UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended:	September 30, ~~2020~~2021
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to ~~For the transition period~~from to

Commission File Number: 001-11852

HEALTHCARE REALTY TRUST INCORPORATED

(Exact name of Registrant as specified in its charter)


Maryland			62-1507028
(State or other jurisdiction of Incorporation or organization)			(I.R.S. Employer Identification No.)

3310 West End Avenue, Suite 700

Nashville, Tennessee 37203

(Address of principal executive offices)

(615) 269-8175

(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common stock, $0.01 par value per share

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☒ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October ~~30, 2020,~~29, 2021, the Registrant had ~~136,054,024 shares~~ 147,541,832 shares of Common Stock outstanding.

HEALTHCARE REALTY TRUST INCORPORATED

FORM 10-Q

September 30, ~~2020~~2021

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Healthcare Realty Trust Incorporated

Condensed Consolidated Balance Sheets

Amounts in thousands, except per share data


ASSETS	ASSETS					ASSETS
		Unaudited SEPTEMBER 30, 2020		DECEMBER 31, 2019			Unaudited SEPTEMBER 30, 2021		DECEMBER 31, 2020
Real estate properties	Real estate properties					Real estate properties
Land	Land	$	330,840	$	289,751	Land	$	375,342	$	362,695
Buildings, improvements and lease intangibles	Buildings, improvements and lease intangibles	4,014,740		3,986,326		Buildings, improvements and lease intangibles	4,383,314		4,220,297
Personal property	Personal property	10,962		10,538		Personal property	11,555		11,195
Investment in financing receivable, net						Investment in financing receivable, net	104,806		—
Construction in progress	Construction in progress	0		48,731		Construction in progress	1,546		—
Land held for development	Land held for development	24,647		24,647		Land held for development	27,232		27,226
Total real estate properties	Total real estate properties	4,381,189		4,359,993		Total real estate properties	4,903,795		4,621,413
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(1,198,444)		(1,121,102)		Less accumulated depreciation and amortization	(1,322,577)		(1,239,224)
Total real estate properties, net	Total real estate properties, net	3,182,745		3,238,891		Total real estate properties, net	3,581,218		3,382,189
Cash and cash equivalents	Cash and cash equivalents	121,992		657		Cash and cash equivalents	16,000		15,303
Restricted cash		60,644		0

Assets held for sale, net	Assets held for sale, net	20,051		37		Assets held for sale, net	13,603		20,646
Operating lease right-of-use assets	Operating lease right-of-use assets	123,807		126,177		Operating lease right-of-use assets	128,945		125,198
Financing lease right-of-use assets	Financing lease right-of-use assets	19,776		12,667		Financing lease right-of-use assets	20,760		19,667

Investments in unconsolidated joint ventures						Investments in unconsolidated joint ventures	122,345		73,137
Other assets, net	Other assets, net	182,436		185,426		Other assets, net	186,328		176,120
Total assets	Total assets	$	3,711,451	$	3,563,855	Total assets	$	4,069,199	$	3,812,260

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities	Liabilities					Liabilities
Notes and bonds payable	Notes and bonds payable	$	1,554,395	$	1,414,069	Notes and bonds payable	$	1,691,433	$	1,602,769
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	79,528		78,517		Accounts payable and accrued liabilities	79,381		81,174
Liabilities of assets held for sale	Liabilities of assets held for sale	548		145		Liabilities of assets held for sale	766		1,216
Operating lease liabilities	Operating lease liabilities	91,466		91,574		Operating lease liabilities	95,913		92,273
Financing lease liabilities	Financing lease liabilities	18,697		18,037		Financing lease liabilities	20,460		18,837
Other liabilities	Other liabilities	66,442		61,504		Other liabilities	65,913		67,615
Total liabilities	Total liabilities	1,811,076		1,663,846		Total liabilities	1,953,866		1,863,884
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0
Stockholders' equity	Stockholders' equity					Stockholders' equity
Preferred stock, $.01 par value per share; 50,000 shares authorized; NaN issued and outstanding		0		0
Common stock, $.01 par value per share; 300,000 shares authorized; 136,054 and 134,706 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		1,361		1,347
Preferred stock, $.01 par value per share; 50,000 shares authorized; none issued and outstanding						Preferred stock, $.01 par value per share; 50,000 shares authorized; none issued and outstanding	—		—
Common stock, $.01 par value per share; 300,000 shares authorized; 147,542 and 139,487 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively						Common stock, $.01 par value per share; 300,000 shares authorized; 147,542 and 139,487 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	1,475		1,395
Additional paid-in capital	Additional paid-in capital	3,532,130		3,485,003		Additional paid-in capital	3,882,572		3,635,341
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(19,267)		(6,175)		Accumulated other comprehensive loss	(12,413)		(17,832)
Cumulative net income attributable to common stockholders	Cumulative net income attributable to common stockholders	1,215,362		1,127,304		Cumulative net income attributable to common stockholders	1,244,551		1,199,499
Cumulative dividends	Cumulative dividends	(2,829,211)		(2,707,470)		Cumulative dividends	(3,000,852)		(2,870,027)
Total stockholders' equity	Total stockholders' equity	1,900,375		1,900,009		Total stockholders' equity	2,115,333		1,948,376

Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	3,711,451	$	3,563,855	Total liabilities and stockholders' equity	$	4,069,199	$	3,812,260

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, are an integral part of these financial statements.

Table of Contents

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Income

For the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Amounts in thousands, except per share data

Unaudited


		THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,					THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenues	Revenues									Revenues
Rental income	Rental income	$	123,384	$	117,740	$	368,385	$	342,787	Rental income	$	131,746	$	123,384	$	388,620	$	368,385
Interest from financing receivable, net										Interest from financing receivable, net	1,917		—		2,426		—

Other operating	Other operating	1,868		2,059		5,364		5,987		Other operating	2,969		1,868		7,347		5,364
		125,252		119,799		373,749		348,774			136,632		125,252		398,393		373,749
Expenses	Expenses									Expenses
Property operating	Property operating	50,171		46,777		146,305		133,790		Property operating	55,518		50,171		159,241		146,305
General and administrative	General and administrative	7,299		10,802		23,498		27,157		General and administrative	8,207		7,299		25,251		23,498
Acquisition and pursuit costs	Acquisition and pursuit costs	440		501		1,621		1,227		Acquisition and pursuit costs	974		440		2,388		1,621
Depreciation and amortization	Depreciation and amortization	47,143		45,137		142,331		131,725		Depreciation and amortization	50,999		47,143		150,904		142,331

		105,053		103,217		313,755		293,899			115,698		105,053		337,784		313,755
Other Income (Expense)
Gain on sales of real estate assets		2,177		200		70,395		5,065
Other income (expense)										Other income (expense)
Gain on sales of real estate properties										Gain on sales of real estate properties	1,186		2,177		41,046		70,395
Interest expense	Interest expense	(14,154)		(14,181)		(42,556)		(41,619)		Interest expense	(13,334)		(14,154)		(39,857)		(42,556)

Impairment of real estate assets		—		—		—		(5,610)

Impairment of real estate properties										Impairment of real estate properties	(10,669)		—		(16,581)		—
Equity loss from unconsolidated joint ventures										Equity loss from unconsolidated joint ventures	(183)		(66)		(404)		(194)
Interest and other income (expense), net	Interest and other income (expense), net	8		—		225		(736)		Interest and other income (expense), net	—		74		239		419
		(11,969)		(13,981)		28,064		(42,900)			(23,000)		(11,969)		(15,557)		28,064

Net Income		$	8,230	$	2,601	$	88,058	$	11,975
Net (loss) income										Net (loss) income	$	(2,066)	$	8,230	$	45,052	$	88,058

Basic earnings per common share	Basic earnings per common share	$	0.06	$	0.02	$	0.65	$	0.08	Basic earnings per common share	$	(0.02)	$	0.06	$	0.31	$	0.65

Diluted earnings per common share	Diluted earnings per common share	$	0.06	$	0.02	$	0.65	$	0.08	Diluted earnings per common share	$	(0.02)	$	0.06	$	0.31	$	0.65

Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	134,309		128,090		133,662		126,571		Weighted average common shares outstanding - basic	143,818		134,309		141,521		133,662
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	134,357		128,169		133,736		126,657		Weighted average common shares outstanding - diluted	143,818		134,357		141,613		133,736
Dividends declared, per common share, during the period		$	0.30	$	0.30	$	0.90	$	0.90

Table of Contents

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the Three and Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Amounts in thousands

Unaudited


		THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,					THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income		$	8,230	$	2,601	$	88,058	$	11,975
Net (loss) income										Net (loss) income	$	(2,066)	$	8,230	$	45,052	$	88,058
Other comprehensive income (loss)	Other comprehensive income (loss)									Other comprehensive income (loss)

Interest rate swaps	Interest rate swaps									Interest rate swaps
Reclassification adjustments for losses included in net income (interest expense)	Reclassification adjustments for losses included in net income (interest expense)	1,101		60		2,367		74		Reclassification adjustments for losses included in net income (interest expense)	1,131		1,101		3,340		2,367
Losses arising during the period on interest rate swaps		(74)		(2,341)		(11,192)		(7,642)
Gains (losses) arising during the period on interest rate swaps										Gains (losses) arising during the period on interest rate swaps	36		(74)		2,079		(11,192)
Losses on settlement of treasury rate locks arising during the period	Losses on settlement of treasury rate locks arising during the period	0		0		(4,267)		0		Losses on settlement of treasury rate locks arising during the period	—		—		—		(4,267)
		1,027		(2,281)		(13,092)		(7,568)			1,167		1,027		5,419		(13,092)

Comprehensive income		$	9,257	$	320	$	74,966	$	4,407
Comprehensive (loss) income										Comprehensive (loss) income	$	(899)	$	9,257	$	50,471	$	74,966

Table of Contents

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Equity

For the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Amounts in thousands, except per share data

Unaudited


															Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity
Balance at June 30, 2021														Balance at June 30, 2021	$	1,455	$	3,818,592	$	(13,580)	$	1,246,617	$	(2,956,830)	$	2,096,254
Issuance of common stock, net of issuance costs														Issuance of common stock, net of issuance costs	20		61,442		—		—		—		61,462

Share-based compensation														Share-based compensation	—		2,538		—		—		—		2,538
Net loss														Net loss	—		—		—		(2,066)		—		(2,066)
Reclassification adjustments for losses included in net income (interest expense)														Reclassification adjustments for losses included in net income (interest expense)	—		—		1,131		—		—		1,131
Gains arising during the period on interest rate swaps														Gains arising during the period on interest rate swaps	—		—		36		—		—		36
Dividends to common stockholders ($0.3025 per share)														Dividends to common stockholders ($0.3025 per share)	—		—		—		—		(44,022)		(44,022)
Balance at September 30, 2021														Balance at September 30, 2021	$	1,475	$	3,882,572	$	(12,413)	$	1,244,551	$	(3,000,852)	$	2,115,333

		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity			Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity
Balance at June 30, 2020	Balance at June 30, 2020	$	1,360	$	3,529,559	$	(20,294)	$	1,207,132	$	(2,788,396)	$	1,929,361	Balance at June 30, 2020	$	1,360	$	3,529,559	$	(20,294)	$	1,207,132	$	(2,788,396)	$	1,929,361
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	1		126		—		—		—		127		Issuance of common stock, net of issuance costs	1		126		—		—		—		127

Share-based compensation	Share-based compensation	—		2,445		—		—		—		2,445		Share-based compensation	—		2,445		—		—		—		2,445
Net income	Net income	—		—		—		8,230		—		8,230		Net income	—		—		—		8,230		—		8,230
Reclassification adjustments for losses included in net income (interest expense)	Reclassification adjustments for losses included in net income (interest expense)	—		—		1,101		—		—		1,101		Reclassification adjustments for losses included in net income (interest expense)	—		—		1,101		—		—		1,101
Losses arising during the period on interest rate swaps and treasury rate locks		—		—		(74)		—		—		(74)
Dividends to common stockholders ($0.30 per share)		—		—		—		—		(40,815)		(40,815)
Losses arising during the period on interest rate swaps														Losses arising during the period on interest rate swaps	—		—		(74)		—		—		(74)
Dividends to common stockholders ($0.3000 per share)														Dividends to common stockholders ($0.3000 per share)	—		—		—		—		(40,815)		(40,815)
Balance at September 30, 2020	Balance at September 30, 2020	$	1,361	$	3,532,130	$	(19,267)	$	1,215,362	$	(2,829,211)	$	1,900,375	Balance at September 30, 2020	$	1,361	$	3,532,130	$	(19,267)	$	1,215,362	$	(2,829,211)	$	1,900,375

		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity
Balance at June 30, 2019		$	1,292	$	3,305,344	$	(6,189)	$	1,097,493	$	(2,628,497)	$	1,769,443
Issuance of common stock, net of issuance costs		22		71,792		—		—		—		71,814
Common stock redemptions		—		(2,695)		—		—		—		(2,695)
Share-based compensation		—		5,131		—		—		—		5,131
Net income		—		—		—		2,601		—		2,601
Reclassification adjustments for losses included in net income (interest expense)		—		—		60		—		—		60
Losses arising during the period on interest rate swaps		—		—		(2,341)		—		—		(2,341)
Dividends to common stockholders ($0.30 per share)		—		—		—		—		(38,852)		(38,852)
Balance at September 30, 2019		$	1,314	$	3,379,572	$	(8,470)	$	1,100,094	$	(2,667,349)	$	1,805,161

Table of Contents

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Equity

For the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Amounts in thousands, except per share data

Unaudited


															Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity
Balance at December 31, 2020														Balance at December 31, 2020	$	1,395	$	3,635,341	$	(17,832)	$	1,199,499	$	(2,870,027)	$	1,948,376
Issuance of common stock, net of issuance costs														Issuance of common stock, net of issuance costs	78		240,660		—		—		—		240,738
Common stock redemptions														Common stock redemptions	—		(1,610)		—		—		—		(1,610)
Share-based compensation														Share-based compensation	2		8,181		—		—		—		8,183
Net income														Net income	—		—		—		45,052		—		45,052
Reclassification adjustments for losses included in net income (interest expense)														Reclassification adjustments for losses included in net income (interest expense)	—		—		3,340		—		—		3,340
Gains arising during the period on interest rate swaps														Gains arising during the period on interest rate swaps	—		—		2,079		—		—		2,079
Dividends to common stockholders ($0.9075 per share)														Dividends to common stockholders ($0.9075 per share)	—		—		—		—		(130,825)		(130,825)
Balance at September 30, 2021														Balance at September 30, 2021	$	1,475	$	3,882,572	$	(12,413)	$	1,244,551	$	(3,000,852)	$	2,115,333

		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity			Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity
Balance at December 31, 2019	Balance at December 31, 2019	$	1,347	$	3,485,003	$	(6,175)	$	1,127,304	$	(2,707,470)	$	1,900,009	Balance at December 31, 2019	$	1,347	$	3,485,003	$	(6,175)	$	1,127,304	$	(2,707,470)	$	1,900,009
Issuance of common stock, net of issuance costs	Issuance of common stock, net of issuance costs	13		40,477		—		—		—		40,490		Issuance of common stock, net of issuance costs	13		40,477		—		—		—		40,490
Common stock redemptions	Common stock redemptions	—		(798)		—		—		—		(798)		Common stock redemptions	—		(798)		—		—		—		(798)
Share-based compensation	Share-based compensation	1		7,448		—		—		—		7,449		Share-based compensation	1		7,448		—		—		—		7,449
Net income	Net income	—		—		—		88,058		—		88,058		Net income	—		—		—		88,058		—		88,058
Reclassification adjustments for losses included in net income (interest expense)	Reclassification adjustments for losses included in net income (interest expense)	—		—		2,367		—		—		2,367		Reclassification adjustments for losses included in net income (interest expense)	—		—		2,367		—		—		2,367
Losses arising during the period on interest rate swaps	Losses arising during the period on interest rate swaps	—		—		(15,459)		—		—		(15,459)		Losses arising during the period on interest rate swaps	—		—		(15,459)		—		—		(15,459)
Dividends to common stockholders ($0.90 per share)		—		—		—		—		(121,741)		(121,741)
Dividends to common stockholders ($0.9000 per share)														Dividends to common stockholders ($0.9000 per share)	—		—		—		—		(121,741)		(121,741)
Balance at September 30, 2020	Balance at September 30, 2020	$	1,361	$	3,532,130	$	(19,267)	$	1,215,362	$	(2,829,211)	$	1,900,375	Balance at September 30, 2020	$	1,361	$	3,532,130	$	(19,267)	$	1,215,362	$	(2,829,211)	$	1,900,375

		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Cumulative Net Income		Cumulative Dividends		Total Stockholders’ Equity
Balance at December 31, 2018		$	1,253	$	3,180,284	$	(902)	$	1,088,119	$	(2,552,112)	$	1,716,642
Issuance of common stock, net of issuance costs		61		192,414		—		—		—		192,475
Common stock redemptions		(1)		(3,266)		—		—		—		(3,267)
Share-based compensation		1		10,140		—		—		—		10,141
Net income		—		—		—		11,975		—		11,975
Reclassification adjustments for losses included in net income (interest expense)		—		—		74		—		—		74
Losses arising during the period on interest rate swaps		—		—		(7,642)		—		—		(7,642)
Dividends to common stockholders ($0.90 per share)		—		—		—		—		(115,237)		(115,237)
Balance at September 30, 2019		$	1,314	$	3,379,572	$	(8,470)	$	1,100,094	$	(2,667,349)	$	1,805,161

Table of Contents

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Amounts in thousands

Unaudited


OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
		NINE MONTHS ENDED September 30,					NINE MONTHS ENDED September 30,
		2020		2019			2021		2020
Net income	Net income	$	88,058	$	11,975	Net income	$	45,052	$	88,058
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	142,331		131,725		Depreciation and amortization	150,904		142,331
Other amortization	Other amortization	3,409		2,279		Other amortization	2,721		3,409
Share-based compensation	Share-based compensation	7,449		10,141		Share-based compensation	8,183		7,449
Amortization of straight-line rent receivable (lessor)	Amortization of straight-line rent receivable (lessor)	(2,722)		(1,833)		Amortization of straight-line rent receivable (lessor)	(4,574)		(2,722)
Amortization of straight-line rent on operating leases (lessee)	Amortization of straight-line rent on operating leases (lessee)	1,122		1,159		Amortization of straight-line rent on operating leases (lessee)	1,115		1,122
Gain on sales of real estate assets		(70,395)		(5,065)
Gain on sales of real estate properties						Gain on sales of real estate properties	(41,046)		(70,395)

Impairment of real estate assets		—		5,610
Loss from unconsolidated joint ventures		194		16
Impairment of real estate properties						Impairment of real estate properties	16,581		—
Equity loss from unconsolidated joint ventures						Equity loss from unconsolidated joint ventures	404		194
Distributions from unconsolidated joint ventures	Distributions from unconsolidated joint ventures	193		277		Distributions from unconsolidated joint ventures	—		193
Proceeds from disposition of sales-type lease properties	Proceeds from disposition of sales-type lease properties	244,454		0		Proceeds from disposition of sales-type lease properties	—		244,454
Non-cash interest from financing receivable						Non-cash interest from financing receivable	(196)		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:

