UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________
FORM 10-Q
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x☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017March 31, 2022
or
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¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-35568 (Healthcare Trust of America, Inc.)
Commission File Number: 333-190916 (Healthcare Trust of America Holdings, LP)
_________________________
HEALTHCARE TRUST OF AMERICA, INC.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
(Exact name of registrant as specified in its charter)
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| Maryland | (Healthcare Trust of America, Inc.) | | | 20-4738467 | |
| Delaware | (Healthcare Trust of America Holdings, LP) | | | 20-4738347 | |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification No.) | |
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16435 N. Scottsdale Road, Suite 320, | Scottsdale, | Arizona | 85254 | | | | (480) | 998-3478 | | | |
(Address of Principal Executive Office and Zip Code) | | | (Registrant’s telephone number, including area code) | | |
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Maryland (Healthcare Trust of America, Inc.) | | 20-4738467www.htareit.com |
Delaware (Healthcare Trust of America Holdings, LP) | | 20-4738347 |
(State or other jurisdiction of incorporation or organization)
| | (I.R.S. Employer
Identification No.) Internet address) |
16435 N. Scottsdale Road, Suite 320
Scottsdale, Arizona 85254
(Address of principal executive offices)
(480) 998-3478
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
Title of each class | | Trading symbol(s) | | Name of each exchange on which registered |
Common stock, $0.01 par value | | HTA | | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Healthcare Trust of America, Inc. | x Yes☒
| Yes | ¨ No | |
Healthcare Trust of America Holdings, LP | x Yes☒
| Yes | ¨ No | |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
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Healthcare Trust of America, Inc. | x Yes☒
| Yes | ¨ No | |
Healthcare Trust of America Holdings, LP | x Yes☒
| 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.
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Healthcare Trust of America, Inc. | Large-accelerated filer x☒
| Large accelerated filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filer¨ | Smaller reporting company ¨
| Emerging growth company ¨
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| | | (Do not check if a smaller reporting company) | | |
Healthcare Trust of America Holdings, LP | ☐ | Large accelerated filer | ☐ | Accelerated filer | Large-accelerated filer ¨☒
| Accelerated filer ¨
| Non-accelerated filerx |
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Healthcare Trust of America, Inc. | ☐ | Smaller reporting company¨ | ☐ | Emerging growth company¨ |
Healthcare Trust of America Holdings, LP | ☐ | Smaller reporting company | (Do not check if a 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.
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Healthcare Trust of America, Inc. | ¨ | | ☐ |
Healthcare Trust of America Holdings, LP | ¨ | | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Healthcare Trust of America, Inc. | ☐ | Yes | ¨ Yes
| x No | |
Healthcare Trust of America Holdings, LP | ☐ | Yes | ¨ Yes
| x No | |
As of October 23, 2017,April 29, 2022, there were 204,886,019229,075,890 shares of Class A common stock of Healthcare Trust of America, Inc. outstanding.
Explanatory Note
This Quarterly Reportquarterly report combines the Quarterly Reports on Form 10-Q (“Quarterly Report”) for the quarter ended September 30, 2017March 31, 2022, of Healthcare Trust of America, Inc. (“HTA”), a Maryland corporation, and Healthcare Trust of America Holdings, LP (“HTALP”), a Delaware limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this Quarterly Report to “we,” “us,” “our,” “the Company” or “our Company” refer to HTA and HTALP, collectively, and all references to “common stock” shall refer to the Class A common stock of HTA.
HTA operates as a real estate investment trust (“REIT”) and is the general partner of HTALP. As of September 30, 2017,March 31, 2022, HTA owned a 98.0%98.3% partnership interest in HTALP, and other limited partners, including some of HTA’s directors, executive officers and their affiliates, owned the remaining partnership interest (including the long-term incentive plan units (“LTIP” Units)) in HTALP. As the sole general partner of HTALP, HTA has the full, exclusive and complete responsibility for HTALP’s day-to-day management and control, including its compliance with the Securities and Exchange Commission (“SEC”) filing requirements.
We believe it is important to understand the few differences between HTA and HTALP in the context of how we operate as an integrated consolidated company. HTA operates as an umbrella partnership REIT structure in which HTALP and its subsidiaries hold substantially all of the assets. HTA’s only material asset is its ownership of partnership interestsunits of HTALP. As a result, HTA does not conduct business itself, other than acting as the sole general partner of HTALP, issuing public equity from time to time and guaranteeing certain debts of HTALP. HTALP conducts the operations of the business and issues publicly-traded debt, but has no publicly-traded equity. Except for net proceeds from public equity issuances by HTA, which are generally contributed to HTALP in exchange for partnership units of HTALP, HTALP generates the capital required for the business through its operations and by direct or indirect incurrence of indebtedness or through the issuance of its partnership units (“OP Units”).
NoncontrollingNon-controlling interests, stockholders’ equity and partners’ capital are the primary areas of difference between the condensed consolidated financial statements of HTA and HTALP. Limited partnership units in HTALP are accounted for as partners’ capital in HTALP’s condensed consolidated balance sheets and as noncontrollinga non-controlling interest reflected within equity in HTA’s condensed consolidated balance sheets. The differences between HTA’s stockholders’ equity and HTALP’s partners’ capital are due to the differences in the equity issued by HTA and HTALP, respectively.
We believe combining the Quarterly Reports of HTA and HTALP, including the notes to the condensed consolidated financial statements, into this single Quarterly Report results in the following benefits:
•enhances stockholders’ understanding of HTA and HTALP by enabling stockholders to view the business as a whole in the same manner that management views and operates the business;
•eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this Quarterly Report applies to both HTA and HTALP; and
•creates time and cost efficiencies through the preparation of a single combined Quarterly Report instead of two separate Quarterly Reports.
In order to highlight the material differences between HTA and HTALP, this Quarterly Report includes sections that separately present and discuss areas that are materially different between HTA and HTALP, including:
•the condensed consolidated financial statements;
•certain accompanying notes to the condensed consolidated financial statements, including Note 78 - Debt,, Note 1011 - Stockholders’ Equity and Partners’ Capital,, Note 1213 - Per Share Data of HTA, and Note 1314 - Per Unit Data of HTALP;
•as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), the Funds From Operations (“FFO”) and Normalized FFO in Part 1, Item 2 of this Quarterly Report;
•the Controls and Procedures in Part 1, Item 4 of this Quarterly Report; and
•the Certifications of the Chief Executive Officer and the Chief Financial Officer included as Exhibits 31 and 32 to this Quarterly Report.
In the sections of this Quarterly Report that combine disclosure for HTA and HTALP, this Quarterly Report refers to actions or holdings as being actions or holdings of the Company. Although HTALP (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues or incurs debt, management believes this presentation is appropriate for the reasons set forth above and because the business of the Company is a single integrated enterprise operated through HTALP.
