrictions on the conduct of our business prior to completion of the Merger. Due to these operating restrictions, during the pendency of the Merger Agreement we may be unable to pursue strategic transactions, undertake significant capital projects, undertake certain financing transactions•consolidation among healthcare providers, health insurers, hospitals and otherwise pursue other actions, even if such actions would prove beneficial.health systems;
The Merger Agreement also contains provisions that limit our ability to pursue alternatives to the Merger•a rise in government-funded health insurance coverage;
•pressure on providers' operating profit margins from lower reimbursement rates, lower admissions growth, and that could discourage a potential competing acquirerhigher expense growth;
•availability of us from making a favorable alternative transaction proposal. In addition, matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by our management, which could divert their time and attention. We have also incurred, and will continue to incur, significant non-recurring costs in connection with the Merger that we may be unable to recover. Further, the Merger Agreement requires us to pay a substantial termination fee to HR in certain circumstances or if our stockholders do not approve the transaction.capital;
•credit downgrades;
•liability insurance expense;
•rising pharmaceutical drug expense;
•regulatory and government reimbursement uncertainty related to the Medicare and Medicaid programs;
•a trend toward government regulation of pharmaceutical pricing;
•government regulation of hospitals' and health insurers' pricing transparency;
•federal court decisions on cases challenging the legality of the Affordable Care Act, in whole or in part;
•site-neutral rate-setting for Medicare services across different care settings;
•disruption in patient volume and revenue from pandemics, such as COVID-19;
•trends in the method of delivery of healthcare services, such as telehealth;
•heightened health information technology security standards and the meaningful use of electronic health records by healthcare providers; and
•potential tax law changes affecting providers.
These trends, among others, can adversely affect the economic performance of some or all of the tenants and, in turn, negatively affect the lease revenues and the value of the Company’s property investments.
The risk,costs of complying with governmental laws and adverse effect,regulations may adversely affect the Company's results of any disruptionoperations.
All real property and the operations conducted on real property are subject to federal, state, and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on tenants, owners, or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may hinder the Company's ability to sell, rent, or pledge such property as collateral for future borrowings.
Compliance with new laws or regulations or stricter interpretation of existing laws may require the Company to incur significant expenditures. For example, proposed legislation to address climate change could increase utility and other costs of operating the Company's properties. Future laws or regulations may impose significant environmental liability. Additionally, tenant or other operations in the vicinity of the Company's properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect the Company's properties. There are various local, state, and federal fire, health, life-safety, and similar regulations with which the Company may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance. Any expenditures, fines, or damages that the Company must pay would adversely affect its results of operations.
Discovery of previously undetected environmentally hazardous conditions may adversely affect the Company's financial condition and results of operations. Under various federal, state, and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on such property. These costs could be exacerbatedsignificant. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require significant expenditures or prevent the Company from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could adversely affect the Company's financial condition and results of operations.
Qualifying as a delay in completionREIT involves highly technical and complex provisions of the Merger or termination of the Merger Agreement.Internal Revenue Code.
Completion of the Merger is subject to the satisfaction or waiver of certain conditions.
Completion of the Merger is subject to the satisfaction or waiver of certain conditions, including: (1) approval by the Company’s stockholders of the issuance of Company Common Stock to HR’s stockholders pursuant to the terms of the Merger Agreement and approval by HR’s stockholders of the Merger and the transactions contemplated under the Merger Agreement; (2) the effectiveness of the registration statement on Form S-4 to be filed with the SEC by the Company in connection with the transactions contemplated by the Merger Agreement; (3) approval for listing on the NYSE of the shares of Company Common Stock to be issued in the Merger or reserved for issuance in connection therewith; (4) no injunction or law prohibiting the Merger; (5) accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications; (6) material compliance with each party’s covenants; (7) receipt by each of HR and us of an opinion to the effect that the Merger will qualifyQualification as a “reorganization” withinREIT involves the meaningapplication of Section 368(a)highly technical and complex provisions of the Internal Revenue Code for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize the Company’s REIT qualification. The Company’s continued qualification as a REIT will depend on the Company’s satisfaction of 1986,certain asset, income, organizational, distribution, stockholder ownership and other
requirements on a continuing basis. In addition, the Company’s ability to satisfy the requirements to qualify as amended,a REIT depends in part on the actions of third parties over which the Company has no control or only limited influence, including in cases where the Code, and (8) receipt by eachCompany owns an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
If the Company fails to remain qualified as a REIT, the Company will be subject to significant adverse consequences, including adversely affecting the value of HR and us of an opinionits common stock.
The Company intends to operate in a manner that will allow it to continue to qualify as a REIT for federal income tax purposes. Although the other partyCompany believes that it qualifies as a REIT, under the Code.
Weit cannot provide any assurance that these conditionsit will continue to completing the Mergerqualify as a REIT for federal income tax purposes. The Company’s continued qualification as a REIT will be satisfied or waived, and accordingly, that our pending Merger with HR will be completeddepend on the timelinesatisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. The Company’s ability to satisfy the asset tests depends upon the characterization and fair market values of its assets. The Company’s compliance with the REIT income and quarterly asset requirements also depends upon the Company’s ability to successfully manage the composition of the Company’s income and assets on an ongoing basis. Accordingly, there can be no assurance that we anticipate or at all. Failurethe Internal Revenue Service (“IRS”) will not contend that the Company has operated in a manner that violates any of the REIT requirements.
If the Company were to complete the Merger could negatively affect our stock price and our future business and financial results.
An adverse outcomefail to qualify as a REIT in any litigationtaxable year, the Company would be subject to federal income tax on its taxable income at regular corporate rates and possibly increased state and local taxes (and the Company might need to borrow money or other legal proceedings relatingsell assets in order to pay any such tax). Further, dividends paid to the Merger AgreementCompany’s stockholders would not be deductible by the Company in computing its taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to the Company’s stockholders, which in turn could have a materialan adverse impact on our the value of the Company’s common stock. In addition, in such an event the Company would no longer be required to pay dividends to maintain REIT status, which could adversely affect the value of the Company’s common stock. Unless the Company were entitled to relief under certain provisions of the Internal Revenue Code, the Company also would continue to be disqualified from taxation as a REIT for the four taxable years following the year in which the Company failed to qualify as a REIT.
Even if the Company remains qualified for taxation as a REIT, the Company is subject to certain federal, state and local taxes on its income and assets, including taxes on any undistributed taxable income, and state or local income, franchise, property and transfer taxes. These tax liabilities would reduce the Company’s cash flow and could adversely affect the value of the Company’s common stock. For more specific information on state income taxes paid, see Note 16 to the Consolidated Financial Statements.
The Company’s articles of incorporation, as well as provisions of the MGCL, contain limits and restrictions on transferability of the Company’s common stock which may have adverse effects on the value of the Company’s common stock.
In order to qualify as a REIT, no more than 50% of the value of the Company’s outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. To assist in complying with this REIT requirement, the Company’s articles of incorporation contain provisions restricting share transfers where the transferee would, after such transfer, own more than 9.8% either in number or value of the outstanding stock of the Company. If, despite this prohibition, stock is acquired increasing a transferee’s ownership to over 9.8% in value of the outstanding stock, the stock in excess of this 9.8% in value is deemed to be held in trust for transfer at a price that does not exceed what the purported transferee paid for the stock, and, while held in trust, the stock is not entitled to receive dividends or to vote. In addition, under these circumstances, the Company has the right to redeem such stock.
In addition, certain provisions of the MGCL applicable to the Company may have the effect of inhibiting or deterring a third party from making a proposal to acquire the Company or of delaying or preventing a change of control under circumstances that otherwise could provide Company stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
•provisions under Subtitle 8 of Title 3 of the MGCL that permit the Board of Directors, without stockholders’ approval and regardless of what is currently provided in the Company's Articles of Incorporation or bylaws, to implement certain takeover defenses;
•“business combination” provisions that, subject to limitations, prohibit certain business combinations, asset transfers and ourequity security issuances or reclassifications between the Company and an “interested stockholder” (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the Company's outstanding voting stock or an affiliate or associate of the Company who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the Company's then outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose supermajority voting requirements unless certain minimum price conditions are satisfied; and
•“control share” provisions that provide that holders of “control shares” of the Company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by Company stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Pursuant to a resolution adopted by the Board of Directors, the Company is prohibited from classifying the Board of Directors under Subtitle 8 unless stockholders entitled to vote generally in the election of directors approve a proposal to repeal such resolution by the affirmative of a majority of the votes cast on the matter. In the case of the business combination provisions of the MGCL, the Board of Directors has adopted a resolution providing that any business combination between the Company and any other person is exempted from this statute, provided that such business combination is first approved by the Board of Directors. This resolution, however, may be altered or repealed in whole or in part at any time. In the case of the control share provisions of the MGCL, the Company has opted out of these provisions pursuant to a provision in its bylaws. The Company may, however, by amendment to its bylaws, opt into the control share provisions of the MGCL. The Company may also choose to adopt other takeover defenses in the future. Any such actions could deter a transaction that may otherwise be in the interest of Company stockholders.
These restrictions on the transfer of the Company’s shares could have adverse effects on the value of the Company’s common stock.
Complying with the REIT requirements may cause the Company to forego otherwise attractive opportunities.
To qualify as a REIT for federal income tax purposes, the Company must continually satisfy tests concerning, among other things, the sources of its income, the nature of its assets, the amounts it distributes to its stockholders and the ownership of its stock. The Company may be unable to pursue investments that would be otherwise advantageous to the Company in order to satisfy the source-of-income or distribution requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder the Company’s ability to consummatemake certain attractive investments.
The prohibited transactions tax may limit the Company's ability to sell properties.
A REIT's net gain from prohibited transactions contemplatedis subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The Company may be subject to the prohibited transaction tax equal to 100% of net gain upon the disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, there can be no assurance that the Company can comply in all cases with the safe harbor or that it will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of
business. Consequently, the Company may choose not to engage in certain sales of its properties or may conduct such sales through a taxable REIT subsidiary, which would be subject to federal and state income taxation.
New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Company to qualify as a REIT.
The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in the Company. The federal income tax rules that affect REITs are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could cause the Company to change its investments and commitments and affect the tax considerations of an investment in the Company. There can be no assurance that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to the Company’s qualification as a REIT or with respect to the federal income tax consequences of qualification.
New and increased transfer tax rates may reduce the value of the Company’s properties.
In recent years, several cities in which the Company owns assets have increased transfer tax rates. These include Boston, Los Angeles, San Francisco, Seattle, and Washington, D.C. In 2022, Los Angeles increased its transfer tax rate from 0.45% to 5.5% on sales of real properties greater than $10 million in value, effective April 1, 2023. In 2020, San Francisco increased it transfer tax rate to 6% for sales in excess of $25 million in value. Also in 2020, the State of Washington increased its transfer tax rate from 1.28% to 3% on sales in excess of $3 million in value; the combined state and local transfer tax rate in Seattle/King County, Washington is 3.5% on sales above $3 million. As state and municipal governments seek new ways to raise revenue, other jurisdictions may implement new real estate transfer taxes or increase existing transfer tax rates. Increases in such tax rates can impose significant additional transaction costs on sales of commercial real estate and may reduce the value of the Company’s properties for sale by the Merger Agreement.amount of the new or increased tax.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
The Company annually reviews its overall risk profile with the Audit Committee and full Board of Directors. Assessing, identifying and managing material risks from cybersecurity threats are integrated into the Company’s overall risk management processes.
The Audit Committee of the Company’s Board of Directors has oversight in the management of risks associated with cybersecurity. The Audit Committee is briefed regularly on cybersecurity matters, including meeting with the Company’s Chief Technology Officer at least annually and receiving a memorandum quarterly regarding cybersecurity. In addition, the Audit Committee discusses cybersecurity with other members of management and the internal audit staff at each quarterly meeting. The Audit Committee reports to the full Board of Directors quarterly regarding cybersecurity.
Management of the Company plays an integral role in assessing and managing risks from cybersecurity threats. The Company has a dedicated technology services department, led by the Company’s Chief Technology Officer. The Company also has an in-house internal audit staff that is involved in risk management of cybersecurity threats. The Company solicits input from key employees regarding the overall risk environment, including cybersecurity threats. The Company requires all employees to complete cybersecurity training semi-annually and periodically facilitates penetration tests on the Company's systems.
The Company’s Chief Technology Officer reports to the Executive Vice President – Operations. In addition, as discussed in more detail below, any cybersecurity incident is reported to the Company’s legal department. While the
Company’s Executive Vice President – Operations and the Merger are frequently the subjectmembers of litigation or otherits legal proceedings, including actions alleging that either our board of directors breached their respective duties to their stockholders by entering into the Merger Agreement, by failing to obtaindepartment do not have a greater value in the transaction for their stockholders or otherwise. Wetechnology services background, we believe that anythe Company’s Chief Technology Officer and technology services team possess the requisite background and experience to effectively manage the Company’s cybersecurity needs.
The Company also engages with third parties on an as-needed basis to advise and assist in managing cybersecurity risks. When the Company utilizes third-party services that include web-based platforms or data collection stored on third-party servers, it reviews the service provider’s SOC1 attestation reports on internal controls and inquires regarding controls and procedures utilized by such litigation or proceedingsthird parties with respect to cybersecurity of the Company’s data.
The Company has in place a cybersecurity incident response plan. Procedures for addressing cybersecurity incidents include reporting incidents up to senior management, including the Company’s legal department for analysis. If a cybersecurity incident were determined to be material, the Company’s disclosure committee would address appropriate public disclosures. As noted above, management regularly reports to the Audit Committee regarding the current cyber threat environment and the controls and procedures meant to address such risks. If a cybersecurity incident were determined to be material, the Audit Committee would be without merit,informed promptly.
The Company carries cyber risk insurance, but there can be no assurance that they willlosses from a cybersecurity incident would not be brought. If litigationexceed the insurance coverage.
The Company is subject to risks associated with cybersecurity threats. Although the Company has not experienced a cybersecurity incident that materially affected or, other legal proceedings are brought against usto the Company’s knowledge, is reasonably likely to materially affect the Company, including its business strategy, results of operations or against our board in connectionfinancial condition, the Company has, from time to time, experienced threats to and breaches of its data and systems. The Company faces risks associated with the Merger Agreement, we will defend against it, but we might not be successful in doing so. An adverse outcome in such matters,security breaches through cyber attacks, cyber intrusions, or otherwise, as well as the costsother significant disruptions of its information technology networks and efforts of a defense even if successful, could have a material adverse effect on our business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.
The exchange ratio will not be adjustedrelated systems. These risks are described in the event of any change in the stock prices of either us or HR.
Upon the consummation of the Merger, each outstanding share of HR Common Stock will be converted automatically into the right to receive one share of Company Common Stock, with cash paid in lieu of any fractional shares. The exchange ratio of 1.0 will not be adjusted for changes in the market prices of either shares of our Common Stock or shares of HR Common Stock. Changes in the market price of shares of HR Common Stock prior to the effective time of the Merger will affect the market value of the merger consideration that HR’s stockholders will receive on the closing date of the Merger. Stock price changes may result from a variety of factors (many of which are beyond our or HR’s control), including the following factors:
•market reaction to the announcement of the Merger and the prospects of the combined company;
•changes in the respective businesses, operations, assets, liabilities and prospects of us and HR;
•changes in market assessments of the business, operations, financial position and prospects of either company or the combined company;
•market assessments of the likelihood that the Merger will be completed;
•interest rates, general market and economic conditions and other factors generally affecting the market prices of our Common Stock and HR Common Stock;
•federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and HR operate; and
•other factors beyond the control of us and HR, including those described or referred to in this “Risk Factors” section.
The market price of shares of HR Common Stock at the closing of the Merger may vary from its price on the date the Merger Agreement was executed, on the date of the proxy statement/prospectus and on the date of our special meeting. As a result, the market value of the merger consideration represented by the exchange ratio will also vary.
If the market price of shares of Company Common Stock increases between the date the Merger Agreement was signed, the date of the proxy statement/prospectus or the date of our special meeting and the closing of the Merger, HR’s stockholders could receive shares of Company Common Stock that have a market value upon completion of the Merger that is greater than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed, the date of the proxy statement/prospectus or on the date of the special meeting, respectively. Alternatively, if the market price of shares of Company Common Stock declines between the date the Merger Agreement was signed, the date of the proxy
statement/prospectus or the date of our special meeting and the closing of the Merger, HR’s stockholders could receive shares of Company Common Stock that have a market value upon completion of the Merger that is less than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed, the date of the proxy statement/prospectus or on the date of the special meeting, respectively.
Therefore, while the number of shares of Company Common Stock to be issued per share of our Common Stock is fixed, HR’s stockholders cannot be sure of the market value of the merger consideration they will receive upon completion of the Merger.
However, subject to the closing of the Merger and the other transactions contemplated therein, the holders of shares of Company Common Stock issued and outstanding on the last business day prior to the closing date of the Merger will receive a special distribution in the amount of $4.82 in cash per share of Company Common Stock held on such date (the “Special Distribution Payment”), regardless of the fluctuation in the market prices of shares of HR Common Stock and Company Common Stock.
more detail under Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Since inception, we have invested $7.8 billion primarilyIn addition to the properties described in MOBs, development projects, landItem 1. “Business,” in Note 3 to the Consolidated Financial Statements, and other healthcare real estate assets that servein Schedule III of Item 15 of this Annual Report on Form 10-K, the healthcare industry through December 31, 2021. As of December 31, 2021, our portfolio consisted of approximately 26.1 million square feet of GLA, with a leased rate of 89.3% (includesCompany leases which have been executed, but which have not yet commenced). Approximately 67% of our portfolio wasoffice space from unrelated third parties from time to time. The Company owns its corporate headquarters located on the campuses of, or adjacent to, nationally and regionally recognized healthcare systems. Our portfolio is diversified geographically across 32 states, with no state having more than 21% of the total GLA as of December 31, 2021. All but two of our properties are 100% owned.at 3310 West End Avenue in Nashville, Tennessee.
As of December 31, 2021, we owned fee simple interests in properties representing 63% of our total GLA. We hold long-term leasehold interests in the remaining properties in our portfolio, representing 37% of our total GLA. As of December 31, 2021, these leasehold interests had an average remaining term of 46.5 years, excluding available extension options.
The following information generally applies to our properties:
•we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;
•our properties are located in markets where we are subject to competition in attracting new tenants and retaining current tenants; and
•depreciation is provided on a straight-line basis over the estimated useful lives of the buildings, up to 39 years, and over the shorter of the lease term or useful lives of the tenant improvements.
Tenant Lease Expirations
The following table presents the sensitivity of our annualized base rent due to tenant lease expirations for existing leases for the next 10 years: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expiration (1) | | Number of
Expiring
Leases | | Annualized Base Rent of Expiring Leases (2)(3) | | Percent of Total Annualized Base Rent | | Total GLA of Expiring Leases (2) | | Percent of GLA of Expiring Leases |
| Month-to-month | | 121 | | | $ | 6,915 | | | 1.2 | % | | 245 | | | 1.0 | % |
| 2022 | | 662 | | | 57,635 | | | 9.9 | | | 2,097 | | | 9.0 | |
| 2023 | | 592 | | | 61,494 | | | 10.5 | | | 2,564 | | | 11.0 | |
| 2024 | | 572 | | | 69,928 | | | 12.0 | | | 2,713 | | | 11.7 | |
| 2025 | | 426 | | | 55,980 | | | 9.6 | | | 2,239 | | | 9.6 | |
| 2026 | | 469 | | | 50,555 | | | 8.6 | | | 2,344 | | | 10.1 | |
| 2027 | | 309 | | | 68,387 | | | 11.7 | | | 2,597 | | | 11.2 | |
| 2028 | | 175 | | | 35,001 | | | 6.0 | | | 1,405 | | | 6.0 | |
| 2029 | | 236 | | | 44,570 | | | 7.6 | | | 1,816 | | | 7.8 | |
| 2030 | | 110 | | | 30,808 | | | 5.3 | | | 1,183 | | | 5.1 | |
| 2031 | | 68 | | | 23,265 | | | 4.0 | | | 1,112 | | | 4.8 | |
| Thereafter | | 281 | | | 79,812 | | | 13.6 | | | 2,944 | | | 12.7 | |
| Total | | 4,021 | | | $ | 584,350 | | | 100 | % | | 23,259 | | | 100 | % |
| | | | | | | | | | |
| (1) Leases scheduled to expire on December 31 of a given year are included within that year in the table. |
| (2) Amounts presented in thousands. |
| (3) Annualized base rent is calculated by multiplying contractual base rent as of the end of the year by 12 (excluding the impact of abatements, concessions, and straight-line rent). |
Geographic Diversification/Concentration Table
The following table lists the states in which our properties are located and provides certain information regarding our portfolio’s geographic diversification/concentration as of December 31, 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| State | | GLA (1) | | Percent of GLA | | Annualized Base Rent (1)(2) | | Percent of Annualized Base Rent |
| Texas | | 5,315 | | | 20.4 | % | | $ | 118,777 | | | 20.3 | % |
| Florida | | 3,093 | | | 11.9 | | | 76,638 | | | 13.1 | |
| North Carolina | | 1,812 | | | 6.9 | | | 38,963 | | | 6.7 | |
| Massachusetts | | 965 | | | 3.7 | | | 36,346 | | | 6.2 | |
| Indiana | | 1,811 | | | 7.0 | | | 34,087 | | | 5.8 | |
| Georgia | | 1,280 | | | 4.9 | | | 30,024 | | | 5.1 | |
| New York | | 1,390 | | | 5.3 | | | 29,155 | | | 5.0 | |
| Pennsylvania | | 1,454 | | | 5.6 | | | 29,072 | | | 5.0 | |
| Arizona | | 1,529 | | | 5.9 | | | 28,932 | | | 5.0 | |
| Connecticut | | 1,187 | | | 4.6 | | | 25,215 | | | 4.3 | |
| California | | 992 | | | 3.8 | | | 23,334 | | | 4.0 | |
| Ohio | | 932 | | | 3.6 | | | 16,757 | | | 2.9 | |
| Colorado | | 708 | | | 2.7 | | | 14,892 | | | 2.5 | |
| Illinois | | 454 | | | 1.7 | | | 13,706 | | | 2.3 | |
| Missouri | | 355 | | | 1.4 | | | 9,694 | | | 1.7 | |
| South Carolina | | 377 | | | 1.4 | | | 8,745 | | | 1.5 | |
| Wisconsin | | 368 | | | 1.4 | | | 7,084 | | | 1.2 | |
| Alabama | | 319 | | | 1.2 | | | 6,456 | | | 1.1 | |
| Michigan | | 203 | | | 0.8 | | | 5,194 | | | 0.9 | |
| Maryland | | 181 | | | 0.7 | | | 4,834 | | | 0.8 | |
| Tennessee | | 176 | | | 0.7 | | | 4,578 | | | 0.8 | |
| Hawaii | | 146 | | | 0.6 | | | 4,021 | | | 0.7 | |
| Virginia | | 158 | | | 0.6 | | | 3,607 | | | 0.6 | |
| Utah | | 159 | | | 0.6 | | | 2,911 | | | 0.5 | |
| New Mexico | | 141 | | | 0.5 | | | 2,365 | | | 0.4 | |
| Oklahoma | | 186 | | | 0.7 | | | 2,294 | | | 0.4 | |
| New Jersey | | 57 | | | 0.2 | | | 1,819 | | | 0.3 | |
| Mississippi | | 80 | | | 0.3 | | | 1,591 | | | 0.3 | |
| Nevada | | 73 | | | 0.3 | | | 1,547 | | | 0.3 | |
| Idaho | | 83 | | | 0.3 | | | 1,178 | | | 0.2 | |
| Oregon | | 21 | | | 0.1 | | | 314 | | | 0.1 | |
| Minnesota | | 50 | | | 0.2 | | | 220 | | | — | |
| Total | | 26,055 | | | 100 | % | | $ | 584,350 | | | 100 | % |
| | | | | | | | |
| (1) Amounts presented in thousands. |
| (2) Annualized base rent is calculated by multiplying contractual base rent as of the end of the year by 12 (excluding the impact of abatements, concessions, and straight-line rent). |
Item 3. Legal Proceedings
We are subject to claims and litigation arising in the ordinary courseThe Company is not aware of business. We are also subject to employee claims and/any pending or threatened claims from time to time. We do not believe any liability from any reasonably foreseeable disposition of such claims and litigation individually or inthat, if resolved against the aggregate,Company, would have a material adverse effect on our accompanyingthe Company's consolidated financial statements.position, results of operations, or cash flows.
Item 4. Mine Safety Disclosures
Not applicable
PART II
Item 5. Market for Registrant’sRegistrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
HTA hasShares of the Company’s common stock and is reported on the NYSEare traded under the trading symbol “HTA”. There is no established market for trading HTALP’s OP Units.
Dividends
In accordance with the terms of HTALP’s partnership agreement, the dividend HTA pays to its stockholders is equal to the amount of distributions it receives from HTALP. Please refer to Liquidity and Capital Resources - Dividends within Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for more information relating to our dividend policy.
Stockholders
“HR.” As of February 22, 2022, HTA had 1,908 December 31, 2023, there were 2,167 stockholders of record.
Stock Performance Graph
The graph below compares the cumulative returns of HTA, US REIT (RMS) Index, S&P 500 Index and Dow Jones U.S. Real Estate Health Care Index from the date of our listing on the NYSE on June 6, 2012 through December 31, 2021. All periods prior to 2015 have been adjusted retroactively to reflect the reverse stock split effective December 15, 2014. The total returns assume dividends are reinvested.22
Future dividends will be declared and paid at the discretion of the Board of Directors. The Company’s ability to pay dividends is dependent upon its ability to generate funds from operations and cash flows, and to make accretive new investments.
Equity Compensation Plan Information
The following table provides information as of December 31, 2023, about the Company’s common stock that may be issued as restricted stock and upon the exercise of options, warrants and rights under the Company’s existing compensation plans, including the Amended and Restated 2006 Incentive Plan.
| | | | | | | | | | | |
| PLAN CATEGORY | NUMBER OF SECURITIES TO BE ISSUED upon exercise of outstanding options, warrants, and rights 1 | WEIGHTED AVERAGE EXERCISE PRICE of outstanding options, warrants, and rights 1 | NUMBER OF SECURITIES REMAINING AVAILABLE
for future issuance under equity
compensation plans (excluding
securities reflected in the first column) |
| Equity compensation plans approved by security holders | 155,613 | | — | | 8,102,861 | |
| Equity compensation plans not approved by security holders | — | | — | | — | |
| Total | 155,613 | | — | | 8,102,861 | |
1The outstanding options relate only to Legacy HR's 2000 Employee Stock Purchase Plan (the "Legacy HR Employee Stock Purchase Plan"), which was terminated in November 2022. No new options will be issued under the Legacy HR Employee Stock Purchase Plan and existing options will expire in March 2024. The Company is unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights under the Legacy HR Employee Stock Purchase Plan or the weighted average exercise price of outstanding rights under that plan. The Legacy HR Employee Stock Purchase Plan provides that shares of common stock may be purchased at a per share price equal to 85% of the fair market value of the common stock at the beginning of the offering period or a purchase date applicable to such offering period, whichever is lower.
Issuer Purchases of Equity Securities
During the year ended December 31, 2023, the Company withheld and canceled shares of Company common stock to satisfy employee tax withholding obligations payable upon the vesting of non-vested shares, as follows:
| | | | | | | | | | | | | | |
| PERIOD | TOTAL NUMBER OF SHARES PURCHASED | AVERAGE PRICE PAID
per share | TOTAL NUMBER OF SHARES purchased as part of publicly announced plans or programs | MAXIMUM NUMBER OF SHARES
that may yet be purchased
under the plans or programs |
| February 1 - February 28 | 38,632 | | $ | 21.71 | | — | | — | |
| December 1 - December 31 | 87,453 | | 15.97 | | — | | — | |
| Total | 126,085 | | $ | 18.84 | | | |
Authorization to Repurchase Common Stock
On May 31, 2023, the Company’s Board of Directors authorized the repurchase of up to $500 million of outstanding shares of the Company’s common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints, and other customary conditions. The Company is not obligated under this authorization to repurchase any specific number of shares. This authorization supersedes all previous stock repurchase authorizations. As of the date of this report, the Company has not repurchased any shares of its common stock under this authorization.
PurchasesThe following graph provides a comparison of the Company's cumulative total shareholder return with the Russell 3000 Index and cumulative total returns of FTSE NAREIT All Equity Securities byREITs Index for the Issuer and Affiliated Purchasers
During the three months endedperiod from December 31, 2021, we repurchased shares of our2018, through December 31, 2023. The comparison assumes $100 was invested on December 31, 2018, in the Company's common stock and in each of the indexes and assumes reinvestment of dividends, as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased (1) (2) | | Average Price Paid per Share (1) (2) | | Total Number of
Shares Purchased
as Part of
Publicly Announced
Plan or Program | | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
| October 1, 2021 to October 31, 2021 | | 97 | | | $ | 32.96 | | | — | | | — | |
| November 1, 2021 to November 30, 2021 | | 506 | | | 33.39 | | | — | | | — | |
| December 1, 2021 to December 31, 2021 | | 160 | | | 33.25 | | | — | | | — | |
| | | | | | | | |
| (1) Purchases represent shares of common stock withheld by us to satisfy withholding obligations on the vesting of restricted shares. The price paid per share was the then applicable closing price of our common stock on the NYSE. |
| (2) For each share of common stock redeemed by HTA, HTALP redeems a corresponding number of OP Units in the HTALP operating partnership. Therefore, the OP Units in the HTALP operating partnership repurchased by HTALP are the same as the shares of common stock repurchased by HTA as shown above. |
Securities Authorized for Issuance under Equity Compensation Plans
The Amended and Restated 2006 Incentive Plan (the “Plan”) authorizes the granting of awards in any of the following forms: options; stock appreciation rights; restricted stock; restricted or deferred stock units; performance awards; dividend equivalents; other stock-based awards, including units in operating partnership; and cash-based awards. Subject to adjustment as provided in the Plan, the aggregate number of shares of our common stock reserved and available for issuance pursuant to awards granted under the Plan is 9,804,333.
Recent Sales of Unregistered Securities, Use of Proceeds from Registered Securities PaidItem 6. [Reserved]
None.
Item 6. Selected Financial Data
The following should be read with Item 1A - Risk Factors, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, our accompanying consolidated financial statements and the notes thereto, as acquisitions, changes in accounting policies and other items impact the comparability of our financial data. Our historical results are not necessarily indicative of results for any future period.
Healthcare Trust of America, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (In thousands, except per share data) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 |
| Balance Sheet Data as of December 31: | | | | | | | | | |
| Real estate investments, net | $ | 6,167,829 | | | $ | 6,110,165 | | | $ | 6,045,801 | | | $ | 5,665,621 | | | $ | 5,947,874 | |
| Total assets | 6,889,689 | | | 6,790,692 | | | 6,638,749 | | | 6,188,476 | | | 6,449,582 | |
| Debt | 3,028,122 | | | 3,026,999 | | | 2,749,775 | | | 2,541,232 | | | 2,781,031 | |
| Non-controlling interests | 86,712 | | | 60,680 | | | 72,635 | | | 78,890 | | | 84,666 | |
| Total equity | 3,344,316 | | | 3,234,919 | | | 3,430,644 | | | 3,334,914 | | | 3,363,448 | |
| Statement of Operations Data: | | | | | | | | | |
| Total revenues | $ | 767,073 | | | $ | 738,965 | | | $ | 692,040 | | | $ | 696,426 | | | $ | 613,990 | |
| Rental expenses | 236,850 | | | 226,859 | | | 211,479 | | | 220,617 | | | 192,147 | |
| Net income attributable to common stockholders | 98,016 | | | 52,618 | | | 30,154 | | | 213,463 | | | 63,916 | |
| Net income attributable to common stockholders per share - basic | 0.45 | | | 0.24 | | | 0.15 | | | 1.04 | | | 0.35 | |
| Net income attributable to common stockholders per share - diluted | 0.44 | | | 0.24 | | | 0.14 | | | 1.02 | | | 0.34 | |
| Statement of Cash Flows Data: | | | | | | | | | |
| Cash flows provided by operating activities | $ | 385,616 | | | $ | 387,962 | | | $ | 340,394 | | | $ | 337,396 | | | $ | 307,543 | |
| Cash flows (used in) provided by investing activities | (399,855) | | | (319,260) | | | (667,289) | | | 176,309 | | | (2,455,096) | |
| Cash flows (used in) provided by financing activities | (47,457) | | | 12,447 | | | 230,981 | | | (498,735) | | | 2,241,068 | |
| Other Data: | | | | | | | | | |
| Dividends declared to stockholders | $ | 286,040 | | | $ | 277,626 | | | $ | 260,593 | | | $ | 253,699 | | | $ | 227,024 | |
| Dividends declared per share | 1.29 | | | 1.27 | | | 1.25 | | | 1.23 | | | 1.21 | |
| Dividends paid in cash to stockholders | 281,820 | | | 275,816 | | | 256,117 | | | 252,651 | | | 207,087 | |
FFO attributable to common stockholders (1) | 386,386 | | | 344,699 | | | 319,738 | | | 335,565 | | | 284,226 | |
Normalized FFO attributable to common stockholders (1) | 391,810 | | | 379,311 | | | 344,272 | | | 340,400 | | | 301,957 | |
NOI (2) | 530,223 | | | 512,106 | | | 480,561 | | | 475,809 | | | 421,843 | |
| | | | | | | | | |
| (1) For additional information on FFO and Normalized FFO, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, which includes a reconciliation to net income or loss attributable to common stockholders and an explanation of why we present these non-GAAP financial measures. |
| (2) For additional information on NOI, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, which includes a reconciliation to net income or loss attributable to common stockholders and an explanation of why we present this non-GAAP financial measure. |
Healthcare Trust of America Holdings, LP | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (In thousands, except per unit data) | 2021 | | 2020 | | 2019 | | 2018 | | 2017 |
| Balance Sheet Data as of December 31: | | | | | | | | | |
| Real estate investments, net | $ | 6,167,829 | | | $ | 6,110,165 | | | $ | 6,045,801 | | | $ | 5,665,621 | | | $ | 5,947,874 | |
| Total assets | 6,889,689 | | | 6,790,692 | | | 6,638,749 | | | 6,188,476 | | | 6,449,582 | |
| Debt | 3,028,122 | | | 3,026,999 | | | 2,749,775 | | | 2,541,232 | | | 2,781,031 | |
| Total partners’ capital | 3,344,316 | | | 3,234,919 | | | 3,430,644 | | | 3,334,914 | | | 3,363,448 | |
| Statement of Operations Data: | | | | | | | | | |
| Total revenues | $ | 767,073 | | | $ | 738,965 | | | $ | 692,040 | | | $ | 696,426 | | | $ | 613,990 | |
| Rental expenses | 236,850 | | | 226,859 | | | 211,479 | | | 220,617 | | | 192,147 | |
| Net income attributable to common OP unitholders | 99,784 | | | 53,508 | | | 30,692 | | | 217,537 | | | 65,454 | |
| Net income attributable to common OP unitholders per unit - basic | 0.45 | | | 0.24 | | | 0.15 | | | 1.04 | | | 0.35 | |
| Net income attributable to common OP unitholders per unit - diluted | 0.45 | | | 0.24 | | | 0.15 | | | 1.04 | | | 0.35 | |
| Statement of Cash Flows Data: | | | | | | | | | |
| Cash flows provided by operating activities | $ | 385,616 | | | $ | 387,962 | | | $ | 340,394 | | | $ | 337,396 | | | $ | 307,543 | |
| Cash flows (used in) provided by investing activities | (399,855) | | | (319,260) | | | (667,289) | | | 176,309 | | | (2,455,096) | |
| Cash flows (used in) provided by financing activities | (47,457) | | | 12,447 | | | 230,981 | | | (498,735) | | | 2,241,068 | |
| Other Data: | | | | | | | | | |
| Distributions declared to general partner | $ | 286,040 | | | $ | 277,626 | | | $ | 260,593 | | | $ | 253,699 | | | $ | 227,024 | |
| Distributions declared per unit | 1.29 | | | 1.27 | | | 1.25 | | | 1.23 | | | 1.21 | |
| Distributions paid in cash to general partner | 281,820 | | | 275,816 | | | 256,117 | | | 252,651 | | | 207,087 | |
FFO attributable to common OP Unitholders (1) | 388,154 | | | 345,589 | | | 320,276 | | | 339,639 | | | 285,764 | |
Normalized FFO attributable to common OP Unitholders (1) | 391,810 | | | 379,311 | | | 344,272 | | | 340,400 | | | 301,957 | |
NOI (2) | 530,223 | | | 512,106 | | | 480,561 | | | 475,809 | | | 421,843 | |
| | | | | | | | | |
| (1) For additional information on FFO and Normalized FFO, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, which includes a reconciliation to net income or loss attributable to common unitholders and an explanation of why we present these non-GAAP financial measures. |
| (2) For additional information on NOI, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, which includes a reconciliation to net income or loss attributable to common unitholders and an explanation of why we present this non-GAAP financial measure. |
Item 7. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
The
Disclosure Regarding Forward-Looking Statements
This report and other materials the Company have filed or may file with the SEC, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could” and other comparable terms. These forward-looking statements are based on the words “we,” “us” or “our” referscurrent plans and expectations of management and are subject to HTAa number of risks and HTALP, collectively.
The following discussion should be read in conjunction with our consolidated financial statementsuncertainties that could materially affect the Company’s current plans and notes appearing elsewhere in this Annual Report. Such consolidated financial statementsexpectations and information have been prepared to reflect HTA and HTALP’s financial position as of December 31, 2021 and 2020, together with results of operations and cash flows for the years ended December 31, 2021, 2020 and 2019.
The information set forth below is intended to provide readers with an understanding of ourfuture financial condition changesand results. Such risks and uncertainties as more fully discussed in Item 1A “Risk Factors” of this report and in other reports filed by the Company with the SEC from time to time include, among other things, the following:
Risks relating to our business and operations
•The Company's expected results may not be achieved;
•The Company’s revenues depend on the ability of its tenants under its leases to generate sufficient income from their operations to make rental payments to the Company;
•Owning real estate and indirect interests in real estate is subject to inherent risks;
•The Company may incur impairment charges on its real estate properties or other assets;
•The Company has properties subject to purchase options that expose it to reinvestment risk and reduction in expected investment returns;
•If the Company is unable to promptly re-let its properties, if the rates upon such re-letting are significantly lower than the previous rates or if the Company is required to undertake significant expenditures or make significant leasing concessions to attract new tenants, then the Company’s business, consolidated financial condition and results of operations.
•Forward-Looking Statements;operations would be adversely affected;
•Executive Summary;The Company’s real estate investments are illiquid and the Company may not be able to sell properties strategically targeted for disposition;
•The Company Highlights;is subject to risks associated with the development and redevelopment of properties;
•Critical Accounting Policies;The Company may make material acquisitions and undertake developments and redevelopments that may involve the expenditure of significant funds and may not perform in accordance with management’s expectations;
•Recently Issued or Adopted Accounting Pronouncements;Many of the Company’s leases are dependent on the viability of associated health systems. Revenue concentrations relating to these leases expose the Company to risks related to the financial condition of the associated health systems;
•Factors Which May Influence ResultsMany of Operations;the Company’s properties are held under ground leases. These ground leases contain provisions that may limit the Company’s ability to lease, sell, or finance these properties;
•Results of Operations;The Company may experience uninsured or underinsured losses;
•Non-GAAP Financial Measures;Damage from catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in losses to the Company;
•LiquidityThe Company faces risks associated with security breaches through cyber attacks, cyber intrusions, or otherwise, as well as other significant disruptions of its information technology networks and Capital Resources;related systems;
•Commitments and Contingencies;The Company may structure acquisitions of property in exchange for limited partnership units of the OP on terms that could limit its liquidity or flexibility;
•Debt Service Requirements;The Company cannot assure you that it will be able to continue paying dividends at or above the rates previously paid;
•Contractual Obligations;The Company previously incurred and may continue to incur substantial expenses related to the Merger; and
•Pandemics, such as COVID-19, and measures intended to prevent their spread or mitigate their severity could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition.
Risks relating to our capital structure and financings
•The Company has incurred significant debt obligations and may incur additional debt and increase leverage in the future;
•Off-Balance Sheet Arrangements;Covenants in the Company’s debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company’s consolidated financial condition and results of operations;
•If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company’s operations and consolidated financial position would be negatively impacted;
•The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings could have an adverse effect on the Company’s ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and development activity;
•Increases in interest rates could have a material adverse effect on the Company's cost of capital;
•The Company's swap agreements may not effectively reduce its exposure to changes in interest rates;
•The Company has entered into joint venture agreements that limit its flexibility with respect to jointly owned properties and expects to enter into additional such agreements in the future;
•The U.S. federal income tax treatment of the cash that the Company might receive from cash settlement of a forward equity agreement is unclear and could jeopardize the Company's ability to meet the REIT qualification requirements; and
•Inflation.In case of our bankruptcy or insolvency, any forward equity agreements will automatically terminate, and the Company would not receive the expected proceeds from any forward sale of shares of its common stock.
Forward-Looking StatementsRisks relating to government regulations
Certain statements contained•The Company's property taxes could increase due to reassessment or property tax rate changes;
•Trends in this Annual Report constitute forward-looking statements within the meaninghealthcare service industry may negatively affect the demand for the Company’s properties, lease revenues and the values of its investments;
•The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations;
•Qualifying as a REIT involves highly technical and complex provisions of the safe harbor from civil liability provided for such statements byInternal Revenue Code;
•If the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A ofCompany fails to remain qualified as a REIT, the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”)). Such statements include, in particular, statements about our plans, strategies, prospects and estimates regarding future MOB market performance. Additionally, such statements areCompany will be subject to certain risks and uncertainties,significant adverse consequences, including adversely affecting the value of its common stock;
•The Company’s articles of incorporation, as well as known and unknown risks, which could cause actual results to differ materially and in adverse ways from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Forward-looking statements are generally identifiable by the use of such terms as “expect,” “project,” “may,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “pro forma” or the negative of such terms and other comparable terminology. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only asprovisions of the date this Annual Report is filedMGCL, contain limits and restrictions on transferability of the Company’s common stock which may have adverse effects on the value of the Company’s common stock;
•Complying with the SEC. We cannot guaranteeREIT requirements may cause the accuracyCompany to forego otherwise attractive opportunities;
•The prohibited transactions tax may limit the Company's ability to sell properties;
•New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Company to qualify as a REIT; and
•New and increased transfer tax rates may reduce the value of any such forward-looking statements contained in this Annual Report, and we do not intendthe Company’s properties.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as requiredotherwise. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.
Overview
The Company owns and operates properties that facilitate the delivery of healthcare services in primarily outpatient settings. To execute its strategy, the Company engages in a broad spectrum of integrated services including leasing, management, acquisition, financing, development and redevelopment of such properties. The Company seeks to generate stable, growing income and lower the long-term risk profile of its portfolio of properties by law.
Forward-looking statements regarding HR and HTA, include, but are not limitedfocusing on facilities primarily located on or near the campuses of acute care hospitals associated with leading health systems. The Company seeks to statements related to the Proposed Transaction, including the anticipated timing, benefits andreduce financial and operational impact thereof; HR’s expectedrisk by owning properties in high-growth markets with a broad tenant mix that includes over 30 physician specialties, as well as surgery, imaging, cancer, and diagnostic centers.
As described in the Explanatory Note above and elsewhere in this report, on July 20, 2022, Legacy HR and Legacy HTA completed a merger between the companies in which Legacy HR merged with and into a wholly-owned subsidiary of Legacy HTA, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA. Immediately following the Merger, Legacy HTA changed its name to “Healthcare Realty Trust Incorporated.” For accounting purposes, the Merger was treated as a “reverse acquisition” in which Legacy HR was considered the acquirer. Accordingly, the information discussed in this section reflects, for periods prior to the closing of the Merger, the financial condition and results of operations of Legacy HR, and for periods from the closing of the Merger, that of the Company.
This section is organized into the following sections:
•Liquidity and Capital Resources;
•Trends and Matters Impacting Operating Results;
•Results of Operations;
•Non-GAAP Financial Measures and Key Performance Indicators; and
•Application of Critical Accounting Policies to Accounting Estimates.
Liquidity and Capital Resources
The Company monitors its liquidity and capital resources and considers several indicators in its assessment of capital markets for financing for the transaction; other statements of management’s belief, intentions or goals;acquisitions and other statements thatoperating activities. The Company considers, among other factors, its leverage ratios and lending covenants, dividend payout percentages, interest rates, underlying treasury rates, debt market spreads and cost of equity capital to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.
Sources and Uses of Cash
The Company's revenues are not historical facts. These forward-looking statements arederived from its real estate property portfolio based on eachcontractual arrangements with its tenants. These sources of revenue represent the companies’ current plans, objectives, estimates, expectationsCompany's primary source of liquidity to fund its dividends and intentionsits operating expenses, including interest incurred on debt, principal payments on debt, general and inherently involve significant risksadministrative costs, capital expenditures and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with: HR’s and HTA’s ability to complete the Proposed Transaction on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the Proposed Transaction; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the Proposed Transaction; risks related to diverting the attention of HR and HTA management from ongoing business operations; failure to realize the expected benefits of the Proposed Transaction; significant transaction costs and/or unknown or inestimable liabilities; the risk of shareholder litigationexpenses incurred in connection with managing its existing portfolio and investing in additional properties. To the Proposed Transaction,extent additional investments are not funded by these sources, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets, property dispositions or through proceeds from the Unsecured Credit Facility.
The Company expects to continue to meet its liquidity needs, including resultingcapital for additional investments, tenant improvement allowances, operating and finance lease payments, paying dividends, and funding debt service, through cash on hand, cash flows from operations and the cash flow sources addressed above. See Note 4 to the Consolidated Financial Statements for additional discussion of operating and financing lease payment obligations. See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's sources and uses of cash.
The Company also had unencumbered real estate assets with a gross book value of approximately $13.2 billion at December 31, 2023, of which a portion could serve as collateral for secured mortgage financing. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot,
expensehowever, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.
The Company has exposure to variable interest rates and its common stock price is impacted by the volatility in the stock markets. However, the Company’s leases, which provide its main source of income and cash flow, have terms of approximately one to 20 years and have lease rates that generally increase on an annual basis at fixed rates or delay;based on consumer price indices.
Operating Activities
Cash flows provided by operating activities for the risk that HTA’s business willtwo years ended December 31, 2023 and 2022 were $499.8 million and $272.7 million, respectively. Several items impact cash flows from operating activities including, but not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;limited to, cash generated from property operations, merger-related costs, interest payments and the ability to obtain the expected financing to consummate the Proposed Transaction; riskstiming related to future opportunitiesthe payment of invoices and plans for the Company, including the uncertainty of expected future financial performance and results of the Company following completion of the Proposed Transaction; effects relating to the announcement of the Proposed Transaction or any further announcements or the consummation of the Proposed Transaction on the market price of HR’s or HTA’s common stock; the possibility that, if HR does not achieve the perceived benefits of the Proposed Transaction as rapidly or to the extent anticipated by financial analysts or investors, the market price of HR’s common stock could decline; general adverse economic and local real estate conditions; the inability of significant tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; increases in interest rates; increases in operatingother expenses and real estate taxes; changes in the dividend policy for HR’s common stock or its ability to pay dividends; impairment charges; pandemics or other health crises, such as COVID-19; and other risks and uncertainties affecting HR and HTA, including those describedreceipt of tenant rent.
The Company may, from time to time, undersell properties and redeploy cash from property sales into new investments. To the caption “Risk Factors”extent revenues related to the properties being sold exceed income from these new investments, the Company's consolidated results of operations and elsewhere in HR’scash flows could be adversely affected.
See "Trends and HTA’s SEC filings and reports, including HR’s Annual Report on Form 10-KMatters Impacting Operating Results" for additional information regarding the Company's operating activities.
Investing Activities
A summary of the significant transactions impacting investing activities for the year ended December 31, 2021, HTA’s Annual Report2023 is listed below. See Note 5 to the Consolidated Financial Statements for more detail on Form 10-Kthese activities.
The following table details the Company's real estate acquisition activity for the year ended December 31, 2021,2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | DATE ACQUIRED | PURCHASE PRICE | MORTGAGE NOTES PAYABLE, NET | | CASH
CONSIDERATION 1 | REAL
ESTATE | OTHER 2 | SQUARE FOOTAGE |
| Tampa, FL | 3/10/23 | $ | 31,500 | | $ | — | | | $ | 30,499 | | $ | 30,596 | | $ | (97) | | 115,867 | |
| Colorado Springs, CO | 7/28/23 | 11,450 | | (5,284) | | | 6,024 | | 11,416 | | (108) | | 42,770 | |
| | | | | | | | |
| Total real estate acquisitions | | $ | 42,950 | | $ | (5,284) | | | $ | 36,523 | | $ | 42,012 | | $ | (205) | | 158,637 | |
1Cash consideration excludes prorations of revenue and other filings and reports by either company. Moreover, other risks and uncertainties of which HR or HTA are not currently aware may also affect eachexpense due to/from seller at the time of the companies’ forward-looking statementsacquisition.
2Includes other assets acquired, liabilities assumed, and may cause actual resultsintangibles recognized at acquisition.
Capital Funding
In 2023, the Company incurred capital expenditures totaling $262.1 million for the following:
•$112.2 million toward development and the timingredevelopment of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by HR or HTA on their respective websites or otherwise. Neither HR nor HTA undertakes any obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.properties;
Any such forward-looking statements reflect our current views about future events, are subject to unknown risks, uncertainties,•$38.7 million toward first generation tenant improvements and other factors,planned capital expenditures for acquisitions;
•$63.5 million toward second generation tenant improvements; and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive
•$47.7 million toward capital expenditures.
See "Trends and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to stockholders and maintain the value of our real estate properties, may be significantly hindered. Factors that might impair our ability to meet such forward-looking statements include, without limitation, those discussed in Part I, Item 1A - Risk Factors are included herein and other filings with the SEC.
Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, our stockholders are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date made. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Executive Summary
We are the largest publicly-traded REIT focused on MOBs in the U.S. as measured by the GLA of our MOBs. We conduct substantially all of our operations through HTALP. We invest in MOBs that we believe will serve the future of healthcare delivery and MOBs that are primarily located on health system campuses, near university medical centers, or in core community outpatient locations. We also focus on our key markets that have certain demographic and macro-economic trends and where we can utilize our institutional full-service operating platform to generate strong tenant and health system relationships and operating cost efficiencies. Our primary objective is to maximize stockholder value with disciplined growth through strategic investments that provide an attractive risk-adjusted returnMatters Impacting Operating Results" below for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and could enhance our existing portfolio.more detail.
Since 2006, we have invested $7.8 billion primarily in MOBs, development projects, land and other healthcare real estate assets consisting of approximately 26.1 million square feet of GLA throughout
The following table details the U.S. Approximately 67% of our portfolio was located on the campuses of, or adjacent to, nationally and regionally recognized healthcare systems. Our portfolio is diversified geographically across 32 states, with no state having more than 21% of our total GLA as of December 31, 2021. We are concentrated in 20 to 25 key markets that are experiencing higher economic and demographic trends than other markets, on average, that we expect will drive demand for MOBs. As of December 31, 2021, we had approximately 1 million square feet of GLA in ten of our top 20 key markets and approximately 95% of our portfolio, based on GLA, is located in the top 75 MSAs, with Dallas, Houston, Boston, Atlanta and Miami being our largest markets by investment.
Company Highlights
Portfolio Operating Performance
•For the year ended December 31, 2021, total revenue increased 3.8%, or $28.1 million, to $767.1 million, compared to $739.0 milliondispositions for the year ended December 31, 2020.2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | DATE DISPOSED | SALE PRICE | CLOSING ADJUSTMENTS | COMPANY-FINANCED NOTES | NET PROCEEDS | NET REAL ESTATE INVESTMENT | OTHER (INCLUDING RECEIVABLES) 1 | GAIN/(IMPAIRMENT) | SQUARE FOOTAGE |
Tampa/Miami, FL2 | 1/12/23 | $ | 93,250 | | $ | (5,875) | | $ | — | | 87,375 | | $ | 87,302 | | $ | (888) | | $ | 961 | | 224,037 | |
Dallas, TX 3 | 1/30/23 | 19,210 | | (141) | | — | | 19,069 | | 18,986 | | 43 | | 40 | | 36,691 | |
| St. Louis, MO | 2/10/23 | 350 | | (18) | | — | | 332 | | 398 | | — | | (66) | | 6,500 | |
| Los Angeles, CA | 3/23/23 | 21,000 | | (526) | | — | | 20,474 | | 20,610 | | 52 | | (188) | | 37,165 | |
Los Angeles, CA 4 | 3/30/23 | 75,000 | | (8,079) | | (45,000) | | 21,921 | | 88,624 | | (803) | | (20,900) | | 147,078 | |
Los Angeles, CA 5 | 5/12/23 | 3,300 | | (334) | | — | | 2,966 | | 3,268 | | — | | (302) | | — | |
| Albany, NY | 6/30/23 | 10,000 | | (1,229) | | — | | 8,771 | | 2,613 | | (1,040) | | 7,198 | | 40,870 | |
| Houston, TX | 8/2/23 | 8,320 | | (285) | | — | | 8,035 | | 4,567 | | 194 | | 3,274 | | 57,170 | |
| Atlanta, GA | 8/22/23 | 25,140 | | (66) | | — | | 25,074 | | 23,226 | | (536) | | 2,386 | | 55,195 | |
| Dallas, TX | 9/15/23 | 115,000 | | (1,504) | | — | | 113,496 | | 64,183 | | 6,094 | | 43,219 | | 161,264 | |
| Houston, TX | 9/18/23 | 250 | | (24) | | — | | 226 | | 1,998 | | — | | (1,772) | | 52,040 | |
| Chicago, IL | 9/27/23 | 59,950 | | (870) | | — | | 59,080 | | 74,710 | | (380) | | (15,250) | | 104,912 | |
Evansville, IN 6 | 11/13/23 | 18,500 | | (63) | | — | | 18,437 | | 17,807 | | (149) | | 779 | | 260,520 | |
| Houston, TX | 12/1/23 | 4,100 | | (6) | | — | | 4,094 | | 3,486 | | — | | 608 | | 83,223 | |
Charleston, SC 7 | 12/15/23 | 6,200 | | (401) | | — | | 5,799 | | 3,415 | | — | | 2,384 | | 15,014 | |
| Dallas, TX | 12/20/23 | 43,295 | | (764) | | — | | 42,531 | | 33,882 | | (3,782) | | 12,431 | | 77,827 | |
| Los Angeles, CA | 12/21/23 | 19,000 | | (1,311) | | — | | 17,689 | | 17,787 | | — | | (98) | | 104,377 | |
Tucson, AZ 8,9 | 12/22/23 | 43,230 | | (3,770) | | (6,000) | | 33,460 | | 39,786 | | (26) | | (300) | | 215,471 | |
| Miami, FL | 12/22/23 | 18,250 | | (756) | | — | | 17,494 | | 17,354 | | 643 | | (503) | | 48,000 | |
| Sebring, FL | 12/27/23 | 9,500 | | (81) | | — | | 9,419 | | 10,438 | | (512) | | (507) | | 38,949 | |
| Boston, MA | 12/28/23 | 117,197 | | (2,079) | | — | | 115,118 | | 107,803 | | 9,828 | | (2,513) | | 161,254 | |
Jacksonville/Orlando/Miami, FL 10 | 12/29/23 | 77,000 | | (8,678) | | (7,700) | | 60,622 | | 65,839 | | (294) | | 2,777 | | 354,500 | |
| Total dispositions | | $ | 787,042 | | $ | (36,860) | | $ | (58,700) | | $ | 691,482 | | $ | 708,082 | | $ | 8,444 | | $ | 33,658 | | 2,282,057 | |
1Includes straight-line rent receivables, leasing commissions and lease inducements.
•2ForIncludes two properties sold in two separate transactions to the year ended December 31, 2021, net income was $99.8 million, compared to $53.5 million forsame buyer on the year ended December 31, 2020.same date.
•3ForThe Company sold this property to a joint venture in which it retained a 40% interest. Sales price and square footage reflect the year ended December 31, 2021, net income attributable to common stockholders was $0.44 per diluted share, or $98.0 million, compared to $0.24 per diluted share, or $52.6 million, fortotal sales price paid by the year ended December 31, 2020.joint venture and total square footage of the property.
•4ForThe Company entered into a mortgage loan agreement with the year ended December 31, 2021, HTA’s FFO, as defined by NAREIT, was $386.4 million, or $1.72 per diluted share, compared to $1.56 per diluted share, or $344.7 million,buyer for the year ended December 31, 2020.$45.0 million.
•5For the year ended December 31, 2021, HTALP’s FFO, as defined by NAREIT, was $388.2 million, or $1.73 per diluted OP Unit, compared to $1.56 per diluted OP Unit, or $345.6 million, for the year ended December 31, 2020.The Company sold a land parcel totaling 0.34 acres.
•6ForIncludes five properties sold in three separate transactions to the year ended December 31, 2021, HTA’s and HTALP’s Normalized FFO was $1.75 per diluted share and OP Unit, or $391.8 million, compared to $1.71 per diluted share and OP Unit, or $379.3 million, forsame buyer on the year ended December 31, 2020.same date.
•7For additional information on FFO and Normalized FFO, see “FFO and Normalized FFO” below, which includesThe Company sold a reconciliation to net income attributable to common stockholders/unitholders and an explanation of why we present this non-GAAP financial measure.corporate office in Charleston, SC that was 100% occupied by the Company.
•8ForIncludes 12 properties sold in one transaction to the year ended December 31, 2021, NOI increased 3.5%, or $18.1 million, to $530.2 million, compared to $512.1 million for the year ended December 31, 2020.same buyer.
•9ForThe Company entered into a mezzanine loan agreement with the year ended December 31, 2021, Same-Property Cash NOI increased 1.7%, or $7.8 million, to $460.8 million, compared to $453.0 millionbuyer for the year ended December 31, 2020.$6.0 million.
•10For additional information on NOI and Same-Property Cash NOI, see “NOI, Cash NOI and Same-Property Cash NOI” below, which includesIncludes three properties sold in one transaction to the same buyer. The Company entered into a reconciliation from net income and an explanation of why we present these non-GAAP financial measures.
Key Market Focused Strategy and Investments
We believe we have been one of the most active investors in the medical office sector over the last decade. This has enabled usseparate note receivable for $7.7 million related to create a high quality portfolio focused on MOBs serving the future of healthcare with scale and significance in 20 to 25 key markets.
•Our investment strategy includes alignment with key healthcare systems, hospitals, and leading academic medical universities. We are the largest owner of on-campus or adjacent MOBs in the country, with approximately 17.4 million square feet of GLA, or 67% of our portfolio, located in these locations. The remaining 33% of our portfolio is located in core community outpatient locations where healthcare is increasingly being delivered.this sale.
•Over the last several years, our investments have been focused in our 20 to 25 key markets which we believe will outperform the broader U.S. from an economic and demographic perspective. As of December 31, 2021, approximately 95% of our portfolio’s GLA is located in the top 75 MSAs. Our key markets represent top MSAs with strong growth metrics in jobs, household income and population, as well as low unemployment and mature healthcare infrastructures. Many of our key markets are also supported by strong university systems.
•Our key market focus has enabled us to establish scale and effectively utilize our asset management and leasing platform to deliver consistent same store growth and additional yield on investments, and also cost effective service to tenants. As of December 31, 2021, we had approximately 1 million square feet of GLA in ten of our top 20 key markets and approximately 0.5 million square feet of GLA in 17 of our top 20 key markets. We expect to establish this scale across 20 to 25 key markets as our portfolio expands.
•During the year ended December 31, 2021, HTA closed on approximately $308.8 million of investments totaling approximately 960,000 square feet of GLA, with expected year-one contractual MOB yields of approximately 5.7%. These properties were approximately 85% leased as of closing, and are located within HTA's key markets. Additionally, HTA funded approximately $80 millionFinancing Activities
Common Stock Issuances
The Company has in loan funding commitments for MOB development projects in Houston, Texas and Charlotte, North Carolina.
•During the year ended December 31, 2021, we completed the disposition of fifteen MOBs located in non-key markets forplace an aggregate gross sales price of $88.3 million, representing approximately 599,000 square feet of GLA, and generating net gains of approximately $39.2 million.
•During the year ended December 31, 2021, we completed the development of three new on-campus MOBs located in the key markets of Miami, Florida; Bakersfield, California; and Dallas, Texas. Total construction costs on these developments were approximately $110 million and totaled approximately 245,000 square feet of GLA and are currently 78% leased. Our development pipeline consists of five projects in the pre-leasing process, totaling over 850,000 square feet of GLA. These projects are located in Houston, Orlando and Raleigh and are highlighted by HTA's previously announced strategic partnership with Medistar Corporationat-the-market ("ATM") equity offering program to co-develop the Texas A&M Innovation Plaza - Horizon Tower located in Houston, Texas, a 485,000 square foot medical office and life sciences tower with anticipated costs of $215 million expected to commence construction in 2022.
Internal Growth through Proactive In-House Property Management and Leasing
We believe we have the largest full-service operating platform in the medical office sector that consists of our in-house property management and leasing functions which allows us to better manage and service our existing portfolio. In each of these markets, we have established a strong in-house asset management and leasing platform that has allowed us to develop valuable relationships with health systems, physician practices, universities, and regional development firms that have led to investment and leasing opportunities. Our full-service operating platform has also enabled us to focus on generating cost efficiencies as we gain scale across individual markets and regions.
•As of December 31, 2021, our in-house asset management and leasing platform operated approximately 25.1 million square feet of GLA, or 96% of our total portfolio, a significant increase from 8.8 million square feet, or 70%, of GLA managed in-house in 2012.
•As of December 31, 2021, our leased rate (which includes leases which have been executed, but which have not yet commenced) was 89.3% by GLA, and our occupancy rate was 87.5% by GLA.
•We entered into new and renewal leases on approximately 2.8 million square feet of GLA, or 10.8%sell shares of the GLA of our total portfolio, during the year ended December 31, 2021.
•During the year ended December 31, 2021, tenant retention for the Same-Property portfolio was 74%, which included approximately 2.8 million square feet of GLA of expiring leases, which we believe is indicative of our commitmentCompany’s common stock from time to maintaining buildingstime in desirable locations and fostering strong tenant relationships. Tenant retention is defined as the sum of the total leased GLA of tenants that renewed a lease during the period over the total GLA of leases that renewed or expired during the period.
Financial Strategy and Balance Sheet Flexibility
•As of December 31, 2021, we had total leverage, measured by debt less cash and cash equivalents to total capitalization, of 27.7%. Total liquidity was $1.1 billion, inclusive of $1.0 billion available on our unsecured revolving credit facility and cash and cash equivalents of $52.4 million as of December 31, 2021.
•As of December 31, 2021, the weighted average remaining term of our debt portfolio was 6.6 years.
•In March 2021, we entered intoat-the-market sales transactions. The Company has equity distribution agreements with various sales agents with respect to our at-the-market ("ATM")the ATM offering program of common stock with an aggregate sales amount of up to $750.0 million, which replaced our prior ATM offering program that expired in February 2021.million. As of December 31, 2021,2023, $750.0 million remained available for issuance by us under ourthe current ATM.ATM offering program.
•DuringDebt Activity
Below is a summary of the significant debt financing activity for the year ended December 31, 2021, we issued2023. See Note 10 to the Consolidated Financial Statements for additional information on financing activities.
Mortgage Activity
The following table details the mortgage note repayment activity for the year ended December 31, 2023: | | | | | | | | | | | | | | |
| (dollars in millions) | TRANSACTION DATE | PRINCIPAL BORROWING (REPAYMENT) | ENCUMBERED SQUARE FEET | CONTRACTUAL INTEREST RATE |
| Debt assumptions: | | | | |
| Colorado Springs, CO | 7/28/2023 | $ | 5.6 | | 42,770 | | 4.50 | % |
| | | | |
| Mortgages repaid at maturity: | | | | |
| Atlanta, GA | 8/1/2023 | $ | (9.8) | | 66,984 | | 3.31 | % |
| Lakewood, CO | 12/1/2023 | (6.6) | | 93,992 | | 4.51 | % |
| Total repayments | | $ | (16.4) | | 160,976 | | 3.79 | % |
| | | | |
Subsequent Activity
| | | | | | | | | | | | | | |
| (dollars in millions) | TRANSACTION DATE | PRINCIPAL REPAYMENT | ENCUMBERED SQUARE FEET | CONTRACTUAL INTEREST RATE |
| | | | |
| Mortgages repaid at maturity: | | | | |
| West Hills, CA | 1/5/2024 | $ | (11.3) | | 63,012 | | 4.77 | % |
| Atlanta, GA | 2/1/2024 | (5.6) | | 40,324 | | 4.12 | % |
| Total repayments | | $ | (16.9) | | 103,336 | | 4.55 | % |
Term Loans
On April 26, 2023, the Company exercised the first of its two one-year extension options for the $350 million delayed-draw term loan facility, extending the initial maturity date of July 20, 2023 to July 20, 2024. An extension fee of $0.4 million (0.125% of the committed funds) was paid and will be amortized over the extension term.
Interest Rate Swaps
As of December 31, 2023, the Company had outstanding interest rate derivatives totaling approximately 9.4 million shares$1.3 billion to hedge one-month SOFR. The following details the amount and rate of our common stock under our ATM program for net proceedseach swap as of approximately $251.3 million, adjusted for costs to borrow equating to a net price to us of $26.68 per share of common stock.such date (dollars in thousands):
Critical Accounting Policies | | | | | | | | |
| EXPIRATION | AMOUNT | WEIGHTED
AVERAGE RATE |
| January 2024 | 200,000 | | 1.21 | % |
| May 2026 | 275,000 | | 3.74 | % |
| June 2026 | 150,000 | | 3.83 | % |
| December 2026 | 150,000 | | 3.84 | % |
| June 2027 | 200,000 | | 4.27 | % |
| December 2027 | 300,000 | | 3.93 | % |
| $ | 1,275,000 | | 3.49 | % |
2023 Interest Rate Swap Activity
On February 16, 2023, the Company entered into a swap transaction with a notional amount of $50.0 million and a fixed rate of 4.16%. The preparationswap agreement has an effective date of financial statements in conformityMarch 1, 2023 and a termination date of June 1, 2026.