Other assets, including right-of-use-assets	Other assets, including right-of-use-assets	(965)		(6,740)		Other assets, including right-of-use-assets	(9,947)		(965)
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	5,098		3,220		Accounts payable and accrued liabilities	215		5,098
Other liabilities	Other liabilities	(6,662)		5,709		Other liabilities	843		(6,662)
Net cash provided by operating activities	Net cash provided by operating activities	411,564		158,473		Net cash provided by operating activities	170,255		411,564

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Acquisitions of real estate	Acquisitions of real estate	(199,162)		(271,575)		Acquisitions of real estate	(250,766)		(199,162)
Development of real estate	Development of real estate	(2,941)		(19,152)		Development of real estate	(2,020)		(2,941)
Additional long-lived assets	Additional long-lived assets	(62,707)		(45,902)		Additional long-lived assets	(69,647)		(62,707)
Proceeds from sales of real estate assets		4,905		14,151
Investments in unconsolidated joint ventures						Investments in unconsolidated joint ventures	(49,612)		—
Investment in financing receivable						Investment in financing receivable	(104,654)		—
Proceeds from sales of real estate properties						Proceeds from sales of real estate properties	112,029		4,905

Net cash used in investing activities	Net cash used in investing activities	(259,905)		(322,478)		Net cash used in investing activities	(364,670)		(259,905)

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Net (repayments) borrowings on unsecured credit facility		(293,000)		60,000
Net borrowings (repayments) on unsecured credit facility						Net borrowings (repayments) on unsecured credit facility	90,500		(293,000)
Borrowings on term loan	Borrowings on term loan	150,000		50,000		Borrowings on term loan	—		150,000

Borrowings of notes and bonds payable	Borrowings of notes and bonds payable	298,995		—		Borrowings of notes and bonds payable	—		298,995
Repayments of notes and bonds payable	Repayments of notes and bonds payable	(32,704)		(12,663)		Repayments of notes and bonds payable	(2,914)		(32,704)

Dividends paid	Dividends paid	(121,741)		(115,237)		Dividends paid	(130,825)		(121,741)
Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	40,296		192,514		Net proceeds from issuance of common stock	240,779		40,296
Common stock redemptions	Common stock redemptions	(892)		(2,343)		Common stock redemptions	(2,014)		(892)

Settlement of treasury rate locks	Settlement of treasury rate locks	(4,267)		—		Settlement of treasury rate locks	—		(4,267)
Debt issuance and assumption costs	Debt issuance and assumption costs	(3,057)		(4,589)		Debt issuance and assumption costs	(252)		(3,057)
Payments made on finance leases	Payments made on finance leases	(3,310)		(249)		Payments made on finance leases	(162)		(3,310)
Net cash provided by financing activities	Net cash provided by financing activities	30,320		167,433		Net cash provided by financing activities	195,112		30,320

Increase in cash, cash equivalents and restricted cash		181,979		3,428
Increase in cash and cash equivalents						Increase in cash and cash equivalents	697		181,979
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	657		8,381		Cash and cash equivalents at beginning of period	15,303		657
Cash, cash equivalents and restricted cash at end of period		$	182,636	$	11,809
Cash and cash equivalents at end of period						Cash and cash equivalents at end of period	$	16,000	$	182,636

Supplemental Cash Flow Information	Supplemental Cash Flow Information					Supplemental Cash Flow Information
Interest paid	Interest paid	$	39,165	$	37,946	Interest paid	$	40,653	$	39,165
Invoices accrued for construction, tenant improvements and other capitalized costs	Invoices accrued for construction, tenant improvements and other capitalized costs	$	12,709	$	10,702	Invoices accrued for construction, tenant improvements and other capitalized costs	$	11,663	$	12,709
Mortgage notes payable assumed upon acquisition (adjusted to fair value)	Mortgage notes payable assumed upon acquisition (adjusted to fair value)	$	19,269	$	—	Mortgage notes payable assumed upon acquisition (adjusted to fair value)	$	—	$	19,269
Capitalized interest	Capitalized interest	$	913	$	999	Capitalized interest	$	187	$	913

Table of Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Business Overview

Healthcare Realty Trust Incorporated (the "Company") is a real estate investment trust ("REIT") that owns, leases, manages, acquires, finances, develops and redevelops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. As of September 30, ~~2020,~~2021, the Company had gross investments of approximately ~~$4.3~~$4.9 billion in ~~211~~235 real estate properties located in 24 states totaling approximately ~~15.5~~16.8 million square feet. The Company provided leasing and property management services to approximately ~~11.9~~13.8 million square feet nationwide. ~~Square footage~~The Company owns 50% of an unconsolidated joint venture with Teachers Insurance and ~~property count disclosures in these Notes to~~Annuity Association (the "TIAA Joint Venture") and earns certain fees as the managing member. As of September 30, 2021, the TIAA Joint Venture owned 10 real estate properties. See Note 2 for more details regarding the Company's ~~Condensed Consolidated Financial Statements are unaudited.~~

unconsolidated joint ventures.

Basis of Presentation

The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, management believes there has been no material change in the information disclosed in the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. All material intercompany transactions and balances have been eliminated in consolidation.

This interim financial information should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. In addition, the interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, ~~2020~~2021 for many reasons including, but not limited to, acquisitions, dispositions, capital financing transactions, changes in interest rates and the effects of other trends, risks and ~~uncertainties,~~uncertainties.

Principles of Consolidation

The Company’s Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures and partnerships where the Company controls the operating activities. GAAP requires us 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”). Accounting Standards Codification 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 Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following 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. The Company may change its original assessment of a VIE upon subsequent events such as the ~~impact~~modification of contractual arrangements that affect the characteristics or adequacy of the ~~COVID-19 pandemic.~~entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. 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.

As of September 30, 2021, the Company's unconsolidated joint venture arrangements were accounted for using the equity method of accounting as the Company exercised significant influence over but did not control these entities. See Note 2 for more details regarding the Company's unconsolidated joint ventures.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Use of Estimates in the Condensed Consolidated Financial Statements

Preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates.

The Company considered the impact of COVID-19 on these assumptions and estimates used and determined that there were no material adverse impacts on the Company's results of operations and financial position at September 30, ~~2020.~~2021. There can be no assurance that COVID-19 will not have a future material adverse impact on the financial results and business operations of the Company.

~~COVID-19 Update~~

~~Since being reported~~Investments in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.Leases - Financing Receivables, Net

In ~~response to the COVID-19 pandemic, all of the states and cities~~accordance with Accounting Standards Codification ("ASC") 842, for transactions in which the Company ~~owns properties, manages properties, and/or~~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 development or redevelopment projects instituted quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue.a purchase option. As a result, a number of the Company's tenants temporarily closed their offices or clinical space or operated on a reduced basis in response to government requirements or recommendations. Many of these restrictions have been lifted, but could be reimposed. In response to these disruptions, the Company ~~provided some of its tenants with deferred rent arrangements. Such arrangements were made primarily in~~does not recognize the second quarter of 2020, and less than $0.1 million of deferred rent arrangements originated in the third quarter. Through November 2, 2020, the Company has collected more than 99% of second and third quarter 2020 aggregate tenant billings. The Company has collected 96% of total scheduled deferral payments due in the third quarter of 2020. In addition, the Company has remaining various forms of rent deferrals outstanding representing

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~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.~~

approximately $1.2 million, or less than 1% of second and third quarter 2020 aggregate tenant billings. The tenant deferral agreements generally require the deferred amounts to be repaid by the fourth quarter of 2020.

~~For accounting purposes,~~underlying real estate asset but instead recognizes a financial asset in accordance with ASC 842: Leases, normally a company would be required to assess a lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied which would require a company to reassess the classification of the lease. However, in light of the COVID-19 pandemic in which many leases are being modified, the Financial Accounting Standards Board (the "FASB") and U.S. Securities and Exchange Commission (the "SEC") have provided relief that will allow companies to make a policy election as to whether they treat COVID-19 related lease amendments as a provision included in the pre-concession arrangement, and therefore, not a lease modification, or to treat the lease amendment as a modification. The Company has elected to use this relief where applicable and therefore will have no change in the current classification of its leases in connection with many of the leases impacted by negotiations with its tenants. In order to be considered COVID-19 related, cash flows must be substantially the same or less than those prior to the concession. If the cash flows are substantially the same or less, there are two methods to potentially account for such rent deferrals under the relief. The first would be as if no changes to the lease contract were made. Under that accounting, a lessor would increase its lease receivable and a lessee would increase its accounts payable as receivables/payments accrue. In its income statement, a lessor would continue to recognize revenue during the deferral period. The second method would be to treat the deferred payments as variable lease payments (i.e., revenue recognized when cash received)310 “Receivables”. ~~The Company has elected the first method described above, which results in the revenue being recognized on an accrual basis.~~

If tenants are unable to timely repay deferred rent, or repay at all, request additional rent deferrals or abatements, decide not to renew leases, or renew leases at lower cash leasing spreads, the impact on the Company’s results of operations and financial condition could be material. In the second quarter of ~~2020,~~2021, the Company ~~recognized approximately $0.7 million general reserve against~~acquired a building in San Diego, California in a sale leaseback transaction in which the ~~deferred rent balance. Following positive collection trends~~seller-lessee had a purchase option. Therefore, control was not considered to be transferred under GAAP. Accordingly, this transaction was accounted for as a financing receivable and recorded on the Condensed Consolidated Balance Sheet in the third quarter of 2020, the Company released approximately $0.3 million of the general reserve. As of September 30, 2020, the Company had a remaining general reserve of $0.4 million against an approximate $1.7 million deferred rent balance.

Given the daily evolution of the COVID-19 pandemic and the global response to curb its spread, the Company is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for the fiscal year 2020.line item Investment in financing receivable, net. The Company ~~continues to evaluate~~evaluated the impact of ~~various forms of governmental assistance that may be or become available~~ASC 326, "Credit Losses" to the financing receivable, and the amount calculated was determined to be immaterial and therefore not recorded.

Income from Lease Financing Receivables

The Company ~~or its tenants.~~recognizes the related income from the financing receivable based on an imputed interest rate over the terms of the applicable lease. As a result, the interest recognized from the financing receivable will not equal the cash payments from the lease agreement.

Acquisition costs incurred in connection with entering 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 Income from financing receivable, net over the life of the lease.

Revenue from Contracts with Customers (Topic 606)

The Company recognizes certain revenue under the core principle of Topic 606. This topic 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 Condensed Consolidated Statements of Income in the Other operating line item. This line item includes parking income, ~~rental lease guaranty income,~~ management fee income and other miscellaneous income. Below is a detail of the amounts by category:


		THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,					THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,
in thousands	in thousands	2020		2019		2020		2019		in thousands	2021		2020		2021		2020
Type of Revenue	Type of Revenue									Type of Revenue
Parking income	Parking income	$	1,764	$	1,935	$	5,042	$	5,538	Parking income	$	2,187	$	1,764	$	5,725	$	5,042
Rental lease guaranty		0		0		0		128
Management fee income		62		69		209		201

Management fee income 1										Management fee income 1	723		62		1,381		209
Miscellaneous	Miscellaneous	42		55		113		120		Miscellaneous	59		42		241		113
		$	1,868	$	2,059	$	5,364	$	5,987		$	2,969	$	1,868	$	7,347	$	5,364

1 Includes the recovery of certain expenses under the financing receivable as outlined in the management agreement.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The Company’s major types of revenue that are accounted for under Topic 606 that are listed above 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.

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~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.~~

~~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 from the sale of a property in Oklahoma. These proceeds have been or will be disbursed as the Company acquires real estate investments in like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company's Condensed Consolidated Balance Sheets to the combined amounts shown on the Company's Condensed Consolidated Statements of Cash Flows:

In thousands
September 30, 2020 December 31, 2019
Cash and cash equivalents $ 121,992 $ 657
Restricted cash 60,644 0
Total cash, cash equivalents and restricted cash $ 182,636 $ 657

New Accounting Pronouncements

~~Accounting Standards Update No. 2016-13~~

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." This update is intended to improve financial reporting by requiring timelier recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. This update requires that financial statement assets measured at an amortized cost and certain other financial instruments be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. This standard is effective for annual and interim periods beginning after December 15, 2019 with early adoption permitted. Operating lease receivables, representing the majority of the Company's receivables, are not within the scope of the new standard. The Company adopted this standard as of January 1, 2020. There was not a material impact to the Condensed Consolidated Financial Statements resulting from the adoption of this standard.

~~Accounting Standards Update No. 2017-04~~

In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." This update eliminates Step 2 of the goodwill impairment test. As such, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value. This standard is effective for the Company for annual and interim periods beginning after December 15, 2019. The Company adopted this standard as of January 1, 2020. There was not a material impact to the Condensed Consolidated Financial Statements resulting from the adoption of this standard.

Accounting Standards Update No. 2020-04

On March 12, 2020, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.~~

Note 2. Real Estate Investments

~~2020~~2021 Company Acquisitions

The following table details the Company's acquisitions for the nine months ended September 30, ~~2020:~~2021:

Dollars in millions
TYPE 1
DATE ACQUIRED PURCHASE PRICE MORTGAGE NOTES PAYABLE
CASH
CONSIDERATION 2
REAL
ESTATE
OTHER 3
SQUARE FOOTAGE
Los Angeles, CA MOB 1/3/20 $ 42.0 $ (19.3) $ 22.8 $ 42.4 $ (0.3) 86,986
Atlanta, GA MOB 2/13/20 12.0 0 11.8 12.1 (0.3) 64,624
Raleigh, NC MOB 2/25/20 6.3 0 6.5 6.5 0 15,964
Colorado Springs, CO MOB 3/9/20 8.2 0 8.3 8.6 (0.3) 34,210
Denver, CO 4
MOB 3/13/20 33.5 0 33.2 34.0 (0.8) 136,994
San Diego, CA MOB 7/1/20 16.7 0 16.7 16.9 (0.2) 46,083
Los Angeles, CA MOB 7/17/20 35.0 0 37.7 37.7 0 49,785
Seattle, WA MOB 7/23/20 11.0 0 10.9 11.3 (0.4) 21,309
Atlanta, GA MOB 7/31/20 20.5 0 21.6 21.3 0.3 48,145
Houston, TX MOB 9/24/20 11.0 0 10.9 11.0 (0.1) 40,235
Los Angeles, CA MOB 9/28/20 14.0 0 14.0 13.9 0.1 24,252
Total real estate acquisitions $ 210.2 $ (19.3) $ 194.4 $ 215.7 $ (2.0) 568,587
Land acquisition 5
1.6 0 1.7 1.7 0 0
Land acquisition 6
1.0 0 1.1 1.1 0 0
$ 212.8 $ (19.3) $ 197.2 $ 218.5 $ (2.0) 568,587


Dollars in thousands	DATE ACQUIRED	PURCHASE PRICE		CASH CONSIDERATION 1		REAL ESTATE		OTHER 2		SQUARE FOOTAGE
San Diego, CA 3	1/7/21	$	17,150	$	17,182	$	17,182	$	—	22,461
Dallas, TX 4	2/1/21	22,515		22,299		22,641		(342)		121,709
Atlanta, GA 4	2/17/21	9,800		10,027		10,073		(46)		44,567
Washington, D.C.	3/3/21	12,750		12,709		12,658		51		26,496
Houston, TX	5/14/21	13,500		12,986		13,379		(393)		45,393
San Diego, CA 5	5/28/21	102,650		103,984		104,629		(645)		160,394
Greensboro, NC	6/28/21	9,390		9,475		10,047		(572)		25,168
Baltimore, MD	6/29/21	14,600		14,357		14,437		(80)		33,316
Denver, CO 6	7/16/21	70,426		69,151		65,100		4,051		259,555
Greensboro, NC 3	7/19/21	6,400		6,374		6,514		(140)		18,119
Colorado Springs, CO	7/27/21	33,400		32,738		33,241		(503)		69,526
Birmingham, AL	8/19/21	9,250		9,355		9,388		(33)		29,942
Raleigh, NC	9/20/21	5,780		5,821		5,810		11		18,280
Denver, CO	9/22/21	20,250		19,630		19,405		225		83,604
Raleigh, NC	9/30/21	10,000		9,921		9,874		47		29,178




Total real estate acquisitions		$	357,861	$	356,009	$	354,378	$	1,631	987,708

1~~MOB = medical office building.~~

2Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.

32Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.

3Represents a single-tenant property.

4Includes 32 properties.

5The Company ~~acquired land parcels under 4 existing buildings (previously ground leased).~~accounted for this transaction as a financing receivable.

6~~The Company acquired a land parcel under an existing building (previously ground leased). The building and land were sold on September 30, 2020.~~Includes 3 properties.

~~Subsequent Acquisition~~

~~On October 7, 2020~~

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

2021 TIAA Joint Venture Acquisitions

The TIAA Joint Venture is not consolidated for purposes of the ~~Company acquired a 36,720 square foot medical office building in Colorado Springs, CO for a purchase price of $8.9 million.~~

~~2020 Real Estate Asset Dispositions~~

Company's Condensed Consolidated Financial Statements. The following table details the ~~Company's dispositions~~TIAA Joint Venture acquisitions for the nine months ended September 30, ~~2020:~~2021:

Dollars in millions
TYPE 1
Date
Disposed Sale
Price Closing Adjustments Net Proceeds Net Real Estate Investment
Other (including receivables)2
Gain/(Impairment) Square Footage (Unaudited)
Springfield, MO 3
SF 7/30/20 $ 138.0 $ 0 $ 138.0 $ 92.4 $ 3.9 $ 41.7 186,000
Oklahoma City, OK 3
MOB 7/30/20 106.5 0 106.5 76.8 3.1 26.6 200,000
Miami, FL MOB 9/30/20 5.0 (0.2) 4.8 2.6 0.1 2.1 26,000
Total dispositions $ 249.5 $ (0.2) $ 249.3 $ 171.8 $ 7.1 $ 70.4 412,000


Dollars in thousands	DATE ACQUIRED	PURCHASE PRICE		CASH CONSIDERATION 1		REAL ESTATE		OTHER 2		SQUARE FOOTAGE	COMPANY OWNERSHIP %
Denver, CO	3/30/21	$	14,375	$	14,056	$	14,550	$	(494)	59,359	50	%
Colorado Springs, CO	4/1/21	7,200		7,288		7,347		(59)		27,510	50	%
Los Angeles, CA	4/8/21	31,335		30,179		30,642		(463)		57,573	50	%
San Antonio, TX	4/30/21	13,600		13,412		13,656		(244)		45,000	50	%
Los Angeles, CA	5/10/21	24,600		24,259		24,147		112		73,078	50	%
Colorado Springs, CO 3	7/27/21	9,133		9,137		9,135		2		23,956	50	%




Total real estate acquisitions		$	100,243	$	98,331	$	99,477	$	(1,146)	286,476

1.1~~MOB = medical office building; SF = surgical facility~~Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.