HEALTHCARE TRUST OF AMERICA, INC. AND
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
TABLE OF CONTENTS
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Healthcare Trust of America, Inc. | |
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Healthcare Trust of America Holdings, LP | |
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Healthcare Trust of America Holdings, LP | |
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Notes for Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP | |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(Unaudited)
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| | September 30, 2017 | | December 31, 2016 |
ASSETS | | | | |
Real estate investments: | | | | |
Land | | $ | 480,850 |
| | $ | 386,526 |
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Building and improvements | | 5,788,837 |
| | 3,466,516 |
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Lease intangibles | | 648,591 |
| | 467,571 |
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Construction in progress | | 59,573 |
| | — |
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| | 6,977,851 |
| | 4,320,613 |
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Accumulated depreciation and amortization | | (973,566 | ) | | (817,593 | ) |
Real estate investments, net | | 6,004,285 |
| | 3,503,020 |
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Investment in unconsolidated joint venture | | 68,303 |
| | — |
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Cash and cash equivalents | | 9,410 |
| | 11,231 |
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Restricted cash and escrow deposits | | 17,469 |
| | 13,814 |
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Receivables and other assets, net | | 206,030 |
| | 173,461 |
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Other intangibles, net | | 108,025 |
| | 46,318 |
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Total assets | | $ | 6,413,522 |
| | $ | 3,747,844 |
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LIABILITIES AND EQUITY | | | | |
Liabilities: | | | | |
Debt | | $ | 2,856,758 |
| | $ | 1,768,905 |
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Accounts payable and accrued liabilities | | 159,070 |
| | 105,034 |
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Derivative financial instruments - interest rate swaps | | 1,441 |
| | 1,920 |
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Security deposits, prepaid rent and other liabilities | | 61,402 |
| | 49,859 |
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Intangible liabilities, net | | 69,852 |
| | 37,056 |
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Total liabilities | | 3,148,523 |
| | 1,962,774 |
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Commitments and contingencies | |
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Redeemable noncontrolling interests | | 4,692 |
| | 4,653 |
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Equity: | | | | |
Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding | | — |
| | — |
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Class A common stock, $0.01 par value; 1,000,000,000 shares authorized; 200,686,673 and 141,719,134 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | | 2,007 |
| | 1,417 |
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Additional paid-in capital | | 4,386,224 |
| | 2,754,818 |
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Accumulated other comprehensive loss | | (615 | ) | | — |
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Cumulative dividends in excess of earnings | | (1,212,051 | ) | | (1,068,961 | ) |
Total stockholders’ equity | | 3,175,565 |
| | 1,687,274 |
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Noncontrolling interests | | 84,742 |
| | 93,143 |
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Total equity | | 3,260,307 |
| | 1,780,417 |
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Total liabilities and equity | | $ | 6,413,522 |
| | $ | 3,747,844 |
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| | March 31, 2022 | | December 31, 2021 |
ASSETS | | | | |
Real estate investments: | | | | |
Land | | $ | 644,194 | | | $ | 640,382 | |
Building and improvements | | 6,744,865 | | | 6,688,516 | |
Lease intangibles | | 393,756 | | | 404,714 | |
Construction in progress | | 15,673 | | | 32,685 | |
| | 7,798,488 | | | 7,766,297 | |
Accumulated depreciation and amortization | | (1,650,257) | | | (1,598,468) | |
Real estate investments, net | | 6,148,231 | | | 6,167,829 | |
Assets held for sale, net | | — | | | 27,070 | |
Investment in unconsolidated joint venture | | 62,454 | | | 62,834 | |
Cash and cash equivalents | | 10,944 | | | 52,353 | |
Restricted cash | | 4,478 | | | 4,716 | |
Receivables and other assets, net | | 350,781 | | | 334,941 | |
Right-of-use assets - operating leases, net | | 228,009 | | | 229,226 | |
Other intangibles, net | | 10,011 | | | 10,720 | |
Total assets | | $ | 6,814,908 | | | $ | 6,889,689 | |
LIABILITIES AND EQUITY | | | | |
Liabilities: | | | | |
Debt | | $ | 3,053,884 | | | $ | 3,028,122 | |
Accounts payable and accrued liabilities | | 159,659 | | | 198,078 | |
Liabilities of assets held for sale | | — | | | 262 | |
Derivative financial instruments - interest rate swaps | | — | | | 5,069 | |
Security deposits, prepaid rent and other liabilities | | 78,771 | | | 86,225 | |
Lease liabilities - operating leases | | 196,226 | | | 196,286 | |
Intangible liabilities, net | | 30,001 | | | 31,331 | |
Total liabilities | | 3,518,541 | | | 3,545,373 | |
Commitments and contingencies | | 0 | | 0 |
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Equity: | | | | |
Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding | | — | | | — | |
Class A common stock, $0.01 par value; 1,000,000,000 shares authorized; 229,076,322 and 228,879,846 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | | 2,291 | | | 2,289 | |
Additional paid-in capital | | 5,180,579 | | | 5,178,132 | |
Accumulated other comprehensive income (loss) | | 1,727 | | | (7,041) | |
Cumulative dividends in excess of earnings | | (1,971,904) | | | (1,915,776) | |
Total stockholders’ equity | | 3,212,693 | | | 3,257,604 | |
Non-controlling interests | | 83,674 | | | 86,712 | |
Total equity | | 3,296,367 | | | 3,344,316 | |
Total liabilities and equity | | $ | 6,814,908 | | | $ | 6,889,689 | |
| | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | |
Rental income | $ | 175,431 |
| | $ | 118,252 |
| | $ | 438,949 |
| | $ | 338,646 |
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Interest and other operating income | 563 |
| | 88 |
| | 1,271 |
| | 243 |
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Total revenues | 175,994 |
| | 118,340 |
| | 440,220 |
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| 338,889 |
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Expenses: | | | | | | | |
Rental | 56,331 |
| | 36,885 |
| | 138,874 |
| | 105,299 |
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General and administrative | 8,283 |
| | 7,293 |
| | 25,178 |
| | 20,879 |
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Transaction | 261 |
| | 1,122 |
| | 5,618 |
| | 4,997 |
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Depreciation and amortization | 70,491 |
| | 47,864 |
| | 172,900 |
| | 130,430 |
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Impairment | — |
| | — |
| | 5,093 |
| | — |
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Total expenses | 135,366 |
| | 93,164 |
| | 347,663 |
| | 261,605 |
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Income before other income (expense) | 40,628 |
| | 25,176 |
| | 92,557 |
| | 77,284 |
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Interest expense: | | | | | | |
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Interest related to derivative financial instruments | (264 | ) | | (552 | ) | | (827 | ) | | (1,856 | ) |
Gain (loss) on change in fair value of derivative financial instruments, net | — |
| | 1,306 |
| | 884 |
| | (2,144 | ) |
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments | (264 | ) | | 754 |
| | 57 |
| | (4,000 | ) |
Interest related to debt | (25,924 | ) | | (16,386 | ) | | (59,688 | ) | | (44,503 | ) |
Gain on sale of real estate, net | — |
| | — |
| | 3 |
| | 4,212 |
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Loss on extinguishment of debt, net | (774 | ) | | (3,000 | ) | | (11,192 | ) | | (3,022 | ) |
Income from unconsolidated joint venture | 318 |
| | — |
| | 381 |
| | — |
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Other (expense) income | (27 | ) | | 95 |
| | (13 | ) | | 220 |
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Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
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Net income attributable to noncontrolling interests (1) | (194 | ) | | (212 | ) | | (715 | ) | | (830 | ) |
Net income attributable to common stockholders | $ | 13,763 |
| | $ | 6,427 |
| | $ | 21,390 |