On March 28, 2023, the Company entered into a swap transaction with GAAP requires our management to use judgment ina notional amount of $100.0 million and a fixed rate of 3.67%. The swap agreement has an effective date of April 3, 2023 and a termination date of June 1, 2026.
On October 19, 2023, the applicationCompany entered into two swap transactions totaling $100.0 million. The notional amounts were $50.0 million each with fixed rates of accounting principles, including making estimates. We base our estimates4.71% and 4.67%. The swap agreements have effective dates of November 1, 2023 and termination dates of June 1, 2027 and December 1, 2027, respectively.
On October 23, 2023, the Company entered into two swap transactions totaling $100.0 million with an aggregate fixed rate of 4.73%. The swap agreements have effective dates of November 1, 2023 and termination dates of May 31, 2026.
On November 9, 2023, the Company entered into a swap transaction with a notional amount of $75.0 million and a fixed rate of 4.54%. The swap agreement has an effective date of December 1, 2023 and a termination date of May 31, 2026.
The following table details the Company's debt balances as of December 31, 2023:
| | | | | | | | | | | | | | | | | |
| PRINCIPAL BALANCE | CARRYING BALANCE 1 | WEIGHTED YEARS TO MATURITY 2 | CONTRACTUAL RATE | EFFECTIVE RATE |
| Senior Notes due 2025 | $ | 250,000 | | $ | 249,484 | | 1.3 | | 3.88 | % | 4.12 | % |
Senior Notes due 2026 3 | 600,000 | | 579,017 | | 2.6 | | 3.50 | % | 4.94 | % |
Senior Notes due 2027 3 | 500,000 | | 483,727 | | 3.5 | | 3.75 | % | 4.76 | % |
| Senior Notes due 2028 | 300,000 | | 297,429 | | 4.0 | | 3.63 | % | 3.85 | % |
Senior Notes due 2030 3 | 650,000 | | 575,443 | | 6.1 | | 3.10 | % | 5.30 | % |
Senior Notes due 2030 | 299,500 | | 296,780 | | 6.2 | | 2.40 | % | 2.72 | % |
Senior Notes due 2031 | 299,785 | | 295,832 | | 7.2 | | 2.05 | % | 2.25 | % |
Senior Notes due 2031 3 | 800,000 | | 649,521 | | 7.2 | | 2.00 | % | 5.13 | % |
| Total Senior Notes Outstanding | 3,699,285 | | 3,427,233 | | 4.9 | | 2.97 | % | 4.43 | % |
$1.5 billion unsecured credit facility 4 | — | | — | | 3.8 | | SOFR + 0.95% | 6.31 | % |
| $350 million unsecured term loan | 350,000 | | 349,798 | | 1.6 | | SOFR + 1.05% | 6.39 | % |
| $200 million unsecured term loan | 200,000 | | 199,903 | | 2.4 | | SOFR + 1.05% | 6.39 | % |
| $150 million unsecured term loan | 150,000 | | 149,643 | | 2.4 | | SOFR + 1.05% | 6.39 | % |
$300 million unsecured term loan 3 | 300,000 | | 299,958 | | 2.8 | | SOFR + 1.05% | 6.39 | % |
$200 million unsecured term loan 3 | 200,000 | | 199,502 | | 3.5 | | SOFR + 1.05% | 6.39 | % |
| $300 million unsecured term loan | 300,000 | | 298,288 | | 4.0 | | SOFR + 1.05% | 6.39 | % |
| Mortgage notes payable | 70,752 | | 70,534 | | 2.0 | | 4.17 | % | 4.15 | % |
| Total Outstanding Notes and Bonds Payable | $ | 5,270,037 | | $ | 4,994,859 | | 4.0 | | 3.96 | % | 5.02 | % |
1Balances are reflected net of discounts and debt issuance costs and include premiums.
2Includes extension options.
3Debt instruments assumed as part of the Merger with Legacy HTA on experience and various other assumptions we believe are reasonableJuly 20, 2022. The amounts shown represent fair value adjustments.
4As of December 31, 2023, the Company had no outstanding borrowings under the circumstances. These estimates affectUnsecured Credit Facility with a remaining borrowing capacity of $1.5 billion.
Debt Covenant Information
The Company’s various debt agreements contain certain representations, warranties, and financial and other covenants customary in such debt agreements. Among other things, these provisions require the reported amount of assetsCompany to maintain certain financial ratios and liabilities,impose certain limits on the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. However, if our judgment or interpretation of the facts and circumstances relating to the various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in different presentation of our financial statements. We periodically reevaluate our estimates and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates about matters that are inherently uncertain. Below is a discussion of accounting policies that we consider critical as they may require more complex judgment in their application or require estimates about matters that are inherently uncertain. For further information on significant accounting policies that impact us, see Note 2 - Summary of Significant Accounting Policies in the accompanying consolidated financial statements in Part IV, Item 15.
Basis of Presentation
Our accompanying consolidated financial statements include our accounts and those of our wholly-owned subsidiaries and joint venture entities in which we own a majority interest with the ability control operations. We consolidate variable interest entities (“VIEs”) when we are the primary beneficiary. All inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.
We make judgments with respect to our level of influence or control and whether we are (or are not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, ourCompany’s ability to direct the activities that most significantly impact the entity’s economic performance, our form or ownership interest, our representation on the entity’s governing body, the sizeincur indebtedness and seniority of our investment, our ability and rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity, if applicable. Our ability to correctly assess our influence or control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entities in our consolidated financial statements. If we perform a primary beneficiary analysis at a date other than at inception of the VIE, our assumptions may be different and may result in the identification of a different primary beneficiary.
Revenue Recognition
Rental revenue is our primary source of revenue. At the inception of a new lease we assess the terms and conditions to determine proper classification. If the estimates utilized by us in our assessment were different, then our lease classification for accounting purposes may have been different, which could impact the timing and amount of revenue recognized. We recognize rental revenue from operating leases on a straight-line basis over the term of the related lease (including rent holidays). Tenant reimbursement revenue, which is comprised of additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, is recognized as revenue in the period in which the related expenses are incurred. Effective January 1, 2018, with the adoption of Topic 606 - Revenue from Contracts with Customers, the revenue recognition process is based on a five-step model to account for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. Topic 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For more detailed information on Topic 606, see Note 2 - Summary of Significant Accounting Policies to the accompanying consolidated financial statements in Part IV, Item 15.
Leases
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, codified as ASC 842 - Leases (Topic 842). This new standard superseded ASC Topic 840 and states that companies will be required to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Topic 842 requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand the nature of the entity’s leasing activities, including significant judgments and changes in judgments.
As a lessor, we lease space in our MOBs primarily to medical enterprises. The assets underlying these leases consist of buildings and associated land which are included as real estate investments on our accompanying consolidated balance sheets. All of our leases for which we are the lessor are classified as operating leases under Topic 842.
Leases, for which we are the lessee, are classified as separate components on our accompanying consolidated balance sheets. Operating leases are included as right-of-use (“ROU”) assets - operating leases, net, with a corresponding lease liability - operating leases. Financing leases are included in receivables and other assets, net with a corresponding lease liability in security deposits, prepaid rent and other liabilities. A lease liability is recognized for our obligation related to the lease and an ROU asset represents our right to use the underlying asset over the lease term. For more detailed information on Topic 842, see Note 2 - Summary of Significant Accounting Policies to the accompanying consolidated financial statements in Part IV, Item 15.create
Investmentsliens or encumbrances. As of December 31, 2023, the Company was in Real Estatecompliance with the financial covenant provisions under all of its various debt instruments.
With the adoptionAs of ASU 2017-01 in January 2017, the majority of our investments in real estate investments have been accounted for as asset acquisitions and we record the purchase price to tangible and intangible assets and liabilities based on their relative fair values. Tangible assets primarily consist of land and buildings and improvements. Additionally, the purchase price includes acquisition related expenses, above or below market leases, above or below market leasehold interests, in place leases, tenant relationships, above or below market debt assumed, interest rate swaps assumed and any contingent consideration recorded when the contingency is resolved. The determinationDecember 31, 2023, 99.5% of the fair value requires us to make certain estimatesCompany’s principal balances were due after 2024, including extension options. Also, as of December 31, 2023, the Company's incurrence of total debt as defined in the senior notes [debt divided by (total assets less intangibles and assumptions.accounts receivable)] was approximately 37.5% (cannot be greater than 60%) and debt service coverage [interest expense divided by (net income plus interest expense, taxes, depreciation and amortization, gains and impairments)] was approximately 3.2 times (cannot be less than 1.5 times).
The fair valueCompany plans to manage its capital structure to maintain compliance with its debt covenants consistent with its current profile. Downgrades in ratings by the rating agencies could have a material adverse impact on the Company’s cost and availability of the landcapital, which could in turn have a material adverse impact on consolidated results of operations, liquidity and/or financial condition.
Trends and buildingsMatters Impacting Operating Results
Management monitors factors and improvements is based upon our determination of the value of the property as if it were to be replaced or as if it were vacant using discounted cash flow models similar to those used by market participants. Factors considered by us include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases.
The value of in place leases is based on our evaluation of the specific characteristics of each tenant’s lease. The factors considered include estimated lease-up periods, market rent and other market conditions.
We analyze the acquired leases to determine whether the rental rates are above or below market. The value associated with above or below market leases is based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuanttrends important to the lease over its remaining term and (ii) our estimate of the amounts that would be received using fair market rates over the remaining term of the lease.
We analyze the acquired leasehold interests to determine whether the rental rates are above or below market. The value associated with above or below market leasehold interests is based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term and (ii) our estimate of the amounts that would be paid using fair market rates over the remaining term of the lease.
We record debt or interest rate swaps assumed at fair value. The amount of above or below market debt is determined based upon the present value of the difference between the cash flow stream of the assumed mortgageCompany and the cash flow stream of a market rate mortgage. The value of interest rate swaps is based upon a discounted cash flow analysis on the expected cash flows, taking into account interest rate curves and the period to maturity.
We are required to make certain estimatesREIT industry in order to determinegauge their potential impact on the fair valueoperations of the tangibleCompany. Discussed below are some of the factors and intangibletrends that management believes may impact the future operations of the Company.
Economic and Market Conditions
Rising interest rates and increased volatility in the capital markets have increased the Company’s cost and availability of debt and equity capital. Limited availability and increases in the cost of capital could adversely impact the Company’s ability to finance operations and acquire and develop properties. To the extent the Company’s tenants experience increased costs or financing difficulties due to the economic and market conditions, they may be unable or unwilling to make payments or perform their obligations when due. Additionally, increased interest rates may also result in less liquid property markets, limiting the Company’s ability to sell existing assets and liabilities acquired in a business investment. Our assumptions directly impact our resultsor obtain joint venture capital.
The Company reviews goodwill for impairment annually as of operations, as amounts allocated to certain assets and liabilities have different depreciation and amortization lives. In addition, the amortization and depreciationDecember 31 of these assets and liabilities are recorded in different line items in our accompanying consolidated statements of operations.
Recoverability of Real Estate Investments
Real estate investments are evaluated for potential impairment at least annually,each year or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Impairment losses are recorded when indicators of impairment are present and the carrying amount of the asset is greater than the sum of future undiscounted cash flows expected to be generated by that asset over the remaining expected holding period. We would recognize an impairment loss whenmay exist. Given volatility in its stock price, the carrying amount is not recoverable to the extent the carrying amount exceedsCompany performed a quantitative assessment, and the fair value of the property. The fair value is generally based onCompany’s single reporting unit was estimated using a combination of discounted cash flow analyses. In performingmodels and earnings multiples techniques. The determination of fair value using the analysis we utilize a variety of methodologies, including undiscounteddiscounted cash flow modelsmodel technique requires the use of estimates and assumptions related to revenue and expense growth rates, capitalization rates, discount rates, capital expenditures and working capital levels. The determination of fair value using the earnings multiples technique requires assumptions to be made in relation to maintainable earnings and earnings multipliers. These forecasts and assumptions are highly subjective, and while we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. Although the quantitative assessment indicated goodwill was not impaired as of December 31, 2023, given the results of our quantitative assessment, the Company is at risk for certainfuture goodwill impairment because it is reasonably possible that, among other factors, continual stock price volatility and downward pressure on the Company's market capitalization could have a material impact on one or more of the estimates and assumptions used to evaluate goodwill.
Acquisitions and Dispositions
In 2023, the Company acquired two medical office buildings. The total purchase price of the acquisitions was $43.0 million and the weighted average capitalization rate for these investments was 6.5%.
The Company disposed of 39 properties that meet quantitative and/or qualitative thresholds. Our methodology contemplatesin 2023 for sales prices totaling $787.0 million, including a regional corporate office and one property contributed into a joint venture in which the Company maintains a non-controlling interest. These transactions yielded net cash proceeds of $687.6 million, net of $36.9 million of closing costs and related adjustments, $58.7 million in Company financed notes and $3.8 million of retained joint venture interests. The weighted average capitalization rate for these properties was 6.5%. The Company calculates the capitalization rate for dispositions as the in-place cash flows from existing tenants, with certain assumptions for future anticipated occupancy levels, lease-up and absorption periods after known or estimated vacating tenants, inflationary adjustments for rents andnet operating expenses, market lease assumptions based on in-place rents and comparative properties' rates, ordinary tenant concessions, such as free rent, and planned tenant improvement and maintenance or other capital expenditures, as well as other initial direct costs, such as leasing commissions paid to third-parties. We also utilize capitalization rates to arrive at a final value of our property, less estimated selling costs. Further, we also will consider executedincome divided by the sales agreements or management’s best estimate of market comparables in arriving at our total undiscounted cash flows.
Recently Issued or Adopted Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies in the accompanying consolidated financial statements in Part IV, Item 15 for a discussion of recently issued or adopted accounting pronouncements.price.
Factors Which May Influence ResultsSee the Company's discussion of Operationsits 2023 acquisition and disposition activity in Note 5 to the Consolidated Financial Statements.
Development and Redevelopment Activity
The economic uncertainty created bytable below details the COVID-19 pandemic and the potential for new strains of SARS-CoV-2 or entirely new types of viruses and/or global propagation of communicable disease continueCompany’s activity related to present risks to the Company and the future results of our operations. Should current and planned measures, including furtherits active development and deliveryredevelopment projects as of vaccinesDecember 31, 2023. The information included in the table below represents management’s estimates and other measures intendedexpectations at December 31, 2023, which are subject to reducechange. The Company’s disclosures regarding certain projections or eliminate the spread of COVID-19, past and/or proposed economic stimulus, and other laws, acts and orders proposed or enacted by federal, state and local agencies or foreign governments, ultimatelyestimates may not be successful or limited in their efficacy, our business and the broader real estate industry may experience significant adverse consequences. These consequences include loss of revenues, increased expenses, difficulty in maintaining an active workforce, and constraints on our ability to secure capital or financing, among other factors. Please refer to Part I, Item 1A - Risk Factors forreflect actual results.
| | | | | | | | | | | | | | | | | | | | | |
| | | | ESTIMATED REMAINING FUNDINGS | ESTIMATED TOTAL INVESTMENT | APPROXIMATE SQUARE FEET |
| Dollars in thousands | NUMBER OF PROPERTIES | | TOTAL FUNDED DURING THE YEAR | TOTAL AMOUNT FUNDED |
| | | | | | |
| Development Activity | | | | | | |
| Nashville, TN | 1 | | | $ | 11,971 | | $ | 37,330 | | $ | 6,670 | | $ | 44,000 | | 106,194 | |
Orlando, FL 1 | 2 | | | 16,047 | | 32,680 | | 32,320 | | 65,000 | | 156,566 | |
| Raleigh, NC | 1 | | | 19,766 | | 33,392 | | 19,208 | | 52,600 | | 120,694 | |
| Phoenix, AZ | 1 | | | 21,341 | | 21,341 | | 32,659 | | 54,000 | | 101,000 | |
| Total | | | $ | 69,125 | | $ | 124,743 | | $ | 90,857 | | $ | 215,600 | | 484,454 | |
| | | | | | | |
| Redevelopment Activity | | | | | | |
| Washington, DC | 3 | | | 7,918 | | 10,776 | | 10,424 | | 21,200 | | 259,290 | |
| Houston, TX | 3 | | | 4,698 | | 5,683 | | 24,317 | | 30,000 | | 314,861 | |
| Charlotte, NC | 2 | | | 3,627 | | 3,890 | | 14,810 | | 18,700 | | 169,135 | |
| Washington, DC | 1 | | | 4,270 | | 4,783 | | 5,295 | | 10,078 | | 57,323 | |
| Total | | | $ | 20,513 | | $ | 25,132 | | $ | 54,846 | | $ | 79,978 | | 800,609 | |
1This project is funded through a comprehensive summary of these and other risks associated with pandemics and other health concerns.construction note receivable.
We are not aware of any other material trends or uncertainties, other than national economic conditions affecting real estate generally and the risk factors previously listed in Part I, Item 1A - Risk Factors, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the investment, management and operation of our properties.
Rental Income
The amount of rental income generated by our properties depends principally on our abilityCompany funded an additional $22.6 million related to maintainongoing tenant improvements at previously completed projects.
The Company is in the occupancy rates of currently leased spaceplanning stages with several health systems and to lease currently available spacedevelopers regarding new development and space that will become available from tenant vacancies or unscheduled lease terminations at the then applicable rental rates. Negative trends inredevelopment opportunities and one or more could begin in 2024. Total costs to develop or redevelop a typical medical office building can vary depending on the scope of these factors could adversely affect ourthe project, market rental income in future periods.terms, parking configuration, building amenities, asset type and geographic location.
Investment ActivityThe Company’s disclosures regarding certain estimates or projections may not be indicative of actual results.
During the years ended
Security Deposits and Letters of Credit
As of December 31, 2021, 20202023, the Company held approximately $38.5 million in letters of credit and 2019, we had investments with an aggregate purchase pricesecurity deposits for the benefit of $308.8 million, $191.7 millionthe Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and $560.5 million, respectively. Duringupon notification to the years ended December 31, 2021, 2020 and 2019, we had dispositions with an aggregate gross sales pricetenant, draw upon these instruments if there are any defaults under the leases.
Expiring Leases
The Company expects that approximately 15% to 20% of $90.0 million, $24.3 million and $4.9 million, respectively. The amount of any future acquisitions or dispositions couldthe leases in its portfolio will expire each year. In-place leases have a significant impact onweighted average lease term of 8.5 years and a weighted average remaining lease term of 4.2 years. Demand for well-located real estate with complementary practice types and services remains consistent, and the Company's 2023 quarterly tenant retention statistics ranged from 74% to 79%. In 2024, the Company has 1,546 leases totaling 5.0 million square feet in its multi-tenant portfolio that are scheduled to expire. Of those leases, 74% are in on-campus buildings, which, in our results of operations in future periods.experience, tend to have high tenant retention rates between 75% to 90%. See additional information regarding expiring single-tenant leases under the heading "Single-Tenant Leases" below.
The Company continues to emphasize its contractual rent increases for in-place leases. As of ContentsDecember 31, 2023 and 2022, the Company's contractual rental rate growth averaged 2.82% and 2.77%, respectively, for in-place leases. In addition, the Company continued to see strong quarterly weighted average rental rate growth for renewing leases ("cash leasing spread") and expects the majority of its renewal rates to increase between 3.0% and 4.0%. In 2023, cash leasing spreads averaged 2.6%.
In a further effort to maximize revenue growth and reduce its exposure to key expenses such as taxes and utilities, the Company carefully manages its balance of lease types. Gross leases, wherein the Company has full exposure to all operating expenses, comprise 8% of its lease portfolio. Modified gross or base year leases, in which the Company and tenant both pay a share of operating expenses, comprise 28% of the Company's leased portfolio. Net leases, in which tenants pay substantially all operating expenses, total 59% of the leased portfolio. Absolute net leases, in which tenants pay substantially all the building's operating and capital expenses, comprise 5%.
Capital Expenditures
Capital expenditures are long-term investments made to maintain and improve the physical and aesthetic attributes of the Company's owned properties. Examples of such improvements include, but are not limited to, material changes to, or the full replacement of, major building systems (exterior facade, building structure, roofs, elevators, mechanical systems, electrical systems, energy management systems, upgrades to existing systems for improved efficiency) and common area improvements (furniture, signage and artwork, bathroom fixtures and finishes, exterior landscaping, parking lots or garages). These additions are capitalized into the gross investment of a property and then depreciated over their estimated useful lives, typically ranging from 7 to 20 years. Capital expenditures specifically do not include recurring maintenance expenses, whether direct or indirect, related to the upkeep and maintenance of major building systems or common area improvements. Capital expenditures also do not include improvements related to a specific tenant suite, unless the improvement is part of a major building system or common area improvement.
The Company invested $47.7 million, or $1.24 per square foot, in capital expenditures in 2023 and $48.9 million, or $1.21 per square foot, in capital expenditures in 2022. As a percentage of cash net operating income, 2023 and 2022 capital expenditures were 5.8% and 8.5%, respectively. For a reconciliation of cash net operating income, see "Same Store Cash NOI" in the "Non-GAAP Financial Measures and Key Performance Indicators" section as part of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II of this report.
Tenant Improvements
The Company may invest in tenant improvements for the purpose of refurbishing or renovating tenant space. The Company categorizes these expenditures into first and second generation tenant improvements. As of December 31, 2023, the Company had commitments of approximately $222.4 million that are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction.
First Generation Tenant Improvements & Planned Capital Expenditures for Acquisitions
First generation tenant improvements and planned capital expenditures for acquisition spending totaled $38.7 million and $46.4 million for the years ended December 31, 2023 and 2022, respectively. First generation tenant improvements include build out costs related to suite space in shell condition. Planned capital expenditures for acquisitions include expected near-term fundings that were contemplated as part of the acquisition.
Second Generation Tenant Improvements
Second generation tenant improvements spending totaled $63.5 million in 2023, or 7.7% of total cash net operating income. In 2022, this spending totaled $33.6 million, or 5.8% of total cash net operating income.
If the cost of a tenant improvement project exceeds a tenant improvement allowance, the Company generally offers the tenant the option to finance the excess over the lease term with interest or to reimburse the overage to the Company in a lump sum. In either case, such overages are amortized by the Company as rental income over the term of the lease. Interest earned on tenant overages is included in other operating income in the Company's Consolidated Statements of Operations. The first and second generation tenant overage amount amortized to rent, including interest, totaled approximately $8.4 million in 2023, $7.5 million in 2022, and $5.9 million in 2021.
Second generation, multi-tenant tenant improvement commitments in 2023 for renewals averaged $1.78 per square foot per lease year, ranging quarterly from $1.64 to $1.89. In 2022, these commitments averaged $1.76 per square foot per lease year, ranging quarterly from $1.46 to $1.90. In 2021, these commitments averaged $1.53 per square foot per lease year, ranging quarterly from $1.27 to $1.87.
Second generation, multi-tenant tenant improvement commitments in 2023 for new leases averaged $5.69 per square foot per lease year, ranging quarterly from $4.44 to $7.11. In 2022, these commitments averaged $5.74 per square foot per lease year, ranging quarterly from $4.84 to $7.07. In 2021, these commitments averaged $5.39 per square foot per lease year, ranging quarterly from $4.74 to $5.96.
Leasing Commissions
In certain markets, the Company may pay leasing commissions to real estate brokers who represent either the Company or prospective tenants, with commissions generally equating to 4% to 6% of the gross lease value for new leases and 2% to 4% of the gross lease value for renewal leases. In addition, the Company pays its leasing employees incentive compensation when leases are executed that meet certain leasing thresholds. External leasing commissions are amortized to property operating expense, and internal leasing costs are amortized to general and administrative expense in the Company's Consolidated Statements of Operations. In 2023, the Company paid leasing commissions of approximately $35.9 million, or $0.93 per square foot. In 2022, the Company paid leasing commissions of approximately $22.9 million, or $0.57 per square foot. As a percentage of total cash net operating income, leasing commissions paid for 2023 and 2022 were 4.3% and 4.0%, respectively. The amount of leasing commissions amortized over the term of the applicable leases totaled $13.8 million, $11.0 million and $9.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Rent Abatements
Rent abatements, which generally take the form of deferred rent, are sometimes used to help induce a potential tenant to lease space in the Company's properties. Such abatements, when made, are amortized by the Company on a straight-line basis against rental income over the lease term. Rent abatements for 2023 totaled approximately $14.3 million, or $0.37 per square foot. Rent abatements for 2022 totaled approximately $14.8 million, or $0.37 per square foot. Rent abatements for 2021 totaled approximately $4.6 million, or $0.27 per square foot.
Single-Tenant Leases
As of December 31, 2023, the Company had a total of 125 single-tenant buildings, with a weighted average lease term of 11.4 years and a weighted average remaining lease term of 5.2 years.
Twenty-one single-tenant buildings have leases that expire in 2024. Eleven of these leases have been renewed. The Company is in negotiations with eight of the tenants and expects the leases to be renewed or the building to be immediately backfilled. The Company expects the tenants of two of these single-tenant buildings to vacate the buildings upon lease expiration. One of these buildings is part of a planned redevelopment and the other is expected to be leased or sold. The expected lost revenue from these expirations in 2024 is $3.8 million.
Operating Leases
As of December 31, 2023, the Company was obligated to make rental payments under operating lease agreements consisting primarily of ground leases related to 157 real estate investments, excluding those ground leases the Company has prepaid. As of December 31, 2023, the Company had 232 properties totaling 16.9 million square feet that were held under ground leases with a remaining weighted average term of 64.9 years, including renewal options. These ground leases typically have initial terms of 50 to 75 years with one or more renewal options extending the terms to 75 to 100 years, with expiration dates through 2119.
Purchase Options
The Company had approximately $111.1 million in real estate properties as of December 31, 2023 that were subject to exercisable purchase options. The Company has approximately $1.1 billion in real estate properties that are subject to purchase options that will become exercisable after 2023. Additional information about the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):
| | | | | | | | |
| YEAR EXERCISABLE | NUMBER OF PROPERTIES | GROSS REAL ESTATE INVESTMENT AS OF DECEMBER 31, 2023 1 |
Current 2 | 6 | | $ | 111,074 | |
| 2024 | — | | — | |
| 2025 | 5 | | 93,813 | |
| 2026 | 6 | | 181,696 | |
| 2027 | 4 | | 110,537 | |
| 2028 | 5 | | 134,227 | |
| 2029 | 3 | | 81,855 | |
| 2030 | — | | — | |
| 2031 | 4 | | 108,936 | |
| 2032 | 2 | | 24,629 | |
| 2033 | — | | — | |
2034 and thereafter 3 | 9 | | 320,771 | |
| Total | 44 | | $ | 1,167,538 | |
1Purchase option prices are based on fair market value components that are determined by an appraisal process, except for three properties totaling $45.3 million with stated prices or prices based on fixed capitalization rates.
2These purchase options have been exercisable for an average of 13.9 years.
3Includes two medical office buildings that are recorded in the line item Investment in financing receivable, net on the Company's Consolidated Balance Sheet.
Debt Management
The Company maintains a conservative and flexible capital structure that allows it to fund new investments and operate its existing portfolio. The Company has approximately $70.8 million of mortgage notes payable, most of which were assumed when the Company acquired properties. The Company has approximately $24.1 million of mortgage notes payable that will mature in 2024. The Company will repay mortgages with cash on hand or borrowings under the Unsecured Credit Facility. See additional information in Liquidity and Capital Resources - Financing Activities.
Impact of Inflation
The Company is subject to the risk of inflation as most of its revenues are derived from long-term leases. Most of the Company's leases provide for fixed increases in base rents or increases based on the Consumer Price Index and require the tenant to pay all or some portion of increases in operating expenses. The Company believes that these provisions mitigate the impact of inflation. However, there can be no assurance that the Company's ability to increase rents or recover operating expenses will keep pace with inflation. The Company's leases have a weighted average lease term remaining of approximately 4.2 years. The Company has 94.9% of leases that provide for fixed base rent increases and 5.1% that provide for Consumer Price Index-based rent increases as of December 31, 2023.
New Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for information on new accounting standards including both standards that the Company adopted during the year and those that have not yet been adopted. The Company continues to evaluate the impact of the new standards that have not yet been adopted.
Other Items Impacting Operations
General and administrative expenses will fluctuate quarter-to-quarter. In the first quarter of each year, general and administrative expense include increases for certain expenses such as payroll taxes and healthcare savings account fundings. The Company expects these customary expenses to increase by approximately $0.9 million in the first quarter of 2024. Approximately $0.6 million is not expected to recur in subsequent quarters in 2024.
Results of Operations
Comparison of the YearsYear Ended December 31, 2021 and 2020
As of2023 Compared to Year Ended December 31, 20212022
The Company’s consolidated results of operations for 2023 compared to 2022 were significantly impacted by the Merger, acquisitions, dispositions, gain on sales and 2020, we ownedimpairment charges recorded on real estate properties, and operatedcapital markets transactions.
Revenues
Rental income increased $401.7 million, or 44.3%, to approximately 26.1$1.3 billion compared to $907.5 million in the prior year as a result of the following:
•Impact from the Merger contributed $377.0 million.
•Acquisitions in 2022 and 2023 contributed $19.4 million.
•Leasing activity contributed $21.5 million.
•Dispositions in 2022 and 2023 resulted in a decrease of $16.2 million.
Interest income increased $5.7 million, or 49.3%, from the prior year primarily as result of notes receivables assumed in the Merger and notes receivables entered into with a buyer upon disposition of properties during 2023.
Other operating income increased $3.7 million, or 27.3%, from the prior year primarily as a result of income from transient parking and management fees assumed with the Merger.
Expenses
Property operating expenses increased $156.4 million, or 45.5%, from the prior year primarily as a result of the following activity:
•Impact from the Merger resulted in an increase of $130.9 million.
•Acquisitions in 2022 and 2023 resulted in an increase of $8.9 million.
•Increases in portfolio operating expenses as follows:
◦Utilities expense of $7.0 million;
◦Administrative, leasing commissions, and other legal expense of $5.7 million;
◦Maintenance and repair expense of $4.9 million;
◦Janitorial expense of $1.9 million; and
◦Security expense of $0.1 million.
•Dispositions in 2022 and 2023 resulted in a decrease of $1.7 million.
•Property tax expense decreased $1.0 million.
•Insurance expense decreased $0.3 million.
General and administrative expenses increased approximately $5.7 million, or 10.8%, from the prior year primarily as a result of the following activity:
•Net increases, primarily due to impacts from the Merger, including professional fees, audit services, insurance, travel and other administrative costs, of $5.6 million.
•Payroll and related expenses of $1.5 million, of which $1.3 million was related to severance.
•Decrease in non-cash compensation incentive expense of $1.4 million.
The Company incurred Merger-related costs of $(2.0) million and 25.4$103.4 million, square feet of GLA, respectively, with a leased rate of 89.3% and 89.8%, respectively (which includes leases which have been executed, but which have not yet commenced), and an occupancy rate of 87.5% and 89.1%, respectively. All explanations are applicable to both HTA and HTALP unless otherwise noted.
Comparison offor the years ended December 31, 20212023 and 2020, respectively, is set forth below: | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | Change | | % Change |
| Revenues: | | | | | | | |
| Rental income | $ | 763,923 | | | $ | 738,414 | | | $ | 25,509 | | | 3.5 | % |
| Interest and other operating income | 3,150 | | | 551 | | | 2,599 | | | NM |
| Total revenues | 767,073 | | | 738,965 | | | 28,108 | | | 3.8 | |
| Expenses: | | | | | | | |
| Rental | 236,850 | | | 226,859 | | | 9,991 | | | 4.4 | |
| General and administrative | 49,744 | | | 42,969 | | | 6,775 | | | 15.8 | |
| Transaction | 372 | | | 965 | | | (593) | | | (61.5) | |
| Depreciation and amortization | 303,834 | | | 303,828 | | | 6 | | | — | |
| Interest expense | 92,762 | | | 94,613 | | | (1,851) | | | (2.0) | |
| Impairment | 22,938 | | | — | | | 22,938 | | | NM |
| Total expenses | 706,500 | | | 669,234 | | | 37,266 | | | 5.6 | |
| Gain (loss) on sale of real estate, net | 39,228 | | | 9,590 | | | 29,638 | | | NM |
| Loss on sale of corporate asset, net | (2,106) | | | — | | | (2,106) | | | NM |
| Loss on extinguishment of debt, net | — | | | (27,726) | | | 27,726 | | | NM |
| Income from unconsolidated joint venture | 1,604 | | | 1,612 | | | (8) | | | (0.5) | |
| Other income | 485 | | | 301 | | | 184 | | | 61.1 | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 46,276 | | | 86.5 | % |
| | | | | | | |
| NOI | $ | 530,223 | | | $ | 512,106 | | | $ | 18,117 | | | 3.5 | % |
| Same-Property Cash NOI | $ | 460,792 | | | $ | 452,972 | | | $ | 7,820 | | | 1.7 | % |
*NM- not meaningful
Comparison2022, which were included within Merger-related costs in results of the years ended December 31, 2020operations. The Merger-related costs primarily consisted of legal, consulting, severance, and 2019, respectively,banking services, and related discussions can be found in the Item 7. MD&A section under the Results of Operations header in our Annual Report on Form 10-K as filed on February 24, 2021 for the year ended December 31, 2020 which is herein incorporated by reference.Rental Income
For the years ended December 31, 2021 and 2020, respectively, rental income was comprised2023, included a refund of the following (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | Change | | % Change |
| Contractual rental income | $ | 728,218 | | | $ | 698,962 | | | $ | 29,256 | | | 4.2 | % |
| Straight-line rent and amortization of above and (below) market leases | 19,950 | | | 24,115 | | | (4,165) | | | (17.3) | |
| Other rental revenue | 15,755 | | | 15,337 | | | 418 | | | 2.7 | |
| Total rental income | $ | 763,923 | | | $ | 738,414 | | | $ | 25,509 | | | 3.5 | % |
Contractual rental income, which includes expense reimbursements, increased $29.3$17.8 million for transfer taxes paid during the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily due to $24.7 million of additional contractual rental income from our 2020 and 2021 acquisitions, and contractual rent increases for the year ended December 31, 2021.2022.
37
Average startingDepreciation and expiring base rents for new and renewal leases consisted ofamortization expense increased $277.6 million, or 61.3%, from the following for the years ended December 31, 2021 and 2020, respectively (in thousands, except in average base rents per square foot of GLA): | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
New and renewal leases: | | | |
| Average starting base rents | $ | 25.04 | | | $ | 27.04 | |
| Average expiring base rents | 21.98 | | | 25.84 | |
| | | |
| Square feet of GLA | 2,826 | | | 3,865 | |
Lease rates can vary across markets, and lease rates that are considered above or below current market rent may change over time. Leases that expired in 2021 had rents that we believed were at market rates. In general, leasing concessions vary depending on lease type and term.
Tenant improvements, leasing commissions and tenant concessions for new and renewal leases consisted of the following for the years ended December 31, 2021 and 2020, respectively (in per square foot of GLA): | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
| New leases: | | | |
| Tenant improvements | $ | 35.70 | | | $ | 38.16 | |
| Leasing commissions | 5.96 | | | 2.86 | |
| Tenant concessions | 7.05 | | | 3.70 | |
| Renewal leases: | | | |
| Tenant improvements | $ | 9.75 | | | $ | 5.58 | |
| Leasing commissions | 2.89 | | | 2.87 | |
| Tenant concessions | 0.14 | | | 1.99 | |
The average term for new and renewal leases executed consisted of the following for the years ended December 31, 2021 and 2020, respectively (in years): | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
| New leases | 6.4 | | 7.9 |
| Renewal leases | 4.9 | | 5.4 |
Rental Expenses
For the years ended December 31, 2021 and 2020, rental expenses attributable to our properties were $236.9 million and $226.9 million, respectively. The increase in rental expenses isprior year primarily due to $8.4 million of additional rental expenses associated with our 2020 and 2021 acquisitions for the year ended December 31, 2021.
General and Administrative Expenses
For the years ended December 31, 2021 and 2020 general and administrative expenses were $49.7 million and $43.0 million, respectively. This increase was driven by costs related to the Company’s: (i) whistleblower investigation (as further outlined in the Company’s Current Report on Form 8-K filed November 4, 2021), (ii) CEO search costs, (iii) the announced strategic review process, and (iv) employee retention costs and administrative costs with respect to having an interim CEO. Costs related to these matters primarily included: (i) an increase in compensation and employee expenses including $0.9 million of increased bonus accruals related to Company out-performance on total shareholder return in Q3 2021, $0.7 million of CEO search fees, and $0.5 million of short-term consulting and other employee retention costs; (ii) increased legal and professional fees of $2.3 million primarily related to ongoing whistleblower and strategic review matters; (iii) increased corporate-related travel costs of $0.5 million; and (iv) increased board fees of $0.6 million as a result of the following activity:
•Impact from the Merger, including purchase accounting fair value adjustments, resulted in an increase of $251.2 million.
•Acquisitions in 2022 and 2023 resulted in an increase of 9.8 million.
•Various building and tenant improvement expenditures caused an increase of $28.3 million.
•Dispositions in 2022 and 2023 resulted in a significant increasedecrease of $1.1 million.
•Assets that became fully depreciated resulted in board and committee meetings pertaininga decrease of $10.6 million.
Other Income (Expense)
Other income (expense), as an expense increased $400.7 million, or 621.1%, from the prior year mainly due to the CEO search and whistleblower and strategic review matters, as well as additional compensation for the lead independent director in his appointed role as board chairman.following activity:
Transaction ExpensesGain on Sales of Real Estate Properties
For the years ended December 31, 2021 and 2020, transaction expenses were $0.4Gain on sales of real estate properties totaling approximately $77.5 million and $1.0$270.3 million respectively. The decrease in 2021 compared to 2020 was primarily due to decreased acquisition costs in 2021 as compared to 2020.
Depreciation12 and Amortization Expense
For each of the years ended December 31, 2021ten real estate properties during 2023 and 2020, depreciation and amortization expense was $303.8 million. Depreciation and amortization for 2021 was neutral compared to 2020 as most of our investments were in the last half of 2021 and a 13 property portfolio was disposed of in the first half of 2021.2022, respectively.
Interest Expense
Interest expense decreased by $1.9 million during the year ended December 31, 2021 compared to 2020. For the year ended December 31, 2021, the decrease was primarily due to lower average interest rates as compared to 2020.
To achieve our objectives, we borrow at both fixed and variable rates. From time to time, we also enter into derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.
Gain (loss) on Sale of Real Estate
For the year ended December 31, 2021, we realized a net gain of $39.2 million from the disposition of fifteen MOBs located in non-key markets in Tennessee, Virginia, Minnesota and Ohio. For the year ended December 31, 2020, we realized a net gain on the sale of real estate of $7.6 million from the disposition of one MOB Kansas City. See Note 4 - Dispositions and Impairment in the accompanying consolidated financial statements in Part IV, Item 15 for more detail on the dispositions.
Loss on Extinguishment of Debt
For the year ended December 31, 2020, we realized a net loss on the extinguishment of debt of $27.7 million, related to make-whole provisions in the redemption of senior unsecured notes. For the year ended December 31, 2021 there was no extinguishment of debt.
Net Income
Net income increased $46.3 million to $99.8$111.9 million for the year ended December 31, 2021, compared to $53.5 million for the year ended December 31, 2020. This increase was primarily the result of additional gains recognized on the sale of assets in non-core markets of $29.6 million and a loss in 2020 on extinguishment of debt of $27.7 million.
NOI and Same-Property Cash NOI
NOI increased $18.1 million to $530.2 million for the year ended December 31, 2021,2023 compared to the year ended December 31, 2020.prior year. The increase was primarily due to $19.1 millioncomponents of additional NOI from our 2020 and 2021 acquisitions for the year ended December 31, 2021, partially offset by $4.2 million of reduced NOI from our 2020 and 2021 dispositions for the year ended December 31, 2021.interest expense are as follows:
Same-Property Cash NOI | | | | | | | | | | | | | | |
| | | CHANGE |
| Dollars in thousands | 2023 | 2022 | $ | % |
| Contractual interest | $ | 208,305 | | $ | 118,085 | | $ | 90,220 | | 76.4 | % |
| Net discount/premium accretion | 38,941 | | 18,227 | | 20,714 | | 113.6 | % |
| Debt issuance costs amortization | 5,588 | | 4,256 | | 1,332 | | 31.3 | % |
| Amortization of interest rate swap settlement | 168 | | 168 | | — | | — | % |
| Amortization of treasury hedge settlement | 427 | | 427 | | — | | — | % |
| Fair value derivative | 4,412 | | 4,057 | | 355 | | 8.8 | % |
| Interest cost capitalization | (2,961) | | (1,409) | | (1,552) | | 110.1 | % |
| Interest on lease liabilities | 3,704 | | 2,880 | | 824 | | 28.6 | % |
| Total interest expense | $ | 258,584 | | $ | 146,691 | | $ | 111,893 | | 76.3 | % |
Contractual interest increased $7.8 $90.2 million, or 1.7%76.4%, to $460.8 million for the year ended December 31, 2021, compared to $453.0 million for the year ended December 31, 2020. These increases were primarily theas a result of contractual rent escalationsthe following activity:
•Senior notes and improved operating efficiencies offset by a slight decreaseunsecured term loans assumed in average occupancy.the Merger accounted for an increase of approximately $54.7 million.
Non-GAAP Financial Measures
FFO and Normalized FFO
We compute FFO in accordance•New unsecured term loans executed with the current standards established by NAREIT. FFO is defined asamended credit facility accounted for an increase of approximately $30.1 million.
•The Company's Unsecured Term Loans due 2024 and due 2026, accounted for an increase of approximately $11.9 million.
•The Unsecured Credit Facility accounted for an increase of approximately $10.4 million.
•Active interest rate derivatives accounted for a decrease of $16.6 million.
•Mortgage note repayments, net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP), excluding gains or losses from salesof assumptions, accounted for a decrease of approximately $0.3 million.
Impairment of Real Estate Assets and Credit Loss Reserves
Impairment of real estate property and impairment write-downsassets in 2023 totaling approximately $149.7 million is associated with completed or planned disposition activity. Additionally, the Company recorded $5.2 million of depreciable assets, plus depreciation and amortization related to investments incredit loss reserves on its mortgage notes receivable.
Impairment of real estate and after adjustments for unconsolidated partnerships and joint ventures. Additionally,assets in 2022 totaling approximately $54.4 million is associated with respect to gains and losses on the sale of assets incidental to the main business of a REIT, the REIT has the option to includecompleted or exclude such gains and losses in the calculation of FFO. Since FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders/unitholders.
We also compute Normalized FFO, which excludes from FFO: (i) transaction expenses; (ii) gain or loss on extinguishment of debt; (iii) non-controlling income or loss from OP Units included in diluted shares (only applicable to the Company); and (iv) other normalizing adjustments, which include items that are unusual and infrequent in nature. Our methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs.planned disposition activity.
We present FFO and Normalized FFO because we consider them important supplemental measures of our operating performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Historical cost accounting assumes that the value of real estate assets diminishes ratably over time. Since real estate values have historically risen or fallen based on market conditions, many industry investors have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. FFO and Normalized FFO should not be considered as alternatives to net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP) as indicators of our financial performance, nor are they indicative of cash available to fund cash needs. FFO and Normalized FFO should be reviewed in connection with other GAAP measurements.
In addition, the amounts included in the calculation of FFO and Normalized FFO are generally the same for HTALP and HTA, except for net income or loss attributable to common stockholders/unitholders, non-controlling income or loss from OP Units included in diluted shares (only applicable to the Company) and the weighted average shares of our common stock or HTALP OP Units outstanding.
The following is the reconciliation of HTA’s FFO and Normalized FFO to net income attributable to common
stockholders for the years ended December 31, 2021 and 2020, respectively (in thousands, except per share data): | | | | | | | | | | | | | |
| | Year Ended December 31, |
| 2021 | | 2020 | | |
| Net income attributable to common stockholders | $ | 98,016 | | | $ | 52,618 | | | |
| Depreciation and amortization expense related to investments in real estate | 300,605 | | | 299,722 | | | |
| Gain on sale of real estate, net | (39,228) | | | (9,590) | | | |
| Loss on sale of corporate asset, net | 2,106 | | | — | | | |
| Impairment | 22,938 | | | — | | | |
| Proportionate share of joint venture depreciation and amortization | 1,949 | | | 1,949 | | | |
| FFO attributable to common stockholders | $ | 386,386 | | | $ | 344,699 | | | |
| Transaction expenses | 372 | | | 965 | | | |
| | | | | |
| Loss on extinguishment of debt, net | — | | | 27,726 | | | |
| Non-controlling income from OP Units included in diluted shares | 1,768 | | | 890 | | | |
Other normalizing adjustments (1) | 3,284 | | | 5,031 | | | |
| Normalized FFO attributable to common stockholders | $ | 391,810 | | | $ | 379,311 | | | |
| | | | | |
| Net income attributable to common stockholders per diluted share | $ | 0.44 | | | $ | 0.24 | | | |
| FFO adjustments per diluted share, net | 1.28 | | | 1.32 | | | |
| FFO attributable to common stockholders per diluted share | $ | 1.72 | | | $ | 1.56 | | | |
| Normalized FFO adjustments per diluted share, net | 0.03 | | | 0.15 | | | |
| Normalized FFO attributable to common stockholders per diluted share | $ | 1.75 | | | $ | 1.71 | | | |
| | | | | |
| Weighted average diluted common shares outstanding | 224,215 | | | 221,666 | | | |
| | | | | |
| (1) For the year ended December 31, 2021, other normalizing adjustments includes the following: costs related to whistleblower investigation of $1,645; CEO search fees of $743; costs related to strategic matters of $387; and corresponding additional board and consulting fees of $509. For the year ended December 31, 2020, other normalizing adjustments includes the following: non-recurring bad debt of $4,672, incremental hazard pay to facilities employees of $314, and incremental personal protective equipment of $45. | | |
The following is the reconciliation of HTALP’s FFO and Normalized FFO to net income attributable to common unitholders for the years ended December 31, 2021 and 2020, respectively (in thousands, except per unit data): | | | | | | | | | | | | | |
| | Year Ended December 31, |
| 2021 | | 2020 | | |
| Net income attributable to common OP unitholders | $ | 99,784 | | | $ | 53,508 | | | |
| Depreciation and amortization expense related to investments in real estate | 300,605 | | | 299,722 | | | |
| Gain on sale of real estate, net | (39,228) | | | (9,590) | | | |
| Loss on sale of corporate asset, net | 2,106 | | | — | | | |
| Impairment | 22,938 | | | — | | | |
| Proportionate share of joint venture depreciation and amortization | 1,949 | | | 1,949 | | | |
| FFO attributable to common OP unitholders | $ | 388,154 | | | $ | 345,589 | | | |
| Transaction expenses | 372 | | | 965 | | | |
| | | | | |
| Loss on extinguishment of debt, net | — | | | 27,726 | | | |
Other normalizing adjustments (1) | 3,284 | | | 5,031 | | | |
| Normalized FFO attributable to common OP unitholders | $ | 391,810 | | | $ | 379,311 | | | |
| | | | | |
| Net income attributable to common OP unitholders per diluted OP unit | $ | 0.45 | | | $ | 0.24 | | | |
| FFO adjustments per diluted OP unit, net | 1.28 | | | 1.32 | | | |
| FFO attributable to common OP unitholders per diluted OP unit | $ | 1.73 | | | $ | 1.56 | | | |
| Normalized FFO adjustments per diluted OP unit, net | 0.02 | | | 0.15 | | | |
| Normalized FFO attributable to common OP unitholders per diluted OP unit | $ | 1.75 | | | $ | 1.71 | | | |
| | | | | |
| Weighted average diluted common OP units outstanding | 224,215 | | | 221,666 | | | |
| | | | | |
| (1) For the year ended December 31, 2021, other normalizing adjustments includes the following: costs related to whistleblower investigation of $1,645; CEO search fees of $743; costs related to strategic matters of $387; and corresponding additional board and consulting fees of $509. For the year ended December 31, 2020, other normalizing adjustments includes the following: non-recurring bad debt of $4,672, incremental hazard pay to facilities employees of $314, and incremental personal protective equipment of $45. | | |
NOI, Cash NOI and Same-Property Cash NOI
NOI is a non-GAAP financial measure that is defined as net income or loss (computed in accordance with GAAP) before: (i) general and administrative expenses; (ii) transaction expenses; (iii) depreciation and amortization expense; (iv) impairment; (v) interest expense; (vi) gain or loss on sales of real estate and corporate assets; (vii) gain or loss on extinguishment of debt; (viii) income or loss from unconsolidated joint venture; and (ix) other income or expense. We believe that NOI provides an accurate measure of the operating performance of our operating assets because NOI excludes certain items that are not associated with the management of our properties. Additionally, we believe that NOI is a widely accepted measure of comparative operating performance of REITs. However, our use of the term NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. NOI should be reviewed in connection with other GAAP measurements.
Cash NOI is a non-GAAP financial measure which excludes from NOI: (i) straight-line rent adjustments; (ii) amortization of below and above market leases/leasehold interests and other GAAP adjustments; (iii) notes receivable interest income; and (iv) other normalizing adjustments. Contractual base rent, contractual rent increases, contractual rent concessions and changes in occupancy or lease rates upon commencement and expiration of leases are a primary driver of our revenue performance. We believe that Cash NOI, which removes the impact of straight-line rent adjustments, provides another measurement of the operating performance of our operating assets. Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance of REITs. However, our use of the term Cash NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. Cash NOI should be reviewed in connection with other GAAP measurements.
To facilitate the comparison of Cash NOI between periods, we calculate comparable amounts for a subset of our owned and operational properties referred to as “Same-Property”. Same-Property Cash NOI excludes (i) properties which have not been owned and operated by us during the entire span of all periods presented and disposed properties, (ii) our share of unconsolidated joint ventures, (iii) development, redevelopment and land parcels, (iv) properties intended for disposition in the near term which have (a) been approved by the Board of Directors, (b) is actively marketed for sale, and (c) an offer has been received at prices we would transact and the sales process is ongoing, and (v) certain non-routine items. Same-Property Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. Same-Property Cash NOI should be reviewed in connection with other GAAP measurements.
The following is the reconciliation of HTA’s and HTALP’s NOI, Cash NOI and Same-Property Cash NOI to net income for the years ended December 31, 2021 and 2020, respectively (in thousands): | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 |
| Net income | $ | 99,784 | | | $ | 53,508 | |
| General and administrative expenses | 49,744 | | | 42,969 | |
| Transaction expenses | 372 | | | 965 | |
| Depreciation and amortization expense | 303,834 | | | 303,828 | |
| Impairment | 22,938 | | | — | |
| Interest expense | 92,762 | | | 94,613 | |
| Gain on sale of real estate, net | (39,228) | | | (9,590) | |
| Loss on sale of corporate asset, net | 2,106 | | | — | |
| Loss on extinguishment of debt, net | — | | | 27,726 | |
| Income from unconsolidated joint venture | (1,604) | | | (1,612) | |
| Other income | (485) | | | (301) | |
| NOI | $ | 530,223 | | | $ | 512,106 | |
| Straight-line rent adjustments, net | (13,883) | | | (15,971) | |
| Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments | (1,899) | | | (2,722) | |
| Notes receivable interest income | (2,730) | | | (161) | |
Other normalizing adjustments (1) | — | | | 5,031 | |
| Cash NOI | $ | 511,711 | | | $ | 498,283 | |
The following is the reconciliation of HTA’s and HTALP’s Same-Property Cash NOI to Cash NOI for the years ended December 31, 2021 and 2020, respectively (in thousands): | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 |
| Cash NOI | $ | 511,711 | | | $ | 498,283 | |
| Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI | (24,401) | | | (12,133) | |
| Redevelopment Cash NOI | (928) | | | (4,435) | |
| Intended for sale Cash NOI | (25,590) | | | (28,743) | |
Same-Property Cash NOI (2) | $ | 460,792 | | | $ | 452,972 | |
| | | |
| (1) For the year ended December 31, 2020, other normalizing adjustments includes the following: Non-recurring bad debt of $4,672, incremental hazard pay to facilities employees of $314, and incremental personal protective equipment of $45. |
| (2) Same-Property includes 414 buildings for the years ended December 31, 2021 and 2020. |
Liquidity and Capital Resources
Our primary sources of cash include: (i) cash flow from operations; (ii) borrowings under our unsecured revolving credit facility; (iii) net proceeds from the issuances of debt and equity securities; and (iv) proceeds from our dispositions. During the next 12 months our primary uses of cash are expected to include: (a) the funding of acquisitions of MOBs, development properties and other facilities that serve the healthcare industry; (b) capital expenditures; (c) the payment of operating expenses; (d) debt service payments, including principal payments; and (e) the payment of dividends to our stockholders. We anticipate cash flow from operations, restricted cash and reserve accounts and our unsecured revolving credit facility, if needed, will be sufficient to fund our operating expenses, capital expenditures and dividends to stockholders. Investments and maturing indebtedness may require funds from the issuance of debt and/or equity securities or proceeds from sales of real estate.
As of December 31, 2021, we had liquidity of $1.1 billion, including $1.0 billion available under our unsecured revolving credit facility and $52.4 million of cash and cash equivalents.
In addition, we had unencumbered assets with a gross book value of $7.9 billion. The unencumbered properties may be used as collateral to secure additional financings in future periods or refinance our current debt as it becomes due. Our ability to raise funds from future debt and equity issuances is dependent on our investment grade credit ratings, general economic and market conditions and our operating performance.
When we acquire a property, we prepare a capital plan that contemplates the estimated capital needs of that investment. In addition to operating expenses, capital needs may also include costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of December 31, 2021, we estimate that our expenditures for capital improvements including lease commissions for 2022 will range from $115 million to $135 million depending on leasing activity. In addition, we have approximately $110 million inclusive of costs to complete on active development projects and incremental tenant improvements as part of our recently completed development projects. Although we cannot provide assurance that we will not exceed these estimated expenditure levels, our liquidity of $1.1 billion allows us the flexibility to fund such capital expenditures.
If we experience lower occupancy levels, reduced rental rates, reduced revenues as a result of asset sales, or increased capital expenditures and leasing costs compared to historical levels due to competitive market conditions for new and renewal leases, the effect would be a reduction of net cash provided by operating activities. If such a reduction of net cash provided by operating activities is realized, we may have a cash flow deficit in subsequent periods. Our estimate of net cash available is based on various assumptions which are difficult to predict, including the levels of our leasing activity and related leasing costs. Any changes in these assumptions could impact our financial results and our ability to fund working capital and unanticipated cash needs.
Cash Flows
The following is a summary of our cash flows for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Current Year Change | | Prior Year Change |
| 2021 | | 2020 | | 2019 | | |
| Cash, cash equivalents and restricted cash - beginning of year | $ | 118,765 | | | $ | 37,616 | | | $ | 133,530 | | | $ | 81,149 | | | $ | (95,914) | |
| Net cash provided by operating activities | 385,616 | | | 387,962 | | | 340,394 | | | (2,346) | | | 47,568 | |
| Net cash used in investing activities | (399,855) | | | (319,260) | | | (667,289) | | | (80,595) | | | 348,029 | |
| Net cash (used in) provided by financing activities | (47,457) | | | 12,447 | | | 230,981 | | | (59,904) | | | (218,534) | |
| Cash, cash equivalents and restricted cash - end of year | $ | 57,069 | | | $ | 118,765 | | | $ | 37,616 | | | $ | (61,696) | | | $ | 81,149 | |
Net cash provided by operating activities in 2021 was flat compared to 2020 as most of our 2021investments were in the last half of 2021 and a 13 property portfolio was disposed of in the first half of 2021. We do anticipate cash flows from operating activities to increase from the impact of those later investments, contractual increases and continued leasing activity in our existing portfolio.
For the year ended December 31, 2021, net cash used in investing activities primarily related to the investment in real estate of $264.3 million, capital expenditures of $97.2 million, advances on real estate notes receivable of $82.2 million and development costs of $63.3 million, partially offset by proceeds from the sale of real estate of $87.6 million and collection of real estate notes receivable of $15.4 million. For the year ended December 31, 2020, net cash used in investing activities primarily related to investments in real estate of $185.3 million, capital expenditures of $74.7 million and development costs of $77.1 million, partially offset by proceeds from the sale of real estate of $22.9 million. For the year ended December 31, 2019, net cash used in investing activities primarily related to investments in real estate of $553.3 million, capital expenditures of $91.5 million and development costs of $28.1 million, partially offset by proceeds from the sale of real estate of $4.9 million.
For the year ended December 31, 2021, net cash used in financing activities primarily related to dividends paid to holders of our common stock of $281.8 million, deferred financing costs of $8.1 million, and distributions paid to non-controlling interest of limited partners of $5.4 million, partially offset by net proceeds of shares of common stock issued of $251.3 million. For the year ended December 31, 2020, net cash provided by financing activities primarily related to the proceeds from unsecured senior notes of $793.6 million and net proceeds of shares of common stock issued of $50.0 million, offset by payments on our unsecured senior notes of $300.0 million, dividends paid to holders of our common stock of $275.8 million, payments on our secured mortgage loans of $114.1 million, net payments under our revolving credit facility of $100.0 million and the repurchase and cancellation of our common stock of $5.2 million. For the year ended December 31, 2019, net cash provided by financing activities primarily related to the proceeds from unsecured notes of $906.9 million, net proceeds of shares of common stock issued of $323.4 million, and net borrowings under our revolving credit facility of $100.0 million which was partially offset by payments on our unsecured notes of $700.0 million, dividends paid to holders of our common stock of $256.1 million, payments on our secured mortgage loans of $97.4 million, and the repurchase and cancellation of our common stock of $12.2 million.
Dividends
The amount of dividends we pay to our stockholders is determined by our Board of Directors, in their sole discretion, and is dependent on a number of factors, including funds available, our financial condition, capital expenditure requirements and annual dividend distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended. We have paid monthly or quarterly dividends since February 2007, and if our investments produce sufficient cash flow, we expect to continue to pay dividends to our stockholders. Because our cash available for dividend distributions in any year may be less than 90% of our taxable income for the year, we may obtain the necessary funds through borrowings, issuing new securities or selling assets to pay out enough of our taxable income to satisfy our dividend distribution requirement. Our organizational documents do not establish a limit on dividends that may constitute a return of capital for federal income tax purposes. The dividend we pay to our stockholders is equal to the distributions received from HTALP in accordance with the terms of the HTALP partnership agreement. It is our intention to continue to pay dividends. However, our Board of Directors may reduce our dividend rate and we cannot guarantee the timing and amount of dividends that we may pay in the future, if any.
For the year ended December 31, 2021, we paid cash dividends of $281.8 million on our common stock. In January 2022, we paid cash dividends on our common stock of $74.4 million for the quarter ended December 31, 2021.
Financing
We have historically maintained a low leveraged balance sheet and intend to continue to maintain this structure in the long term. However, our total leverage may fluctuate on a short-term basis as we execute our business strategy. As of December 31, 2021, our leverage ratio, measured by debt less cash and cash equivalents to total capitalization, was 27.7%.
As of December 31, 2021, we had debt outstanding of $3.0 billion and the weighted average interest rate therein was 2.87% per annum, inclusive of the impact of our cash flow hedges. The following is a summary of our unsecured and secured debt. See Note 8 - Debt in the accompanying consolidated financial statements in Part IV, Item 15 for a further discussion of our debt.
Unsecured Revolving Credit Facility
As of December 31, 2021, the full $1.0 billion was available on our unsecured revolving credit facility. Our unsecured revolving credit facility matures in October 2025.
Unsecured Term Loans
As of December 31, 2021, we had $500.0 million of unsecured term loans outstanding, comprised of $300.0 million under our Unsecured Credit Agreement maturing in 2025, and $200.0 million under our unsecured term loan maturing in 2024.
Unsecured Senior Notes
As of December 31, 2021, we had $2.55 billion of unsecured senior notes outstanding, comprised of $600.0 million of senior notes maturing in 2026, $500.0 million of senior notes maturing in 2027, $650.0 million of senior notes maturing in 2030, and $800.0 million of senior notes maturing in 2031.
Commitments and Contingencies
See Note 10 - Commitments and Contingencies in the accompanying consolidated financial statements in Part IV, Item 15 for a further discussion of our commitments and contingencies.
Debt Service Requirements
We are required by the terms of our applicable loan agreements to meet certain financial covenants, such as minimum net worth and liquidity, and reporting requirements, among others. As of December 31, 2021, we believe that we were in compliance with all such covenants and we are not aware of any covenants that it is reasonably likely that we would not be able to meet in accordance with our loan agreements.
Contractual Obligations
The table below presents our obligations and commitments to make future payments under our debt obligations and lease agreements as of December 31, 2021 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payment Due by Period |
| | Less than 1 Year | | 1-3 Years | | 3-5 Years | | More than 5 Years | | Total |
| Debt | $ | — | | | $ | 200,000 | | | $ | 900,000 | | | $ | 1,950,000 | | | $ | 3,050,000 | |
Interest (1) | 83,190 | | | 170,538 | | | 158,088 | | | 161,275 | | | 573,091 | |
| Ground lease and other operating lease obligations | 11,198 | | | 22,403 | | | 21,027 | | | 637,478 | | | 692,106 | |
| Total | $ | 94,388 | | | $ | 392,941 | | | $ | 1,079,115 | | | $ | 2,748,753 | | | $ | 4,315,197 | |
| | | | | | | | | |
| (1) Interest on variable rate debt is calculated using the forward rates in effect at December 31, 2021 and excludes the impact of our interest rate swaps. Forward rates do not contemplate the transition of LIBOR to Secured Overnight Financing Rate or other rate to be used in the calculation of interest amounts. Any differences between LIBOR and alternative rates are not deemed to be material. |
Off-Balance Sheet Arrangements
As of and during the year ended December 31, 2021, we had no material off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, other than operating lease arrangements consisting primarily of ground leases which as of December 31, 2021 were not carried on our consolidated balance sheets.
Inflation
We are exposed to inflation risk as income from future long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that protect us from the impact of normal inflation. These provisions include rent escalations, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements on a per square foot allowance. However, due to the long-term nature of our leases, among other factors, the leases may not reset frequently enough to cover inflation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we believe the primary market risk to which we have exposure is interest rate risk.
We are exposed to the effects of interest rate changes on our variable rate debt. Interest rate changes on our fixed rate debt will generally not affect our future earnings or cash flows unless such instruments mature or are otherwise terminated. Our interest rate risk is monitored using a variety of techniques. In order to mitigate our interest rate risk, we enter into derivative financial instruments such as interest rate swaps and caps. To the extent we enter into such derivative financial instruments, we are exposed to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, it does not possess credit risk. It is our policy to enter into these transactions with what we believe are high quality counterparties, including those with whom we have a lending relationship. We believe the likelihood of realized losses from counterparty non-performance is remote. We manage the market risk associated with interest rate swaps or caps by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. We do not enter into derivative or interest rate transactions for speculative purposes.
The table below presents, as of December 31, 2021, information about HTA's financial instruments that are sensitive to changes in interest rates, including interest rate swaps and debt obligations. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on implied forward rates in effect as of December 31, 2021 (in thousands, except interest rates): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Expected Maturity Date | | |
| | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total (1) | | Fair Value |
| Fixed rate debt, gross | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 600,000 | | | $ | 1,950,000 | | | $ | 2,550,000 | | | $ | 2,616,630 | |
| Weighted average interest rate on fixed rate debt (per annum) | — | % | | — | % | | — | % | | — | % | | 3.50 | % | | 2.82 | % | | 2.98 | % | | |
| Variable rate debt, gross | $ | — | | | $ | — | | | $ | 200,000 | | | $ | 300,000 | | | $ | — | | | $ | — | | | $ | 500,000 | | | $ | 500,972 | |
| Weighted average interest rate on variable rate debt (per annum) | — | % | | — | % | | 2.25 | % | | 2.52 | % | | — | % | | — | % | | 2.41 | % | | |
| Interest Rate Swaps: | | | | | | | | | | | | | | | |
| Variable to Fixed | $ | — | | | $ | 300,000 | | | $ | 200,000 | | | $ | — | | | $ | — | | | $ | — | | | $ | 500,000 | | | $ | 5,069 | |
| Average pay rate | — | % | | 1.42 | % | | 1.32 | % | | — | % | | — | % | | — | % | | 1.38 | % | | |
| Average receive rate | — | % | | 1.24 | % | | 1.25 | % | | — | % | | — | % | | — | % | | 1.24 | % | | |
| | | | | | | | | | | | | | | |
| (1) Total for interest rate swaps represents notional amount of derivative financial instruments designated as cash flow hedges. |
As of December 31, 2021, we had $3.1 billion of gross fixed and variable rate debt with interest rates ranging from 0.98% to 3.75% per annum and a weighted average interest rate of 2.67% per annum, excluding the impact of cash flow hedges. We had $2.6 billion (excluding net premium/discount and deferred financing costs) of fixed rate debt with a weighted average interest rate of 2.98% per annum and $500.0 million (excluding net premium/discount and deferred financing costs) of variable rate debt with a weighted average interest rate of 1.09% per annum as of December 31, 2021, excluding the impact of cash flow hedges.
In addition to changes in interest rates, the value of our future properties is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt if necessary.
Item 8. Financial Statements and Supplementary Data
See the disclosure listed at Item 15 - Exhibits, Financial Statement Schedules subsections (a)(1) and (a)(2).
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Healthcare Trust of America, Inc.
(a) Evaluation of disclosure controls and procedures. HTA’s management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including HTA’s Chief Executive Officer (as the principal executive officer) and HTA’s Chief Financial Officer (as the principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosures.
As of December 31, 2021, an evaluation was conducted by HTA under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and HTA’s Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, HTA’s Chief Executive Officer and HTA’s Chief Financial Officer each concluded that HTA’s disclosure controls and procedures were effective as of December 31, 2021.
(b) Management’s report on internal control over financial reporting. HTA’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of HTA’s management, including its Chief Executive Officer and Chief Financial Officer, HTA conducted an evaluation of the effectiveness of its internal control over financial reporting based on the criteria in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, HTA’s Interim Chief Executive Officer and HTA’s Chief Financial Officer concluded that HTA’s internal control over financial reporting was effective as of December 31, 2021.
Our independent registered public accounting firm, Deloitte & Touche LLP, independently assessed the effectiveness of HTA’s internal control over financial reporting. Deloitte & Touche LLP has issued a report, which is included at the end of Item 9A of this Annual Report.