2.2Includes ~~straight-line rent receivables, leasing commissions~~other assets acquired, liabilities assumed, and ~~lease inducements.~~intangibles recognized at acquisition.

3.3~~In the second quarter~~Includes purchase of ~~2020, the Company entered into agreements to sell 2 single-tenant net leased properties, resulting in a lease modification and classification change from operating to sales-type.~~adjoining 3.0 acre land parcel.

~~Assets Held~~Subsequent to September 30, 2021, the TIAA Joint Venture acquired the following property:


Dollars in thousands	DATE ACQUIRED	PURCHASE PRICE		SQUARE FOOTAGE	COMPANY OWNERSHIP %
Denver, CO	10/21/21	$	23,000	57,257	50	%

Unconsolidated Joint Ventures

The Company's investment in and loss recognized for ~~Sale~~the three and nine months ended September 30, 2021 and 2020 related to its joint ventures accounted for under the equity method are shown in the table below:


	THREE MONTHS ENDED September 30,				NINE MONTHS ENDED September 30,
Dollars in thousands	2021		2020		2021		2020

Investments in unconsolidated joint ventures, beginning of period 1	$	117,935	$	7,818	$	73,137	$	8,130
New investments during the period	4,593		—		49,612		—
Equity loss recognized during the period 1	(183)		(66)		(404)		(194)
Owner distributions	—		(9)		—		(193)
Investments in unconsolidated joint ventures, end of period 1	$	122,345	$	7,743	$	122,345	$	7,743

1In ~~September 2020,~~addition to the TIAA Joint Venture, the Company ~~reclassified 4 medical office buildings~~also has a 55% and 27% ownership interest, respectively, in 2 limited liability companies that each own a land parcel to assets held for sale upon acceptance of an offer from a third party to purchase the properties under a single sales agreement. The contractual sales price of $23.0 million is greater than the current net investment of approximately $18.1 million. Asparking garage in Atlanta, Georgia.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

2021 Real Estate Asset Dispositions

The following table details the Company's dispositions for the nine months ended September 30, 2021:


Dollars in millions	DATE DISPOSED	SALE PRICE		CLOSING ADJUSTMENTS		NET PROCEEDS		NET REAL ESTATE INVESTMENT		OTHER (INCLUDING RECEIVABLES) 1		GAIN/(IMPAIRMENT)		SQUARE FOOTAGE
Los Angeles, CA 2	3/11/21	$	26,000	$	(555)	$	25,445	$	6,046	$	509	$	18,890	73,906
Atlanta, GA 3	4/12/21	8,050		(272)		7,778		5,675		151		1,952		19,732
Richmond, VA 3	5/18/21	52,000		(314)		51,686		29,414		3,270		19,002		142,856
Gadsden, AL 3,4	5/19/21	5,500		(280)		5,220		5,914		175		(869)		120,192
Dallas, TX 3,5	7/9/21	23,000		(1,117)		21,883		18,733		1,966		1,184		190,160

Total dispositions		$	114,550	$	(2,538)	$	112,012	$	65,782	$	6,071	$	40,159	546,846

1Includes straight-line rent receivables, leasing commissions and lease inducements.

2Includes 2 properties sold to a single purchaser in 2 transactions which occurred on March 5 and March 11, 2021.

3Previously classified as held for sale.

4Includes 3 properties.

5Includes 4 properties and a land parcel sold under a single purchase agreement.

Assets Held for Sale

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had 41 and 04 properties, respectively, classified as assets held for sale. During the third quarter of 2021, the Company reclassified to held for sale a medical office building in Chicago, Illinois with a contractual sales price of $13.3 million and recorded an impairment charge of $10.7 million based on the contractual sales price less estimated costs to sell. The Company disposed of this property on October 28, 2021.

The table below reflects the assets and liabilities of the properties classified as held for sale as of September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

(Dollars in thousands) September 30, 2020 December 31, 2019
Balance Sheet data:
Land $ 1,664 $ 0
Building, improvements and lease intangibles 26,871 0
Personal property 39 0
28,574 0
Accumulated depreciation (10,443) 0
Real estate assets held for sale, net 18,131 0
Other assets, net 1,920 37
Assets held for sale, net $ 20,051 $ 37
Accounts payable and accrued liabilities $ 437 $ 37
Other liabilities 111 108
Liabilities of assets held for sale $ 548 $ 145


(Dollars in thousands)	September 30, 2021		December 31, 2020
Balance Sheet data:
Land	$	5,859	$	1,664
Building, improvements and lease intangibles	13,710		27,443
Personal property	133		39
	19,702		29,146
Accumulated depreciation	(7,158)		(10,455)
Real estate assets held for sale, net	12,544		18,691

Other assets, net	1,059		1,955
Assets held for sale, net	$	13,603	$	20,646

Accounts payable and accrued liabilities	$	467	$	533
Other liabilities	299		683
Liabilities of assets held for sale	$	766	$	1,216

Note 3. Leases

Lessor Accounting

The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through ~~2035.~~2040. Some leases provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first 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 ~~CPI (consumer~~the consumer price ~~index)~~index ("CPI"). In addition, most of the Company's leases include nonlease components, such as

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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 three and nine months ended September 30, ~~2020~~2021 was ~~$123.4~~$131.7 million and ~~$368.4~~$388.6 million, respectively.

In May 2020, the Company and Mercy Health negotiated the sale of 2 single-tenant net leased properties, a medical office building in Oklahoma and an orthopedic specialty hospital in Missouri, for $244.5 million. The sale was structured through amendments to the leases to allow for the early exercise of existing purchase options. The amendments resulted in the application of lease modification accounting under ASC Topic 842, which resulted in lease classification changes from operating to sales-type. During the second quarter, the Company derecognized the real estate assets on the Condensed Consolidated Balance Sheets and recognized the net investment in sales-type leases, resulting in a gain of $68.3 million. The Company disposed of these properties on July 30, 2020.

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~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.~~

~~Tabular Disclosure of the Components of Sales-Type Leases~~

~~The table below presents the components of sale-type leases for the three and nine months ended September 30, 2020:~~

SALES-TYPE LEASES
In thousands three months ended
September 30, 2020 nine months ended September 30, 2020
Profit recognized at commencement date $ 0 $ 68,267 Gain on sales of real estate assets
Interest income 1,454 3,007 Rental income

Future lease payments under the non-cancelable operating leases, excluding any reimbursements, as of September 30, ~~2020~~2021 were as follows:

In thousands Operating
2020 $ 93,722
2021 352,341
2022 307,166
2023 261,187
2024 200,578
2025 and thereafter 555,264
$ 1,770,258


In thousands	OPERATING
2021	$	102,435
2022	385,734
2023	336,473
2024	266,722
2025	215,350
2026 and thereafter	598,757
	$	1,905,471

Lessee Accounting

As of September 30, ~~2020,~~2021, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of September 30, ~~2020,~~2021, the Company had ~~103~~110 properties totaling ~~8.7~~9.2 million square feet that were held under ground leases. Some of the ground ~~leases'~~lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These 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 4243 prepaid ground leases as of September 30, ~~2020.~~2021. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately ~~$0.2~~$0.1 million and $0.1 million of the Company’s rental expense for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$0.5~~$0.4 million and ~~$0.4~~$0.5 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The Company’s future lease payments (primarily for its 6167 non-prepaid ground leases) as of September 30, ~~2020~~2021 were as follows:


In thousands	In thousands	OPERATING		FINANCING		In thousands	OPERATING		FINANCING
2020		$	1,008	$	143
2021	2021	4,844		930		2021	$	1,051	$	180
2022	2022	4,875		783		2022	5,030		838
2023	2023	4,913		793		2023	5,071		848
2024	2024	4,969		815		2024	5,130		871
2025 and thereafter		307,665		88,808
2025						2025	5,174		886
2026 and thereafter						2026 and thereafter	312,163		92,689
Total undiscounted lease payments	Total undiscounted lease payments	328,274		92,272		Total undiscounted lease payments	333,619		96,312
Discount	Discount	(236,808)		(73,575)		Discount	(237,706)		(75,852)
Lease liabilities	Lease liabilities	$	91,466	$	18,697	Lease liabilities	$	95,913	$	20,460

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The following table provides details of the Company's total lease expense for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:


		THREE MONTHS ENDED September 30,						NINE MONTHS ENDED September 30,					THREE MONTHS ENDED September 30,						NINE MONTHS ENDED September 30,
In thousands	In thousands	2020			2019			2020		2019		In thousands	2021			2020			2021		2020
Operating lease cost	Operating lease cost											Operating lease cost
Operating lease expense	Operating lease expense	$	1,180		$	1,169		$	3,534	$	3,448	Operating lease expense	$	1,196		$	1,180		$	3,555	$	3,529
Variable lease expense	Variable lease expense	1,066			845			2,664		2,380		Variable lease expense	1,016			1,066			2,883		2,669

Finance lease cost	Finance lease cost											Finance lease cost
Amortization of right-of-use assets	Amortization of right-of-use assets	88			51			236		101		Amortization of right-of-use assets	90			88			267		236
Interest on lease liabilities	Interest on lease liabilities	245			196			722		392		Interest on lease liabilities	255			245			748		722
Total lease expense	Total lease expense	$	2,579		$	2,261		$	7,156	$	6,321	Total lease expense	$	2,557		$	2,579		$	7,453	$	7,156

Other information	Other information											Other information
Operating cash flows outflows related to operating leases	Operating cash flows outflows related to operating leases	$	1,440		$	1,313		$	5,412	$	5,461	Operating cash flows outflows related to operating leases	$	1,424		$	1,440		$	5,855	$	5,412
Operating cash flows outflows related to financing leases												Operating cash flows outflows related to financing leases	$	151		$	151		$	678	$	616
Financing cash flows outflows related to financing leases	Financing cash flows outflows related to financing leases	$	143		$	107		$	3,310	$	249	Financing cash flows outflows related to financing leases	$	6		$	143		$	162	$	3,310
Right-of-use assets obtained in exchange for new finance lease liabilities	Right-of-use assets obtained in exchange for new finance lease liabilities	$	0		$	0		$	7,212	$	14,294	Right-of-use assets obtained in exchange for new finance lease liabilities	$	1,420		$	—		$	1,420	$	7,212
Right-of-use assets obtained in exchange for new operating lease liabilities												Right-of-use assets obtained in exchange for new operating lease liabilities	$	8,298		$	—		$	8,298	$	—

Weighted-average remaining lease term (excluding renewal options) - operating leases	Weighted-average remaining lease term (excluding renewal options) - operating leases	48.9			49.7							Weighted-average remaining lease term (excluding renewal options) - operating leases	47.8			48.9
Weighted-average remaining lease term (excluding renewal options) -finance leases		64.7			70.1
Weighted-average remaining lease term (excluding renewal options) - finance leases												Weighted-average remaining lease term (excluding renewal options) - finance leases	63.2			64.7
Weighted-average discount rate - operating leases	Weighted-average discount rate - operating leases	5.7		%	5.7		%					Weighted-average discount rate - operating leases	5.6		%	5.7		%
Weighted-average discount rate - finance leases	Weighted-average discount rate - finance leases	5.4		%	5.5		%					Weighted-average discount rate - finance leases	5.4		%	5.4		%

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Note 4. Notes and Bonds Payable

The table below details the Company’s notes and bonds payable.


		MATURITY DATES	BALANCE AS OF				EFFECTIVE INTEREST RATE as of 9/30/2020			MATURITY DATES	BALANCE AS OF				EFFECTIVE INTEREST RATE as of 9/30/2021
Dollars in thousands	Dollars in thousands		9/30/2020		12/31/2019				Dollars in thousands		9/30/2021		12/31/2020
$700 million Unsecured Credit Facility	$700 million Unsecured Credit Facility	5/23	$	0	$	293,000	N/A		$700 million Unsecured Credit Facility	5/23	$	90,500	$	—	0.98	%
$200 million Unsecured Term Loan Facility, net of issuance costs 1		5/24	199,180		199,013		1.99	%
$150 million Unsecured Term Loan due 2026 2		6/26	149,455		0		3.14	%
Senior Notes due 2023, net of discount and issuance costs		4/23	248,863		248,540		3.95	%
$200 million Unsecured Term Loan due 2024, net of issuance costs 1									$200 million Unsecured Term Loan due 2024, net of issuance costs 1	5/24	199,404		199,236		1.94	%
$150 million Unsecured Term Loan due 2026, net of issuance costs 2									$150 million Unsecured Term Loan due 2026, net of issuance costs 2	6/26	149,341		149,479		2.47	%
Senior Notes due 2025, net of discount and issuance costs 3	Senior Notes due 2025, net of discount and issuance costs 3	5/25	248,711		248,522		4.08	%	Senior Notes due 2025, net of discount and issuance costs 3	5/25	248,973		248,776		4.08	%
Senior Notes due 2028, net of discount and issuance costs	Senior Notes due 2028, net of discount and issuance costs	1/28	296,003		295,651		3.84	%	Senior Notes due 2028, net of discount and issuance costs	1/28	296,488		296,123		3.84	%
Senior Notes due 2030, net of discount and issuance costs 4	Senior Notes due 2030, net of discount and issuance costs 4	3/30	296,384		0		2.71	%	Senior Notes due 2030, net of discount and issuance costs 4	3/30	296,726		296,468		2.71	%
Senior Notes due 2031, net of discount and issuance costs									Senior Notes due 2031, net of discount and issuance costs	3/31	295,261		294,924		2.24	%
Mortgage notes payable, net of discounts and issuance costs and including premiums	Mortgage notes payable, net of discounts and issuance costs and including premiums	1/21-4/27	115,799		129,343		4.38	%	Mortgage notes payable, net of discounts and issuance costs and including premiums	11/22-4/27	114,740		117,763		4.06	%
			$	1,554,395	$	1,414,069					$	1,691,433	$	1,602,769

1The effective interest rate includes the impact of interest rate swaps on $75.0 million at a weighted average rate of 2.37% (plus the applicable margin rate, currently 100 basis points).

2The effective interest rate includes the impact of interest rate swaps on $100.0 million at a weighted average rate of 2.23% (plus the applicable margin rate, currently ~~160~~95 basis points).

3The effective interest rate includes the impact of the $1.7 million settlement of a forward-starting interest rate ~~swap~~swaps that is included in Accumulated other comprehensive loss on the Company's Condensed Consolidated Balance Sheets.

4The effective interest rate includes the impact of the $4.3 million settlement of forward interest rate hedges that is included in Accumulated other comprehensive loss on the Company's Condensed Consolidated Balance Sheets.

Changes in Debt Structure

On ~~February 3, 2020,~~June 1, 2021, the Company entered into a second amendment to the Amended and Restated Term Loan, dated May 31, 2019, that reduced the current interest rate on the $150 million portion of the loan due 2026 from LIBOR plus a margin rate ranging from 1.45% to 2.40% (previously 1.60%) to LIBOR plus a margin rate ranging from 0.80% to 1.60% (0.95% as of September 30, 2021). With the amendment, the Company paid up front fees of approximately $0.5 million, of which $0.2 million was paid to lenders, capitalized and amortized over the remainder of the term of the loan, and $0.3 million was paid to lenders as administration fees and was expensed in the second quarter of 2021. In addition, the amendment added a sustainability metric incentive tied to increasing the Company's properties with green building certifications.

Subsequent Changes in Debt Structure

On November 1, 2021, the Company repaid in full a mortgage note payable bearing interest at a rate of ~~6.10%~~4.69% per annum with an outstanding principal of ~~$5.9~~$11.1 million. The mortgage note encumbered a ~~68,860~~62,379 square foot property in ~~Oklahoma.~~

On March 4, 2020, the Company issued $300.0 million of unsecured senior notes due 2030 (the "Senior Notes due 2030") in a registered public offering. The Senior Notes due 2030 bear interest at 2.40%, payable semi-annually on March 15 and September 15, beginning September 15, 2020, and are due on March 15, 2030, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $1.0 million and the Company incurred approximately $2.8 million in debt issuance costs. Concurrent with this transaction, the Company settled 2 treasury rate locks for $4.3 million. Inclusive of the discount, debt issuance costs and settlement of the treasury rate locks, the effective interest rate was 2.71%. The Senior Notes due 2030 have various financial covenants that are required to be met on a quarterly and annual basis.

On May 4, 2020, the Company repaid in full a mortgage note payable bearing interest at a rate of 5.74% per annum with an outstanding principal of $0.3 million. The mortgage note encumbered an 83,318 square foot property in Iowa.

~~On May 29, 2020, the Company borrowed $150.0 million pursuant to its unsecured term loan due 2026.~~

On June 2, 2020, the Company repaid in full a mortgage note payable bearing interest at a rate of 6.44% per annum with an outstanding principal of $12.6 million. The mortgage note encumbered a 67,510 square foot property in Washington.

On June 25, 2020, the Company repaid in full 3 mortgage notes bearing interest at rates of 5.63%, 6.63% and 6.88% per annum with outstanding principal of $0.5 million, $2.8 million, and $7.0 million, respectively. The mortgage notes encumbered a 60,476 square foot property in Minnesota.

~~Subsequent Changes in Debt Structure~~

On October 1, 2020, the Company repaid in full a mortgage note payable bearing interest at a rate of 5.47% per annum with an outstanding principal of $4.2 million. The mortgage note encumbered a 40,171 square foot property in Georgia.

~~Table of Contents~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.~~

On October 2, 2020, the Company issued $300.0 million of unsecured senior notes due 2031 (the "Senior Notes due 2031") in a registered public offering. The Senior Notes due 2031 bear interest at 2.05%, payable semi-annually on March 15 and September 15, beginning March 15, 2021, and are due on March 15, 2031, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $2.4 million and the Company incurred approximately $2.8 million in debt issuance costs. Inclusive of the discount and debt issuance costs, the effective interest rate was 2.24%. The Senior Notes due 2031 have various financial covenants that are required to be met on a quarterly and annual basis.

On October 19, 2020, the Company redeemed its unsecured senior notes due 2023 (the "Senior Notes due 2023"). The aggregate redemption price of $270.5 million consisted of outstanding principal of $250.0 million, accrued interest of $0.1 million, and a "make-whole" amount of approximately $20.4 million for the early extinguishment of debt. The unaccreted discount and unamortized costs on these notes of $1.1 million was written off upon redemption. In October 2020, the Company recognized a loss on early extinguishment of debt of approximately $21.5 million related to this redemption.Maryland.

Note 5. Derivative Financial Instruments

Risk Management Objective of Using Derivatives

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, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 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 recorded in Accumulated Other Comprehensive Income (Loss) ("AOCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

On February 24 and 25, 2020, the Company entered into 2 treasury rate locks totaling $75.0 million and $40.0 million, respectively. The treasury rate locks were settled for an aggregate amount of $4.3 million on March 4, 2020 concurrent with the Company's issuance of its Senior Notes due 2030. The settlement will be amortized over the 10-year term of the notes.