| | $ | 29,361 |
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Earnings per common share - basic: | | | | | | | |
Net income attributable to common stockholders | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
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Earnings per common share - diluted: | | | | | | | |
Net income attributable to common stockholders | $ | 0.07 |
| | $ | 0.04 |
| | $ | 0.12 |
| | $ | 0.21 |
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Weighted average common shares outstanding: | | | | | | | |
Basic | 200,674 |
| | 138,807 |
| | 173,189 |
| | 134,905 |
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Diluted | 204,795 |
| | 143,138 |
| | 177,410 |
| | 138,314 |
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Dividends declared per common share | $ | 0.305 |
| | $ | 0.300 |
| | $ | 0.905 |
| | $ | 0.890 |
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(1) Includes amounts attributable to redeemable noncontrolling interests. |
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| Three Months Ended March 31, |
| 2022 | | 2021 |
Revenues: | | | |
Rental income | $ | 200,243 | | | $ | 191,350 | |
Interest and other operating income | 1,759 | | | 143 | |
Total revenues | 202,002 | | | 191,493 | |
Expenses: | | | |
Rental | 65,884 | | | 59,579 | |
General and administrative | 12,448 | | | 10,560 | |
Merger-related costs | 6,018 | | | — | |
Transaction | 144 | | | 96 | |
Depreciation and amortization | 75,386 | | | 76,274 | |
Interest expense | 23,940 | | | 22,986 | |
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Total expenses | 183,820 | | | 169,495 | |
Loss on sale of real estate, net | (4) | | | — | |
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Income from unconsolidated joint venture | 400 | | | 392 | |
Other income | 88 | | | 3 | |
Net income | $ | 18,666 | | | $ | 22,393 | |
Net income attributable to non-controlling interests | (351) | | | (363) | |
Net income attributable to common stockholders | $ | 18,315 | | | $ | 22,030 | |
Earnings per common share - basic: | | | |
Net income attributable to common stockholders | $ | 0.08 | | | $ | 0.10 | |
Earnings per common share - diluted: | | | |
Net income attributable to common stockholders | $ | 0.08 | | | $ | 0.10 | |
Weighted average common shares outstanding: | | | |
Basic | 228,978 | | | 218,753 | |
Diluted | 233,046 | | | 222,268 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
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Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
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Other comprehensive gain (loss) | | | | | | | |
Change in unrealized gains (losses) on cash flow hedges | 205 |
| | — |
| | (631 | ) | | — |
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Total other comprehensive gain (loss) | 205 |
| | — |
| | (631 | ) | | — |
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Total comprehensive income | 14,162 |
| | 6,639 |
| | 21,474 |
| | 30,191 |
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Comprehensive income attributable to noncontrolling interests | (170 | ) | | (211 | ) | | (619 | ) | | (802 | ) |
Total comprehensive income attributable to common stockholders | $ | 13,992 |
| | $ | 6,428 |
| | $ | 20,855 |
| | $ | 29,389 |
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| Three Months Ended March 31, |
| 2022 | | 2021 |
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Net income | $ | 18,666 | | | $ | 22,393 | |
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Other comprehensive income | | | |
Change in unrealized gains on cash flow hedges | 8,817 | | | 2,792 | |
Total other comprehensive income | 8,817 | | | 2,792 | |
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Total comprehensive income | 27,483 | | | 25,185 | |
Comprehensive income attributable to non-controlling interests | (400) | | | (407) | |
Total comprehensive income attributable to common stockholders | $ | 27,083 | | | $ | 24,778 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Cumulative Dividends in Excess of Earnings | | Total Stockholders’ Equity | | Non-controlling Interests | | Total Equity |
| Shares | | Amount |
Balance as of December 31, 2020 | 218,578 | | | $ | 2,186 | | | $ | 4,916,784 | | | $ | (16,979) | | | $ | (1,727,752) | | | $ | 3,174,239 | | | $ | 60,680 | | | $ | 3,234,919 | |
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Share-based award transactions, net | 354 | | | 3 | | | 3,334 | | | — | | | — | | | 3,337 | | | — | | | 3,337 | |
Repurchase and cancellation of common stock | (119) | | | (1) | | | (3,247) | | | — | | | — | | | (3,248) | | | — | | | (3,248) | |
Redemption of non-controlling interest and other | 11 | | | — | | | 255 | | | — | | | — | | | 255 | | | (255) | | | — | |
Dividends declared ($0.320 per common share) | — | | | — | | | — | | | — | | | (70,023) | | | (70,023) | | | (1,183) | | | (71,206) | |
Net income | — | | | — | | | — | | | — | | | 22,030 | | | 22,030 | | | 363 | | | 22,393 | |
Other comprehensive income | — | | | — | | | — | | | 2,748 | | | — | | | 2,748 | | | 44 | | | 2,792 | |
Balance as of March 31, 2021 | 218,824 | | | 2,188 | | | $ | 4,917,126 | | | $ | (14,231) | | | $ | (1,775,745) | | | $ | 3,129,338 | | | $ | 59,649 | | | $ | 3,188,987 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Loss | | Cumulative Dividends in Excess of Earnings | | Total Stockholders’ Equity | | Noncontrolling Interests | | Total Equity |
| Shares | | Amount |
Balance as of December 31, 2015 | 127,027 |
| | $ | 1,270 |
| | $ | 2,328,806 |
| | $ | — |
| | $ | (950,652 | ) | | $ | 1,379,424 |
| | $ | 27,534 |
| | $ | 1,406,958 |
|
Issuance of common stock, net | 14,138 |
| | 141 |
| | 417,022 |
| | — |
| | — |
| | 417,163 |
| | — |
| | 417,163 |
|
Issuance of operating partnership units in connection with an acquisition | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 71,754 |
| | 71,754 |
|
Share-based award transactions, net | 393 |
| | 4 |
| | 5,132 |
| | — |
| | — |
| | 5,136 |
| | — |
| | 5,136 |
|
Repurchase and cancellation of common stock | (87 | ) | | (1 | ) | | (2,424 | ) | | — |
| | — |
| | (2,425 | ) | | — |
| | (2,425 | ) |
Redemption of noncontrolling interest and other | 257 |
| | 3 |
| | 5,030 |
| | — |
| | — |
| | 5,033 |
| | (5,709 | ) | | (676 | ) |
Dividends declared | — |
| | — |
| | — |
| | — |
| | (121,686 | ) | | (121,686 | ) | | (3,134 | ) | | (124,820 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 29,361 |
| | 29,361 |
| | 802 |
| | 30,163 |
|
Balance as of September 30, 2016 | 141,728 |
| | $ | 1,417 |
| | $ | 2,753,566 |
| | $ | — |
| | $ | (1,042,977 | ) | | $ | 1,712,006 |
| | $ | 91,247 |
| | $ | 1,803,253 |
|
| | | | | | | | | | | | | | | |
Balance as of December 31, 2016 | 141,719 |
| | $ | 1,417 |
| | $ | 2,754,818 |
| | $ | — |
| | $ | (1,068,961 | ) | | $ | 1,687,274 |
| | $ | 93,143 |
| | $ | 1,780,417 |
|
Issuance of common stock, net | 58,623 |
| | 586 |
| | 1,623,636 |
| | — |
| | — |
| | 1,624,222 |
| | — |
| | 1,624,222 |
|
Issuance of operating partnership units in connection with an acquisition | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 610 |
| | 610 |
|
Share-based award transactions, net | 234 |
| | 3 |
| | 5,490 |
| | — |
| | — |
| | 5,493 |
| | — |
| | 5,493 |
|
Repurchase and cancellation of common stock | (116 | ) | | (1 | ) | | (3,412 | ) | | — |
| | — |
| | (3,413 | ) | | — |
| | (3,413 | ) |
Redemption of noncontrolling interest and other | 227 |
| | 2 |
| | 5,692 |
| | — |
| | — |
| | 5,694 |
| | (5,694 | ) | | — |
|
Dividends declared | — |
| | — |
| | — |
| | — |
| | (164,480 | ) | | (164,480 | ) | | (3,936 | ) | | (168,416 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 21,390 |
| | 21,390 |
| | 635 |
| | 22,025 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | (615 | ) | | — |
| | (615 | ) | | (16 | ) | | (631 | ) |
Balance as of September 30, 2017 | 200,687 |
| | $ | 2,007 |
| | $ | 4,386,224 |
| | $ | (615 | ) | | $ | (1,212,051 | ) | | $ | 3,175,565 |
| | $ | 84,742 |
| | $ | 3,260,307 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Cumulative Dividends in Excess of Earnings | | Total Stockholders’ Equity | | Non-controlling Interests | | Total Equity |
| Shares | | Amount |
Balance as of December 31, 2021 | 228,880 | | | $ | 2,289 | | | $ | 5,178,132 | | | $ | (7,041) | | | $ | (1,915,776) | | | $ | 3,257,604 | | | $ | 86,712 | | | $ | 3,344,316 | |
Issuance of common stock, net | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Share-based award transactions, net | 154 | | | 1 | | | 2,023 | | | — | | | — | | | 2,024 | | | — | | | 2,024 | |
Repurchase and cancellation of common stock | (50) | | | — | | | (1,640) | | | — | | | — | | | (1,640) | | | — | | | (1,640) | |
Redemption of non-controlling interest and other | 92 | | | 1 | | | 2,064 | | | — | | | — | | | 2,065 | | | (2,065) | | | — | |
Dividends declared ($0.325) per common share) | — | | | — | | | — | | | — | | | (74,443) | | | (74,443) | | | (1,373) | | | (75,816) | |