(c) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
March 1, 2022
Healthcare Trust of America Holdings, LP
(a) Evaluation of disclosure controls and procedures. HTALP’s management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including HTA’s Chief Executive Officer (as the principal executive officer) and HTA’sChief Financial Officer (as the principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosures.
As of December 31, 2021, an evaluation was conducted by HTALP under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and HTA’s Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, HTA’s Interim Chief Executive Officer and HTA’sChief Financial Officer, on behalf of HTA in its capacity as general partner of HTALP, each concluded that HTALP’s disclosure controls and procedures were effective as of December 31, 2021.
(b) Management’s report on internal control over financial reporting. HTALP’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and HTA’s Chief Financial Officer, HTALP conducted an evaluation of the effectiveness of its internal control over financial reporting based on the criteria in the 2013 Internal Control-Integrated Framework issued by COSO. Based on this evaluation, HTALP’s management, including HTA’s Chief Executive Officer and HTA’s Chief Financial Officer, concluded that HTALP’s internal control over financial reporting was effective as of December 31, 2021.
This Annual Report does not include an attestation report of HTALP’s independent registered public accounting firm, Deloitte & Touche LLP, pursuant to rules of the SEC applicable to “non-accelerated filers.”
(c) Changes in internal control over financial reporting. There were no changes in HTALP’s internal control over financial reporting that occurred during the year ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, HTALP’s internal control over financial reporting.
March 1, 2022
Equity income (loss) from unconsolidated joint ventures
The Company recognizes its proportionate share of losses from its unconsolidated joint ventures. The losses are primarily attributable to non-cash depreciation expense. See Note 5 for more details regarding the Company's unconsolidated joint ventures.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
The Company's discussion regarding the comparison of the year ended December 31, 2022 compared to the year ended December 31, 2021 was previously disclosed beginning on page 39 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023, and is incorporated herein by reference.
Non-GAAP Financial Measures and Key Performance Indicators
Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of these measures to the most directly comparable GAAP financial measures.
The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.
Funds from Operations ("FFO"), Normalized FFO and Funds Available for Distribution ("FAD")
FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, impairment, and after adjustments for unconsolidated partnerships and joint ventures.”
In addition to FFO, the Company presents Normalized FFO and FAD. Normalized FFO is presented by adding to FFO acquisition-related costs, acceleration of debt issuance costs, debt extinguishment costs and other Company-defined normalizing items to evaluate operating performance. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense and provision for bad debts, net; and subtracting straight-line rent income, net of expense, and maintenance capital expenditures, including second generation tenant improvements, capital expenditures and leasing commissions paid. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO, and FAD should not be considered as an alternative to net income as an indicator of the Company's financial performance or to cash flow from operating activities as an indicator of the Company's liquidity. FFO, Normalized FFO, and FAD should be reviewed in connection with GAAP financial measures.
Management believes FFO, Normalized FFO, FFO per share, Normalized FFO per share and FAD ("Non-GAAP Measures") provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily gains on sales of real estate, impairments and depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation,
amortization, impairments and gains or losses from sales of real estate, all of which are based on historical costs, and which may be of limited relevance in evaluating current performance, Non-GAAP Measures can facilitate comparisons of operating performance between periods. The Company reports Non-GAAP Measures because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these Non-GAAP Measures. However, none of these measures represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. Further, these measures should not be considered as an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.
The table below reconciles net income attributable to common stockholders to FFO, Normalized FFO and FAD attributable to common stockholders for the years ended December 31, 2023, 2022, and 2021.
| | | | | | | | | | | |
| | YEAR ENDED DECEMBER 31, |
| Amounts in thousands, except per share data | 2023 | | 2022 | | 2021 | |
| Net (loss) income attributable to common stockholders | $ | (278,261) | | $ | 40,897 | | $ | 66,659 | |
Net (loss) income attributable to common stockholders per diluted share 1 | $ | (0.74) | | $ | 0.15 | | $ | 0.45 | |
| | | |
| Gain on sales of real estate assets | (77,546) | | (270,271) | | (55,940) | |
| Impairments | 149,717 | | 54,427 | | 17,101 | |
| Real estate depreciation and amortization | 738,526 | | 459,211 | | 208,155 | |
| Non-controlling income from operating partnership units | (3,426) | | (5) | | — | |
| Proportionate share of unconsolidated joint ventures | 18,116 | | 12,722 | | 5,541 | |
| FFO adjustments | $ | 825,387 | | $ | 256,084 | | $ | 174,857 | |
FFO adjustments per common share - diluted 8 | $ | 2.15 | | $ | 1.01 | | $ | 1.22 | |
| FFO attributable to common stockholders | $ | 547,126 | | $ | 296,981 | | $ | 241,516 | |
FFO attributable to common stockholders per common share - diluted 7 | $ | 1.43 | | $ | 1.17 | | $ | 1.68 | |
| | | |
Acquisition and pursuit costs 2 | 2,026 | | 3,229 | | 3,930 | |
Merger-related costs 3 | (1,952) | | 103,380 | | — | |
| Merger-related fair value of debt instruments | 42,885 | | 21,248 | | — | |
| Lease intangible amortization | 860 | | 1,028 | | 162 | |
Allowance for credit losses 4 | 8,599 | | — | | — | |
| Non-routine legal costs/forfeited earnest money received | 175 | | 771 | | (35) | |
| Debt financing costs | (62) | | 3,145 | | 283 | |
| Severance costs | 1,445 | | — | | — | |
Unconsolidated JV normalizing items 5 | 389 | | 330 | | 225 | |
| Normalized FFO adjustments | $ | 54,365 | | $ | 133,131 | | $ | 4,565 | |
Normalized FFO adjustments per common share - diluted 8 | $ | 0.14 | | $ | 0.52 | | $ | 0.03 | |
| Normalized FFO attributable to common stockholders | $ | 601,491 | | $ | 430,112 | | $ | 246,081 | |
Normalized FFO attributable to common stockholders per common share - diluted 8 | $ | 1.57 | | $ | 1.69 | | $ | 1.71 | |
| | | |
| Non-real estate depreciation and amortization | 2,566 | | 2,217 | | 2,397 | |
Non-cash interest expense amortization 6 | 4,968 | | 5,129 | | 3,182 | |
| Provision for bad debt, net | 3,163 | | 516 | | 73 | |
| Straight-line rent income, net | (32,592) | | (20,124) | | (4,303) | |
| Share-based compensation | 13,791 | | 14,294 | | 10,729 | |
Unconsolidated JV non-cash items 7 | (1,034) | | (1,206) | | (1,357) | |
| Normalized FFO adjusted for non-cash items | $ | 592,353 | | $ | 430,938 | | $ | 256,802 | |
| 2nd Generation tenant improvements | (66,081) | | (33,620) | | (26,363) | |
| Leasing commissions paid | (36,391) | | (22,929) | | (11,742) | |
| Capital expenditures | (49,343) | | (48,913) | | (19,582) | |
| Maintenance capital expenditures | (151,815) | | (105,462) | | (57,687) | |
| FAD | $ | 440,538 | | $ | 325,476 | | $ | 199,115 | |
FFO weighted average common shares outstanding - diluted 8 | 383,381 | | 254,622 | | 143,618 | |
40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
1Potential common shares are not included in the Stockholderscomputation of diluted earnings per share when a loss exists as the effect would be an antidilutive per share amount.
2Acquisition and pursuit costs include third-party and travel costs related to the pursuit of acquisitions and developments.
3Includes costs incurred related to the Merger. For the year ended December 31, 2023, Merger costs are net of a refund of $17.8 million for transfer taxes paid during the year ended December 31, 2022.
4For the year ended December 31, 2023, includes a $5.2 million credit allowance for a mezzanine loan included in "Impairment of real estate and credit loss reserves" on the Statement of Operations and $3.4 million reserve included in “Rental Income” on the Statement of Operations for previously deferred rent and straight line rent for three skilled nursing facilities.
5Includes the Company's proportionate share of acquisition and pursuit costs related to unconsolidated joint ventures.
6Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
7Includes the Company's proportionate share of straight-line rent, net related to unconsolidated joint ventures.
8The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 397,168, 748,385, and 907,393 for the years ended December 31, 2023, 2022, and 2021, respectively.
Merger Combined Same Store Cash NOI
Cash NOI and Merger Combined Same Store Cash NOI are key performance indicators. Management considers these to be supplemental measures that allow investors, analysts and Company management to measure unlevered property-level operating results. The Company defines Cash NOI as rental income plus interest from financing receivables, less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, financing receivable amortization, tenant improvement amortization, leasing commission amortization, and cash lease termination fees. Cash NOI is historical and not necessarily indicative of future results.
Merger Combined Same Store Cash NOI compares Cash NOI for stabilized properties. Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale or intended for sale, properties undergoing redevelopment, and newly redeveloped or developed properties.
Legacy HTA properties that met the same store criteria are included in both periods shown as if they were owned by the Company for the full analysis period. The Legacy HR same store pool represented approximately 35% of the NOI of the combined company at the time of the Merger. Management believes that continued reporting of the same store portfolio of only the pre-Merger accounting acquirer (i.e., Legacy HR) offered little value to the investor who was seeking to understand the operating performance and growth potential of the combined company. The Company was provided access to the underlying financial statements of Legacy HTA (which financial statements had been audited or, in the case of interim periods, reviewed) and other detailed information about each property, such as the acquisition date. Based on this available information, the Company was able to consistently apply its same store definition across the combined portfolio, resulting in approximately 85% of the combined portfolio being represented in the same store presentation.
The Company utilizes the redevelopment classification for properties where management has approved a change in strategic direction for such properties through the application of additional resources including an amount of capital expenditures significantly above routine maintenance and capital improvement expenditures.
As of December 31, 2023, recently acquired properties were included in the merger combined same store pool after the Company owned the property for eight full quarters. Newly developed properties have been included in the merger combined same store pool eight full quarters after substantial completion.
The following table reflects the Company's Merger Combined Same Store Cash NOI for the years ended December 31, 2023 and 2022.
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| NUMBER OF PROPERTIES | GROSS INVESTMENT
at December 31, 2023 | MERGER COMBINED SAME STORE CASH NOI for the year ended December 31, |
| Dollars in thousands | 2023 | 2022 |
| Merger combined same store properties | 597 | | $ | 12,088,929 | | $ | 726,574 | | $ | 707,385 | |
| Joint venture merger combined same store properties | 18 | | $ | 227,064 | | $ | 12,150 | | $ | 11,523 | |
| | | | |
| | | | |
The following tables reconcile net income to Merger Combined Same Store NOI and the merger combined same store property metrics to the total owned real estate portfolio for the years ended December 31, 2023 and 2022:
Reconciliations of Legacy HR and Merger Combined Same Store Cash NOI
| | | | | | | | |
| MERGER COMBINED SAME STORE RECONCILIATION |
| YEAR ENDED DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 |
| Net (loss) income attributable to common stockholders | $ | (278,261) | | $ | 40,897 | |
| | |
| | |
| Other expense (income) | 336,227 | | (64,519) | |
| General and administrative expense | 58,405 | | 52,734 | |
| Depreciation and amortization expense | 730,709 | | 453,082 | |
Other expenses 1 | 12,653 | | 120,576 | |
| Straight-line rent revenue, net | (32,592) | | (23,498) | |
| Joint venture properties | 19,176 | | 15,222 | |
Other revenue 2 | (20,311) | | (16,577) | |
| 826,006 | | 577,917 | |
| Pre-Merger Legacy HTA NOI | — | | 280,421 | |
| Cash NOI | 826,006 | | 858,338 | |
| Cash NOI not included in same store | (87,282) | | (139,430) | |
| Merger combined same store cash NOI, including joint ventures | 738,724 | | 718,908 | |
| Same store joint venture properties | (12,150) | | (11,523) | |
| Wholly-owned merger combined same store cash NOI | $ | 726,574 | | $ | 707,385 | |
| | |
| | |
1Includes acquisition and pursuit costs, Merger-related costs, rent reserves, above and below market ground lease intangible amortization, leasing commission amortization and ground lease straight-line rent expense.
2Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization.
| | | | | | | | |
| LEGACY HR SAME STORE RECONCILIATION |
| YEAR ENDED DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 |
| Net (loss) income attributable to common stockholders | $ | (278,261) | | $ | 40,897 | |
| | |
| | |
| Other expense (income) | 336,227 | | (64,519) | |
| General and administrative expense | 58,405 | | 52,734 | |
| Depreciation and amortization expense | 730,709 | | 453,082 | |
Other expenses 1 | 12,653 | | 120,576 | |
| Straight-line rent revenue, net | (32,592) | | (23,498) | |
| Joint venture properties | 19,176 | | 15,222 | |
Other revenue 2 | (20,311) | | (16,577) | |
| 826,006 | | 577,917 | |
| Cash NOI not included in same store | (482,779) | | (250,066) | |
| Legacy HR same store cash NOI, including joint ventures | 343,227 | | 327,851 | |
| Legacy HR same store joint venture properties | (7,745) | | (7,275) | |
Legacy HR same store cash NOI 3 | $ | 335,482 | | $ | 320,576 | |
1Includes acquisition and pursuit costs, Merger-related costs, rent reserves, above and below market ground lease intangible amortization, leasing commission amortization and ground lease straight-line rent expense.
2Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization.
3Legacy HR same store cash NOI includes 240 properties.
Reconciliation of Merger Combined Same Store Properties
| | | | | | | | | | | | | | |
| AS OF DECEMBER 31, 2023 |
| Dollars and square feet in thousands | PROPERTY COUNT | GROSS INVESTMENT 1 | SQUARE
FEET | OCCUPANCY |
| Merger combined same store properties | 597 | | $ | 12,088,929 | | 35,298 | | 89.2 | % |
| Joint venture same store properties | 18 | | 227,064 | | 1,225 | | 87.3 | % |
| Wholly owned and joint venture acquisitions | 47 | | 591,462 | | 1,788 | | 90.9 | % |
| Development completions | 5 | | 120,425 | | 403 | | 67.0 | % |
| Redevelopments | 16 | | 415,763 | | 1,369 | | 54.8 | % |
| Planned Dispositions | 5 | | 66,674 | | 228 | | 25.4 | % |
| Total | 688 | | $ | 13,510,317 | | 40,311 | | 87.5 | % |
Joint venture properties 2 | 34 | | 359,635 | | 1,949 | | 86.2 | % |
| Total wholly-owned real estate properties | 654 | | $ | 13,150,682 | | 38,362 | | 87.6 | % |
1Excludes assets held for sale, construction in progress, land held for development, corporate property and financing lease right-of-use assets unrelated to an imputed lease arrangement as a result of a sale leaseback transaction.
2Includes one property held in a consolidated joint venture.
Application of Critical Accounting Policies to Accounting Estimates
The Company’s Consolidated Financial Statements are prepared in accordance with GAAP and the rules and regulations of the SEC. In preparing the Consolidated Financial Statements, management is required to exercise judgment and make assumptions that impact the carrying amount of assets and liabilities and the reported amounts of revenues and expenses reflected in the Consolidated Financial Statements.
Management routinely evaluates the estimates and assumptions used in the preparation of its Consolidated Financial Statements. These regular evaluations consider historical experience and other reasonable factors and use the seasoned judgment of management personnel. Management has reviewed the Company’s critical accounting policies with the Audit Committee of the Board of DirectorsDirectors.
Management believes the following paragraphs in this section describe the application of Healthcare Trustcritical accounting policies and estimates by management to arrive at the critical accounting estimates reflected in the Consolidated Financial Statements. The Company’s accounting policies are more fully discussed in Note 1 to the Consolidated Financial Statements.
Principles of America, Inc.Consolidation
OpinionThe Company’s Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, joint ventures, and partnerships where the Company controls the operating activities. All material intercompany accounts and transactions have been eliminated.
Capitalization of Costs
GAAP generally allows for the capitalization of various types of costs. The rules and regulations on Internal Control over Financial Reportingcapitalizing costs and the subsequent depreciation or amortization of those costs versus expensing them in the period incurred vary depending on the type of costs and the reason for capitalizing the costs.
Direct costs of a development project generally include construction costs, professional services such as architectural and legal costs, travel expenses, and land acquisition costs as well as other types of fees and expenses. These costs are capitalized as part of the basis of an asset to which such costs relate. Indirect costs include capitalized interest and overhead costs. Indirect costs are capitalized during construction and on the unoccupied space in a property for up to one year after the property is ready for its intended use. Capitalized interest is calculated using the weighted average interest rate of the Company's unsecured debt or the interest rate on project specific debt, if applicable. The Company’s overhead costs are based on overhead load factors that are charged to a project based on direct time incurred. The Company computes the overhead load factors annually for its acquisition and development departments, which have employees who are involved in the projects. The overhead load factors are computed to absorb that portion of indirect employee costs (payroll and benefits, training, and similar costs) that are attributable to the productive time the employee incurs working directly on projects. The employees in the Company’s
development departments who work on these projects maintain and report their hours, by project. Employee costs that are administrative, such as vacation time, sick time, or general and administrative time, are expensed in the period incurred.
Acquisition-related costs include finder’s fees, advisory, legal, accounting, valuation, other professional or consulting fees, and certain general and administrative costs. Acquisition-related costs are expensed in the period incurred for acquisitions accounted for as a business combination under Accounting Standards Codification Topic 805, Business Combinations. These costs associated with asset acquisitions are capitalized in accordance with GAAP.
Management’s judgment is also exercised in determining whether costs that have auditedbeen previously capitalized to a project should be reserved for or written off if or when the internal controlproject is abandoned or circumstances otherwise change that would call the project’s viability into question. The Company follows a standard and consistently applied policy of classifying pursuit activity as well as reserving for these types of costs based on their classification.
The Company classifies its pursuit projects into two categories relating to development. The first category includes pursuits of developments that have a remote chance of producing new business. Costs for these projects are expensed in the period incurred. The second category includes those pursuits of developments that are either probable or highly probable to result in a project or contract. Since the Company believes it is probable that these pursuits will result in a project or contract, it capitalizes these costs in full and records no reserve.
Each quarter, all capitalized pursuit costs are again reviewed for viability or a change in classification, and a management decision is made as to whether any additional reserve is deemed necessary. If necessary and considered appropriate, management would record an additional reserve at that time. Capitalized pursuit costs, net of the reserve, are carried in other assets in the Company’s Consolidated Balance Sheets, and any reserve recorded is charged to acquisition and pursuit costs on the Consolidated Statements of Operations. All pursuit costs will ultimately be written off to expense or capitalized as part of the constructed real estate asset.
As of December 31, 2023 and 2022, the Company's Consolidated Balance Sheets include capitalized pursuit costs relating to potential developments totaling $6.2 million and $4.3 million, respectively. The Company expensed costs related to the pursuit of acquisitions totaling $0.8 million, $1.0 million and $2.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, the Company expensed costs related to the pursuit of developments totaling $0.8 million, $2.2 million and $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Furthermore, the Company expensed costs related to the Merger totaling $(2.0) million, including a refund of $17.8 million for transfer taxes paid during the year ended December 31, 2022, and $103.4 million for the years ended December 31, 2023 and 2022, respectively.
Valuation of Long-Lived Assets Held and Used, Unconsolidated Joint Ventures, Intangible Assets and Goodwill
Long-Lived Assets Held and Used
The Company assesses the potential for impairment of identifiable intangible assets and long-lived assets, primarily real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be recoverable. Important factors that could cause management to review for impairment include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company's use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company reviews for possible impairment of those assets subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes.
In addition, at least annually, the Company assesses whether there were indicators, including property operating performance, changes in anticipated holding period and general market conditions, that the value of the Company’s investments, including unconsolidated joint ventures, may have been impaired. The investment’s value would have been impaired only if management’s estimate of the fair value of the Company’s investment was less than its carrying value. To the extent impairment had occurred, a loss would have been recognized for the excess of its carrying amount over financial reportingits fair value.
The Company may, from time to time, be approached by a third party with an interest in purchasing one or more of Healthcare Trustthe Company's operating real estate properties that were otherwise not for sale. Alternatively, the Company may
explore disposing of America, Inc.an operating real estate property but without specific intent to sell the property and subsidiaries (the “Company”)without the property meeting the criteria to be classified as held for sale (see discussion below). In such cases, the Company and a potential buyer typically negotiate a letter of intent followed by a purchase and sale agreement that includes a due diligence timeline for completion of customary due diligence procedures. Anytime throughout this period the transaction could be terminated by the parties. The Company views the execution of a purchase and sale agreement as a circumstance that warrants an impairment assessment and must include its best estimates of the impact of a potential sale in the recoverability test discussed in more detail below.
A property value is considered impaired only if management's estimate of current and projected (undiscounted and unleveraged) operating cash flows of the property is less than the net carrying value of the property. These estimates of future cash flows include only those that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the property based on its estimated remaining useful life. These estimates, including the useful life determination which can be affected by any potential sale of the property, are based on management's assumptions about its use of the property. Therefore, significant judgment is involved in estimating the current and projected cash flows.
When the Company executes a purchase and sale agreement for a held and used property, the Company performs the cash flow estimation described above. This assessment gives consideration to all available information, including an assessment of the likelihood the potential transaction will be consummated under the terms and conditions set forth in the purchase and sale agreement. Management will re-evaluate the recoverability of the property if and when significant changes occur as the transaction proceeds toward closing. Normally sale transactions will close within 15 to 30 days after the due diligence period expires. Upon expiration of the due diligence period, management will again re-evaluate the recoverability of the property, updating its assessment based on the status of the potential sale.
Whenever management determines that the carrying value of an asset that has been tested may not be recoverable, then an impairment charge would be recognized to the extent the current carrying value exceeds the current fair value of the asset. Significant judgment is also involved in making a determination of the estimated fair value of the asset.
The Company also performs an annual goodwill impairment review. The Company's reviews are performed as of December 31 2021, based onof each year. The 2023 and 2022 reviews indicated that no impairment had occurred with respect to the Company's goodwill asset of $250.5 million and $223.2 million, respectively.
Long-Lived Assets to be Disposed of by Planned Sale
From time-to-time management affirmatively decides to sell certain real estate properties under a plan of sale. The Company reclassifies the property or disposal group as held for sale when all the following criteria establishedfor a qualifying plan of sale are met:
•Management, having the authority to approve the action, commits to a plan to sell the property or disposal group;
•The property or disposal group is available for immediate sale (i.e., a seller currently has the intent and ability to transfer the property or disposal group to a buyer) in its present condition, subject only to conditions that are usual and customary for sales of such properties or disposal groups;
•Internal Control - Integrated Framework (2013)An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;
• issued by the Committee of Sponsoring OrganizationsThe sale of the Treadway Commission (COSO). In our opinion,property or disposal group is probable (i.e., likely to occur) and the Company maintained,transfer is expected to qualify for recognition as a completed sale within one year, with certain exceptions;
•The property or disposal group is being actively marketed for sale at a price that is reasonable in all material respects, effective internal control over financial reportingrelation to its current fair value; and
•Actions necessary to complete the plan indicate that it is unlikely significant changes to the plan will be made or that the plan will be withdrawn.
A property or disposal group classified as held for sale is initially measured at the lower of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standardsits carrying amount or fair value less estimated costs to sell. An impairment charge is recognized for any initial adjustment of the Publicproperty's or disposal group's carrying amount to its fair value less estimated costs to sell in the period the held for sale criteria are
met. The fair value less estimated costs to sell the property (disposal group) should be assessed each reporting period it remains classified as held for sale. Depreciation ceases as long as a property is classified as held for sale.
If circumstances arise that were previously considered unlikely and a subsequent decision not to sell a property classified as held for sale were to occur, the property is reclassified as held and used. The property is measured at the time of reclassification at the lower of its (a) carrying amount before it was classified as held for sale, adjusted for any depreciation expense or impairment losses that would have been recognized had the property been continuously classified as held and used or (b) fair value at the date of the subsequent decision not to sell. The effect of any required adjustment is reflected in income from continuing operations at the date of the decision not to sell.
The Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedules as of andrecorded impairment charges totaling $149.7 million for the year ended December 31, 2021,2023 related to real estate properties and other long-lived assets. The impairment charges related to 31 properties sold and six additional properties associated with planned disposition activity in 2024. The Company recorded impairment charges of $54.4 million in 2022.
Valuation of Asset Acquisitions
As described in more detail in Note 1 to the Consolidated Financial Statements, when the Company acquires real estate properties with in-place leases, the cost of the Companyacquisition must be allocated between the acquired tangible real estate assets “as if vacant” and our report dated March 1, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reportingany acquired intangible assets. Such intangible assets could include above- (or below-) market in-place leases and for its assessmentat-market in-place leases, which could include the opportunity costs associated with absorption period rentals, direct costs associated with obtaining new leases such as tenant improvements, leasing commissions and customer relationship assets. With regard to the elements of estimating the “as if vacant” values of the effectiveness of internal control over financial reporting, included inproperty and the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibilityintangible assets, including the absorption period, occupancy increases during the absorption period, tenant improvement amounts, and leasing commission percentages, the Company uses the same absorption period and occupancy assumptions for similar property types. Any remaining excess purchase price is then allocated to express an opinion on the Company’s internal control over financial reportingtangible and intangible assets based on our audit. Wetheir relative fair values. The identifiable tangible and intangible assets are a public accounting firm registered withthen subject to depreciation and amortization.
Depreciation of Real Estate Assets and Amortization of Related Intangible Assets
As of December 31, 2023, the PCAOBCompany had gross investments of approximately $12.1 billion in depreciable real estate assets and related intangible assets. When real estate assets and related intangible assets are requiredacquired or placed in service, they must be depreciated or amortized. Management’s judgment involves determining which depreciation method to be independent withuse, estimating the economic life of the building and improvement components of real estate assets, and estimating the value of intangible assets acquired when real estate assets are purchased that have in-place leases.
With respect to the Companybuilding components, there are several depreciation methods available under GAAP. Some methods record relatively more depreciation expense on an asset in accordance with the U.S. federal securities laws and the applicable rules and regulationsearly years of the Securitiesasset’s economic life, and Exchange Commissionrelatively less depreciation expense on the asset in the later years of its economic life. The straight-line method of depreciating real estate assets is the method the Company follows because, in the opinion of management, it is the method that most accurately and consistently allocates the PCAOB.cost of the asset over its estimated life. The Company assigns a useful life to its owned properties based on many factors, including the age and condition of the property when acquired.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.46
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 1, 2022
Item 9B. Other Information
None.
Revenue Recognition
The Company's primary source of revenue is rental income derived from non-cancelable leases. When a lease is executed, the terms and conditions of the lease are assessed to determine the appropriate accounting classification. As of December 31, 2023, with the exception of one finance lease, all of the Company's leases, where the Company is the lessor, are classified as operating leases. Operating leases are recognized on the straight-line basis over the term of the related lease, including periods where a tenant is provided a rent concession. Operating expense recoveries, which include reimbursements for building specific operating expenses, are recognized as revenue in the period in which the related expenses are incurred. The Company generally expects that collectability is probable at lease commencement. If the assessment of collectability changes after the lease commencement date and Rental income is not considered probable, Rental income is recognized on a cash basis and all previously recognized uncollectible Rental income is reversed in the period in which it is determined not to be probable of collection. In addition to the lease-specific collectability assessment performed under Topic 842, the Company may also apply a general reserve ("provision for bad debt"), as a reduction to Rental income, for its portfolio of operating lease receivables.
The Company also recognizes certain revenue based on the guidance in Topic 606 and is based on the five-step model to account for revenue arising from contracts with customers. The Company's primary source of revenue associated with Topic 606 relates to parking revenue and management fee income.
Derivative Instruments
Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the derivative instrument with the recognition of the changes in the fair-value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transaction in a cash flow hedge. The accounting for a derivative requires that the Company make judgments in determining the nature of the derivatives and their effectiveness, including ones regarding the likelihood that a forecasted transaction will take place. These judgments could materially affect our consolidated financial statements.
The Company may enter into a derivative instrument to manage interest rate risk from time to time. When a derivative instrument is initiated, the Company will assess its intended use of the derivative instrument and may elect a hedging relationship and apply hedge accounting. As required by the accounting literature, the Company will formally document the hedging relationship for all derivative instruments prior to or contemporaneous with entering into the derivative instrument.
PART III
Item 10. Directors, Executive Officers7A. Quantitative and Corporate GovernanceQualitative Disclosures About Market Risk
The information required by this Item 10 will be set forthCompany is exposed to market risk in the Proxy Statementform of changing interest rates on its debt. Management uses regular monitoring of market conditions and is incorporated herein by reference.analysis techniques to manage this risk.
Item 11. Executive CompensationAs of December 31, 2023, $3.5 billion of the Company’s $5.0 billion of outstanding debt bore interest at fixed rates.
The following table provides information required byregarding the sensitivity of certain of the Company’s financial instruments, as described above, to market conditions and changes resulting from changes in interest rates. For purposes of this Item 11 will be set forthanalysis, sensitivity is demonstrated based on hypothetical 10% changes in the Proxy Statementunderlying market interest rates.
| | | | | | | | | | | | | | |
| | | | IMPACT ON EARNINGS AND CASH FLOW |
| Dollars in thousands | OUTSTANDING
PRINCIPAL BALANCE
as of Dec. 31, 2023 | CALCULATED
ANNUAL INTEREST | ASSUMING 10%
INCREASE
in market interest rates | ASSUMING 10%
DECREASE
in market interest rates |
| Variable Rate Debt | | | | |
| Unsecured Credit Facility | $ | — | | $ | — | | $ | — | | $ | — | |
| Unsecured Term Loan due 2024 | 350,000 | | 22,372 | | (2,237) | | 2,237 | |
| Unsecured Term Loan due 2024 | 200,000 | | 12,784 | | (1,278) | | 1,278 | |
| Unsecured Term Loan due 2025 | 300,000 | | 19,176 | | (1,918) | | 1,918 | |
| Unsecured Term Loan due 2026 | 150,000 | | 9,588 | | (959) | | 959 | |
| Unsecured Term Loan due 2027 | 200,000 | | 12,784 | | (1,278) | | 1,278 | |
| Unsecured Term Loan due 2028 | 300,000 | | 19,176 | | (1,918) | | 1,918 | |
| $ | 1,500,000 | | $ | 95,880 | | $ | (9,588) | | $ | 9,588 | |
The Company has outstanding interest rate swaps to help mitigate its risk related to variable rate debt. As of December 31, 2023, the Company had $1.3 billion of interest rate swaps at a weighted average rate of 3.49%. See Note 11 to the Consolidated Financial Statements for more information regarding the Company's interest rate swaps.
| | | | | | | | | | | | | | | | | |
| | | FAIR VALUE |
| Dollars in thousands | CARRYING VALUE as of Dec. 31, 2023 2 | DEC. 31, 2023 2 | ASSUMING 10%
INCREASE
in market interest rates | ASSUMING 10%
DECREASE
in market interest rates | DEC. 31, 2022 1 |
| Fixed Rate Debt | | | | | |
| Senior Notes due 2025 | $ | 249,484 | | $ | 244,233 | | $ | 244,527 | | $ | 243,909 | | $ | 241,413 | |
| Senior Notes due 2026 | 579,017 | | 581,556 | | 582,919 | | 580,141 | | 570,139 | |
| Senior Notes due 2027 | 483,727 | | 483,590 | | 485,102 | | 482,048 | | 473,450 | |
| Senior Notes due 2028 | 297,429 | | 282,200 | | 283,207 | | 281,170 | | 271,058 | |
| Senior Notes due 2030 | 575,443 | | 577,702 | | 580,777 | | 574,583 | | 560,723 | |
| Senior Notes due 2030 | 296,780 | | 249,124 | | 250,490 | | 247,728 | | 236,219 | |
| Senior Notes due 2031 | 295,832 | | 235,894 | | 237,394 | | 234,366 | | 219,321 | |
| Senior Notes due 2031 | 649,521 | | 649,347 | | 653,508 | | 645,118 | | 611,392 | |
| Mortgage Notes Payable | 70,534 | | 69,058 | | 69,157 | | 68,959 | | 80,913 | |
| Total Fixed Rate Debt | $ | 3,497,767 | | $ | 3,372,704 | | $ | 3,387,081 | | $ | 3,358,022 | | $ | 3,264,628 | |
1Fair values as of December 31, 2022, represent fair values of obligations that were outstanding as of that date, and do not reflect the effect of any subsequent changes in principal balances and/or additions or extinguishments of instruments.
2Balances are presented net of discounts and debt issuance costs and including premiums. The fair value presented is incorporated herein by reference.based on Level 2 inputs defined as model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be set forth in the Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be set forth in the Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 will be set forth in the Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits,8. Financial Statement Schedules
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | | | | | | | | |
| Page |
(a)(1) Financial Statements:
| |
| | |
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 34) | |
| | |
| | |
Financial Statements of Healthcare Trust of America, Inc. | |
| | |
| | |
| | |
| | |
| | |
Financial Statements of Healthcare Trust of America Holdings, LP | |
| | |
| | |
| | |
| | |
| | |
Notes for Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP | |
| | |
(a)(2) Financial Statement Schedules: | | | | | | | | |
Financial Statement Schedules of Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP | |
| | |
| | |
All other schedules have been omitted because they are inapplicable.
(a)(3) Exhibits:
The exhibits listed on the Exhibit Index (preceding the signature section of this Annual Report) are incorporated by reference into this Annual Report.
(b) Exhibits:
See Item 15(a)(1) above.
(c) Financial Statement Schedules:
See Item 15(a)(2) above.Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMIndependent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Healthcare Realty Trust of America, Inc.Incorporated
Nashville, Tennessee
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Healthcare Realty Trust of America, Inc. and subsidiariesIncorporated (the “Company”) as of December 31, 20212023 and 2020,2022, the related consolidated statements of operations, comprehensive income (loss), equity and redeemable non-controlling interests, and cash flows for each of the three years in the period ended December 31, 2021,2023, and the related notes and the financial statement schedules listed in the Index at Item 15accompanying index (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as ofat December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021,2023, in conformity with accounting principles generally accepted in the United States of America.
We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”), the Company’sCompany's internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 1, 2022,February 16, 2024 expressed an unqualified opinion on the Company’s internal control over financial reporting.thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current-periodcurrent period audit of the consolidated financial statements that werewas communicated or required to be communicated to the audit committee and thatthat: (1) relaterelates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing separate opinions on the critical audit mattersmatter or on the accounts or disclosures to which they relate.it relates.
RecoverabilityAsset Impairment - Identification of Triggering Events for Real Estate and Real Estate Related Assets - Refer to Notes 2 and 4 to the financial statementsProperties
Critical Audit Matter Description
The Company’sCompany recorded total real estate investments, are evaluatednet, of approximately $11.2 billion as of December 31, 2023. As described in Note 1 to the Company's consolidated financial statements, the Company assesses the potential for potential impairment of long-lived assets, including real estate properties, whenever events occur, or changesa change in circumstances indicateindicates, that the carrying value might not be fully recoverable ("triggering events").
We identified management’s assessment of qualitative indicators of potential impairment for real estate properties as a critical audit matter. Qualitative indicators of potential impairment may include significant changes in the Company’s use of properties or the strategy for its overall business, plans to sell a property may not be recoverable. Impairment losses are recorded when indicators of impairment are present and the carrying amount of the asset is greater than the sum of future undiscounted cash flows expected to be generated by that asset over the remaining expected holding period. The Company’s undiscounted future cash flows analysis and the assessment of expected remaining holding period requires management to make significant estimates and assumptions related to future occupancy levels, rental rates, lease-up periods and capitalization rates.before its depreciable life has ended, or negative economic or
49
Changes in these assumptions could have a significant impact on the real estate assets identified for further analysis. For the year ended December 31, 2021, the Company recorded impairment charges of $22.9 million on its real estate investments.
Given the Company’s evaluation of the sum of future undiscounted cash flows expected to be generated by an asset over the remaining expected holding period when indicators of impairment are present requires management to make significant estimates and assumptions related to future occupancy levels, rental rates, and capitalization rates, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flows analysis and assessment of expected remaining holding period required a high degree of auditor judgment and an increased extent of effort, including the need to involve our
fair value specialists.
Howindustry trends for the Critical Audit Matter Was Addressed in the Audit
Our audit procedures relatedCompany or its tenants. Auditing these elements involved especially challenging auditor judgment due to the evaluationnature and extent of real estate assets for possible indicators of impairment included the following, among others:audit effort required to address these matters.
The primary procedures we performed to address this critical audit matter included:
•We testedTesting the design and operating effectiveness of controls over management’s analysis for impairment indicators, including the identification of impairment indicatorchanges in circumstances that could indicate the carrying amounts of real estate properties and significant estimates and assumptions used by management in preparing undiscounted future cash flows analysis for properties with impairment indicators.may not be fully recoverable.
•We audited management’s impairment indicator analysis by:
◦Evaluating management's process for identifying impairment indicators and whether management appropriately considered the examples of impairment indicators provided within the Financial Accounting Standards Board’s (FASB) Accounting Standard Codification (ASC) 360, Property, Plant, and Equipment.
◦Conducting independent market analysis to determine if there were additional indicators of impairment not identified by management.
◦Conducting inquiries of property management, leasing, asset management, and other departments outside of the accounting department to determine if there might be additional indicators of impairment not identified by management.
•With the assistance of our fair value specialists, we evaluated management’s undiscounted cash flow analysis for various properties that exhibited indicators of impairment by:
◦Evaluating whether the valuation method used was in accordance with ASC 820, Fair Value Measurement.
◦Evaluating the undiscounted future cash flows analysis, including estimates of future occupancy levels, rental rates, lease-up periods and capitalization rates, in addition to the assessment of expected remaining holding period for each real estate asset with possible impairment indicators by (1) evaluating the source information and assumptions used by management and (2) testing the mathematical accuracy of the undiscounted future cash flows analysis.
Investments in Real Estate - Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description
For the year ended December 31, 2021, the Company had acquired investments in real estate with an aggregate purchase price of $308.8 million. The Company accounted for these acquisitions as asset acquisitions. Accordingly, the purchase price for assets acquired and liabilities assumed was allocated, based on relative fair value, to land, buildings and improvements, in-place leases, above or below market leases, and other intangible assets. The method for determining relative fair value varied depending on the type of asset or liability and involved management making significant estimates related to assumptions such as future cash flows, discount rates, and costs during the expected lease-up periods.
Given the relative fair value determination of assets acquired and liabilities assumed requires management to make significant estimates related to assumptions such as future cash flows, discount rates, and costs during hypothetical lease-up periods, performing audit procedures to evaluate the reasonableness of these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the relative fair value of assets acquired and liabilities assumed for investments in real estate included the following, among others:
•We tested the effectiveness of controls over the purchase price allocation, including management’s controls over the review of purchase price allocations prepared by third party specialists.
•For properties selected for further evaluation by our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) current market data, (3) cost to replace certain assets, and (4) assumptions used in the discounted cash flows, including testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing our estimates to those used by management.
•We assessedAssessing the reasonableness of management’s projectionskey assumptions with respect to qualitative factors, including potential sales of rental revenue by comparing the assumptions usedproperties based on offers received and changes in the projections to external market sources, in-place lease agreements, historical data, and results from other areasuse of the audit.Company’s properties, used to determine whether triggering events had occurred.
•Examining internal documentation to assess whether additional triggering events were present.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 1, 2022BDO USA, P.C.
We have served as the Company’sCompany's auditor since 2006.2005.
Nashville, Tennessee
February 16, 2024
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMHealthcare Realty Trust Incorporated
Consolidated Balance Sheets
Amounts in thousands, except per share data
| | | | | | | | |
| ASSETS | | |
| | DECEMBER 31, |
| 2023 | 2022 |
| Real estate properties | | |
| Land | $ | 1,343,265 | | $ | 1,439,798 | |
| Buildings and improvements | 10,881,373 | | 11,332,037 | |
| Lease intangibles | 836,302 | | 959,998 | |
| Personal property | 12,718 | | 11,907 | |
| Investment in financing receivables, net | 122,602 | | 120,236 | |
| Financing lease right-of-use assets | 82,209 | | 83,824 | |
| Construction in progress | 60,727 | | 35,560 | |
| Land held for development | 59,871 | | 74,265 | |
| Total real estate investments | 13,399,067 | | 14,057,625 | |
| Less accumulated depreciation | (2,226,853) | | (1,645,271) | |
| Total real estate investments, net | 11,172,214 | | 12,412,354 | |
| Cash and cash equivalents | 25,699 | | 60,961 | |
| | |
| | |
| Assets held for sale, net | 8,834 | | 18,893 | |
| Operating lease right-of-use assets | 275,975 | | 336,983 | |
| | |
| Investments in unconsolidated joint ventures | 311,511 | | 327,248 | |
| Goodwill | 250,530 | | 223,202 | |
| Other assets, net | 592,368 | | 469,990 | |
| Total assets | $ | 12,637,131 | | $ | 13,849,631 | |
| | |
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND STOCKHOLDERS' EQUITY |
| DECEMBER 31, |
| 2023 | 2022 |
| Liabilities | | |
| Notes and bonds payable | $ | 4,994,859 | | $ | 5,351,827 | |
| Accounts payable and accrued liabilities | 211,994 | | 244,033 | |
| Liabilities of properties held for sale | 295 | | 437 | |
| Operating lease liabilities | 229,714 | | 279,895 | |
| Financing lease liabilities | 74,503 | | 72,939 | |
| Other liabilities | 202,984 | | 218,668 | |
| Total liabilities | 5,714,349 | | 6,167,799 | |
| Commitments and contingencies (See Footnote 15) | | |
| Redeemable non-controlling interests | 3,868 | | 2,014 | |
| Stockholders' equity | | |
| Preferred stock, $0.01 par value; 200,000 shares authorized; none issued and outstanding | — | | — | |
| Common stock, $0.01 par value; 1,000,000 shares authorized; 380,964 and 380,590 shares issued and outstanding at December 31, 2023 and 2022, respectively. | 3,810 | | 3,806 | |
| Additional paid-in capital | 9,602,592 | | 9,587,637 | |
| Accumulated other comprehensive (loss) income | (10,741) | | 2,140 | |
| Cumulative net income attributable to common stockholders | 1,028,794 | | 1,307,055 | |
| Cumulative dividends | (3,801,793) | | (3,329,562) | |
| Total stockholders’ equity | 6,822,662 | | 7,571,076 | |
| Non-controlling interest | 96,252 | | 108,742 | |
| Total equity | 6,918,914 | | 7,679,818 | |
| Total liabilities, redeemable non-controlling interests, and stockholders' equity | $ | 12,637,131 | | $ | 13,849,631 | |
See accompanying notes.
51
To the Partners and the Board of Directors of the General Partner of Healthcare Trust of America Holdings, LP
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Healthcare Trust of America Holdings, LP and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in partners’ capital, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the financial statement schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Recoverability of Real Estate and Real Estate Related Assets - Refer to Notes 2 and 4 to the financial statements
Critical Audit Matter Description
The Company’s real estate investments are evaluated for potential impairment whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. Impairment losses are recorded when indicators of impairment are present and the carrying amount of the asset is greater than the sum of future undiscounted cash flows expected to be generated by that asset over the remaining expected holding period. The Company’s undiscounted future cash flows analysis and the assessment of expected remaining holding period requires management to make significant estimates and assumptions related to future occupancy levels, rental rates, lease-up periods and capitalization rates.
Changes in these assumptions could have a significant impact on the real estate assets identified for further analysis. For the year ended December 31, 2021, the Company recorded impairment charges of $22.9 million on its real estate investments.
Given the Company’s evaluation of the sum of future undiscounted cash flows expected to be generated by an asset over the remaining expected holding period when indicators of impairment are present requires management to make significant estimates and assumptions related to future occupancy levels, rental rates, and capitalization rates, performing audit procedures to evaluate the reasonableness of management’s undiscounted future cash flows analysis and assessment of expected remaining holding period required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the evaluation of real estate assets for possible indicators of impairment included the following, among others:
•We tested the effectiveness of controls over management’s analysis for impairment indicators, including the identification of impairment indicator properties and significant estimates and assumptions used by management in preparing undiscounted future cash flows analysis for properties with impairment indicators.
•We audited management’s impairment indicator analysis by:
◦Evaluating management's process for identifying impairment indicators and whether management appropriately considered the examples of impairment indicators provided within the Financial Accounting Standards Board’s (FASB) Accounting Standard Codification (ASC) 360, Property, Plant, and Equipment.
◦Conducting independent market analysis to determine if there were additional indicators of impairment not identified by management.
◦Conducting inquiries of property management, leasing, asset management, and other departments outside of the accounting department to determine if there might be additional indicators of impairment not identified by management.
•With the assistance of our fair value specialists, we evaluated management’s undiscounted cash flow analysis for various properties that exhibited indicators of impairment by:
◦Evaluating whether the valuation method used was in accordance with ASC 820, Fair Value Measurement.
◦Evaluating the undiscounted future cash flows analysis, including estimates of future occupancy levels, rental rates, lease-up periods and capitalization rates, in addition to the assessment of expected remaining holding period for each real estate asset with possible impairment indicators by (1) evaluating the source information and assumptions used by management and (2) testing the mathematical accuracy of the undiscounted future cash flows analysis.
Investments in Real Estate - Refer to Notes 2 and 3 to the financial statements
Critical Audit Matter Description
For the year ended December 31, 2021, the Company had acquired investments in real estate with an aggregate purchase price of $308.8 million. The Company accounted for these acquisitions as asset acquisitions. Accordingly, the purchase price for assets acquired and liabilities assumed was allocated based on relative fair value, to land, buildings and improvements, in-place leases, above or below market leases, and other intangible assets. The method for determining relative fair value varied depending on the type of asset or liability and involved management making significant estimates related to assumptions such as future cash flows, discount rates, and costs during the expected lease-up periods.
Given the relative fair value determination of assets acquired and liabilities assumed requires management to make significant estimates related to assumptions such as future cash flows, discount rates, and costs during hypothetical lease-up periods, performing audit procedures to evaluate the reasonableness of these assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the relative fair value of assets acquired and liabilities assumed for investments in real estate included the following, among others:
•We tested the effectiveness of controls over the purchase price allocation, including management’s controls over the review of purchase price allocations prepared by third party specialists.
•For properties selected for further evaluation by our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology, (2) current market data, (3) cost to replace certain assets, and (4) assumptions used in the discounted cash flows, including testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing our estimates to those used by management.
•We assessed the reasonableness of management’s projections of rental revenue by comparing the assumptions used in the projections to external market sources, in-place lease agreements, historical data, and results from other areas of the audit.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 1, 2022
We have served as the Company’s auditor since 2013.
HEALTHCARE TRUST OF AMERICA, INC.Healthcare Realty Trust Incorporated
CONSOLIDATED BALANCE SHEETSConsolidated Statements of Operations
(InAmounts in thousands, except for share and per share data)data
| | | | | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| ASSETS | | | | |
| Real estate investments: | | | | |
| Land | | $ | 640,382 | | | $ | 596,269 | |
| Building and improvements | | 6,688,516 | | | 6,507,816 | |
| Lease intangibles | | 404,714 | | | 628,621 | |
| Construction in progress | | 32,685 | | | 80,178 | |
| | 7,766,297 | | | 7,812,884 | |
| Accumulated depreciation and amortization | | (1,598,468) | | | (1,702,719) | |
| Real estate investments, net | | 6,167,829 | | | 6,110,165 | |
| Assets held for sale, net | | 27,070 | | | — | |
| Investment in unconsolidated joint venture | | 62,834 | | | 64,360 | |
| Cash and cash equivalents | | 52,353 | | | 115,407 | |
| Restricted cash | | 4,716 | | | 3,358 | |
| Receivables and other assets, net | | 334,941 | | | 251,728 | |
| Right-of-use assets - operating leases, net | | 229,226 | | | 235,223 | |
| Other intangibles, net | | 10,720 | | | 10,451 | |
| Total assets | | $ | 6,889,689 | | | $ | 6,790,692 | |
| LIABILITIES AND EQUITY | | | | |
| Liabilities: | | | | |
| Debt | | $ | 3,028,122 | | | $ | 3,026,999 | |
| Accounts payable and accrued liabilities | | 198,078 | | | 200,358 | |
| Liabilities of assets held for sale | | 262 | | | — | |
| Derivative financial instruments - interest rate swaps | | 5,069 | | | 14,957 | |
| Security deposits, prepaid rent and other liabilities | | 86,225 | | | 82,553 | |
| Lease liabilities - operating leases | | 196,286 | | | 198,367 | |
| Intangible liabilities, net | | 31,331 | | | 32,539 | |
| Total liabilities | | 3,545,373 | | | 3,555,773 | |
| Commitments and contingencies | | 0 | | 0 |
| Redeemable non-controlling interests | | — | | | — | |
| 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; 228,879,846 and 218,578,012 shares issued and outstanding as of December 31, 2021 and 2020, respectively | | 2,289 | | | 2,186 | |
| Additional paid-in capital | | 5,178,132 | | | 4,916,784 | |
| Accumulated other comprehensive loss | | (7,041) | | | (16,979) | |
| Cumulative dividends in excess of earnings | | (1,915,776) | | | (1,727,752) | |
| Total stockholders’ equity | | 3,257,604 | | | 3,174,239 | |
| Non-controlling interests | | 86,712 | | | 60,680 | |
| Total equity | | 3,344,316 | | | 3,234,919 | |
| Total liabilities and equity | | $ | 6,889,689 | | | $ | 6,790,692 | |
| | | | | | | | | | | |
| | YEAR ENDED DECEMBER 31, |
| 2023 | 2022 | 2021 |
| Revenues | | | |
| Rental income | $ | 1,309,184 | | $ | 907,451 | | $ | 520,334 | |
| Interest income | 17,134 | | 11,480 | | 4,192 | |
| Other operating | 17,451 | | 13,706 | | 10,291 | |
| 1,343,769 | | 932,637 | | 534,817 | |
| Expenses | | | |
| Property operating | 500,437 | | 344,038 | | 212,273 | |
| General and administrative | 58,405 | | 52,734 | | 34,152 | |
| Acquisition and pursuit costs | 2,026 | | 3,229 | | 3,930 | |
| Merger-related costs | (1,952) | | 103,380 | | — | |
| Depreciation and amortization | 730,709 | | 453,082 | | 202,714 | |
| | | |
| 1,289,625 | | 956,463 | | 453,069 | |
| Other income (expense) | | | |
| Gain on sales of real estate properties | 77,546 | | 270,271 | | 55,940 | |
| Interest expense | (258,584) | | (146,691) | | (53,124) | |
| Gain (loss) on extinguishment of debt | 62 | | (2,401) | | — | |
| | | |
| Impairment of real estate properties and credit loss reserves | (154,912) | | (54,427) | | (17,101) | |
| | | |
| Equity loss from unconsolidated joint ventures | (1,682) | | (687) | | (795) | |
| Interest and other income (expense), net | 1,343 | | (1,546) | | (9) | |
| (336,227) | | 64,519 | | (15,089) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Net (loss) income | (282,083) | | 40,693 | | 66,659 | |
| Net loss attributable to non-controlling interests | 3,822 | | 204 | | — | |
| Net (loss) income attributable to common stockholders | $ | (278,261) | | $ | 40,897 | | $ | 66,659 | |
| | | |
| | | |
| | | |
| | | |
| Basic earnings per common share | $ | (0.74) | | $ | 0.15 | | $ | 0.45 | |
| | | |
| | | |
| | | |
| Diluted earnings per common share | $ | (0.74) | | $ | 0.15 | | $ | 0.45 | |
| | | |
| Weighted average common shares outstanding - basic | 378,928 | | 252,356 | | 142,637 | |
| Weighted average common shares outstanding - diluted | 378,928 | | 253,873 | | 142,710 | |
TheSee accompanying notes are an integral part of these consolidated financial statements.notes.
HEALTHCARE TRUST OF AMERICA, INC.Healthcare Realty Trust Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONSConsolidated Statements of Comprehensive Income (Loss)
(InAmounts in thousands except for per share data)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Revenues: | | | | | |
| Rental income | $ | 763,923 | | | $ | 738,414 | | | $ | 691,527 | |
| Interest and other operating income | 3,150 | | | 551 | | | 513 | |
| Total revenues | 767,073 | | | 738,965 | | | 692,040 | |
| Expenses: | | | | | |
| Rental | 236,850 | | | 226,859 | | | 211,479 | |
| General and administrative | 49,744 | | | 42,969 | | | 41,360 | |
| Transaction | 372 | | | 965 | | | 2,350 | |
| Depreciation and amortization | 303,834 | | | 303,828 | | | 290,384 | |
| Interest expense | 92,762 | | | 94,613 | | | 96,632 | |
| Impairment | 22,938 | | | — | | | — | |
| Total expenses | 706,500 | | | 669,234 | | | 642,205 | |
| Gain (loss) on sale of real estate, net | 39,228 | | | 9,590 | | | (154) | |
| Loss on sale of corporate asset, net | (2,106) | | | — | | | — | |
| Loss on extinguishment of debt, net | — | | | (27,726) | | | (21,646) | |
| Income from unconsolidated joint venture | 1,604 | | | 1,612 | | | 1,882 | |
| Other income | 485 | | | 301 | | | 841 | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
Net income attributable to non-controlling interests (1) | (1,768) | | | (890) | | | (604) | |
| Net income attributable to common stockholders | $ | 98,016 | | | $ | 52,618 | | | $ | 30,154 | |
| Earnings per common share - basic: | | | | | |
| Net income attributable to common stockholders | $ | 0.45 | | | $ | 0.24 | | | $ | 0.15 | |
| Earnings per common share - diluted: | | | | | |
| Net income attributable to common stockholders | $ | 0.44 | | | $ | 0.24 | | | $ | 0.14 | |
| Weighted average common shares outstanding: | | | | | |
| Basic | 219,439 | | | 218,078 | | | 205,720 | |
| Diluted | 224,215 | | | 221,666 | | | 209,605 | |
| | | | | |
| (1) Includes amounts attributable to redeemable non-controlling interests for 2019. |
| | | | | | | | | | | |
| | YEAR ENDED DECEMBER 31, |
| 2023 | 2022 | 2021 |
| Net (loss) income | $ | (282,083) | | $ | 40,693 | | $ | 66,659 | |
| Other comprehensive (loss) income | | | |
| | | |
| | | |
| | | |
| Interest rate swaps | | | |
| Reclassification adjustment for (gains) losses included in net income (interest expense) | (14,488) | | 1,527 | | 4,472 | |
| Gains arising during the period on interest rate swaps | 1,463 | | 10,630 | | 3,379 | |
| | | |
| (13,025) | | 12,157 | | 7,851 | |
| Comprehensive (loss) income | (295,108) | | 52,850 | | 74,510 | |
| Less: Comprehensive loss attributable to non-controlling interests | 3,966 | | 168 | | — | |
| Comprehensive (loss) income attributable to common stockholders | $ | (291,142) | | $ | 53,018 | | $ | 74,510 | |
TheSee accompanying notes are an integral part of these consolidated financial statements.notes.
HEALTHCARE TRUST OF AMERICA, INC.Healthcare Realty Trust Incorporated
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEConsolidated Statements of Equity and Redeemable Non-Controlling Interests
(In thousands)Amounts in thousands, except per share data
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | | | | | |
| Net income | | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| | | | | | |
| Other comprehensive income (loss) | | | | | | |
| Change in unrealized gains (losses) on cash flow hedges | | 10,114 | | | (21,876) | | | 4,316 | |
| Total other comprehensive (loss) income | | 10,114 | | | (21,876) | | | 4,316 | |
| | | | | | |
| Total comprehensive income | | 109,898 | | | 31,632 | | | 35,074 | |
| Comprehensive income attributable to non-controlling interests | | (1,944) | | | (539) | | | (615) | |
| Total comprehensive income attributable to common stockholders | | $ | 107,954 | | | $ | 31,093 | | | $ | 34,459 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred
Stock | Common
Stock | Additional
Paid-In
Capital | Accumulated
Other
Comprehensive
Income (Loss) | Cumulative
Net Income | Cumulative
Dividends | Total
Stockholders’
Equity | Non-
controlling
Interests | Total
Equity | Redeemable Non-controlling Interests |
| Balance at December 31, 2020 | $ | — | | $ | 1,395 | | $ | 3,635,341 | | $ | (17,832) | | $ | 1,199,499 | | $ | (2,870,027) | | $ | 1,948,376 | | $ | — | | $ | 1,948,376 | | $ | — | |
| Issuance of stock, net of costs | — | | 109 | | 330,933 | | — | | — | | — | | 331,042 | | — | | 331,042 | | — | |
| Common stock redemption | — | | (1) | | (4,084) | | — | | — | | — | | (4,085) | | — | | (4,085) | | — | |
| Share-based compensation | — | | 2 | | 10,727 | | — | | — | | — | | 10,729 | | — | | 10,729 | | — | |
| Net income | — | | — | | — | | — | | 66,659 | | — | | 66,659 | | — | | 66,659 | | — | |
| | | | | | | | | | |
| Loss on interest rate swaps and treasury locks | — | | — | | — | | 7,851 | | — | | — | | 7,851 | | — | | 7,851 | | — | |
Dividends to common stockholders ($1.21 per share) | — | | — | | — | | — | | — | | (175,456) | | (175,456) | | — | | (175,456) | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| Balance at December 31, 2021 | — | | 1,505 | | 3,972,917 | | (9,981) | | 1,266,158 | | (3,045,483) | | 2,185,116 | | — | | 2,185,116 | | — | |
| Issuance of stock, net of costs | — | | 6 | | 22,901 | | — | | — | | — | | 22,907 | | — | | 22,907 | | — | |
| Merger consideration transferred | — | | 2,289 | | 5,574,174 | | — | | — | | — | | 5,576,463 | | 110,702 | | 5,687,165 | | — | |
| Common stock redemption | — | | (1) | | (2,791) | | — | | — | | — | | (2,792) | | — | | (2,792) | | — | |
| Share-based compensation | — | | 7 | | 20,339 | | — | | — | | — | | 20,346 | | — | | 20,346 | | — | |
| Redemption of non-controlling interest | — | | — | | 97 | | — | | — | | — | | 97 | | (97) | | — | | — | |
| Net income | — | | — | | — | | — | | 40,897 | | — | | 40,897 | | (204) | | 40,693 | | — | |
| Reclassification adjustments for losses included in net income (interest expense) | — | | — | | — | | 1,531 | | — | | — | | 1,531 | | (4) | | 1,527 | | — | |
| Gain on interest rate swaps and treasury locks | — | | — | | — | | 10,590 | | — | | — | | 10,590 | | 40 | | 10,630 | | — | |
| Contributions from redeemable non-controlling interests | — | | — | | — | | — | | — | | — | | — | | — | | — | | 2,014 | |
Dividends to common stockholders ($1.24 per share) | — | | — | | — | | — | | — | | (284,079) | | (284,079) | | (1,695) | | (285,774) | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Balance at December 31, 2022 | — | | 3,806 | | 9,587,637 | | 2,140 | | 1,307,055 | | (3,329,562) | | 7,571,076 | | 108,742 | | 7,679,818 | | 2,014 | |
| Issuance of stock, net of costs | — | | — | | 130 | | — | | — | | — | | 130 | | — | | 130 | | — | |
| | | | | | | | | | |
| | | | | | | | | | |
| Common stock redemption | — | | (1) | | (2,234) | | — | | — | | — | | (2,235) | | — | | (2,235) | | — | |
| Conversion of OP Units to common stock | — | | 2 | | 2,774 | | — | | — | | — | | 2,776 | | (2,776) | | — | | — | |
| Share-based compensation | — | | 3 | | 14,285 | | — | | — | | — | | 14,288 | | — | | 14,288 | | — | |
| | | | | | | | | | |
| Net loss | — | | — | | — | | — | | (278,261) | | — | | (278,261) | | (3,822) | | (282,083) | | — | |
| Reclassification adjustments for gains included in net income (interest expense) | — | | — | | — | | (14,315) | | — | | — | | (14,315) | | (173) | | (14,488) | | — | |
| Gains arising during the period on interest rate swaps | — | | — | | — | | 1,434 | | — | | — | | 1,434 | | 29 | | 1,463 | | — | |
| Contributions from redeemable non-controlling interests | — | | — | | — | | — | | — | | — | | — | | — | | — | | 1,889 | |
The accompanying notes are an integral part of these consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjustments to redemption value of redeemable non-controlling interests | — | | — | | — | | — | | — | | — | | — | | — | | — | | (35) | |
Dividends to common stockholders ($1.24 per share) | — | | — | | — | | — | | — | | (472,231) | | (472,231) | | (5,748) | | (477,979) | | — | |
| Balance at December 31, 2023 | $ | — | | $ | 3,810 | | $ | 9,602,592 | | $ | (10,741) | | $ | 1,028,794 | | $ | (3,801,793) | | $ | 6,822,662 | | $ | 96,252 | | $ | 6,918,914 | | $ | 3,868 | |
See accompanying notes.
HEALTHCARE TRUST OF AMERICA, INC.Healthcare Realty Trust Incorporated
CONSOLIDATED STATEMENTS OF EQUITYConsolidated Statements of Cash Flows
(In thousands)Amounts in thousands
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Cumulative Dividends in Excess of Earnings | | Total Stockholders’ Equity | | Non-controlling Interests | | Total Equity |
| | Shares | | Amount |
| Balance as of December 31, 2018 | 205,267 | | | $ | 2,053 | | | $ | 4,525,969 | | | $ | 307 | | | $ | (1,272,305) | | | $ | 3,256,024 | | | $ | 78,890 | | | $ | 3,334,914 | |
| Issuance of common stock, net | 11,096 | | | 112 | | | 322,106 | | | — | | | — | | | 322,218 | | | — | | | 322,218 | |
| Issuance of OP Units in HTALP | | | | | | | | | | | | | 2,603 | | | 2,603 | |
| Issuance of limited partner OP Units in connection with acquisitions | — | | | — | | | — | | | — | | | — | | | — | | | 2,000 | | | 2,000 | |
| Share-based award transactions, net | 319 | | | 3 | | | 10,124 | | | — | | | — | | | 10,127 | | | — | | | 10,127 | |
| Repurchase and cancellation of common stock | (487) | | | (5) | | | (12,173) | | | — | | | — | | | (12,178) | | | — | | | (12,178) | |
| Redemption of non-controlling interest and other | 258 | | | 2 | | | 8,016 | | | — | | | — | | | 8,018 | | | (6,293) | | | 1,725 | |
| Dividends declared ($1.250 per common share) | — | | | — | | | — | | | — | | | (260,593) | | | (260,593) | | | (5,180) | | | (265,773) | |
| Net income | — | | | — | | | — | | | — | | | 30,154 | | | 30,154 | | | 538 | | | 30,692 | |
| Other comprehensive income | — | | | — | | | — | | | 4,239 | | | | | 4,239 | | | 77 | | | 4,316 | |
| Balance as of December 31, 2019 | 216,453 | | | 2,165 | | | 4,854,042 | | | 4,546 | | | (1,502,744) | | | 3,358,009 | | | 72,635 | | | 3,430,644 | |
| Issuance of common stock, net | 1,675 | | | 17 | | | 50,003 | | | — | | | — | | | 50,020 | | | — | | | 50,020 | |
| Issuance of OP Units in HTALP | — | | | — | | | — | | | — | | | — | | | — | | | 1,378 | | | 1,378 | |
| Share-based award transactions, net | 263 | | | 3 | | | 8,913 | | | — | | | — | | | 8,916 | | | — | | | 8,916 | |
| Repurchase and cancellation of common stock | (174) | | | (2) | | | (5,190) | | | — | | | — | | | (5,192) | | | — | | | (5,192) | |
| Redemption of non-controlling interest and other | 361 | | | 3 | | | 9,016 | | | — | | | — | | | 9,019 | | | (9,019) | | | — | |
| Dividends declared ($1.270 per common share) | — | | | — | | | — | | | — | | | (277,626) | | | (277,626) | | | (4,853) | | | (282,479) | |
| Net income | — | | | — | | | — | | | — | | | 52,618 | | | 52,618 | | | 890 | | | 53,508 | |
| Other comprehensive loss | — | | | — | | | — | | | (21,525) | | | — | | | (21,525) | | | (351) | | | (21,876) | |
| Balance as of December 31, 2020 | 218,578 | | | 2,186 | | | 4,916,784 | | | (16,979) | | | (1,727,752) | | | 3,174,239 | | | 60,680 | | | 3,234,919 | |
| Issuance of common stock, net | 9,419 | | | 94 | | | 251,156 | | | — | | | — | | | 251,250 | | | — | | | 251,250 | |
| Issuance of OP Units in HTALP | — | | | — | | | — | | | — | | | — | | | — | | | 35,785 | | | 35,785 | |
| Share-based award transactions, net | 391 | | | 4 | | | 7,258 | | | — | | | — | | | 7,262 | | | — | | | 7,262 | |
| Repurchase and cancellation of common stock | (125) | | | (1) | | | (3,413) | | | — | | | — | | | (3,414) | | | — | | | (3,414) | |
| Redemption of non-controlling interest and other | 617 | | | 6 | | | 6,347 | | | — | | | — | | | 6,353 | | | (6,353) | | | — | |
| Dividends declared ($1.290 per common share) | — | | | — | | | — | | | — | | | (286,040) | | | (286,040) | | | (5,344) | | | (291,384) | |
| Net income | — | | | — | | | — | | | — | | | 98,016 | | | 98,016 | | | 1,768 | | | 99,784 | |
| Other comprehensive income | — | | | — | | | — | | | 9,938 | | | — | | | 9,938 | | | 176 | | | 10,114 | |
| Balance as of December 31, 2021 | 228,880 | | | $ | 2,289 | | | $ | 5,178,132 | | | $ | (7,041) | | | $ | (1,915,776) | | | $ | 3,257,604 | | | $ | 86,712 | | | $ | 3,344,316 | |
| | | | | | | | | | | |
|
| | YEAR ENDED DECEMBER 31, |
| OPERATING ACTIVITIES | 2023 | 2022 | 2021 |
| Net (loss) income | $ | (282,083) | | $ | 40,693 | | $ | 66,659 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 730,709 | | 453,082 | | 202,714 | |
| Other amortization | 45,181 | | 24,695 | | 3,793 | |
| Share-based compensation | 14,288 | | 20,346 | | 10,729 | |
| Amortization of straight-line rent receivable (lessor) | (38,676) | | (23,498) | | (5,801) | |
| Amortization of straight-line rent on operating leases (lessee) | 6,084 | | 3,374 | | 1,498 | |
| Gain on sales of real estate properties | (77,546) | | (270,271) | | (55,940) | |
| (Gain) loss on extinguishment of debt | (62) | | 2,401 | | — | |
| Impairment of real estate properties and credit loss reserves | 154,912 | | 54,427 | | 17,101 | |
| | | |
| | | |
| Equity loss from unconsolidated joint ventures | 1,682 | | 687 | | 795 | |
| Distributions from unconsolidated joint ventures | 17,880 | | 1,881 | | — | |
| | | |
| Non-cash interest from financing and real estate notes receivable | (1,654) | | (2,257) | | (391) | |
| Changes in operating assets and liabilities: | | | |
| Other assets, including right-of-use-assets | (55,946) | | (26,098) | | (11,436) | |
| Accounts payable and accrued liabilities | (18,775) | | 24,191 | | (839) | |
| Other liabilities | 3,826 | | (30,906) | | 3,747 | |
| Net cash provided by operating activities | 499,820 | | 272,747 | | 232,629 | |
| | | |
| INVESTING ACTIVITIES | | | |
| Acquisitions of real estate | (49,171) | | (402,529) | | (365,943) | |
| Development of real estate | (41,058) | | (37,862) | | (4,029) | |
| Additional long-lived assets | (231,026) | | (163,544) | | (100,689) | |
| Funding of mortgages and notes receivable | (26,803) | | (23,325) | | — | |
| Investments in unconsolidated joint ventures | (3,824) | | (99,967) | | (89,600) | |
| Investment in financing receivable | (1,801) | | (1,002) | | (186,433) | |
| Proceeds from sales of real estate properties and additional long-lived assets | 701,434 | | 1,201,068 | | 184,221 | |
| Contributions from redeemable non-controlling interests | 1,389 | | — | | — | |
| Proceeds from notes receivable repayments | — | | 1,688 | | — | |
| Cash assumed in Merger, including restricted cash for special dividend payment | — | | 1,159,837 | | |
| Net cash provided by (used in) investing activities | 349,140 | | 1,634,364 | | (562,473) | |
| | | |
| FINANCING ACTIVITIES | | | |
| Net (repayments) borrowing on unsecured credit facility | (385,000) | | 40,000 | | 210,000 | |
| Borrowings on term loans | — | | 666,500 | | — | |
| Repayment on term loan | — | | (1,141,500) | | — | |
| | | |
| Repayments of notes and bonds payable | (19,143) | | (20,042) | | (24,557) | |
| Redemption of notes and bonds payable | — | | (2,184) | | — | |
| Dividends paid | (472,242) | | (283,713) | | (175,456) | |
| Special dividend paid in relation to the Merger | — | | (1,123,648) | | — | |
| Net proceeds from issuance of common stock | 130 | | 22,902 | | 331,119 | |
| Common stock redemptions | (2,298) | | (3,192) | | (3,803) | |
| Distributions to non-controlling interest of limited partners | (5,123) | | (1,695) | | — | |
| | | |
| Debt issuance and assumption costs | (529) | | (12,753) | | (405) | |
| Payments made on finance leases | (17) | | — | | (9,182) | |
| Net cash (used in) provided by financing activities | (884,222) | | (1,859,325) | | 327,716 | |
| | | |
| (Decrease) increase in cash and cash equivalents | (35,262) | | 47,786 | | (2,128) | |
| Cash and cash equivalents cash at beginning of period | 60,961 | | 13,175 | | 15,303 | |
| Cash and cash equivalents at end of period | $ | 25,699 | | $ | 60,961 | | $ | 13,175 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
TheSee accompanying notes are an integral partnotes.