As of September 30, ~~2020,~~2021, the Company had 8 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:


DERIVATIVE INSTRUMENT	NUMBER OF INSTRUMENTS	NOTIONAL AMOUNT in millions
Interest rate swaps	8	$175.0

~~Table of Contents~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.~~

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company's derivative financial instruments, as well as their classification on the Condensed Consolidated Balance Sheet as of September 30, ~~2020.~~2021.


	BALANCE AT SEPTEMBER 30, ~~2020~~2021
In thousands	BALANCE SHEET LOCATION	FAIR VALUE
Derivatives designated as hedging instruments
Interest rate swaps	Other liabilities	$	~~14,460~~8,201
Total derivatives designated as hedging instruments		$	~~14,460~~8,201

Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)

The table below presents the effect of cash flow hedge accounting on AOCI during the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 related to the Company's outstanding interest rate swaps.


		LOSS RECOGNIZED IN AOCI ON DERIVATIVE three months ended September 30,					(GAIN) LOSS RECLASSIFIED FROM AOCI INTO INCOME three months ended September 30,					(GAIN) LOSS RECOGNIZED IN AOCI ON DERIVATIVE three months ended September 30,					LOSS RECLASSIFIED FROM AOCI INTO INCOME three months ended September 30,
In thousands	In thousands	2020		2019			2020		2019		In thousands	2021		2020			2021		2020
Interest rate swaps	Interest rate swaps	$	74	$	2,341	Interest expense	$	952	$	18	Interest rate swaps	$	(36)	$	74	Interest expense	$	982	$	952
Settled treasury hedges	Settled treasury hedges	0		0		Interest expense	107		0		Settled treasury hedges	—		—		Interest expense	107		107
Settled interest rate swaps	Settled interest rate swaps	0		0		Interest expense	42		42		Settled interest rate swaps	—		—		Interest expense	42		42
		$	74	$	2,341	Total interest expense	$	1,101	$	60		$	(36)	$	74	Total interest expense	$	1,131	$	1,101


		LOSS RECOGNIZED IN AOCI ON DERIVATIVE nine months ended September 30,					(GAIN) LOSS RECLASSIFIED FROM AOCI INTO INCOME nine months ended September 30,					(GAIN) LOSS RECOGNIZED IN AOCI ON DERIVATIVE nine months ended September 30,					LOSS RECLASSIFIED FROM AOCI INTO INCOME nine months ended September 30,
In thousands	In thousands	2020		2019			2020		2019		In thousands	2021		2020			2021		2020
Interest rate swaps	Interest rate swaps	$	11,192	$	7,642	Interest expense	$	2,012	$	(52)	Interest rate swaps	$	(2,079)	$	11,192	Interest expense	$	2,894	$	2,012
Settled treasury hedges	Settled treasury hedges	4,267		0		Interest expense	229		0		Settled treasury hedges	—		4,267		Interest expense	320		229
Settled interest rate swaps	Settled interest rate swaps	0		0		Interest expense	126		126		Settled interest rate swaps	—		—		Interest expense	126		126
		$	15,459	$	7,642	Total interest expense	$	2,367	$	74		$	(2,079)	$	15,459	Total interest expense	$	3,340	$	2,367

The Company estimates that $4.4 million will be reclassified from AOCI to interest expense over the next 12 months.

Credit-risk-related Contingent Features

The Company's agreements with each of its derivative counterparties contain a cross-default provision under which the Company could be declared in default of its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.

As of September 30, ~~2020,~~2021, 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 ~~$15.1~~$8.6 million. As of September 30, ~~2020,~~

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

2021, the Company has not posted any collateral related to these agreements and was not in breach of any agreement.

Note 6. Commitments and Contingencies

Legal Proceedings

The Company is, from time to time, involved in litigation arising in the ordinary course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Redevelopment Activity

During the third quarter of 2021, the Company continued the redevelopment of 110,860 square feet of a 217,114 square foot medical office building in Dallas, Texas. As of September 30, 2021, the Company had funded approximately $2.1 million in project costs. The building continues to operate with in-place leases during construction. The first new tenant lease of the redevelopment is expected to commence in the first quarter of 2022.

During the third quarter of 2021, the Company ~~initiated~~continued the redevelopment of a 110,883 square foot medical office building in Memphis, ~~Tennessee ("Memphis Redevelopment") in December 2019.~~Tennessee. As of September 30, ~~2020,~~2021, the Company had funded approximately ~~$5.7~~$31.1 million in project ~~costs, excluding the purchase price of $8.7 million for the land and building. The building will continue to operate with in-place leases during construction.~~costs. The core and shell portion of this redevelopment was completed and the ~~Memphis Redevelopment is expected to be completed~~first new tenant took occupancy in the first quarter of 2021, with the construction of tenant spaces to be completed ~~throughout the remainder of 2021.~~

~~Table of Contents~~

~~Development Activity~~in early 2022.

In April 2021, the ~~first~~Company began the redevelopment of a medical office building in Tacoma, Washington. As of September 30, 2021, the Company had funded approximately $1.7 million in project costs. The redevelopment includes interior and exterior improvements to the existing building, plus the addition of 23,000 square feet. The Company expects the 23,000 square foot tenant lease for the expansion space to commence in the second quarter of ~~2020,~~2022.

In July 2021, the Company ~~completed~~began the ~~construction of the core and shell~~redevelopment of a ~~151,031~~medical office building in Nashville, Tennessee. The Company expects to construct a new 106,194 square foot medical office building with the initial tenant lease expected to commence in ~~Seattle, Washington.~~the second quarter of 2023. As of September 30, ~~2020,~~2021, the Company had funded approximately ~~$59.1~~$0.8 million ~~towards~~in project costs. The redevelopment includes the ~~development and additional tenant improvements. The~~demolition of an existing 81,000 square foot medical office building. In the second quarter of 2021, the Company ~~expects to fund~~recognized an ~~additional amount~~impairment charge of ~~approximately~~ $5.0 million ~~for additional tenant improvements associated with this project. The first tenant commenced rent payment in~~related to the ~~first quarter of 2020.~~existing building.

Note 7. Stockholders' Equity

Common Stock

The following table provides a reconciliation of the beginning and ending shares of common stock outstanding for the nine months ended September 30, ~~2020~~2021 and the year ended December 31, ~~2019:~~2020:

SEPTEMBER 30, 2020 DECEMBER 31, 2019
Balance, beginning of period 134,706,154 125,279,455
Issuance of common stock 1,292,324 9,251,440
Nonvested share-based awards, net of withheld shares 55,462 175,259
Balance, end of period 136,053,940 134,706,154

~~At-The-Market Equity Offering Program~~

On February 14, 2020, the Company entered into sales agreements with 6 investment banks to allow sales under its at-the-market equity offering program of up to an aggregate of $500.0 million of common stock. The Company sold 1,268,237 shares under the Company's at-the market equity offering program during the nine months ended September 30, 2020. The sales generated $39.9 million in net proceeds at prices to the public ranging from $30.50 to $36.15 per share (weighted average of $31.86 per share). The sales occurred during the following time periods:

•During the first quarter of 2020, the Company sold 196,250 shares generating approximately $7.0 million in net proceeds at prices to the public ranging from $33.00 to $36.15 per share (weighted average of $36.09 per share).

•During the second quarter of 2020, the Company sold 1,071,987 shares generating approximately $32.9 million in net proceeds at prices to the public ranging from $30.50 to $31.29 per share (weighted average of $31.08 per share).

~~In addition, the Company has entered into 3 forward equity agreements totaling~~ ~~3.6 million~~ ~~shares at a weighted average price of~~ ~~$31.30~~ ~~per share:~~

•In the second quarter of 2020, the Company entered into a forward equity agreement for a total of 1,579,371 shares at a weighted average price of $31.66 per share, subject to adjustments as provided in the forward equity agreements. This agreement matures in June 2021.

•In the third quarter of 2020, the Company entered into a forward equity agreement for a total of 764,472 shares at a weighted average price of $31.84 per share, subject to adjustments as provided in the forward equity agreements. This agreement matures in July 2021.

•In the fourth quarter of 2020, the Company entered into a forward equity agreement for a total of 1,235,129 shares at a weighted average price of $30.52 per share, subject to adjustments as provided in the forward equity agreements. This agreement matures in October 2021.

After taking into account the forward equity contracts discussed above, the Company has approximately $347.6 million remaining available to be sold under the current sales agreements at the date of this filing.

~~Common Stock Dividends~~

During the nine months ended September 30, 2020, the Company declared and paid common stock dividends totaling $0.90 per share. On November 3, 2020, the Company declared a quarterly common stock dividend in the amount of $0.30 per share payable on December 1, 2020 to stockholders of record on~~November 16, 2020.~~


	NINE MONTHS ENDED	TWELVE MONTHS ENDED
	SEPTEMBER 30, 2021	DECEMBER 31, 2020
Balance, beginning of period	139,487,375	134,706,154
Issuance of common stock	7,905,570	4,637,445
Nonvested share-based awards, net of withheld shares	148,772	143,776
Balance, end of period	147,541,717	139,487,375

1716

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

At-The-Market Equity Offering Program

On August 6, 2021, the Company entered into equity distribution agreements with 11 investment banks to allow for issuance and sale under its at-the-market equity offering program of up to an aggregate of $750.0 million of common stock. The Company's previous at-the-market equity program to sell up to an aggregate of $500.0 million of common stock ended in August 2021. The following table details the Company's forward at-the-market activity:


	WEIGHTED AVERAGE SALE PRICE per share		FORWARD SHARE CONTRACTS	SHARES SETTLED	SHARES REMAINING TO BE SETTLED	NET PROCEEDS in millions
Balance at December 31, 2020	$	—	—	—	1,823,259	$	—
1Q 2021	$	30.09	215,532	2,038,791	—	$	62.7
2Q 2021	$	30.99	5,835,400	3,827,971	2,007,429	$	116.1
3Q 2021	$	31.06	1,670,186	2,007,429	1,670,186	$	61.3
October 2021 1	$	31.34	2,042,562	—	3,712,748	$	—

1Includes forward share activity from August to October 2021 for trade confirmations dated in October 2021.

The 3.7 million shares remaining to be settled in forward equity arrangements are expected to be settled by October 2022 for expected gross proceeds of $115.9 million, depending on the timing of settlement. Expected net proceeds are calculated by reducing the initial price by adjustments provided in the forward equity arrangements. After accounting for these settlements, the Company has approximately $686.0 million remaining available to be sold under the current equity distribution agreements at the date of this filing.

Common Stock Dividends

During the nine months ended September 30, 2021, the Company declared and paid common stock dividends totaling $0.9075 per share. On November 2, 2021, the Company declared a quarterly common stock dividend in the amount of $0.3025 per share payable on November 30, 2021 to stockholders of record onNovember 15, 2021.

Earnings Per Common Share

The Company uses the two-class method of computing net earnings per common shares. The Company's ~~nonvested~~non-vested share-based awards are considered participating securities pursuant to the two-class method.

During the ~~nine~~three months ended September 30, ~~2020,~~2021, the Company entered into forward sale agreements to sell approximately ~~2.3~~1.7 million shares of common stock through the Company's at-the-market equity offering program. The Company considered the accounting guidance governing financial instruments and derivatives to account for these agreements and concluded that it 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 for which the monetary value was predominately fixed, varying with something other than the fair value of the shares, or varying inversely in relation to the shares. In addition, the Company evaluated whether the agreements met the derivative and hedging guidance scope exception to be accounted for as an equity instrument and concluded that the agreements can be classified as equity.

The Company used the treasury method to determine the dilution from the forward equity 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 three and nine months ended September 30, ~~2020~~2021 included the effect from the assumed issuance of ~~2.3~~1.7 million shares of common stock pursuant to the settlement of the forward equity agreements at the contractual price, less the assumed repurchase of the common stock at the average market price using the proceeds, ~~of approximately $72.7 million,~~ adjusted for costs to borrow. ~~For the three and nine months ended September 30, 2020, 137,757 and 51,133 weighted-average incremental shares~~

Table of ~~common stock were excluded from the computation of weighted-average common shares outstanding - diluted, as the impact was anti-dilutive.~~Contents

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The following table sets forth the computation of basic and diluted earnings per common share for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.


		THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,					THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
Dollars in thousands, except per share data	Dollars in thousands, except per share data	2020		2019		2020		2019		Dollars in thousands, except per share data	2021		2020		2021		2020
Weighted average common shares outstanding	Weighted average common shares outstanding									Weighted average common shares outstanding
Weighted average common shares outstanding	Weighted average common shares outstanding	136,048,781		129,865,985		135,393,798		128,348,638		Weighted average common shares outstanding	145,594,127		136,048,781		143,305,737		135,393,798
Non-vested shares	Non-vested shares	(1,739,364)		(1,775,911)		(1,731,658)		(1,777,743)		Non-vested shares	(1,776,508)		(1,739,364)		(1,784,544)		(1,731,658)
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	134,309,417		128,090,074		133,662,140		126,570,895		Weighted average common shares outstanding - basic	143,817,619		134,309,417		141,521,193		133,662,140

Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	134,309,417		128,090,074		133,662,140		126,570,895		Weighted average common shares outstanding - basic	143,817,619		134,309,417		141,521,193		133,662,140
Dilutive effect of forward equity shares	Dilutive effect of forward equity shares	0		0		0		0		Dilutive effect of forward equity shares	—		—		14,036		—
Dilutive effect of employee stock purchase plan	Dilutive effect of employee stock purchase plan	47,810		78,610		74,029		85,690		Dilutive effect of employee stock purchase plan	—		47,810		78,200		74,029
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	134,357,227		128,168,684		133,736,169		126,656,585		Weighted average common shares outstanding - diluted	143,817,619		134,357,227		141,613,429		133,736,169

Net Income		$	8,230	$	2,601	$	88,058	$	11,975
Net Income (loss)										Net Income (loss)	$	(2,066)	$	8,230	$	45,052	$	88,058
Dividends paid on nonvested share-based awards	Dividends paid on nonvested share-based awards	(522)		(534)		(1,561)		(1,603)		Dividends paid on nonvested share-based awards	(537)		(522)		(1,617)		(1,561)
Net income applicable to common stockholders		$	7,708	$	2,067	$	86,497	$	10,372
Net income (loss) applicable to common stockholders										Net income (loss) applicable to common stockholders	$	(2,603)	$	7,708	$	43,435	$	86,497

Basic earnings per common share - net income		$	0.06	$	0.02	$	0.65	$	0.08
Basic earnings per common share - net income (loss)										Basic earnings per common share - net income (loss)	$	(0.02)	$	0.06	$	0.31	$	0.65

Diluted earnings per common share - net income		$	0.06	$	0.02	$	0.65	$	0.08
Diluted earnings per common share - net income (loss)										Diluted earnings per common share - net income (loss)	$	(0.02)	$	0.06	$	0.31	$	0.65

The effect of non-vested stock awards totaling 911,594 shares, options under the the Company's Employee Stock Purchase Plan (the "Purchase Plan")to purchase the Company's stock totaling 63,383 shares, and the dilutive impact of forward-equity contracts outstanding of 14,734 shares of common stock for the three months ended September 30, 2021 were excluded from the calculation of diluted loss per common share because the effect was anti-dilutive due to the loss from continuing operations incurred during that period.

Incentive Plans

During the nine months ended September 30, 2021, the Company made the following stock awards:

•On January 1, 2021, the Company granted non-vested stock awards to certain officers with a grant date fair value of $0.6 million, which consisted of an aggregate 21,396 non-vested shares through its salary deferral program.

•On February 10, 2021, the Company granted non-vested stock awards to its 4 named executive officers, 5 senior vice presidents, and 5 first vice presidents with a grant date fair value totaling $3.8 million, which consisted of an aggregate 124,648 non-vested shares, with a five-year vesting period.

•Also, on February 10, 2021, the Company granted a performance-based award to its officers, excluding the 4 named executive officers, 5 senior vice presidents, and 5 first vice presidents totaling $0.6 million, which consisted of an aggregate 19,679 non-vested shares.

•On May 11, 2021, the Company granted non-vested stock awards to its 8 directors with a grant date fair value totaling $1.2 million, which consisted of an aggregate 36,682 non-vested shares, with a one-year vesting period.

•On June 21, 2021, the Company granted a non-vested stock award to an employee, which consisted of 1,296 non-vested shares as a discretionary grant.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

~~Incentive Plans~~

A summary of the activity under the Company's share-based incentive plans for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 is included in the table below.


		THREE MONTHS ENDED SEPTEMBER 30,		NINE MONTHS ENDED SEPTEMBER 30,			THREE MONTHS ENDED SEPTEMBER 30,		NINE MONTHS ENDED SEPTEMBER 30,
		2020	2019	2020	2019		2021	2020	2021	2020
Share-based awards, beginning of period	Share-based awards, beginning of period	1,739,258	1,778,134	1,754,066	1,769,863	Share-based awards, beginning of period	1,778,308	1,739,258	1,766,061	1,754,066
Granted	Granted	188	0	79,025	89,767	Granted	—	188	203,701	79,025
Vested 1		0	(204,548)	(93,645)	(286,044)

Vested						Vested	—	—	(191,454)	(93,645)
Forfeited						Forfeited	(2,957)	—	(2,957)	—
Share-based awards, end of period	Share-based awards, end of period	1,739,446	1,573,586	1,739,446	1,573,586	Share-based awards, end of period	1,775,351	1,739,446	1,775,351	1,739,446

1~~The Company's former Executive Chairman, David R. Emery, died on September 30, 2019 resulting in the accelerated vesting of 204,548 outstanding nonvested share-based awards.~~

During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company withheld ~~23,563~~51,972 and ~~100,036~~23,563 shares of common stock, respectively, from participants to pay estimated withholding taxes related to shares that vested.

In addition to the share-based incentive plans, the Company maintains the ~~2000 Employee Stock~~ Purchase ~~Plan (the "Purchase Plan").~~Plan. A summary of the activity under the Purchase Plan for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 is included in the table below.


		THREE MONTHS ENDED SEPTEMBER 30,		NINE MONTHS ENDED SEPTEMBER 30,			THREE MONTHS ENDED SEPTEMBER 30,		NINE MONTHS ENDED SEPTEMBER 30,
		2020	2019	2020	2019		2021	2020	2021	2020
Outstanding and exercisable, beginning of period	Outstanding and exercisable, beginning of period	361,719	363,218	332,659	328,533	Outstanding and exercisable, beginning of period	389,414	361,719	341,647	332,659
Granted	Granted	0	0	212,716	235,572	Granted	—	—	253,200	212,716
Exercised	Exercised	(3,504)	(9,927)	(17,871)	(28,943)	Exercised	(5,323)	(3,504)	(24,300)	(17,871)
Forfeited	Forfeited	(6,659)	(11,762)	(36,154)	(51,559)	Forfeited	(18,961)	(6,659)	(60,995)	(36,154)
Expired	Expired	0	0	(139,794)	(142,074)	Expired	—	—	(144,422)	(139,794)
Outstanding and exercisable, end of period	Outstanding and exercisable, end of period	351,556	341,529	351,556	341,529	Outstanding and exercisable, end of period	365,130	351,556	365,130	351,556

Note 8. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practical to estimate that value.