Net income | — | | | — | | | — | | | — | | | 18,315 | | | 18,315 | | | 351 | | | 18,666 | |
Other comprehensive income | — | | | — | | | — | | | 8,768 | | | — | | | 8,768 | | | 49 | | | 8,817 | |
Balance as of March 31, 2022 | 229,076 | | | $ | 2,291 | | | $ | 5,180,579 | | | $ | 1,727 | | | $ | (1,971,904) | | | $ | 3,212,693 | | | $ | 83,674 | | | $ | 3,296,367 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Cash flows from operating activities: | | | | |
Net income | | $ | 22,105 |
| | $ | 30,191 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation, amortization and other | | 169,057 |
| | 128,728 |
|
Share-based compensation expense | | 5,493 |
| | 5,136 |
|
Bad debt expense | | 635 |
| | 508 |
|
Impairment | | 5,093 |
| | — |
|
Income from unconsolidated joint venture | | (381 | ) | | — |
|
Gain on sale of real estate, net | | (3 | ) | | (4,212 | ) |
Loss on extinguishment of debt, net | | 11,192 |
| | 3,022 |
|
Change in fair value of derivative financial instruments | | (884 | ) | | 2,144 |
|
Changes in operating assets and liabilities: | | | | |
Receivables and other assets, net | | (20,489 | ) | | (14,051 | ) |
Accounts payable and accrued liabilities | | 29,566 |
| | 3,598 |
|
Prepaid rent and other liabilities | | 7,158 |
| | (6,807 | ) |
Net cash provided by operating activities | | 228,542 |
| | 148,257 |
|
Cash flows from investing activities: | | | | |
Investments in real estate | | (2,357,570 | ) | | (532,527 | ) |
Investment in unconsolidated joint venture | | (68,839 | ) | | — |
|
Development of real estate | | (19,163 | ) | | — |
|
Proceeds from the sale of real estate | | 4,746 |
| | 23,368 |
|
Capital expenditures | | (42,990 | ) | | (34,064 | ) |
Restricted cash, escrow deposits and other assets | | (3,655 | ) | | 2,143 |
|
Net cash used in investing activities | | (2,487,471 | ) | | (541,080 | ) |
Cash flows from financing activities: | | | | |
Borrowings on unsecured revolving credit facility | | 515,000 |
| | 513,000 |
|
Payments on unsecured revolving credit facility | | (528,000 | ) | | (704,000 | ) |
Proceeds from unsecured senior notes | | 900,000 |
| | 347,725 |
|
Borrowings on unsecured term loans | | — |
| | 200,000 |
|
Payments on unsecured term loans | | — |
| | (155,000 | ) |
Payments on secured mortgage loans | | (75,444 | ) | | (98,453 | ) |
Deferred financing costs | | (16,902 | ) | | (3,039 | ) |
Debt extinguishment costs | | (10,391 | ) | | — |
|
Security deposits | | 1,932 |
| | 862 |
|
Proceeds from issuance of common stock | | 1,624,222 |
| | 418,891 |
|
Repurchase and cancellation of common stock | | (3,413 | ) | | (2,425 | ) |
Dividends paid | | (145,877 | ) | | (116,655 | ) |
Distributions paid to noncontrolling interest of limited partners | | (4,019 | ) | | (2,724 | ) |
Redemption of redeemable noncontrolling interest | | — |
| | (491 | ) |
Net cash provided by financing activities | | 2,257,108 |
| | 397,691 |
|
Net change in cash and cash equivalents | | (1,821 | ) | | 4,868 |
|
Cash and cash equivalents - beginning of period | | 11,231 |
| | 13,070 |
|
Cash and cash equivalents - end of period | | $ | 9,410 |
| | $ | 17,938 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net income | $ | 18,666 | | | $ | 22,393 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 71,009 | | | 71,671 | |
Share-based compensation expense | 2,025 | | | 3,337 | |
Income from unconsolidated joint venture | (400) | | | (392) | |
Distributions from unconsolidated joint venture | 785 | | | 785 | |
| | | |
Loss on sale of real estate, net | 4 | | | — | |
| | | |
Changes in operating assets and liabilities: | | | |
Receivables and other assets, net | (3,229) | | | 2,275 | |
Accounts payable and accrued liabilities | (34,131) | | | (27,613) | |
Security deposits, prepaid rent and other liabilities | (5,421) | | | (7,103) | |
Net cash provided by operating activities | 49,308 | | | 65,353 | |
Cash flows from investing activities: | | | |
Investments in real estate | (19,094) | | | (30,472) | |
Development of real estate | (10,372) | | | (17,096) | |
Proceeds from the sale of real estate | 26,791 | | | — | |
Capital expenditures | (28,560) | | | (28,931) | |
Collection of real estate notes receivable | — | | | 200 | |
Loan origination fees | 325 | | | — | |
Advances on real estate notes receivable | (2,270) | | | — | |
Net cash used in investing activities | (33,180) | | | (76,299) | |
Cash flows from financing activities: | | | |
Borrowings on unsecured revolving credit facility | 75,000 | | | 15,000 | |
Payments on unsecured revolving credit facility | (50,000) | | | (15,000) | |
| | | |
| | | |
| | | |
Deferred financing costs | (5,355) | | | — | |
| | | |
| | | |
| | | |
| | | |
Repurchase and cancellation of common stock | (1,641) | | | (3,248) | |
Dividends paid | (74,377) | | | (70,000) | |
Distributions paid to non-controlling interest of limited partners | (1,402) | | | (1,485) | |
Net cash used in financing activities | (57,775) | | | (74,733) | |
Net change in cash, cash equivalents and restricted cash | (41,647) | | | (85,679) | |
Cash, cash equivalents and restricted cash - beginning of period | 57,069 | | | 118,765 | |
Cash, cash equivalents and restricted cash - end of period | $ | 15,422 | | | $ | 33,086 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
(Unaudited)
|
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
ASSETS | | | | |
Real estate investments: | | | | |
Land | | $ | 480,850 |
| | $ | 386,526 |
|
Building and improvements | | 5,788,837 |
| | 3,466,516 |
|
Lease intangibles | | 648,591 |
| | 467,571 |
|
Construction in progress | | 59,573 |
| | — |
|
| | 6,977,851 |
| | 4,320,613 |
|
Accumulated depreciation and amortization | | (973,566 | ) | | (817,593 | ) |
Real estate investments, net | | 6,004,285 |
| | 3,503,020 |
|
Investment in unconsolidated joint venture | | 68,303 |
| | — |
|
Cash and cash equivalents | | 9,410 |
| | 11,231 |
|
Restricted cash and escrow deposits | | 17,469 |
| | 13,814 |
|
Receivables and other assets, net | | 206,030 |
| | 173,461 |
|
Other intangibles, net | | 108,025 |
| | 46,318 |
|
Total assets | | $ | 6,413,522 |
| | $ | 3,747,844 |
|
LIABILITIES AND PARTNERS’ CAPITAL | | | | |
Liabilities: | | | | |
Debt | | $ | 2,856,758 |
| | $ | 1,768,905 |
|
Accounts payable and accrued liabilities | | 159,070 |
| | 105,034 |
|
Derivative financial instruments - interest rate swaps | | 1,441 |
| | 1,920 |
|
Security deposits, prepaid rent and other liabilities | | 61,402 |
| | 49,859 |
|
Intangible liabilities, net | | 69,852 |
| | 37,056 |
|
Total liabilities | | 3,148,523 |
| | 1,962,774 |
|
Commitments and contingencies | |
|
| |
|
|
Redeemable noncontrolling interests | | 4,692 |
| | 4,653 |
|
Partners’ Capital: | | | | |
Limited partners’ capital, 4,116,546 and 4,323,095 units issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | | 84,472 |
| | 92,873 |
|
General partners’ capital, 200,686,673 and 141,719,134 units issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | | 3,175,835 |
| | 1,687,544 |
|
Total partners’ capital | | 3,260,307 |
| | 1,780,417 |
|
Total liabilities and partners’ capital | | $ | 6,413,522 |
| | $ | 3,747,844 |
|
| | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
ASSETS | | | | |
Real estate investments: | | | | |
Land | | $ | 644,194 | | | $ | 640,382 | |
Building and improvements | | 6,744,865 | | | 6,688,516 | |
Lease intangibles | | 393,756 | | | 404,714 | |
Construction in progress | | 15,673 | | | 32,685 | |
| | 7,798,488 | | | 7,766,297 | |
Accumulated depreciation and amortization | | (1,650,257) | | | (1,598,468) | |
Real estate investments, net | | 6,148,231 | | | 6,167,829 | |
Assets held for sale, net | | — | | | 27,070 | |
Investment in unconsolidated joint venture | | 62,454 | | | 62,834 | |
Cash and cash equivalents | | 10,944 | | | 52,353 | |
Restricted cash | | 4,478 | | | 4,716 | |
Receivables and other assets, net | | 350,781 | | | 334,941 | |
Right-of-use assets - operating leases, net | | 228,009 | | | 229,226 | |
Other intangibles, net | | 10,011 | | | 10,720 | |
Total assets | | $ | 6,814,908 | | | $ | 6,889,689 | |
LIABILITIES AND PARTNERS’ CAPITAL | | | | |
Liabilities: | | | | |
Debt | | $ | 3,053,884 | | | $ | 3,028,122 | |
Accounts payable and accrued liabilities | | 159,659 | | | 198,078 | |
Liabilities of assets held for sale | | — | | | 262 | |
Derivative financial instruments - interest rate swaps | | — | | | 5,069 | |
Security deposits, prepaid rent and other liabilities | | 78,771 | | | 86,225 | |
Lease liabilities - operating leases | | 196,226 | | | 196,286 | |
Intangible liabilities, net | | 30,001 | | | 31,331 | |
Total liabilities | | 3,518,541 | | | 3,545,373 | |
Commitments and contingencies | | 0 | | 0 |
| | | | |
Partners’ Capital: | | | | |
Limited partners’ capital, 4,050,493 and 4,142,408 OP Units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | | 83,404 | | | 86,442 | |
General partners’ capital, 229,076,322 and 228,879,846 OP Units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | | 3,212,963 | | | 3,257,874 | |
Total partners’ capital | | 3,296,367 | | | 3,344,316 | |