Healthcare Realty Trust Incorporated
Consolidated Statements of these consolidated financial statements.Cash Flows, cont.
Amounts in thousands
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| Supplemental Cash Flow Information | 2023 | 2022 | 2021 |
| Interest paid | $ | 216,033 | | $ | 112,692 | | $ | 49,443 | |
| Mortgage notes payable assumed in connection with acquisition of real estate, net | $ | 5,284 | | $ | — | | $ | 11,790 | |
| Invoices accrued for construction, tenant improvements and other capitalized costs | $ | 31,469 | | $ | 48,292 | | $ | 17,655 | |
| Capitalized interest | $ | 2,961 | | $ | 1,410 | | $ | 221 | |
| Mortgage note receivables taken in connection with sale of real estate | $ | 51,000 | | $ | — | | $ | — | |
| Real estate notes receivable assumed in Merger (adjusted to fair value) | $ | — | | $ | 74,819 | | $ | — | |
| Unsecured credit facility and term loans assumed in Merger (adjusted to fair value) | $ | — | | $ | 1,758,650 | | $ | — | |
| Senior notes assumed in Merger (adjusted to fair value) | $ | — | | $ | 2,232,650 | | $ | — | |
| Consideration transferred in relation to the Merger | $ | — | | $ | 5,576,463 | | $ | — | |
See accompanying notes.
HEALTHCARE TRUST OF AMERICA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS
(In thousands) | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 283,300 | | | 283,039 | | | 280,969 | |
| Share-based compensation expense | 7,262 | | | 8,916 | | | 10,127 | |
| Impairment | 22,938 | | | — | | | — | |
| Income from unconsolidated joint venture | (1,604) | | | (1,612) | | | (1,882) | |
| Distributions from unconsolidated joint venture | 3,130 | | | 3,240 | | | 3,030 | |
| (Gain) loss on sale of real estate, net | (39,228) | | | (9,590) | | | 154 | |
| Loss on sale of corporate asset, net | 2,106 | | | — | | | — | |
| Loss on extinguishment of debt, net | — | | | 27,726 | | | 21,646 | |
| | | | | |
| Changes in operating assets and liabilities: | | | | | |
| Receivables and other assets, net | (4,699) | | | (11,042) | | | (12,857) | |
| Accounts payable and accrued liabilities | 9,430 | | | 2,066 | | | (128) | |
| Prepaid rent and other liabilities | 3,197 | | | 31,711 | | | 8,577 | |
| Net cash provided by operating activities | 385,616 | | | 387,962 | | | 340,394 | |
| Cash flows from investing activities: | | | | | |
| Investments in real estate | (264,340) | | | (185,286) | | | (553,298) | |
| | | | | |
| Development of real estate | (63,306) | | | (77,077) | | | (28,066) | |
| Proceeds from the sale of real estate | 87,628 | | | 22,939 | | | 4,880 | |
| Proceeds from the sale of corporate assets | 10,127 | | | — | | | — | |
| Capital expenditures | (97,155) | | | (74,743) | | | (91,544) | |
| Other investment | (6,000) | | | — | | | — | |
| Collection of real estate notes receivable | 15,405 | | | 907 | | | 739 | |
| Advances on real estate notes receivable | (82,214) | | | (6,000) | | | — | |
| Net cash used in investing activities | (399,855) | | | (319,260) | | | (667,289) | |
| Cash flows from financing activities: | | | | | |
| Borrowings on unsecured revolving credit facility | 310,000 | | | 1,329,862 | | | 610,000 | |
| Payments on unsecured revolving credit facility | (310,000) | | | (1,429,862) | | | (510,000) | |
| Proceeds from unsecured senior notes | — | | | 793,568 | | | 906,927 | |
| Payments on unsecured senior notes | — | | | (300,000) | | | (700,000) | |
| Payments on secured mortgage loans | — | | | (114,060) | | | (97,361) | |
| Deferred financing costs | (8,053) | | | (6,800) | | | (7,776) | |
| Debt extinguishment costs | — | | | (25,939) | | | (18,383) | |
| | | | | |
| Proceeds from issuance of common stock | 251,250 | | | 50,020 | | | 323,393 | |
| Issuance of OP Units | — | | | 1,378 | | | — | |
| Repurchase and cancellation of common stock | (3,414) | | | (5,192) | | | (12,178) | |
| Dividends paid | (281,820) | | | (275,816) | | | (256,117) | |
| Distributions paid to non-controlling interest of limited partners | (5,420) | | | (4,712) | | | (8,758) | |
| Sale of non-controlling interest | — | | | — | | | 1,234 | |
| Net cash (used in) provided by financing activities | (47,457) | | | 12,447 | | | 230,981 | |
| Net change in cash, cash equivalents and restricted cash | (61,696) | | | 81,149 | | | (95,914) | |
| Cash, cash equivalents and restricted cash - beginning of year | 118,765 | | | 37,616 | | | 133,530 | |
| Cash, cash equivalents and restricted cash - end of year | $ | 57,069 | | | $ | 118,765 | | | $ | 37,616 | |
The accompanying notes are an integral part of these consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
| | | | | | | | | | | | | | |
| | December 31, |
| | 2021 | | 2020 |
| ASSETS | | | | |
| Real estate investments: | | | | |
| Land | | $ | 640,382 | | | $ | 596,269 | |
| Building and improvements | | 6,688,516 | | | 6,507,816 | |
| Lease intangibles | | 404,714 | | | 628,621 | |
| Construction in progress | | 32,685 | | | 80,178 | |
| | 7,766,297 | | | 7,812,884 | |
| Accumulated depreciation and amortization | | (1,598,468) | | | (1,702,719) | |
| Real estate investments, net | | 6,167,829 | | | 6,110,165 | |
| Assets held for sale, net | | 27,070 | | | — | |
| Investment in unconsolidated joint venture | | 62,834 | | | 64,360 | |
| Cash and cash equivalents | | 52,353 | | | 115,407 | |
| Restricted cash | | 4,716 | | | 3,358 | |
| Receivables and other assets, net | | 334,941 | | | 251,728 | |
| Right-of-use assets - operating leases, net | | 229,226 | | | 235,223 | |
| Other intangibles, net | | 10,720 | | | 10,451 | |
| Total assets | | $ | 6,889,689 | | | $ | 6,790,692 | |
| LIABILITIES AND PARTNERS’ CAPITAL | | | | |
| Liabilities: | | | | |
| Debt | | $ | 3,028,122 | | | $ | 3,026,999 | |
| Accounts payable and accrued liabilities | | 198,078 | | | 200,358 | |
| Liabilities of assets held for sale | | 262 | | | — | |
| Derivative financial instruments - interest rate swaps | | 5,069 | | | 14,957 | |
| Security deposits, prepaid rent and other liabilities | | 86,225 | | | 82,553 | |
| Lease liabilities - operating leases | | 196,286 | | | 198,367 | |
| Intangible liabilities, net | | 31,331 | | | 32,539 | |
| Total liabilities | | 3,545,373 | | | 3,555,773 | |
| Commitments and contingencies | | 0 | | 0 |
| Redeemable non-controlling interests | | — | | | — | |
| Partners’ Capital: | | | | |
| Limited partners’ capital, 4,142,408 and 3,519,545 OP Units issued and outstanding as of December 31, 2021 and 2020, respectively | | 86,442 | | | 60,410 | |
| General partners’ capital, 228,879,846 and 218,578,012 OP Units issued and outstanding as of December 31, 2021 and 2020, respectively | | 3,257,874 | | | 3,174,509 | |
| Total partners’ capital | | 3,344,316 | | | 3,234,919 | |
| Total liabilities and partners’ capital | | $ | 6,889,689 | | | $ | 6,790,692 | |
The accompanying notes are an integral part of these consolidated financial statements.
1. Summary of Significant Accounting Policies Business Overview
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Revenues: | | | | | |
| Rental income | $ | 763,923 | | | $ | 738,414 | | | $ | 691,527 | |
| Interest and other operating income | 3,150 | | | 551 | | | 513 | |
| Total revenues | 767,073 | | | 738,965 | | | 692,040 | |
| Expenses: | | | | | |
| Rental | 236,850 | | | 226,859 | | | 211,479 | |
| General and administrative | 49,744 | | | 42,969 | | | 41,360 | |
| Transaction | 372 | | | 965 | | | 2,350 | |
| Depreciation and amortization | 303,834 | | | 303,828 | | | 290,384 | |
| Interest expense | 92,762 | | | 94,613 | | | 96,632 | |
| Impairment | 22,938 | | | — | | | — | |
| Total expenses | 706,500 | | | 669,234 | | | 642,205 | |
| Gain (loss) on sale of real estate, net | 39,228 | | | 9,590 | | | (154) | |
| Loss on sale of corporate asset, net | (2,106) | | | — | | | — | |
| Loss on extinguishment of debt, net | — | | | (27,726) | | | (21,646) | |
| Income from unconsolidated joint venture | 1,604 | | | 1,612 | | | 1,882 | |
| Other income | 485 | | | 301 | | | 841 | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| Net income attributable to non-controlling interests | — | | | — | | | (66) | |
| Net income attributable to common OP unitholders | $ | 99,784 | | | $ | 53,508 | | | $ | 30,692 | |
| Earnings per common OP unit - basic: | | | | | |
| Net income attributable to common OP unitholders | $ | 0.45 | | | $ | 0.24 | | | $ | 0.15 | |
| Earnings per common OP unit - diluted: | | | | | |
| Net income attributable to common OP unitholders | $ | 0.45 | | | $ | 0.24 | | | $ | 0.15 | |
| Weighted average common OP units outstanding: | | | | | |
| Basic | 223,299 | | | 221,666 | | | 209,605 | |
| Diluted | 224,215 | | | 221,666 | | | 209,605 | |
The accompanying notes are an integral partoutpatient healthcare services throughout the United States of theseAmerica. Except as otherwise provided in the Notes to the Company’s Consolidated Financial Statements, references herein to the "Company" mean Healthcare Realty Trust Incorporated and its consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| | | | | | |
| Net income | | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| | | | | | |
| Other comprehensive income (loss) | | | | | | |
| Change in unrealized gains (losses) on cash flow hedges | | 10,114 | | | (21,876) | | | 4,316 | |
| Total other comprehensive income (loss) | | 10,114 | | | (21,876) | | | 4,316 | |
| | | | | | |
| Total comprehensive income | | 109,898 | | | 31,632 | | | 35,074 | |
| Comprehensive income attributable to non-controlling interests | | — | | | — | | | (66) | |
| Total comprehensive income attributable to common unitholders | | $ | 109,898 | | | $ | 31,632 | | | $ | 35,008 | |
The accompanying notes are an integral part of these consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| General Partners’ Capital | | Limited Partners’ Capital | | Total Partners’ Capital |
| | Units | | Amount | | Units | | Amount | |
| Balance as of December 31, 2018 | 205,267 | | | $ | 3,256,294 | | | 3,929 | | | $ | 78,620 | | | $ | 3,334,914 | |
| Issuance of general partner OP Units, net | 11,096 | | | 322,218 | | | — | | | — | | | 322,218 | |
| Issuance of limited partner OP Units | — | | | — | | | — | | | 2,603 | | | 2,603 | |
| Issuance of limited partner OP Units in connection with an acquisition | — | | | — | | | 163 | | | 2,000 | | | 2,000 | |
| Share-based award transactions, net | 319 | | | 10,127 | | | — | | | — | | | 10,127 | |
| Redemption and cancellation of general partner OP Units | (487) | | | (12,178) | | | — | | | — | | | (12,178) | |
| Redemption of limited partner OP Units and other | 258 | | | 8,018 | | | (258) | | | (6,293) | | | 1,725 | |
| Distributions declared ($1.250 per common unit) | — | | | (260,593) | | | — | | | (5,180) | | | (265,773) | |
| Net income | — | | | 30,154 | | | — | | | 538 | | | 30,692 | |
| Other comprehensive income | — | | | 4,239 | | | — | | | 77 | | | 4,316 | |
| Balance as of December 31, 2019 | 216,453 | | | 3,358,279 | | | 3,834 | | | 72,365 | | | 3,430,644 | |
| Issuance of general partner OP Units, net | 1,675 | | | 50,020 | | | — | | | — | | | 50,020 | |
| Issuance of limited partner OP Units | — | | | — | | | 47 | | | 1,378 | | | 1,378 | |
| | | | | | | | | |
| Share-based award transactions, net | 263 | | | 8,916 | | | — | | | — | | | 8,916 | |
| Redemption and cancellation of general partner OP Units | (174) | | | (5,192) | | | — | | | — | | | (5,192) | |
| Redemption of limited partner OP Units and other | 361 | | | 9,019 | | | (361) | | | (9,019) | | | — | |
| Distributions declared ($1.270 per common unit) | — | | | (277,626) | | | — | | | (4,853) | | | (282,479) | |
| Net income | — | | | 52,618 | | | — | | | 890 | | | 53,508 | |
| Other comprehensive loss | — | | | (21,525) | | | — | | | (351) | | | (21,876) | |
| Balance as of December 31, 2020 | 218,578 | | | 3,174,509 | | | 3,520 | | | 60,410 | | | 3,234,919 | |
| Issuance of general partner OP Units, net | 9,419 | | | 251,250 | | | — | | | — | | | 251,250 | |
| | | | | | | | | |
| Issuance of limited partner OP Units in connection with acquisitions | — | | | — | | | 1,239 | | | 35,785 | | | 35,785 | |
| Share-based award transactions, net | 391 | | | 7,262 | | | — | | | — | | | 7,262 | |
| Redemption and cancellation of general partner OP Units | (125) | | | (3,414) | | | — | | | — | | | (3,414) | |
| Redemption of limited partner OP Units and other | 617 | | | 6,353 | | | (617) | | | (6,353) | | | — | |
| Distributions declared ($1.290 per common unit) | — | | | (286,040) | | | — | | | (5,344) | | | (291,384) | |
| Net income | — | | | 98,016 | | | — | | | 1,768 | | | 99,784 | |
| Other comprehensive income | — | | | 9,938 | | | — | | | 176 | | | 10,114 | |
| Balance as of December 31, 2021 | 228,880 | | | $ | 3,257,874 | | | 4,142 | | | $ | 86,442 | | | $ | 3,344,316 | |
The accompanying notes are an integral part of these consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 283,300 | | | 283,039 | | | 280,969 | |
| Share-based compensation expense | 7,262 | | | 8,916 | | | 10,127 | |
| Impairment | 22,938 | | | — | | | — | |
| Income from unconsolidated joint venture | (1,604) | | | (1,612) | | | (1,882) | |
| Distributions from unconsolidated joint venture | 3,130 | | | 3,240 | | | 3,030 | |
| (Gain) loss on sale of real estate, net | (39,228) | | | (9,590) | | | 154 | |
| Loss on sale of corporate asset, net | 2,106 | | | — | | | — | |
| Loss on extinguishment of debt, net | — | | | 27,726 | | | 21,646 | |
| | | | | |
| Changes in operating assets and liabilities: | | | | | |
| Receivables and other assets, net | (4,699) | | | (11,042) | | | (12,857) | |
| Accounts payable and accrued liabilities | 9,430 | | | 2,066 | | | (128) | |
| Prepaid rent and other liabilities | 3,197 | | | 31,711 | | | 8,577 | |
| Net cash provided by operating activities | 385,616 | | | 387,962 | | | 340,394 | |
| Cash flows from investing activities: | | | | | |
| Investments in real estate | (264,340) | | | (185,286) | | | (553,298) | |
| | | | | |
| Development of real estate | (63,306) | | | (77,077) | | | (28,066) | |
| Proceeds from the sale of real estate | 87,628 | | | 22,939 | | | 4,880 | |
| Proceeds from the sale of corporate assets | 10,127 | | | — | | | — | |
| Capital expenditures | (97,155) | | | (74,743) | | | (91,544) | |
| Other investment | (6,000) | | | — | | | — | |
| Collection of real estate notes receivable | 15,405 | | | 907 | | | 739 | |
| Advances on real estate notes receivable | (82,214) | | | (6,000) | | | — | |
| Net cash used in investing activities | (399,855) | | | (319,260) | | | (667,289) | |
| Cash flows from financing activities: | | | | | |
| Borrowings on unsecured revolving credit facility | 310,000 | | | 1,329,862 | | | 610,000 | |
| Payments on unsecured revolving credit facility | (310,000) | | | (1,429,862) | | | (510,000) | |
| Proceeds from unsecured senior notes | — | | | 793,568 | | | 906,927 | |
| Payments on unsecured senior notes | — | | | (300,000) | | | (700,000) | |
| Payments on secured mortgage loans | — | | | (114,060) | | | (97,361) | |
| Deferred financing costs | (8,053) | | | (6,800) | | | (7,776) | |
| Debt extinguishment costs | — | | | (25,939) | | | (18,383) | |
| | | | | |
| Proceeds from issuance of general partner OP units | 251,250 | | | 50,020 | | | 323,393 | |
| Issuance of limited partner OP units | — | | | 1,378 | | | — | |
| Repurchase and cancellation of general partner OP units | (3,414) | | | (5,192) | | | (12,178) | |
| Distributions paid to general partner | (281,820) | | | (275,816) | | | (256,117) | |
| Distributions paid to limited partners and redeemable non-controlling interests | (5,420) | | | (4,712) | | | (8,758) | |
| Sale of non-controlling interest | — | | | — | | | 1,234 | |
| Net cash (used in) provided by financing activities | (47,457) | | | 12,447 | | | 230,981 | |
| Net change in cash, cash equivalents and restricted cash | (61,696) | | | 81,149 | | | (95,914) | |
| Cash, cash equivalents and restricted cash - beginning of year | 118,765 | | | 37,616 | | | 133,530 | |
| Cash, cash equivalents and restricted cash - end of year | $ | 57,069 | | | $ | 118,765 | | | $ | 37,616 | |
The accompanying notes are an integral part of these consolidated financial statements.
Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us” or “our” refers tosubsidiaries, including Healthcare Trust of America, Inc. andRealty Holdings, L.P. (formerly known as Healthcare Trust of America Holdings, LP, collectively.
1. Organization and DescriptionLP) (the "OP"), after giving effect to the Merger discussed in more detail in Note 2 below. As of Business
HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006. HTA operates as a REIT and isDecember 31, 2023, the general partnerCompany had gross investments of HTALP, which is the operating partnership,approximately $13.4 billion in an umbrella partnership, or “UPREIT” structure. HTA has qualified and intends to continue to be taxed as a REIT for federal income tax purposes under the applicable sections of the Internal Revenue Code.
We own655 consolidated real estate primarily consisting of MOBs located on or adjacent to hospital campuses orproperties, construction in off-campus, community core outpatient locations across 32 states within the U.S., and weprogress, redevelopments, financing receivables, financing lease space to tenants primarily consisting of health systems, research and academic institutions, and various sized physician practices. We generate substantially all of our revenues from rents and rental-related activities, such asright-of-use assets, land held for development, corporate property and facilities managementexcluding held for sale assets. The Company’s real estate properties are located in 35 states and other incidental revenues relatedtotal approximately 38.5 million square feet. In addition, the Company had a weighted average ownership interest of approximately 43% in 33 real estate properties held in unconsolidated joint ventures.
See Note 5 below for more details regarding the Company's joint ventures. Square footage and property count disclosures in these Notes to the operation of real estate.
Our primary objective is to maximize stockholder value with growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and we expect to enhance our existing portfolio.
COVID-19 Pandemic
On March 11, 2020 the novel coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization. As the virus continued to spread throughout the United States and other countries across the world, Federal, state and local governments took various actions including the issuance of “stay-at-home” orders, social distancing guidelines and ordering the temporary closure of non-essential businesses to limit the spread of COVID-19. While many businesses have reopened and vaccinationsCompany's Consolidated Financial Statements are becoming more widely available to the general population, the economic uncertainty created by the COVID-19 pandemic continue to present risks to the Company and the future results of our operations. Although we did not experience significant disruptions from the COVID-19 pandemic during the year ended December 31, 2021, should current and planned measures, including further development and delivery of vaccines and other measures intended to reduce or eliminate the spread of COVID-19, past and/or proposed economic stimulus, and other laws, acts and orders proposed or enacted by these various governmental agencies ultimately not be successful or limited in their efficacy, our business and the broader real estate industry may experience significant adverse consequences. These consequences include loss of revenues, increased expenses, increased costs of materials, difficulty in maintaining an active workforce, and constraints on our ability to secure capital or financing, among other factors.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our consolidated financial statements. Such consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to GAAP in all material respects and have been consistently applied in preparing our accompanying consolidated financial statements.
Basis of Presentation
Our accompanying consolidated financial statements include our accounts and those of our subsidiaries and any consolidated VIEs. All inter-company balances and transactions have been eliminated in the accompanying consolidated financial statements.unaudited.
Principles of Consolidation
The consolidated financial statementsCompany’s Consolidated Financial Statements include the accounts of ourthe Company, its wholly owned subsidiaries, and consolidated joint venture arrangements.ventures and partnerships where the Company controls the operating activities. GAAP requires the Company to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). ASC Topic 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The portionsCompany identifies the primary beneficiary of a VIE as the enterprise that has both of the HTALP operating partnership not owned by us are presentedfollowing characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary, with any minority interests reflected as non-controlling interests in our consolidated balance sheets and statements of operations, consolidated statements of comprehensive income or loss, consolidated statements of equity, and consolidated statements of changes in partners’ capital. The portions of other joint venture arrangements not owned by us are presented as redeemable non-controlling interests onin the accompanying consolidated balance sheets.Consolidated Financial Statements.
The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk, the disposition of all or a portion of an interest held by the primary beneficiary, or changes in facts and circumstances that impact the power to direct activities of the VIE that most significantly impacts economic performance. The Company performs this analysis on an ongoing basis.
For property holding entities not determined to be VIEs, the Company consolidates such entities in which it owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the entity if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements.
The OP is 98.8% owned by the Company. Holders of operating partnership units (“OP UnitsUnits”) are considered to be non-controlling interest holders in HTALPthe OP and their ownership interests are reflected as equity on the accompanying consolidated balance sheets.Consolidated Balance Sheets. Further, a portion of the earnings and losses of HTALPthe OP are allocated to non-controlling interest holders based on their respective ownership percentages. Upon conversion
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of OP Units to common stock, any difference between the fair value of the common stock issued and the carrying value of the OP Units converted to common stock is recorded as a component of equity. As of December 31, 2021, 2020 and 2019,2023, there were approximately 4.14.5 million 3.5 million and 3.8 million, respectively,, or 1.2%, of OP Units issued and outstanding.outstanding held by non-controlling interest holders. Additionally, the Company is the primary beneficiary of this VIE. Accordingly, the Company consolidates its interests in the OP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
As of December 31, 2023, the Company had four consolidated VIEs are entities where investors lack sufficient equity at risk forin addition to the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack oneOP, consisting of joint venture investments in which the Company is the primary beneficiary of the following: (i)VIE based on the powercombination of operational control and the rights to direct the activities that most significantly impact the entity’s economic performance; (ii)receive residual returns or the obligation to absorb losses arising from the expected lossesjoint ventures. Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs, excluding the OP, in the aggregate:
| | | | | |
| (dollars in thousands) | DECEMBER 31, 2023 |
| Assets: | |
| Net real estate investments | $ | 85,752 | |
| Cash and cash equivalents | 2,144 | |
| Receivables and other assets | 2,704 | |
| Total assets | $ | 90,600 | |
| Liabilities: | |
| Accrued expenses and other liabilities | $ | 17,835 | |
| Total equity | 72,765 | |
| Total liabilities and equity | $ | 90,600 | |
As of December 31, 2023, the Company had three unconsolidated VIEs consisting of two notes receivables and one joint venture. It was determined that the Company was not the primary beneficiary of the entity; and (iii)unconsolidated VIEs because the right to receiveCompany does not have the expected returns of the entity. We consolidate our investment in VIEs when we determine that we are the primary beneficiary. A primary beneficiary is one that has both: (i) the power or economics to direct the activities of the VIE that most significantly impactsVIEs on a stand-alone basis. Therefore, the entity’s economic performance;Company accounts for the two notes receivables as amortized cost and (ii)a joint venture arrangement under the obligation to absorb losses orequity method. See below for additional information regarding the right to receive benefitsCompany's unconsolidated VIEs:
| | | | | | | | | | | | | | |
| (dollars in thousands) ORIGINATION DATE | LOCATION | SOURCE | CARRYING AMOUNT | MAXIMUM EXPOSURE TO LOSS |
| 2021 | Houston, TX 1 | Note receivable | $ | 31,150 | | $ | 31,150 | |
| 2021 | Charlotte, NC 1 | Note receivable | 5,796 | | 6,000 | |
| 2022 | Texas 2 | Equity method | 61,801 | | 61,801 | |
1Assumed mortgage note receivable in connection with the Merger.
2Includes investments in seven properties.
As of December 31, 2023, the VIE that could be significant to the entity. The HTALP operating partnership and our otherCompany's unconsolidated joint venture arrangements are VIEs becausewere accounted for using the limited partners in those partnerships, although entitled to vote on certain matters, doequity method of accounting as the Company exercised significant influence over but did not possess kick-out rights or substantive participating rights. Additionally, we determined that we arecontrol these entities. See Note 5 for more details regarding the primary beneficiary of our VIEs. Accordingly, we consolidate our interests in the HTALP operating partnership and in our otherCompany's unconsolidated joint venture arrangements. However, because we hold what is deemed a majority voting interest in the HTALP operating partnership and our other joint venture arrangements, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs. We will evaluate on an ongoing basis the need to consolidate entities based on the standards set forth in GAAP as described above.ventures.
Use of Estimates in the Consolidated Financial Statements
The preparationPreparation of our consolidated financial statementsthe Consolidated Financial Statements in conformityaccordance with GAAPaccounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the reported amounts of assets, liabilities, revenuesConsolidated Financial Statements and expenses, and related disclosure of contingent assets and liabilities. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances.accompanying notes. Actual results couldmay differ from those estimates perhapsand assumptions. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in adverse ways,real estate, impairments, collectability of tenant receivables, and fair value measurements, as applicable.
Segment Reporting
The Company owns, leases, acquires, manages, finances, develops and redevelops outpatient and other healthcare-related properties. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore, the Company discloses its operating results in a single reportable segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Real Estate Properties
Real estate properties are recorded at cost or at fair value if acquired in a transaction that is a business combination under ASC Topic 805, Business Combinations. Cost or fair value at the time of acquisition is allocated among land, buildings, tenant improvements, lease and other intangibles, and personal property as applicable.
During 2023 and 2022, the Company eliminated against accumulated depreciation approximately $51.7 million and $19.6 million, respectively, of fully amortized real estate intangibles that were initially recorded as a component of certain real estate acquisitions. During 2022, approximately $4.1 million of fully depreciated tenant and capital improvements that were no longer in service were eliminated against accumulated depreciation.
Depreciation expense of real estate properties for the three years ended December 31, 2023, 2022 and 2021 was $518.6 million, $320.8 million and $170.0 million, respectively. Depreciation and amortization of real estate assets in place as of December 31, 2023, is provided for on a straight-line basis over the asset’s estimated useful life:
| | | | | |
| Land improvements | 2.0 to 39.0 years |
| Buildings and improvements | 3.3 to 49.0 years |
| Lease intangibles (including ground lease intangibles) | 1.0 to 99.0 years |
| Personal property | 3.0 to 20.0 years |
The Company capitalizes direct costs, including costs such as construction costs and professional services, and indirect costs, including capitalized interest and overhead costs, associated with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their intended use. Capitalized interest cost is calculated using the weighted average interest rate of the Company's unsecured debt or the interest rate on project specific debt, if applicable. The Company continues to capitalize interest on the unoccupied portion of the properties in stabilization for up to one year after the buildings have been placed into service, at which time the capitalization of interest must cease.
Asset Impairment
The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable. Indicators of impairment may include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its tenants. In addition, the Company reviews for possible impairment, those assets subject to purchase options and those impacted by casualty losses, such as tornadoes and hurricanes. A property value is considered impaired only if management's estimate of current and projected (undiscounted and unleveraged) operating cash flows of the property is less than the net carrying value of the property. These estimates couldof future cash flows include only those that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the property based on its estimated remaining useful life. These estimates, including the useful life determination which can be different under differentaffected by any potential sale of the property, are based on management's assumptions about its use of the property. Therefore, significant judgment is involved in estimating the current and projected cash flows. If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or conditions.others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property.
Acquisitions of Real Estate Properties with In-Place Leases
The Company's acquisitions of real estate properties typically do not meet the definition of a business and are accounted for as asset acquisitions. Acquisitions of real estate properties with in-place leases are accounted for at relative fair value. When a building with in-place leases is acquired, the cost of the acquisition must be allocated between the tangible real estate assets "as-if-vacant" and the intangible real estate assets related to in-place leases based on their estimated fair values. Land fair value is estimated by using an assessment of comparable transactions and other relevant data.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
The Company considers whether any of the in-place lease rental rates are above- or below-market. An asset (if the actual rental rate is above-market) or a liability (if the actual rental rate is below-market) is calculated and recorded in an amount equal to the present value of the future cash flows that represent the difference between the actual lease rate and the estimated market rate. If an in-place lease is identified as a below-market rental rate, the Company would also evaluate any renewal options associated with that lease to determine if the intangible should include those periods. The values related to above- or below-market in-place lease intangibles are amortized over the remaining term of the leases upon acquisition to rental income where the Company is the lessor and to property operating expense where the Company is the lessee.
The Company also estimates an absorption period, which can vary by property, assuming the building is vacant and must be leased up to the actual level of occupancy when acquired. During that absorption period, the owner would incur direct costs, such as tenant improvements, and would suffer lost rental income. Likewise, the owner would have acquired a measurable asset in that, assuming the building was vacant, certain fixed costs would be avoided because the actual in-place lessees would reimburse a certain portion of fixed costs through expense reimbursements during the absorption period.
These assets (above- or below-market lease, tenant improvement, leasing costs avoided, rental income lost, and expenses recovered through in-place lessee reimbursements) are estimated and recorded in amounts equal to the present value of estimated future cash flows. The actual purchase price is allocated based on the various relative asset fair values described above.
The building and tenant improvement components of the purchase price are depreciated over the estimated useful life of the building or the weighted average remaining term of the in-place leases. The at-market, in-place lease intangibles are amortized to depreciation and amortization expense over the weighted average remaining term of the leases, and customer relationship assets are amortized to depreciation amortization expense over terms applicable to each acquisition. Any goodwill recorded through a business combination would be reviewed for impairment at least annually and is not amortized.
See Note 9 for more details on the Company’s intangible assets.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements.
A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
•Level 1 – quoted prices for identical instruments in active markets;
•Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Executed purchase and sale agreements, which are binding agreements, are categorized as level one inputs. Brokerage estimates, letters of intent, or unexecuted purchase and sale agreements are considered to be level three as they are nonbinding in nature.
Fair Value of Derivative Financial Instruments
Derivative financial instruments are recorded at fair value on the Company's Consolidated Balance Sheets as other assets or other liabilities. The valuation of derivative instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. Fair values of derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of the Company's forward starting interest
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
rate swap contracts are estimated by pricing models that consider foreign trade rates and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. For derivatives designated in qualifying cash flow hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss). Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the underlying hedged transaction is recognized in earnings. As of December 31, 2023 and 2022, the Company had $10.7 million recorded in accumulated other comprehensive loss and $2.1 million recorded in accumulated other comprehensive (loss) income, respectively, related to forward starting interest rate swaps entered into and settled during 2015 and 2020 and a hedge of the Company's variable rate debt. See Note 11 for additional information.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of all highly liquidincludes short-term investments with a maturityoriginal maturities of three months or less when purchased. Restricted cash isincludes cash held in escrow in connection with proceeds from the sales of certain real estate properties. The Company did not have any restricted cash for the years ended December 31, 2023 or 2022.
Cash and cash equivalents are held in bank accounts and overnight investments. The Company maintains its bank deposits with large financial institutions in amounts that often exceed federally-insured limits. The Company has not experienced any losses in such accounts.
Goodwill and Other Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present.
Identifiable intangible assets of the Company are comprised of (i) reserve accounts for property taxes, insurance, capital improvementsenterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and tenant improvements; (ii) collateral accounts for debt issuance costs. In-place lease and interest rate swaps; and (iii) deposits for future investments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets to the combined amounts shown on the accompanying consolidated statements of cash flows (in thousands): | | | | | | | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 | | 2019 |
| Cash and cash equivalents | $ | 52,353 | | | $ | 115,407 | | | $ | 32,713 | |
| Restricted cash | 4,716 | | | 3,358 | | | 4,903 | |
| Total cash, cash equivalents and restricted cash | $ | 57,069 | | | $ | 118,765 | | | $ | 37,616 | |
Revenue Recognition
Minimum annual rental revenue is recognizedcustomer relationship intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Debt issuance costs are amortized over the term of the related lease (including rent holidays). Differences between rental income recognized and amounts contractually due underdebt instrument on the lease agreements are recorded aseffective interest method or the straight-line rent receivables. If we determine that collectability of future minimum lease paymentsmethod when the effective interest method is not probable, the straight-line rent receivable balanceapplicable. Goodwill is written off and recognizednot amortized but is evaluated annually as of December 31 for impairment. The Company's goodwill asset increased $27.3 million to $250.5 million in 2023 compared to $223.2 million in 2022, as a decrease in revenue inresult of the final purchase price allocation adjustments related to the Merger. The 2023 impairment evaluation indicated that period. Tenant reimbursement revenue, which is comprisedno impairment had occurred with respect to the Company's goodwill asset. See Note 9 for more detail on the Company’s intangible assets.
Contingent Liabilities
From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of additional amounts recoverable from tenants for real estate taxes, common area maintenanceits properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages.
The Company continually monitors any matters that may present a contingent liability, and, other certain operating expenses are recognized as revenue on a gross basis in the period in which the related recoverable expenses are incurred. We accrue revenue corresponding to these expenses on a quarterly basis, management reviews the Company’s reserves and accruals in relation to adjusteach of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are first recorded amounts to our best estimate of the final annual amountswhen a loss is determined to be billed. Subsequentboth probable and can be reasonably estimated. Changes in estimates regarding the exposure to year-end,a contingent loss are reflected as adjustments to the related liability in the periods when they occur.
Because of uncertainties inherent in the estimation of contingent liabilities, it is possible that the Company’s provision for contingent losses could change materially in the near term. To the extent that any significant losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements.
Share-Based Compensation
The Company has various employee and director share-based awards outstanding. These awards include non-vested common stock or other stock-based awards, including units in the OP, pursuant to the Company's Amended and Restated 2006 Incentive Plan, dated April 29, 2021 ("the Incentive Plan"). The Company recognizes share-based payments to employees and directors in the Consolidated Statements of Operations on a calendar yearstraight-line basis we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences betweenover the estimated expenses we billed and the actual expenses that were incurred. We recognize lease termination fees when there is a signed termination letter agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property. Rental income is reported net of amortization of inducements.
Effective January 1, 2018, with the adoption of Topic 606 - Revenue from Contracts with Customers and corresponding amendments, the revenue recognition process is now based on a five-step model to account for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. Topic 606 requires an entity to recognize
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
requisite service period based on the fair value of the award on the measurement date. The Company recognizes the impact of forfeitures as they occur. See Note 13 for details on the Company’s share-based awards.
Accumulated Other Comprehensive (Loss) Income
Certain items must be included in comprehensive (loss) income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, changes in the fair value of derivative instruments and unrealized gains or losses on available-for-sale securities. As of December 31, 2023, the Company’s accumulated other comprehensive (loss) income consists of the loss for changes in the fair value of active derivatives designated as cash flow hedges and the loss on the unamortized settlement of forward starting swaps and treasury hedges. See Note 11 for more details on the Company's derivative financial instruments.
Revenue from Contracts with Customers (Topic 606)
The Company recognizes certain revenue under the core principle of Topic 606. This requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We have identified allLease revenue is not within the scope of our revenue streams and we have concludedTopic 606. To achieve the core principle, the Company applies the five-step model specified in the guidance.
Revenue that rental income from leasing arrangements represents a substantial portion of our revenue and, therefore, is specifically excluded from Topic 606 and will be governedaccounted for under Topic 842 - Leases. The other revenue stream identified as impacting Topic 606 is concentratedsegregated on the Company’s Consolidated Statements of Operations in the recognitionOther operating line item. This line item includes parking income, management fee income and other miscellaneous income. Below is a detail of real estate sales.the amounts by category:
Investments | | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| in thousands | 2023 | 2022 | 2021 |
| Type of Revenue | | | |
| Parking income | $ | 9,903 | | $ | 8,513 | | $ | 7,859 | |
| | | |
Management fee income/other 1 | 7,548 | | 5,193 | | 2,432 | |
| $ | 17,451 | | $ | 13,706 | | $ | 10,291 | |
1 Includes the recovery of certain expenses under the financing receivable as outlined in Real Estatethe management agreement.
The majorityCompany’s two major types of our investments in real estaterevenue that are accounted for under Topic 606 are all accounted for as asset acquisitionsthe performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time and the purchase price of tangible and intangible assets and liabilities are recordedCompany recognizes revenue monthly based on their respective fair values. Tangible assets primarily consistthis principle. In most cases, the revenue is due and payable on a monthly basis. The Company had a receivable balance of land$1.9 million and buildings$1.5 million, and improvements. Additionally,$1.4 million for the purchase priceyears ended December 31, 2023, 2022 and 2021, respectively.
Management fee income includes acquisition related expenses, above or below market leases, above or below market interests, in place leases, tenant relationships, above or below market debt assumed, interest rate swaps assumedproperty management services provided to third parties and any contingent consideration recorded when the contingency is resolved. The determinationcertain of the fair value requires us to make certain estimatesproperties in the Company's unconsolidated joint ventures and assumptions.
With the assistance of independent valuation specialists, we record the purchase price of completed investments in real estate associated with tangibleis generally calculated, accrued and intangible assets and liabilitiesbilled monthly based on their fair values. The tangible assets (land and building and improvements) are determined based upona percentage of cash collections of tenant receivables for the value of the property as if it were to be replacedmonth or as if it were vacant using discounted cash flow models similar to those used by market participants. Factors considered by us include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price of the applicable completed acquisition property is inclusive of above or below market leases, above or below market leasehold interests, in place leases, tenant relationships, above or below market debt assumed, interest rate swaps assumed, any contingent consideration and acquisition related expenses.
The value of above or below market leases is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractualstated amount per square foot. Management fee income also includes amounts to be received pursuantpaid to the lease overCompany for its remaining term and (ii) our estimateasset management services for certain of its unconsolidated joint ventures. Internal management fee income, where the amounts that would be received using fair market rates over the remaining term of the lease including any bargain renewal periods. Under Topic 840, the amounts associated with above market leases are includedCompany manages its owned properties, is eliminated in other intangibles, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining lease term. The amounts allocated to below market leases are included in intangible liabilities, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining lease term. Upon adoption of Topic 842 on January 1, 2019, the amounts associated with above market leases are included in right-of-use assets - operating leases, net in our accompanying consolidated balance sheets and amortized to rental income over the remaining lease term. The amounts allocated to below market leases are included in lease liabilities - operating leases in our accompanying consolidated balance sheets and amortized to rental income over the remaining lease term.
The value associated with above or below market leasehold interests is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between: (i) the contractual amounts to be paid pursuant to the lease over its remaining term; and (ii) our estimate of the amounts that would be paid using fair market rates over the remaining term of the lease including any bargain renewal periods. Under Topic 840, the amounts recorded for above market leasehold interests are included in intangible liabilities, net in our accompanying consolidated balance sheets and amortized to rental expense over the remaining lease term. The amounts allocated to below market leasehold interests are included in other intangibles, net in our accompanying consolidated balance sheets and amortized to rental expense over the remaining lease term. Upon adoption of Topic 842 on January 1, 2019, the amounts recorded for above market leasehold interests are included in lease liabilities - operating leases in our accompanying consolidated balance sheets and amortized to rental expense over the remaining lease term. The amounts allocated to below market leasehold interests are included in right-of-use assets - operating leases, net in our accompanying consolidated balance sheets and amortized to rental expense over the remaining lease term.
The total amount of other intangible assets includes in place leases and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. Characteristics considered by us in allocating these values include the nature and extent of the credit quality and expectations of lease renewals, among other factors. The amounts recorded for in place leases and tenant relationships are included in lease intangibles in our accompanying consolidated balance sheets and will be amortized to amortization expense over the remaining lease term.
The value recorded for above or below market debt is determined based upon the present value of the difference between the cash flow stream of the assumed mortgage and the cash flow stream of a market rate mortgage. The amounts recorded for above or below market debt are included in debt in our accompanying consolidated balance sheets and are amortized to interest expense over the remaining term of the assumed debt.consolidation.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
Rental Income
Rental income related to non-cancelable operating leases is recognized as earned over the life of the lease agreements on a straight-line basis. The Company's lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index ("CPI"). Rental income from properties under multi-tenant office lease arrangements and rental income from properties with single-tenant lease arrangements are included in rental income on the Company's Consolidated Statements of Operations. For lessors, the standard requires a lessor to classify leases as either sales-type, direct-financing or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease.
Nonlease components, such as common area maintenance, are generally accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. The combined component is accounted for under Accounting Standards Codification, Topic 842.
The value recorded for interest rate swapscomponents of rental income are as follows:
| | | | | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, | |
| in thousands | 2023 | 2022 | 2021 | |
| Property operating income | $ | 1,270,508 | | $ | 883,953 | | $ | 514,533 | | |
| Straight-line rent | 38,676 | | 23,498 | | 5,801 | | |
| Rental income | $ | 1,309,184 | | $ | 907,451 | | $ | 520,334 | | |
Federal Income Taxes
The Company believes it has qualified to be taxed as a REIT and intends at all times to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code. The Company must distribute at least 90% per annum of its real estate investment trust taxable income to its stockholders and meet other requirements to continue to qualify as a real estate investment trust. As a REIT, the Company is based upon a discounted cash flow analysisgenerally not subject to federal income tax on the expected cash flows, taking into account interest rate curvesnet income it distributes to its stockholders, but may be subject to certain state and the remaining term.local taxes and fees. See derivative financial instruments belowNote 16 for further discussion.
If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes on its taxable income and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which the qualification is lost unless the IRS grants it relief under certain statutory provisions. Such an event could have a material adverse effect on its business, financial condition, results of operations and net cash available for dividend distributions to its stockholders.
The costCompany conducts substantially all of operating properties includesits operations through the cost of landOP. As a partnership, the OP generally is not liable for federal income taxes. The income and buildings and related improvements. Expenditures that increaseloss from the service life of properties are capitalized and the cost of maintenance and repairs is charged to expense as incurred. The cost of buildings is depreciated on a straight-line basis over the estimated useful livesoperations of the buildings up to 39 years andOP is included in the tax returns of its partners, including the Company, who are responsible for tenant improvements, the shorterreporting their allocable share of the lease term or useful life, typically ranging from onepartnership income and loss. Accordingly, no provision for income tax has been made in the accompanying consolidated financial statements.
The Company classifies interest and penalties related to 10 years. Furniture, fixturesuncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and equipment is depreciated over 5 years. Depreciation expense of buildings and improvements foradministrative expenses. No such amounts were recognized during the three years ended December 31, 2021, 2020 and 2019, was $246.3 million, $235.8 million and $219.2 million, respectively.2023.
Leases
As a lessor, we lease space in our MOBs primarily to medical enterprises for terms ranging from three to seven years in length. The assets underlying these leases consist of buildings and associated land which are included as real estate investments on our accompanying consolidated balance sheets. All of our leases for which we are the lessor are classified as operating leases under Topic 842.
Leases, for which we are the lessee, are classified as separate components on our accompanying consolidated balance sheets. Operating leases are included as right-of-use (“ROU”) assets - operating leases, net, with a corresponding lease liability. Financing lease assets are included in receivables and other assets, net, with a corresponding lease liability in security deposits, prepaid rent and other liabilities. A lease liability is recognized for our obligation related to the lease and an ROU asset represents our right to use the underlying asset over the lease term. Refer to Note 7 - Leases in the accompanying notes to the consolidated financial statements for more detail relating to our leases.
Through the duration of the COVID-19 pandemic, changes to our leases as a result of COVID-19 have been in two categories. Leases are categorized based upon the impact of the modification on its cash flows. One category is rent deferrals for which the guidance above was utilized, which provided relief from requiring a lease by lease analysis pursuant to Topic 842. These deferrals are generally for up to three months of rent with a payback period from three to twelve months once the deferral period has ended. Deferrals do not have an impact on cash flows over the lease term, rather, payments are made in different periods while the cash flowsFederal tax returns for the entirety of the lease termyears 2020, 2021, 2022 and 2023 are the same. However, we have continued to recognize revenue and straight line revenue for amountscurrently subject to deferral agreements in accordance with Topic 842. In 2020, which is the period that we believe constituted the majority of our COVID-19-related deferral request, we approved deferral plans totaling approximately $11.1 million, of which approximately $10.8 million have been repaid through December 31, 2021.
The second category is early renewals, where the Company renewed lease arrangements prior to their contractual expirations, providing concession at the commencement of the lease in exchange for additional term, on average approximately three years. This category is treated as a modification under Topic 842, with the existing balance of cumulative difference between rental income and payment amounts (existing straight line rent receivable) being recast over the new term, factoring in any changes attributable to the new lease arrangement and for which we performed a leaseexamination by lease analysis. Cash flows are impacted over the long term as customary free rent, at an average of three months in conjunction with these agreements, and is offset by substantively more term and/or increased rental rates. During the year ended December 31, 2021, the Company has entered into minimal new deferral arrangements or early renewal leases with substantive amounts of free rent or other forms of concession at the onset of the lease.
The Lease Modification Q&A had no material impact on our condensed consolidated financial statements as of and for the year ended December 31, 2021, however, its future impact to us is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by us at the time of entering into any such concessions.
Development
We capitalize interest, direct and indirect project costs associated with the initial construction up to the time the property is substantially complete and ready for its intended use. In addition, we capitalize costs, including real estate taxes, insurance and utilities, that have been allocated to vacant space based on the square footage of the portion of the building not held available for immediate occupancy during the extended lease-up periods after construction of the building shell has been completed if costs are being incurred to ready the vacant space for its intended use. If costs and activities incurred to ready the vacant space cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space, project costs are no longer capitalized. We cease capitalization of all project costs on extended lease-up periods when significant activities have ceased, which does not exceed the shorter of a one-year period after the completion of the building shell or when the property attains 90% occupancy.taxing authorities.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
Real EstateState Income Taxes
The Company must pay certain state income taxes and the provisions for such taxes are generally included in general and administrative expenses on the Company’s Consolidated Statements of Operations. See Note 16 for further discussion.
Sales and Use Taxes
The Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in rental income in the Company’s Consolidated Statements of Operations.
Assets Held for Sale
We consider propertiesLong-lived assets held for sale once management commits to a plan to sell the property and has determined that the sale is probable and expected to occur within one year. Upon classification as held for sale, we record the propertyare reported at the lower of itstheir carrying amount or their fair value less costsestimated cost to sell, and ceasesell. Further, depreciation and amortization. The fair value is generally based on discounted cash flow analyses, which involve management’s best estimate of market participants’ holding period, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods and capital requirements. As of December 31, 2021, we classified a single-tenant MOB located inthese assets ceases at the greater Atlanta, Georgia market as real estate held for sale ontime the accompanying consolidated balance sheets. As of December 31, 2020, the Company had no propertiesassets are classified as held for sale. Losses resulting from the sale of such properties are characterized as impairment losses in the Consolidated Statements of Operations. See Note 6 for more detail on assets held for sale.
Earnings per Share
The following table representsCompany uses the major classestwo-class method of assetscomputing net earnings per common share. Earnings per common share is calculated by considering share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities. Undistributed earnings (excess net income over dividend payments) are allocated on a pro rata basis to common shareholders and liabilities,restricted shareholders. Undistributed losses (dividends in excess of net income) do not get allocated to restricted stockholders as they do not have the contractual obligation to share in losses. The amount of undistributed losses that applies to the restricted stockholders is allocated to the common stockholders.
Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of the outstanding stock options from the Legacy HR Employee Stock Purchase Plan using the treasury stock method and the balance sheet classificationaverage stock price during the period. Additionally, net income (loss) allocated to OP units has been included in the numerator and common stock related to redeemable OP units have been included in the denominator for the purpose of computing diluted earnings per share. See Note 14 for the calculations of earnings per share.
Redeemable Non-Controlling Interests
The Company accounts for redeemable equity securities in accordance with Accounting Standards Update ("ASU") 2009-04 Liabilities (Topic 480): Accounting for Redeemable Equity Instruments, which requires that equity securities contingently redeemable at the option of the holder, not solely within our control, be classified outside permanent stockholders’ equity. The Company classifies redeemable equity securities as redeemable non-controlling interests in the accompanying Consolidated Balance Sheet. Accordingly, the Company records the carrying amount at the greater of the initial carrying amount (increased or decreased for the non-controlling interest’s share of net income or loss and distributions) or the redemption value. We measure the redemption value and record an adjustment to the carrying value of the equity securities as a component of redeemable non-controlling interest. As of December 31, 2023, the Company had redeemable non-controlling interests of $3.9 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Investments in Leases - Financing Receivables, Net
In accordance with ASC Topic 842: Leases, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale-leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option. As a result, the Company does not recognize the underlying real estate asset but instead recognizes a financial asset in accordance with ASC Topic 310: Receivables. See below for additional information regarding the Company's financing receivables as of December 31,
2021 (in thousands): | | | | | |
| December 31, 2021 |
Land | $ | 2,401 | |
Buildings and Improvements | 27,408 | |
Lease intangibles | 4,769 | |
| 34,578 | |
Accumulated depreciation and amortization | (8,148) | |
Real estate assets held for sale, net | 26,430 | |
Receivables and other assets, net | 640 | |
Assets held for sale, net | $ | 27,070 | |
| |
| |
Intangible liabilities, net | $ | 262 | |
Liabilities of assets held for sale | $ | 262 | |
2023. Recoverability of Real Estate Investments
Real estate investments are evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Impairment indicators are assessed separately for each property and include, but are not limited to, significant decreases in real estate property net income, significant decreases in occupancy percentage, changes in management’s intent with respect to the properties and prevailing market conditions. Impairment losses are recorded when indicators of impairment are present and the carrying amount of the asset is greater than the sum of future undiscounted cash flows expected to be generated by that asset over the remaining expected holding period. We would recognize an impairment loss when the carrying amount is not recoverable to the extent the carrying amount exceeds the fair value of the property. The fair value is generally based on discounted cash flow analyses. In performing the analyses we consider executed sales agreements or management’s best estimate of market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods and capital requirements. For the year ended December 31, 2021, we recorded impairment charges of $22.9 million. During each of the years ended December 31, 2019 and 2020, we recorded no impairment charges. | | | | | | | | | | | |
| (dollars in thousands) ORIGINATION DATE | LOCATION | INTEREST RATE | CARRYING VALUE as of DECEMBER 31, 2023 |
| May 2021 | Poway, CA | 5.71% | $ | 115,239 | |
| November 2021 | Columbus, OH | 6.48% | 7,363 | |
| | | $ | 122,602 | |
Real Estate Notes ReceivableFair Value Measurements
Real estate notes receivable consistFair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of mezzanineobservable market inputs, minimize the use of unobservable market inputs and other real estate loans,disclose in the form of an outlined hierarchy the details of such fair value measurements.
A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
•Level 1 – quoted prices for identical instruments in active markets;
•Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Executed purchase and sale agreements, which are generally collateralized by a pledgebinding agreements, are categorized as level one inputs. Brokerage estimates, letters of the borrower’s ownership interest in the respective real estate owner and/intent, or corporate guarantees. Real estate notes receivableunexecuted purchase and sale agreements are intendedconsidered to be held-to-maturity andlevel three as they are nonbinding in nature.
Fair Value of Derivative Financial Instruments
Derivative financial instruments are recorded at amortized cost, net of unamortized loan origination costs and fees and allowance for credit losses. During the year ended December 31, 2021, we originated 3 mezzanine loans with commitments totaling $60.1 million, at an annual interest rate of 8%, maturing in 2024. Unpaid interest is capitalized, with principal and any unpaid interest duefair value on the maturity date. AsCompany's Consolidated Balance Sheets as other assets or other liabilities. The valuation of December 31, 2021, mezzanine loans outstanding, including accruedderivative instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. Fair values of derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of the Company's forward starting interest totaled $54.8 million, net of unamortized loan fees. Additionally, during the year ended December 31, 2021, we originated a mortgage loan of $15.0 million, at an annual interest rate of 10%, maturing in 2022. Interest on the mortgage loan was prefunded through an interest reserve and will be recognized as interest income through maturity, with principal and any unpaid interest due on the maturity date. As of December 31, 2021, real estate notes receivable, net totaled $69.1 million. During the year ended December 31, 2021, we recognized interest income of $2.8 million related to real estate notes receivable.
60
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
The following table summarizes real estate notes receivable asrate swap contracts are estimated by pricing models that consider foreign trade rates and discount rates. Such amounts and the recognition of December 31, 2021 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Stated Interest Rate | | Maximum Loan Commitment | | Outstanding Loan Amount |
| Origination Date | | Maturity Date | | | | December 31, 2021 |
Mezzanine Loans - Texas (1) | 6/24/2021 | | 6/24/2024 | | 8 | % | | $ | 54,119 | | | $ | 49,319 | |
| Mezzanine Loan - North Carolina | 12/22/2021 | | 12/22/2024 | | 8 | % | | 6,000 | | | 6,000 | |
| Mortgage Loan - Texas | 6/30/2021 | | 7/1/2022 | | 10 | % | | 15,000 | | | 15,000 | |
| | | | | | | | | 70,319 | |
| Accrued interest receivable | | | | | | | | | 54 | |
| Unamortized fees and costs | | | | | | | | | (526) | |
| Unearned revenue | | | | | | | | | (733) | |
| | | | | | | | | $ | 69,114 | |
| | | | | | | | | |
| (1) Interest on these mezzanine loans is accrued and funded utilizing interest reserves, which is included in the maximum loan commitment, and such accrued interest is added to the note receivable balance. |
| | | | | | | | | |
Pursuantsuch amounts are subject to Topic 326 - Financial Instruments - Credit Losses, we adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under Topic 326. We utilize a probability of default method approach for estimating current expected credit losses and have determinedsignificant estimates that the current risk of credit loss is remote. Accordingly, we have recorded no reserve for credit loss as of December 31, 2021.
Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures using the equity method of accounting because we have the ability to exercise significant influence, but not control, over the financial and operational policy decisions of the investments. Using the equity method of accounting, the initial investment is recognized at cost and subsequently adjusted for our share of the net income and any distributions from the joint venture. As of December 31, 2021 and 2020, we had a 50% interest in one such investment with a carrying value and maximum exposure to risk of $62.8 million and $64.4 million, respectively, which is recorded in investment in unconsolidated joint venturemay change in the accompanying consolidated balance sheets. We record our share of net incomefuture. For derivatives designated in income from unconsolidated joint venture in the accompanying consolidated statements of operations. For the years ended December 31, 2021, 2020, and 2019, we recognized income from unconsolidated joint venture of $1.6 million, $1.6 million, and $1.9 million, respectively.
Derivative Financial Instruments
We are exposed to the effect of interest rate changes in the normal course of business. We seek to mitigate these risks by following established risk management policies and procedures which include the occasional use of derivatives. Our primary strategy in entering into derivative contracts is to add stability to interest expense and to manage our exposure to interest rate movements. We utilize derivative instruments, including interest rate swaps, to effectively convert a portion of our variable rate debt to fixed rate debt. We do not enter into derivative instruments for speculative purposes. To qualify for hedge accounting, derivative financial instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions, must be, and are expected to remain, probable of occurring in accordance with our related assertions.
Derivatives are recognized as either assets or liabilities in our accompanying consolidated balance sheets and are measured at fair value. Changes in fair value of derivative financial instruments that are not designated in hedging relationships, or that do not meet the criteria of hedge accounting are included as a component of interest expense in our accompanying consolidated statements of operations. As a result of our adoption of ASU 2017-12 as of January 1, 2018, the entire change in the fair value of derivatives designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets and are subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings. Since we solely use derivatives to hedge interest rate risk, amounts paid or received pursuant to our derivative agreements are included in interest expense on the consolidated statements of operations which then flows through to operating activities on the consolidated statements of cash flows. Additionally, as a result of the adoption of ASU 2017-12, we no longer disclose the ineffective portion of the change in fair value of our derivatives financial instruments designated as hedges.
The valuation of our derivative financial instruments is determined with the assistance of an independent valuation specialist using a proprietary model that utilizes widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative and observable inputs. The proprietary model reflects the contractual termseffective portion of the derivatives includingis recognized in accumulated other comprehensive income (loss). Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the periodunderlying hedged transaction is recognized in earnings. As of December 31, 2023 and 2022, the Company had $10.7 million recorded in accumulated other comprehensive loss and $2.1 million recorded in accumulated other comprehensive (loss) income, respectively, related to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates and implied volatilities. The fair values offorward starting interest rate swaps entered into and settled during 2015 and 2020 and a hedge of the Company's variable rate debt. See Note 11 for additional information.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash includes cash held in escrow in connection with proceeds from the sales of certain real estate properties. The Company did not have any restricted cash for the years ended December 31, 2023 or 2022.
Cash and cash equivalents are held in bank accounts and overnight investments. The Company maintains its bank deposits with large financial institutions in amounts that often exceed federally-insured limits. The Company has not experienced any losses in such accounts.
Goodwill and Other Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present.
Identifiable intangible assets of the Company are comprised of enterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and debt issuance costs. In-place lease and customer relationship intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Debt issuance costs are amortized over the term of the debt instrument on the effective interest method or the straight-line method when the effective interest method is not applicable. Goodwill is not amortized but is evaluated annually as of December 31 for impairment. The Company's goodwill asset increased $27.3 million to $250.5 million in 2023 compared to $223.2 million in 2022, as a result of the final purchase price allocation adjustments related to the Merger. The 2023 impairment evaluation indicated that no impairment had occurred with respect to the Company's goodwill asset. See Note 9 for more detail on the Company’s intangible assets.
Contingent Liabilities
From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages.
The Company continually monitors any matters that may present a contingent liability, and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are first recorded when a loss is determined usingto be both probable and can be reasonably estimated. Changes in estimates regarding the market standardexposure to a contingent loss are reflected as adjustments to the related liability in the periods when they occur.
Because of uncertainties inherent in the estimation of contingent liabilities, it is possible that the Company’s provision for contingent losses could change materially in the near term. To the extent that any significant losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements.
Share-Based Compensation
The Company has various employee and director share-based awards outstanding. These awards include non-vested common stock or other stock-based awards, including units in the OP, pursuant to the Company's Amended and Restated 2006 Incentive Plan, dated April 29, 2021 ("the Incentive Plan"). The Company recognizes share-based payments to employees and directors in the Consolidated Statements of Operations on a straight-line basis over the
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts arerequisite service period based on an expectationthe fair value of future interest rates (forward curves) derived from observable market interest rate curves.the award on the measurement date. The Company recognizes the impact of forfeitures as they occur. See Note 13 for details on the Company’s share-based awards.
We incorporate credit valuationAccumulated Other Comprehensive (Loss) Income
Certain items must be included in comprehensive (loss) income, including items such as foreign currency translation adjustments, to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance riskminimum pension liability adjustments, changes in the fair value measurements. In adjustingof derivative instruments and unrealized gains or losses on available-for-sale securities. As of December 31, 2023, the Company’s accumulated other comprehensive (loss) income consists of the loss for changes in the fair value of ouractive derivatives designated as cash flow hedges and the loss on the unamortized settlement of forward starting swaps and treasury hedges. See Note 11 for more details on the Company's derivative contractsfinancial instruments.
Revenue from Contracts with Customers (Topic 606)
The Company recognizes certain revenue under the core principle of Topic 606. This requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease revenue is not within the scope of Topic 606. To achieve the core principle, the Company applies the five-step model specified in the guidance.
Revenue that is accounted for under Topic 606 is segregated on the Company’s Consolidated Statements of Operations in the Other operating line item. This line item includes parking income, management fee income and other miscellaneous income. Below is a detail of the amounts by category:
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| in thousands | 2023 | 2022 | 2021 |
| Type of Revenue | | | |
| Parking income | $ | 9,903 | | $ | 8,513 | | $ | 7,859 | |
| | | |
Management fee income/other 1 | 7,548 | | 5,193 | | 2,432 | |
| $ | 17,451 | | $ | 13,706 | | $ | 10,291 | |
1 Includes the recovery of certain expenses under the financing receivable as outlined in the management agreement.
The Company’s two major types of revenue that are accounted for under Topic 606 are all accounted for as the performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time and the Company recognizes revenue monthly based on this principle. In most cases, the revenue is due and payable on a monthly basis. The Company had a receivable balance of $1.9 million and $1.5 million, and $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Management fee income includes property management services provided to third parties and certain of the properties in the Company's unconsolidated joint ventures and is generally calculated, accrued and billed monthly based on a percentage of cash collections of tenant receivables for the month or a stated amount per square foot. Management fee income also includes amounts paid to the Company for its asset management services for certain of its unconsolidated joint ventures. Internal management fee income, where the Company manages its owned properties, is eliminated in consolidation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Rental Income
Rental income related to non-cancelable operating leases is recognized as earned over the life of the lease agreements on a straight-line basis. The Company's lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index ("CPI"). Rental income from properties under multi-tenant office lease arrangements and rental income from properties with single-tenant lease arrangements are included in rental income on the Company's Consolidated Statements of Operations. For lessors, the standard requires a lessor to classify leases as either sales-type, direct-financing or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease.
Nonlease components, such as common area maintenance, are generally accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. The combined component is accounted for under Accounting Standards Codification, Topic 842.
The components of rental income are as follows:
| | | | | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, | |
| in thousands | 2023 | 2022 | 2021 | |
| Property operating income | $ | 1,270,508 | | $ | 883,953 | | $ | 514,533 | | |
| Straight-line rent | 38,676 | | 23,498 | | 5,801 | | |
| Rental income | $ | 1,309,184 | | $ | 907,451 | | $ | 520,334 | | |
Federal Income Taxes
The Company believes it has qualified to be taxed as a REIT and intends at all times to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code. The Company must distribute at least 90% per annum of its real estate investment trust taxable income to its stockholders and meet other requirements to continue to qualify as a real estate investment trust. As a REIT, the Company is generally not subject to federal income tax on net income it distributes to its stockholders, but may be subject to certain state and local taxes and fees. See Note 16 for further discussion.
If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes on its taxable income and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which the qualification is lost unless the IRS grants it relief under certain statutory provisions. Such an event could have a material adverse effect on its business, financial condition, results of operations and net cash available for dividend distributions to its stockholders.