•Cash and cash equivalents - The carrying amount approximates fair value due to the short term maturity of these investments.

•Borrowings under the Unsecured Credit Facility and the Term Loans Due 2024 and 2026 - The carrying amount approximates fair value because the borrowings are based on variable market interest rates.

•Senior Notes and Mortgage Notes payable - The fair value of notes and bonds payable is estimated using cash flow analyses, based on the Company’s current interest rates for similar types of borrowing arrangements.

•Interest rate swap agreements - Interest rate swap agreements are recorded in other liabilities on the Company's Condensed Consolidated Balance Sheets at fair value. Fair value is estimated by utilizing pricing models that consider forward yield curves and discount rates.

The table below details the fair values and carrying values for notes and bonds payable at September 30, ~~2020~~2021 and December 31, ~~2019.~~2020.


		September 30, 2020				December 31, 2019					September 30, 2021				December 31, 2020
Dollars in millions	Dollars in millions	CARRYING VALUE		FAIR VALUE		CARRYING VALUE		FAIR VALUE		Dollars in millions	CARRYING VALUE		FAIR VALUE		CARRYING VALUE		FAIR VALUE
Notes and bonds payable 1	Notes and bonds payable 1	$	1,554.4	$	1,621.7	$	1,414.1	$	1,425.8	Notes and bonds payable 1	$	1,691.4	$	1,678.6	$	1,602.8	$	1,645.4

1Level 2 – model-derived valuations in which significant inputs and significant value drivers are observable in active markets.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Disclosure Regarding Forward-Looking Statements

This report and other materials the Company has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by 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," "budget" and other comparable terms. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties, including the duration and scope of the COVID-19 pandemic; the impact of the COVID-19 pandemic on occupancy rates for the Company's properties, actions governments take in response to the COVID-19 pandemic, including the introduction of public health measures and other regulations affecting the Company’s properties and the operations of the Company and its tenants; the effects of health and safety measures adopted by the Company and its tenants related to the COVID-19 pandemic; the impact of the COVID-19 pandemic on the operations, business and financial condition of the Company and its tenants; general economic uncertainty in key markets as a result of the COVID-19 pandemic and a worsening of global economic conditions or low levels of economic growth; the status of capital markets, including availability and cost of capital; and the risks described in this report and the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, that could significantly affect the Company’s current plans and expectations and future financial condition and results.

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. 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.

For a detailed discussion of the Company’s risk factors, please refer to the Company’s filings with the Securities and Exchange Commission, including this report and its Annual Report on Form 10-K for the year ended December 31, ~~2019,~~ ~~and the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30,~~ 2020.

~~COVID-19 Update~~

Since being reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

In response to the COVID-19 pandemic, all of the states and cities in which the Company owns properties, manages properties, and/or has development or redevelopment projects instituted quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue. As a result, a number of the Company's tenants temporarily closed their offices or clinical space or operated on a reduced basis in response to government requirements or recommendations. Many of these restrictions have been lifted, but could be reimposed. In response to these disruptions, the Company provided some of its tenants with deferred rent arrangements. Through November 2, 2020, the Company has collected more than 99% of second and third quarter 2020 aggregate tenant billings. The Company has collected 96% of total scheduled deferral payments in the third quarter of 2020. In addition, the Company has remaining various forms of rent deferrals outstanding representing approximately $1.2 million, or less than 1% of second and third quarter 2020 aggregate tenant billings. The tenant deferral agreements generally require the deferred amounts to be repaid by the fourth quarter of 2020.

If tenants are unable to timely repay, or repay at all, deferred rent, if they request additional rent deferrals or abatements, decide not to renew leases, or renew leases at lower cash leasing spreads (See “Expiring Leases” below), the impact on the Company’s results of operations and financial condition could be material. In the second quarter of 2020, the Company recognized an approximately $0.7 million general reserve against the deferred rent balance. Following positive collection trends in the third quarter of 2020, the Company released approximately $0.3 million of the general reserve. As of September 30, 2020, the Company had a remaining general reserve of $0.4 million against an approximate $1.7 million deferred rent balance.

~~Table of Contents~~

At September 30, 2020, the Company had available $882.6 million in liquidity (See “Sources and Uses of Cash” and “Financing Activities” below) and no significant debt maturities prior to 2023. In addition, the Company has entered into forward equity agreements that have expected proceeds of up to approximately $112.0 million, before the costs of borrowing, that can be settled at the Company's election anytime through October 2021. The COVID-19 pandemic has affected the availability and cost of capital and may continue to do so for some time. Management believes that the Company currently has adequate liquidity to operate its business without significant disruption. However, if the pandemic continues to have an impact on the availability and cost of capital, the Company’s business could be materially affected.

Liquidity and Capital Resources

Sources and Uses of Cash

The Company’s primary sources of cash include rent receipts from its real estate portfolio based on contractual arrangements with its tenants, borrowings under the Company's ~~Unsecured~~Amended and Restated Credit ~~Facility~~Agreement, dated as of May 31, 2019, as amended (the "Unsecured Credit Facility") and the Amended and Restated Term Loan Agreement, dated as of May 31, 2019, as amended (the "Term Loan Agreement"), proceeds from the sales of real estate properties, joint ventures, and proceeds from public or private debt or equity offerings. As of September 30, ~~2020,~~2021, the Company had ~~$700.0~~$609.5 million available to be drawn on its Unsecured Credit Facility and ~~$182.6~~$16.0 million in ~~cash and restricted~~ cash. In addition, the Company has entered into forward equity agreements that have expected gross proceeds of up to approximately ~~$112.0~~$115.9 million, ~~before~~depending on the ~~costs~~timing of ~~borrowing, that can be settled at the Company's election anytime through October 2021.~~settlement.

The Company expects to continue to meet its liquidity needs, including funding additional investments, paying dividends, and funding debt service, through cash flows from operations and ~~the cash flow~~liquidity sources described above. The Company had unencumbered real estate assets with a gross book value of approximately ~~$4.1~~$4.6 billion at September 30, ~~2020,~~2021, 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, however, 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.

Investing Activities

Cash flows used in investing activities for the nine months ended September 30, ~~2020~~2021 were approximately ~~$259.9~~$364.7 million. Below is a summary of significant investing activities.

~~2020~~

Table of Contents

2021 Company Acquisitions

The following table details the Company's acquisitions for the nine months ended September 30, ~~2020:~~2021:

Dollars in millions HEALTH SYSTEM AFFILIATION DATE ACQUIRED PURCHASE PRICE SQUARE FOOTAGE CAP
RATE MILES TO CAMPUS
Los Angeles, CA MemorialCare Health 1/3/20 $ 42.0 86,986 5.3 % 0.14
Atlanta, GA Wellstar Health System 2/13/20 12.0 64,624 5.6 % 0.10
Raleigh, NC WakeMed Health 2/25/20 6.3 15,964 6.7 % 0.04
Colorado Springs, CO None 3/9/20 8.2 34,210 6.5 % 1.60
Denver, CO 1
UCHealth 3/13/20 33.5 136,994 6.1 % 0.24
San Diego, CA Palomar Health 7/1/20 16.7 46,083 5.9 % 0.04
Los Angeles, CA Cedars-Sinai/Huntington 7/17/20 35.0 49,785 5.4 % 0.11
Seattle, WA MultiCare Health System 7/23/20 11.0 21,309 5.6 % 0.06
Atlanta, GA Wellstar Health System 7/31/20 20.5 48,145 6.2 % 0.13
Houston, TX Memorial Hermann Health 9/24/20 11.0 40,235 5.6 % 0.03
Los Angeles, CA Providence St. Joseph Health 9/28/20 14.0 24,252 5.6 % 0.03
Total real estate acquisitions $ 210.2 568,587 5.7 %
Land acquisition 2
1.6 —
Land acquisition 3
1.0 —
$ 212.8 568,587


Dollars in thousands	ASSOCIATED HEALTH SYSTEM/TENANCY 1	DATE ACQUIRED	PURCHASE PRICE		SQUARE FOOTAGE	MILES TO CAMPUS
San Diego, CA 2	Scripps Health/UCSD	1/7/21	$	17,150	22,461	0.02
Dallas, TX 3	Baylor Scott & White Health	2/1/21	22,515		121,709	0.00
Atlanta, GA 3	Wellstar Health System	2/17/21	9,800		44,567	0.19
Washington, D.C.	Sentara Healthcare	3/3/21	12,750		26,496	0.09
Houston, TX	Houston Methodist	5/14/21	13,500		45,393	0.03
San Diego, CA 4	Palomar Health	5/28/21	102,650		160,394	0.00
Greensboro, NC	Cone Health	6/28/21	9,390		25,168	0.60
Baltimore, MD	None	6/29/21	14,600		33,316	1.50
Denver, CO 5	Centura Health (AdventHealth)	7/16/21	70,426		259,555	0.00
Greensboro, NC 2	Cone Health	7/19/21	6,400		18,119	0.18
Colorado Springs, CO	Centura Health (CommonSpirit)	7/27/21	33,400		69,526	0.00
Birmingham, AL	Community Health Systems	8/19/21	9,250		29,942	0.24
Raleigh, NC	WakeMed Health	9/20/21	5,780		18,280	0.70
Denver, CO	Centura Health (AdventHealth)	9/22/21	20,250		83,604	0.00
Raleigh, NC	WakeMed Health	9/30/21	10,000		29,178	0.22



Total real estate acquisitions			$	357,861	987,708

1Includes buildings located on-campus, adjacent and off-campus that are anchored by healthcare systems or located within two miles of a hospital campus.

2Represents a single-tenant property.

3Includes 2 properties.

4The Company accounted for this transaction as a financing receivable. See Note 1 to the Condensed Consolidated Financial Statements accompanying this report for more information.

5Includes three properties.

2021 TIAA Joint Venture Acquisitions

The following table details the TIAA Joint Venture's acquisitions for the nine months ended September 30, 2021:


Dollars in thousands	ASSOCIATED HEALTH SYSTEM/TENANCY 1	DATE ACQUIRED	PURCHASE PRICE		SQUARE FOOTAGE	MILES TO CAMPUS	COMPANY OWNERSHIP %
Denver, CO	HCA	3/30/21	$	14,375	59,359	0.60	50	%
Colorado Springs, CO	None	4/1/21	7,200		27,510	4.70	50	%
Los Angeles, CA	MemorialCare Health	4/8/21	31,335		57,573	0.00	50	%
San Antonio, TX	CHRISTUS Health/Baptist Health	4/30/21	13,600		45,000	0.90	50	%
Los Angeles, CA	MemorialCare Health	5/10/21	24,600		73,078	0.00	50	%
Colorado Springs, CO 2	Centura Health (CommonSpirit)	7/27/21	9,133		23,956	1.90	50	%


Total TIAA Joint Venture real estate acquisitions			$	100,243	286,476

1~~The Company acquired land parcels under four existing~~Includes buildings ~~(previously ground leased with the~~located on-campus, adjacent and off-campus that are anchored by healthcare systems or located within two miles of a hospital ~~system).~~campus.

32~~The Company acquired a~~Includes purchase of an adjoining 3.0 acre land ~~parcel under an existing building (previously ground leased). The building and land were disposed~~parcel.

Subsequent to September 30, ~~2020.~~2021, the TIAA Joint Venture acquired the following property:

Dollars in thousands

ASSOCIATED HEALTH SYSTEM/TENANCY 1

DATE ACQUIRED

PURCHASE PRICE

SQUARE FOOTAGE

MILES TO CAMPUS

COMPANY OWNERSHIP %

Denver, CO

None

10/21/21

23,000

57,257

3.10

1Includes buildings located on-campus, adjacent and off-campus that are anchored by healthcare systems or located within two miles of a hospital campus.

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~~Subsequent Acquisition~~

~~On October 7, 2020 the Company acquired a 36,720 square foot medical office building in Colorado Springs, CO for a purchase price of $8.9 million.~~

~~2020~~2021 Dispositions

The Company disposed of ~~three~~11 properties during the nine months ended September 30, ~~2020~~2021 for a total sales price of ~~$249.5~~$114.6 million, including cash proceeds of ~~$249.3 million and $0.2 million of closing costs and related adjustments.~~$112.0 million. The following table details these dispositions for the nine months ended September 30, ~~2020:~~2021:

Dollars in millions Date Disposed Sales Price Square Footage 3Q 2020 NOI Disposition Cap Rate Property Type
Springfield, MO 7/30/20 $ 138.0 186,000 $ 0.8 7.5 % SF
Oklahoma City, OK 7/30/20 106.5 200,000 0.6 7.5 % MOB
Miami, FL 9/30/20 5.0 26,000 — 3.9 % MOB
Total dispositions $ 249.5 412,000 $ 1.4 7.4 %


Dollars in thousands	Date Disposed	Sales Price		Square Footage
Los Angeles, CA 1,2	3/11/21	$	26,000	73,906
Atlanta, GA 2	4/12/21	8,050		19,732
Richmond, VA 2,5	5/18/21	52,000		142,856
Gadsden, AL 2,3	5/19/21	5,500		120,192
Dallas, TX 2,4	7/9/21	23,000		190,160


Total dispositions		$	114,550	546,846

1~~MOB = Medical office building; SF = Surgical facility~~Includes two properties sold to a single purchaser in two transactions which occurred on March 5 and March 11, 2021.

2Previously classified as held for sale.

3Includes three properties.

4Includes four properties and an associated land parcel sold to a single purchaser in two transactions.

5 The Company deferred the tax gain through a 1031 exchange and reinvested the proceeds.

Subsequent Disposition

On October 28, 2021, the Company disposed of a 95,436 square foot medical office building located in Chicago, Illinois. The sales price was $13.3 million, and the Company's net investment in the building as of September 30, 2021 was approximately $12.5 million and was included in assets held for sale. During the third quarter of 2021, an impairment charge of $10.7 million was recorded based on the contractual sales price less estimated costs to sell.

Capital Funding

During the nine months ended September 30, ~~2020,~~2021, the Company funded the following:

•$~~17.3~~21.6 million toward the following development and redevelopment of ~~properties;~~properties:

◦Memphis, Tennessee redevelopment totaled $9.4 million;

◦Dallas, Texas redevelopment totaled $1.7 million;

◦Tacoma, Washington redevelopment totaled $1.7 million;

◦reposition properties capital and tenant improvements totaled $1.5 million; and

◦tenant improvement funding for previously completed projects totaled $7.3 million.

•$~~14.2~~14.5 million toward first generation tenant improvements and planned capital expenditures for acquisitions;

•$~~17.4~~16.2 million toward second generation tenant improvements; and

•$~~12.8~~13.5 million toward capital expenditures.

Financing Activities

Cash flows provided by financing activities for the nine months ended September 30, ~~2020~~2021 were approximately ~~$30.3~~$195.1 million. Inflows from equity proceeds related to the Company's common stock issuances and net borrowings totaled ~~$160.5~~$328.1 million, net of issuance costs incurred. Aggregate cash outflows totaled approximately ~~$130.2~~$133.0 million primarily associated with dividends paid to common stockholders. See Notes 4 and 7 to the Condensed Consolidated Financial Statements accompanying this report for more information about capital markets and financing activities.

Common Stock Issuances

At-The-Market Equity Offering Program

On ~~February 14, 2020,~~August 6, 2021, the Company entered into ~~sales~~equity distribution agreements with ~~six investment~~eleven investment banks to allow ~~sales~~for issuance and sale under its at-the-market equity offering program of up to an aggregate of ~~$500.0~~$750.0 million of common stock. The ~~Company sold 1,268,237 shares under~~Company's previous at-the-market equity program to sell up to an aggregate of $500.0 million ended in August 2021. The following table details the Company's at-the market equity offering program during the nine months ended September 30, 2020. The sales generated $39.9 million in net proceeds at prices to the public ranging from $30.50 to $36.15 per share (weighted average of $31.86 per share). The sales occurred during the following time periods:

~~In addition, the Company has entered into three~~ forward ~~equity agreements totaling~~ ~~3.6 million~~ ~~shares at a weighted average price of~~ ~~$31.30~~ ~~per share:~~at-the-market activity:

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	WEIGHTED AVERAGE SALE PRICE per share		FORWARD SHARE CONTRACTS	SHARES SETTLED	SHARES REMAINING TO BE SETTLED	NET PROCEEDS in millions
Balance at December 31, 2020	$	—	—	—	1,823,259	$	—
1Q 2021	$	30.09	215,532	2,038,791	—	$	62.7
2Q 2021	$	30.99	5,835,400	3,827,971	2,007,429	$	116.1
3Q 2021	$	31.06	1,670,186	2,007,429	1,670,186	$	61.3
October 2021 1	$	31.34	2,042,562	—	3,712,748	$	—

•1~~In the second quarter of 2020, the Company entered into a~~Includes forward share activity from August to October 2021 for trade confirmations dated in October 2021.

The 3.7 million shares remaining to be settled in forward equity ~~agreement~~arrangements are expected to be settled by October 2022 for ~~a total~~expected gross proceeds of ~~1,579,371 shares at~~ ~~a weighted average~~$115.9 million, depending on the timing of settlement. Expected net proceeds are calculated by reducing the initial price ~~of $31.66 per share, subject to~~ by adjustments as provided in the forward equity ~~agreements. This agreement matures in June 2021.~~

•~~In the third quarter of 2020, the Company entered into a forward equity agreement~~arrangements. After accounting for ~~a total of 764,472 shares at~~ ~~a weighted average price~~ ~~of $31.84 per share, subject to adjustments as provided in the forward equity agreements. This agreement matures in July 2021.~~

•~~In the fourth quarter of 2020, the Company entered into a forward equity agreement for a total of 1,235,129 shares at~~ ~~a weighted average price~~ ~~of $30.52 per share, subject to adjustments as provided in the forward equity agreements. This agreement matures in October 2021.~~

~~After taking into account the forward equity contracts discussed above,~~these settlements, the Company has approximately ~~$347.6~~$686.0 million remaining available to be sold under the current ~~sales~~equity distribution agreements at the date of this filing.

Debt Activity

On February 3, 2020, the Company repaid in full a mortgage note payable bearing interest at a rate of 6.10% per annum with an outstanding principal of $5.9 million. The mortgage note encumbered a 68,860 square foot property in Oklahoma.

On March 4, 2020, the Company issued $300.0 million of Senior Notes due 2030 in a registered public offering. The Senior Notes due 2030 bear interest at 2.40%, payable semi-annually on March 15 and September 15, beginning September 15, 2020, and are due on March 15, 2030, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $1.0 million and the Company incurred approximately $2.8 million in debt issuance costs. Concurrent with this transaction, the Company settled two treasury rate locks for $4.3 million. Inclusive of the discount, debt issuance costs and settlement of the treasury rate locks, the effective interest rate was 2.71%. The Senior Notes due 2030 have various financial covenants that are required to be met on a quarterly and annual basis.