Total liabilities and partners’ capital | | $ | 6,814,908 | | | $ | 6,889,689 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | |
Rental income | $ | 175,431 |
| | $ | 118,252 |
| | $ | 438,949 |
| | $ | 338,646 |
|
Interest and other operating income | 563 |
| | 88 |
| | 1,271 |
| | 243 |
|
Total revenues | 175,994 |
| | 118,340 |
| | 440,220 |
| | 338,889 |
|
Expenses: | | | | | | | |
Rental | 56,331 |
| | 36,885 |
| | 138,874 |
| | 105,299 |
|
General and administrative | 8,283 |
| | 7,293 |
| | 25,178 |
| | 20,879 |
|
Transaction | 261 |
| | 1,122 |
| | 5,618 |
| | 4,997 |
|
Depreciation and amortization | 70,491 |
| | 47,864 |
| | 172,900 |
| | 130,430 |
|
Impairment | — |
| | — |
| | 5,093 |
| | — |
|
Total expenses | 135,366 |
| | 93,164 |
| | 347,663 |
| | 261,605 |
|
Income before other income (expense) | 40,628 |
| | 25,176 |
| | 92,557 |
| | 77,284 |
|
Interest expense: | | | | | | | |
Interest related to derivative financial instruments | (264 | ) | | (552 | ) | | (827 | ) | | (1,856 | ) |
Gain (loss) on change in fair value of derivative financial instruments, net | — |
| | 1,306 |
| | 884 |
| | (2,144 | ) |
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments | (264 | ) | | 754 |
| | 57 |
| | (4,000 | ) |
Interest related to debt | (25,924 | ) | | (16,386 | ) | | (59,688 | ) | | (44,503 | ) |
Gain on sale of real estate, net | — |
| | — |
| | 3 |
| | 4,212 |
|
Loss on extinguishment of debt, net | (774 | ) | | (3,000 | ) | | (11,192 | ) | | (3,022 | ) |
Income from unconsolidated joint venture | 318 |
| | — |
| | 381 |
| | — |
|
Other (expense) income | (27 | ) | | 95 |
| | (13 | ) | | 220 |
|
Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
|
Net income attributable to noncontrolling interests | (28 | ) | | (1 | ) | | (80 | ) | | (28 | ) |
Net income attributable to common unitholders | $ | 13,929 |
| | $ | 6,638 |
| | $ | 22,025 |
| | $ | 30,163 |
|
Earnings per common unit - basic: | | | | | | | |
Net income attributable to common unitholders | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
|
Earnings per common unit - diluted: | | | | | | | |
Net income attributable to common unitholders | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
|
Weighted average common units outstanding: | | | | | | | |
Basic | 204,795 |
| | 143,137 |
| | 177,410 |
| | 138,314 |
|
Diluted | 204,795 |
| | 143,137 |
| | 177,410 |
| | 138,314 |
|
Dividends declared per common unit | $ | 0.305 |
| | $ | 0.300 |
| | $ | 0.905 |
| | $ | 0.890 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Revenues: | | | |
Rental income | $ | 200,243 | | | $ | 191,350 | |
Interest and other operating income | 1,759 | | | 143 | |
Total revenues | 202,002 | | | 191,493 | |
Expenses: | | | |
Rental | 65,884 | | | 59,579 | |
General and administrative | 12,448 | | | 10,560 | |
Merger-related costs | 6,018 | | | — | |
Transaction | 144 | | | 96 | |
Depreciation and amortization | 75,386 | | | 76,274 | |
Interest expense | 23,940 | | | 22,986 | |
| | | |
Total expenses | 183,820 | | | 169,495 | |
Loss on sale of real estate, net | (4) | | | — | |
| | | |
Income from unconsolidated joint venture | 400 | | | 392 | |
Other income | 88 | | | 3 | |
Net income | $ | 18,666 | | | $ | 22,393 | |
Net income attributable to non-controlling interests | — | | | — | |
Net income attributable to common unitholders | $ | 18,666 | | | $ | 22,393 | |
Earnings per common OP Unit - basic: | | | |
Net income attributable to common unitholders | $ | 0.08 | | | $ | 0.10 | |
Earnings per common OP Unit - diluted: | | | |
Net income attributable to common unitholders | $ | 0.08 | | | $ | 0.10 | |
Weighted average common OP Units outstanding: | | | |
Basic | 233,046 | | | 222,268 | |
Diluted | 233,046 | | | 222,268 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | |
Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
|
| | | | | | | |
Other comprehensive gain (loss) | | | | | | | |
Change in unrealized gains (losses) on cash flow hedges | 205 |
| | — |
| | (631 | ) | | — |
|
Total other comprehensive gain (loss) | 205 |
| | — |
| | (631 | ) | | — |
|
| | | | | | | |
Total comprehensive income | 14,162 |
| | 6,639 |
| | 21,474 |
| | 30,191 |
|
Comprehensive income attributable to noncontrolling interests | (28 | ) | | (1 | ) | | (80 | ) | | (28 | ) |
Total comprehensive income attributable to common unitholders | $ | 14,134 |
| | $ | 6,638 |
| | $ | 21,394 |
| | $ | 30,163 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| | | |
Net income | $ | 18,666 | | | $ | 22,393 | |
| | | |
Other comprehensive income | | | |
Change in unrealized gains on cash flow hedges | 8,817 | | | 2,792 | |
Total other comprehensive income | 8,817 | | | 2,792 | |
| | | |
Total comprehensive income | 27,483 | | | 25,185 | |
Comprehensive income attributable to non-controlling interests | — | | | — | |
Total comprehensive income attributable to common unitholders | $ | 27,483 | | | $ | 25,185 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(In thousands)
(Unaudited)(Unaudited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| General Partners’ Capital | | Limited Partners’ Capital | | Total Partners’ Capital |
| Units | | Amount | | Units | | Amount | |
Balance as of December 31, 2020 | 218,578 | | | $ | 3,174,509 | | | 3,520 | | | $ | 60,410 | | | $ | 3,234,919 | |
| | | | | | | | | |
Share-based award transactions, net | 354 | | | 3,337 | | | — | | | — | | | 3,337 | |
Redemption and cancellation of general partner OP Units | (119) | | | (3,248) | | | — | | | — | | | (3,248) | |
Redemption of limited partner OP Units and other | 11 | | | 255 | | | (11) | | | (255) | | | — | |
Distributions declared ($0.320 per common OP Unit) | — | | | (70,023) | | | — | | | (1,183) | | | (71,206) | |
Net income | — | | | 22,030 | | | — | | | 363 | | | 22,393 | |
Other comprehensive income | — | | | 2,748 | | | — | | | 44 | | | 2,792 | |
Balance as of March 31, 2021 | 218,824 | | | $ | 3,129,608 | | | 3,509 | | | $ | 59,379 | | | $ | 3,188,987 | |
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| | | | | | | | | | | | | | | | | |
| General Partners’ Capital | | Limited Partners’ Capital | | Total Partners’ Capital |
| Units | | Amount | | Units | | Amount | |
Balance as of December 31, 2015 | 127,027 |
| | $ | 1,379,694 |
| | 1,930 |
| | $ | 27,264 |
| | $ | 1,406,958 |
|
Issuance of general partner units, net | 14,138 |
| | 417,163 |
| | — |
| | — |
| | 417,163 |
|
Issuance of limited partner units in connection with an acquisition | — |
| | — |
| | 2,650 |
| | 71,754 |
| | 71,754 |
|
Share-based award transactions, net | 393 |
| | 5,136 |
| | — |
| | — |
| | 5,136 |
|
Redemption and cancellation of general partner units | (87 | ) | | (2,425 | ) | | — |
| | — |
| | (2,425 | ) |
Redemption of limited partner units and other | 257 |
| | 5,033 |
| | (257 | ) | | (5,709 | ) | | (676 | ) |
Distributions declared | — |
| | (121,686 | ) | | — |
| | (3,134 | ) | | (124,820 | ) |
Net income | — |
| | 29,361 |
| | — |
| | 802 |
| | 30,163 |
|
Balance as of September 30, 2016 | 141,728 |
| | $ | 1,712,276 |
| | 4,323 |
| | $ | 90,977 |
| | $ | 1,803,253 |
|
| | | | | | | | | |
Balance as of December 31, 2016 | 141,719 |
| | $ | 1,687,544 |
| | 4,323 |
| | $ | 92,873 |
| | $ | 1,780,417 |
|
Issuance of general partner units, net | 58,623 |
| | 1,624,222 |
| | — |
| | — |
| | 1,624,222 |
|
Issuance of limited partner units in connection with an acquisition | — |
| | — |
| | 21 |
| | 610 |
| | 610 |
|
Share-based award transactions, net | 234 |
| | 5,493 |
| | — |
| | — |
| | 5,493 |
|
Redemption and cancellation of general partner units | (116 | ) | | (3,413 | ) | | — |
| | — |
| | (3,413 | ) |
Redemption of limited partner units and other | 227 |
| | 5,694 |
| | (227 | ) | | (5,694 | ) | | — |
|
Distributions declared | — |
| | (164,480 | ) | | — |
| | (3,936 | ) | | (168,416 | ) |
Net income | — |
| | 21,390 |
| | — |
| | 635 |
| | 22,025 |
|
Other comprehensive loss | — |
| | (615 | ) | | — |
| | (16 | ) | | (631 | ) |
Balance as of September 30, 2017 | 200,687 |
| | $ | 3,175,835 |
| | 4,117 |
| | $ | 84,472 |
| | $ | 3,260,307 |
|
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| General Partners’ Capital | | Limited Partners’ Capital | | Total Partners’ Capital |
| Units | | Amount | | Units | | Amount | |
Balance as of December 31, 2021 | 228,880 | | | $ | 3,257,874 | | | 4,142 | | | $ | 86,442 | | | $ | 3,344,316 | |
| | | | | | | | | |
Share-based award transactions, net | 154 | | | 2,024 | | | — | | | — | | | 2,024 | |
Redemption and cancellation of general partner OP Units | (50) | | | (1,640) | | | — | | | — | | | (1,640) | |
Redemption of limited partner OP Units and other | 92 | | | 2,065 | | | (92) | | | (2,065) | | | — | |
Distributions declared ($0.325 per common OP Unit) | — | | | (74,443) | | | — | | | (1,373) | | | (75,816) | |
Net income | — | | | 18,315 | | | — | | | 351 | | | 18,666 | |
Other comprehensive income | — | | | 8,768 | | | — | | | 49 | | | 8,817 | |
Balance as of March 31, 2022 | 229,076 | | | $ | 3,212,963 | | | 4,050 | | | $ | 83,404 | | | $ | 3,296,367 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