The Company conducts substantially all of its operations through the OP. As a partnership, the OP generally is not liable for federal income taxes. The income and loss from the operations of the OP is included in the tax returns of its partners, including the Company, who are responsible for reporting their allocable share of the partnership income and loss. Accordingly, no provision for income tax has been made in the accompanying consolidated financial statements.
The Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and administrative expenses. No such amounts were recognized during the three years ended December 31, 2023.
Federal tax returns for the years 2020, 2021, 2022 and 2023 are currently subject to examination by taxing authorities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
State Income Taxes
The Company must pay certain state income taxes and the provisions for such taxes are generally included in general and administrative expenses on the Company’s Consolidated Statements of Operations. See Note 16 for further discussion.
Sales and Use Taxes
The Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in rental income in the Company’s Consolidated Statements of Operations.
Assets Held for Sale
Long-lived assets held for sale are reported at the lower of their carrying amount or their fair value less estimated cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as held for sale. Losses resulting from the sale of such properties are characterized as impairment losses in the Consolidated Statements of Operations. See Note 6 for more detail on assets held for sale.
Earnings per Share
The Company uses the two-class method of computing net earnings per common share. Earnings per common share is calculated by considering share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities. Undistributed earnings (excess net income over dividend payments) are allocated on a pro rata basis to common shareholders and restricted shareholders. Undistributed losses (dividends in excess of net income) do not get allocated to restricted stockholders as they do not have the contractual obligation to share in losses. The amount of undistributed losses that applies to the restricted stockholders is allocated to the common stockholders.
Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of nonperformance risk, wethe outstanding stock options from the Legacy HR Employee Stock Purchase Plan using the treasury stock method and the average stock price during the period. Additionally, net income (loss) allocated to OP units has been included in the numerator and common stock related to redeemable OP units have been included in the denominator for the purpose of computing diluted earnings per share. See Note 14 for the calculations of earnings per share.
Redeemable Non-Controlling Interests
The Company accounts for redeemable equity securities in accordance with Accounting Standards Update ("ASU") 2009-04 Liabilities (Topic 480): Accounting for Redeemable Equity Instruments, which requires that equity securities contingently redeemable at the option of the holder, not solely within our control, be classified outside permanent stockholders’ equity. The Company classifies redeemable equity securities as redeemable non-controlling interests in the accompanying Consolidated Balance Sheet. Accordingly, the Company records the carrying amount at the greater of the initial carrying amount (increased or decreased for the non-controlling interest’s share of net income or loss and distributions) or the redemption value. We measure the redemption value and record an adjustment to the carrying value of the equity securities as a component of redeemable non-controlling interest. As of December 31, 2023, the Company had redeemable non-controlling interests of $3.9 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Investments in Leases - Financing Receivables, Net
In accordance with ASC Topic 842: Leases, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale-leaseback transaction), control of the asset is not considered to have transferred when the impactseller-lessee has a purchase option. As a result, the Company does not recognize the underlying real estate asset but instead recognizes a financial asset in accordance with ASC Topic 310: Receivables. See below for additional information regarding the Company's financing receivables as of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.December 31, 2023.
| | | | | | | | | | | |
| (dollars in thousands) ORIGINATION DATE | LOCATION | INTEREST RATE | CARRYING VALUE as of DECEMBER 31, 2023 |
| May 2021 | Poway, CA | 5.71% | $ | 115,239 | |
| November 2021 | Columbus, OH | 6.48% | 7,363 | |
| | | $ | 122,602 | |
Fair Value Measurements
Fair value is a market-based measurement and isdefined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate the fair value. Financial assets and liabilities are measured using inputs from three levels of theparticipants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy as follows:the details of such fair value measurements.
A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
•Level 1 — Inputs are – quoted prices (unadjusted)for identical instruments in active markets for identical assets or liabilities that we have the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.markets;
•Level 2 — Inputs include – quoted prices for similar assets and liabilitiesinstruments in active markets, quoted prices for identical or similar assets or liabilitiesinstruments in markets that are not active, (markets with few transactions),and model-derived valuations in which significant inputs other than quoted prices thatand significant value drivers are observable for the asset or liability (i.e., interest rates, yield curves, etc.)in active markets; and inputs that are derived principally from or corroborated by observable market data correlation or other means (market corroborated inputs).
•Level 3 — Unobservable inputs, only used to the extent that observable inputs are not available, reflect our assumptions about the pricing of an asset or liability.
We use – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Executed purchase and sale agreements, which are binding agreements, are categorized as level one inputs. Brokerage estimates, letters of intent, or unexecuted purchase and sale agreements are considered to record fair valuebe level three as they are nonbinding in nature.
Fair Value of certain assets and to estimate fair value ofDerivative Financial Instruments
Derivative financial instruments notare recorded at fair value but requiredon the Company's Consolidated Balance Sheets as other assets or other liabilities. The valuation of derivative instruments requires the Company to be disclosed atmake estimates and judgments that affect the fair value.value of the instruments. Fair values of derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of the Company's forward starting interest
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
rate swap contracts are estimated by pricing models that consider foreign trade rates and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. For derivatives designated in qualifying cash flow hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss). Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the underlying hedged transaction is recognized in earnings. As of December 31, 2023 and 2022, the Company had $10.7 million recorded in accumulated other comprehensive loss and $2.1 million recorded in accumulated other comprehensive (loss) income, respectively, related to forward starting interest rate swaps entered into and settled during 2015 and 2020 and a hedge of the Company's variable rate debt. See Note 11 for additional information.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash includes cash held in escrow in connection with proceeds from the sales of certain real estate properties. The Company did not have any restricted cash for the years ended December 31, 2023 or 2022.
Cash and cash equivalents are held in bank accounts and overnight investments. The Company maintains its bank deposits with large financial institutions in amounts that often exceed federally-insured limits. The Company has not experienced any losses in such accounts.
Goodwill and Other Intangible Assets
Deferred financing costs include amounts paidGoodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to lenders and others to obtain financingtheir estimated residual values and are reviewed for impairment only when impairment indicators are present.
Identifiable intangible assets of the Company are comprised of enterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and debt issuance costs. In-place lease and customer relationship intangible assets are amortized to interest expense on a straight-line basis over the termapplicable lives of the unsecured revolving credit facility which approximates the effective interest method. Deferred leasingassets. Debt issuance costs are amounts incurred in executing a lease, both for external broker and marketing costs, plus a portion of internal leasing related costs. Deferred leasing costs are amortized on a straight-line basis method over the term of the applicable lease. Deferred leasing costsdebt instrument on the effective interest method or the straight-line method when the effective interest method is not applicable. Goodwill is not amortized but is evaluated annually as of December 31 for impairment. The Company's goodwill asset increased $27.3 million to $250.5 million in 2023 compared to $223.2 million in 2022, as a result of the final purchase price allocation adjustments related to the Merger. The 2023 impairment evaluation indicated that no impairment had occurred with respect to the Company's goodwill asset. See Note 9 for more detail on the Company’s intangible assets.
Contingent Liabilities
From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages.
The Company continually monitors any matters that may present a contingent liability, and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are includedfirst recorded when a loss is determined to be both probable and can be reasonably estimated. Changes in operating activitiesestimates regarding the exposure to a contingent loss are reflected as adjustments to the related liability in our accompanying consolidated statementsthe periods when they occur.
Because of cash flows.uncertainties inherent in the estimation of contingent liabilities, it is possible that the Company’s provision for contingent losses could change materially in the near term. To the extent that any significant losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements.
Share-Based Compensation
We calculateThe Company has various employee and director share-based awards outstanding. These awards include non-vested common stock or other stock-based awards, including units in the OP, pursuant to the Company's Amended and Restated 2006 Incentive Plan, dated April 29, 2021 ("the Incentive Plan"). The Company recognizes share-based payments to employees and directors in the Consolidated Statements of Operations on a straight-line basis over the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
requisite service period based on the fair value of share-based awardsthe award on the datemeasurement date. The Company recognizes the impact of grant. Restricted common stock is valued basedforfeitures as they occur. See Note 13 for details on the closing priceCompany’s share-based awards.
Accumulated Other Comprehensive (Loss) Income
Certain items must be included in comprehensive (loss) income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, changes in the fair value of our common stockderivative instruments and unrealized gains or losses on available-for-sale securities. As of December 31, 2023, the Company’s accumulated other comprehensive (loss) income consists of the loss for changes in the fair value of active derivatives designated as cash flow hedges and the loss on the NYSE. We amortize the share-based compensation expense over the period that the awards are expected to vest, netunamortized settlement of estimated forfeitures.forward starting swaps and treasury hedges. See Note 11 - Stockholders’ Equity and Partners’ Capital for further discussion.more details on the Company's derivative financial instruments.
Non-controlling InterestsRevenue from Contracts with Customers (Topic 606)
HTA’s net income attributableThe Company recognizes certain revenue under the core principle of Topic 606. This requires an entity to non-controlling interestsrecognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease revenue is not within the scope of Topic 606. To achieve the core principle, the Company applies the five-step model specified in the accompanying consolidated statementsguidance.
Revenue that is accounted for under Topic 606 is segregated on the Company’s Consolidated Statements of operations relate to non-controlling interest reflected within equity. OP Units, including LTIP awards,Operations in the Other operating line item. This line item includes parking income, management fee income and other miscellaneous income. Below is a detail of the amounts by category:
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| in thousands | 2023 | 2022 | 2021 |
| Type of Revenue | | | |
| Parking income | $ | 9,903 | | $ | 8,513 | | $ | 7,859 | |
| | | |
Management fee income/other 1 | 7,548 | | 5,193 | | 2,432 | |
| $ | 17,451 | | $ | 13,706 | | $ | 10,291 | |
1 Includes the recovery of certain expenses under the financing receivable as outlined in the management agreement.
The Company’s two major types of revenue that are accounted for under Topic 606 are all accounted for as partners’ capitalthe performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time and the Company recognizes revenue monthly based on this principle. In most cases, the revenue is due and payable on a monthly basis. The Company had a receivable balance of $1.9 million and $1.5 million, and $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Management fee income includes property management services provided to third parties and certain of the properties in HTALP’s accompanying consolidated balance sheetsthe Company's unconsolidated joint ventures and is generally calculated, accrued and billed monthly based on a percentage of cash collections of tenant receivables for the month or a stated amount per square foot. Management fee income also includes amounts paid to the Company for its asset management services for certain of its unconsolidated joint ventures. Internal management fee income, where the Company manages its owned properties, is eliminated in consolidation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Rental Income
Rental income related to non-cancelable operating leases is recognized as non-controlling interest reflected within equityearned over the life of the lease agreements on a straight-line basis. The Company's lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index ("CPI"). Rental income from properties under multi-tenant office lease arrangements and rental income from properties with single-tenant lease arrangements are included in HTA’s accompanying consolidated balance sheets.rental income on the Company's Consolidated Statements of Operations. For lessors, the standard requires a lessor to classify leases as either sales-type, direct-financing or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease.
Nonlease components, such as common area maintenance, are generally accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. The combined component is accounted for under Accounting Standards Codification, Topic 842.
The components of rental income are as follows:
| | | | | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, | |
| in thousands | 2023 | 2022 | 2021 | |
| Property operating income | $ | 1,270,508 | | $ | 883,953 | | $ | 514,533 | | |
| Straight-line rent | 38,676 | | 23,498 | | 5,801 | | |
| Rental income | $ | 1,309,184 | | $ | 907,451 | | $ | 520,334 | | |
Federal Income Taxes
HTAThe Company believes that it has qualified to be taxed as a REIT under the provisions of the Code, beginning with the taxable year ending December 31, 2007 and it intends at all times to continue to qualify to be taxed as a REIT. To continue to qualify as a REIT for federalunder Sections 856 through 860 of the Internal Revenue Code. The Company must distribute at least 90% per annum of its real estate investment trust taxable income tax purposes, HTA must meet certain organizational and operational requirements, including a requirement to pay dividend distributions to its stockholders of at least 90% of its annual taxable income.and meet other requirements to continue to qualify as a real estate investment trust. As a REIT, HTAthe Company is generally not subject to federal income tax on net income that it distributes to its stockholders, but it may be subject to certain state orand local taxes and fees.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
See Note 16 for further discussion.If HTAthe Company fails to qualify as a REIT in any taxable year, it will then be subject to U.S. federal income taxes on ourits taxable income and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which the qualification is lost unless the IRS grants it relief under certain statutory provisions. Such an event could have a material adverse effect on its business, financial condition, results of operations and net cash available for dividend distributions to its stockholders.
HTAThe Company conducts substantially all of its operations through HTALP.the OP. As a partnership, HTALPthe OP generally is not liable for federal income taxes. The income and loss from the operations of HTALPthe OP is included in the tax returns of its partners, including HTA,the Company, who are responsible for reporting their allocable share of the partnership income and loss. Accordingly, no provision for income taxestax has been made onin the accompanying consolidated financial statements.
WeThe Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and administrative expenses. No such amounts were recognized during the three years ended December 31, 2023.
Federal tax returns for the years 2020, 2021, 2022 and 2023 are currently subject to examination by taxing authorities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
State Income Taxes
The Company must pay certain state income taxes and the provisions for such taxes are generally included in general and administrative expenses on the Company’s Consolidated Statements of Operations. See Note 16 for further discussion.
Sales and Use Taxes
The Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in rental income in the Company’s Consolidated Statements of Operations.
Assets Held for Sale
Long-lived assets held for sale are reported at the lower of their carrying amount or their fair value less estimated cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as held for sale. Losses resulting from the sale of such properties are characterized as impairment losses in the Consolidated Statements of Operations. See Note 6 for more detail on assets held for sale.
Earnings per Share
The Company uses the two-class method of computing net earnings per common share. Earnings per common share is calculated by considering share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities. Undistributed earnings (excess net income over dividend payments) are allocated on a pro rata basis to common shareholders and restricted shareholders. Undistributed losses (dividends in excess of net income) do not get allocated to restricted stockholders as they do not have any liabilitythe contractual obligation to share in losses. The amount of undistributed losses that applies to the restricted stockholders is allocated to the common stockholders.
Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of the outstanding stock options from the Legacy HR Employee Stock Purchase Plan using the treasury stock method and the average stock price during the period. Additionally, net income (loss) allocated to OP units has been included in the numerator and common stock related to redeemable OP units have been included in the denominator for uncertain tax positionsthe purpose of computing diluted earnings per share. See Note 14 for the calculations of earnings per share.
Redeemable Non-Controlling Interests
The Company accounts for redeemable equity securities in accordance with Accounting Standards Update ("ASU") 2009-04 Liabilities (Topic 480): Accounting for Redeemable Equity Instruments, which requires that we believe shouldequity securities contingently redeemable at the option of the holder, not solely within our control, be recognizedclassified outside permanent stockholders’ equity. The Company classifies redeemable equity securities as redeemable non-controlling interests in ourthe accompanying consolidated financial statements. The tax basis exceededConsolidated Balance Sheet. Accordingly, the Company records the carrying amount at the greater of the initial carrying amount (increased or decreased for the non-controlling interest’s share of net income or loss and distributions) or the redemption value. We measure the redemption value and record an adjustment to the carrying value of the equity securities as a component of redeemable non-controlling interest. As of December 31, 2023, the Company had redeemable non-controlling interests of $3.9 million.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Investments in Leases - Financing Receivables, Net
In accordance with ASC Topic 842: Leases, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale-leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option. As a result, the Company does not recognize the underlying real estate assets reportedasset but instead recognizes a financial asset in our accompanying consolidated balance sheet by approximately $766.9 millionaccordance with ASC Topic 310: Receivables. See below for additional information regarding the Company's financing receivables as of December 31, 2021, primarily due to2023.
| | | | | | | | | | | |
| (dollars in thousands) ORIGINATION DATE | LOCATION | INTEREST RATE | CARRYING VALUE as of DECEMBER 31, 2023 |
| May 2021 | Poway, CA | 5.71% | $ | 115,239 | |
| November 2021 | Columbus, OH | 6.48% | 7,363 | |
| | | $ | 122,602 | |
Real Estate Notes Receivable
Real estate notes receivable consists of mezzanine and other real estate loans, which are generally collateralized by a pledge of the differences in depreciation and amortization.
Concentration of Credit Risk
We maintain the majority of our cash and cash equivalents at major financial institutionsborrower’s ownership interest in the U.S.respective real estate owner, a mortgage or deed of trust, and/or corporate guarantees. Real estate notes receivable are intended to be held-to-maturity and deposits with these financial institutions may exceed the amountare recorded at amortized cost, net of insurance provided on such deposits; however, we regularly monitor the financial stability of these financial institutionsunamortized loan origination costs and believe we are not currently exposed to any significant default risk with respect to these deposits.fees and allowance for credit losses. As of December 31, 2021, we had2023, real estate notes receivable, net, which are included in Other assets, net on the Company's Consolidated Balance Sheets totaled $173.6 million.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in thousands) | ORIGINATION | MATURITY | STATED INTEREST RATE | MAXIMUM LOAN COMMITMENT | OUTSTANDING as of
DEC 31, 2023 | ALLOWANCE FOR CREDIT LOSSES | FAIR VALUE DISCOUNT AND FEES | CARRYING VALUE as of DEC 31, 2023 |
| Mezzanine loans | | | | | | | | |
| Texas | 6/24/2021 | 6/24/2024 | 8.00 | % | $ | 54,119 | | $ | 54,119 | | $ | (5,196) | | $ | (3,067) | | $ | 45,856 | |
| Arizona | 12/21/2023 | 12/20/2026 | 9.00 | % | 6,000 | | 6,000 | | — | | — | | 6,000 | |
| | | | 60,119 | | 60,119 | | (5,196) | | (3,067) | | 51,856 | |
| Mortgage loans | | | | | | | | |
| Texas | 6/30/2021 | 7/01/2024 | 7.00 | % | 31,150 | | 31,150 | | — | | — | | 31,150 | |
| North Carolina | 12/22/2021 | 12/22/2024 | 8.00 | % | 6,000 | | 6,000 | | — | | (204) | | 5,796 | |
| Florida | 5/17/2022 | 2/27/2026 | 6.00 | % | 65,000 | | 32,156 | | — | | (44) | | 32,112 | |
| California | 3/30/2023 | 3/29/2026 | 6.00 | % | 45,000 | | 45,000 | | — | | — | | 45,000 | |
| Florida | 12/28/2023 | 12/28/2026 | 9.00 | % | 7,700 | | 7,700 | | — | | — | | 7,700 | |
| | | | 154,850 | | 122,006 | | — | | (248) | | 121,758 | |
| | | | | | | | |
| | | | $ | 214,969 | | $ | 182,125 | | $ | (5,196) | | $ | (3,315) | | $ | 173,614 | |
Allowance for Credit Losses
Pursuant to ASC Topic 326, Financial Instruments - Credit Losses, the Company adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under ASC Topic 326. The Company utilizes a probability of default method approach for estimating current expected credit losses and evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis to determine whether any updates to the future expected losses recognized upon inception are necessary. The Company’s evaluation considers industry and economic conditions, credit enhancements, liquidity, and other factors. The determination of the credit allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments. The Company evaluates the collectability of loan receivables based on a combination of credit quality indicators, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent, and value of the underlying collateral. A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that the Company will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement. For those loans identified as having deteriorated credit quality, the amount of credit loss is determined on an individual basis. Placement on non-accrual status may be required. Consistent with this definition, all loans on non-accrual status are
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
deemed to have deteriorated credit quality. To the extent circumstances improve and the risk of collectability is diminished, the loan may return to income accrual status. While a loan is on non-accrual status, any cash balances at financial institutionsreceipts are applied against the outstanding principal balance. As of $62.5 million in excessDecember 31, 2023, the Company's carrying value of Federal Deposit Insurance Corporation insured limits.its outstanding loans was $173.6 million.
Segment Disclosure
We haveDuring the first quarter of 2023, the Company determined that we have 1 reportable segment,the risk of credit loss on its mezzanine loans was no longer remote and recorded a credit loss reserve of $5.2 million. The following table summarizes the Company's allowance for credit losses on real estate notes receivable:
| | | | | | | | | | | |
| Dollars in thousands | TWELVE MONTHS ENDED DECEMBER 31, 2023 | TWELVE MONTHS ENDED DECEMBER 31, 2022 | | | |
| Allowance for credit losses, beginning of period | $ | — | | $ | — | | | | |
| Credit loss reserves | 5,196 | | — | | | | |
| Allowance for credit losses, end of period | $ | 5,196 | | $ | — | | | | |
Interest Income
Income from Lease Finance Receivables
The Company recognized the related income from two financing receivables totaling $8.3 million and $8.1 million, respectively, for the years ended December 31, 2023 and 2022, based on an imputed interest rate over the terms of the applicable lease. As a result, the interest recognized from the financing receivable in any particular period will not equal the cash payments from the lease agreement in that period.
Acquisition costs incurred in connection with activitiesentering into the financing receivable are treated as loan origination fees. These costs are classified with the financing receivable and are included in the balance of the net investment. Amortization of these amounts will be recognized as a reduction to Interest income over the life of the lease.
Income from Real Estate Notes Receivable
For the years ended December 31, 2023 and 2022, the Company recognized interest income of $8.8 million and $3.4 million, respectively, related to investing in healthcare real estate assets. Our investments in healthcarenotes receivable. For 2021, the Company had no real estate assetsnotes receivable. The Company recognizes interest income on an accrual basis unless the Company has determined that collectability of contractual amounts is not reasonably assured, at which point the note is placed on non-accrual status and interest income is recognized on a cash basis. As of January 1, 2023, the Company placed real estate notes receivable with principal balances of $48.9 million on non-accrual status and accordingly did not recognize any interest income for the year ended December 31, 2023.
New Accounting Pronouncements
On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280). Some of the main provisions of this update to segment reporting include; (i) a requirement to disclose significant segment expenses, on an annual and interim basis, that are geographically diversified and ourregularly provided to the chief operating decision maker evaluates operating performance on an individual asset level. As("CODM") and included within each reported measure of our assets has similar economic characteristics, long-term financial performance, tenants,segment profit or loss; (ii) a requirement to disclose the title and products and services, our assets have been aggregated into 1 reportable segment.
Related Party Aircraft Use
HTA owns an airplane that is used for business purposes. The Chief Executive Officerposition of the Company is permittedCODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to useallocate resources, and (iii) a requirement that an entity that has a single reportable segment provide all the aircraft for personal travel and, pursuant to a policy adopted by HTA relating to such personal use, the Company is reimburseddisclosures required by the executive for the incremental costs of using the aircraft for personal travel.
Recently Issued or Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
S-X Rule 13-01
In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule became effective on January 4, 2021, at which time we adopted S-X Rule 13-01. The adoption did not have a material effect on our financial statements and related footnotes.
Recently Issued Accounting Pronouncementsin this update.
ASU 2021-01, Reference Rate Reform (Topic 848)
In January 2021, the FASB issued ASU 2021-01, which amends the scope of ASU 2020-04. The amendments of ASU 2021-01 clarify that certain optional expedients and exceptions to Topic 848 for contract modification and hedge accounting apply to derivatives that are affected by the discounting transition. For information related to the Company's current cash flow hedges, refer to Note 9 - Derivative Financial Instruments and Hedging Activities. The amendments are elective and effective immediately for contract modifications made through December 31, 2022. The Company is evaluating how the transition away from LIBOR will effect the Company and if the guidance with respect to this standard will be adopted, however, if adopted, we do not expect that this ASU will have a material impact on our financial statements.
ASU 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments
In July 2021, the FASB issued ASU 2021-05, which amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on a reference index or a rate. The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease. The update is effective for reporting periods beginning after December 15, 2021, with early2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. At this time, the Company does not expect that the adoption of this standardASU will have a material impact on ourits consolidated financial statements.statements and compliance of these new disclosure requirements will begin with the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
66
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
Note 2. Merger with HTA
On July 20, 2022 (the “Closing Date”), pursuant to the Agreement and Plan of Merger dated as of February 28, 2022 (the “Merger Agreement”), by and among Healthcare Realty Trust Incorporated (now known as HRTI, LLC,) (“Legacy HR”), Healthcare Trust of America, Inc. (now known as Healthcare Realty Trust Incorporated) (“Legacy HTA”), the OP, and HR Acquisition 2, LLC (“Merger Sub”), Merger Sub merged with and into Legacy HR, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA (the “Merger”).
On the Closing Date, each outstanding share of Legacy HR common stock, $0.01 par value per share (the “Legacy HR Common Stock”), was cancelled and converted into the right to receive one share of Legacy HTA class A common stock at a fixed ratio of 1.00 to 1.00. Per the terms of the Merger Agreement, Legacy HTA declared a special dividend of $4.82 (the “Special Dividend”) for each outstanding share of Legacy HTA class A common stock, $0.01 par value per share ( the “Legacy HTA Common Stock”), and the OP declared a corresponding distribution to the holders of its partnership units, payable to Legacy HTA stockholders and OP unitholders of record on July 19, 2022.
Immediately following the Merger, Legacy HR converted to a Maryland limited liability company and changed its name to HRTI, LLC and Legacy HTA changed its name to “Healthcare Realty Trust Incorporated”. In addition, the equity interests of Legacy HR were contributed by Legacy HTA by means of a contribution and assignment agreement to the OP, and Legacy HR became a wholly-owned subsidiary of the OP. The Company operates under the name “Healthcare Realty Trust Incorporated” and its shares of class A common stock, $0.01 par value per share, trade on the New York Stock Exchange under the ticker symbol “HR”.
For accounting purposes, the Merger was treated as a “reverse acquisition” in which Legacy HTA was considered the legal acquirer and Legacy HR was considered the accounting acquirer based on various factors, including, but not limited to: (i) the composition of the board of directors of the combined company following the Merger, (ii) the composition of senior management of the combined company following the Merger, and (iii) the premium transferred to the Legacy HTA stockholders. As a result, the historical financial statements of the accounting acquirer, Legacy HR, became the historical financial statements of the Company.
The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires, among other things, the assets acquired and the liabilities assumed and non-controlling interests, if any, to be recognized at their acquisition date fair value.
The implied consideration transferred on the Closing Date is as follows:
| | | | | |
| Dollars in thousands, except for per share data | |
Shares of Legacy HTA Common Stock outstanding as of July 20, 2022 as adjusted(a) | 228,520,990 | |
| Exchange ratio | 1.00 | |
| Implied shares of Legacy HR Common Stock issued | 228,520,990 | |
Adjusted closing price of Legacy HR Common Stock on July 20, 2022(b) | $ | 24.37 | |
| Value of implied Legacy HR Common Stock issued | $ | 5,569,057 | |
Fair value of Legacy HTA restricted stock awards attributable to pre-Merger services(c) | 7,406 | |
| Consideration transferred | $ | 5,576,463 | |
(a) The number of shares of Legacy HTA Common Stock presented above was based on 228,857,717 total shares of Legacy HTA Common Stock outstanding as of the Closing Date, less 192 Legacy HTA fractional shares that were cancelled in lieu of cash and less 336,535 shares of Legacy HTA restricted stock (net of 215,764 shares of Legacy HTA restricted stock withheld). For accounting purposes, these shares were converted to Legacy HR Common Stock, at an exchange ratio of 1.00 share of Legacy HR Common Stock per share of Legacy HTA Common Stock.
(b) For accounting purposes, the fair value of Legacy HR Common Stock issued to former holders of Legacy HTA Common Stock was based on the per share closing price of Legacy HR Common Stock on July 20, 2022.
(c) Represents the fair value of Legacy HTA restricted shares which fully vested prior to the closing of the Merger or became fully vested as a result of the closing of the Merger and which are attributable to pre-combination services.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Final Purchase Price Allocation
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Closing Date:
| | | | | | | | | | | |
| Dollars in thousands | PRELIMINARY AMOUNTS RECOGNIZED ON THE CLOSING DATE | CUMULATIVE MEASUREMENT PERIOD ADJUSTMENTS | AMOUNTS RECOGNIZED ON THE CLOSING DATE
(as adjusted) |
| ASSETS | | | |
| Real estate investments | | | |
| Land | $ | 985,926 | | $ | 18,359 | | $ | 1,004,285 | |
| Buildings and improvements | 6,960,418 | | (119,135) | | 6,841,283 | |
Lease intangible assets(a) | 831,920 | | 1,839 | | 833,759 | |
| Financing lease right-of-use assets | 9,874 | | 3,146 | | 13,020 | |
| Construction in progress | 10,071 | | (6,744) | | 3,327 | |
| Land held for development | 46,538 | | — | | 46,538 | |
| Total real estate investments | $ | 8,844,747 | | $ | (102,535) | | $ | 8,742,212 | |
| Assets held for sale, net | 707,442 | | (7,946) | | 699,496 | |
| Investments in unconsolidated joint ventures | 67,892 | | — | | 67,892 | |
| Cash and cash equivalents | 26,034 | | 11,403 | | 37,437 | |
| Restricted cash | 1,123,647 | | (1,247) | | 1,122,400 | |
| Operating lease right-of-use assets | 198,261 | | 16,370 | | 214,631 | |
Other assets, net (b) (c) | 209,163 | | (3,840) | | 205,323 | |
| Total assets acquired | $ | 11,177,186 | | $ | (87,795) | | $ | 11,089,391 | |
| | | |
| LIABILITIES | | | |
| Notes and bonds payable | $ | 3,991,300 | | $ | — | | $ | 3,991,300 | |
| Accounts payable and accrued liabilities | 1,227,570 | | 17,374 | | 1,244,944 | |
| Liabilities of assets held for sale | 28,677 | | (3,939) | | 24,738 | |
| Operating lease liabilities | 173,948 | | 10,173 | | 184,121 | |
| Financing lease liabilities | 10,720 | | (855) | | 9,865 | |
| Other liabilities | 203,210 | | (8,909) | | 194,301 | |
| Total liabilities assumed | $ | 5,635,425 | | $ | 13,844 | | $ | 5,649,269 | |
| Net identifiable assets acquired | $ | 5,541,761 | | $ | (101,639) | | $ | 5,440,122 | |
| Non-controlling interest | $ | 110,702 | | $ | — | | $ | 110,702 | |
| Goodwill | $ | 145,404 | | $ | 101,639 | | $ | 247,043 | |
| (a) The weighted average amortization period for the acquired lease intangible assets is approximately 6 years. |
| (b) Includes $15.9 million of contractual accounts receivable, which approximates fair value. |
| (c) Includes $78.7 million of gross contractual real estate notes receivable, the fair value of which was $74.8 million, and the Company preliminarily expects to collect substantially all of the real estate notes receivable proceeds as of the Closing Date. |
The cumulative measurement period adjustments recorded through June 30, 2023 are final and primarily resulted from updated valuations related to the Company’s real estate assets and liabilities and additional information obtained by the Company related to the properties acquired in the Merger and their respective tenants, and resulted in an increase to goodwill of $101.6 million.
Based on the final purchase price allocation of fair value, approximately $247.0 million has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed. The recognized goodwill is attributable to expected synergies and benefits arising from the Merger, including anticipated general and administrative cost savings and potential economies of scale benefits in both tenant and vendor relationships following the closing of the Merger. None of the goodwill recognized is expected to be deductible for tax purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
3. Investments in Real Estate
For the year ended December 31, 2021, our investments had an aggregate purchase priceMerger-related Costs
The Company incurred Merger-related costs of
$308.8 million. As part of these investments, we incurred approximately $2.1$(2.0) million
of capitalized costs. The allocations for these investments, in which we own a controlling financial interest, are set forth below in the aggregateand $103.4 million, respectively, for the years ended December 31,
2021, 20202023 and
2019, respectively (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Land | $ | 44,905 | | | $ | 15,242 | | | $ | 108,709 | |
| Building and improvements | 233,219 | | | 156,486 | | | 396,660 | |
| In place leases | 23,056 | | | 17,948 | | | 51,629 | |
| Below market leases | (4,592) | | | (1,132) | | | (5,187) | |
| Above market leases | 3,283 | | | 1,215 | | | 3,487 | |
| | | | | |
| ROU assets | 300 | | | 1,527 | | | — | |
| | | | | |
| | | | | |
| Net assets acquired | 300,171 | | | 191,286 | | | 555,298 | |
Other, net (1) | 8,593 | | | 432 | | | 5,158 | |
| Aggregate purchase price | $ | 308,764 | | | $ | 191,718 | | | $ | 560,456 | |
| | | | | |
| (1) Other, net, consisted primarily of tenant improvements and capital expenditures received as credits at the time of acquisition. |
Subsequent to2022, which were included within Merger-related costs in results of operations. The Merger-related costs primarily consisted of legal, consulting, severance, and banking services and for the year ended December 31, 2021, we completed an investment with2023, including a purchase pricerefund of $19.0 million. The$17.8 million for transfer taxes paid during the year ended December 31, 2022.
purchase price
3. Property Investments
The Company invests in healthcare-related properties located throughout the United States. The Company provides management, leasing, development and redevelopment services, and capital for the construction of this investment was subject to certain post-closing adjustments. Due tonew facilities as well as for the recent timing of the
acquisition of this investment, weexisting properties. The following table summarizes the Company’s consolidated investments at December 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | NUMBER OF PROPERTIES | LAND | BUILDINGS AND IMPROVEMENTS | LEASE INTANGIBLES | PERSONAL PROPERTY | TOTAL | ACCUMULATED DEPRECIATION |
| Dallas, TX | 43 | | $ | 90,168 | | $ | 1,004,810 | | $ | 68,139 | | $ | 550 | | $ | 1,163,667 | | $ | (221,375) | |
| Houston, TX | 31 | | 76,959 | | 614,531 | | 60,651 | | 57 | | 752,198 | | (97,793) | |
| Seattle, WA | 29 | | 64,295 | | 631,438 | | 9,921 | | 715 | | 706,369 | | (186,903) | |
| Denver, CO | 33 | | 76,698 | | 501,994 | | 43,268 | | 610 | | 622,570 | | (94,906) | |
| Charlotte, NC | 32 | | 35,465 | | 463,461 | | 26,971 | | 110 | | 526,007 | | (116,578) | |
| Phoenix, AZ | 35 | | 20,262 | | 437,804 | | 36,384 | | 425 | | 494,875 | | (59,449) | |
| Atlanta, GA | 27 | | 49,095 | | 417,112 | | 28,204 | | 100 | | 494,511 | | (79,569) | |
| Boston, MA | 17 | | 127,447 | | 299,742 | | 41,183 | | 14 | | 468,386 | | (37,569) | |
| Raleigh, NC | 28 | | 56,620 | | 371,932 | | 36,411 | | 9 | | 464,972 | | (38,879) | |
| Nashville, TN | 13 | | 43,347 | | 397,192 | | 10,206 | | 7,427 | | 458,172 | | (115,979) | |
| Los Angeles, CA | 20 | | 72,086 | | 360,330 | | 16,481 | | 453 | | 449,350 | | (145,875) | |
| Miami, FL | 19 | | 53,994 | | 326,343 | | 35,014 | | 178 | | 415,529 | | (74,470) | |
| Tampa, FL | 19 | | 31,121 | | 351,879 | | 27,438 | | 33 | | 410,471 | | (36,726) | |
| Indianapolis, IN | 36 | | 54,899 | | 285,806 | | 32,780 | | 13 | | 373,498 | | (42,273) | |
| Austin, TX | 13 | | 27,063 | | 274,229 | | 18,568 | | 142 | | 320,002 | | (55,891) | |
| New York, NY | 14 | | 64,402 | | 170,304 | | 26,430 | | — | | 261,136 | | (15,887) | |
| Chicago, IL | 6 | | 13,804 | | 216,473 | | 13,011 | | 81 | | 243,369 | | (39,671) | |
| Memphis, TN | 11 | | 13,901 | | 189,941 | | 4,211 | | 322 | | 208,375 | | (71,813) | |
| Honolulu, HI | 6 | | 9,527 | | 188,772 | | 6,319 | | 169 | | 204,787 | | (61,575) | |
| Hartford, CT | 30 | | 29,381 | | 138,713 | | 21,848 | | — | | 189,942 | | (15,883) | |
| Other (49 markets) | 193 | | 332,731 | | 3,238,567 | | 272,864 | | 1,310 | | 3,845,472 | | (617,789) | |
| 655 | | 1,343,265 | | 10,881,373 | | 836,302 | | 12,718 | | 13,073,658 | | (2,226,853) | |
| | | | | | | |
| Investment in financing receivables, net | — | | — | | — | | | — | | 122,602 | | — | |
| Financing lease right-of-use assets | — | | — | | — | | — | | — | | 82,209 | | — | |
| Construction in progress | — | | — | | — | | — | | — | | 60,727 | | — | |
| Land held for development | — | | — | | — | | — | | — | | 59,871 | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total real estate investments | 655 | | $ | 1,343,265 | | $ | 10,881,373 | | $ | 836,302 | | $ | 12,718 | | $ | 13,399,067 | | $ | (2,226,853) | |
4. Leases
Lessor Accounting Under ASC 842
The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have not completed our purchase price allocation with respect to this investment and,
therefore, cannotmarket rent renewal terms. Some leases provide disclosures at this time similar to those contained above in Note 3 - Investments in Real Estate to our
consolidated financial statements.
The acquired intangible assets and liabilities referenced above had weighted average livesthe lessee, during the term of the following termslease, with an option or right of first
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as the CPI. In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the years ended December 31,
2021, 20202023 and
2019, respectively (in years): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Acquired intangible assets | 6.5 | | 10.2 | | 5.7 |
| Acquired intangible liabilities | 8.0 | | 7.1 | | 7.0 |
Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2023 were as follows:
| | | | | |
| In thousands | |
| 2024 | $ | 894,442 | |
| 2025 | 801,973 | |
| 2026 | 701,615 | |
| 2027 | 582,028 | |
| 2028 | 469,549 | |
| 2029 and thereafter | 1,579,010 | |
| $ | 5,028,617 | |
Revenue Concentrations
4.The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2023, 2022 and 2021.
Purchase Option Provisions
Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had investments of approximately $111.1 million in six real estate properties as of December 31, 2023 that were subject to purchase options that were exercisable.
Lessee Accounting Under ASC 842
As of December 31, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. Contracts evaluated and treated as leases are those that convey the right to control the use of identified assets for a period of time in exchange for consideration. ASC 842 requires the recording of these leases based on the aggregate future cash flows, discounted utilizing the implicit rate in the lease, or, if not readily determinable, based upon the lessee's incremental borrowing rate, to which the Company utilizes market inputs that are both similar to the Company's credit profile and corresponding term of the leases. As of December 31, 2023, the Company had 232 properties totaling 16.9 million square feet that were held under ground leases. Some of the ground leases include fixed rent renewal terms and others have market rent renewal terms. The ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on the CPI. The Company had 75 prepaid ground leases as of December 31, 2023. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $1.3 million, $1.1 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
The Company’s future lease payments (primarily for its 157 non-prepaid ground leases) as of December 31, 2023 were as follows:
| | | | | | | | |
| In thousands | OPERATING | FINANCING |
| 2024 | $ | 12,263 | | $ | 2,182 | |
| 2025 | 12,428 | | 2,218 | |
| 2026 | 12,516 | | 2,254 | |
| 2027 | 12,703 | | 2,294 | |
| 2028 | 12,822 | | 2,326 | |
| 2029 and thereafter | 698,905 | | 394,072 | |
| Total undiscounted lease payments | $ | 761,637 | | $ | 405,346 | |
| Discount | (531,923) | | (330,843) | |
| Lease liabilities | $ | 229,714 | | $ | 74,503 | |
The following table provides details of the Company's total lease expense for the years ended December 31, 2023 and 2022:
| | | | | | | | | |
| In thousands | | YEAR ENDED
Dec. 31, 2023 | YEAR ENDED
Dec. 31, 2022 |
| Operating lease cost | | | |
| Operating lease expense | | $ | 20,623 | | $ | 12,699 | |
| Variable lease expense | | 8,979 | | 4,529 | |
| | | |
| Finance lease cost | | | |
| Amortization of right-of-use assets | | 1,564 | | 1,288 | |
| Interest on lease liabilities | | 3,718 | | 2,876 | |
| Total lease expense | | $ | 34,884 | | $ | 21,392 | |
| | | |
| Other information | | | |
| Operating cash flows outflows related to operating leases | | $ | 19,222 | $ | 12,816 |
| Operating cash flows outflows related to financing leases | | $ | 2,122 | $ | 1,838 |
| Financing cash flows outflows related to financing leases | | $ | 17 | $ | — |
| Right-of-use assets obtained in exchange for new finance lease liabilities | | $ | — | $ | 53,765 |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | $ | 1,758 | $ | 216,047 |
| | | |
| Weighted-average remaining lease term (excluding renewal options) - operating leases | | 45.8 | 47.5 |
| Weighted-average remaining lease term (excluding renewal options) - finance leases | | 57.9 | 58.9 |
| Weighted-average discount rate - operating leases | | 5.7 | % | 5.8 | % |
| Weighted-average discount rate - finance leases | | 5.0 | % | 5.0 | % |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
5. Acquisitions, Dispositions and ImpairmentMortgage Repayments
Dispositions2023 Acquisition Activity
DuringThe following table details the Company's real estate acquisition activity for the year ended December 31, 2021, we completed2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | DATE ACQUIRED | PURCHASE PRICE | MORTGAGE NOTES PAYABLE, NET | | CASH
CONSIDERATION 1 | REAL
ESTATE | OTHER 2 | SQUARE FOOTAGE |
| Tampa, FL | 3/10/23 | $ | 31,500 | | $ | — | | | $ | 30,499 | | $ | 30,596 | | $ | (97) | | 115,867 | |
| Colorado Springs, CO | 7/28/23 | 11,450 | | (5,284) | | | 6,024 | | 11,416 | | (108) | | 42,770 | |
| | | | | | | | |
| Total real estate acquisitions | | $ | 42,950 | | $ | (5,284) | | | $ | 36,523 | | $ | 42,012 | | $ | (205) | | 158,637 | |
1.Cash consideration excludes prorations of revenue and expense due to/from seller at the dispositiontime of 15 MOBs, locatedthe acquisition.
2.Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.
In the second quarter of 2023, the Company entered into a joint venture agreement for the development of a medical office building in Tennessee, Virginia, MinnesotaScottsdale, Arizona. The Company holds a 90% interest in the joint venture and Ohio fordetermined the arrangement meets the criteria to be consolidated. The joint venture acquired an aggregate gross sales price$8.8 million land parcel to be developed with the Company contributing cash of $88.3 million, representing approximately 599,000 square feet$8.3 million.
In the third quarter of GLA, in addition to2023, the sale of ourCompany acquired the fee interest in a parcel of land parcelpreviously held under a ground lease for $0.8 million and an additional interest in Connecticut on whichan operating property for $0.6 million.
The following table summarizes the ground lessee exercised its purchase optionestimated relative fair values of the assets acquired and liabilities assumed in the real estate acquisitions for 2023 as of the acquisition date:
| | | | | | | | |
| ESTIMATED
FAIR VALUE
in millions | ESTIMATED
USEFUL LIFE
in years |
| Building | $ | 27.5 | | 17.0 - 30.0 |
| | |
| | |
| Tenant Improvements | 3.4 | | 5.1 - 5.9 |
| Land | 5.5 | | — | |
| Land Improvements | 1.1 | | 6.0 - 10.0 |
| | |
| Intangibles | | |
| At-market lease intangibles | 4.5 | | 5.1 - 5.9 |
| Above-market lease intangibles (lessor) | 0.2 | | 1.8 - 4.9 |
| Below-market lease intangibles (lessor) | (0.2) | | 6.4 - 13.9 |
| | |
| | |
| | |
| Mortgage notes payable assumed, including fair value adjustments | (5.3) | | |
| | |
| | |
| Other assets acquired | 0.1 | | |
| Accounts payable, accrued liabilities and other liabilities assumed | (0.3) | | |
| Total cash paid | $ | 36.5 | | |
Unconsolidated Joint Ventures
As of December 31, 2023, the Company had a gross sales price of $1.8 million, resulting in a net gain to usweighted average ownership interest of approximately $39.2 million.43% in 33 real estate properties held in unconsolidated joint ventures. The Company recognizes distributions from unconsolidated joint ventures utilizing the nature of distribution approach and classifies the distributions based on the nature of the underlying activity that generated the distribution. The distributions from unconsolidated joint ventures for the years ended December 31, 2023 and 2022 were classified as operating activities.
During
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
The Company's investment in and loss recognized for the years ended December 31, 2023 and 2022 related to its unconsolidated joint ventures accounted for under the equity method are shown in the table below:
| | | | | | | | |
| DECEMBER 31, |
| Dollars in millions | 2023 | 2022 |
| Investments in unconsolidated joint ventures, beginning of period | $ | 327.2 | | $ | 161.9 | |
| New investments during the period | 3.8 | | 167.9 | |
| Equity loss recognized during the period | (1.7) | | (0.7) | |
| Owner distributions | (17.8) | | (1.9) | |
| Investments in unconsolidated joint ventures, end of period | $ | 311.5 | | $ | 327.2 | |
2022 Acquisitions
The following table details the Company's acquisitions, exclusive of the Merger, for the year ended December 31, 2020, we completed2022:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | TYPE 1 | DATE ACQUIRED | PURCHASE PRICE | | | CASH
CONSIDERATION 2 | REAL
ESTATE | OTHER 3 | SQUARE FOOTAGE
unaudited |
Dallas, TX 4 | MOB | 2/11/22 | $ | 8,175 | | | | $ | 8,185 | | $ | 8,202 | | $ | (17) | | 18,000 |
San Francisco, CA 5 | MOB | 3/7/22 | 114,000 | | | | 112,986 | | 108,687 | | 4,299 | | 166,396 |
| Atlanta, GA | MOB | 4/7/22 | 6,912 | | | | 7,054 | | 7,178 | | (124) | | 21,535 |
| Denver, CO | MOB | 4/13/22 | 6,320 | | | | 5,254 | | 5,269 | | (15) | | 12,207 |
Colorado Springs, CO 6 | MOB | 4/13/22 | 13,680 | | | | 13,686 | | 13,701 | | (15) | | 25,800 |
| Seattle, WA | MOB | 4/28/22 | 8,350 | | | | 8,334 | | 8,370 | | (36) | | 13,256 |
| Houston, TX | MOB | 4/28/22 | 36,250 | | | | 36,299 | | 36,816 | | (517) | | 76,781 |
| Los Angeles, CA | MOB | 4/29/22 | 35,000 | | | | 35,242 | | 25,400 | | 9,842 | | 34,282 |
| Oklahoma City, OK | MOB | 4/29/22 | 11,100 | | | | 11,259 | | 11,334 | | (75) | | 34,944 |
Raleigh, NC 5 | MOB | 5/31/22 | 27,500 | | | | 26,710 | | 27,127 | | (417) | | 85,113 |
Tampa, FL 6 | MOB | 6/9/22 | 18,650 | | | | 18,619 | | 18,212 | | 407 | | 55,788 |
| Seattle, WA | MOB | 8/1/22 | 4,850 | | | | 4,806 | | 4,882 | | (76) | | 10,593 |
| Raleigh, NC | MOB | 8/9/22 | 3,783 | | | | 3,878 | | 3,932 | | (54) | | 11,345 |
| Jacksonville, FL | MOB | 8/9/22 | 18,195 | | | | 18,508 | | 18,583 | | (75) | | 34,133 |
| Atlanta, GA | MOB | 8/10/22 | 11,800 | | | | 11,525 | | 12,038 | | (513) | | 43,496 |
| Denver, CO | MOB | 8/11/22 | 14,800 | | | | 13,902 | | 13,918 | | (16) | | 34,785 |
| Raleigh, NC | MOB | 8/18/22 | 11,375 | | | | 10,670 | | 10,547 | | 123 | | 31,318 |
| Nashville, TN | MOB | 9/15/22 | 21,000 | | | | 20,764 | | 20,572 | | 192 | | 61,932 |
| Austin, TX | MOB | 9/29/22 | 5,450 | | | | 5,449 | | 5,572 | | (123) | | 15,000 |
Jacksonville, FL 4 | MOB | 10/12/22 | 3,600 | | | | 3,530 | | 3,609 | | (79) | | 6,200 |
| Houston, TX | MOB | 11/21/22 | 5,500 | | | | 5,469 | | 5,513 | | (44) | | 28,369 |
Austin, TX 7 | MOB | 12/28/22 | 888 | | | | 890 | | 889 | | 1 | | 2,219 |
| Denver, CO | MOB | 12/28/22 | 16,400 | | | | 16,170 | | 16,467 | | (297) | | 39,692 |
| | | | | | | | | |
| | | $ | 403,578 | | | | $ | 399,189 | | $ | 386,818 | | $ | 12,371 | | 863,184 | |
1MOB = medical outpatient building.
2Cash consideration excludes prorations of revenue and expense due to/from seller at the dispositiontime of 1 MOB, locatedthe acquisition.
3Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.
4Represents a single-tenant property.
5Includes three properties.
6Includes two properties.
7The Company acquired additional ownership interests in Kansas Cityan existing building bringing the Company's ownership to 71.4%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the real estate acquisitions for an aggregate gross sales price2022 as of $24.3 million, representing approximately 69,000 square feet of GLA, and generating net gains of approximately $7.6 million. Additionally, duringthe acquisition date:
| | | | | | | | |
| ESTIMATED
FAIR VALUE
in millions | ESTIMATED
USEFUL LIFE
in years |
| Building | $ | 250.7 | | 14.0 - 38.0 |
| | |
| | |
| Tenant Improvements | 20.7 | | 1.5 - 13.4 |
| Land | 76.1 | | — | |
| Land Improvements | 11.2 | | 5.0 - 14.0 |
| | |
| Intangibles | | |
| At-market lease intangibles | 28.1 | | 1.5 - 13.4 |
| Above-market lease intangibles (lessor) | 15.9 | | 1.3 - 15.6 |
| Below-market lease intangibles (lessor) | (2.2) | | 1.3 - 19.3 |
| | |
| Below-market lease intangibles (lessee) | 1.2 | | 13.1 |
| | |
| | |
| | |
| Other assets acquired | 0.4 | | |
| Accounts payable, accrued liabilities and other liabilities assumed | (2.9) | | |
| Total cash paid | $ | 399.2 | | |
Unconsolidated Joint Ventures
The following table details the joint venture acquisitions for the year ended December 31, 2020, we sold part2022:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | TYPE 1 | DATE ACQUIRED | PURCHASE PRICE | | | CASH
CONSIDERATION 2 | REAL
ESTATE | OTHER 3 | SQUARE FOOTAGE
unaudited |
San Francisco, CA 4 | MOB | 3/7/22 | $ | 67,175 | | | | $ | 66,789 | | $ | 65,179 | | $ | 1,610 | | 110,865 |
Los Angeles, CA 5 | MOB | 3/7/22 | 33,800 | | | | 32,384 | | 32,390 | | (6) | | 103,259 |
| | | | | | | | | |
| | | $ | 100,975 | | | | $ | 99,173 | | $ | 97,569 | | $ | 1,604 | | 214,124 | |
1MOB = medical outpatient building.
2Cash consideration excludes prorations of our interest in undeveloped land in Miami, Floridarevenue and expense due to/from seller at the time of the acquisition.
3Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.
4Includes three properties.
5Includes two properties.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
2023 Real Estate Asset Dispositions
The following table details the Company's dispositions for a gross sales price of $7.6 million which resulted in a net gain of approximately $2.0 million.
During the year ended December 31, 2019, we completed2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | Type1 | DATE DISPOSED | SALE PRICE | CLOSING ADJ | COMPANY-FINANCED NOTES | NET PROCEEDS | NET REAL ESTATE | OTHER (INCLUDING RECEIVABLES) 2 | GAIN/(IMPAIR-MENT) | SQUARE FOOTAGE |
Tampa/Miami, FL3 | MOB | 1/12/23 | $ | 93,250 | | $ | (5,875) | | $ | — | | $ | 87,375 | | $ | 87,302 | | $ | (888) | | $ | 961 | | 224,037 | |
Dallas, TX 4 | MOB | 1/30/23 | 19,210 | | (141) | | — | | 19,069 | | 18,986 | | 43 | | 40 | | 36,691 | |
| St. Louis, MO | MOB | 2/10/23 | 350 | | (18) | | — | | 332 | | 398 | | — | | (66) | | 6,500 | |
| Los Angeles, CA | MOB | 3/23/23 | 21,000 | | (526) | | — | | 20,474 | | 20,610 | | 52 | | (188) | | 37,165 | |
Los Angeles, CA 5 | MOB | 3/30/23 | 75,000 | | (8,079) | | (45,000) | | 21,921 | | 88,624 | | (803) | | (20,900) | | 147,078 | |
Los Angeles, CA 6 | LAND | 5/12/23 | 3,300 | | (334) | | — | | 2,966 | | 3,268 | | — | | (302) | | — | |
| Albany, NY | MOB | 6/30/23 | 10,000 | | (1,229) | | — | | 8,771 | | 2,613 | | (1,040) | | 7,198 | | 40,870 | |
| Houston, TX | MOB | 8/2/23 | 8,320 | | (285) | | — | | 8,035 | | 4,567 | | 194 | | 3,274 | | 57,170 | |
| Atlanta, GA | MOB | 8/22/23 | 25,140 | | (66) | | — | | 25,074 | | 23,226 | | (536) | | 2,386 | | 55,195 | |
| Dallas, TX | INPATIENT | 9/15/23 | 115,000 | | (1,504) | | — | | 113,496 | | 64,183 | | 6,094 | | 43,219 | | 161,264 | |
| Houston, TX | MOB | 9/18/23 | 250 | | (24) | | — | | 226 | | 1,998 | | — | | (1,772) | | 52,040 | |
| Chicago, IL | MOB | 9/27/23 | 59,950 | | (870) | | — | | 59,080 | | 74,710 | | (380) | | (15,250) | | 104,912 | |
Evansville, IN 7 | MOB | 11/13/23 | 18,500 | | (63) | | — | | 18,437 | | 17,807 | | (149) | | 779 | | 260,520 | |
| Houston, TX | HOSPITAL | 12/1/23 | 4,100 | | (6) | | — | | 4,094 | | 3,486 | | — | | 608 | | 83,223 | |
Charleston, SC 8 | OFFICE | 12/15/23 | 6,200 | | (401) | | — | | 5,799 | | 3,415 | | — | | 2,384 | | 15,014 | |
| Dallas, TX | MOB | 12/20/23 | 43,295 | | (764) | | — | | 42,531 | | 33,882 | | (3,782) | | 12,431 | | 77,827 | |
| Los Angeles, CA | OFFICE | 12/21/23 | 19,000 | | (1,311) | | — | | 17,689 | | 17,787 | | — | | (98) | | 104,377 | |
Tucson, AZ 9,10 | MOB | 12/22/23 | 43,230 | | (3,770) | | (6,000) | | 33,460 | | 39,786 | | (26) | | (300) | | 215,471 | |
| Miami, FL | MOB | 12/22/23 | 18,250 | | (756) | | — | | 17,494 | | 17,354 | | 643 | | (503) | | 48,000 | |
| Sebring, FL | MOB | 12/27/23 | 9,500 | | (81) | | — | | 9,419 | | 10,438 | | (512) | | (507) | | 38,949 | |
| Boston, MA | MOB | 12/28/23 | 117,197 | | (2,079) | | — | | 115,118 | | 107,803 | | 9,828 | | (2,513) | | 161,254 | |
Jacksonville/Orlando/Miami, FL 11 | SNF | 12/29/23 | 77,000 | | (8,678) | | (7,700) | | 60,622 | | 65,839 | | (294) | | 2,777 | | 354,500 | |
| Total dispositions | | | $ | 787,042 | | $ | (36,860) | | $ | (58,700) | | $ | 691,482 | | $ | 708,082 | | $ | 8,444 | | $ | 33,658 | | 2,282,057 | |
1.MOB = medical outpatient building; SNF = skilled nursing facility.
2.Includes straight-line rent receivables, leasing commissions and lease inducements.
3.Includes two properties sold in two separate transactions to the disposition of 4 MOBs, locatedsame buyer on the same date.
4.The Company sold this property to a joint venture in South Carolinawhich it retained a 40% interest. Sales price and New Mexico for an aggregate grosssquare footage reflect the total sales price paid by the joint venture and total square footage of $4.9the property.
5.The Company entered into a mortgage loan agreement with the buyer for $45.0 million.
6.The Company sold a land parcel totaling 0.34 acres.
7.Includes five properties sold in three separate transactions to the same buyer on the same date.
8.The Company sold a corporate office in Charleston, SC that was 100% occupied by the Company.
9.Includes 12 properties sold in one transaction to the same buyer.
10.The Company entered into a mezzanine loan with the buyer for $6.0 million.
11.Includes three properties sold in one transaction to the same buyer. The Company entered into a separate note receivable for $7.7 million representing approximately 51,000related to this sale.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
2022 Real Estate Asset Dispositions
The following table details the Company's dispositions for the year ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | TYPE 1 | DATE DISPOSED | SALES PRICE | CLOSING ADJUSTMENTS | NET PROCEEDS | NET REAL ESTATE INVESTMENT | OTHER
including
receivables 2 | GAIN/
(IMPAIRMENT) | SQUARE FOOTAGE
unaudited |
Loveland, CO 3, 4 | MOB | 2/24/22 | $ | 84,950 | | $ | (45) | | $ | 84,905 | | $ | 40,095 | | $ | 4 | | $ | 44,806 | | 150,291 | |
San Antonio, TX 3 | MOB | 4/15/22 | 25,500 | | (2,272) | | 23,228 | | 14,381 | | 284 | | 8,563 | | 201,523 | |
GA, FL, PA 5, 11 | MOB | 7/29/22 | 133,100 | | (8,109) | | 124,991 | | 124,991 | | — | | — | | 316,739 | |
GA, FL, TX 7, 11 | MOB | 8/4/22 | 160,917 | | (5,893) | | 155,024 | | 151,819 | | 3,205 | | — | | 343,545 | |
Los Angeles, CA 5, 9, 11 | MOB | 8/5/22 | 134,845 | | (3,102) | | 131,743 | | 131,332 | | 411 | | — | | 283,780 | |
Dallas, TX 7, 10, 11 | MOB | 8/30/22 | 114,290 | | (682) | | 113,608 | | 113,608 | | — | | — | | 189,385 | |
Indianapolis, IN 6, 12 | MOB | 8/31/22 | 238,845 | | (5,846) | | 232,999 | | 84,767 | | 4,324 | | 143,908 | | 506,406 | |
Dallas, TX 3 | MOB | 10/4/22 | 104,025 | | (5,883) | | 98,142 | | 38,872 | | 6,436 | | 52,834 | | 291,328 | |
| Houston, TX | MOB | 10/21/22 | 32,000 | | (280) | | 31,720 | | 10,762 | | 744 | | 20,214 | | 134,910 | |
| College Station, TX | MOB | 11/10/22 | 49,177 | | (3,755) | | 45,422 | | 44,918 | | 475 | | 28 | | 122,942 | |
| El Paso, TX | MOB | 12/22/22 | 55,326 | | (4,002) | | 51,324 | | 56,427 | | (1,897) | | (3,205) | | 110,465 | |
Atlanta, GA 8 | MOB | 12/22/22 | 91,243 | | (4,326) | | 86,917 | | 109,051 | | 235 | | (22,369) | | 348,416 | |
| St. Louis, MO | MOB | 12/28/22 | 18,000 | | (1,471) | | 16,529 | | 18,340 | | 4 | | (1,815) | | 69,394 | |
| | | | | | | | | |
| | | $ | 1,242,218 | | $ | (45,666) | | $ | 1,196,552 | | $ | 939,363 | | $ | 14,225 | | $ | 242,964 | | 3,069,124 | |
1MOB = medical outpatient building
2Includes straight-line rent receivables, leasing commissions and lease inducements.
3Includes two properties.
4The Company deferred the tax gain through a 1031 exchange and reinvested the proceeds.
5Includes four properties.
6Includes five properties.
7Includes six properties.
8Includes nine properties.
9Values and square feet are represented at 100%. The Company retained a 20% ownership interest in the joint venture with an unrelated third party that purchased these properties.
10Values and square feet are represented at 100%. The Company retained a 40% ownership interest in the joint venture with an unrelated third party that purchased these properties.
11These properties were acquired as part of GLA,the Merger and generating net losseswere included as assets held for sale in the purchase price allocation.
12Two of $0.2 million.the five properties included in this portfolio were acquired in the Merger and were included as assets held for sale in the purchase price allocation.
Subsequent to
6. Held for Sale
The Company had one property classified as assets held for sale as of December 31, 2021, we closed a tenant purchase option transaction on a2023. The net real estate assets held for sale includes the impact of $5.9 million of impairment charges for the year ended December 31, 2023. The Company had one property locatedclassified as assets held for sale as of December 31, 2022, which was sold in Georgia for a gross sales pricethe first quarter of $26.8 million. This property is properly2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
The table below reflects the assets and liabilities classified as held for sale as of December 31, 2021. For more details, see Note 2 - Summary of Significant Accounting Policies in the “Real Estate Held for Sale” section.2023 and 2022.
| | | | | | | | |
| | DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 |
| Balance Sheet data | | |
| Land | $ | 1,850 | | $ | 1,700 | |
| Buildings and improvements | 6,779 | | 15,164 | |
| Lease intangibles | 1,017 | | 1,986 | |
| 9,646 | | 18,850 | |
| Accumulated depreciation | (913) | | — | |
| Real estate assets held for sale, net | 8,733 | | 18,850 | |
| | |
| Other assets, net | 101 | | 43 | |
| Assets held for sale, net | $ | 8,834 | | $ | 18,893 | |
| | |
| Accounts payable and accrued liabilities | $ | 23 | | $ | 282 | |
| | |
| Other liabilities | 272 | | 155 | |
| Liabilities of properties held for sale | $ | 295 | | $ | 437 | |
7. Impairment Charges
An asset is impaired when undiscounted cash flows expected to be generated by the asset are less than the carrying value of the asset. The Company must assess the potential for impairment of its long-lived assets, including real estate properties, whenever events occur or there is a change in circumstances, such as the sale of a property or the decision to sell a property, which indicate that the recorded value might not be fully recoverable.
The Company recorded impairment charges on 31 properties sold and six additional properties associated with planned disposition activity for the year ended December 31, 2023, totaling $149.7 million. The Company recorded impairment charges on 12 properties sold and three additional properties associated with planned disposition activity for the year ended December 31, 2022, totaling $54.4 million. Both level 1 and level 3 fair value techniques were used to derive these impairment charges.
As of December 31, 2023, six properties totaling $53.6 million were measured at fair value using level 3 fair value hierarchy. The level 3 fair value techniques included nonbinding letters of intent and unexecuted purchase and sale agreements, less estimated closing costs.
8. Other Assets
| | | | | | | | | | | | | | |
| Dollars in thousands | | December 31, 2023 | | December 31, 2022 |
| Real estate notes receivable, net | | $ | 173,614 | | | $ | 99,643 | |
| Straight-line rent receivables | | 116,866 | | | 88,868 | |
| Prepaid assets | | 116,455 | | | 81,900 | |
| Above-market intangible assets, net | | 66,695 | | | 80,720 | |
Accounts receivable, net 1 | | 63,203 | | | 54,667 | |
| Additional long-lived assets, net | | 20,717 | | | 21,446 | |
| Interest rate swap assets | | 4,634 | | | 14,512 | |
Investment in securities 2 | | 6,011 | | | 6,011 | |
| Debt issuance costs, net | | 3,867 | | | 5,977 | |
| Project costs | | 6,187 | | | 4,337 | |
| Net investment in lease | | 2,112 | | | 1,828 | |
| Customer relationship intangible assets, net | | 1,066 | | | 1,120 | |
| Other | | 10,941 | | | 8,961 | |
| | $ | 592,368 | | | $ | 469,990 | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
Impairment
During the year ended1The amounts for December 31, 2021, we recorded impairment charges2023 and 2022 are net of $22.9allowance for doubtful accounts of $8.4 million and $4.0 million, respectively. The amount for December 31, 2022 includes $7,169 of other receivables, net.
2This amount represents the value of the Company's preferred stock investment in a data analytics platform.
9. Intangible Assets and Liabilities
The Company has several types of intangible assets and liabilities included in its Consolidated Balance Sheets, including goodwill, debt issuance costs, above-, below-, and at-market lease intangibles, and customer relationship intangibles. For additional details on 4 properties, one of which was soldthe Company's debt issuance costs, see Note 10 to the Consolidated Financial Statements. The Company’s intangible assets and liabilities, including assets held for sale and certain debt issuance costs, as of December 31, 2021. The other three properties are located in Georgia, Texas2023 and New Mexico. During each2022 consisted of the following:
| | | | | | | | | | | | | | | | | | | | |
| | GROSS BALANCE
at December 31, | ACCUMULATED AMORTIZATION
at December 31, | WEIGHTED AVG.
REMAINING LIFE
in years | BALANCE SHEET CLASSIFICATION |
| Dollars in millions | 2023 | 2022 | 2023 | 2022 |
| Goodwill | $ | 250.5 | | $ | 223.2 | | $ | — | | $ | — | | N/A | Goodwill |
| Credit facility debt issuance costs | 6.9 | | 6.9 | | 3.1 | | 0.9 | | 1.9 | Other assets, net |
| Above-market lease intangibles (lessor) | 98.0 | | 91.5 | | 31.3 | | 10.7 | | 5.3 | Other assets, net |
| Customer relationship intangibles (lessor) | 2.1 | | 2.1 | | 1.1 | | 1.0 | | 19.6 | Other assets, net |
| Below-market lease intangibles (lessor) | (112.5) | | (112.5) | | (35.7) | | (14.6) | | 5.8 | Other liabilities |
| | | | | | |
| At-market lease intangibles | 837.3 | | 1,067.4 | | 301.7 | | 188.3 | | 4.0 | Real estate properties |
| | | | | | |
| | | | | | |
| $ | 1,082.3 | | $ | 1,278.6 | | $ | 301.5 | | $ | 186.3 | | 4.3 | |
For the years ended December 31, 20202023 and 2019, we recorded no impairment charges. For more details, see Note 2 - Summary2022, the Company recognized approximately $214.8 million and $133.6 million of Significant Accounting Policies inintangible amortization, respectively.
The following table represents expected amortization over the “Recoverabilitynext five years of Real Estate Investments” section.