~~On May 29, 2020, the Company borrowed $150.0 million from its unsecured term loan due 2026.~~

On June 25, 2020, the Company repaid in full three mortgage notes bearing interest at rates of 5.63%, 6.63% and 6.88% per annum with outstanding principal of $0.5 million, $2.8 million, and $7.0 million, respectively. The mortgage notes encumbered a 60,476 square foot property in Minnesota.

The Company has outstanding interest rate derivatives totaling $175.0 million to hedge one-month LIBOR. The following details the amount and rate of each swap (dollars in thousands):


EFFECTIVE DATE	AMOUNT		WEIGHTED AVERAGE RATE		EXPIRATION DATE
December 18, 2017	$	25,000	2.18	%	December 16, 2022
February 1, 2018	50,000		2.46	%	December 16, 2022
May 1, 2019	50,000		2.33	%	May 1, 2026
June 3, 2019	50,000		2.13	%	May 1, 2026
	$	175,000	2.29	%

On June 1, 2021, the Company entered into a second amendment to the Term Loan Agreement that reduced the current interest rate on the $150 million portion of the loan due 2026 from LIBOR plus a margin rate ranging from 1.45% to 2.40% (previously 1.60%) to LIBOR plus a margin rate ranging from 0.80% to 1.60% (0.95% as of September 30, 2021). With the amendment, the Company paid up front fees of approximately $0.5 million, of which $0.2 million was paid to lenders, capitalized and amortized over the remainder of the term of the loan, and $0.3 million was paid to lenders as administration fees and was expensed in the second quarter of 2021. In addition, the amendment added a sustainability metric incentive tied to increasing the Company's properties with green building certifications.

Subsequent Changes in Debt ~~Activity~~Structure

On ~~October~~November 1, ~~2020,~~2021, the Company repaid in full a mortgage note payable bearing interest at a rate of ~~5.47%~~4.69% per annum with an outstanding principal of ~~$4.2~~$11.1 million. The mortgage note encumbered a ~~40,171~~62,379 square foot property in ~~Georgia.~~

~~Table of Contents~~

On October 2, 2020, the Company issued $300.0 million of Senior Notes due 2031 in a registered public offering. The Senior Notes due 2031 bear interest at 2.05%, payable semi-annually on March 15 and September 15, beginning March 15, 2021, and are due on March 15, 2031, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $2.4 million and the Company incurred approximately $2.8 million in debt issuance costs. Inclusive of the discount and debt issuance costs, the effective interest rate was 2.24%. The Senior Notes due 2031 have various financial covenants that are required to be met on a quarterly and annual basis.

On October 19, 2020, the Company redeemed its Senior Notes due 2023. The aggregate redemption price of $270.5 million consisted of outstanding principal of $250.0 million, accrued interest of $0.1 million, and a "make-whole" amount of approximately $20.4 million for the early extinguishment of debt. The unaccreted discount and unamortized costs on these notes of $1.1 million was written off upon redemption. In October 2020, the Company recognized a loss on early extinguishment of debt of approximately $21.5 million related to this redemption.Maryland.

Operating Activities

Cash flows provided by operating activities ~~increased~~decreased from ~~$158.5 million for the nine months ended September 30, 2019 to~~ $411.6 million for the nine months ended September 30, ~~2020.~~2020 to $170.3 million for the nine months ended September 30, 2021. The nine months ended September 30, 2020 includes proceeds from the disposition of sales-type lease properties totaling $244.5 million. Items impacting cash flows from operations include, but are not limited to, cash generated from property operations, interest payments and the timing related to the payment of invoices and other expenses. ~~Also included in operating cash flows was approximately $244.4 million of proceeds from the dispositions of sale-type lease properties.~~

The Company may, from time to time, sell properties and redeploy cash from property sales into new investments. To the extent revenues related to the properties being sold exceed income from these new investments, the Company's results of operations and cash flows could be adversely affected.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital

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expenditures or capital resources.

New Accounting Pronouncements

See Note 1 to the ~~Company's~~ Condensed Consolidated Financial Statements accompanying this report for information on new accounting standards.

Trends and Matters Impacting Operating Results

Management monitors factors and trends important to the Company and the REIT industry to gauge the potential impact on the operations of the Company. In addition to the matters discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, below are some of the factors and trends that management believes may impact future operations of the Company.

~~COVID-19 Pandemic~~

~~For information on the ways that the COVID-19 pandemic is impacting the Company and its tenants, see "COVID-19 Update" above.~~

Expiring Leases

The Company expects that approximately 15% to 20% of the leases ~~in its multi-tenanted portfolio~~ will expire each year in the ordinary course of business. There are ~~211~~193 leases totaling ~~0.8~~0.6 million square feet ~~in the Company's multi-tenant portfolio~~ that will expire during the remainder of ~~2020.~~2021. Approximately ~~85%~~91% of the leases expiring in ~~2020~~2021 are in buildings located on or adjacent to hospital campuses, are distributed throughout the portfolio, and are not concentrated with any one tenant, health system or market area. The Company typically expects to retain 75% to 90% of ~~multi-tenant property~~ tenants upon expiration, and the retention ratio for the first nine months of the year ~~has been~~was within this range.

Previously included in the 2020 lease expirations was a 111,000 square foot fitness center leased by Baylor Scott & White Health. The fitness center is located in a 217,000 square foot on-campus medical office building. A new operator, Cowboys Fit, executed an approximately 14-year lease for a reconfigured 52,000 square foot fitness center.

~~Table of Contents~~

Baylor has executed a temporary lease at a reduced rental rate to continue to operate the existing fitness center until the construction of the new center is complete. Once the Baylor lease expires, the remaining 59,000 square feet is expected to be redeveloped into clinical space. In addition, the Company plans to upgrade the common areas, bathrooms, and the exterior of the building.

Previously included in the 2020 lease expirations was the July 31 expiration of a 62,000 square foot office lease. A telecommunication company occupied three floors of a 145,000 square foot office building and vacated upon expiration of the lease. The Company recognized revenue of approximately $0.1 million related to this lease in the third quarter of 2020. The Company intends to reposition the property, converting the vacated space from full floor to multi-tenant configurations. The Company has begun marketing the space and has executed a 10,000 square foot lease.

The Company had an 83,000 square foot, single-tenant net leased, on-campus medical office building with a lease term that expired in the second quarter of 2020. The Company has been in discussions about a long-term lease renewal, but given the COVID-19 pandemic, executed a 6-month extension through December 31, 2020 to allow more time to finalize a long-term lease agreement.

Operating Expenses

The Company historically has ~~historically~~ experienced increases in property taxes throughout its portfolio as a result of increasing assessments and tax rates levied across the country. The Company continues its efforts to appeal property tax increases and manage the impact of the increases. In addition, the Company historically has ~~historically~~ incurred variability in portfolio utilities expense based on seasonality, with the first and third quarters usually reflecting greater amounts. The effects of these operating expense increases are mitigated in leases that have provisions for operating expense reimbursement. As of September 30, ~~2020,~~2021, leases for ~~89%~~90% of the Company's multi-tenant leased square footage allow for some recovery of operating expenses, with ~~31%~~32% having modified gross lease structures and 58% having net lease structures.

Purchase Options

Information about the Company's unexercised purchase options and the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):


		NUMBER OF PROPERTIES		GROSS REAL ESTATE INVESTMENT AS OF SEPTEMBER 30, 2020							NUMBER OF PROPERTIES		GROSS REAL ESTATE INVESTMENT AS OF SEPTEMBER 30, 2021
YEAR EXERCISABLE	YEAR EXERCISABLE	MOB	INPATIENT	FAIR MARKET VALUE METHOD 1		NON FAIR MARKET VALUE METHOD 2		TOTAL		YEAR EXERCISABLE	MOB	INPATIENT	FAIR MARKET VALUE METHOD 1		NON FAIR MARKET VALUE METHOD 2		TOTAL
Current 3	Current 3	3	1	$	96,865	$	—	$	96,865	Current 3	2	1	$	54,543	$	—	$	54,543
2021		1	—	—		14,984		14,984
2022	2022	—	—	—		—		—		2022	1	—	—		14,984		14,984
2023	2023	—	—	—		—		—		2023	—	—	—		—		—
2024	2024	—	—	—		—		—		2024	—	—	—		—		—
2025	2025	4	—	48,165		19,459		67,624		2025	4	—	48,241		19,459		67,700
2026	2026	—	—	—		—		—		2026	1	—	18,164		—		18,164
2027	2027	—	—	—		—		—		2027	—	—	—		—		—
2028	2028	1	—	43,961		—		43,961		2028	1	—	41,082		—		41,082
2029	2029	1	—	26,494		—		26,494		2029	1	—	26,501		—		26,501
2030 and thereafter		4	—	101,118		—		101,118
2030										2030	—	—	—		—		—
2031 and thereafter 4										2031 and thereafter 4	9	—	298,260		—		298,260
Total	Total	14	1	$	316,603	$	34,443	$	351,046	Total	19	1	$	486,791	$	34,443	$	521,234

1The purchase option price includes a fair market value component that is determined by an appraisal process.

2Includes properties with stated purchase prices or prices based on fixed capitalization rates.

3These purchase options have been exercisable for an average of ~~12.1~~14.1 years.

4Includes the medical office building that is recorded in the line item Investment in financing receivable, net on the Company's Condensed Consolidated Balance Sheet.

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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 Condensed Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

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, non-cash financing receivable amortization, loan origination cost amortization, deferred financing fees amortization, stock-based compensation expense and provision for bad debts, net; and subtracting maintenance capital expenditures, including second generation tenant improvements and leasing commissions paid and straight-line rent income, net of expense. 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 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 to FFO, Normalized FFO ~~and FAD for the three and nine months ended September 30, 2020 and 2019.~~

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THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
Amounts in thousands, except per share data 2020 2019 2020 2019
Net income $ 8,230 $ 2,601 $ 88,058 $ 11,975
(Gain) on sales of real estate assets (2,177) (200) (70,395) (5,065)
Impairment of real estate assets — — — 5,610
Real estate depreciation and amortization 48,295 45,926 145,564 133,993
FFO attributable to common stockholders $ 54,348 $ 48,327 $ 163,227 $ 146,513
Acquisition and pursuit costs 1
440 501 1,621 1,227
Lease intangible amortization (35) 5 694 143
Accelerated Stock Awards — 2,854 — 2,854
Debt financing costs — — — 760
Normalized FFO attributable to common stockholders $ 54,753 $ 51,687 $ 165,542 $ 151,497
Non-real estate depreciation and amortization 785 838 2,430 2,430
Non-cash interest expense amortization 2
934 727 2,715 2,136
Provision for bad debt, net (144) (32) 718 43
Straight-line rent, net (535) (379) (1,577) (650)
Stock-based compensation 3
2,445 2,375 7,449 7,386
Normalized FFO adjusted for non-cash items $ 58,238 $ 55,216 $ 177,277 $ 162,842
2nd generation TI (5,323) (6,114) (17,368) (16,564)
Leasing commissions paid (1,999) (2,697) (7,081) (6,359)
Capital additions (4,580) (3,543) (12,827) (11,998)
FAD $ 46,336 $ 42,862 $ 140,001 $ 127,921
FFO per common share - diluted $ 0.40 $ 0.37 $ 1.21 $ 1.15
Normalized FFO per common share - diluted $ 0.41 $ 0.40 $ 1.23 $ 1.19
FFO weighted average common shares outstanding - diluted 4
135,159 129,015 134,537 127,424
and FAD for the three and nine months ended September 30, 2021 and 2020.


	THREE MONTHS ENDED SEPTEMBER 30,				NINE MONTHS ENDED SEPTEMBER 30,
Amounts in thousands, except per share data	2021		2020		2021		2020
Net income (loss)	$	(2,066)	$	8,230	$	45,052	$	88,058
Gain on sales of real estate properties	(1,186)		(2,177)		(41,046)		(70,395)
Impairment of real estate properties	10,669		—		16,581		—
Real estate depreciation and amortization	52,390		48,215		154,899		145,324
Proportionate share of unconsolidated joint ventures	1,558		80		3,726		240
FFO attributable to common stockholders	$	61,365	$	54,348	$	179,212	$	163,227
Acquisition and pursuit costs 1	974		440		2,388		1,621
Lease intangible amortization	48		(35)		(30)		694
Forfeited earnest money received	—		—		(500)		—
Debt financing costs	—		—		283		—
Unconsolidated JV normalizing items 2	54		—		136		—
Normalized FFO attributable to common stockholders	$	62,441	$	54,753	$	181,489	$	165,542
Non-real estate depreciation and amortization	586		785		1,900		2,430
Non-cash interest amortization 3	720		934		2,511		2,715
Provision for bad debt, net	25		(144)		3		718
Straight-line rent, net	(1,171)		(543)		(3,459)		(1,600)
Stock-based compensation	2,538		2,445		8,183		7,449
Unconsolidated JV non-cash items 4	(341)		8		(1,051)		23
Normalized FFO adjusted for non-cash items	$	64,798	$	58,238	$	189,576	$	177,277
2nd generation TI	(6,219)		(5,323)		(16,156)		(17,368)
Leasing commissions paid	(4,531)		(1,999)		(9,528)		(7,081)
Capital additions	(5,443)		(4,580)		(13,539)		(12,827)
FAD	$	48,605	$	46,336	$	150,353	$	140,001
FFO per common share - diluted	$	0.42	$	0.40	$	1.26	$	1.21
Normalized FFO per common share - diluted	$	0.43	$	0.41	$	1.27	$	1.23
FFO weighted average common shares outstanding - diluted 5	144,807		135,159		142,488		134,537

1Acquisition and pursuit costs include ~~third party~~third-party and travel costs related to the pursuit of acquisitions and developments.

2Includes the Company's proportionate share of acquisition and pursuit costs related to unconsolidated joint ventures.

3Includes the amortization of deferred financing costs, discounts and ~~premiums.~~

3~~The Company's former Executive Chairman, David R. Emery, died on September 30, 2019 resulting in a $2.9 million charge for the acceleration of his outstanding nonvested share-based awards~~premiums, and ~~associated taxes.~~non-cash financing receivable amortization.

4Includes the Company's proportionate share of straight-line rent, net related to unconsolidated joint ventures.

5The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of ~~801,382~~911,594 and ~~800,370,~~874,189, respectively for the three and nine months ended September 30, ~~2020.~~2021.

Cash ~~NOI~~Net Operating Income ("NOI") and Same Store Cash NOI

Cash NOI and 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, interest from financing receivables and property lease guaranty income 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 and leasing commission amortization. The Company also excludes cash lease termination fees. Cash NOI is historical and not necessarily indicative of future results.

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 and include redevelopment projects. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale, reposition properties and newly developed properties. The Company utilizes the reposition classification for properties experiencing a shift in strategic direction. Such a shift can occur for a variety of reasons, including a substantial change in the use of the asset, a change in strategy or closure of a

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neighboring hospital, or significant property damage. Such properties may require enhanced management, leasing, capital needs or a disposition strategy that differs from the rest of the portfolio. To identify properties exhibiting these reposition characteristics, the Company applies the following Company-defined criteria:

•Properties having less than 60% occupancy that is expected to last at least two quarters;

•Properties that experience a loss of occupancy over 30% in a single quarter; or

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•Properties with negative ~~net operating income~~NOI that is expected to last at least two quarters.

Any recently acquired property will be included in the same store pool once the Company has owned the property for eight full quarters. Newly developed properties will be included in the same store pool eight full quarters after substantial completion. Any additional square footage created by redevelopment projects at a same store property is included in the same store pool immediately upon completion. Any property included in the reposition property group will be included in the same store analysis once occupancy has increased to 60% or greater with positive ~~net operating income~~NOI and has remained at that level for eight full quarters.

During the third quarter of ~~2020,~~2021, the Company's reposition pool ~~increased~~decreased by one property to a total of ~~11 properties. Two~~six properties ~~were~~as a result of the property being reclassified from reposition to held for sale, two properties were reclassified into reposition pursuant to the Company-defined criteria outlined above and one property that is undergoing a shift in strategic direction as a significant portion of the building is being repurposed from fitness space to clinical space was reclassified from same store to reposition . This 217,000 square foot on-campus medical office building included a 111,000 square foot fitness center previously leased by Baylor Scott & White Health. A new operator, Cowboys Fit, executed an approximately 14-year lease for a reconfigured 52,000 square foot fitness center. Baylor has executed a temporary lease for the remaining 59,000 square feet at a reduced rental rate to continue to operate the existing fitness center until the construction of the new center is complete. Once the Baylor lease expires, the remaining 59,000 square feet is expected to be redeveloped into clinical space. In addition, the Company plans to upgrade the common areas, bathrooms, and the exterior of the building.store.

The following table reflects the Company's same store cash NOI for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

NUMBER OF PROPERTIES GROSS INVESTMENT
at September 30, 2020 SAME STORE CASH NOI for the three months ended September 30,
Dollars in thousands 2020 2019
Multi-tenant properties 156 $ 3,237,143 $ 57,663 $ 56,317
Single-tenant net lease properties 12 257,229 6,033 5,870
Total 168 $ 3,494,372 $ 63,696 $ 62,187


	NUMBER OF PROPERTIES	GROSS INVESTMENT at September 30, 2021		SAME STORE CASH NOI for the three months ended September 30,
Dollars in thousands				2021		2020
Same store properties	178	$	3,786,406	$	68,062	$	66,874

The following tables reconcile net income to same store NOI and the same store property metrics to the total owned real estate portfolio for the three months ended September 30, ~~2020~~2021 and ~~2019:~~2020:

Reconciliation of Same Store Cash NOI


		THREE MONTHS ENDED SEPTEMBER 30,					THREE MONTHS ENDED SEPTEMBER 30,
Dollars in thousands	Dollars in thousands	2020		2019		Dollars in thousands	2021		2020
Net income		$	8,230	$	2,601
Net income (loss)						Net income (loss)	$	(2,066)	$	8,230

Other income (expense)	Other income (expense)	11,969		13,981		Other income (expense)	23,000		11,969
General and administrative expense	General and administrative expense	7,299		10,802		General and administrative expense	8,207		7,299
Depreciation and amortization expense	Depreciation and amortization expense	47,143		45,137		Depreciation and amortization expense	50,999		47,143
Other expenses 1	Other expenses 1	2,737		2,462		Other expenses 1	3,193		2,364
Straight-line rent revenue	Straight-line rent revenue	(915)		(770)		Straight-line rent revenue	(1,170)		(542)
Joint venture properties						Joint venture properties	1,210		19
Other revenue 2	Other revenue 2	(3,062)		(1,726)		Other revenue 2	(2,043)		(1,609)
Cash NOI	Cash NOI	73,401		72,487		Cash NOI	81,330		74,873
Cash NOI not included in same store	Cash NOI not included in same store	(9,705)		(10,300)		Cash NOI not included in same store	(13,268)		(7,999)
Same store cash NOI	Same store cash NOI	63,696		62,187		Same store cash NOI	68,062		66,874
Reposition NOI	Reposition NOI	1,358		1,660		Reposition NOI	691		954
Same store and reposition cash NOI	Same store and reposition cash NOI	$	65,054	$	63,847	Same store and reposition cash NOI	$	68,753	$	67,828

1Includes acquisition and pursuit costs, bad debt, 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.