Cash flows from operating activities: | | | | |
Net income | | $ | 22,105 |
| | $ | 30,191 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation, amortization and other | | 169,057 |
| | 128,728 |
|
Share-based compensation expense | | 5,493 |
| | 5,136 |
|
Bad debt expense | | 635 |
| | 508 |
|
Impairment | | 5,093 |
| | — |
|
Income from unconsolidated joint venture | | (381 | ) | | — |
|
Gain on sale of real estate, net | | (3 | ) | | (4,212 | ) |
Loss on extinguishment of debt, net | | 11,192 |
| | 3,022 |
|
Change in fair value of derivative financial instruments | | (884 | ) | | 2,144 |
|
Changes in operating assets and liabilities: | | | | |
Receivables and other assets, net | | (20,489 | ) | | (14,051 | ) |
Accounts payable and accrued liabilities | | 29,566 |
| | 3,598 |
|
Prepaid rent and other liabilities | | 7,158 |
| | (6,807 | ) |
Net cash provided by operating activities | | 228,542 |
| | 148,257 |
|
Cash flows from investing activities: | | | | |
Investments in real estate | | (2,357,570 | ) | | (532,527 | ) |
Investment in unconsolidated joint venture | | (68,839 | ) | | — |
|
Development of real estate | | (19,163 | ) | | — |
|
Proceeds from the sale of real estate | | 4,746 |
| | 23,368 |
|
Capital expenditures | | (42,990 | ) | | (34,064 | ) |
Restricted cash, escrow deposits and other assets | | (3,655 | ) | | 2,143 |
|
Net cash used in investing activities | | (2,487,471 | ) | | (541,080 | ) |
Cash flows from financing activities: | | | | |
Borrowings on unsecured revolving credit facility | | 515,000 |
| | 513,000 |
|
Payments on unsecured revolving credit facility | | (528,000 | ) | | (704,000 | ) |
Proceeds from unsecured senior notes | | 900,000 |
| | 347,725 |
|
Borrowings on unsecured term loans | | — |
| | 200,000 |
|
Payments on unsecured term loans | | — |
| | (155,000 | ) |
Payments on secured mortgage loans | | (75,444 | ) | | (98,453 | ) |
Deferred financing costs | | (16,902 | ) | | (3,039 | ) |
Debt extinguishment costs | | (10,391 | ) | | — |
|
Security deposits | | 1,932 |
| | 862 |
|
Proceeds from issuance of general partner units | | 1,624,222 |
| | 418,891 |
|
Repurchase and cancellation of general partner units | | (3,413 | ) | | (2,425 | ) |
Distributions paid to general partner | | (145,877 | ) | | (116,655 | ) |
Distributions paid to limited partners and redeemable noncontrolling interests | | (4,019 | ) | | (2,724 | ) |
Redemption of redeemable noncontrolling interest | | — |
| | (491 | ) |
Net cash provided by financing activities | | 2,257,108 |
| | 397,691 |
|
Net change in cash and cash equivalents | | (1,821 | ) | | 4,868 |
|
Cash and cash equivalents - beginning of period | | 11,231 |
| | 13,070 |
|
Cash and cash equivalents - end of period | | $ | 9,410 |
| | $ | 17,938 |
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| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net income | $ | 18,666 | | | $ | 22,393 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 71,009 | | | 71,671 | |
Share-based compensation expense | 2,025 | | | 3,337 | |
Income from unconsolidated joint venture | (400) | | | (392) | |
Distributions from unconsolidated joint venture | 785 | | | 785 | |
| | | |
Loss on sale of real estate, net | 4 | | | — | |
| | | |
Changes in operating assets and liabilities: | | | |
Receivables and other assets, net | (3,229) | | | 2,275 | |
Accounts payable and accrued liabilities | (34,131) | | | (27,613) | |
Security deposits, prepaid rent and other liabilities | (5,421) | | | (7,103) | |
Net cash provided by operating activities | 49,308 | | | 65,353 | |
Cash flows from investing activities: | | | |
Investments in real estate | (19,094) | | | (30,472) | |
Development of real estate | (10,372) | | | (17,096) | |
Proceeds from the sale of real estate | 26,791 | | | — | |
Capital expenditures | (28,560) | | | (28,931) | |
Collection of real estate notes receivable | — | | | 200 | |
Loan origination fees | 325 | | | — | |
Advances on real estate notes receivable | (2,270) | | | — | |
Net cash used in investing activities | (33,180) | | | (76,299) | |
Cash flows from financing activities: | | | |
Borrowings on unsecured revolving credit facility | 75,000 | | | 15,000 | |
Payments on unsecured revolving credit facility | (50,000) | | | (15,000) | |
| | | |
| | | |
| | | |
Deferred financing costs | (5,355) | | | — | |
| | | |
| | | |
| | | |
| | | |
Repurchase and cancellation of general partner units | (1,641) | | | (3,248) | |
Distributions paid to general partner | (74,377) | | | (70,000) | |
Distributions paid to limited partners and redeemable non-controlling interests | (1,402) | | | (1,485) | |
Net cash used in financing activities | (57,775) | | | (74,733) | |
Net change in cash, cash equivalents and restricted cash | (41,647) | | | (85,679) | |
Cash, cash equivalents and restricted cash - beginning of period | 57,069 | | | 118,765 | |
Cash, cash equivalents and restricted cash - end of period | $ | 15,422 | | | $ | 33,086 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us”“us,” or “our” refers to Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP, collectively.
1. Organization and Description of Business
HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006.2006. HTA operates as a REIT and is the general partner of HTALP, which is the operating partnership. As of September 30, 2017, HTA owned a 98.0% partnership, interest and other limited partners, including some of our directors, executive officers and their affiliates, owned the remaining partnership interest (including the LTIP Units) in HTALP. As the sole general partner of HTALP, HTA has the full, exclusive and complete responsibility for HTALP’s day-to-day management and control. HTA operates in an umbrella partnership, or “UPREIT” structure. HTA has qualified and intends to continue to be taxed as a REIT structure in which HTALP and its subsidiaries hold substantially allfor federal income tax purposes under the applicable sections of the assets. HTA’s only material asset is its ownershipInternal Revenue Code.
We own real estate primarily consisting of partnership interests of HTALP. As a result, HTA does not conduct business itself, other than acting as the sole general partner of HTALP, issuing public equity from time to time and guaranteeing certain debts of HTALP. HTALP conducts the operations of the business and issues publicly-traded debt, but has no publicly-traded equity.
HTA is the largest publicly-traded REIT focused on medical office buildings (“MOBs”) in the U.S. as measured by the gross leasable area (“GLA”) of our MOBs. HTA conducts substantially all of its operations through HTALP. We invest in MOBs that we believe will serve the future of healthcare delivery, and MOBs that are primarily located on health systemor adjacent to hospital campuses near university medical centers, or in off-campus, community core community outpatient locations. We also focus onlocations across 32 states within the United States, and we lease space to tenants primarily consisting of health systems, research and academic institutions, and various sized physician practices. Through our key markets that have certain demographicfull-service operating platform, we provide leasing, asset management, acquisitions, development and macro-economic trends and where we can utilizeother related services for our institutional property management and leasing platform to generate strong tenant relationships and operating cost efficiencies. properties.
Our primary objective is to maximize stockholder value with disciplined growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and couldwe expect to enhance our existing portfolio.
Merger with Healthcare Realty Trust Incorporated
On February 28, 2022, Healthcare Trust of America, Inc. (the “Company”), a Maryland corporation, Healthcare Trust of America Holdings, LP, a Delaware limited partnership (the “Company OP”) of which the Company is the sole general partner, HR Acquisition 2, LLC, a Maryland limited liability company and a direct, wholly owned subsidiary of the Company (“Merger Sub”), and Healthcare Realty Trust Incorporated, a Maryland corporation (“HR”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into HR, with HR surviving the merger (the “Merger”).
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time, each outstanding share of Common Stock, $0.01 par value per share, of HR (“HR Common Stock”) will be converted into the right to receive 1.0 (the “Exchange Ratio”) share of Class A Common Stock, $0.01 par value per share, of the Company (“Company Common Stock” and, such consideration, the “Merger Consideration”). Subject to the closing of the Merger and the other transactions contemplated therein, the holders of shares of Company Common Stock issued and outstanding on the last business day prior to the closing date of the Merger will receive a special distribution in the amount of $4.82 in cash per share of Company Common Stock held on such date (the “Special Distribution Payment”).