5. Intangible Assets and Liabilities
Intangiblethe Company’s intangible assets and liabilities consisted of the followingin place as of December 31, 2021 and 2020, respectively (in thousands, except weighted average remaining amortization terms): | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Balance | | Weighted Average Remaining
Amortization in Years | | Balance | | Weighted Average Remaining
Amortization in Years |
| Assets: | | | | | | | |
| In place leases | $ | 349,863 | | | 9.3 | | $ | 483,779 | | | 9.7 |
| Tenant relationships | 54,851 | | | 10.8 | | 144,842 | | | 10.0 |
| Above market leases | 21,537 | | | 6.9 | | 37,876 | | | 5.8 |
| | | | | | | |
| 426,251 | | | | | 666,497 | | | |
| Accumulated amortization | (213,801) | | | | | (427,937) | | | |
| Total | $ | 212,450 | | | 9.3 | | $ | 238,560 | | | 9.6 |
| | | | | | | |
| Liabilities: | | | | | | | |
| Below market leases | $ | 55,073 | | | 14.3 | | $ | 61,896 | | | 14.6 |
| | | | | | | |
| | | | | | | |
| Accumulated amortization | (23,742) | | | | | (29,357) | | | |
| Total | $ | 31,331 | | | 14.3 | | $ | 32,539 | | | 14.6 |
|
|
The following is a summary of the net intangible amortization for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Amortization recorded against rental income related to above and (below) market leases | $ | (2,638) | | | $ | (4,056) | | | $ | (4,422) | |
| Amortization expense related to in place leases and tenant relationships | 45,447 | | | 55,138 | | | 60,363 | |
| | | | | |
| | | | | |
| Dollars in millions | FUTURE AMORTIZATION OF INTANGIBLES, NET |
| 2024 | $ | 206.7 | |
| 2025 | 109.1 | |
| 2026 | 84.3 | |
| 2027 | 53.0 | |
| 2028 | 31.9 | |
As of December 31, 2021, the expected future amortization of intangible assets and liabilities is as follows (in thousands): | | | | | | | | | | | | | | |
| Year | | Assets | | Liabilities |
| 2022 | | $ | 40,676 | | | $ | 5,254 | |
| 2023 | | 33,161 | | | 4,408 | |
| 2024 | | 27,345 | | | 3,798 | |
| 2025 | | 23,136 | | | 3,161 | |
| 2026 | | 19,437 | | | 2,686 | |
| Thereafter | | 68,695 | | | 12,024 | |
| Total | | $ | 212,450 | | | $ | 31,331 | |
78
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
6. Receivables10. Notes and Other AssetsBonds Payable
| | | | | | | | | | | | | | | | | | | | | | | |
| | DECEMBER 31, | MATURITY DATES | CONTRACTUAL INTEREST RATES | EFFECTIVE INTEREST RATES | PRINCIPAL PAYMENTS | INTEREST PAYMENTS |
| Dollars in thousands | 2023 | 2022 |
| $1.5B Unsecured Credit Facility | — | | 385,000 | | 10/25 | SOFR + 0.95% | 6.24 | % | At maturity | Monthly |
$350M Unsecured Term Loan 1 | 349,798 | | 349,114 | | 7/24 | SOFR + 1.05% | 6.30 | % | At maturity | Monthly |
$200M Unsecured Term Loan 1 | 199,903 | | 199,670 | | 5/24 | SOFR + 1.05% | 6.30 | % | At maturity | Monthly |
$150M Unsecured Term Loan 1 | 149,643 | | 149,495 | | 6/26 | SOFR + 1.05% | 6.30 | % | At maturity | Monthly |
$300M Unsecured Term Loan 1 | 299,958 | | 299,936 | | 10/25 | SOFR + 1.05% | 6.30 | % | At maturity | Monthly |
$200M Unsecured Term Loan 1 | 199,502 | | 199,362 | | 7/27 | SOFR + 1.05% | 6.30 | % | At maturity | Monthly |
$300M Unsecured Term Loan 1 | 298,288 | | 297,869 | | 1/28 | SOFR + 1.05% | 6.30 | % | At maturity | Monthly |
Senior Notes due 2025 1 | 249,484 | | 249,115 | | 5/25 | 3.88 | % | 4.12 | % | At maturity | Semi-annual |
Senior Notes due 2026 1 | 579,017 | | 571,587 | | 8/26 | 3.50 | % | 4.94 | % | At maturity | Semi-annual |
Senior Notes due 2027 1 | 483,727 | | 479,553 | | 7/27 | 3.75 | % | 4.76 | % | At maturity | Semi-annual |
Senior Notes due 2028 1 | 297,429 | | 296,852 | | 1/28 | 3.63 | % | 3.85 | % | At maturity | Semi-annual |
Senior Notes due 2030 1 | 575,443 | | 565,402 | | 2/30 | 3.10 | % | 5.30 | % | At maturity | Semi-annual |
Senior Notes due 2030 1 | 296,780 | | 296,385 | | 3/30 | 2.40 | % | 2.72 | % | At maturity | Semi-annual |
Senior Notes due 2031 1 | 295,832 | | 295,547 | | 3/31 | 2.05 | % | 2.25 | % | At maturity | Semi-annual |
Senior Notes due 2031 1 | 649,521 | | 632,693 | | 3/31 | 2.00 | % | 5.13 | % | At maturity | Semi-annual |
Mortgage notes payable 2 | 70,534 | | 84,247 | | 1/24-12/26 | 3.6%-4.77% | 3.57%-6.88% | Monthly | Monthly |
| $ | 4,994,859 | | $ | 5,351,827 | | | | | | |
Receivables1Balances are shown net of discounts and unamortized issuance costs.
2Balances are shown net of discounts and unamortized issuance costs and include premiums.
The Company’s various debt agreements contain certain representations, warranties, and financial and other assets consistedcovenants customary in such loan agreements. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain limits on the Company’s ability to incur indebtedness and create liens or encumbrances. As of December 31, 2023, the Company was in compliance with its financial covenant provisions under its various debt instruments.
Senior Notes
The following
table reconciles the Company’s aggregate Senior notes principal balance with the Company’s Consolidated Balance Sheets as of December 31,
20212023 and
2020, respectively (in thousands): | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Tenant receivables, net | $ | 10,477 | | | $ | 17,717 | |
| Other receivables, net | 6,098 | | | 6,243 | |
| Deferred financing costs, net | 7,055 | | | 2,586 | |
| Deferred leasing costs, net | 45,008 | | | 43,234 | |
| Straight-line rent receivables, net | 142,604 | | | 128,070 | |
| Prepaid expenses, deposits, equipment and other, net | 38,301 | | | 46,114 | |
| Real estate notes receivable, net | 69,114 | | | — | |
| | | |
| Finance ROU asset, net | 16,284 | | | 7,764 | |
| | | |
| | | |
| Total | $ | 334,941 | | | $ | 251,728 | |
| | | |
| | | | | | | | |
| | DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 |
| Senior notes principal balance | $ | 3,699,285 | | $ | 3,699,500 | |
| Unaccreted discount | (265,852) | | (304,919) | |
| Debt issuance costs | (6,200) | | (7,447) | |
| Senior notes carrying amount | $ | 3,427,233 | | $ | 3,387,134 | |
Term Loans
The following
is a summary oftable reconciles the
amortization of deferred leasing costs and financing costs forCompany’s aggregate term loan principal balance with the
years ended December 31, 2021, 2020 and 2019, respectively (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| 2021 | | 2020 | | 2019 |
| Amortization expense related to deferred leasing costs | $ | 8,831 | | | $ | 8,755 | | | $ | 7,976 | |
| Interest expense related to amortization of deferred financing costs | 1,753 | | | 1,724 | | | 1,724 | |
AsCompany’s Consolidated Balance Sheets as of December 31, 2021, the expected future amortization of deferred leasing costs2023 and financing costs is as follows (in thousands): | | | | | | | | |
| Year | | Amount |
| 2022 | | $ | 10,287 | |
| 2023 | | 9,263 | |
| 2024 | | 8,203 | |
| 2025 | | 6,939 | |
| 2026 | | 4,560 | |
| Thereafter | | 12,811 | |
| Total | | $ | 52,063 | |
| | | | | | | | |
| | DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 |
| Term loan principal balances | $ | 1,500,000 | | $ | 1,500,000 | |
| Debt issuance costs | (2,908) | | (4,554) | |
| Term Loans carrying amount | $ | 1,497,092 | | $ | 1,495,446 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Mortgage Notes Payable
The majority of our lease expenses are derived from our ground leases and a few corporate leases, which are primarily for office space. We recognize lease expense for these leases on a straight-line basis overfollowing table reconciles the lease term. Many of our leases contain renewal options that can extendCompany’s aggregate mortgage notes principal balance with the lease term from one to ten years, or in certain cases, longer durations. The exercise of lease renewal options is at our sole discretion. Certain of our ground leases have the option to purchase the land at the end of the initial term. Our leases have one of the following payment options: (i) fixed payment throughout the term; (ii) fixed payments with periodic escalations; (iii) variable lease payments based on the Consumer Price Index (“CPI”) or another similar index; and (iv) a combination of the aforementioned. Our leases do not contain any material residual value guarantees or material restrictive covenants other than certain prohibitionsCompany’s Consolidated Balance Sheets as to the nature of business that can be conducted within the buildings which we own in order to limit activities that may be deemed competitive in nature to the ground lessor’s activities. As of December 31, 2021, we have no new ground leases or corporate leases that have not yet commenced.2023 and 2022.
| | | | | | | | |
| | DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 |
| Mortgage notes payable principal balance | $ | 70,752 | | $ | 84,122 | |
| Unamortized premium | 285 | | 486 | |
| Unaccreted discount | (237) | | (38) | |
| Debt issuance costs | (266) | | (323) | |
| Mortgage notes payable carrying amount | $ | 70,534 | | $ | 84,247 | |
Mortgage Activity
On July 28, 2023, the Company assumed a mortgage note payable of $5.6 million in connection with the acquisition of a 42,770 square foot property in Colorado Springs, Colorado. The note bears interest at a rate of 4.5% per annum and matures on April 1, 2026.
On August 1, 2023, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 3.31% per annum with an outstanding principal of $9.8 million. The mortgage note encumbered a 66,984 square foot property in Marietta, Georgia.
On December 1, 2023, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 4.51% per annum with an outstanding principal of $6.6 million. The mortgage note encumbered a 93,992 square foot property in Lakewood, Colorado.
Subsequent Changes in Debt Structure
On January 6, 2024, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 4.77% per annum with an outstanding principal of $11.3 million. The mortgage note encumbered a 63,012 square foot property in California.
DuringOn February 1, 2024, the year endedCompany repaid in full at maturity a mortgage note payable bearing interest at a rate of 4.12% per annum with an outstanding principal of $5.6 million. The mortgage note encumbered a 40,324 square foot property in Georgia.
The following table details the Company’s mortgage notes payable, with related collateral.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | ORIGINAL BALANCE | EFFECTIVE INTEREST RATE 9 | MATURITY
DATE | COLLATERAL 10 | PRINCIPAL AND INTEREST PAYMENTS 8 | INVESTMENT IN COLLATERAL
at December 31, | BALANCE
at December 31, |
| Dollars in millions | 2023 | 2023 | 2022 |
| | | | | | | | |
| | | | | | | | |
Life Insurance Co. 1 | 12.3 | | 3.86 | % | 8/23 | MOB | Monthly/7-yr amort. | — | | — | | 10.0 | |
Life Insurance Co. 2 | 9.0 | | 4.84 | % | 12/23 | MOB,OFC | Monthly/10-yr amort. | — | | — | | 6.8 | |
Life Insurance Co. 3 | 13.3 | | 4.13 | % | 1/24 | MOB | Monthly/10-yr amort. | 24.4 | | 11.3 | | 11.7 | |
Life Insurance Co. 4 | 6.8 | | 3.96 | % | 2/24 | MOB | Monthly/7-yr amort. | 12.6 | | 5.6 | | 5.8 | |
Financial Services 5 | 9.7 | | 4.32 | % | 9/24 | MOB | Monthly/10-yr amort. | 16.9 | | 7.2 | | 7.5 | |
Life Insurance Co. 6 | 16.5 | | 3.43 | % | 12/25 | MOB,OFC | Monthly/7-yr amort. | 49.2 | | 15.9 | | 16.2 | |
| Financial Services | 11.5 | | 3.71 | % | 1/26 | MOB | Monthly/10-yr amort. | 41.7 | | 7.8 | | 8.3 | |
Life Insurance Co. 7 | 6.0 | | 6.88 | % | 4/26 | MOB | Monthly/7-yr amort. | 11.6 | | 5.2 | | — | |
| Life Insurance Co. | 19.2 | | 4.08 | % | 12/26 | MOB | Monthly/10-yr amort. | 45.7 | | 17.5 | | 17.9 | |
| | | | | | | | |
| | | | | | $ | 202.1 | | $ | 70.5 | | $ | 84.2 | |
1The Company repaid this loan in August 2023. The Company's unencumbered gross investment was $26.0 million at December 31, 2021, we assumed 5 new ground leases as part of building acquisitions made during the year. 2023.
2The new ground leases were analyzed and 3 were classified as finance leases and 2 were classified as operating leases. Additionally, during the year endedCompany repaid this loan in December 2023. The Company's unencumbered gross investment was $24.5 million at December 31, 2021, 92023.
3The unamortized portion of our in-place operating ground leasesthe $0.8 million premium recorded on this note upon acquisition is included in the balance above.
4The unamortized portion of the $0.2 million premium recorded on this note upon acquisition is included in the balance above.
5The unamortized portion of the $0.1 million premium recorded on this note upon acquisition is included in the balance above.
6The unamortized portion of the $0.7 million premium recorded on this note upon acquisition is included in the balance above.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
7The unaccreted portion of the $0.3 million discount recorded on this note upon acquisition is included in the balance above.
8Payable in monthly installments of principal and interest with the final payment due at maturity (unless otherwise noted).
9The contractual interest rates for the seven outstanding mortgage notes ranged from 3.6% to 4.8% as of December 31, 2023.
10MOB-Medical office building; OFC-Office
Other Long-Term Debt Information
Future maturities of the Company’s notes and bonds payable as of December 31, 2023, were removed as a result of property dispositions. For more details onfollows:
| | | | | | | | | | | | | | | | | |
| Dollars in thousands | PRINCIPAL MATURITIES | NET ACCRETION/ AMORTIZATION 1 | DEBT ISSUANCE COSTS 2 | NOTES AND
BONDS PAYABLE | % |
| 2024 | $ | 575,473 | | $ | (41,050) | | $ | (2,438) | | $ | 531,985 | | 10.7 | % |
| 2025 | 566,375 | | (43,163) | | (1,916) | | 521,296 | | 10.4 | % |
| 2026 | 778,904 | | (41,837) | | (1,650) | | 735,417 | | 14.7 | % |
| 2027 | 700,000 | | (36,192) | | (1,519) | | 662,289 | | 13.3 | % |
| 2028 | 600,000 | | (35,179) | | (707) | | 564,114 | | 11.3 | % |
| 2029 and thereafter | 2,049,285 | | (68,382) | | (1,145) | | 1,979,758 | | 39.6 | % |
| $ | 5,270,037 | | $ | (265,803) | | $ | (9,375) | | $ | 4,994,859 | | 100.0 | % |
1Includes discount accretion and premium amortization related to the dispositions, referCompany’s Senior Notes and four mortgage notes payable.
2Excludes approximately $3.9 million in debt issuance costs related to Note 4 - Dispositions and Impairment.the Company's Unsecured Credit Facility included in other assets, net.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Lessee - Lease Term and Discount Rates
The following is the weighted average remaining lease term and the weighted average discount rate for our operating and finance leases as of December 31, 2021 (weighted average remaining lease term in years): | | | | | | | | |
| | December 31, 2021 |
Operating leases: | | |
Weighted-average remaining lease term | | 46.5 |
Weighted-average discount rate | | 5.3 | % |
Finance leases: | | |
Weighted-average remaining lease term | | 48.1 |
Weighted-average discount rate | | 3.8 | % |
Lessee - Maturity of Lease Liabilities
We have ground leases and other operating leases with landlords that generally require fixed annual rental payments and may also include escalation clauses and renewal options. These leases generally have terms up to 99 years, excluding extension options. The following table summarizes the future minimum lease obligations of our operating and finance leases as of December 31, 2021 under Topic 842 (in thousands): | | | | | | | | | | | | | | |
| Year | | Operating leases | | Finance leases |
| 2022 | | $ | 10,568 | | | $ | 630 | |
| 2023 | | 10,758 | | | 635 | |
| 2024 | | 10,370 | | | 640 | |
| 2025 | | 9,857 | | | 645 | |
| 2026 | | 9,869 | | | 656 | |
| Thereafter | | 599,954 | | | 37,524 | |
| Total undiscounted lease payments | | $ | 651,376 | | | $ | 40,730 | |
| Less: Interest | | (455,090) | | | (23,826) | |
| Present value of lease liabilities | | $ | 196,286 | | | $ | 16,904 | |
Lessor - Lease Revenues and Maturity of Future Minimum Rents
We have operating leases with tenants that expire at various dates through 2043 which generally include fixed increases or adjustment based on the consumer price index. Leases also provide for additional rents based on certain operating expenses.
For the years ended December 31, 2021, 2020 and 2019, we recognized $761.7 million, $732.5 million and $686.2 million, respectively, of rental and other lease-related income related to our operating leases, of which $175.7 million, $169.1 million and $154.3 million, respectively, were variable lease payments.
The following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of December 31, 2021 under Topic 842 (in thousands): | | | | | | | | |
| Year | | Amount |
| 2022 | | $ | 569,363 | |
| 2023 | | 524,166 | |
| 2024 | | 466,821 | |
| 2025 | | 407,880 | |
| 2026 | | 360,766 | |
| Thereafter | | 1,322,375 | |
| Total | | $ | 3,651,371 | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
8. Debt
Debt consisted of the following as of December 31, 2021 and 2020, respectively (in thousands): | | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
| Unsecured revolving credit facility | $ | — | | | $ | — | |
| Unsecured term loans | 500,000 | | | 500,000 | |
| Unsecured senior notes | 2,550,000 | | | 2,550,000 | |
| Fixed rate mortgages | — | | | — | |
| 3,050,000 | | | 3,050,000 | |
| Deferred financing costs, net | (17,975) | | | (19,157) | |
| Net premium (discount) | (3,903) | | | (3,844) | |
| Total | $ | 3,028,122 | | | $ | 3,026,999 | |
Unsecured Credit Agreement
Unsecured Revolving Credit Facility due 2025
On October 6, 2021, we entered into a third amended and restated revolving credit and term loan agreement (the “Credit Agreement”), which includes an unsecured revolving credit facility in an aggregate maximum principal amount of $1.0 billion (the “Revolver”) and a term loan facility in an aggregate maximum principal amount of $300.0 million (the “Term Loan”). The Credit Agreement extended the maturities of the unsecured revolving credit facility and the unsecured term loan to October 31, 2025. The maximum principal amount of the Unsecured Credit Agreement may be increased by up to $750.0 million, subject to certain conditions, for a total principal amount of $2.05 billion. Borrowings under the Revolver bears interest at a per annum rate equal to LIBOR plus a margin ranging from 0.725% to 1.40% based on our credit rating. We are also required to pay a facility fee on the aggregate commitments under the Revolver at a per annum rate ranging from 0.125% to 0.30% based on our credit rating. We incurred financing costs of $6.2 million in relation to the credit facility, which are being amortized through the maturity date. As of December 31, 2021, we had 0 outstanding balance under this unsecured revolving credit facility. The margin associated with our borrowings was 0.85% per annum and the facility fee was 0.20% per annum.
Accrued interest under the Credit Agreement is payable quarterly and at maturity. The Credit Agreement includes customary LIBOR replacement terms and contains a sustainability-linked feature, which allows for a reduction in pricing upon our realization of certain sustainability ratings. The other terms of the Credit Agreement prior to the amendment thereof remain substantially unchanged.
$300.0 Million Unsecured Term Loan due 2025
Under the Unsecured Credit Agreement as noted above, we have a $300.0 million unsecured term loan, guaranteed by HTA, with a maturity date of October 31, 2025. Borrowings under this unsecured term loan bear interest at a per annum rate equal to LIBOR, plus a margin ranging from 0.80% to 1.60% per annum based on our credit rating. The margin associated with our borrowings as of December 31, 2021 was 0.95% per annum. We incurred financing costs of $1.8 million in relation to the unsecured term loan, which are being amortized through the maturity date. We have interest rate swaps hedging the floating interest rate, which resulted in a fixed rate of 2.37% per annum, based on our current credit rating. The current hedging arrangement matures on February 1, 2023. As of December 31, 2021, we had $300.0 million under this unsecured term loan outstanding.
$200.0 Million Unsecured Term Loan due 2024
In 2018, HTALP entered into a modification of our $200.0 million unsecured term loan previously due in 2023. The modification decreased pricing at our current credit rating by 65 basis points and extended the maturity date to January 15, 2024. The other material terms of the unsecured term loan prior to the modification remained substantially unchanged. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 0.75% to 1.65% per annum based on our credit rating. The margin associated with our borrowings as of December 31, 2021 was 1.00% per annum. HTALP had interest rate swaps on the balance, which resulted in a fixed interest rate at 2.32% per annum. As of December 31, 2021, HTALP had $200.0 million under this unsecured term loan outstanding.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
$600.0 Million Unsecured Senior Notes due 2026
In September 2019, in connection with the $650.0 million unsecured senior notes due 2030 referenced below, HTALP issued $250.0 million as additional unsecured senior notes to the $350.0 million aggregate principal of senior notes issued on July 12, 2016, all of which are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, bear interest at 3.50% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 103.66% and 99.72%, respectively, of the principal amount thereof, with an effective yield to maturity of 2.89% and 3.53%, respectively, per annum. As of December 31, 2021, HTALP had $600.0 million of these unsecured senior notes outstanding that mature on August 1, 2026.
$500.0 Million Unsecured Senior Notes due 2027
In 2017, HTALP issued $500.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, bear interest at 3.75% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.49% of the principal amount thereof, with an effective yield to maturity of 3.81% per annum. As of December 31, 2021, HTALP had $500.0 million of these unsecured senior notes outstanding that mature on July 1, 2027.
$650.0 Million Unsecured Senior Notes due 2030
In September 2019, in connection with the $250.0 million additional unsecured senior notes due 2026 referenced above, HTALP issued $650.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, bear interest at 3.10% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.66% of the principal amount thereof, with an effective yield to maturity of 3.14% per annum. As of December 31, 2021, HTALP had $650.0 million of these unsecured senior notes outstanding that mature on February 15, 2030. Proceeds from the issuance of $900.0 million of these notes were used, in part, to redeem a total of $700.0 million of unsecured senior notes. During the year ended December 31, 2019, the make-whole fees required per the terms of the indenture agreements upon our calling the notes totaling $18.3 million was recorded in loss on extinguishment of debt in the accompanying consolidated statements of operations.
$800.0 Million Unsecured Senior Notes due 2031
In September 2020, HTALP issued $800.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, bear interest at 2.00% per annum and are payable semi-annually. Additionally, these unsecured notes were offered at 99.20% of the principal amount thereof, with an effective yield to maturity of 2.09% per annum. We incurred financing costs of $6.8 million in relation to this transaction, which are being amortized through the maturity date. As of December 31, 2021, HTALP had $800.0 million of these unsecured senior notes outstanding that mature on March 15, 2031. Proceeds from the issuance of these unsecured notes were used, in part, to redeem $300.0 million of unsecured senior notes. During the year ended December 31, 2020, the make-whole fee that was required per the terms of the indenture agreement upon our calling the notes of $24.7 million was recorded in loss on extinguishment of debt in the accompanying consolidated statements of operations.
Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of December 31, 2021 (in thousands): | | | | | | | | |
| Year | | Amount |
| 2022 | | $ | — | |
| 2023 | | — | |
| 2024 | | 200,000 | |
| 2025 | | 300,000 | |
| 2026 | | 600,000 | |
| Thereafter | | 1,950,000 | |
| Total | | $ | 3,050,000 | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Deferred Financing Costs
As of December 31, 2021, the expected future amortization of our deferred financing costs is as follows (in thousands): | | | | | | | | |
| Year | | Amount |
| 2022 | | $ | 3,106 | |
| 2023 | | 3,106 | |
| 2024 | | 2,724 | |
| 2025 | | 2,603 | |
| 2026 | | 1,839 | |
| Thereafter | | 4,597 | |
| Total | | $ | 17,975 | |
Debt Covenants
We are required by the terms of our applicable loan agreements to meet various affirmative and negative covenants that we believe are customary for these types of facilities, such as limitations on the incurrence of debt by us and our subsidiaries that own unencumbered assets, limitations on the nature of HTALP’s business, and limitations on distributions by HTALP and its subsidiaries that own unencumbered assets. Our loan agreements also impose various financial covenants on us, such as a maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a minimum tangible net worth covenant, a maximum ratio of unsecured indebtedness to unencumbered asset value, rent coverage ratios and a minimum ratio of unencumbered NOI to unsecured interest expense. As of December 31, 2021, we believe that we were in compliance with all such financial covenants and reporting requirements. In addition, certain of our loan agreements include events of default provisions that we believe are customary for these types of facilities, including restricting us from making dividend distributions to our stockholders in the event we are in default thereunder, except to the extent necessary for us to maintain our REIT status.
9.11. Derivative Financial Instruments and Hedging Activities
Risk Management Objective of Using Derivative Financial InstrumentsDerivatives
We may use derivative financial instruments,The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, swaps, caps, options, floorsliquidity, and other interest rate derivative contracts, to hedge all or a portioncredit risk, primarily by managing the amount, sources, and duration of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operatingits assets and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. Theliabilities and the use of derivative financial instruments carries certain risks, includinginstruments. Specifically, the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enterCompany enters into derivative financial instruments with counterparties with high credit ratingsto manage exposures that arise from business activities that result in the receipt or payment of future known and with majoruncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial institutions with which weinstruments are used to manage differences in the amount, timing, and our affiliates may also have other financial relationships. We do not anticipate that anyduration of the counterparties will failCompany’s known or expected cash receipts and its known or expected cash payments principally related to meet their obligations. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, our fair value of interest rate swap derivative liabilities is adjusted to reflect the impact of our credit quality.Company’s borrowings.
Cash Flow Hedges of Interest Rate Risk
OurThe Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage ourits exposure to interest rate movements. To accomplish this objective, wethe Company primarily useuses interest rate swaps and treasury locks as part of ourits interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for usthe Company making fixed ratefixed-rate payments over the life of the agreements without exchange of the underlying notional amount. A treasury lockDuring 2023, 2022, and 2021, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is a synthetic forward sale of a U.S. treasury note,recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period(s) during which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance.
hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable ratethe Company’s variable-rate debt. During the next twelve months, we estimate that an additional $4.9 million will be reclassified from other comprehensive income (loss) in the accompanying consolidated balance sheets as an increase to interest related to derivative financial instruments in the accompanying consolidated statements of operations.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
On February 16, 2023, the Company entered into a swap transaction with a notional amount of $50.0 million and a fixed rate of 4.16%. The swap agreement has an effective date of March 1, 2023 and a termination date of June 1, 2026.
On March 28, 2023, the Company entered into a swap transaction with a notional amount of $100.0 million and a fixed rate of 3.67%. The swap agreement has an effective date of April 3, 2023 and a termination date of June 1, 2026.
On October 19, 2023, the Company entered into two swap transactions totaling $100.0 million. The notional amounts were $50.0 million each with fixed rates of 4.71% and 4.67%. The swap agreements have effective dates of November 1, 2023 and termination dates of June 1, 2027 and December 1, 2027, respectively.
On October 23, 2023, the Company entered into two swap transactions totaling $100.0 million with an aggregate fixed rate of 4.73%. The swap agreements have effective dates of November 1, 2023 and termination dates of May 31, 2026.
On November 9, 2023, the Company entered into a swap transaction totaling $75.0 million with a fixed rate of 4.54%. The swap agreement has an effective date of December 1, 2023 and a termination date of May 31, 2026.
As of December 31,
2021, we2023, the Company had
the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate
risk (in thousands, except numberrisk. The table below presents the notional value and weighted average rates of
instruments): | | | | | | | | |
Cash Flow Hedges | | December 31, 2021 |
Number of instruments | | 7 | |
Notional amount | | $ | 500,000 | |
the Company's derivative financial instruments as of December 31, 2023 and 2022: | | | | | | | | | | | | | | | | | |
| NOTIONAL VALUE AS OF | WEIGHTED AVERAGE RATE | | NOTIONAL VALUE AS OF | WEIGHTED AVERAGE RATE |
| EXPIRATION | DECEMBER 31, 2023 | EXPIRATION | DECEMBER 31, 2022 |
| January 2024 | $ | 200,000 | | 1.21 | % | January 2023 | $ | 300,000 | | 1.42 | % |
| May 2026 | 275,000 | | 3.74 | % | January 2024 | 200,000 | | 1.21 | % |
| June 2026 | 150,000 | | 3.83 | % | May 2026 | 100,000 | | 2.15 | % |
| December 2026 | 150,000 | | 3.84 | % | December 2026 | 150,000 | | 3.84 | % |
| June 2027 | 200,000 | | 4.27 | % | June 2027 | 150,000 | | 4.13 | % |
| December 2027 | 300,000 | | 3.93 | % | December 2027 | 250,000 | | 3.79 | % |
| $ | 1,275,000 | | 3.49 | % | | $ | 1,150,000 | | 2.63 | % |
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of ourthe Company's derivative financial instruments designated as a hedge as well as ourtheir classification inon the accompanying consolidated balance sheetsConsolidated Balance Sheets as of December 31, 20212023 and 2020, respectively (in thousands). We had no2022.
| | | | | | | | | | | | | | |
| AS OF DECEMBER 31, 2023 | AS OF DECEMBER 31, 2022 |
| Dollars in thousands | BALANCE SHEET LOCATION | FAIR
VALUE | BALANCE SHEET LOCATION | FAIR
VALUE |
| | | | |
| | | | |
| | | | |
| Interest rate swaps 2019 | Other Assets | $ | 4,214 | | Other Assets | $ | 13,603 | |
| Interest rate swaps 2022 | | | Other Assets | 909 | |
| Interest rate swaps 2022 | Other Liabilities | (5,067) | | Other Liabilities | (4,269) | |
| Interest rate swaps 2023 | Other Assets | 411 | | | |
| Interest rate swaps 2023 | Other Liabilities | (7,357) | | | |
| Total derivatives designated as hedging instruments | | $ | (7,799) | | | $ | 10,243 | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
Tabular Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive
Income (Loss)
The table below presents the effect of cash flow hedge accounting on Accumulated other comprehensive income (loss) as of December 31, 2023 and 2022 related to the Company's outstanding interest rate swaps.
| | | | | | | | | | | | | | | | | |
| AMOUNT OF GAIN/(LOSS) RECOGNIZED
IN AOCI ON DERIVATIVE
for the year ended December 31, | | AMOUNT OF (GAIN)/LOSS RECLASSIFIED
FROM AOCI INTO INCOME
for the year ended December 31, |
| Dollars in thousands | 2023 | 2022 | 2023 | 2022 |
| Interest rate swaps 2017 | $ | — | | $ | 302 | | Interest expense | $ | — | | $ | 118 | |
| Interest rate swaps 2018 | — | | 616 | | Interest expense | — | | 361 | |
| Interest rate swaps 2019 | 1,995 | | 12,964 | | Interest expense | (6,964) | | 563 | |
| Interest rate swaps 2022 | 4,583 | | (3,252) | | Interest expense | (6,289) | | (109) | |
| Interest rate swaps 2023 | (5,115) | | — | | Interest expense | (1,829) | | — | |
| Settled treasury hedges | — | | — | | Interest expense | 426 | | 426 | |
| Settled interest rate swaps | — | | — | | Interest expense | 168 | | 168 | |
| $ | 1,463 | | $ | 10,630 | | Total interest expense | $ | (14,488) | | $ | 1,527 | |
The Company estimates that an additional $7.3 million will be reclassified from accumulated other comprehensive loss as a net decrease to interest expense over the next 12 months.
Tabular Disclosure Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of December 31, 2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Asset Derivatives | | Liability Derivatives |
| | | | | Fair Value at: | | | | Fair Value at: |
| Derivatives Designated as Hedging Instruments: | | Balance Sheet
Location | | December 31, 2021 | | December 31, 2020 | | Balance Sheet
Location | | December 31, 2021 | | December 31, 2020 |
| Interest rate swaps | | Receivables and other assets | | $ | — | | | $ | — | | | Derivative financial instruments | | $ | 5,069 | | | $ | 14,957 | |
2023. The table below presentsnet amounts of derivative liabilities can be reconciled to the gain or loss recognized on our derivative financial instruments designated as hedges as well as our classification in the accompanying consolidated statementstabular disclosure of operations for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, |
| Effect of Derivative Instruments | | Operations and Comprehensive (Loss) Income | | 2021 | | 2020 | | 2019 |
| (Loss) gain recognized in OCI | | Change in unrealized losses on cash flow hedges | | $ | 3,393 | | | $ | (25,773) | | | $ | 5,910 | |
| (Loss) gain reclassified from accumulated OCI into income | | Interest expense | | (6,721) | | | (3,897) | | | 1,594 | |
Non-Designated Hedges
Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirementsfair value. The tabular disclosure of ASC 815 - Derivatives and Hedging. Changes in the fair value of derivatives not designated in hedging relationshipsprovides the location that derivative liabilities are recorded directly in earnings. Changes inpresented on the fair value of derivatives not designated in hedging relationships are recorded directly to gain or loss on change in fair value of derivative financial instruments in the accompanying consolidated statements of operations. There were no non-designated hedges as of December 31, 2021, 2020 and 2019, respectively.Company's Consolidated Balance Sheets.
Credit Risk Related | | | | | | | | | | | | | | | | | | | | |
| Offsetting of Derivative Assets |
| GROSS AMOUNTS
of recognized assets | GROSS AMOUNTS OFFSET
in the Consolidated
Balance Sheets | NET AMOUNTS OF ASSETS
presented in the Consolidated Balance Sheets | GROSS AMOUNTS NOT OFFSET
in the Consolidated Balance Sheets |
| FINANCIAL INSTRUMENTS | CASH
COLLATERAL | NET
AMOUNT |
| Derivatives | $ | 4,625 | | $ | — | | $ | 4,625 | | $ | (4,625) | | $ | — | | $ | — | |
| | | | | | | | | | | | | | | | | | | | |
| Offsetting of Derivative Liabilities |
| GROSS AMOUNTS
of recognized liabilities | GROSS AMOUNTS OFFSET
in the Consolidated
Balance Sheets | NET AMOUNTS OF LIABILITIES
presented in the Consolidated Balance Sheets | GROSS AMOUNTS NOT OFFSET
in the Consolidated Balance Sheets |
| FINANCIAL INSTRUMENTS | CASH
COLLATERAL | NET
AMOUNT |
| Derivatives | $ | (12,424) | | $ | — | | $ | (12,424) | | $ | 4,625 | | $ | — | | $ | (7,799) | |
Credit-risk-related Contingent Features
We haveThe Company has agreements with each of ourits derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness. The Company has agreements with each of its derivative counterparties that contain a provision where if wethe Company either defaults or is capable of being declared in default on any of ourits indebtedness, including a default where repayment ofthen the indebtedness has not been accelerated by the lender, then weCompany could also be declared in default on ourits derivative obligations.
We also have agreements with each of our derivative counterparties that incorporate provisions from our indebtedness with a lender affiliate of the derivative counterparty requiring it to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by these agreements.
As of December 31, 2021,2023, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $5.2$11.0 million. As of December 31, 2021, we have2023, the Company has not posted any collateral related to these agreements and we werewas not in breach of any agreement provisions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
12. Stockholders’ Equity
Common Stock
The Company had no preferred shares outstanding and had common shares outstanding for the three years ended December 31, 2023, 2022, and 2021 as follows:
| | | | | | | | | | | |
| | YEAR ENDED DECEMBER 31, |
| 2023 | | 2022 | | 2021 | |
| Balance, beginning of year | 380,589,894 | | 150,457,433 | | 139,487,375 | |
| Issuance of common stock | 8,627 | | 229,618,304 | | 10,899,301 | |
| Conversion of OP units to common stock | 190,544 | | — | | — | |
| Non-vested share-based awards, net of withheld shares and forfeitures | 175,368 | | 514,157 | | 70,757 | |
| Balance, end of year | 380,964,433 | | 380,589,894 | | 150,457,433 | |
At-The-Market Equity Offering Program
The Company has in place an ATM equity offering program to sell shares of the provisions of these agreements. If we had breached any of the provisions of these agreements, we could have been required to settle our obligations under these agreements.
10. Commitments and Contingencies
Litigation
We engage in litigationCompany’s common stock from time to time with various parties as a routine part of our business, including tenant defaults and threatened or asserted labor matters. However, we are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material effect on our consolidated financial position, results of operations or cash flows.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Environmental Matters
We follow the policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability at our properties that we believe would require additional disclosure or the recording of a loss contingency.
Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In our opinion, these matters are not expected to have a material effect on our consolidated financial position, results of operations or cash flows.
11. Stockholders’ Equity and Partners’ Capital
HTALP’s operating partnership agreement provides that it will distribute cash flow from operations and net sale proceeds to its partners in accordance with their overall ownership interests at such times and in such amounts as the general partner determines. Dividend distributions are made such that a holder of 1 OP Unit in HTALP will receive distributions from HTALP in an amount equal to the dividend distributions paid to the holder of 1 share of our common stock. In addition, for each share of common stock issued or redeemed by us, HTALP issues or redeems a corresponding number of OP Units.
Common Stock Offerings
In March 2021, we entered intoat-the-market sales transactions. The Company has equity distribution agreements with various sales agents with respect to our at-the-market ("ATM")the ATM offering program of common stock with an aggregate sales amount of up to $750.0 million, which replaced our prior ATM offering program that expired in February 2021.million. As of December 31, 2021,2023, $750.0 million remained available for issuance by us under ourthe current ATM.ATM offering program.
Dividends Declared
During 2023, the year ended DecemberCompany declared and paid common stock dividends aggregating $1.24 per share ($0.31 per share per quarter).
On February 13, 2024, the Company declared a quarterly common stock dividend in the amount of $0.31 per share payable on March 14, 2024, to stockholders of record on February 26, 2024.
Authorization to Repurchase Common Stock
On May 31, 2021, we issued approximately 9.42023, the Company’s Board of Directors authorized the repurchase of up to $500.0 million of outstanding shares of ourthe Company’s common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints, and other customary conditions. The Company is not obligated under this authorization to repurchase any specific number of shares. This authorization supersedes all previous stock repurchase authorizations. As of the date of these Consolidated Financial Statements, the Company has not repurchased any shares of its common stock under our ATM for net proceeds of approximately $251.3 million, adjusted for costs to borrow equating to a net price to us of $26.68 per share of common stock. Refer to Note 13 - Per Share Data of HTA to these consolidated financial statements for a more detailed discussion related to our forward equity agreements.this authorization.
Stock Repurchase PlanAccumulated Other Comprehensive (Loss) Income
In September 2020, our Board of Directors approved a stock repurchase plan authorizing us to purchase up to $300.0 million of our common stock from time to time prior toThe following table represents the expiration thereof on September 22, 2023. As of December 31, 2021, the remaining amount of common stock available for repurchase under the stock repurchase plan was $300.0 million.
Common Stock Dividends
See our accompanying consolidated statements of equity and changes in partners’ capital for the dividends declaredaccumulated other comprehensive income (loss) during the years ended December 31, 2021, 20202023 and 2019. As of2022:
| | | | | | | | |
| INTEREST RATE SWAPS
as of December 31, |
| Dollars in thousands | 2023 | 2022 |
| Beginning balance | $ | 2,140 | | $ | (9,981) | |
| Other comprehensive income (loss) before reclassifications | 1,434 | | 1,531 | |
| Amounts reclassified from accumulated other comprehensive (loss) income | (14,315) | | 10,590 | |
| Net current-period other comprehensive (loss) income | (12,881) | | 12,121 | |
| Ending balance | $ | (10,741) | | $ | 2,140 | |
The following table represents the details regarding the reclassifications from accumulated other comprehensive income (loss) during the year ended December 31, 20212023 (dollars in thousands):
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
| | | | | | | | |
DETAILS ABOUT ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS) COMPONENTS | AMOUNT RECLASSIFIED
from accumulated other comprehensive income (loss) | AFFECTED LINE ITEM
in the statement where net
income is presented |
| Amounts reclassified from accumulated other comprehensive income (loss) related to settled interest rate swaps | $ | 594 | | Interest Expense |
| Amounts reclassified from accumulated other comprehensive income (loss) related to current interest rate swaps | (15,082) | | Interest Expense |
| $ | (14,488) | | |
13. Stock and 2020, declared but unpaid dividends totaling $75.7 million and $71.4 million, respectively, were included in accounts payable and accrued liabilities. On February 28, 2022, our Board of Directors announced a quarterly cash dividend of $0.325 per share of common stock and per OP Unit to be paid on April 11, 2022 to stockholders and unitholders of record on April 4, 2022.Other Incentive Plans
Stock Incentive Plan
OurThe Company's Incentive Plan permits the grant of incentive awards to ourits employees officers, non-employeeand directors and consultants as selected by our Board of Directors. This Plan authorizes us to grant awards in any of the following forms: options;options, stock appreciation rights;rights, restricted stock;stock, restricted or deferred stock units;units, performance awards;awards, dividend equivalents;equivalents, or other stock-based awards, including units in HTALP; and cash-based awards. Subjectthe OP. The Incentive Plan replaced the Legacy HR Incentive Plan as of the merger date. Unvested awards under the Legacy HR Incentive Plan were assumed according to adjustment as providedtheir existing terms by the Company in connection with the Plan,Merger. As of the aggregate number ofMerger date, 9,647,839 share-based awards reserved andwere available for issuancegrant under the Plan is 10,000,000 shares.Incentive Plan. As of December 31, 2021, there were 9,804,3332023 and 2022, the Company had share-based awards available for grant under the Plan.
Restricted Common Stock
The weighted average fair valueIncentive Plan of restricted common stock granted8,102,861 and 9,432,388 shares, respectively. Non-vested shares issued to employees under the Incentive Plan are generally subject to fixed vesting periods varying from three to eight years beginning on the date of issue. If a recipient voluntarily terminates his or her relationship with the Company or is terminated for cause before the end of the vesting period, the shares are forfeited, at no cost to the Company. Once the shares have been issued, the recipient has the right to receive dividends and the right to vote the shares through the vesting period. Compensation expense, included in general and administrative expense, recognized during the years ended December 31, 2023, 2022 and 2021 2020from the amortization of the value of shares over the vesting period issued to employees and 2019, were $28.14, $29.83directors was $14.6 million, $13.9 million and $26.08,$10.4 million, respectively. The following table represents expected amortization of the Company's non-vested shares issued as of December 31, 2023:
| | | | | |
| Dollars in millions | FUTURE AMORTIZATION
of non-vested shares |
| 2024 | $ | 12.2 | |
| 2025 | 9.7 | |
| 2026 | 6.9 | |
| 2027 | 2.1 | |
| 2028 and thereafter | 0.5 | |
| Total | $ | 31.4 | |
Executive Incentive Plan
The Compensation Committee has adopted an executive incentive plan pursuant to the Incentive Plan (the "Executive Incentive Plan") to provide specific award criteria with respect to incentive awards made under the Incentive Plan subject to the discretion of the Compensation Committee. Under the terms of the Executive Incentive Plan, the Company's named executive officers and certain other members of senior management may earn incentive awards in the form of cash, non-vested stock, restricted stock units ("RSUs"), and units in the OP ("OP Units"). For 2023, 2022 and 2021, compensation expense, included in general and administrative expense, resulting from the amortization of the Executive Incentive Plan non-vested share, RSU, and OP Unit grants to officers was approximately $9.0 million, $9.8 million, and $6.6 million, respectively. Details of equity awards that have been issued under this plan are as follows:
•On January 4, 2023, the Company granted non-vested stock awards to its named executive officers, senior vice presidents, and first vice presidents with a grant date fair value of restricted common stock$4.1 million, which consisted of an aggregate of 205,264 shares with a ratable five-year vesting period, which will result in an annual compensation expense of $0.8 million for which2024, 2025, 2026 and 2027.
•On January 4, 2023, the restriction lapsed duringCompany granted 165,174 RSUs to certain of its non-executive senior officers. These award are subject to a three-year performance period and if the years ended December 31, 2021, 2020 and 2019 were $8.2 million, $12.6 million and $8.9 million, respectively.performance criteria is met, the awards are then
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
Wesubject to two additional years with ratable vesting of 50% in year four and 50% in year five. The expense will be recognized compensation expense, equalon the straight-line basis over the five-year vesting period.
◦Approximately 43% of the RSU awards are subject to two market performance conditions: relative and absolute total shareholder return ("TSR"). These components were valued using independent specialists utilizing a Monte Carlo simulation to calculate the weighted average grant date fair values of $24.23 for the absolute TSR component and $27.84 for the relative TSR component for the January 2023 grant using the following assumptions:
| | | | | |
| Volatility | 34.0 | % |
| Dividend Assumption | Accrued |
| Expected term in years | 3 years |
| Risk-free rate | 4.42 | % |
| Stock price (per share) | $20.21 |
◦The remaining 57% of the RSU awards are subject to certain operating performance conditions. With respect to the fair market valueoperating performance conditions of HTA’s stock onthese awards, the grant date overfair value was $20.21 based on the service periodCompany's share price on the date of grant. The Company records amortization expense based on the probability of achieving certain operating performance conditions, which is generallyevaluated throughout the performance period.
◦The combined weighted average grant date fair value of the January 2023 RSUs was $22.55 per share.
LTIP Series C Units
In January 2023, the Company modified its incentive compensation structure to award LTIP Series C units ("LTIP-C units) in the OP to named executive officers in lieu of RSUs. The LTIP-C units were granted with three-year forward-looking performance targets, with a grant date fair value of $7.1 million, which consisted of an aggregate 627,547 LTIP-C units with a five-year vesting period. LTIP-C units are granted notionally at the maximum value of the award.
•Approximately 43% of the LTIP-C units vest based on two market performance conditions. Relative and absolute TSR awards containing these market performance conditions were valued using independent specialists. The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair values of $12.24 for the absolute TSR component and $13.98 for the relative TSR component for the January 2023 grant using the following assumption:
| | | | | | | |
| Volatility | | | 34.0 | % |
| Dividend assumption | | | Accrued |
| Expected term | | | 3 years |
| Risk-free rate | | | 4.42 | % |
| Stock price (per share) | | | $20.21 |
•The remaining 57% of the LTIP-C units vest based upon certain operating performance conditions. With respect to the operating performance conditions of the January 4, 2023 grant, the grant date fair value was $20.21 based on the Company's share price on the date of grant. The Company records amortization expense based on the probability of achieving certain operating performance conditions, which is evaluated throughout the performance period.
•The combined weighted average grant date fair value of the January LTIP-C units was $15.85 per share.
For 2023, compensation expense resulting from the amortization of LTIP-C units awarded to officers was approximately $1.2 million.
Officer Incentive Program
In the first quarter of 2023 the Company granted a performance-based award to certain non-executive officers totaling approximately $0.7 million, which was granted in the form of 33,438 non-vested shares. The shares have vesting periods ranging from three to four years. For theeight years ended December 31, 2021, 2020 and 2019, we recognized compensation expense of $7.3 million, $8.9 million and $10.1 million respectively. Substantially all compensation expense was recorded in general and administrative expenses in the accompanying consolidated statements of operations.
As of December 31, 2021, we had $6.9 million of unrecognized compensation expense, net of estimated forfeitures, which we will recognize overwith a remaining weighted average vesting period of 1.6approximately five years.
The following is a summary of our restricted common stock activity as of December 31, 2021 and 2020, respectively: | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Restricted Common Stock | | Weighted
Average Grant
Date Fair Value | | Restricted Common Stock | | Weighted
Average Grant
Date Fair Value |
| Beginning balance | 436,399 | | | $ | 28.27 | | | 600,987 | | | $ | 28.04 | |
| Granted | 552,989 | | | 28.14 | | | 273,503 | | | 29.83 | |
| Vested | (297,555) | | | 27.47 | | | (426,693) | | | 28.93 | |
| Forfeited | (161,971) | | | 27.47 | | | (11,398) | | | 28.88 | |
| Ending balance | 529,862 | | | $ | 28.83 | | | 436,399 | | | $ | 28.27 | |
86
12. Fair Value of Financial Instruments
Financial Instruments Reported at Fair Value - Recurring
The table below presents the carrying amounts and fair values of our financial instruments on a recurring basis as of December 31, 2021 and 2020 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| Level 2 - Assets: | | | | | | | | |
| Real estate notes receivable, net | | $ | 69,114 | | | $ | 68,476 | | | $ | — | | | $ | — | |
| | | | | | | | |
| Level 2 - Liabilities: | | | | | | | | |
| Derivative financial instruments | | $ | 5,069 | | | $ | 5,069 | | | $ | 14,957 | | | $ | 14,957 | |
| Debt | | 3,028,122 | | | 3,117,602 | | | 3,026,999 | | | 3,258,573 | |
The carrying amounts of cash and cash equivalents, tenant and other receivables, restricted cash, accounts payable, and accrued liabilities approximate fair value. There have been no transfers of assets or liabilities between levels. We will record any such transfers at the end of the reporting period in which a change of event occurs that results in a transfer. Although we have determined that the majority of the inputs used to value our cash flow hedges fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our cash flow hedge positions and have determined that the credit valuation adjustments are not significant to their overall valuation. As a result, we have determined that our cash flow hedge valuations in their entirety are classified in Level 2 of the fair value hierarchy.For further discussion of the assumptions considered, refer to Note 2 - Summary of Significant Accounting Policies.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
Financial Instruments Reported at Fair Value - Non-RecurringFor 2023, 2022 and 2021, compensation expense resulting from the amortization of these non-vested share grants awarded to officers was approximately $0.6 million, $0.9 million, and $1.0 million, respectively.
We alsoSalary Deferral Plan
The Company's salary deferral plan allows certain of its officers to elect to defer up to 50% of their base salary in the form of non-vested shares subject to long-term vesting. The number of shares will be increased through a Company match depending on the length of the vesting period selected by the officer. The officer's vesting period choices are: three years for a 30% match; five years for a 50% match; and eight years for a 100% match. During 2023, 2022 and 2021, the Company issued 31,792 shares, 17,381 shares and 21,396 shares, respectively, to its officers through the salary deferral plan. For 2023, 2022 and 2021, compensation expense resulting from the amortization of non-vested share grants to officers was approximately $0.9 million for each year, respectively.
Non-employee Directors Incentive Plan
The Company grants non-vested share-based awards to its non-employee directors under the Incentive Plan. The directors’ awards typically have assets that under certain conditionsa one-year vesting period and are subject to measurementforfeiture prior to such date upon termination of the director’s service, at no cost to the Company. For each of the years 2023, 2022 and 2021, compensation expense resulting from the amortization of non-vested share-based grants to directors was approximately $2.1 million, $1.5 million, and $1.2 million, respectively.
•On June 5, 2023, the Company granted a non-vested stock award to six of its directors, with a grant date fair value onof $0.7 million, which consisted of an aggregate of 42,768 non-vested shares, with a non-recurring basis. This generally includes assets subjectone-year vesting period.
•On June 5, 2023, the Company also granted LTIP-D units in the OP to impairment. We estimatesix of its directors, with a grant fair value relating to impairment assessments based upon discounted cash flowof $1.1 million, which consisted of an aggregate of 57,868 non-vested units, with a one-year vesting period.
The following table represents the summary of non-vested share-based awards (including restricted stock, RSUs, LTIP-C units and direct capitalization modelsLTIP-D units) under the Incentive Plans and related information for the three years ended December 31, 2023:
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| Dollars in thousands, except per share data | 2023 | 2022 | 2021 |
| Share-based awards, beginning of year | 2,090,060 | | 1,562,028 | | 1,766,061 | |
Granted 1 | 1,164,359 | | 952,407 | | 203,701 | |
| Vested | (403,266) | | (418,949) | | (404,777) | |
Change in awards based on performance assessment 2 | (205,668) | | — | | — | |
| Forfeited | (29,923) | | (5,426) | | (2,957) | |
| Share-based awards, end of year | 2,615,562 | | 2,090,060 | | 1,562,028 | |
| | | |
| Weighted-average grant date fair value of | | | |
| Share-based awards, beginning of year | $ | 30.35 | | $ | 31.10 | | $ | 30.51 | |
| Share-based awards granted during the year | $ | 18.70 | | $ | 29.64 | | $ | 30.86 | |
| Share-based awards vested during the year | $ | 28.38 | | $ | 31.52 | | $ | 28.38 | |
| Share-based awards change in performance assessment during the year | $ | 29.05 | | $ | — | | $ | — | |
| Stock-based awards forfeited during the year | $ | 31.16 | | $ | 31.48 | | $ | 33.04 | |
| Share-based awards, end of year | $ | 25.56 | | $ | 30.35 | | $ | 31.10 | |
| | | |
| Grant date fair value of shares granted during the year | $ | 22,171 | | $ | 28,225 | | $ | 6,286 | |
1LTIP-C units are issued at the maximum possible value of the award and are reflected as such in this table until the performance period has been satisfied and the exact number of awards are determinable.
2The Company's RSUs that include all projected cash inflows and outflows over a specific holding period, or the contractual sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based on market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable rangeoperating performance metrics are evaluated on the probability of current market rates for each property analyzed. Based on these inputs, wethose performance metrics being achieved. During 2023, the Company determined that our valuationthe operating performance goals related to the RSUs issued in 2022 are not probable of properties using a discounted cash flow or a direct capitalization model were classified within Level 3being achieved and reversed all of the fair value hierarchy. For assetsoutstanding amortization expense for whichthat grant. In addition, the estimated fair value was based on contractual sales prices, we determined that our valuation was classified within Level 2Company lowered the probability of achieving the fair value hierarchy. As of December 31, 2021,operating performance goals related to the estimated fair valueRSUs issued in 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
The vesting periods for 1 real estate investment within Level 2 of the fair value hierarchy was based on the purchase price set forth in an executed purchase option, less estimated closing costs. The estimated fair value for 2 real estate investments within Level 3 of the fair value hierarchy was based on income capitalization models utilizingnon-vested shares granted during 2023 ranged from one to eight years with a capitalization rate of 7.00%.
The table below presents our assets measured at fair value on a non-recurring basisweighted-average amortization period remaining as of December 31, 2021 and 2020 (in thousands):
| | | | | | | | | | | | | | |
| | December 31, 20212023 of approximately 4.8 years. | | December 31, 2020 |
| | Fair Value | | Fair Value |
Level 2 - Assets: | | | | |
Real estate investment | | $ | 26,768 | | | $ | — | |
Level 3 - Assets: | | | | |
Real estate investments | | $ | 4,970 | | | $ | — | |
401(k) Plan
13. Per Share Data of HTA
DuringThe Company maintains a 401(k) plan that allows eligible employees to defer salary, subject to certain limitations imposed by the Internal Revenue Code. The Company provides a matching contribution up to $2,800 per employee, subject to certain limitations. The Company’s matching contributions were approximately $1.5 million for the year ended December 31, 2023, $1.2 million for 2022 and $0.7 million for 2021.
Employee Stock Purchase Plan
The outstanding options relate only to the Legacy HR Employee Stock Purchase Plan, which was terminated in November 2022. No new options will be issued under the Legacy HR Employee Stock Purchase Plan and existing options will expire in March 2024.
During the years ended December 31, 2022 and 2021, we issuedthe Company recognized in general and administrative expenses approximately 9.4$0.4 million, and $0.4 million, respectively, of compensation expense related to the annual grant of options to its employees to purchase shares of our common stock under our ATM for net proceeds ofthe Legacy HR Employee Stock Purchase Plan.
Cash received from employees upon exercising options under the Legacy HR Employee Stock Purchase Plan was approximately $251.3$0.2 million adjusted for costs to borrow equating to a net price to us of $26.68 per share of common stock.
To account for the forward equity agreement, we consideredyear ended December 31, 2023, $0.4 million for the accounting guidance governing financial instrumentsyear ended December 31, 2022, and derivatives and concluded that our forward equity agreement was not a liability as it did not embody obligations to repurchase our shares of common stock nor did it embody obligations to issue a variable number of shares$0.8 million for which the monetary value was predominately fixed, varying with something other than the fair valueyear ended December 31, 2021.
A summary of the shares, or varying inverselyLegacy HR Employee Stock Purchase Plan activity and related information for the three years ended December 31, 2023 is as follows:
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| Dollars in thousands, except per share data | 2023 | 2022 | 2021 |
| Options outstanding, beginning of year | 340,976 | | 348,514 | | 341,647 | |
| Granted | — | | 255,960 | | 253,200 | |
| Exercised | (8,627) | | (20,246) | | (30,281) | |
| Forfeited | (43,737) | | (102,619) | | (71,630) | |
| Expired | (132,999) | | (140,633) | | (144,422) | |
| Options outstanding and exercisable, end of year | 155,613 | | 340,976 | | 348,514 | |
| | | |
| Weighted-average exercise price of | | | |
| Options outstanding, beginning of year | $ | 16.38 | | $ | 25.38 | | $ | 24.70 | |
| Options granted during the year | $ | — | | $ | 26.89 | | $ | 25.16 | |
| Options exercised during the year | $ | 15.07 | | $ | 20.97 | | $ | 25.03 | |
| Options forfeited during the year | $ | 15.50 | | $ | 21.88 | | $ | 25.45 | |
| Options expired during the year | $ | 16.43 | | $ | 23.36 | | $ | 24.17 | |
| Options outstanding, end of year | $ | 12.98 | | $ | 16.38 | | $ | 25.38 | |
| | | |
| Weighted-average fair value of options granted during the year (calculated as of the grant date) | $ | — | | $ | 9.91 | | $ | 9.05 | |
| Intrinsic value of options exercised during the year | $ | 23 | | $ | 75 | | $ | 165 | |
Intrinsic value of options outstanding and exercisable (calculated as of December 31) | $ | 401 | | $ | 985 | | $ | 1,997 | |
Exercise prices of options outstanding (calculated as of December 31) | $ | 14.65 | | $ | 16.38 | | $ | 25.91 | |
| Weighted-average contractual life of outstanding options (calculated as of December 31, in years) | 0.3 | 0.8 | 0.8 |
The fair values for these options were estimated at the date of grant using a Black-Scholes options pricing model with the weighted-average assumptions for the options granted during the period noted in relation to our shares. We also evaluated whether the agreement met the derivatives and hedging guidance scope exception to be accounted for as an equity instrument and concluded that the agreement can be classified as an equity contractfollowing table. The risk-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont.
free interest rate was based on the following assessment: (i)U.S. Treasury constant maturity-nominal two-year rate whose maturity is nearest to the agreement did notdate of the expiration of the latest option outstanding and exercisable; the expected dividend yield was based on the expected dividends of the current year as a percentage of the average stock price of the prior year; the expected life of each option was estimated using the historical exercise contingenciesbehavior of employees; expected volatility was based on historical volatility of the Company’s common stock; and expected forfeitures were based on observable markets or indices besides those related tohistorical forfeiture rates within the market for our own stock price and operations; and (ii) nonelook-back period.
| | | | | | | | | | | |
| 2023 | 2022 | 2021 |
| Risk-free interest rates | — | % | 0.73 | % | 0.13 | % |
| Expected dividend yields | — | % | 3.97 | % | 4.11 | % |
| Expected life (in years) | 0 | 1.44 | 1.43 |
| Expected volatility | — | % | 49.0 | % | 48.2 | % |
| Expected forfeiture rates | — | % | 85 | % | 85 | % |
14. Earnings Per Share
The Company uses the two-class method of the settlement provisions precluded the agreement from being indexed to our own common stock.
In addition, we considered the potential dilution resulting from the forward equity agreement(s) on ourcomputing net earnings per common share calculations. Weshares. The Company's non-vested share-based awards are considered participating securities pursuant to the two-class method.
The Company used the treasury method to determine the dilution resulting from the forward equity agreement(s)agreements during the period of time prior to settlement. The number of weighted-average shares outstanding used in the computation of earnings per common share for the year ended December 31, 2021 included the effect from the assumed issuance of 9.40.7 million shares issued during 2019 and 2020, respectively,of common stock pursuant to the settlement(s)settlement of the forward equity agreement(s)agreements at the contractual price(s),price, less the assumed repurchase of ourthe common stock at the average market price using the proceeds of approximately $251.3$23.1 million, adjusted for costs to borrow. For the year ended December 31, 2021, the impact to our weighted-average shares-diluted was approximately 916,000 weighted-average incremental shares. For the year ended December 31, 2020, 819,0001,682 weighted-average incremental shares of our common stock were excluded from the computation of our weighted-average common shares outstanding - diluted, as the impact was anti-dilutive.
We include unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” pursuant to As of and for the two-class method. The resulting classes are our common stock and restricted stock. Our forward equity agreement is not considered a participating security and, therefore, is not included in the computation of earnings per share using the two-class method. For the yearsyear ended December 31, 2021, 20202022, these forward equity agreements settled and 2019, all of our earnings were distributed andconsequently, the calculated earnings per share amount would be the same for all classes.Company did not have any remaining shares subject to unsettled forward sale agreements.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
The following istable below sets forth the reconciliationcomputation of the numerator and denominator used in basic and diluted earnings per common share of HTA for the three years ended December 31, 2021, 20202023.
| | | | | | | | | | | |
| | YEAR ENDED DECEMBER 31, |
| Dollars in thousands, except per share data | 2023 | 2022 | 2021 |
| Weighted average common shares outstanding | | | |
| Weighted average common shares outstanding | 380,850,967 | | 254,296,810 | | 144,411,835 | |
| Non-vested shares | (1,923,096) | | (1,940,607) | | (1,774,669) | |
| Weighted average common shares outstanding - basic | 378,927,871 | | 252,356,203 | | 142,637,166 | |
| | | |
| Weighted average common shares outstanding - basic | 378,927,871 | | 252,356,203 | | 142,637,166 | |
| Dilutive effect of forward equity shares | — | | — | | — | |
| Dilutive effect of OP Units | — | | 1,451,599 | | — | |
| Dilutive effect of employee stock purchase plan | — | | 65,519 | | 73,062 | |
| Weighted average common shares outstanding - diluted | 378,927,871 | | 253,873,321 | | 142,710,228 | |
| | | |
| | | |
| Net (loss) income | $ | (282,083) | | $ | 40,693 | | $ | 66,659 | |
| Net loss attributable to non-controlling interest | 3,822 | | 204 | | — | |
| Net (loss) income attributable to common stockholders | $ | (278,261) | | $ | 40,897 | | $ | 66,659 | |
| Income allocated to participating securities | (2,504) | | (2,437) | | (2,154) | |
| Adjustment to loss attributable to non-controlling interest for legally outstanding restricted units | (851) | | — | | — | |
| Net (loss) income applicable to common stockholders - basic | $ | (281,616) | | $ | 38,460 | | $ | 64,505 | |
| Net income attributable to OP Units | — | | 81 | | — | |
| Net income applicable to common stockholders - diluted | $ | (281,616) | | $ | 38,541 | | $ | 64,505 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Basic earnings per common share - net income | $ | (0.74) | | $ | 0.15 | | $ | 0.45 | |
| | | |
| | | |
| Diluted earnings per common share - net income | $ | (0.74) | | $ | 0.15 | | $ | 0.45 | |
| | | |
The effect of OP units convertible into shares totaling 4,023,679 shares and
2019, respectively (in thousands, exceptoptions to purchase 31,997 shares under the Company's Employee Stock Purchase Plan for the year ended December 31, 2023 were excluded from the calculation of diluted loss per
common share
data): | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Numerator: | | | | | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| Net income attributable to non-controlling interests | (1,768) | | | (890) | | | (604) | |
| Net income attributable to common stockholders | $ | 98,016 | | | $ | 52,618 | | | $ | 30,154 | |
| Denominator: | | | | | |
| Weighted average shares outstanding - basic | 219,439 | | | 218,078 | | | 205,720 | |
| Dilutive shares - OP Units convertible into common stock | 3,860 | | | 3,588 | | | 3,885 | |
| Dilutive effect of forward equity sales agreement | 916 | | | — | | | — | |
| Adjusted weighted average shares outstanding - diluted | 224,215 | | | 221,666 | | | 209,605 | |
| Earnings per common share - basic | | | | | |
| Net income attributable to common stockholders | $ | 0.45 | | | $ | 0.24 | | | $ | 0.15 | |
| Earnings per common share - diluted | | | | | |
| Net income attributable to common stockholders | $ | 0.44 | | | $ | 0.24 | | | $ | 0.14 | |
15. Commitments and Contingencies
14. Per Unit Data of HTALPRe/development Activity
During the year ended December 31, 2021, we issued approximately 9.42023, the Company invested $69.1 million sharesand $20.5 million toward active development and redevelopment of our common stock under our ATMproperties, respectively, and $22.6 million toward recently completed development and redevelopment projects.
Tenant Improvements
The Company may provide a tenant improvement allowance in new or renewal leases for net proceedsthe purpose of refurbishing or renovating tenant space. As of December 31, 2023, the Company had commitments of approximately $251.3$222.4 million adjustedthat are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction.
Land Held for costsDevelopment
Land held for development includes parcels of land owned by the Company, upon which the Company intends to borrow equating to a net price to usdevelop and own outpatient healthcare facilities. The Company's land held for development included 17 parcels as of $26.68 per share of common stock. Refer to Note 13 - Per Share Data of HTA to our consolidated financial statements for a more detailed discussion related to our forward equity agreements.