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Reconciliation of Same Store Properties


		AS OF SEPTEMBER 30, 2020							AS OF SEPTEMBER 30, 2021
		PROPERTY COUNT	GROSS INVESTMENT		SQUARE FEET	OCCUPANCY
Dollars in thousands								Dollars in thousands	PROPERTY COUNT	GROSS INVESTMENT		SQUARE FEET	OCCUPANCY
Same store properties	Same store properties	168	$	3,494,372	12,795,403	88.4	%	Same store properties	178	$	3,786,406	13,426,252	88.4	%
Acquisitions	Acquisitions	31	647,974		1,667,990	91.4	%	Acquisitions	49	895,660		2,396,693	89.8	%
Development completions	Development completions	1	51,889		151,031	60.5	%	Development completions	2	83,452		261,914	72.3	%
Reposition	Reposition	11	142,381		859,004	62.1	%	Reposition	6	101,672		668,889	54.8	%
Total owned real estate properties	Total owned real estate properties	211	$	4,336,616	15,473,428	87.0	%	Total owned real estate properties	235	$	4,867,190	16,753,748	87.0	%

Results of Operations

Three Months Ended September 30, ~~2020~~2021 Compared to Three Months Ended September 30, ~~2019~~2020

The Company’s results of operations for the three months ended September 30, ~~2020~~2021 compared to the same period in ~~2019~~2020 were impacted by acquisitions, developments, dispositions, gains on sale, and capital markets transactions.

Revenues

~~Total revenues~~Rental income increased ~~$5.5~~$8.4 million, or ~~4.6%~~6.8%, ~~to approximately $125.3 million~~ for the three months ended September 30, ~~2020~~2021 compared to ~~$119.8 million in~~ the prior year period. This increase is comprised of the following:

THREE MONTHS ENDED SEPTEMBER 30, CHANGE
Dollars in thousands 2020 2019 $ %
Property operating $ 114,921 $ 105,805 $ 9,116 8.6 %
Single-tenant net lease 7,548 11,165 (3,617) (32.4) %
Straight-line rent 915 770 145 18.8 %
Rental income 123,384 117,740 5,644 4.8 %
Other operating 1,868 2,059 (191) (9.3) %
Total revenues $ 125,252 $ 119,799 $ 5,453 4.6 %
•Acquisitions in 2020 and 2021 contributed $10.0 million.

•Leasing activity, including contractual rent increases, contributed $2.6 million.

•Dispositions in 2020 and 2021 resulted in a decrease of $4.2 million.

Interest from a financing receivable, net totaled $1.9 million for the three months ended September 30, 2021. The Company acquired a property in the second quarter of 2021 under a sale leaseback transaction. The sale leaseback did not qualify for sale accounting as a result of a purchase option included in the tenant lease. Therefore, the Company accounted for the transaction as a financing receivable. See Note 1 to the Condensed Consolidated Financial Statements accompanying this report for more information.

Other operating income increased $1.1 million, or 58.9%, from the prior year period primarily as a result of variable parking and asset management fees.

Expenses

Property operating ~~revenue~~expenses increased ~~$9.1~~$5.3 million, or ~~8.6%~~10.7%, ~~from~~for the three months ended September 30, 2021 compared to the prior year period primarily as a result of the following activity:

•Acquisitions in ~~2019~~2020 and ~~2020 contributed $7.4~~2021 resulted in an increase of $4.9 million.

•~~A development completed~~Increases in ~~2020 contributed $0.8 million.~~portfolio operating expenses as follows:

•◦~~Leasing activity, including contractual rent increases, contributed $1.4~~Maintenance and repair expense of $0.6 million;

◦Utilities expense of $0.5 million;

◦Compensation expense of $0.2 million;

◦Administrative and other legal expense of $0.2 million;

◦Janitorial expense of $0.1 million;

◦Property tax expense increase of $0.1 million;

◦Insurance expense of $0.1 million.

•Dispositions in ~~2019~~2020 and ~~2020~~2021 resulted in a decrease of ~~$0.5~~$1.4 million.

~~Single-tenant net lease revenue decreased $3.6~~General and administrative expenses increased approximately $0.9 million, or ~~32.4%~~12.4%, ~~from~~for the three months ended September 30, 2021 compared to the prior year period primarily as a result of the following activity:

•Travel expense increases of $0.2 million.

•Incentive-based awards increases of $0.5 million.

•Compensation expense increases of $0.7 million, including $0.1 million of non-cash expense.

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•Net decreases, including professional fees and other administrative costs, of $0.5 million.

Depreciation and amortization expense increased $3.9 million, or 8.2%, for the three months ended September 30, 2021 compared to the prior year period primarily as a result of the following activity:

•Acquisitions in 2020 and 2021 resulted in an increase of $5.4 million.

•Various building and tenant improvement expenditures resulted in an increase of $2.4 million.

•Dispositions in ~~2019~~2020 and ~~2020~~2021 resulted in a decrease of ~~$3.8~~$1.2 million.

•~~An acquisition~~Assets that became fully depreciated resulted in a decrease of $2.7 million.

Other Income (Expense)

Gains on sale of real estate properties

In the third quarter of 2021, the Company recognized gains of approximately $1.2 million on the sale of four properties and a land parcel sold under a single purchase agreement.

In the third quarter of 2020, ~~contributed~~the Company recognized gains of approximately $2.2 million primarily related to the sale of one property.

Interest expense

Interest expense decreased $0.8 million, or 5.8%, for the three months ended September 30, 2021 compared to the prior year period. The components of interest expense are as follows:


	THREE MONTHS ENDED SEPTEMBER 30,				CHANGE
Dollars in thousands	2021		2020		$		%
Contractual interest	$	12,201	$	13,182	$	(981)	(7.4)	%
Net discount/premium accretion	50		102		(52)		(51.0)	%
Deferred financing costs amortization	713		683		30		4.4	%
Interest rate swap amortization	42		42		—		—	%
Treasury hedge amortization	107		107		—		—	%
Interest cost capitalization	(34)		(207)		173		(83.6)	%
Right-of-use assets financing amortization	255		245		10		4.1	%
Total interest expense	$	13,334	$	14,154	$	(820)	(5.8)	%

Contractual interest expense decreased $1.0 million, or 7.4%, primarily as a result of the following activity:

•The unsecured senior notes due 2031 accounted for an increase of approximately $1.5 million.

•The redemption of the unsecured senior notes due 2023 accounted for a decrease of $2.3 million.

•The Company's unsecured term loan due 2024 and unsecured term loan due 2026, net of swaps, accounted for a decrease of approximately $0.3 million.

•The Unsecured Credit Facility accounted for an increase of approximately $0.2 million.

•Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.1 million.

•
~~Leasing activity contributed $0.1 million.~~

Impairment of Real Estate Properties

Impairment of real estate properties totaling approximately $10.7 million was recorded based on the contractual sales price of a property that was reclassified to held for sale during the third quarter of 2021.

Equity loss from unconsolidated joint ventures

The Company recognized its proportionate share of losses from the TIAA Joint Venture and its parking garage joint ventures during the third quarter of 2021. These losses are primarily attributable to non-cash depreciation expense. See Note 2 to the Condensed Consolidated Financial Statements accompanying this report for more details regarding the Company's unconsolidated joint ventures.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

The Company’s results of operations for the nine months ended September 30, 2021 compared to the same period in 2020 were impacted by acquisitions, developments, dispositions, gains on sale, and capital markets transactions.

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~~Straight-line rent revenue~~Revenues

Rental income increased ~~$0.1~~$20.2 million, or ~~18.8% from~~5.5%, for the nine months ended September 30, 2021 compared to the prior year ~~period primarily as a result~~period. This increase is comprised of the ~~following activity:~~following:

•Acquisitions in ~~2019~~2020 and ~~2020~~2021 contributed ~~$0.4~~$27.8 million.

•A development completed in 2020 contributed ~~$0.1~~$1.0 million.

•Leasing activity, including contractual rent increases, ~~resulted in a decrease of $0.3~~contributed $7.0 million.

•Dispositions in ~~2019~~2020 and ~~2020~~2021 resulted in a decrease of ~~$0.1~~$15.6 million.

Interest from financing receivable, net of $2.4 million resulted from the 2021 acquisition of a property classified as an investment in financing receivable. See Note 1 to the Condensed Consolidated Financial Statements accompanying this report.

Other operating income ~~decreased $0.2~~increased $2.0 million, or ~~9.3%~~37.0%, from the prior year period primarily ~~due to a reduction in~~resulting from variable parking ~~revenue.~~

and asset management fees.

Expenses

Property operating expenses increased ~~$3.4~~$12.9 million, or ~~7.3%~~8.8%, for the ~~three~~nine months ended September 30, ~~2020~~2021 compared to the prior year period primarily as a result of the following activity:

•Acquisitions in ~~2019~~2020 and ~~2020~~2021 resulted in an increase of ~~$3.1 million.~~

•~~A development completed in 2020 resulted in an increase of $0.2 million.~~

•~~Increases in portfolio operating expenses as follows:~~

•~~Portfolio property tax expense of $0.6 million;~~

•~~Janitorial expenses of $0.2 million; and~~

•~~Portfolio insurance expense of $0.1 million.~~

•~~Maintenance and repair expense decreased $0.3 million.~~

•~~Utilities expense decreased $0.1 million.~~

•~~Dispositions in 2019 and 2020 resulted in a decrease of $0.4 million.~~

General and administrative expenses decreased approximately $3.5 million, or 32.4%, for the three months ended September 30, 2020 compared to the prior year period primarily as a result of the following activity:

•The Company's former Executive Chairman, David R. Emery, died on September 30, 2019 resulting in a $2.9 million charge for the three months ended September 30, 2019 because of the acceleration of his outstanding nonvested share-based awards and associated taxes.

•~~Decrease in performance-based awards of approximately $0.2 million.~~

•~~Decrease in travel expense of $0.4 million.~~

~~Depreciation and amortization expense increased $2.0 million, or 4.4%, for the three months ended September 30, 2020 compared to the prior year period primarily as a result of the following activity:~~

•~~Acquisitions in 2019 and 2020 and a development in 2020 resulted in an increase of $4.2 million.~~

•~~Various building and tenant improvement expenditures resulted in an increase of $2.8 million.~~

•~~Dispositions in 2019 and 2020 resulted in a decrease of $1.6 million.~~

•~~Assets that became fully depreciated resulted in a decrease of $3.4 million.~~

~~Other income (Expense)~~

~~Gains on sale of real estate properties~~

~~In the third quarter of 2020, the Company recognized a gain of approximately $2.2 million on the sale of one property.~~

~~In the third quarter of 2019, the Company recognized gains of approximately $0.2 million on the sale of two properties.~~

~~Interest expense~~

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~~Interest expense did not change significantly for the three months ended September 30, 2020 compared to the prior year period. The components of interest expense are as follows:~~

THREE MONTHS ENDED SEPTEMBER 30, CHANGE
Dollars in thousands 2020 2019 $ %
Contractual interest $ 13,182 $ 13,605 $ (423) (3.1) %
Net discount/premium accretion 102 72 30 41.7 %
Deferred financing costs amortization 683 613 70 11.4 %
Interest rate swap amortization 42 42 — — %
Treasury hedge amortization 107 — 107 — %
Interest cost capitalization (207) (347) 140 (40.3) %
Right-of-use assets financing amortization 245 196 49 25.0 %
Total interest expense $ 14,154 $ 14,181 $ (27) (0.2) %

~~Contractual interest expense decreased $0.4 million, or 3.1%, primarily due to the following activity:~~

•~~The Senior Notes due 2030 accounted for an increase of $1.8 million.~~

•~~The Term Loan due 2024 and the initial funding of the Term Loan due 2026, net of swaps, accounted for an increase of approximately $0.4 million.~~

•~~The Unsecured Credit Facility principal and rate decreases accounted for a decrease of approximately $2.3 million.~~

•~~Mortgage note assumptions and repayments accounted for a net decrease of $0.3 million.~~

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

The Company’s results of operations for the nine months ended September 30, 2020 compared to the same period in 2019 were impacted by acquisitions, developments, dispositions, gains on sale, and capital markets transactions.

~~Revenues~~

Total revenues increased $25.0 million, or 7.2%, to approximately $373.7 million for the nine months ended September 30, 2020 compared to $348.8 million in the prior year period. This increase is comprised of the following:

NINE MONTHS ENDED SEPTEMBER 30, CHANGE
Dollars in thousands 2020 2019 $ %
Property operating $ 337,144 $ 307,606 $ 29,538 9.6 %
Single-tenant net lease 28,519 33,348 (4,829) (14.5) %
Straight-line rent 2,722 1,833 889 48.5 %
Rental income 368,385 342,787 25,598 7.5 %
Other operating 5,364 5,987 (623) (10.4) %
Total revenues $ 373,749 $ 348,774 $ 24,975 7.2 %

~~Property operating revenue increased $29.5 million, or 9.6%, from the prior year period primarily as a result of the following activity:~~

•~~Acquisitions in 2019 and 2020 contributed $24.5 million.~~

•~~A development completed in 2020 contributed $1.6 million.~~

•~~Leasing activity, including contractual rent increases, contributed $5.6 million.~~

•~~Dispositions in 2019 and 2020 resulted in a decrease of $2.2 million.~~

~~Single-tenant net lease revenue decreased $4.8 million, or 14.5%, from the prior year period primarily as a result of the following activity:~~

•~~Dispositions in 2019 and 2020 resulted in a decrease of $5.2 million.~~

•~~Leasing activity, including contractual increases, contributed $0.4 million.~~

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Straight-line rent revenue increased $0.9 million or 48.5% from the prior year period primarily due to acquisitions in 2019 and 2020 and a development in 2020 totaling $1.2 million, partially offset by 2019 and 2020 dispositions totaling $0.3 million.

~~Other operating income decreased $0.6 million or 10.4% from the prior year period primarily due to a reduction in variable parking revenue.~~

~~Expenses~~

~~Property operating expenses increased $12.5 million, or 9.4%, for the nine months ended September 30, 2020 compared to the prior year period primarily as a result of the following activity:~~

•~~Acquisitions in 2019 and 2020 resulted in an increase of $10.8~~$11.4 million.

•A development completed in 2020 resulted in an increase of $0.4 million.

•Increases in portfolio operating expenses as follows:

•~~Portfolio property tax expense of $1.9 million;~~

•~~Compensation related expenses of $0.3 million;~~

•~~Administration and legal fees of $0.3 million;~~

•~~Portfolio insurance expense of $0.5 million;~~

•~~Portfolio security expense of $0.3 million; and~~

•~~Portfolio janitorial expense of $0.2 million.~~

•~~Utilities expense resulted in a decrease of $0.6 million.~~

•◦Maintenance and repair expense of $2.2 million;

◦Property tax expense of $0.7 million;

◦Utilities expense of $0.9 million;

◦Compensation expense of $0.5 million; and

◦Insurance expense of $0.3 million.

•Intangible amortization write-off in the first quarter of 2020 resulted from the acquisition of previously ground leased land resulted in a decrease of ~~$0.6 million.~~

•~~Increase in intangible amortization expense totaling~~ $0.7 million.

•Dispositions in ~~2019~~2020 and ~~2020~~2021 resulted in a decrease of ~~$1.7~~$2.8 million.

General and administrative expenses ~~decreased~~increased approximately ~~$3.7~~$1.8 million, or ~~13.5%~~7.5%, for the nine months ended September 30, ~~2020~~2021 compared to the prior year period primarily ~~due to travel expense.~~as a result of the following activity:

•The Company's former Executive Chairman, David R. Emery, died on September 30, 2019 resulting in a $2.9 million charge for the nine months ended September 30, 2019 because of the acceleration of his outstanding nonvested share-based awards and associated taxes.

•~~Decrease~~Increase in incentive-based awards of approximately ~~$0.6~~$0.7 million.

•~~Decrease in travel~~Compensation expense increases of $1.8 million, including $0.6 ~~million.~~million of non-cash expense.

•~~Increase in compensation expense~~Net decreases, including professional fees and other administrative costs, of ~~approximately $0.4~~$0.7 million.

Depreciation and amortization expense increased ~~$10.6~~$8.6 million, or ~~8.1%~~6.0%, for the nine months ended September 30, ~~2020~~2021 compared to the prior year period primarily as a result of the following activity:

•Acquisitions in ~~2019~~2020 and ~~2020~~2021 and a development in 2020 resulted in an increase of ~~$15.3~~$15.1 million.

•Various building and tenant improvement expenditures resulted in an increase of ~~$7.8~~$7.1 million.

•Dispositions in ~~2019~~2020 and ~~2020~~2021 resulted in a decrease of ~~$3.7~~$5.3 million.

•Assets that became fully depreciated resulted in a decrease of ~~$8.8~~$8.3 million.

~~Other income (expense)~~

~~Gains on sale of real estate properties~~

~~Gains on sale of real estate properties totaling approximately $70.4 million and $5.1 million are associated with the three and six real estate properties during 2020 and 2019, respectively.~~

~~Interest expense~~

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Other Income (Expense)

Gains on sale of real estate properties

Gains on sale of real estate properties in 2021 totaling approximately $41.0 million are associated with eight real estate properties.

Gains on sale of real estate properties in 2020 totaling $70.4 million are associated with three real estate properties.

Interest expense

Interest expense ~~increased $0.9~~decreased $2.7 million, or ~~2.3%~~6.3%, for the nine months ended September 30, ~~2020~~2021 compared to the prior year period. The components of interest expense are as follows:


		NINE MONTHS ENDED SEPTEMBER 30,				CHANGE					NINE MONTHS ENDED SEPTEMBER 30,				CHANGE
Dollars in thousands	Dollars in thousands	2020		2019		$		%		Dollars in thousands	2021		2020		$		%
Contractual interest	Contractual interest	$	40,031	$	40,091	$	(60)	(0.1)	%	Contractual interest	$	36,590	$	40,031	$	(3,441)	(8.6)	%
Net discount/premium accretion	Net discount/premium accretion	358		174		184		105.7	%	Net discount/premium accretion	146		358		(212)		(59.2)	%
Deferred financing costs amortization	Deferred financing costs amortization	2,003		1,835		168		9.2	%	Deferred financing costs amortization	2,114		2,003		111		5.5	%
Interest rate swap amortization	Interest rate swap amortization	126		126		—		—	%	Interest rate swap amortization	126		126		—		—	%
Treasury hedge amortization	Treasury hedge amortization	229		—		229		—	%	Treasury hedge amortization	320		229		91		39.7	%
Interest cost capitalization	Interest cost capitalization	(913)		(999)		86		(8.6)	%	Interest cost capitalization	(187)		(913)		726		(79.5)	%
Right-of-use assets financing amortization	Right-of-use assets financing amortization	722		392		330		84.2	%	Right-of-use assets financing amortization	748		722		26		3.6	%
Total interest expense	Total interest expense	$	42,556	$	41,619	$	937	2.3	%	Total interest expense	$	39,857	$	42,556	$	(2,699)	(6.3)	%

Contractual interest expense decreased ~~$0.1~~$3.4 million, or ~~0.1%~~8.6%, primarily ~~due to~~as a result of the following activity:

•The unsecured senior notes due 2031 and the Senior Notes due 2030 accounted for an increase of approximately ~~$3.9~~$6.1 million.