Once the conditions to close the Merger have been satisfied or waived, the Merger Agreement requires HR and the Company to exchange irrevocable certifications that all such closing conditions have been satisfied or waived. At such time, the Company OP will transfer or cause the transfer, on the business day before the effective time, to HR or its designees certain of the Company OP’s assets as specified by HR for a cash purchase price equal to the reasonably equivalent fair market value of the assets transferred. To the extent the net proceeds to the Company of the asset transfer or joint venture transactions relating to such assets are insufficient to pay the full amount of the Special Distribution Payment, the Merger Agreement requires the Company to utilize new financing to fund the balance of the Special Distribution Payment. The Company has obtained a commitment letter from JPMorgan Chase Bank, N.A. for a $1.7 billion bridge financing facility. HTA has qualifiedand HR have received letters of intent from, and are in advanced negotiations with, 3 institutional investors for a combination of joint ventures and asset sales totaling $1.7 billion at a weighted average cap rate of approximately 4.8%. Net proceeds from these transactions are expected to be taxed as a REIT for federal income tax purposesapproximately $1.6 billion. The transactions may occur in separate tranches, with the initial transactions targeted to close prior to the vote on the contemplated Merger by HR and intends to continueHTA stockholders and the remainder to be taxed ascompleted on or around the closing date of the contemplated Merger. These transactions are subject to execution of definitive documentation and customary closing conditions. In addition, HTA and HR have secured initial commitments for amended and restated credit facilities, including the following: (i) a REIT.
Since 2006, we have invested $7.0$1.5 billion to create a portfolio of MOBs and other healthcare assets consisting of approximately 24.2 million square feet of GLA throughout the U.S. As of September 30, 2017, our portfolio included $2.24revolving credit facility; (ii) $1.5 billion of investments, netterm loans, including $650 million of development credits received at closing,new capacity; and (iii) a $1.1 billion asset sale term loan to replace the transaction bridge loan commitment and to backstop the $1.1 billion special dividend to HTA stockholders, if needed, depending on the timing of asset sales and joint ventures.
Additionally, on May 2, 2022, HTA and HR filed a Form S-4 Registration Statement with the SEC in connection with our acquisitionthe contemplated Merger. Please review this Form S-4 for more information about the contemplated Merger.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders. The boards of directors of the Duke MOB business (the “Duke Acquisition”Company and HR have unanimously approved the Merger Agreement. The Merger is expected to close during the third quarter of 2022.
COVID-19 Pandemic
On March 11, 2020 the novel coronavirus disease (“COVID-19”), which includes was declared a 50% ownership interest in an unconsolidated joint venture for $68.8 million aspandemic by the World Health Organization. As the virus continued to spread throughout the United States and other countries across the world, Federal, state and local governments took various actions including the issuance of “stay-at-home” orders, social distancing guidelines and ordering the datetemporary closure of acquisition. Our only remaining obligations relatednon-essential businesses to limit the spread of COVID-19. While many businesses have reopened and vaccinations are becoming more widely available to the Duke Acquisition aregeneral population, the potential acquisition of a land parcel in Miami, FLeconomic uncertainty created by the COVID-19 pandemic continue to present risks to the Company and a single property in Texas that are each currently excluded from our purchase obligations due to current outstanding physical condition issues.
As of September 30, 2017, approximately 96%the future results of our portfolio, basedoperations. Although we did not experience significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2022, should current and planned measures, including further development and delivery of vaccines and other measures intended to reduce or eliminate the spread of COVID-19, past and/or proposed economic stimulus, and other laws, acts and orders proposed or enacted by these various governmental agencies ultimately not be successful or limited in their efficacy, our business and the broader real estate industry may experience significant adverse consequences. These consequences include loss of revenues, increased expenses, increased costs of materials, difficulty in maintaining an active workforce, and constraints on GLA, was located on the campuses of,our ability to secure capital or aligned with, nationally or regionally recognized healthcare systems. Our portfolio is diversified geographically across 33 states, with no state having more than 19% of our total GLA as of September 30, 2017. We are concentrated in 20 to 25 key markets that are experiencing higher economic and demographic trends thanfinancing, among other markets, on average, that we expect will drive demand for MOBs. Approximately 92% of our portfolio, based on GLA, is located in the top 75 metropolitan statistical areas (“MSAs”) with Atlanta, Boston, Dallas, Houston and Tampa being our largest markets by investment.factors.
Our principal executive office is located at 16435 North Scottsdale Road, Suite 320, Scottsdale, Arizona, 85254.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles in the U.S. (“GAAP”) in all material respects and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Our accompanying condensed consolidated financial statements include our accounts and those of our subsidiaries and any consolidated variable interest entities (“VIEs”). All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements (i) do not include all information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements, and (ii) reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable for the full year. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 20162021 Annual Report on Form 10-K.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of our subsidiaries and consolidated joint venture arrangements. The portions of the HTALP operating partnership not owned by us are presented as non-controlling interests in ouron the accompanying condensed consolidated balance sheets and statements of operations, condensed consolidated statements of comprehensive income, or loss,and condensed consolidated statements of equity and consolidated statements of changes in partners’ capital. The portions of other joint venture arrangements not owned by us are presented as redeemable non-controlling interests in our consolidated balance sheets. In addition, as described in Note 1 - Organization and Description of Business, certain third parties have been issued OP Units in HTALP. Holders of OP Units are considered to be noncontrollingnon-controlling interest holders in HTALP and their ownership interests are reflected as equity inon the accompanying condensed consolidated balance sheets. Further, a portion of the earnings and losses of HTALP are allocated to noncontrollingnon-controlling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of the common stock issued and the carrying value of the OP Units converted to common stock is recorded as a component of equity. As of September 30, 2017both March 31, 2022 and December 31, 2016,2021, there were approximately 4.1 million and 4.3 million, respectively, of OP Units issued and outstanding.outstanding held by non-controlling interest holders.
VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following: (i) the power to direct the activities that most significantly impact the entity’s economic performance; (ii) the obligation to absorb the expected losses of the entity; and (iii) the right to receive the expected returns of the entity. We consolidate our investment in VIEs when we determine that we are the primary beneficiary. A primary beneficiary is one that has both: (i) the power to direct the activities
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
of the VIE that most significantly impacts the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The HTALP operating partnership and our other joint venture arrangements are VIEs because the limited partners in those partnerships, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights. Additionally, we determined that we are the primary beneficiary of our VIEs. Accordingly, we consolidate our interests in the HTALP operating partnership and in our other joint venture arrangements. However, because we hold what is deemed a majority voting interest in the HTALP operating partnership and our other joint venture arrangements, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs. We will evaluate
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent asset and liabilities. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the needcircumstances. Actual results could differ from those estimates, perhaps in adverse ways, and those estimates could be different under different assumptions or conditions.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of all highly liquid investments with a maturity of three months or less when purchased. Restricted cash is typically comprised of: (i) reserve accounts for property taxes, insurance, capital and tenant improvements; (ii) collateral accounts for debt and interest rate swaps; (iii) 1031 exchange funds; and (iv) deposits for future investments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed consolidated balance sheets to consolidate entitiesthe combined amounts shown on the accompanying condensed consolidated statements of cash flows (in thousands): | | | | | | | | | | | |
| March 31, |
| 2022 | | 2021 |
Cash and cash equivalents | $ | 10,944 | | | $ | 29,990 | |
Restricted cash | 4,478 | | | 3,096 | |
Total cash, cash equivalents and restricted cash | $ | 15,422 | | | $ | 33,086 | |
Revenue Recognition
Minimum annual rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). Differences between rental income recognized and amounts contractually due under the lease agreements are recorded as straight-line rent receivables. Tenant reimbursements, which is comprised of additional amounts recoverable from tenants for real estate taxes, common area maintenance and other certain operating expenses are recognized as revenue on a gross basis in the period in which the related recoverable expenses are incurred. We accrue revenue corresponding to these expenses on a quarterly basis to adjust recorded amounts to our best estimate of the final annual amounts to be billed. Subsequent to year-end, on a calendar year basis, we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences between the estimated expenses we billed and the actual expenses that were incurred. We recognize lease termination fees when there is a signed termination letter agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property. Rental income is reported net of amortization of inducements.
The revenue recognition process is based on a five-step model to account for revenue arising from contracts with customers as outlined in Topic 606. We recognize revenue to depict the standards set forthtransfer of promised goods or services to customers in GAAPan amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We have identified all of our revenue streams and we have concluded that rental income from leasing arrangements represents a substantial portion of our revenue and is governed and evaluated with the adoption of Topic 842.
Investments in Real Estate
Depreciation expense of buildings and improvements for the three months ended March 31, 2022 and 2021 was $62.3 million and $61.2 million, respectively.
Leases
As a lessor, we lease space in our MOBs primarily to medical enterprises for terms generally ranging from three to seven years in length. The assets underlying these leases consist of buildings and associated land which are included as described above.real estate investments on our accompanying condensed consolidated balance sheets. All of our leases for which we are the lessor are classified as operating leases under Topic 842.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Leases, for which we are the lessee, are classified as separate components on our accompanying condensed consolidated balance sheets. Operating leases are included as right-of-use (“ROU”) assets - operating leases, net, with a corresponding lease liability. Financing lease assets are included in receivables and other assets, net, with a corresponding lease liability in security deposits, prepaid rent and other liabilities. A lease liability is recognized for our obligation related to the lease and an ROU asset represents our right to use the underlying asset over the lease term. Refer to Note 7 - Leases in the accompanying notes to the condensed consolidated financial statements for more detail relating to our leases.