The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per unit of HTALP for the years ended December 31, 2021, 20202023 and 2019, respectively (in thousands, except per unit data): | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Numerator: | | | | | |
| Net income | $ | 99,784 | | | $ | 53,508 | | | $ | 30,758 | |
| Net income attributable to non-controlling interests | — | | | — | | | (66) | |
| Net income attributable to common OP unitholders | $ | 99,784 | | | $ | 53,508 | | | $ | 30,692 | |
Denominator: | | | | | |
| Weighted average units outstanding - basic | 223,299 | | | 221,666 | | | 209,605 | |
| Dilutive units - OP Units convertible into common units | — | | | — | | | — | |
| Dilutive effect of forward equity sales agreement | 916 | | | — | | | — | |
| Adjusted weighted average OP units outstanding - diluted | 224,215 | | | 221,666 | | | 209,605 | |
| Earnings per common unit - basic: | | | | | |
| Net income attributable to common OP unitholders | $ | 0.45 | | | $ | 0.24 | | | $ | 0.15 | |
| Earnings per common unit - diluted: | | | | | |
| Net income attributable to common OP unitholders | $ | 0.45 | | | $ | 0.24 | | | $ | 0.15 | |
90
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15. Supplemental Cash Flow Information
The following is the supplemental cash flow information for the years ended December 31, 2021, 2020 and 2019, respectively (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Supplemental Disclosure of Cash Flow Information: | | | | | |
| Interest paid, net of capitalized interest | $ | 80,367 | | | $ | 83,375 | | | $ | 94,668 | |
| | | | | |
| Cash paid for operating leases | 15,108 | | | 12,465 | | | 11,842 | |
| | | | | |
| | | | | |
| Supplemental Disclosure of Noncash Investing and Financing Activities: | | | | | |
| Accrued capital and development expenditures | $ | 12,696 | | | $ | 31,807 | | | $ | 6,381 | |
| | | | | |
| Conversion of notes receivable to investments in real estate | 1,142 | | | — | | | — | |
| Extinguishment of finance ground lease from land acquisition | — | | | 1,710 | | | — | |
| Dividend distributions declared, but not paid | 75,723 | | | 71,423 | | | 69,468 | |
| Issuance of OP Units in HTALP | — | | | — | | | 2,603 | |
| Issuance of OP Units in HTALP in connection with an acquisition | 35,785 | | | — | | | 2,000 | |
| Note receivable retired in connection with an acquisition | — | | | 6,000 | | | — | |
| Redemption of non-controlling interest | 6,354 | | | 9,019 | | | 7,527 | |
| ROU assets obtained in exchange for lease obligations | 8,798 | | | 4,373 | | | 200,879 | |
16. Treatment of Dividends of HTA
The following is the income tax treatment of dividend distributions for the years ended December 31, 2021, 2020 and 2019 (in per share): | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, |
| | | 2021 | | 2020 | | 2019 |
| Ordinary income | | $ | 0.7920 | | | $ | 0.6976 | | | $ | 0.6405 | |
| Return of capital | | 0.4930 | | | 0.5582 | | | 0.6045 | |
| Capital gain | | 0.0000 | | | 0.0092 | | | 0.0000 | |
| Total | | $ | 1.2850 | | | $ | 1.2650 | | | $ | 1.2450 | |
17. Selected Quarterly Financial Data of HTA (Unaudited)
The following is the selected quarterly financial data of HTA for 2021 and 2020. We believe that all necessary adjustments, consisting of only normal recurring adjustments, have been included (in thousands, except per share data). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended (1) |
| 2021 | | March 31 | | June 30 | | September 30 | | December 31 |
| Revenues | | $ | 191,493 | | | $ | 188,615 | | | $ | 191,262 | | | $ | 195,703 | |
| Net income | | 22,393 | | | 38,739 | | | 22,042 | | | 16,610 | |
| Net income attributable to common stockholders | | 22,030 | | | 38,011 | | | 21,672 | | | 16,303 | |
| Earnings per common share - basic: | | | | | | | | |
| Net income attributable to common stockholders | | $ | 0.10 | | | $ | 0.17 | | | $ | 0.10 | | | $ | 0.07 | |
| Earnings per common share - diluted: | | | | | | | | |
| Net income attributable to common stockholders | | $ | 0.10 | | | $ | 0.17 | | | $ | 0.10 | | | $ | 0.07 | |
| | | | | | | | |
| (1) The sum of the individual quarterly amounts may not agree to the annual amounts included in the accompanying consolidated statements of operations due to rounding. |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended (1) |
| 2020 | | March 31 | | June 30 | | September 30 | | December 31 |
| Revenues | | $ | 185,776 | | | $ | 178,845 | | | $ | 187,326 | | | $ | 187,018 | |
| Net income (loss) | | 18,208 | | | 13,725 | | | (6,932) | | | 28,507 | |
| Net income (loss) attributable to common stockholders | | 17,901 | | | 13,489 | | | (6,827) | | | 28,055 | |
| Earnings per common share - basic: | | | | | | | | |
| Net income (loss) attributable to common stockholders | | $ | 0.08 | | | $ | 0.06 | | | $ | (0.03) | | | $ | 0.13 | |
| Earnings per common share - diluted: | | | | | | | | |
| Net income (loss) attributable to common stockholders | | $ | 0.08 | | | $ | 0.06 | | | $ | (0.03) | | | $ | 0.13 | |
| | | | | | | | |
| (1) The sum of the individual quarterly amounts may not agree to the annual amounts included in the accompanying consolidated statements of operations due to rounding. |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
18. Selected Quarterly Financial Data of HTALP (Unaudited)
The following is the selected quarterly financial data of HTALP for 2021 and 2020. We believe that all necessary adjustments, consisting of only normal recurring adjustments, have been included (in thousands, except per unit data). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended (1) |
| 2021 | | March 31 | | June 30 | | September 30 | | December 31 |
| Revenues | | $ | 191,493 | | | $ | 188,615 | | | $ | 191,262 | | | $ | 195,703 | |
| Net income | | 22,393 | | | 38,739 | | | 22,042 | | | 16,610 | |
| Net income attributable to common OP unitholders | | 22,393 | | | 38,739 | | | 22,042 | | | 16,610 | |
| Earnings per common OP unit - basic: | | | | | | | | |
| Net income attributable to common OP unitholders | | $ | 0.10 | | | $ | 0.17 | | | $ | 0.10 | | | $ | 0.07 | |
| Earnings per common OP unit - diluted: | | | | | | | | |
| Net income attributable to common OP unitholders | | $ | 0.10 | | | $ | 0.17 | | | $ | 0.10 | | | $ | 0.07 | |
| | | | | | | | |
| (1) The sum of the individual quarterly amounts may not agree to the annual amounts included in the accompanying consolidated statements of operations due to rounding. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended (1) |
| 2020 | | March 31 | | June 30 | | September 30 | | December 31 |
| Revenues | | $ | 185,776 | | | $ | 178,845 | | | $ | 187,326 | | | $ | 187,018 | |
| Net income (loss) | | 18,208 | | | 13,725 | | | (6,932) | | | 28,507 | |
| Net income (loss) attributable to common OP unitholders | | 18,208 | | | 13,725 | | | (6,932) | | | 28,507 | |
| Earnings per common OP unit - basic: | | | | | | | | |
| Net income (loss) attributable to common OP unitholders | | $ | 0.08 | | | $ | 0.06 | | | $ | (0.03) | | | $ | 0.13 | |
| Earnings per common OP unit - diluted: | | | | | | | | |
| Net income (loss) attributable to common OP unitholders | | $ | 0.08 | | | $ | 0.06 | | | $ | (0.03) | | | $ | 0.13 | |
| | | | | | | | |
| (1) The sum of the individual quarterly amounts may not agree to the annual amounts included in the accompanying consolidated statements of operations due to rounding. |
19. Subsequent Events
Merger with Healthcare Realty Trust Incorporated
On February 28, 2022, Healthcare Trust of America, Inc. (the “Company”), a Maryland corporation, Healthcare Trust of America Holdings, LP, a Delaware limited partnership (the “Company OP”) of whichDecember 31, 2023, the Company isheld approximately $38.5 million in letters of credit and security deposits for the sole general partner, HR Acquisition 2, LLC, a Maryland limited liability company and a direct, wholly owned subsidiarybenefit of the Company (“Merger Sub”), and Healthcare Realty Trust Incorporated, a Maryland corporation (“HR”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). Uponin the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon these instruments if there are any defaults under the leases.
16. Other Data
Taxable Income (unaudited)
The Company has elected to be taxed as a REIT, as defined under the Internal Revenue Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its taxable income to its stockholders.
As a REIT, the Company generally will not be subject to the conditions set forthfederal income tax on taxable income it distributes currently to its stockholders. Accordingly, no provision for federal income taxes has been made in the Merger Agreement, Merger Sub will merge with and into HR, with HR surviving the merger (the “Merger”).
Prior to the effective time of the Merger (the “Effective Time”),accompanying Consolidated Financial Statements. If the Company and the Company OP will take all requisite action so that, as of immediately after the Effective Time, the existing amended and restated agreement of limited partnership of the Company OP will be amended and restated to update the redemption provisions therein to account for the Merger Consideration described below.
The board of directors of the Company (the “Company Board”) has unanimously approved the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Merger is intendedfails to qualify as a “reorganization” withinREIT for any taxable year, then it will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum tax, and may not be able to qualify as a REIT for four subsequent taxable years. Even if the meaning of Section 368(a) ofCompany qualifies as a REIT, it may be subject to certain state and local taxes on its income and property and to federal income and excise tax on its undistributed taxable income.
Earnings and profits (as defined under the Internal Revenue CodeCode), the current and accumulated amounts of 1986, as amended.which determine the taxability of distributions to stockholders, vary from net income attributable to common stockholders and taxable income because of different depreciation recovery periods, depreciation methods, and other items.
Pursuant toWhile Legacy HR was considered the terms and subject to the conditions set forthaccounting acquirer in the Merger Agreement, at the Effective Time, each outstanding share of Common Stock, $0.01 par value per share, of HR (“HR Common Stock”) will be converted into the right to receive 1.0 (the “Exchange Ratio”) share of Class A Common Stock, $0.01 par value per share, of the Company (“Company Common Stock” and, such consideration, the “Merger Consideration”). Subject to the closing offor GAAP purposes, Legacy HR’s separate tax existence ceased with the Merger and Legacy HTA continues as the other transactions contemplated therein,tax successor. On a tax basis, the holdersCompany’s gross real estate assets totaled approximately $12.6 billion and $13.0 billion as of sharesDecember 31, 2023 and 2022, respectively. As of Company Common Stock issuedDecember 31, 2021, gross real estate assets on a tax basis were $5.0 billion for Legacy HR and outstanding on$8.2 billion for Legacy HTA, respectively.
Characterization of Distributions (unaudited)
Distributions in excess of earnings and profits generally constitute a return of capital. The following table gives the last business day prior to the closing datecharacterization of the Merger will receive a special distribution in the amount of $4.82 in cash per share of Company Common Stock held on such date (the “Special Distribution Payment”).
Once the conditions to close the Merger have been satisfied or waived, the Merger Agreement requires HR and the Company to exchange irrevocable certifications that all such closing conditions have been satisfied or waived. At such time, the Company OP will transfer or cause the transfer, on the business day before the Effective Time, to HR or its designees certaindistributions of the Company OP’s assetsCompany’s common stock for the three years ended December 31, 2023.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
For the three years ended December 31, 2023, there were no preferred shares outstanding. As such, no dividends were distributed related to preferred shares for those periods.
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| | 2023 | 2022 | 2021 |
| | PER SHARE | PER SHARE | PER SHARE |
| Tax Treatment of Dividends Pre-Merger Healthcare Trust of America | | | |
Ordinary income 1 | $ | — | | $ | 0.5862 | | $ | 0.7920 | |
| Return of capital | — | | 4.0162 | | 0.4930 | |
| Capital gain | — | | 1.2216 | | — | |
| Common stock distributions | $ | — | | $ | 5.8240 | | $ | 1.2850 | |
| | | |
| Tax Treatment of Dividends Pre-Merger Healthcare Realty | | | |
Ordinary income 1 | $ | — | | $ | 0.2655 | | $ | 0.7500 | |
| Return of capital | — | | 0.5555 | | 0.3600 | |
| Capital gain | — | | — | | 0.0964 | |
| Common stock distributions | $ | — | | $ | 0.8210 | | $ | 1.2064 | |
| | | |
| Tax Treatment of Dividends Post-Merger Healthcare Realty | | | |
Ordinary income 1 | $ | 0.5482 | | $ | 0.0422 | | $ | — | |
| Return of capital | 0.5031 | | 0.2889 | | — | |
| Capital gain | 0.1887 | | 0.0879 | | — | |
| Common stock distributions | $ | 1.2400 | | $ | 0.4190 | | $ | — | |
1Reporting year ordinary income is also Code Section 199A eligible per the The Tax Cut and Jobs Act of 2017.
State Income Taxes
The Company must pay certain state income taxes, which are typically included in general and administrative expense on the Company’s Consolidated Statements of Operations.
The State of Texas gross margins tax on gross receipts from operations is disclosed in the table below as specified by HRan income tax.
State income tax expense and state income tax payments for a cash purchase price equalthe three years ended December 31, 2023 are detailed in the table below:
| | | | | | | | | | | |
| YEAR ENDED DECEMBER 31, |
| Dollars in thousands | 2023 | 2022 | 2021 |
| State income tax expense | | | |
| Texas gross margins tax | $ | 1,206 | | $ | 1,693 | | $ | 564 | |
| Other | 133 | | 151 | | 8 | |
| Total state income tax expense | $ | 1,339 | | $ | 1,844 | | $ | 572 | |
| State income tax payments, net of refunds and collections | $ | 1,324 | | $ | 1,834 | | $ | 560 | |
17. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the reasonably equivalent fair market value of each class of financial instrument for which it is practical to estimate that value.
•Cash, cash equivalents and restricted cash - The carrying amount approximates fair value.
•Borrowings under the assets transferred. ToUnsecured Credit Facility, Unsecured Term Loan due 2024 and Unsecured Term Loan due 2026 - The carrying amount approximates fair value because the extent the net proceeds to the Company of the asset transfer or joint venture transactions relating to such assetsborrowings are insufficient to pay the full amount of the Special Distribution Payment, the Merger Agreement requires the Company to utilize new financing to fund the balance of the Special Distribution Payment.based on variable market interest rates.
•Senior unsecured notes payable - The Company has obtained a commitment letter from JPMorgan Chase Bank, N.A. for a $1.7 billion bridge financing facility.
Each option to acquire HR Common Stock that is outstanding immediately prior to the Effective Time will by virtue of the Merger be assumed by the Company with the same terms and conditions of such options immediately prior to the Effective Time, except that each HR stock option will be exercisable (or will become exercisable in accordance with its terms) for the same number of shares of Company Common Stock. Each share of restricted HR common stock and each right of any kind, contingent or accrued, to receive shares of HR Common Stock or benefits measured in whole or in part by thefair value of a number of shares of HR Common Stock granted by HR outstanding immediately prior to the Effective Time will become an award,notes and bonds payable is estimated using cash flow analyses, based on the same terms and conditions as applied to each such HR stock-based award immediately prior to the Effective Time, with respect to the numberCompany’s current interest rates for similar types of shares of Company Common Stock thatborrowing arrangements.
•Mortgage notes payable - The fair value is equal to the number of shares of HR Common Stock subject to the HR stock-based award immediately prior to the Effective Time multiplied by the Exchange Ratio and rounded down to the nearest full shares.
Each share of Company Common Stock subject to forfeiture conditions outstanding immediately prior to the Effective Time will vest in full as of immediately prior to the Effective Time with any Company restricted shares that were granted subject to performance-based vesting conditions treated assuming attainment of the target level of performance. Each such Company restricted share will be entitled to receive $4.82 inestimated using cash and any accrued but unpaid dividends with respect to such Company restricted share.
Pursuant to the Merger Agreement, the parties have agreed that following the closing of the Merger, the Company Board will consist of 14 members, nine of whom will be the directors of HR immediately prior to the Effective Time and four of whom will be individuals designated by the Company, consisting of W. Bradley Blair II, Vicki U. Booth, Jay P. Leupp and Constance Moore. John Knox Singleton, currently Chairman of the HR board of directors, will be Chairman of the Company Board and W. Bradley Blair, II, currently Chairman of the Company Board, will be appointed Vice Chairman.
Each of the Company and HR have made certain customary representations and warranties in the Merger Agreement and have agreed to customary covenants, including covenants that each party conduct its business in the ordinary course of business during the period between execution of the Merger Agreement and the Effective Time and covenants prohibiting each party from engaging in certain kinds of activities during such period without the consent of the other party.
The Merger Agreement provides that, during the period from the date of the Merger Agreement until the Effective Time, subject to customary exceptions, the Company and HR will be subject to certain restrictionsflow analyses, based on (a) soliciting proposals relating to certain alternative transactions, (b) entering into discussions or negotiating or providing non-public information in connection with any proposal for an alternative transaction from a third party, (c) approving or entering into any agreements providing for any such alternative transaction, or (d) agreeing to or proposing publicly to do any of the foregoing. Notwithstanding these “no-shop” restrictions, prior to obtaining the approval of HR stockholders and approval of the Company stockholders, under specified circumstances, the Company Board and the board of directors of HR, respectively, may change their recommendations with respect to the Merger, and the Company and HR may each also terminate the Merger Agreement to accept a superior proposal upon payment of the termination fees described below.
In accordance with the Merger Agreement, the Company will prepare and file with the U.S. Securities and Exchange Commission (the “SEC”) a Form S-4 registering shares of Company Common Stock issuable in the Merger, and the parties will prepare a joint proxy statement with respect to the special meeting of the Company’s stockholders to be convenedcurrent interest rates for purposessimilar types of approving the issuance of shares of Company Common Shares in the Merger and the special meeting of HR’s stockholders to be convened for purposes of approving the Merger Agreement and the Merger. The joint proxy statement will be included in the Form S-4 and will contain, subject to certain exceptions, the recommendation of the Company Board that the Company’s stockholders vote in favor of the issuance of shares of Company Common Shares in the Merger and the recommendation of the HR board of directors that HR’s stockholders vote in favor of approval of the Merger Agreement and the Merger.
The completion of the Merger is subject to customary conditions, including, among others: (i) approval by the Company’s stockholders and approval by HR’s stockholders, (ii) the effectiveness of the Form S-4, (iii) the absence of injunctions, restraints or government restrictions, (iv) approval by the New York Stock Exchange for listing of the shares of Company Common Stock issuable in the Merger, (v) the absence of a material adverse effect on either the Company or HR, (vi) the accuracy of each party’s representations and warranties and performance in all material respects of each party’s covenants and agreements in the Merger Agreement, (vii) the receipt of tax opinions relating to the status as a real estate investment trust (“REIT”) of each company and the tax-free nature of the transaction, and (viii) other customary conditions specified in the Merger Agreement.
The Merger Agreement may be terminated under certain circumstances, including by either party (i) if the Merger has not been consummated on or before August 28, 2022, (ii) if a final and non-appealable order is entered, or other action is taken permanently restraining or prohibiting the transaction, (iii) upon a failure of either party to obtain approval of its stockholders, (iv) upon a material, uncured breach by the other party that would cause the closing conditions not to be satisfied, subject to a 30-day cure period, (v) if the other party’s board makes an adverse recommendation change with respect to the transaction, or (vi) prior to obtaining approval of itsborrowing arrangements.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, – (Continued)cont.
stockholders, and upon payment of the applicable termination fee,•Interest rate swap agreements - Interest rate swap agreements are recorded in order to enter into a definitive agreement with a third party with respect to a superior acquisition proposal.
If the Merger Agreement is terminated because (i) a party’s board changes its recommendation in favor of the transactions contemplated by the Merger Agreement, (ii) a party terminates the Merger Agreement to enter into a definitive agreement with a third party with respect to a superior acquisition proposal, or (iii) a party consummates or enters into an agreement for an alternative transaction within 12 months following termination under certain circumstances, such party must pay a termination fee to the other party; provided, further, that HR must also pay the Company a termination fee (plus reimburse the Company for its actual transaction expenses up to $5,000,000) if,assets on the business day immediately prior to the Outside Date, the proceeds of the asset transfer, any immediate asset transferCompany's Consolidated Balance Sheets at fair value. Fair value, using level 2 inputs, is estimated by utilizing pricing models that consider forward yield curves and the financing available to the Company pursuant to the Commitment Letter or if applicable any alternative financing are insufficient to pay the aggregate Special Distribution and any unpaid cash payment obligations of HR under the Merger Agreement (so long as such termination is not in material breach of the financing, financing cooperation and sale activity provisions of the Merger Agreement). The termination fee payable by HR to the Company in such circumstances is $163 million. The termination fee payable by the Company to HR in such circumstances is $291 million. The actual amount of each termination fee described above is subject to an escrow and adjustment mechanism for REIT compliance purposes to provide for a lesser amount if necessary to be paid to the receiving party without causing such party to fail to meet its REIT requirements for such year.discount rates.
The Merger Agreement also provides that iftable below details the Company’s stockholders have approved the transactions contemplated by the Merger Agreement, but the Merger Agreement is terminated by the Company because HR’s stockholders vote against the transactions contemplated by the Merger Agreement, HR must pay the Company a fixed expense reimbursement base amount of $25,000,000, plus reimburse the Company for its actual transaction expenses up to $5,000,000. The Merger Agreement also provides that if HR’s stockholders have approved the transactions contemplated by the Merger Agreement, but the Merger Agreement is terminated by HR because the Company’s stockholders vote against the transactions contemplated by the Merger Agreement, the Company must pay HR a fixed expense reimbursement base amount of $25,000,000, plus reimburse the Company for its actual transaction expenses up to $5,000,000).
The Merger Agreement contains customary representations, warrantiesfair value and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders. The boards of directors of the Company and HR have unanimously approved the Merger Agreement. The Merger is expected to close mid-2022.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following schedule presents our total real estate investments and accumulated depreciationcarrying values for our portfolioother financial instruments as of December 31, 2021 (in thousands):2023 and 2022.
| | | | | | | | | | | | | | |
| | December 31, 2023 | December 31, 2022 |
| Dollars in millions | CARRYING VALUE | FAIR VALUE | CARRYING VALUE | FAIR VALUE |
Notes and bonds payable 1, 2 | $ | 4,994.9 | | $ | 4,872.7 | | $ | 5,351.8 | | $ | 5,149.6 | |
Real estate notes receivable 1 | $ | 173.6 | | $ | 172.5 | | $ | 99.6 | | $ | 99.6 | |
| | | | |
1 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| Operating Properties: | | | | | | | | | | | | | | | | | | | | | |
| Shelby MOBs | Alabaster, AL | $ | — | | | $ | — | | | $ | 25,095 | | | $ | 2,686 | | | $ | — | | | $ | 27,781 | | | $ | 27,781 | | | $ | (5,390) | | | 1995-1998 | | 2016 | | 36 |
| Simon Williamson Clinic | Birmingham, AL | — | | | — | | | 25,689 | | | (156) | | | — | | | 25,533 | | | 25,533 | | | (4,489) | | | 2007 | | 2016 | | 36 |
| Jasper | Jasper, AL | — | | | — | | | 5,973 | | | 325 | | | — | | | 6,298 | | | 6,298 | | | (1,563) | | | 1979 | | 2016 | | 25 |
| Phoenix Med Center | Glendale, AZ | — | | | 453 | | | 2,768 | | | 841 | | | 453 | | | 3,609 | | | 4,062 | | | (1,311) | | | 1989 | | 2011 | | 39 |
| Thunderbird MOP | Glendale, AZ | — | | | 3,842 | | | 19,679 | | | 2,198 | | | 3,842 | | | 21,877 | | | 25,719 | | | (9,597) | | | 1976-1987 | | 2007 | | 39 |
| Peoria MOB | Peoria, AZ | — | | | 605 | | | 4,394 | | | 2,248 | | | 605 | | | 6,642 | | | 7,247 | | | (2,115) | | | 2000 | | 2010 | | 39 |
| Baptist MC | Phoenix, AZ | — | | | — | | | 12,637 | | | 3,661 | | | — | | | 16,298 | | | 16,298 | | | (6,113) | | | 1973 | | 2008 | | 39 |
| Desert Ridge MOB | Phoenix, AZ | — | | | — | | | 27,738 | | | 2,690 | | | — | | | 30,428 | | | 30,428 | | | (9,779) | | | 2004-2006 | | 2011 | | 39 |
| Dignity Phoenix MOBs | Phoenix, AZ | — | | | — | | | 66,106 | | | 1,342 | | | — | | | 67,448 | | | 67,448 | | | (10,483) | | | 1984-1997 | | 2017 | | 20-39 |
| Estrella Med Center | Phoenix, AZ | — | | | — | | | 24,703 | | | 2,142 | | | — | | | 26,845 | | | 26,845 | | | (9,240) | | | 2004 | | 2010 | | 39 |
| Sun City Boswell MOBs | Sun City, AZ | — | | | — | | | 12,642 | | | 4,464 | | | — | | | 17,106 | | | 17,106 | | | (6,672) | | | 1971-2001 | | 2009 | | 39 |
| Sun City Boswell West | Sun City, AZ | — | | | — | | | 6,610 | | | 1,913 | | | — | | | 8,523 | | | 8,523 | | | (3,354) | | | 1992 | | 2009 | | 39 |
| Sun City Webb MP | Sun City, AZ | — | | | — | | | 16,188 | | | 4,021 | | | — | | | 20,209 | | | 20,209 | | | (7,808) | | | 1997-2004 | | 2009 | | 39 |
| Sun City West MOBs | Sun City, AZ | — | | | 744 | | | 13,466 | | | 4,160 | | | 744 | | | 17,626 | | | 18,370 | | | (6,936) | | | 1987-2002 | | 2009 | | 39 |
| Gateway Med Plaza | Tucson, AZ | — | | | — | | | 14,005 | | | 565 | | | — | | | 14,570 | | | 14,570 | | | (4,629) | | | 2008 | | 2010 | | 39 |
| Tucson Academy MOP | Tucson, AZ | — | | | 1,193 | | | 6,107 | | | 1,396 | | | 1,193 | | | 7,503 | | | 8,696 | | | (3,071) | | | 1978 | | 2008 | | 39 |
| Tucson Desert Life MOP | Tucson, AZ | — | | | 1,309 | | | 17,572 | | | 6,466 | | | 1,309 | | | 24,038 | | | 25,347 | | | (10,468) | | | 1980 -1984 | | 2007 | | 39 |
| Bakersfield Medical Office Building | Bakersfield, CA | — | | | — | | | — | | | 28,695 | | | — | | | 28,695 | | | 28,695 | | | (293) | | | 2021 | | 2020 | | 39 |
| Dignity Mercy MOBs | Bakersfield, CA | — | | | — | | | 15,207 | | | (240) | | | — | | | 14,967 | | | 14,967 | | | (2,144) | | | 1992 | | 2017 | | 35 |
| 5995 Plaza Drive | Cypress, CA | — | | | 5,109 | | | 17,961 | | | 2,703 | | | 5,109 | | | 20,664 | | | 25,773 | | | (7,860) | | | 1986 | | 2008 | | 39 |
| Dignity Glendale MOB | Glendale, CA | — | | | — | | | 7,244 | | | 257 | | | — | | | 7,501 | | | 7,501 | | | (1,530) | | | 1980 | | 2017 | | 30 |
| 3rd Street MOB | Los Angeles, CA | — | | | 10,603 | | | 63,419 | | | 2,070 | | | 10,603 | | | 65,489 | | | 76,092 | | | (5,750) | | | 1990 | | 2019 | | 39 |
| Mission Medical Center MOBs | Mission Viejo, CA | — | | | 21,911 | | | 117,672 | | | 7,416 | | | 21,911 | | | 125,088 | | | 146,999 | | | (18,184) | | | 1972-1985 | | 2016 | | 39 |
| Dignity Northridge MOBs | Northridge, CA | — | | | — | | | 21,467 | | | 1,250 | | | — | | | 22,717 | | | 22,717 | | | (3,657) | | | 1979-1994 | | 2017 | | 30-35 |
| San Luis Obispo MOB | San Luis Obispo, CA | — | | | — | | | 11,900 | | | 985 | | | — | | | 12,885 | | | 12,885 | | | (4,169) | | | 2009 | | 2010 | | 39 |
| Facey MOB | Santa Clarita, CA | — | | | 6,452 | | | 5,586 | | | 19,641 | | | 6,452 | | | 25,227 | | | 31,679 | | | (3,447) | | | 2018 | | 2017 | | 39 |
| Dignity Marian MOBs | Santa Maria, CA | — | | | — | | | 13,646 | | | 726 | | | — | | | 14,372 | | | 14,372 | | | (2,940) | | | 1994-1995 | | 2017 | | 17-38 |
| Premier Health Plaza | Colorado Springs, CO | — | | | 1,672 | | | 10,954 | | | 113 | | | 1,668 | | | 11,071 | | | 12,739 | | | (307) | | | 2001 | | 2021 | | 39 |
| Rampart MOB | Denver, CO | — | | | 3,794 | | | 13,077 | | | 434 | | | 3,794 | | | 13,511 | | | 17,305 | | | (1,017) | | | 1983-1995 | | 2019 | | 39 |
| SCL Health MOBs | Denver, CO | — | | | 11,652 | | | 104,327 | | | 10,372 | | | 11,652 | | | 114,699 | | | 126,351 | | | (14,592) | | | 2015-2017 | | 2017 | | 39 |
| Hampden Place MOB | Englewood, CO | — | | | 3,032 | | | 12,553 | | | 475 | | | 3,032 | | | 13,028 | | | 16,060 | | | (4,095) | | | 2004 | | 2009 | | 39 |
| Highlands Ranch MOP | Highlands Ranch, CO | — | | | 2,240 | | | 10,426 | | | 8,385 | | | 2,240 | | | 18,811 | | | 21,051 | | | (8,692) | | | 1983-1985 | | 2007 | | 39 |
| Lone Tree Medical Office Buildings | Lone Tree, CO | — | | | 3,736 | | | 29,546 | | | 2,313 | | | 3,736 | | | 31,859 | | | 35,595 | | | (7,115) | | | 2004-2008 | | 2014 | | 38 |
| Lincoln Medical Center | Parker, CO | — | | | 5,142 | | | 28,638 | | | 1,682 | | | 5,142 | | | 30,320 | | | 35,462 | | | (7,894) | | | 2008 | | 2013 | | 39 |
2Fair value for senior notes includes accrued interest as of December 31, 2023.
18. Related-Party Transactions
In the ordinary course of conducting its business, the Company enters into agreements with affiliates in relation to the management and leasing of its real estate assets, including real estate assets owned through joint ventures.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure.
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles
generally accepted in the United States of ContentsAmerica, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LPBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| 80 Fisher | Avon, CT | $ | — | | | $ | — | | | $ | 5,094 | | | $ | 1 | | | $ | — | | | $ | 5,095 | | | $ | 5,095 | | | $ | (1,414) | | | 2008 | | 2016 | | 39 |
| 533 Cottage - Northwestern | Bloomfield, CT | — | | | 726 | | | 3,964 | | | (527) | | | 726 | | | 3,437 | | | 4,163 | | | (749) | | | 1955 | | 2016 | | 35 |
| Northwestern MOBs | Bloomfield, CT | — | | | 1,369 | | | 6,287 | | | 732 | | | 1,369 | | | 7,019 | | | 8,388 | | | (1,865) | | | 1985 | | 2016 | | 35 |
| 406 Farmington | Farmington, CT | — | | | 379 | | | 3,509 | | | 3 | | | 379 | | | 3,512 | | | 3,891 | | | (692) | | | 1988 | | 2016 | | 39 |
| 704 Hebron | Glastonbury, CT | — | | | 2,223 | | | 6,544 | | | 20 | | | 2,223 | | | 6,564 | | | 8,787 | | | (1,575) | | | 2001 | | 2016 | | 37 |
| Gateway MOBs | Glastonbury, CT | — | | | 11,328 | | | 41,320 | | | 10,291 | | | 13,448 | | | 49,491 | | | 62,939 | | | (10,190) | | | 2007-2017 | | 2016-2017 | | 39 |
| Hamden MOB | Hamden, CT | — | | | 4,925 | | | 36,835 | | | 69 | | | 4,925 | | | 36,904 | | | 41,829 | | | (2,356) | | | 1970-1972 | | 2019 | | 39 |
| Haynes MOBs | Manchester, CT | — | | | 1,100 | | | 14,620 | | | 6 | | | 1,100 | | | 14,626 | | | 15,726 | | | (2,681) | | | 2007-2010 | | 2016 | | 39 |
| Pomeroy MOBs | Meriden, CT | — | | | 1,774 | | | 10,078 | | | (48) | | | 1,774 | | | 10,030 | | | 11,804 | | | (2,412) | | | 2009-2011 | | 2016 | | 39 |
| Saybrook MOBs | Middleton, CT | — | | | — | | | 10,314 | | | 887 | | | — | | | 11,201 | | | 11,201 | | | (2,711) | | | 1989 | | 2016 | | 28 |
| Yale Long Wharf | New Haven, CT | — | | | 9,367 | | | 58,691 | | | 7,707 | | | 7,791 | | | 67,974 | | | 75,765 | | | (17,824) | | | 1977 | | 2016 | | 30 |
| Devine MOBs | North Haven, CT | — | | | 3,606 | | | 27,278 | | | 1,708 | | | 3,606 | | | 28,986 | | | 32,592 | | | (5,301) | | | 2006-2017 | | 2016-2017 | | 35 |
| Evergreen MOBs | South Windsor, CT | — | | | 5,565 | | | 25,839 | | | (81) | | | 5,833 | | | 25,490 | | | 31,323 | | | (4,845) | | | 2006-2011 | | 2016 | | 39 |
| Westport Center | Westport, CT | — | | | 3,311 | | | 13,296 | | | 843 | | | 3,311 | | | 14,139 | | | 17,450 | | | (1,364) | | | 1985 | | 2019 | | 39 |
| Day Hill MOBs | Windsor, CT | — | | | 3,980 | | | 7,055 | | | 34 | | | 3,980 | | | 7,089 | | | 11,069 | | | (2,166) | | | 1990-1999 | | 2016 | | 30 |
| Clint Moore Medical Facility | Boca Raton, FL | — | | | 20,051 | | | 27,157 | | | 64 | | | 20,072 | | | 27,200 | | | 47,272 | | | (384) | | | 1996 | | 2021 | | 39 |
| Riverside MOB | Bradenton, FL | — | | | 2,230 | | | 7,689 | | | 354 | | | 2,230 | | | 8,043 | | | 10,273 | | | (1,886) | | | 1980 | | 2016 | | 25 |
| Brandon MOP | Brandon, FL | — | | | 901 | | | 6,946 | | | 867 | | | 901 | | | 7,813 | | | 8,714 | | | (2,807) | | | 1997 | | 2008 | | 39 |
| McMullen MOB | Clearwater, FL | — | | | 3,470 | | | 12,621 | | | (613) | | | 3,470 | | | 12,008 | | | 15,478 | | | (2,907) | | | 2009 | | 2014 | | 39 |
| Orlando Rehab Hospital | Edgewood, FL | — | | | 2,600 | | | 20,256 | | | 3,000 | | | 2,600 | | | 23,256 | | | 25,856 | | | (8,425) | | | 2007 | | 2010 | | 39 |
| Palmetto MOB | Hialeah, FL | — | | | — | | | 15,512 | | | 5,487 | | | — | | | 20,999 | | | 20,999 | | | (7,775) | | | 1980 | | 2013 | | 39 |
| Palmetto II | Hialeah, FL | — | | | — | | | 51,480 | | | 75 | | | — | | | 51,555 | | | 51,555 | | | (1,673) | | | 1992 | | 2020 | | 39 |
| East FL Senior Jacksonville | Jacksonville, FL | — | | | 4,291 | | | 9,220 | | | (736) | | | 4,291 | | | 8,484 | | | 12,775 | | | (3,647) | | | 1985 | | 2007 | | 39 |
| King Street MOB | Jacksonville, FL | — | | | — | | | 7,232 | | | 86 | | | — | | | 7,318 | | | 7,318 | | | (2,445) | | | 2007 | | 2010 | | 39 |
| Jupiter MP | Jupiter, FL | — | | | 1,204 | | | 11,778 | | | 1,283 | | | 1,204 | | | 13,061 | | | 14,265 | | | (3,336) | | | 1996-1997 | | 2013 | | 39 |
| Central FL SC | Lakeland, FL | — | | | 768 | | | 3,002 | | | 511 | | | 768 | | | 3,513 | | | 4,281 | | | (1,549) | | | 1995 | | 2008 | | 39 |
| Vista Pro Center MOP | Lakeland, FL | — | | | 1,082 | | | 3,587 | | | 569 | | | 1,082 | | | 4,156 | | | 5,238 | | | (1,582) | | | 1996-1999 | | 2007-2008 | | 39 |
| Largo Medical Center | Largo, FL | — | | | — | | | 51,045 | | | 660 | | | — | | | 51,705 | | | 51,705 | | | (11,897) | | | 2009 | | 2013 | | 39 |
| Largo MOP | Largo, FL | — | | | 729 | | | 8,908 | | | 1,496 | | | 729 | | | 10,404 | | | 11,133 | | | (4,234) | | | 1975-1986 | | 2008 | | 39 |
| FL Family Medical Center | Lauderdale Lakes, FL | — | | | — | | | 4,257 | | | 1,271 | | | — | | | 5,528 | | | 5,528 | | | (2,519) | | | 1978 | | 2013 | | 39 |
| Northwest Medical Park | Margate, FL | — | | | — | | | 9,525 | | | (297) | | | 5 | | | 9,223 | | | 9,228 | | | (2,138) | | | 2009 | | 2013 | | 39 |
| Coral Reef | Miami, FL | — | | | 1,160 | | | — | | | 18,454 | | | 1,160 | | | 18,454 | | | 19,614 | | | (343) | | | 2021 | | 2017 | | 39 |
| North Shore MOB | Miami, FL | — | | | — | | | 4,942 | | | 1,592 | | | — | | | 6,534 | | | 6,534 | | | (2,889) | | | 1978 | | 2013 | | 39 |
| Sunset Professional and Kendall MOBs | Miami, FL | — | | | 11,855 | | | 13,633 | | | 6,679 | | | 11,855 | | | 20,312 | | | 32,167 | | | (7,506) | | | 1954-2006 | | 2014 | | 27 |
| Commons V MOB | Naples, FL | — | | | 4,173 | | | 9,070 | | | 2,788 | | | 4,173 | | | 11,858 | | | 16,031 | | | (4,642) | | | 1990 | | 2007 | | 39 |
| Orlando Lake Underhill MOB | Orlando, FL | — | | | — | | | 8,515 | | | 428 | | | — | | | 8,943 | | | 8,943 | | | (2,837) | | | 2000 | | 2010 | | 39 |
| Florida Hospital MOBs | Orlando, Sebring and Tampa, FL | — | | | — | | | 151,647 | | | 3,185 | | | — | | | 154,832 | | | 154,832 | | | (21,818) | | | 2006-2012 | | 2017 | | 39 |
| Orlando Oviedo MOB | Oviedo, FL | — | | | — | | | 5,711 | | | 926 | | | — | | | 6,637 | | | 6,637 | | | (2,364) | | | 1998 | | 2010 | | 39 |
| Heart & Family Health MOB | Port St. Lucie, FL | — | | | 686 | | | 8,102 | | | 15 | | | 686 | | | 8,117 | | | 8,803 | | | (2,248) | | | 2008 | | 2013 | | 39 |
| St. Lucie MC | Port St. Lucie, FL | — | | | — | | | 6,127 | | | (41) | | | — | | | 6,086 | | | 6,086 | | | (1,473) | | | 2008 | | 2013 | | 39 |
| East FL Senior Sunrise | Sunrise, FL | — | | | 2,947 | | | 12,825 | | | (1,006) | | | 2,947 | | | 11,819 | | | 14,766 | | | (4,641) | | | 1989 | | 2007 | | 39 |
| Tallahassee Rehab Hospital | Tallahassee, FL | — | | | 7,142 | | | 18,691 | | | 2,400 | | | 7,142 | | | 21,091 | | | 28,233 | | | (7,903) | | | 2007 | | 2010 | | 39 |
| Optimal MOBs | Tampa, FL | — | | | 4,002 | | | 69,824 | | | 552 | | | 4,002 | | | 70,376 | | | 74,378 | | | (10,921) | | | 2005-2015 | | 2017 | | 39 |
| Tampa Medical Village MOB | Tampa, FL | — | | | 3,627 | | | 14,806 | | | 1,295 | | | 3,627 | | | 16,101 | | | 19,728 | | | (2,906) | | | 2003 | | 2017 | | 35 |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| VA MOBs | Tampa, FL | $ | — | | | $ | 17,802 | | | $ | 80,154 | | | $ | 732 | | | $ | 17,802 | | | $ | 80,886 | | | $ | 98,688 | | | $ | (11,226) | | | 2013 | | 2017 | | 39 |
| FL Ortho Institute | Temple Terrace, FL | — | | | 2,923 | | | 17,647 | | | (1) | | | 2,923 | | | 17,646 | | | 20,569 | | | (6,021) | | | 2001-2003 | | 2010 | | 39 |
| Wellington MAP III | Wellington, FL | — | | | — | | | 10,511 | | | 31 | | | — | | | 10,542 | | | 10,542 | | | (3,288) | | | 2006 | | 2010 | | 39 |
| Victor Farris MOB | West Palm Beach, FL | — | | | — | | | 23,052 | | | 11,965 | | | — | | | 35,017 | | | 35,017 | | | (9,022) | | | 1988 | | 2013 | | 39 |
| East FL Senior Winter Park | Winter Park, FL | — | | | 2,840 | | | 12,825 | | | (1,023) | | | 2,840 | | | 11,802 | | | 14,642 | | | (4,872) | | | 1988 | | 2007 | | 39 |
| Camp Creek Med Center | Atlanta, GA | — | | | 2,961 | | | 19,688 | | | 1,371 | | | 2,961 | | | 21,059 | | | 24,020 | | | (7,593) | | | 2006 - 2010 | | 2010-2012 | | 39 |
| Camp Creek MOB | Atlanta, GA | — | | | 328 | | | 12,539 | | | — | | | 328 | | | 12,539 | | | 12,867 | | | (875) | | | 2018 | | 2019 | | 39 |
| North Atlanta MOBs | Atlanta, GA | — | | | — | | | 41,836 | | | 1,621 | | | — | | | 43,457 | | | 43,457 | | | (6,249) | | | 2011-2012 | | 2017 | | 39 |
| Paces Pavilion | Atlanta, GA | — | | | 3,670 | | | 16,328 | | | 27 | | | 3,670 | | | 16,355 | | | 20,025 | | | — | | | 1996 | | 2021 | | 39 |
| Augusta Rehab Hospital | Augusta, GA | — | | | 1,059 | | | 20,899 | | | — | | | 1,059 | | | 20,899 | | | 21,958 | | | (6,779) | | | 2007 | | 2010 | | 39 |
| Austell Medical Park | Austell, GA | — | | | 432 | | | 4,057 | | | (160) | | | 432 | | | 3,897 | | | 4,329 | | | (1,113) | | | 2007 | | 2013 | | 39 |
| Harbin Clinic MOBs | Cedartown, Rome and Summerville, GA | — | | | 7,097 | | | 112,155 | | | (11,230) | | | 7,097 | | | 100,925 | | | 108,022 | | | (17,790) | | | 1960-2010 | | 2017 | | 30-39 |
| Decatur MP | Decatur, GA | — | | | 3,166 | | | 6,862 | | | 1,303 | | | 3,166 | | | 8,165 | | | 11,331 | | | (2,954) | | | 1976 | | 2008 | | 39 |
| Yorktown MC | Fayetteville, GA | — | | | 2,802 | | | 12,502 | | | 3,967 | | | 2,802 | | | 16,469 | | | 19,271 | | | (6,766) | | | 1987 | | 2007 | | 39 |
| Gwinett MOP | Lawrenceville, GA | — | | | 1,290 | | | 7,246 | | | 4,525 | | | 1,290 | | | 11,771 | | | 13,061 | | | (5,467) | | | 1985 | | 2007 | | 39 |
| Marietta Health Park | Marietta, GA | — | | | 1,276 | | | 12,197 | | | 3,198 | | | 1,276 | | | 15,395 | | | 16,671 | | | (5,436) | | | 2000 | | 2008 | | 39 |
| WellStar Tower MOB | Marietta, GA | — | | | 748 | | | 13,528 | | | 321 | | | 748 | | | 13,849 | | | 14,597 | | | (2,962) | | | 2007 | | 2015 | | 39 |
| Shakerag MC | Peachtree City, GA | — | | | 743 | | | 3,290 | | | 1,130 | | | 743 | | | 4,420 | | | 5,163 | | | (2,307) | | | 1994 | | 2007 | | 39 |
| Overlook at Eagle's Landing | Stockbridge, GA | — | | | 638 | | | 6,685 | | | 581 | | | 638 | | | 7,266 | | | 7,904 | | | (2,653) | | | 2004 | | 2010 | | 39 |
| SouthCrest MOP | Stockbridge, GA | — | | | 4,260 | | | 14,636 | | | 2,257 | | | 4,260 | | | 16,893 | | | 21,153 | | | (7,061) | | | 2005 | | 2008 | | 39 |
| Cherokee Medical Center | Woodstock, GA | — | | | — | | | 16,558 | | | 990 | | | — | | | 17,548 | | | 17,548 | | | (4,262) | | | 2001 | | 2015 | | 35 |
| Honolulu MOB | Honolulu, HI | — | | | — | | | 27,336 | | | 3,132 | | | — | | | 30,468 | | | 30,468 | | | (6,595) | | | 1997 | | 2014 | | 35 |
| Kapolei Medical Park | Kapolei, HI | — | | | — | | | 16,253 | | | 643 | | | — | | | 16,896 | | | 16,896 | | | (4,237) | | | 1999 | | 2014 | | 35 |
| North Curtis Road | Boise, ID | — | | | 382 | | | 5,995 | | | 12 | | | 382 | | | 6,007 | | | 6,389 | | | (462) | | | 1983 | | 2020 | | 39 |
| Eagle Road MOB | Meridian, ID | — | | | 666 | | | 9,636 | | | (146) | | | 666 | | | 9,490 | | | 10,156 | | | (1,004) | | | 2000 | | 2019 | | 39 |
| Chicago MOBs | Chicago, IL | — | | | 7,723 | | | 129,520 | | | 1,151 | | | 7,723 | | | 130,671 | | | 138,394 | | | (16,824) | | | 2006-2017 | | 2017 | | 38-39 |
| Streeterville Center MOB | Chicago, IL | — | | | 4,223 | | | 35,008 | | | 139 | | | 4,223 | | | 35,147 | | | 39,370 | | | (2,554) | | | 1968 | | 2019 | | 39 |
| Rush Oak Park MOB | Oak Park, IL | — | | | 1,096 | | | 38,550 | | | (2,667) | | | 1,096 | | | 35,883 | | | 36,979 | | | (8,975) | | | 2000 | | 2012 | | 38 |
| Brownsburg MOB | Brownsburg, IN | — | | | 431 | | | 639 | | | 641 | | | 431 | | | 1,280 | | | 1,711 | | | (531) | | | 1989 | | 2008 | | 39 |
| Athens SC | Crawfordsville, IN | — | | | 381 | | | 3,575 | | | 417 | | | 381 | | | 3,992 | | | 4,373 | | | (1,670) | | | 2000 | | 2007 | | 39 |
| Crawfordsville MOB | Crawfordsville, IN | — | | | 318 | | | 1,899 | | | 260 | | | 318 | | | 2,159 | | | 2,477 | | | (907) | | | 1997 | | 2007 | | 39 |
| Deaconess Clinic Downtown | Evansville, IN | — | | | 1,748 | | | 21,963 | | | 77 | | | 1,748 | | | 22,040 | | | 23,788 | | | (8,675) | | | 1952-1967 | | 2010 | | 39 |
| Deaconess Clinic Westside | Evansville, IN | — | | | 360 | | | 3,265 | | | 356 | | | 360 | | | 3,621 | | | 3,981 | | | (1,413) | | | 2005 | | 2010 | | 39 |
| Dupont MOB | Fort Wayne, IN | — | | | — | | | 8,246 | | | 1,412 | | | — | | | 9,658 | | | 9,658 | | | (2,209) | | | 2004 | | 2013 | | 39 |
| Ft. Wayne MOB | Ft. Wayne, IN | — | | | — | | | 6,579 | | | (243) | | | — | | | 6,336 | | | 6,336 | | | (1,940) | | | 2008 | | 2009 | | 39 |
| Community MP | Indianapolis, IN | — | | | 560 | | | 3,581 | | | 821 | | | 560 | | | 4,402 | | | 4,962 | | | (1,719) | | | 1995 | | 2008 | | 39 |
| Eagle Highlands MOP | Indianapolis, IN | — | | | 2,216 | | | 11,154 | | | 8,269 | | | 2,216 | | | 19,423 | | | 21,639 | | | (10,226) | | | 1988-1989 | | 2008 | | 39 |
| Epler Parke MOP | Indianapolis, IN | — | | | 1,556 | | | 6,928 | | | 2,095 | | | 1,556 | | | 9,023 | | | 10,579 | | | (3,807) | | | 2002-2003 | | 2007-2008 | | 39 |
| Glendale Professional Plaza | Indianapolis, IN | — | | | 570 | | | 2,739 | | | 1,697 | | | 570 | | | 4,436 | | | 5,006 | | | (2,332) | | | 1993 | | 2008 | | 39 |
111INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LPHealthcare Realty Trust Incorporated
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| MMP Eagle Highlands | Indianapolis, IN | $ | — | | | $ | 1,044 | | | $ | 13,548 | | | $ | 3,914 | | | $ | 1,044 | | | $ | 17,462 | | | $ | 18,506 | | | $ | (6,969) | | | 1993 | | 2008 | | 39 |
| MMP East | Indianapolis, IN | — | | | 1,236 | | | 9,840 | | | 3,374 | | | 1,236 | | | 13,214 | | | 14,450 | | | (6,364) | | | 1996 | | 2008 | | 39 |
| MMP North | Indianapolis, IN | — | | | 1,518 | | | 15,460 | | | 6,210 | | | 1,427 | | | 21,761 | | | 23,188 | | | (9,521) | | | 1995 | | 2008 | | 39 |
| MMP South | Indianapolis, IN | — | | | 1,127 | | | 10,414 | | | 2,333 | | | 1,127 | | | 12,747 | | | 13,874 | | | (5,430) | | | 1994 | | 2008 | | 39 |
| Southpointe MOP | Indianapolis, IN | — | | | 2,190 | | | 7,548 | | | 1,529 | | | 2,190 | | | 9,077 | | | 11,267 | | | (4,016) | | | 1996 | | 2007 | | 39 |
| St. Vincent MOB | Indianapolis, IN | — | | | 2,964 | | | 23,352 | | | 49 | | | 2,964 | | | 23,401 | | | 26,365 | | | (3,773) | | | 2007 | | 2017 | | 35 |
| Kokomo MOP | Kokomo, IN | — | | | 1,779 | | | 9,614 | | | 2,450 | | | 1,779 | | | 12,064 | | | 13,843 | | | (5,260) | | | 1992-1994 | | 2007 | | 39 |
| Deaconess Clinic Gateway | Newburgh, IN | — | | | — | | | 10,952 | | | 26 | | | — | | | 10,978 | | | 10,978 | | | (3,844) | | | 2006 | | 2010 | | 39 |
| Community Health Pavilion | Noblesville, IN | — | | | 5,560 | | | 28,988 | | | 1,658 | | | 5,560 | | | 30,646 | | | 36,206 | | | (8,124) | | | 2009 | | 2015 | | 39 |
| Zionsville MC | Zionsville, IN | — | | | 655 | | | 2,877 | | | 1,152 | | | 664 | | | 4,020 | | | 4,684 | | | (1,825) | | | 1992 | | 2008 | | 39 |
| Nashoba Valley Med Center MOB | Ayer, MA | — | | | — | | | 5,529 | | | 313 | | | 299 | | | 5,543 | | | 5,842 | | | (1,888) | | | 1976-2007 | | 2012 | | 31 |
| 670 Albany | Boston, MA | — | | | — | | | 104,365 | | | (1,795) | | | — | | | 102,570 | | | 102,570 | | | (17,428) | | | 2005 | | 2015 | | 39 |
| Tufts Medical Center | Boston, MA | — | | | 32,514 | | | 109,180 | | | 9,778 | | | 32,514 | | | 118,958 | | | 151,472 | | | (32,158) | | | 1924-2015 | | 2014 | | 35 |
| St. Elizabeth's Med Center | Brighton, MA | — | | | — | | | 20,929 | | | 3,627 | | | 1,379 | | | 23,177 | | | 24,556 | | | (7,529) | | | 1965-2013 | | 2012 | | 31 |
| Good Samaritan MOBs | Brockton , MA | — | | | — | | | 15,887 | | | 2,127 | | | 144 | | | 17,870 | | | 18,014 | | | (5,477) | | | 1980-2007 | | 2012 | | 31 |
| Pearl Street MOBs | Brockton, MA | — | | | 4,714 | | | 18,193 | | | 1,465 | | | 4,714 | | | 19,658 | | | 24,372 | | | (4,266) | | | 1966-2004 | | 2016 | | 39 |
| Carney Hospital MOB | Dorchester, MA | — | | | — | | | 7,250 | | | 813 | | | 530 | | | 7,533 | | | 8,063 | | | (2,450) | | | 1978 | | 2012 | | 31 |
| St. Anne's Hospital MOB | Fall River, MA | — | | | — | | | 9,304 | | | 130 | | | 40 | | | 9,394 | | | 9,434 | | | (2,381) | | | 2011 | | 2012 | | 31 |
| Norwood Hospital MOB | Foxborough, MA | — | | | — | | | 9,489 | | | 536 | | | 2,295 | | | 7,730 | | | 10,025 | | | (2,751) | | | 1930-2000 | | 2012 | | 31 |
| Holy Family Hospital MOB | Methuen, MA | — | | | — | | | 4,502 | | | 304 | | | 168 | | | 4,638 | | | 4,806 | | | (1,872) | | | 1988 | | 2012 | | 31 |
| Morton Hospital MOB | Taunton, MA | — | | | — | | | 15,317 | | | 1,910 | | | 502 | | | 16,725 | | | 17,227 | | | (8,222) | | | 1988 | | 2012 | | 31 |
| Stetson MOB | Weymouth, MA | — | | | 3,362 | | | 15,555 | | | 3,681 | | | 3,362 | | | 19,236 | | | 22,598 | | | (6,409) | | | 1900-1986 | | 2015 | | 20 |
| Johnston Professional Building | Baltimore, MD | — | | | — | | | 21,481 | | | 423 | | | — | | | 21,904 | | | 21,904 | | | (5,208) | | | 1993 | | 2014 | | 35 |
| Triad Tech Center | Baltimore, MD | — | | | — | | | 26,548 | | | 25 | | | — | | | 26,573 | | | 26,573 | | | (8,499) | | | 1989 | | 2010 | | 39 |
| St. John Providence MOB | Novi, MI | — | | | — | | | 42,371 | | | (195) | | | — | | | 42,176 | | | 42,176 | | | (12,659) | | | 2007 | | 2012 | | 39 |
| Fort Road MOB | St. Paul, MN | — | | | 1,571 | | | 5,786 | | | 1,468 | | | 1,571 | | | 7,254 | | | 8,825 | | | (3,319) | | | 1981 | | 2008 | | 39 |
| Chesterfield Rehab Hospital | Chesterfield, MO | — | | | 4,213 | | | 27,898 | | | 774 | | | 4,313 | | | 28,574 | | | 32,887 | | | (11,410) | | | 2007 | | 2007 | | 39 |
| BJC West County MOB | Creve Coeur, MO | — | | | 2,242 | | | 13,130 | | | 994 | | | 2,242 | | | 14,124 | | | 16,366 | | | (5,494) | | | 1978 | | 2008 | | 39 |
| Winghaven MOB | O'Fallon, MO | — | | | 1,455 | | | 9,708 | | | 1,645 | | | 1,455 | | | 11,353 | | | 12,808 | | | (4,479) | | | 2001 | | 2008 | | 39 |
| BJC MOB | St. Louis, MO | — | | | 304 | | | 1,554 | | | (891) | | | 304 | | | 663 | | | 967 | | | (512) | | | 2001 | | 2008 | | 39 |
| Des Peres MAP II | St. Louis, MO | — | | | — | | | 11,386 | | | 36 | | | — | | | 11,422 | | | 11,422 | | | (3,793) | | | 2007 | | 2010 | | 39 |
| Baptist Memorial MOB | Oxford, MS | — | | | — | | | 26,263 | | | 7,570 | | | — | | | 33,833 | | | 33,833 | | | (3,759) | | | 2017 | | 2017 | | 39 |
| Medical Park of Cary | Cary, NC | — | | | 2,931 | | | 20,305 | | | 38,308 | | | 2,931 | | | 58,613 | | | 61,544 | | | (9,072) | | | 1994 | | 2010 | | 39 |
| Rex Cary MOB | Cary, NC | — | | | 1,449 | | | 18,226 | | | 472 | | | 1,449 | | | 18,698 | | | 20,147 | | | (3,696) | | | 2002 | | 2015 | | 39 |
| Tryon Office Center | Cary, NC | — | | | 2,200 | | | 14,956 | | | 1,053 | | | 2,200 | | | 16,009 | | | 18,209 | | | (3,659) | | | 2002-2006 | | 2015 | | 39 |
| Carolinas Health MOB | Charlotte, NC | — | | | — | | | 75,198 | | | (1,072) | | | — | | | 74,126 | | | 74,126 | | | (8,851) | | | 2006 | | 2017 | | 39 |
| Davidson MOB | Davidson , NC | — | | | 1,188 | | | 8,556 | | | 98 | | | 1,188 | | | 8,654 | | | 9,842 | | | (685) | | | 2001 | | 2019 | | 39 |
| Duke Fertility Center | Durham, NC | — | | | 596 | | | 3,882 | | | (106) | | | 596 | | | 3,776 | | | 4,372 | | | (569) | | | 2006 | | 2016 | | 39 |
| Duke Medical Plaza | Durham, NC | — | | | 1,093 | | | 11,836 | | | 1,521 | | | 1,093 | | | 13,357 | | | 14,450 | | | (261) | | | 1988 | | 2021 | | 39 |
| Hock Plaza II | Durham, NC | — | | | 680 | | | 27,044 | | | 643 | | | 680 | | | 27,687 | | | 28,367 | | | (4,569) | | | 2006 | | 2016 | | 36 |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| UNC Rex Holly Springs | Holly Springs, NC | $ | — | | | $ | — | | | $ | 27,591 | | | $ | 11,082 | | | $ | — | | | $ | 38,673 | | | $ | 38,673 | | | $ | (4,347) | | | 2011 | | 2017 | | 39 |
| Huntersville Office Park | Huntersville, NC | — | | | 5,376 | | | 67,125 | | | 2,331 | | | 5,376 | | | 69,456 | | | 74,832 | | | (5,614) | | | 1990-2001 | | 2019 | | 39 |
| Rosedale MOB | Huntersville, NC | — | | | 1,281 | | | 7,738 | | | 58 | | | 1,281 | | | 7,796 | | | 9,077 | | | (698) | | | 2005 | | 2019 | | 39 |
| Medical Park MOBs | Mooresville, NC | — | | | 1,771 | | | 13,266 | | | 9,982 | | | 2,141 | | | 22,878 | | | 25,019 | | | (4,724) | | | 2000-2005 | | 2017 | | 23 |
| 3100 Blue Ridge | Raleigh, NC | — | | | 1,732 | | | 8,891 | | | 714 | | | 1,732 | | | 9,605 | | | 11,337 | | | (3,016) | | | 1985 | | 2014 | | 35 |
| Raleigh Medical Center | Raleigh, NC | — | | | 2,381 | | | 15,630 | | | 5,955 | | | 2,381 | | | 21,585 | | | 23,966 | | | (8,311) | | | 1989 | | 2010 | | 39 |
| Sandy Forks MOB | Raleigh, NC | — | | | 652 | | | 7,263 | | | 15 | | | 652 | | | 7,278 | | | 7,930 | | | (950) | | | 2016 | | 2018 | | 39 |
| Sunset Ridge MOBs | Raleigh, NC | — | | | 811 | | | 3,926 | | | 710 | | | 811 | | | 4,636 | | | 5,447 | | | (585) | | | 1999 | | 2018 | | 39 |
| Piedmont MOB | Statesville, NC | — | | | 1,024 | | | 13,911 | | | 41 | | | 1,024 | | | 13,952 | | | 14,976 | | | (1,307) | | | 1984 | | 2020 | | 39 |
| NorthPark MOBs | Wake Forest, NC | — | | | 2,098 | | | 13,921 | | | 2 | | | 2,098 | | | 13,923 | | | 16,021 | | | (57) | | | 1996-2008 | | 2021 | | 39 |
| Hackensack MOB | North Bergen, NJ | — | | | — | | | 31,658 | | | 608 | | | — | | | 32,266 | | | 32,266 | | | (4,003) | | | 2014 | | 2017 | | 39 |
| Mountain View MOB | Las Cruces, NM | — | | | — | | | 41,553 | | | 2,802 | | | — | | | 44,355 | | | 44,355 | | | (6,064) | | | 2003 | | 2017 | | 39 |
| Santa Fe 440 MOB | Santa Fe, NM | — | | | 842 | | | 7,448 | | | (3,205) | | | 842 | | | 4,243 | | | 5,085 | | | (2,267) | | | 1978 | | 2010 | | 39 |
| San Martin MAP | Las Vegas, NV | — | | | — | | | 14,777 | | | 4,801 | | | — | | | 19,578 | | | 19,578 | | | (7,882) | | | 2007 | | 2010 | | 39 |
| Madison Ave MOB | Albany, NY | — | | | 83 | | | 2,759 | | | 151 | | | 83 | | | 2,910 | | | 2,993 | | | (1,097) | | | 1964-2008 | | 2010 | | 39 |
| Patroon Creek HQ | Albany, NY | — | | | 1,870 | | | 29,453 | | | 4,896 | | | 1,870 | | | 34,349 | | | 36,219 | | | (12,451) | | | 2001 | | 2010 | | 39 |
| Patroon Creek MOB | Albany, NY | — | | | 1,439 | | | 27,639 | | | 186 | | | 1,439 | | | 27,825 | | | 29,264 | | | (9,013) | | | 2007 | | 2010 | | 39 |
| Washington Ave MOB | Albany, NY | — | | | 1,699 | | | 18,440 | | | 1,023 | | | 1,699 | | | 19,463 | | | 21,162 | | | (6,569) | | | 1998-2000 | | 2010 | | 39 |
| Putnam MOB | Carmel, NY | — | | | — | | | 24,216 | | | 326 | | | — | | | 24,542 | | | 24,542 | | | (7,482) | | | 2000 | | 2010 | | 39 |
| Capital Region Health Park | Latham, NY | — | | | 2,305 | | | 37,494 | | | 3,565 | | | 2,305 | | | 41,059 | | | 43,364 | | | (14,672) | | | 2001 | | 2010 | | 39 |
| ACP MOB | New York, NY | — | | | 53,265 | | | 62,873 | | | 505 | | | 53,265 | | | 63,378 | | | 116,643 | | | (4,085) | | | 1920-1988 | | 2019 | | 39 |
| 210 Westchester MOB | White Plains, NY | — | | | 8,628 | | | 18,408 | | | — | | | 8,628 | | | 18,408 | | | 27,036 | | | (5,225) | | | 1981 | | 2014 | | 31 |
| Westchester MOBs | White Plains, NY | — | | | 17,274 | | | 41,865 | | | 11,930 | | | 17,274 | | | 53,795 | | | 71,069 | | | (15,027) | | | 1967-1983 | | 2014 | | 29 |
| Kindred MOBs | Avon, OH, Germantown, TN, Indianapolis, IN and Springfield, MO | — | | | 4,238 | | | 118,778 | | | (101) | | | 4,238 | | | 118,677 | | | 122,915 | | | (16,338) | | | 2013-2016 | | 2017 | | 39 |
| Diley Ridge MOB | Canal Winchester, OH | — | | | — | | | 9,811 | | | 67 | | | — | | | 9,878 | | | 9,878 | | | (2,128) | | | 2010 | | 2015 | | 39 |
| Good Sam MOB | Cincinnati, OH | — | | | 1,825 | | | 9,966 | | | (178) | | | 1,825 | | | 9,788 | | | 11,613 | | | (1,372) | | | 2011 | | 2017 | | 39 |
| TriHealth | Cincinnati, OH | — | | | — | | | 34,894 | | | 313 | | | — | | | 35,207 | | | 35,207 | | | (4,484) | | | 2016 | | 2017 | | 39 |
| Market Exchange MOP | Columbus, OH | — | | | 2,326 | | | 17,207 | | | 4,011 | | | 2,326 | | | 21,218 | | | 23,544 | | | (8,424) | | | 2001-2003 | | 2007-2010 | | 39 |
| Mt. Carmel East | Columbus, OH | — | | | — | | | 14,983 | | | 409 | | | — | | | 15,392 | | | 15,392 | | | (570) | | | 1991 | | 2001 | | 39 |
| Olentangy | Columbus, OH | — | | | 1,247 | | | 9,830 | | | 1,001 | | | 1,247 | | | 10,831 | | | 12,078 | | | (1,425) | | | 1985 | | 2019 | | 39 |
| Polaris MOB | Columbus, OH | — | | | 1,447 | | | 12,192 | | | 66 | | | 1,447 | | | 12,258 | | | 13,705 | | | (2,315) | | | 2012 | | 2016 | | 39 |
| Gahanna MOB | Gahanna, OH | — | | | 1,078 | | | 5,674 | | | 59 | | | 1,078 | | | 5,733 | | | 6,811 | | | (1,322) | | | 1997 | | 2016 | | 30 |
| Hilliard II MOB | Hilliard, OH | — | | | 959 | | | 7,260 | | | 288 | | | 959 | | | 7,548 | | | 8,507 | | | (1,553) | | | 2014 | | 2016 | | 38 |
| Hilliard MOB | Hilliard, OH | — | | | 946 | | | 11,174 | | | 743 | | | 946 | | | 11,917 | | | 12,863 | | | (2,965) | | | 2013 | | 2015 | | 39 |
| Park Place MOP | Kettering, OH | — | | | 1,987 | | | 11,341 | | | 5,411 | | | 1,987 | | | 16,752 | | | 18,739 | | | (7,385) | | | 1998-2002 | | 2007 | | 39 |
| Liberty Falls MP | Liberty, OH | — | | | 842 | | | 5,640 | | | 836 | | | 842 | | | 6,476 | | | 7,318 | | | (2,695) | | | 2008 | | 2008 | | 39 |
| Parma Ridge MOB | Parma, OH | — | | | 372 | | | 3,636 | | | 1,006 | | | 372 | | | 4,642 | | | 5,014 | | | (2,005) | | | 1977 | | 2008 | | 39 |
| St. Ann's MOB | Westerville, OH | — | | | — | | | 16,978 | | | 8 | | | — | | | 16,986 | | | 16,986 | | | (793) | | | 2004 | | 2020 | | 39 |
| Deaconess MOP | Oklahoma City, OK | — | | | — | | | 25,975 | | | 2,938 | | | — | | | 28,913 | | | 28,913 | | | (10,795) | | | 1991-1996 | | 2008 | | 39 |
| Silverton Health MOB | Woodburn, OR | — | | | 953 | | | 6,164 | | | (27) | | | 953 | | | 6,137 | | | 7,090 | | | (1,150) | | | 2001 | | 2016 | | 35 |
| Monroeville MOB | Monroeville, PA | — | | | 3,264 | | | 7,038 | | | 1,453 | | | 3,264 | | | 8,491 | | | 11,755 | | | (2,994) | | | 1985-1989 | | 2013 | | 39 |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| 2750 Monroe MOB | Norristown, PA | $ | — | | | $ | 2,323 | | | $ | 22,631 | | | $ | 5,423 | | | $ | 2,323 | | | $ | 28,054 | | | $ | 30,377 | | | $ | (12,984) | | | 1985 | | 2007 | | 39 |
| 1740 South MOB | Philadelphia, PA | — | | | 1,855 | | | 7,735 | | | 241 | | | 1,855 | | | 7,976 | | | 9,831 | | | (726) | | | 1986 | | 2019 | | 39 |
| Main Line Bryn Mawr MOB | Philadelphia, PA | — | | | — | | | 46,967 | | | 5,095 | | | — | | | 52,062 | | | 52,062 | | | (6,077) | | | 2017 | | 2017 | | 39 |
| Phoenixville MOBs | Phoenixville, PA | — | | | — | | | 60,287 | | | — | | | — | | | 60,287 | | | 60,287 | | | (295) | | | 1991-2008 | | 2021 | | 39 |
| Federal North MOB | Pittsburgh, PA | — | | | 2,489 | | | 30,268 | | | 4,463 | | | 2,489 | | | 34,731 | | | 37,220 | | | (10,290) | | | 1999 | | 2010 | | 39 |
| Highmark Penn Ave | Pittsburgh, PA | — | | | 1,774 | | | 38,921 | | | 865 | | | 1,774 | | | 39,786 | | | 41,560 | | | (11,141) | | | 1907-1998 | | 2012 | | 39 |
| WP Allegheny HQ MOB | Pittsburgh, PA | — | | | 1,514 | | | 32,368 | | | 3,669 | | | 1,514 | | | 36,037 | | | 37,551 | | | (11,020) | | | 2002 | | 2010 | | 39 |
| 39 Broad Street | Charleston, SC | — | | | 3,180 | | | 1,970 | | | 3,161 | | | 3,480 | | | 4,831 | | | 8,311 | | | (1,249) | | | 1891 | | 2015 | | 39 |
| Cannon Park Place | Charleston, SC | — | | | 425 | | | 8,651 | | | 942 | | | 425 | | | 9,593 | | | 10,018 | | | (3,284) | | | 1998 | | 2010 | | 39 |
| MUSC Elm MOB | Charleston, SC | — | | | 1,172 | | | 4,361 | | | 178 | | | 1,172 | | | 4,539 | | | 5,711 | | | (978) | | | 2015 | | 2016 | | 39 |
| Tides Medical Arts Center | Charleston, SC | — | | | 3,763 | | | 19,787 | | | 411 | | | 3,763 | | | 20,198 | | | 23,961 | | | (4,347) | | | 2007 | | 2014 | | 39 |