•The ~~Term Loan~~redemption of the unsecured senior notes due 2023 accounted for a decrease of $7.0 million.

•The Company's unsecured term loan due 2024 and the ~~initial funding of the Term Loan~~unsecured term loan due 2026, net of swaps, accounted for an increase of approximately ~~$1.2~~$0.5 million.

•The Unsecured Credit Facility ~~principal and rate decrease~~ accounted for a decrease of approximately ~~$4.7~~$2.0 million.

•Mortgage note repayments, net of assumptions, ~~and repayments~~ accounted for a ~~net~~ decrease of ~~$0.5~~approximately $1.0 million.

Impairment of Real Estate Properties

Impairment of real estate ~~assets~~

~~Impairment of real estate assets~~properties totaling approximately ~~$5.6~~$16.6 million iswas associated with the disposal of one property totaling $0.8 million and the reclassification of a property to held for sale resulting in an impairment of $10.7 million based on the contractual sales price. In addition, the Company recorded impairment charges totaling $5.1 million which includes a property associated with a redevelopment project in Nashville, Tennessee. See Note 6 to the Condensed Consolidated Financial Statements accompany this report for further discussion of ~~two real estate properties during 2019.~~this project.

Equity loss from unconsolidated joint ventures

The Company recognized its proportionate share of losses from the TIAA Joint Venture and its parking garage joint ventures. These losses are primarily attributable to non-cash depreciation expense. See Note 2 to the Condensed Consolidated Financial Statements accompanying this report for more details regarding the Company's unconsolidated joint ventures.

Interest and other income (expense), net

In ~~2019,~~2021, the Company recorded approximately $0.5 million from a forfeited earnest money deposit and expensed approximately ~~$0.8~~$0.3 million of debt issuance costs as a result of the amendment to the Term Loan ~~modification.~~Agreement.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk in the form of changing interest rates on its debt and mortgage notes. Management uses regular monitoring of market conditions and analysis techniques to manage this risk. During the nine months ended September 30, ~~2020,~~2021, there were no material changes in the quantitative and qualitative

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disclosures about market risks presented in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on this 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 were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files or submits under the Exchange Act.

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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 fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

In addition to the other information set forth in this report, an investor should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019, and the Company's quarterly reports on the Form 10-Q for the quarters ended March 31, 2020 and June 30,~~ 2020, which could materially affect the Company’s business, financial condition or future results. The risks, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019, and the Company's quarterly reports on the Form 10-Q for the quarters ended March 31, 2020 and June 30,~~ 2020, are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems immaterial also may materially, adversely affect the Company’s business, financial condition, operating results or cash flows.

~~The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition.~~

The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. The outbreak of COVID-19 in many countries has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

All of the states and cities in which the Company owns properties, manages properties, and/or has development or redevelopment projects instituted quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue. As a result, a number of the Company's tenants temporarily closed their offices or clinical space or operated on a reduced basis in response to government requirements or recommendations. Many of these restrictions were lifted during the second quarter of 2020, but could be reimposed.

Through November 2, 2020, the Company has collected more than 99% of second and third quarter 2020 aggregate tenant billings. The Company has collected 96% of total scheduled deferral payments in the third quarter of 2020. In addition, the Company has remaining various forms of rent deferrals outstanding representing approximately $1.2 million, or less than 1% of second and third quarter 2020 aggregate tenant billings.

The COVID-19 pandemic has also caused, and is likely to continue to cause, severe economic, market and other disruptions worldwide. There can be no assurance that conditions in the bank lending, capital and other financial markets will not continue to deteriorate as a result of the pandemic, or that the Company's access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. In addition, the deterioration of economic conditions as a result of the pandemic may ultimately decrease occupancy levels and average rent per square foot across the Company's portfolio as tenants reduce or defer their spending.

The extent of the COVID-19 pandemic’s effect on the Company's operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, all of which are uncertain and difficult to predict. Due to the speed with which the situation is developing, the Company is not able at this time to estimate the effect of these factors on its business, but the adverse impact on the business, results of operations,

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financial condition and cash flows could be material. Moreover, many risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 should be interpreted as heightened risks as a result of the impact of the COVID-19 pandemic.

Settlement provisions contained in a forward equity agreement could result in substantial dilution to the Company's earnings per share and return on equity or result in substantial cash payment obligations.

The Company has outstanding forward equity agreements and may enter into additional forward equity agreements in the future. Forward equity agreements typically provide that the relevant forward purchaser will have the right to accelerate that particular forward equity agreement (with respect to all or any portion of the transaction under that particular forward equity 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 establish, maintain or unwind its hedge position with respect to that particular forward equity agreement;~~

•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 equity 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 equity agreement, or a nationalization, a bankruptcy termination event or a change in law (as such terms are defined in that particular forward equity agreement).

A forward purchaser’s decision to exercise its right to accelerate the settlement of a particular forward equity agreement will be made irrespective of the Company's need for capital. In such cases, we could be required to issue and deliver shares of common stock under the physical settlement provisions of that particular forward equity agreement or, if we so elect and the forward purchaser so permits our election, net share settlement provisions of that particular forward equity 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 equity agreement will generally occur no later than the date specified in the particular forward equity agreement, which will generally be no later than twelve months following the trade date of that forward equity agreement. However, any forward equity agreement may be settled earlier than that specified date in whole or in part at our option. We expect that each forward equity agreement will be physically settled by delivery of shares of common stock unless we elect to cash settle or net share settle a particular forward equity agreement. Upon physical settlement or, if we so elect, net share settlement of a particular forward equity agreement, delivery of shares of common stock in connection with such physical settlement or 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 the shares of common stock underlying a particular forward equity agreement, we expect that the relevant forward purchaser (or an affiliate thereof) will purchase a number of shares of common stock necessary to satisfy its or its affiliate’s obligation to return the shares of common stock borrowed from third parties in connection with sales of shares of common stock under that forward equity agreement, adjusted in the case of net share settlement by any shares deliverable by or to us under the forward equity agreement. In addition, the purchase of shares of common stock in connection with the relevant forward purchaser or its affiliate unwinding its hedge positions could cause the price of shares of 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 equity agreement or, in the event of net share settlement, increasing the number of shares of common stock we would deliver to the relevant forward purchaser (or decreasing the number of shares of common stock that the relevant forward purchaser would deliver to us).

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The forward equity price that we expect to receive upon physical settlement of a particular forward equity 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 shares of common stock during the term of the particular forward equity 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 equity price. If the market value of shares of common stock, determined in accordance with the terms of the relevant forward equity agreement, during the relevant valuation period under the particular forward equity agreement is above the applicable forward equity price, in the case of cash settlement, we would pay the relevant forward purchaser under that particular forward equity 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 shares of common stock having a value, determined in accordance with the terms of the relevant forward equity 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 equity agreement. If the market value of the Company’s common stock, determined in accordance with the terms of the relevant forward equity agreement, during the relevant valuation period under that particular forward equity agreement is below the applicable forward equity price, in the case of cash settlement, we would be paid the difference in cash by the relevant forward purchaser under that particular forward equity agreement or, in the case of net share settlement, we would receive from the relevant forward purchaser a number of shares of common stock having a value equal to the difference.

The U.S. federal income tax treatment of the cash that we 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.

In the event that we elect to settle any forward equity agreement for cash and the settlement price is below the applicable forward equity 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 futures contract" (as defined in the Code, by reference to the Securities Exchange Act of 1934, as amended). Although we believe that any amount received by us in exchange for our stock would qualify for the exemption under Section 1032 of the Code, because it is not entirely clear whether a forward equity agreement qualifies as a "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 equity agreement, we might be unable to satisfy the gross income requirements applicable to REITs under the Code. In that case, we may be able to rely upon the relief provisions under the 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, 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 Code.

In case of our bankruptcy or insolvency, any forward equity agreements will automatically terminate, and we would not receive the expected proceeds from any forward sale of shares of the Company’s 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 equity agreements that are then in effect will automatically terminate. If any such forward equity agreement so terminates under these circumstances, we would not be obligated to deliver to the relevant forward purchaser any shares of common stock not previously delivered, and the relevant forward purchaser would be discharged from its obligation to pay the applicable forward equity price per share in respect of any shares of common stock not previously settled under the applicable forward equity agreement. Therefore, to the extent that there are any shares of common stock with respect to which any forward equity 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 equity price per share in respect of those shares of common stock.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Authorized Repurchases of Equity Securities by the Issuer

On May ~~5, 2020,~~4, 2021, the Company’s Board of Directors authorized the repurchase of up to ~~$50~~$50.0 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.

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Item 5. Other Information

On November 2, 2021, the Compensation Committee of the Company's Board of Directors adopted the 2021 Executive Incentive Program under the Company's 2015 Stock Incentive Plan. The 2021 Executive Incentive Program supersedes the Company's Amended and Restated Executive Incentive Plan that was originally adopted in 2015. Copies of the 2021 Executive Incentive Program and the related Form of Restricted Stock Unit Agreement are filed as Exhibits 10.2 and 10.3, respectively, to this report and are incorporated herein by reference.

Item 6. Exhibits


EXHIBIT			DESCRIPTION
Exhibit 3.1			Second Articles of Amendment and Restatement of the Company, as amended 1
Exhibit 3.2			Amended and Restated Bylaws of the Company, as amended 1
Exhibit 4.1			Specimen Stock Certificate 2
Exhibit 4.2			Indenture, dated as of May 15, 2001, by and between the Company and Truist Bank, formally known as Branch Banking and Trust Company,, as trustee (as successor to the trustee named therein) 3
Exhibit 4.3			Fifth Supplemental Indenture, dated March 26, 2013, by and between the Company and Truist Bank, formally known as Branch Banking and Trust Company,, as Trustee (as successor to the trustee named therein)4
Exhibit 4.4			Form of 3.75% Senior ~~Notes~~Note due 2023 (set forth in Exhibit B to the Fifth Supplemental Indenture filed as Exhibit 4.3 thereto) 4
Exhibit 4.5			Sixth Supplemental Indenture, dated April 24, 2015, by and between the Company and Truist Bank, formally known as Branch Banking and Trust Company,, as Trustee (as successor to the trustee named therein) 5
Exhibit 4.6			Form of 3.875% Senior ~~Notes~~Note due 2025 (set forth in Exhibit B to the Sixth Supplemental Indenture filed as Exhibit 4.5 thereto) 5
Exhibit 4.7			Seventh Supplemental Indenture, dated December 11, 2017, by and between the Company and Truist Bank, formally known as Branch Banking and Trust Company,, as Trustee. 6
Exhibit 4.8			Form of 3.625% Senior Note due 2028 (set forth in Exhibit B to the Seventh Supplemental Indenture filed as Exhibit 4.7 hereto). 6
Exhibit 4.9			Eighth Supplemental Indenture, dated March 18, 2020, by and between the Company and Truist Bank, formally known as Branch Banking and Trust Company,, as Trustee.7
Exhibit 4.10			Form of 2.400% Senior Note due 2030 (set forth in Exhibit B to the Eighth Supplemental Indenture filed as Exhibit 4.9 hereto). 7
Exhibit 4.11			Ninth Supplemental Indenture, dated October 2,, 2020, by and between the Company and Truist Bank, formally known as Branch Banking and Trust Company,, as Trustee. 8
Exhibit 4.12			Form of 2.050% Senior Note due 2031 (set forth in Exhibit B to the Ninth Supplemental Indenture filed as Exhibit 4.11 4.11 hereto). 8
Exhibit 10.1			Amended and Restated Employment Agreement between the Company and Julie F. Wilson, dated as of July 1, 2021.9
Exhibit 10.2			Healthcare Realty Trust Incorporated 2021 Executive Incentive Program, dated November 2, 2021 (filed herewith).
Exhibit 10.3			Form of Healthcare Realty Trust Incorporated Restricted Stock Unit Agreement (filed herewith).
Exhibit 31.1			Certification of the Chief Executive Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Exhibit 31.2			Certification of the Chief Financial Officer of Healthcare Realty Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
Exhibit 32			Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
Exhibit 101.INS			The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH			XBRL Taxonomy Extension Schema Document (furnished electronically herewith)
Exhibit 101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document (furnished electronically herewith)
Exhibit 101.LAB			XBRL Taxonomy Extension Labels Linkbase Document (furnished electronically herewith)
Exhibit 101.DEF			XBRL Taxonomy Extension Definition Linkbase Document (furnished electronically herewith)
Exhibit 101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document (furnished electronically herewith)

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1Filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2018 filed February 13, 2019 and hereby incorporated by reference.

2Filed as an exhibit to the Company’s Registration Statement on Form S-11 (Registration No. 33-60506) filed April 2, 1993 and hereby incorporated by reference.

3Filed as an exhibit to the Company's Current Report on Form 8-K filed May 17, 2001 and hereby incorporated by reference.

4Filed as an exhibit to the Company's Current Report on Form 8-K filed March 26, 2013 and hereby incorporated by reference.

5Filed as an exhibit to the Company's Current Report on Form 8-K filed April 24, 2015 and hereby incorporated by reference.

6Filed as an exhibit to the Company’s Current Report on Form 8-K filed December 11, 2017 and hereby incorporated by reference.

7Filed as an exhibit to the Company's Current Report on Form 8-K filed March 18, 2020 and hereby incorporated by reference.

8Filed as an exhibit to the Company's Current Report on Form 8-K filed October 2, 2020 and hereby incorporated by reference.

9Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 and hereby incorporated by reference.

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SIGNATURE

Pursuant to the requirements 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/ J. CHRISTOPHER DOUGLAS
		J. Christopher Douglas
		Executive Vice President and Chief Financial Officer
November 3, 2021		~~November 4, 2020~~

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PART I - FINANCIAL INFORMATION
Item 1	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures about Market Risk	3331
Item 4	Controls and Procedures	3332

PART II - OTHER INFORMATION
Item 1	Legal Proceedings	3532
Item 1A	Risk Factors	3532
Item 2	Unregistered Sales of Equity and Use of Proceeds	3832
Item 5	Other Information	33
Item 6	Exhibits	3933

SIGNATURE		4035


Dollars in millions	TYPE 1	DATE ACQUIRED	PURCHASE PRICE		MORTGAGE NOTES PAYABLE		CASH CONSIDERATION 2		REAL ESTATE		OTHER 3		SQUARE FOOTAGE
Los Angeles, CA	MOB	1/3/20	$	42.0	$	(19.3)	$	22.8	$	42.4	$	(0.3)	86,986
Atlanta, GA	MOB	2/13/20	12.0		0		11.8		12.1		(0.3)		64,624
Raleigh, NC	MOB	2/25/20	6.3		0		6.5		6.5		0		15,964
Colorado Springs, CO	MOB	3/9/20	8.2		0		8.3		8.6		(0.3)		34,210
Denver, CO 4	MOB	3/13/20	33.5		0		33.2		34.0		(0.8)		136,994
San Diego, CA	MOB	7/1/20	16.7		0		16.7		16.9		(0.2)		46,083
Los Angeles, CA	MOB	7/17/20	35.0		0		37.7		37.7		0		49,785
Seattle, WA	MOB	7/23/20	11.0		0		10.9		11.3		(0.4)		21,309
Atlanta, GA	MOB	7/31/20	20.5		0		21.6		21.3		0.3		48,145
Houston, TX	MOB	9/24/20	11.0		0		10.9		11.0		(0.1)		40,235
Los Angeles, CA	MOB	9/28/20	14.0		0		14.0		13.9		0.1		24,252

Total real estate acquisitions			$	210.2	$	(19.3)	$	194.4	$	215.7	$	(2.0)	568,587
Land acquisition 5			1.6		0		1.7		1.7		0		0
Land acquisition 6			1.0		0		1.1		1.1		0		0
			$	212.8	$	(19.3)	$	197.2	$	218.5	$	(2.0)	568,587


Dollars in millions	TYPE 1	Date Disposed	Sale Price		Closing Adjustments		Net Proceeds		Net Real Estate Investment		Other (including receivables)2		Gain/(Impairment)		Square Footage (Unaudited)
Springfield, MO 3	SF	7/30/20	$	138.0	$	0	$	138.0	$	92.4	$	3.9	$	41.7	186,000
Oklahoma City, OK 3	MOB	7/30/20	106.5		0		106.5		76.8		3.1		26.6		200,000
Miami, FL	MOB	9/30/20	5.0		(0.2)		4.8		2.6		0.1		2.1		26,000

Total dispositions			$	249.5	$	(0.2)	$	249.3	$	171.8	$	7.1	$	70.4	412,000


	SALES-TYPE LEASES
In thousands	three months ended September 30, 2020		nine months ended September 30, 2020
Profit recognized at commencement date	$	0	$	68,267	Gain on sales of real estate assets
Interest income	1,454		3,007		Rental income


Dollars in millions	HEALTH SYSTEM AFFILIATION	DATE ACQUIRED	PURCHASE PRICE		SQUARE FOOTAGE	CAP RATE		MILES TO CAMPUS
Los Angeles, CA	MemorialCare Health	1/3/20	$	42.0	86,986	5.3	%	0.14
Atlanta, GA	Wellstar Health System	2/13/20	12.0		64,624	5.6	%	0.10
Raleigh, NC	WakeMed Health	2/25/20	6.3		15,964	6.7	%	0.04
Colorado Springs, CO	None	3/9/20	8.2		34,210	6.5	%	1.60
Denver, CO 1	UCHealth	3/13/20	33.5		136,994	6.1	%	0.24
San Diego, CA	Palomar Health	7/1/20	16.7		46,083	5.9	%	0.04
Los Angeles, CA	Cedars-Sinai/Huntington	7/17/20	35.0		49,785	5.4	%	0.11
Seattle, WA	MultiCare Health System	7/23/20	11.0		21,309	5.6	%	0.06
Atlanta, GA	Wellstar Health System	7/31/20	20.5		48,145	6.2	%	0.13
Houston, TX	Memorial Hermann Health	9/24/20	11.0		40,235	5.6	%	0.03
Los Angeles, CA	Providence St. Joseph Health	9/28/20	14.0		24,252	5.6	%	0.03

Total real estate acquisitions			$	210.2	568,587	5.7	%
Land acquisition 2			1.6		—
Land acquisition 3			1.0		—
			$	212.8	568,587


	NUMBER OF PROPERTIES	GROSS INVESTMENT at September 30, 2020		SAME STORE CASH NOI for the three months ended September 30,
Dollars in thousands	NUMBER OF PROPERTIES	GROSS INVESTMENT at September 30, 2020		2020		2019
Multi-tenant properties	156	$	3,237,143	$	57,663	$	56,317
Single-tenant net lease properties	12	257,229		6,033		5,870
Total	168	$	3,494,372	$	63,696	$	62,187