| Bowman Center | Mt. Pleasant, SC | — | | | 3,896 | | | 6,874 | | | — | | | 3,896 | | | 6,874 | | | 10,770 | | | (67) | | | 2001 | | 2021 | | 39 |
| East Cooper Medical Arts Center | Mt. Pleasant, SC | — | | | 2,470 | | | 6,289 | | | (290) | | | 2,470 | | | 5,999 | | | 8,469 | | | (1,630) | | | 2001 | | 2014 | | 32 |
| East Cooper Medical Center | Mt. Pleasant, SC | — | | | 2,073 | | | 5,939 | | | 2,594 | | | 2,073 | | | 8,533 | | | 10,606 | | | (2,904) | | | 1992 | | 2010 | | 39 |
| The Mullis Building | Mt. Pleasant, SC | — | | | — | | | 18,810 | | | 48 | | | — | | | 18,858 | | | 18,858 | | | (401) | | | 2016 | | 2021 | | 39 |
| MUSC University MOB | North Charleston, SC | — | | | 1,524 | | | 9,627 | | | (882) | | | 1,524 | | | 8,745 | | | 10,269 | | | (1,615) | | | 2006 | | 2015 | | 36 |
| St. Thomas DePaul MOB | Murfreesboro, TN | — | | | — | | | 55,040 | | | 1,003 | | | — | | | 56,043 | | | 56,043 | | | (7,320) | | | 2008 | | 2017 | | 39 |
| Amarillo Hospital | Amarillo, TX | — | | | 1,110 | | | 17,688 | | | 605 | | | 1,110 | | | 18,293 | | | 19,403 | | | (6,618) | | | 2007 | | 2008 | | 39 |
| Austin Heart MOB | Austin, TX | — | | | — | | | 15,172 | | | 612 | | | — | | | 15,784 | | | 15,784 | | | (4,138) | | | 1999 | | 2013 | | 39 |
| BS&W MOBs | Austin, TX | — | | | — | | | 300,952 | | | 1,657 | | | — | | | 302,609 | | | 302,609 | | | (39,353) | | | 2009-2016 | | 2017 | | 39 |
| Post Oak North MC | Austin, TX | — | | | 887 | | | 7,011 | | | (221) | | | 887 | | | 6,790 | | | 7,677 | | | (1,585) | | | 2007 | | 2013 | | 39 |
| MatureWell MOB | Bryan, TX | — | | | 1,307 | | | 11,078 | | | — | | | 1,307 | | | 11,078 | | | 12,385 | | | (1,858) | | | 2016 | | 2017 | | 39 |
| Texas A&M Health Science Center | Bryan, TX | — | | | — | | | 32,494 | | | (2,009) | | | — | | | 30,485 | | | 30,485 | | | (7,374) | | | 2011 | | 2013 | | 39 |
| Dallas Rehab Hospital | Carrollton, TX | — | | | 1,919 | | | 16,341 | | | (505) | | | 1,919 | | | 15,836 | | | 17,755 | | | (5,067) | | | 2006 | | 2010 | | 39 |
| Cedar Hill MOB | Cedar Hill, TX | — | | | 778 | | | 4,830 | | | 1,898 | | | 778 | | | 6,728 | | | 7,506 | | | (2,243) | | | 2007 | | 2008 | | 39 |
| Cedar Park MOB | Cedar Park, TX | — | | | — | | | 30,338 | | | 1,268 | | | — | | | 31,606 | | | 31,606 | | | (4,212) | | | 2007 | | 2017 | | 39 |
| Corsicana MOB | Corsicana, TX | — | | | — | | | 6,781 | | | 233 | | | — | | | 7,014 | | | 7,014 | | | (2,593) | | | 2007 | | 2009 | | 39 |
| Dallas LTAC Hospital | Dallas, TX | — | | | 2,301 | | | 20,627 | | | — | | | 2,301 | | | 20,627 | | | 22,928 | | | (6,996) | | | 2007 | | 2009 | | 39 |
| Forest Park Pavilion | Dallas, TX | — | | | 9,670 | | | 11,152 | | | 48,094 | | | 9,670 | | | 59,246 | | | 68,916 | | | (3,732) | | | 2010-2021 | | 2012-2021 | | 39 |
| Forest Park Tower | Dallas, TX | — | | | 3,340 | | | 35,071 | | | 5,841 | | | 3,340 | | | 40,912 | | | 44,252 | | | (10,289) | | | 2011 | | 2013 | | 39 |
| Northpoint Medical | Dallas, TX | — | | | 2,388 | | | 14,621 | | | 1,629 | | | 2,388 | | | 16,250 | | | 18,638 | | | (3,496) | | | 2017 | | 2017 | | 20 |
| Baylor MOBs | Dallas/Fort Worth, TX | — | | | 9,956 | | | 122,852 | | | 6,737 | | | 9,956 | | | 129,589 | | | 139,545 | | | (16,761) | | | 2013-2017 | | 2017 | | 39 |
| Denton Med Rehab Hospital | Denton, TX | — | | | 2,000 | | | 11,704 | | | — | | | 2,000 | | | 11,704 | | | 13,704 | | | (4,444) | | | 2008 | | 2009 | | 39 |
| Denton MOB | Denton, TX | — | | | — | | | 7,543 | | | 733 | | | — | | | 8,276 | | | 8,276 | | | (2,567) | | | 2000 | | 2010 | | 39 |
| Cliff Medical Plaza MOB | El Paso, TX | — | | | 1,064 | | | 1,972 | | | 4,157 | | | 1,064 | | | 6,129 | | | 7,193 | | | (3,023) | | | 1977 | | 2016 | | 8 |
| El Paso MOB | El Paso, TX | — | | | 2,075 | | | 14,902 | | | (233) | | | 2,075 | | | 14,669 | | | 16,744 | | | (1,207) | | | 1994-2008 | | 2019 | | 39 |
| Providence Medical Plaza | El Paso, TX | — | | | — | | | 5,396 | | | 4,080 | | | — | | | 9,476 | | | 9,476 | | | (2,906) | | | 1981 | | 2016 | | 20 |
| Sierra Medical | El Paso, TX | — | | | — | | | 2,998 | | | 1,011 | | | — | | | 4,009 | | | 4,009 | | | (1,616) | | | 1972 | | 2016 | | 15 |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| Texas Tech MOB | El Paso, TX | $ | — | | | $ | — | | | $ | 42,419 | | | $ | 2,040 | | | $ | — | | | $ | 44,459 | | | $ | 44,459 | | | $ | (1,178) | | | 2017 | | 2020 | | 39 |
| Texas Health MOB | Fort Worth, TX | — | | | — | | | 38,429 | | | 165 | | | — | | | 38,594 | | | 38,594 | | | (5,282) | | | 2014 | | 2017 | | 39 |
| Forest Park Frisco MC | Frisco, TX | — | | | 1,238 | | | 19,979 | | | 9,038 | | | 1,238 | | | 29,017 | | | 30,255 | | | (9,851) | | | 2012 | | 2013 | | 39 |
| T-Mobile Building | Frisco, TX | — | | | 4,807 | | | 67,076 | | | (3,139) | | | 4,807 | | | 63,937 | | | 68,744 | | | (7,827) | | | 2014 | | 2017 | | 38 |
| Greenville MOB | Greenville, TX | — | | | 616 | | | 10,822 | | | 633 | | | 616 | | | 11,455 | | | 12,071 | | | (4,172) | | | 2007 | | 2008 | | 39 |
| 7900 Fannin MOB | Houston, TX | — | | | — | | | 34,764 | | | 2,767 | | | — | | | 37,531 | | | 37,531 | | | (11,942) | | | 2005 | | 2010 | | 39 |
| Cypress Medical Building MOB | Houston, TX | — | | | — | | | 4,678 | | | 203 | | | — | | | 4,881 | | | 4,881 | | | (1,273) | | | 1984 | | 2016 | | 30 |
| Cypress Station MOB | Houston, TX | — | | | 1,345 | | | 8,312 | | | (4,237) | | | 1,345 | | | 4,075 | | | 5,420 | | | (3,644) | | | 1981 | | 2008 | | 39 |
| Gemini MOB | Houston, TX | — | | | 4,619 | | | 17,450 | | | 153 | | | 4,619 | | | 17,603 | | | 22,222 | | | (1,410) | | | 1985-1986 | | 2019 | | 39 |
| Houston Medical Plaza | Houston, TX | — | | | 4,107 | | | 35,560 | | | 36 | | | 4,110 | | | 35,593 | | | 39,703 | | | (363) | | | 1983 | | 2021 | | 39 |
| Park Plaza MOB | Houston, TX | — | | | 5,719 | | | 50,054 | | | 8,389 | | | 5,719 | | | 58,443 | | | 64,162 | | | (15,664) | | | 1984 | | 2016 | | 24 |
| T-Mobile Tower | Houston, TX | — | | | 8,314 | | | 15,335 | | | 35 | | | 8,314 | | | 15,370 | | | 23,684 | | | (419) | | | 1974 | | 2021 | | 39 |
| Triumph Hospital NW | Houston, TX | — | | | 1,377 | | | 14,531 | | | 164 | | | 1,377 | | | 14,695 | | | 16,072 | | | (5,819) | | | 1986 | | 2007 | | 39 |
| Memorial Hermann MOBs | Humble, TX | — | | | — | | | 9,479 | | | 13,361 | | | — | | | 22,840 | | | 22,840 | | | (3,130) | | | 1993 | | 2017 | | 25-39 |
| Jourdanton MOB | Jourdanton, TX | — | | | — | | | 17,804 | | | 2 | | | — | | | 17,806 | | | 17,806 | | | (2,384) | | | 2013 | | 2017 | | 39 |
| Houston Methodist MOBs | Katy, TX | — | | | — | | | 43,078 | | | 7,760 | | | — | | | 50,838 | | | 50,838 | | | (5,641) | | | 2001-2006 | | 2017 | | 35-39 |
| Lone Star Endoscopy MOB | Keller, TX | — | | | 622 | | | 3,502 | | | 36 | | | 622 | | | 3,538 | | | 4,160 | | | (1,330) | | | 2006 | | 2008 | | 39 |
| Seton Medical MOB | Kyle, TX | — | | | — | | | 30,102 | | | 2,617 | | | — | | | 32,719 | | | 32,719 | | | (4,470) | | | 2009 | | 2017 | | 39 |
| Lewisville MOB | Lewisville, TX | — | | | 452 | | | 3,841 | | | (133) | | | 452 | | | 3,708 | | | 4,160 | | | (1,219) | | | 2000 | | 2010 | | 39 |
| Longview Regional MOBs | Longview, TX | — | | | — | | | 59,258 | | | — | | | — | | | 59,258 | | | 59,258 | | | (8,209) | | | 2003-2015 | | 2017 | | 36-39 |
| Terrace Medical Building | Nacogdoches, TX | — | | | — | | | 179 | | | 121 | | | — | | | 300 | | | 300 | | | (154) | | | 1975 | | 2016 | | 5 |
| Towers Medical Plaza | Nacogdoches, TX | — | | | — | | | 786 | | | 236 | | | — | | | 1,022 | | | 1,022 | | | (617) | | | 1981 | | 2016 | | 10 |
| North Cypress MOBs | North Cypress/Houston, TX | — | | | 7,841 | | | 121,215 | | | 1,687 | | | 7,841 | | | 122,902 | | | 130,743 | | | (16,639) | | | 2006-2015 | | 2017 | | 35-39 |
| Pearland MOB | Pearland, TX | — | | | 912 | | | 4,628 | | | 314 | | | 912 | | | 4,942 | | | 5,854 | | | (1,732) | | | 2003-2007 | | 2010 | | 39 |
| Independence Medical Village | Plano, TX | — | | | 4,229 | | | 17,874 | | | (132) | | | 4,229 | | | 17,742 | | | 21,971 | | | (3,347) | | | 2014 | | 2016 | | 39 |
| San Angelo MOB | San Angelo, TX | — | | | — | | | 3,907 | | | (237) | | | — | | | 3,670 | | | 3,670 | | | (1,331) | | | 2007 | | 2009 | | 39 |
| Mtn Plains Pecan Valley | San Antonio, TX | — | | | 416 | | | 13,690 | | | 512 | | | 416 | | | 14,202 | | | 14,618 | | | (5,091) | | | 1998 | | 2008 | | 39 |
| Sugar Land II MOB | Sugar Land, TX | — | | | — | | | 9,648 | | | 79 | | | — | | | 9,727 | | | 9,727 | | | (3,198) | | | 1999 | | 2010 | | 39 |
| Triumph Hospital SW | Sugar Land, TX | — | | | 1,670 | | | 14,018 | | | (670) | | | 1,656 | | | 13,362 | | | 15,018 | | | (5,625) | | | 1989 | | 2007 | | 39 |
| Mtn Plains Clear Lake | Webster, TX | — | | | 832 | | | 21,168 | | | 5,761 | | | 832 | | | 26,929 | | | 27,761 | | | (8,382) | | | 2006 | | 2008 | | 39 |
| N. Texas Neurology MOB | Wichita Falls, TX | — | | | 736 | | | 5,611 | | | (1,957) | | | 736 | | | 3,654 | | | 4,390 | | | (1,838) | | | 1957 | | 2008 | | 39 |
| Wylie Medical Plaza | Wylie, TX | — | | | 1,412 | | | 15,353 | | | 272 | | | 1,412 | | | 15,625 | | | 17,037 | | | (1,205) | | | 2013 | | 2020 | | 39 |
| Renaissance MC | Bountiful, UT | — | | | 3,701 | | | 24,442 | | | 442 | | | 3,701 | | | 24,884 | | | 28,585 | | | (8,850) | | | 2004 | | 2008 | | 39 |
| Salt Lake Regional Medical Building | Salt Lake City, UT | — | | | — | | | 10,351 | | | 110 | | | — | | | 10,461 | | | 10,461 | | | (670) | | | 1989 | | 2020 | | 39 |
| Fairfax MOB | Fairfax, VA | — | | | 2,404 | | | 14,074 | | | 193 | | | 2,404 | | | 14,267 | | | 16,671 | | | (1,379) | | | 1959 | | 2019 | | 39 |
| Fair Oaks MOB | Fairfax, VA | — | | | — | | | 47,616 | | | 562 | | | — | | | 48,178 | | | 48,178 | | | (5,876) | | | 2009 | | 2017 | | 39 |
| Aurora - Menomonee | Menomonee Falls, WI | — | | | 1,055 | | | 14,998 | | | — | | | 1,055 | | | 14,998 | | | 16,053 | | | (6,816) | | | 1964 | | 2009 | | 39 |
| Aurora - Milwaukee | Milwaukee, WI | — | | | 350 | | | 5,508 | | | — | | | 350 | | | 5,508 | | | 5,858 | | | (2,508) | | | 1983 | | 2009 | | 39 |
| Columbia St. Mary's MOBs | Milwaukee, WI | — | | | — | | | 87,825 | | | 1,144 | | | — | | | 88,969 | | | 88,969 | | | (10,921) | | | 1994-2007 | | 2017 | | 35-39 |
| | $ | — | | | $ | 612,952 | | | $ | 6,155,907 | | | $ | 566,865 | | | $ | 619,820 | | | $ | 6,715,906 | | | $ | 7,335,726 | | | $ | (1,401,742) | | | | | | | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Initial Cost to Company | | Cost
Capitalized
Subsequent
to
Acquisition (a) | | Gross Amount at Which
Carried at Close of Period | | | | | | | | |
| | Encumbrances | | Land | | Buildings,
Improvements and
Fixtures | | | Land | | Buildings,
Improvements and
Fixtures | | Total (c) | | Accumulated Depreciation (f) | | Date of Construction | | Date
Acquired | | Life on Which Building Depreciation in Income Statement is Computed (h) |
| | | | | | | | | | | | | | | | | | | | | | |
| Undeveloped land: | | | | | | | | | | | | | | | | | | | | |
| Macon Pond MOB | Raleigh, NC | $ | — | | | $ | 5,504 | | | $ | — | | | $ | 13 | | | $ | 5,504 | | | $ | 13 | | | $ | 5,517 | | | $ | — | | | N/A | | 2021 | | N/A |
| Forest Park Pavilion IV | Dallas, TX | — | | | 7,014 | | | — | | | — | | | 7,014 | | | — | | | 7,014 | | | — | | | N/A | | 2019 | | N/A |
| Houston Heights | Houston, TX | — | | | 10,445 | | | — | | | 5 | | | 10,445 | | | 5 | | | 10,450 | | | — | | | N/A | | 2020 | | N/A |
| | $ | — | | | $ | 22,963 | | | $ | — | | | $ | 18 | | | $ | 22,963 | | | $ | 18 | | | $ | 22,981 | | | $ | — | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Real estate held for sale | $ | — | | | $ | (2,401) | | | $ | (39,693) | | | $ | 12,285 | | | (2,401) | | | (27,408) | | | (29,809) | | | $ | 6,263 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | — | | | $ | 633,514 | | | $ | 6,116,214 | | | $ | 579,168 | | | $ | 640,382 | | | $ | 6,688,516 | | | $ | 7,328,898 | | | $ | (1,395,479) | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
(a)The cost capitalized subsequent to acquisition is net of dispositions or other write-downs and impairment.
(b)The above table excludes lease intangibles; see notes (d) and (g).
(c)The changes in total real estate for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Balance as of the beginning of the year | $ | 7,104,085 | | | $ | 6,837,400 | | | $ | 6,269,023 | |
| Acquisitions | 278,124 | | | 171,728 | | | 505,424 | |
| Additions | 188,592 | | | 121,777 | | | 90,859 | |
| Dispositions and other | (189,156) | | | (26,820) | | | (27,906) | |
| Impairment | (22,938) | | | — | | | — | |
| Held for sale | (29,809) | | | — | | | — | |
| Balance as of the end of the year (d) | $ | 7,328,898 | | | $ | 7,104,085 | | | $ | 6,837,400 | |
Opinion on Internal Control over Financial Reporting
(d)The balancesWe have audited Healthcare Realty Trust Incorporated’s (the “Company’s”) internal control over financial reporting as of December 31, 2021, 2020 and 2019 exclude gross lease intangibles2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of $404.7 million, $628.6 million and $628.1 million, respectively.
(e)The aggregate costSponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our real estate for federal income tax purposes was $6.9 billion.
(f)The changesopinion, the Company maintained, in accumulated depreciation for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
| Balance as of the beginning of the year | $ | 1,302,204 | | | $ | 1,085,048 | | | $ | 882,488 | |
| Additions | 246,417 | | | 236,271 | | | 217,566 | |
| Dispositions and other | (146,879) | | | (19,115) | | | (15,006) | |
| Held for sale | (6,263) | | | — | | | — | |
| Balance as of the end of the year (g) | $ | 1,395,479 | | | $ | 1,302,204 | | | $ | 1,085,048 | |
(g)The balancesall material respects, effective internal control over financial reporting as of December 31, 2021, 2020 and 2019 exclude accumulated amortization of lease intangibles of $203.0 million, $400.5 million and $362.8 million, respectively.2023, based on the COSO criteria.
(h)Tenant improvements are depreciated overWe also have audited, in accordance with the shorterstandards of the lease termPublic Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity and redeemable non-controlling interests, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules and our report dated February 16, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or useful life, ranging from onetimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to 10 years, respectively. Furniture, fixtures and equipmentfuture periods are depreciated over five years.subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, P.C.
Nashville, Tennessee
February 16, 2024
Item 9B. Other Information
During the year ended December 31, 2023, no director or officer of Contentsthe Company adopted or terminated a "Rule 10b5-1 trading agreement" or "non-Rule 10b5-1 trading agreement," as each term is defined in Item 408(a) of Regulation S-K.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION — (Continued)Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
HEALTHCARE TRUST OF AMERICA, INC.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Directors
Information with respect to the Company’s directors, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024, under the caption “Election of Directors,” is incorporated herein by reference.
Executive Officers
The executive officers of the Company are:
| | | | | | | | |
| NAME | AGE | POSITION |
| Todd J. Meredith | 49 | | President and Chief Executive Officer |
| J. Christopher Douglas | 48 | | Executive Vice President and Chief Financial Officer |
| John M. Bryant, Jr. | 57 | | Executive Vice President and General Counsel |
| Robert E. Hull | 51 | | Executive Vice President - Investments |
| Julie F. Wilson | 52 | | Executive Vice President - Operations |
Mr. Meredith was appointed President and Chief Executive Officer effective December 30, 2016. He served as the Company's Executive Vice President - Investments from February 2011 until December 30, 2016, and was responsible for overseeing the Company’s investment activities, including the acquisition, financing and development of medical office and other primarily outpatient medical facilities. Prior to February 2011, he led the Company’s development activities as a Senior Vice President. Before joining the Company in 2001, Mr. Meredith worked in investment banking.
Mr. Douglas was appointed Chief Financial Officer effective March 1, 2016 and has been employed by the Company since 2003. He served as the Company’s Senior Vice President, Acquisitions and Dispositions managing the Company’s acquisition and disposition team from 2011 until March 1, 2016. Prior to that, Mr. Douglas served as Senior Vice President, Asset Administration, administering the Company’s master lease portfolio and led a major disposition strategy in 2007. Mr. Douglas has a background in commercial and investment banking.
Mr. Bryant became the Company’s General Counsel in November 2003. From April 2002 until November 2003, Mr. Bryant was Vice President and Assistant General Counsel. Prior to joining the Company, Mr. Bryant was a shareholder with the law firm of Baker Donelson Bearman & Caldwell in Nashville, Tennessee.
Mr. Hull was appointed Executive Vice President - Investments effective January 1, 2017 and has been employed by the Company since 2004. He served as Senior Vice President - Investments from March 2011 until January 2017, managing the Company's development and acquisition activity. Prior to that, Mr. Hull served in various capacities on the Company's investments team. Before joining the Company, Mr. Hull worked in the senior living and commercial banking industries.
Ms. Wilson was appointed Executive Vice President - Operations effective July 1, 2021 and has been employed by the Company since 2001. She previously served as Senior Vice President - Leasing and Management from March 2008 until July 2021. Prior to that, Ms. Wilson worked in the leasing, property management and investments groups. Before joining the Company, Ms. Wilson worked in investment banking and commercial real estate brokerage.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, as well as all directors, officers and employees of the Company. The Code of Ethics is posted on the Company’s website (www.healthcarerealty.com) and is available in print free of charge to any stockholder who requests a copy. Interested parties may address a written request for a printed copy of the Code of Ethics to: Investor Relations, Healthcare Realty Trust Incorporated, 3310 West End Avenue, Suite 700, Nashville, Tennessee 37203. The Company intends to satisfy the disclosure requirement regarding any amendment to, or a waiver of, a provision of the
Code of Ethics for the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions by posting such information on the Company’s website.
Section 16(a) Compliance
Information with respect to compliance with Section 16(a) of the Exchange Act set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024, under the caption “Security Ownership of Certain Beneficial Owners and Management – Delinquent Section 16(a) Reports,” is incorporated herein by reference.
Stockholder Recommendation of Director Candidates
Information with respect to the Company’s policy relating to stockholder recommendations of director candidates is set forth in the Company’s Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 21, 2024, under the caption “Shareholder Recommendation or Nomination of Director Candidates,” and is incorporated herein by reference.
Audit Committee
Information relating to the Company’s Audit Committee, its members and the Audit Committee’s financial experts, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024, under the caption “Committee Membership,” is incorporated herein by reference.
Item 11. Executive Compensation
Information relating to executive compensation, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024, under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report” and “Director Compensation,” is incorporated herein by reference, except with respect to the disclosure under the heading "Executive Compensation - Pay Versus Performance."
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information relating to the security ownership of management and certain beneficial owners, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024 under the caption “Security Ownership of Certain Beneficial Owners and Management,” is incorporated herein by reference.
Information relating to securities authorized for issuance under the Company’s equity compensation plans, set forth in Item 5 of this report under the caption “Equity Compensation Plan Information,” is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information relating to certain relationships and related transactions, and director independence, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024 under the captions “Certain Relationships and Related Transactions” and “Corporate Governance – Independence of Directors,” is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Our independent registered public accounting firm is BDO USA, P.C., Nashville, TN, PCAOB ID#243.
Information relating to the fees paid to the Company’s accountants, set forth in the Company’s Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 21, 2024, under the caption “Ratification of Appointment of Independent Registered Public Accounting Firm,” is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules
Index to Historical Financial Statements, Financial Statement Schedules and Exhibits
1. Financial Statements
The following financial statements of Healthcare Realty Trust Incorporated are included in Item 8 of this Annual Report on Form 10-K.
•Consolidated Balance Sheets – December 31, 2023 and December 31, 2022.
•Consolidated Statements of Operations for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.
•Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.
•Consolidated Statements of Equity and Redeemable Non-Controlling Interests for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.
•Consolidated Statements of Cash Flows for the years ended December 31, 2023, December 31, 2022 and December 31, 2021.
•Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
| | | | | | | | | | | |
| Schedule II | — | Valuation and Qualifying Accounts for the years ended December 31, 2023, 2022, and 2021 | |
| Schedule III | — | Real Estate and Accumulated Depreciation as of December 31, 2023 | |
| Schedule IV | — | Mortgage Loans on Real Estate Assets as of December 31, 2023 | 112 | |
All other schedules are omitted because they are either not applicable, not required or because the information is included in the consolidated financial statements or notes thereto.
3. Exhibits
| | | | | | | | | | | |
| EXHIBIT NUMBER | | DESCRIPTION OF EXHIBITS | |
| 2.1 | — | Agreement and Plan of Merger, dated as of February 28, 2022, by and among Healthcare Realty Trust Incorporated (now known as HRTI, LLC), Healthcare Trust of America, Inc. (now known as Healthcare Realty Trust Incorporated), Healthcare Trust of America Holdings, L.P. (now known as Healthcare Realty Holdings, L.P.), and HR Acquisition 2, LLC. 1 | |
| 3.1 | — | | |
| 3.2 | — | | |
| 3.3 | — | | |
| 3.4 | — | | |
| 4.1 | — | | |
| 4.2 | — | | |
| | | | | | | | | | | |
| 4.3 | — | | |
| 4.4 | — | | |
| 4.5 | — | | |
| 4.6 | — | | |
| 4.7 | — | | |
| 4.8 | — | | |
| 4.9 | — | | |
| 4.10 | — | | |
| 4.11 | — | | |
| 4.12 | — | | |
| 4.13 | — | | |
| 4.14 | — | | |
| 4.15 | — | | |
| 4.16 | — | | |
| 4.17 | — | | |
| 4.18 | — | | |
| 4.19 | — | | |
| 4.20 | — | | |
| 4.21 | — | | |
| 4.22 | — | Guarantee of 2031 Note.4 | |
| — | Term Loan Agreement, dated as of May 13, 2022, among Healthcare Trust of America, Inc. (now known as Healthcare Realty Trust Incorporated), Healthcare Trust of America Holdings, LP (now known as Healthcare Realty Holdings, L.P.), the lenders named therein, and J.P. Morgan Chase Bank, N.A., as administrative agent for such lenders.11 | |
| — | Fourth Amended and Restated Revolving Credit and Term Loan Agreement, dated as of July 20, 2022, by and among Healthcare Trust of America Holdings, LP (now known as Healthcare Realty Holdings, L.P.), Healthcare Trust of America, Inc. (now known as Healthcare Realty Trust Incorporated), the lenders named therein, and Wells Fargo Bank, National Association.4 | |
| — | | |
| — | | |
| — | | |
| 10.6 | — | Amendment No. 2 to Third Amended and Restated Employment Agreement, dated February 18, 2022, between Todd J. Meredith and Healthcare Realty Trust Incorporated (now known as HRTI, LLC).14 | |
| 10.7 | — | | |
| 10.8 | — | | |
| | | | | | | | | | | |
| 10.9 | — | | |
| 10.10 | — | | |
| 10.11 | — | Amendment No. 2 to Amended and Restated Employment Agreement, dated February 18, 2022, between Robert E. Hull and Healthcare Realty Trust Incorporated (now known as HRTI, LLC).14 | |
| 10.12 | — | | |
| 10.13 | — | | |
| 10.14 | — | Amendment No. 2 to Amended and Restated Employment Agreement, dated February 18, 2022, between J. Christopher Douglas and Healthcare Realty Trust Incorporated (now known as HRTI, LLC).14 | |
| 10.15 | — | | |
| 10.16 | — | | |
| 10.17 | — | | |
| 10.18 | — | | |
| 10.19 | — | | |
| 10.20 | — | | |
| 10.21 | — | | |
| 10.22 | — | | |
| 10.23 | — | | |
| 21 | — | | |
| 22 | | | |
| 23 | — | | |
| — | | |
| — | | |
| — | | |
| 97 | — | | |
| 101.INS | — | This instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
| 101.SCH | — | XBRL Taxonomy Extension Schema Document. (filed herewith) | |
| 101.CAL | — | XBRL Taxonomy Extension Calculation Linkbase Document. (filed herewith) | |
| 101.LAB | — | XBRL Taxonomy Extension Labels Linkbase Document. (filed herewith) | |
| 101.DEF | — | XBRL Taxonomy Extension Definition Linkbase Document. (filed herewith) | |
| 101.PRE | — | XBRL Taxonomy Extension Presentation Linkbase Document. (filed herewith) | |
| 104 | — | Cover Page Interactive Data File (formatted as Inline XBRL document and contained in Exhibit 101). | |
1Filed as an exhibit to Legacy HTA’s (File No. 001-35568) Form 8-K filed with the SEC on March 1, 2022 and hereby incorporated by reference.
2Filed as an exhibit to the Company's (File No. 001-35568) Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 8, 2023 and hereby incorporated by reference.
3Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on April 29, 2020 and hereby incorporated by reference.
4Filed as an exhibit to the Company's (File No. 001-35568) Form 8-K filed with the SEC on July 26, 2022 and hereby incorporated by reference.
5Filed as an exhibit to the Company's Form 10-Q for the period ended September 30, 2023, filed with the SEC on November 3, 2023, and hereby incorporated by reference.
6Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on March 28, 2013 and hereby incorporated by reference.
7Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on July 12, 2016 and hereby incorporated by reference.
8Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on June 13, 2017 and hereby incorporated by reference.
9Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on September 16, 2019 and hereby incorporated by reference.
10Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on September 28, 2020 and hereby incorporated by reference.
11Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on May 16, 2022 and hereby incorporated by reference.
12Filed as an exhibit to Legacy HR's (File No. 001-11852) Form 10-K for the year ended December 31, 2015 filed with the SEC on February 16, 2016 and hereby incorporated by reference.
13Filed as an exhibit to Legacy HR's (File No. 001-11852) Form 10-K for the year ended December 31, 2019 filed with the SEC on February 12, 2020 and hereby incorporated by reference.
14Filed as an exhibit to Legacy HR's (File No. 001-11852) Form 10-K for the year ended December 31, 2021 filed with the SEC on February 22, 2022 and hereby incorporated by reference.
15Filed as an exhibit to Legacy HR's (File No. 001-11852) Form 10-K for the year ended December 31, 2016 filed with the SEC on February 15, 2017 and hereby incorporated by reference.
16Filed as an exhibit to Legacy HR's (File No. 001-11852) Form 8-K filed with the SEC on February 2, 2016 and hereby incorporated by reference.
17Filed as an exhibit to Legacy HR's (File No. 001-11852) Form 10-Q for the quarter ended June 30, 2021 filed with the SEC on August 4, 2021 and hereby incorporated by reference.
18Filed as an exhibit to the Company's (File No. 001-35568) Form 8-K filed with the SEC on August 5, 2022 and hereby incorporated by reference.
19Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on May 18, 2012 and hereby incorporated by reference.
20Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 8-K filed with the SEC on December 22, 2010 and hereby incorporated by reference.
21Filed as an exhibit to Legacy HTA's (File No. 001-35568) Form 10-K for the year ended December 31, 2016 filed with the SEC on February 21, 2017 and hereby incorporated by reference.
22Included as Appendix A to Legacy HTA's (File No. 001-35568) Definitive Proxy Statement on Schedule 14A filed with the SEC on April 30, 2021 and hereby incorporated by reference.
23Filed as an exhibit to the Company's (File No. 001-35568) Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023 and hereby incorporated by reference.
Executive Compensation Plans and Arrangements
The following is a list of all executive compensation plans and arrangements filed as exhibits to this Annual Report on Form 10-K:
1.Third Amended and Restated Employment Agreement, dated February 16, 2016, between Todd J. Meredith and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.4)
2.Amendment No. 1 to Third Amended and Restated Employment Agreement, dated February 12, 2020, between Todd J. Meredith and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.5)
3.Amendment No. 2 to Third Amended and Restated Employment Agreement, dated February 22, 2022, between Todd J. Meredith and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.6)
4.Third Amended and Restated Employment Agreement, dated February 15, 2017, between John M. Bryant, Jr. and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.7)
5.Amendment No. 1 to Third Amended and Restated Employment Agreement, dated February 12, 2020, between John M. Bryant, Jr. and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.8)
6.Amended and Restated Employment Agreement, dated January 1, 2017, between Robert E. Hull and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.9)
7.Amendment No. 1 to Amended and Restated Employment Agreement, dated February 12, 2020, between Robert E. Hull and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.10)
8.Amendment No. 2 to Amended and Restated Employment Agreement, dated February 22, 2022, between Robert E. Hull and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.11)
9.Amended and Restated Employment Agreement, dated February 2, 2016, between J. Christopher Douglas and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.12)
10.Amendment No. 1 to Amended and Restated Employment Agreement, dated February 12, 2020, between J. Christopher Douglas and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.13)
11.Amendment No. 2 to Amended and Restated Employment Agreement, dated February 22, 2022, between J. Christopher Douglas and Healthcare Realty Trust Incorporated (now known as HRTI, LLC) (filed as Exhibit 10.14)
12.Amended and Restated Employment Agreement between Healthcare Realty Trust Incorporated (now known as HRTI, LLC) and Julie F. Wilson, dated July 1, 2021 (filed as Exhibit 10.15)
13.Executive Incentive Program, dated August 1, 2022 (filed as Exhibit 10.16)
14.Form of LTIP Award Agreement (CEO Version) (filed as Exhibit 10.17)
15.Form of LTIP Award Agreement (Executive Version) (filed as Exhibit 10.18)
16.Form of LTIP Award Agreement (Director Version) (filed as Exhibit 10.19)
17.Form of Restricted Stock Award Certificate (filed as Exhibit 10.21)
18.The Company's Amended and Restated 2006 Incentive Plan, dated April 29, 2021 (filed as Exhibit 10.22)
19.Form of LTIP Award Agreement (filed as Exhibit 10.23)
Item 16. Form 10-K Summary
None.
SIGNATURES AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LPSCHEDULES
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE ASSETS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | In Thousands |
| Interest Rate | Final Maturity Date | Payment Terms | | Prior Liens | | Face Amount | | Carrying Amount | | Principal Amount of Loans Subject to Delinquent Principal or Interest |
| Mortgage loan on real estate located in: | | | | | | | | | | |
| Texas | 10.00 | % | 7/1/2022 | (1) | | $ | — | | | $ | 15,000 | | | $ | 14,267 | | | $ | — | |
| | | | | | | | | | | |
| Mezzanine loans on real estate located in: | | | | | | | | | | |
| Texas | 8.00 | % | 6/24/2024 | (2) | | — | | | 49,319 | | | 48,793 | | | — | |
| North Carolina | 8.00 | % | 12/22/2024 | (3) | | — | | | 6,000 | | | 6,012 | | | — | |
| Total real estate notes receivable | | | | | $ | — | | | $ | 70,319 | | | $ | 69,072 | | | $ | — | |
| Accrued interest receivable | | | | | — | | | — | | | 42 | | | — | |
| Total real estate notes receivable, net | | | | | $ | — | | | $ | 70,319 | | | $ | 69,114 | | | $ | — | |
| | | | | | | | | | | |
| (1) Twelve-month prefunded interest reserve, with principal sum and interest on unpaid principal due on the maturity date. |
| (2) Interest is accrued and funded utilizing interest reserves, funded through payment-in-kind interest, until such time the interest reserve is fully funded. Thereafter, interest only payments due with principal and any unpaid interest due on the maturity date. |
| (2) Capitalized interest through maturity, with outstanding principal and accrued interest due on the maturity date. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| HEALTHCARE REALTY TRUST INCORPORATED |
| | |
| By: | /s/ TODD J. MEREDITH |
| | Todd J. Meredith |
| | President, Chief Executive Officer, and Director |
| | February 16, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| SIGNATURE | | TITLE | | DATE |
| | | | |
| /s/ Todd J. Meredith | | President, Chief Executive Officer and Director | | February 16, 2024 |
| Todd J. Meredith | | (Principal Executive Officer) | | |
| | | | |
| /s/ J. Christopher Douglas | | Executive Vice President and Chief Financial | | February 16, 2024 |
| J. Christopher Douglas | | Officer (Principal Financial Officer) | | |
| | | | |
| /s/ Amanda L. Callaway | | Senior Vice President and Chief Accounting | | February 16, 2024 |
| Amanda L. Callaway | | Officer (Principal Accounting Officer) | | |
| | | | |
| /s/ John V. Abbott | | Director | | February 16, 2024 |
| John V. Abbott | | | | |
| | | | |
| /s/ Nancy H. Agee | | Director | | February 16, 2024 |
| Nancy H. Agee | | | | |
| | | | |
| /s/ W. Bradley Blair, II | | Director | | February 16, 2024 |
| W. Bradley Blair, II | | | | |
| | | | |
| /s/ Vicki U. Booth | | Director | | February 16, 2024 |
| Vicki U. Booth | | | | |
| | | | |
| /s/ Edward H. Braman | | Director | | February 16, 2024 |
| Edward H. Braman | | | | |
| | | | |
| /s/ Ajay Gupta | | Director | | February 16, 2024 |
| Ajay Gupta | | | | |
| | | | |
| /s/ James J. Kilroy | | Director | | February 16, 2024 |
| James J. Kilroy | | | | |
| | | | |
| /s/ Jay P. Leupp | | Director | | February 16, 2024 |
| Jay P. Leupp | | | | |
| | | | |
| /s/ Peter F. Lyle | | Director | | February 16, 2024 |
| Peter F. Lyle | | | | |
| | | | |
| /s/ Constance B. Moore | | Director | | February 16, 2024 |
| Constance B. Moore | | | | |
| | | | |
| /s/ John Knox Singleton | | Director | | February 16, 2024 |
| John Knox Singleton | | | | |
| | | | |
| /s/ Christann M. Vasquez | | Director | | February 16, 2024 |
| Christann M. Vasquez | | | | |
Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2023, 2022 and 2021
| | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | | ADDITIONS AND DEDUCTIONS | | |
| DESCRIPTION | BALANCE
AT BEGINNING OF PERIOD | CHARGED/(CREDITED) TO COSTS AND EXPENSES | CHARGED
TO OTHER ACCOUNTS | UNCOLLECTIBLE ACCOUNTS WRITTEN-OFF | BALANCE
AT END OF PERIOD |
| 2023 | Accounts receivable allowance | $ | 3,954 | | $ | 5,119 | | $ | — | | $ | 669 | | $ | 8,404 | |
| 2022 | Accounts receivable allowance
| $ | 654 | | $ | 3,306 | | $ | — | | $ | 6 | | $ | 3,954 | |
| 2021 | Accounts receivable allowance
| $ | 604 | | $ | 72 | | $ | — | | $ | 22 | | $ | 654 | |
Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | LAND 1 | BUILDINGS, IMPROVEMENTS, LEASE INTANGIBLES AND CIP 1 | | | | | | |
| MARKET | NUMBER OF PROP. | INITIAL INVESTMENT | COST CAPITALIZED subsequent to acquisition | TOTAL | INITIAL INVESTMENT | COST CAPITALIZED subsequent to acquisition | TOTAL | PERSONAL PROPERTY | 2, 3, 5
TOTAL PROPERTY | 1, 3 ACCUMULATED DEPRECIATION | 4 ENCUMBRANCES | 5
DATE ACQUIRED | DATE CONST. |
| Dallas, TX | 43 | | $ | 72,772 | | $ | 17,396 | | $ | 90,168 | | $ | 925,170 | | $ | 147,779 | | $ | 1,072,949 | | $ | 550 | | $ | 1,163,667 | | $ | 221,375 | | $ | — | | 2003-2022 | 1974-2021 |
| Houston, TX | 31 | | 63,942 | | 13,018 | | 76,960 | | 642,626 | | 32,557 | | 675,183 | | 57 | | 752,200 | | 97,793 | | — | | 2007-2022 | 1974-2018 |
| Seattle, WA | 29 | | 59,412 | | 4,883 | | 64,295 | | 551,328 | | 90,031 | | 641,359 | | 715 | | 706,369 | | 186,903 | | — | | 2008-2022 | 1977-2018 |
| Denver, CO | 33 | | 62,172 | | 14,526 | | 76,698 | | 488,764 | | 56,499 | | 545,263 | | 610 | | 622,571 | | 94,906 | | — | | 2007-2022 | 1942-2022 |
| Charlotte, NC | 32 | | 28,119 | | 7,345 | | 35,464 | | 451,251 | | 39,182 | | 490,433 | | 110 | | 526,007 | | 116,578 | | — | | 2008-2020 | 1961-2018 |
| Phoenix, AZ | 35 | | 12,205 | | 8,057 | | 20,262 | | 447,753 | | 26,436 | | 474,189 | | 425 | | 494,876 | | 59,449 | | — | | 2007-2017 | 1971-2008 |
| Atlanta, GA | 27 | | 40,227 | | 8,868 | | 49,095 | | 429,729 | | 15,587 | | 445,316 | | 100 | | 494,511 | | 79,569 | | 5,572 | | 2007-2022 | 1974-2014 |
| Boston, MA | 17 | | 117,857 | | 9,590 | | 127,447 | | 336,670 | | 4,255 | | 340,925 | | 14 | | 468,386 | | 37,569 | | — | | 2012-2016 | 1860-2011 |
| Raleigh, NC | 28 | | 44,530 | | 12,090 | | 56,620 | | 393,245 | | 15,098 | | 408,343 | | 9 | | 464,972 | | 38,879 | | — | | 2010-2022 | 1977-2020 |
| Nashville, TN | 13 | | 40,673 | | 2,674 | | 43,347 | | 309,400 | | 97,997 | | 407,397 | | 7,427 | | 458,171 | | 115,979 | | 7,841 | | 2004-2022 | 1976-2022 |
| Los Angeles, CA | 20 | | 68,225 | | 3,861 | | 72,086 | | 305,221 | | 71,590 | | 376,811 | | 453 | | 449,350 | | 145,875 | | 28,870 | | 1994-2022 | 1964-2008 |
| Miami, FL | 19 | | 47,092 | | 6,902 | | 53,994 | | 325,814 | | 35,543 | | 361,357 | | 178 | | 415,529 | | 74,470 | | — | | 1994-2021 | 1954-2021 |
| Tampa, FL | 19 | | 23,491 | | 7,631 | | 31,122 | | 363,588 | | 15,729 | | 379,317 | | 33 | | 410,472 | | 36,726 | | — | | 1994-2023 | 1975-2015 |
| Indianapolis, IN | 36 | | 45,914 | | 8,985 | | 54,899 | | 308,044 | | 10,542 | | 318,586 | | 13 | | 373,498 | | 42,273 | | — | | 2007-2019 | 1988-2013 |
| Austin, TX | 13 | | 22,178 | | 4,885 | | 27,063 | | 261,585 | | 31,211 | | 292,796 | | 142 | | 320,001 | | 55,891 | | — | | 2007-2022 | 1972-2015 |
| New York, NY | 14 | | 58,719 | | 5,683 | | 64,402 | | 192,029 | | 4,705 | | 196,734 | | — | | 261,136 | | 15,887 | | — | | 2014-2019 | 1920-2014 |
| Chicago, IL | 6 | | 11,250 | | 2,554 | | 13,804 | | 212,170 | | 17,314 | | 229,484 | | 81 | | 243,369 | | 39,671 | | — | | 2004-2019 | 1970-2017 |
| Memphis, TN | 11 | | 12,253 | | 1,648 | | 13,901 | | 118,427 | | 75,725 | | 194,152 | | 322 | | 208,375 | | 71,813 | | — | | 1999-2020 | 1982-2014 |
| Honolulu, HI | 6 | | 8,314 | | 1,213 | | 9,527 | | 147,422 | | 47,669 | | 195,091 | | 169 | | 204,787 | | 61,575 | | — | | 2003-2014 | 1975-2010 |
| Hartford, CT | 30 | | 24,167 | | 5,214 | | 29,381 | | 159,178 | | 1,383 | | 160,561 | | — | | 189,942 | | 15,883 | | — | | 2016-2019 | 1955-2017 |
| Other (49 markets) | 194 | | 272,785 | | 61,795 | | 334,580 | | 3,308,020 | | 211,205 | | 3,519,225 | | 1,310 | | 3,855,115 | | 618,702 | | 28,251 | | 1993-2023 | |
| Total real estate | 656 | | 1,136,297 | | 208,818 | | 1,345,115 | | 10,677,434 | | 1,048,037 | | 11,725,471 | | 12,718 | | 13,083,304 | | 2,227,766 | | 70,534 | | | |
| | | | | | | | | | | | | |
| Land held for develop. | — | | 59,871 | | — | | 59,871 | | — | | — | | — | | — | | 59,871 | | | — | | | |
| Construction in Progress | — | | — | | — | | — | | 60,727 | | — | | 60,727 | | — | | 60,727 | | — | | — | | | |
| | | | | | | | | | | | | |
| Financing lease right-of-use assets | — | | — | | — | | — | | — | | — | | — | | — | | 82,209 | | — | | — | | | |
| Investment in financing receivables, net | — | | — | | — | | — | | — | | — | | — | | — | | 122,602 | | — | | — | | | |
| Total properties | 656 | | 1,196,168 | | $ | 208,818 | | $ | 1,404,986 | | $ | 10,738,161 | | $ | 1,048,037 | | $ | 11,786,198 | | $ | 12,718 | | $ | 13,408,713 | | $ | 2,227,766 | | $ | 70,534 | | | |
1Includes one asset held for sale as of December 31, 2023 with gross real estate investments of approximately $9.6 million.
2Total properties as of December 31, 2023 have an estimated aggregate total cost of $12.6 billion for federal income tax purposes.
3Depreciation is provided for on a straight-line basis on buildings and improvements over 3.3 to 49.0 years, lease intangibles over 1.0 to 99.0 years, personal property over 3.0 to 20.0 years, and land improvements over 2.0 to 39.0 years.
4Includes unamortized premium of $0.3 million and unaccreted discount of $0.2 million and debt issuance costs of $0.3 million as of December 31, 2023.
5Includes merger of Healthcare Trust of America, Inc. buildings, acquired in 2022.
6Rollforward of Total Property and Accumulated Depreciation, including assets held for sale, for the year ended December 31, 2023, 2022 and 2021 follows:
| | | | | | | | | | | | | | | | | | | | |
| | YEAR ENDED DEC. 31, 2023 | YEAR ENDED DEC. 31, 2022 | YEAR ENDED DEC. 31, 2021 |
| Dollars in thousands | TOTAL PROPERTY | ACCUMULATED DEPRECIATION | TOTAL PROPERTY | ACCUMULATED DEPRECIATION | TOTAL PROPERTY | ACCUMULATED DEPRECIATION |
| Beginning balance | $ | 14,076,475 | | $ | 1,645,271 | | $ | 5,104,942 | | $ | 1,338,743 | | $ | 4,670,226 | | $ | 1,249,679 | |
| Additions during the period | | | | | | |
| Real estate acquired | 54,024 | | 2,322 | | 9,780,070 | | 241,285 | | 374,912 | | 7,668 | |
| Other improvements | 28,521 | | 668,069 | | 219,783 | | 205,703 | | 103,035 | | 191,875 | |
| | | | | | |
| Land held for development | | — | | 49,416 | | — | | 2,021 | | — | |
| Construction in progress | 49,901 | | — | | 31,586 | | — | | 3,974 | | — | |
| Investment in financing receivable, net | 2,366 | | — | | (66,509) | | — | | 186,745 | | — | |
| Financing lease right-of-use assets, net | (1,616) | | — | | 52,249 | | — | | 11,909 | | — | |
| Corporate Properties | — | | — | | 3,640 | | 236 | | — | | — | |
| Retirement/dispositions | | | | | | |
| Real estate | (800,958) | | (87,896) | | (1,098,702) | | (140,696) | | (247,880) | | (110,479) | |
| | | | | | |
| | | | | | |
| Ending balance | $ | 13,408,713 | | $ | 2,227,766 | | $ | 14,076,475 | | $ | 1,645,271 | | $ | 5,104,942 | | $ | 1,338,743 | |
Schedule IV – Mortgage Loans on Real Estate Assets as of December 31, 2023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Dollars in thousands | Final Maturity Date | Payment Terms | | Prior Liens | | Face Amount | | Carrying Amount | | Principal Amount of Loans Subject to Delinquent Principal or Interest |
| Mortgage loan on real estate located in: | | | | | | | | | | |
| Texas | 7.00 | % | 7/1/2024 | (1) | | $ | — | | | $ | 31,150 | | | $ | 31,150 | | | $ | — | |
| North Carolina | 8.00 | % | 12/22/2024 | (2) | | — | | | 6,000 | | | 5,796 | | | |
| Florida | 6.00 | % | 2/27/2026 | (3) | | — | | | 32,156 | | | 32,112 | | | — | |
| California | 6.00 | % | 3/29/2026 | (4) | | — | | | 45,000 | | | 45,000 | | | — | |
| Florida | 9.00 | % | 12/28/2026 | (5) | | — | | | 7,700 | | | 7,700 | | | — | |
| Mezzanine loans on real estate located in: | | | | | | | | | | |
| Texas | 8.00 | % | 6/24/2024 | (6) | | — | | | 54,119 | | | 45,856 | | | 54,119 | |
| Arizona | 9.00 | % | 12/20/2026 | (4) | | — | | | 6,000 | | | 6,000 | | | — | |
| Total real estate notes receivable | | | | $ | — | | | $ | 182,125 | | | $ | 173,614 | | | $ | 54,119 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| 1 Twelve-month prefunded interest reserve, with principal sum and interest on unpaid principal due on the maturity date. |
| 2 Capitalized interest through maturity, with outstanding principal and accrued interest due on the maturity date. |
| 3 Construction loan up to $65 million with periodic disbursements. Interest only payments due with principal and any unpaid interest due on the maturity date. |
| 4 Interest only payments due with principal and any unpaid interest due on the maturity date. |
| 5 Monthly installment payments of principal and interest in the amount of $152,069. |
| 6 Interest only payments due with principal and any unpaid interest due on the maturity date. Loan on non-accrual status as of December 31, 2023. |
The following shows changes in the carrying amounts of mortgage loans on real estate assets during the years ended December 31,
2021, 20202023, 2022 and
2019 (in thousands): | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Balance as of the beginning of the year | $ | 555 | | | $ | 1,332 | | | $ | 2,070 | |
| Additions: | | | | | |
| New real estate notes | 67,032 | | | 6,000 | | | — | |
| Capitalized interest | 1,841 | | | — | | | — | |
| Accretion of fees and other items | 932 | | | — | | | — | |
| Deductions: | | | | | |
| Mortgage loan retired in connection with an acquisition | — | | | (6,000) | | | — | |
| Collection of real estate loans | (555) | | | (777) | | | (738) | |
| Deferred fees and other items | (691) | | | — | | | — | |
| Balance as of the end of the year | $ | 69,114 | | | $ | 555 | | | $ | 1,332 | |
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2023 | | 2022 | | 2021 |
| Balance as of the beginning of the year | $ | 99,643 | | | $ | — | | | $ | — | |
| Additions: | | | | | |
| Fair value real estate notes assumed | — | | | 74,819 | | | — | |
| New real estate notes | 58,700 | | | 23,325 | | | — | |
| Draws on existing real estate notes | 19,103 | | | | | |
| Capitalized interest | — | | | 1,499 | | | — | |
| Accretion of fees and other items | 1,364 | | | — | | | — | |
| Deductions: | | | | | |
| Collection of real estate loans | — | | | — | | | — | |
| Deferred fees and other items | — | | | — | | | — | |
| Allowance for credit loss | $ | (5,196) | | | | | |
| Balance as of the end of the year | $ | 173,614 | | | $ | 99,643 | | | $ | — | |
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit Index immediately precedesAll other schedules for which provision is made in the exhibits.
The following exhibits are included, or incorporated by reference, in this Annual Report for the fiscal year ended December 31, 2021 (and are numbered in accordance with Item 601 of Regulation S-K). | | | | | |
1.1 | Underwriting Agreement, dated May 2, 2017, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Wells Fargo Securities, LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein, on the other hand (included as Exhibit 1.1 to our Current Report on Form 8-K filed on May 8, 2017 and incorporated herein by reference). |
1.2 | Underwriting Agreement, dated June 1, 2017, among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., and Wells Fargo Securities, LLC, J.P. Morgan Securities LLC and U.S. Bancorp Investments, Inc., as representatives of the several underwriters named therein (included as Exhibit 1.1 to our Current Report on Form 8-K filed on June 7, 2017 and incorporated herein by reference). |
1.3 | Underwriting Agreement, dated September 5, 2019, among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., and BofA Securities, Inc., J.P. Morgan Securities LLC, U.S. Bancorp Investments, Inc. and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein (included as Exhibit 1.1 to our Current Report on Form 8-K filed on September 6, 2019 and incorporated herein by reference). |
1.4 | Underwriting Agreement, dated September 14, 2020, among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., and Wells Fargo Securities, LLC, Jefferies LLC, J.P. Morgan Securities LLC, and U.S. Bancorp Investments, Inc. as representatives of the several underwriters named therein (included as Exhibit 1.1 to our Current Report on Form 8-K filed on September 15, 2020 and incorporated herein by reference). |
1.5 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and J.P. Morgan Securities LLC and JPMorgan Chase Bank, National Association, on the other hand (included as Exhibit 1.1 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.6 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and BMO Capital Markets Corp. and Bank of Montreal, on the other hand (included as Exhibit 1.2 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.7 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and MUFG Securities Americas Inc. and MUFG Securities EMEA plc, on the other hand (included as Exhibit 1.3 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.8 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Wells Fargo Securities, LLC and Wells Fargo Bank, National Association, on the other hand (included as Exhibit 1.4 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.9 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and BofA Securities, Inc. and Bank of America, N.A., on the other hand (included as Exhibit 1.5 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.10 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Jefferies LLC, on the other hand (included as Exhibit 1.6 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.11 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Morgan Stanley & Co. LLC, on the other hand (included as Exhibit 1.7 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.12 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Capital One Securities, Inc., on the other hand (included as Exhibit 1.8 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.13 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and BTIG, LLC, on the other hand (included as Exhibit 1.9 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
1.14 | Equity Distribution Agreement, dated March 5, 2021, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Scotia Capital (USA) Inc. and the Bank of Nova Scotia, on the other hand (included as Exhibit 1.10 to our Current Report on Form 8-K filed on March 8, 2021 and incorporated herein by reference). |
| | | | | |
1.15 | |
1.16 | |
1.17 | |
1.18 | |
1.19 | |
1.20 | |
1.21 | |
1.22 | |
2.1 | Agreement and Plan of Merger, dated as of February 28, 2022, among Healthcare Realty Trust Incorporated, Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, and HR Acquisition 2, LLC (included as Exhibit 2.1 to our Current Report on Form 8-K filed on March 1, 2022 and incorporated herein by reference). |
3.1 | |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
3.6 | |
3.7 | |
3.8 | |
3.9 | |
3.10 | |
3.11 | |
| | | | | |
3.12 | |
4.1 | |
4.2 | |
4.2 | |
4.3 | |
4.4 | |
4.5* | |
5.1 | |
5.2 | |
5.3 | |
5.4 | |
5.5 | |
5.6 | |
5.7 | |
5.8 | |
5.9 | |
5.10 | |
5.11 | |
5.12 | |
8.1 | |
8.2 | |
8.3 | |
8.4 | |
10.1 | |
| | | | | |
10.2 | |
10.3 | |
10.4 | |
10.5 | |
10.6† | |
10.7† | |
10.8 | |
10.9 | |
10.10 | |
10.11 | |
10.12 | |
10.13 | |
10.14 | |
10.15† | |
10.16† | |
10.17† | |
10.18 | |
10.19 | |
10.20 | |
10.21 | |
10.22 | |
10.23 | |
10.24 | |
| | | | | |
10.25 | Credit Agreement by and among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, N.A. and Deutsche Bank Securities Inc., as syndication agents, U.S. Bank National Association, Fifth Third Bank, Capital One, N.A., Regions Bank, and Compass Bank, as documentation agents, and the Lenders Party Hereto dated March 29, 2012 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on April 2, 2012 and incorporated herein by reference). |
10.26 | |
10.27 | Credit Agreement by and among Healthcare Trust of America Holdings, LP, Wells Fargo Bank, N.A., as administrative agent, Wells Fargo Securities, LLC, as lead arranger, and the Lenders Party Hereto, dated July 20, 2012 (included as Exhibit 10.8 to our Quarterly Report on Form 10-Q filed on August 9, 2012 and incorporated herein by reference). |
10.28 | |
10.29 | |
10.30 | |
10.31 | Amended and Restated Revolving Credit and Term Loan Agreement, dated November 19, 2014, by and among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., JP Morgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association and U.S. Bank National Association, as syndication agents, Bank of Montreal, PNC Bank, National Association, The Bank of Nova Scotia, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as documentation agents, Compass Bank, Fifth Third Bank, Regions Bank, and Capital One, N.A., as managing agents and the lenders party thereto (included as Exhibit 10.1 to our Current Report on Form 8-K filed on November 24, 2014 and incorporated herein by reference). |
10.32 | Guaranty dated November 19, 2014, by Healthcare Trust of America, Inc. for the benefit of JPMorgan Chase Bank, N.A., as administrative agent, the Lenders, and Bank of America, N.A., as swing lender and issuing bank (included as Exhibit 10.2 to our Current Report on Form 8-K filed on November 24, 2014 and incorporated herein by reference). |
10.33 | |
10.34 | First Amendment to the Amended and Restated Revolving Credit and Term Loan Agreement, dated February 11, 2015, by and among Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as administrative agent for the lenders (included as Exhibit 10.33 to our Annual Report on Form 10-K filed on February 23, 2015 and incorporated herein by reference). |
10.35 | |
10.36 | Credit Agreement by and among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association, U.S. Bank National Association, Capital One, N.A., PNC Bank, National Association and Bank of America, N.A., as syndication agents, Bank of Montreal, The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Compass Bank, Fifth Third Bank and Morgan Stanley Senior Funding, Inc., as documentation agents, Regions Bank, as managing agent, and the lenders named therein, dated July 27, 2017 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on July 31, 2017 and incorporated herein by reference). |
10.37 | |
10.38 | |
10.39 | |
10.40 | |
10.41† | |
10.42 | |
| | | | | |
10.43 | Credit Agreement by and among Healthcare Trust of America, LP, Healthcare Trust of America, Inc., JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association, U.S. Bank National Association, Capital One, National Association, PNC Bank, National Association and Bank of America, N.A., as syndication agents, Bank of Montreal, The Bank of Nova Scotia, Fifth Third Bank, National Association, Mizuho Bank, LTD., Morgan Stanley Senior Funding, Inc., MUFG Bank, LTD. and Regions Bank, as documentation agents, and the lenders named therein, dated October 6, 2021 (included as Exhibit 10.1 to our Current Report on Form 8-K filed on October 7, 2021 and incorporated herein by reference). |
21.1* | |
23.1* | |
23.2* | |
23.3 | |
23.4 | |
23.5 | |
23.6 | |
23.7 | |
23.8 | |
23.9 | |
23.10 | |
23.11 | |
23.12 | |
23.13 | |
23.14 | |
23.15 | |
23.16 | |
23.17 | |
31.1* | |
31.2* | |
31.3* | |
31.4* | |
32.1** | |
32.2** | |
32.3** | |
32.4** | |
101.INS* | Inline XBRL Instance Document. |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. |
| | | | | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| |
* | Filed herewith. |
** | Furnished herewith. |
† | Compensatory plan or arrangement. |
SIGNATURES
Pursuant to the requirementsapplicable accounting regulations of the Securities and Exchange Act of 1934,Commission are omitted because they are not required under the registrant has duly caused this Annual Report to be signed on its behalf byrelated instructions or are not applicable, or because the undersigned thereunto duly authorized. | | | | | | | | | | | |
| Healthcare Trust of America, Inc. |
| | | |
By: | /s/ Peter N. Foss | | Interim President and Chief Executive Officer |
| Peter N. Foss | | (Principal Executive Officer) |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | March 1, 2022 | | |
| | | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant andrequired information is shown in the capacities and on the dates indicated. | | | | | | | | | | | |
By: | /s/ Peter N. Foss | | Interim President and Chief Executive Officer |
| Peter N. Foss | | (Principal Executive Officer) |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ W. Bradley Blair, II | | Lead Director |
| W. Bradley Blair, II | | |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Vicki U. Booth | | Director |
| Vicki U. Booth | | |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ H. Lee Cooper | | Director |
| H. Lee Cooper | | |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Warren D. Fix | | Director |
| Warren D. Fix | | |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Jay P. Leupp | | Director |
| Jay P. Leupp | | |
Date: | March 1, 2022 | | |
consolidated financial statements or notes thereto.107
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | | | | |
| Healthcare Trust of America Holdings, LP |
| | | |
By: | Healthcare Trust of America, Inc., | | |
| its General Partner | | |
| | | |
By: | /s/ Peter N. Foss | | Interim President and Chief Executive Officer |
| Peter N. Foss | | (Principal Executive Officer) |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | March 1, 2022 | | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | | | | | | | | | | | |
By: | /s/ Peter N. Foss | | Interim President and Chief Executive Officer |
| Peter N. Foss | | (Principal Executive Officer) of Healthcare Trust of America, Inc., |
Date: | March 1, 2022 | | general partner of Healthcare Trust of America Holdings, LP |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) of |
Date: | March 1, 2022 | | Healthcare Trust of America, Inc., general partner of Healthcare Trust |
| | | of America Holdings, LP |
| | | |
By: | /s/ W. Bradley Blair, II | | Lead Director of Healthcare Trust of America, Inc., general partner of |
| W. Bradley Blair, II | | Healthcare Trust of America Holdings, LP |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Vicki U. Booth | | Director of Healthcare Trust of America, Inc., general partner of |
| Vicki U. Booth | | Healthcare Trust of America Holdings, LP |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ H. Lee Cooper | | Director of Healthcare Trust of America, Inc., general partner of |
| H. Lee Cooper | | Healthcare Trust of America Holdings, LP |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Warren D. Fix | | Director of Healthcare Trust of America, Inc., general partner of |
| Warren D. Fix | | Healthcare Trust of America Holdings, LP |
Date: | March 1, 2022 | | |
| | | |
By: | /s/ Jay P. Leupp | | Director of Healthcare Trust of America, Inc., general partner of |
| Jay P. Leupp | | Healthcare Trust of America Holdings, LP |
Date: | March 1, 2022 | | |