Real Estate Held for Sale
We consider properties held for sale once management commits to a plan to sell the property and has determined that the sale is probable and expected to occur within one year. Upon classification as held for sale, we record the property at the lower of its carrying amount or fair value, less costs to sell, and cease depreciation and amortization. The fair value is generally based on a discounted cash flow analysis, which involves management's best estimate of market participants' holding periods, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods and capital requirements. As of March 31, 2022, the Company had no properties classified as held for sale. As of December 31, 2021, the Company had 1 property classified as held for sale.
Real Estate Notes Receivable
Real estate notes receivable consists of mezzanine and other real estate loans, which are generally collateralized by a pledge of the borrower’s ownership interest in the respective real estate owner and/or corporate guarantees. Real estate notes receivable are intended to be held-to-maturity and are recorded at amortized cost, net of unamortized loan origination costs and fees and allowance for credit losses. As of March 31, 2022, real estate notes receivable, net totaled $72.7 million. During the three months ended March 31, 2022, we recognized interest income of $1.6 million related to real estate note receivable.
The following table summarizes real estate notes receivable as of March 31, 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Stated Interest Rate | | Maximum Loan Commitment | | Outstanding Loan Amount |
| Origination Date | | Maturity Date | | | | March 31, 2022 |
Mezzanine Loans - Texas (1) | 6/24/2021 | | 6/24/2024 | | 8 | % | | $ | 54,119 | | | $ | 52,662 | |
Mezzanine Loan - North Carolina | 12/22/2021 | | 12/22/2024 | | 8 | % | | 6,000 | | | 6,000 | |
Mortgage Loan - Texas | 6/30/2021 | | 7/1/2022 | | 10 | % | | 15,000 | | | 15,000 | |
| | | | | | | | | 73,662 | |
Accrued interest receivable | | | | | | | | | 159 | |
Unamortized fees and costs | | | | | | | | | (762) | |
Unearned revenue | | | | | | | | | (358) | |
| | | | | | | | | $ | 72,701 | |
| | | | | | | | | |
(1) Interest on these mezzanine loans is accrued and funded utilizing interest reserves, which is included in the maximum loan commitment, and such accrued interest is added to the note receivable balance. |
| | | | | | | | | |
Pursuant to Topic 326 - Financial Instruments - Credit Losses, we adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under Topic 326. We utilize a probability of default method approach for estimating current expected credit losses and have determined that the current risk of credit loss is remote. Accordingly, we have recorded no reserve for credit loss as of March 31, 2022.
Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures using the equity method of accounting because we have the ability to exercise significant influence, but not control, over the financial and operational policy decisions of the investments. Using the equity method of accounting, the initial investment is recognized at cost and subsequently adjusted for our share of the net income or loss and any distributions from the joint venture. As of September 30, 2017,March 31, 2022 and December 31, 2021, we had a 50% interest in one such investment with a carrying value and maximum exposure to risk of $68.3$62.5 million and $62.8 million, respectively, which is recorded in investment in unconsolidated joint venture inon the accompanying condensed consolidated balance sheets. We record our share of net income (loss) in income (loss) from unconsolidated joint venture inon the accompanying condensed consolidated statements of operations. For each of the three and nine months ended September 30, 2017,March 31, 2022 and 2021, we recognized income of $318,000 and $381,000, respectively, from our unconsolidated joint venture.
Investments in Real Estate
Depreciation expense of buildings and improvements for the three months ended September 30, 2017 and 2016 was $49.8 million and $31.1 million, respectively. Depreciation expense of buildings and improvements for the nine months ended September 30, 2017 and 2016 was $121.5 million and $86.6 million, respectively.
$0.4 million.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Recently Issued or Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
ASU 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments
In July 2021, the FASB issued ASU 2021-05, which amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on a reference index or a rate. The following tableupdate provides criteria, that if met, the lease would be classified and accounted for as an operating lease. The update is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. We adopted ASU 2021-05 effective as of January 1, 2022. The adoption of this standard did not have a brief descriptionmaterial impact on our financial statements.
Recently Issued Accounting Pronouncements
ASU 2021-01, Reference Rate Reform (Topic 848)
In January 2021, the FASB issued ASU 2021-01, which amends the scope of
recentlyASU 2020-04. The amendments of ASU 2021-01 clarify that certain optional expedients and exceptions to Topic 848 for contract modification and hedge accounting apply to derivatives that are affected by the discounting transition. For information related to the Company's current cash flow hedges, refer to Note 9 - Derivative Financial Instruments and Hedging Activities. The amendments are elective and effective immediately for contract modifications made through December 31, 2022. The Company is evaluating how the transition away from LIBOR will effect the Company and if the guidance with respect to this standard will be adopted,
accounting pronouncements: however, if adopted, we do not expect that this ASU will have a material impact on our financial statements. |
| | | | | | |
Accounting Pronouncement | | Description | | Effective Date | | Effect on financial statements |
ASU 2017-01
Business Combinations:
Clarifying the Definition of a Business
(Issued January 2017)
| | ASU 2017-01 clarifies the definition of a business by adding guidance to assist entities evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including, but not limited to, acquisitions, disposals, goodwill and consolidation. | | ASU 2017-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. | | We adopted ASU 2017-01 as of January 1, 2017 on a prospective basis. We expect that the majority of our future investments in real estate will be accounted for as asset acquisitions under ASU 2017-01. The adoption of ASU 2017-01 will impact how we account for acquisition-related expenses and contingent consideration, which may result in lower acquisition-related expenses and eliminate fair value adjustments related to future contingent consideration arrangements. |
The following table provides a brief description of recently issued accounting pronouncements: |
| | | | | | |
Accounting Pronouncement | | Description | | Effective Date | | Effect on financial statements |
ASU 2014-09
Revenue from Contracts with Customers
(Issued May 2014)
| | ASU 2014-09 is a comprehensive new five-step model requiring a company to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (i.e., payment) to which the company expects to be entitled in exchange for those goods or services. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to ASU 2014-09. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach.
| | In August 2015, the FASB deferred the effective date of ASU 2014-09 to the first interim period within annual reporting periods beginning after December 15, 2017 along with the right of early adoption as of the original effective date.
| | We have identified all of our revenue streams and concluded rental income from leasing arrangements represents a substantial portion of our revenue and is specifically excluded from ASU 2014-09 and will be governed and evaluated with the anticipated adoption of ASU 2016-02 as described below. Upon adoption of ASU 2016-02, ASU 2014-09 may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and other reimbursement revenue), even when the revenue for such activities is not separately stipulated in the lease. In that case, the revenue from these items previously recognized on a straight-line basis under the current lease guidance would be recognized under the new revenue guidance as the related services are delivered. As a result, while total revenue recognized over time would not differ under the new guidance, the recognition pattern would be different. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under the current guidance. Upon adoption, there will not be a material impact on our consolidated financial statements since we have historically disposed of the majority of our properties with no future controls or contingencies. We will adopt ASU 2014-09 effective January 1, 2018 using the modified retrospective approach. |
ASU 2016-02
Leases
(Issued February 2016)
| | ASU 2016-02 will supersede the existing guidance for lease accounting and states that companies will be required to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand the nature of the entity’s leasing activities, including significant judgments and changes in judgments. Within ASU 2016-02 lessor accounting remained fairly unchanged. In adopting ASU 2016-02, companies will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.
| | ASU 2016-02 is effective for the fiscal years beginning after December 15, 2018 with early adoption permitted.
| | We are still evaluating the full impact of ASU 2016-02 on our consolidated financial statements, however, we will adopt ASU 2016-02 as of January 1, 2019 and anticipate that we will elect a practical expedient offered in ASU 2016-02 that allows an entity to not reassess the following upon adoption (elected as a group): (i) whether an expired or existing contract contains a lease arrangement; (ii) lease classification related to expired or existing lease arrangements; or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. As a result of the adoption, all new or amended leases for which we are the lessee, including corporate and ground leases, that are entered into on or after January 1, 2019, will be recorded on our consolidated financial statements as either financing leases or operating leases with a related right of use asset and lease liability. In addition, we expect that certain executory and non-lease components, such as common area maintenance, will need to be accounted for separately from the lease component of the lease. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components will be accounted for under the new revenue recognition guidance in ASU 2014-09 as mentioned above. |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
| | | | | | |
Accounting Pronouncement | | Description | | Effective Date | | Effect on financial statements |
ASU 2016-13
Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments
(Issued June 2016)
| | ASU 2016-13 is intended to improve financial reporting by requiring more timely 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. ASU 2016-13 requires that financial statement assets measured at an amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis.
| | ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted.
| | We do not anticipate early adoption or there to be a material impact, however, we are evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements. |
ASU 2016-15
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
(Issued August 2016)
| | ASU 2016-15 clarifies the guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. | | ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
| | We will adopt ASU 2016-15 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. We will reclass cash payments related to debt prepayment and extinguishment costs from operating activities to financing activities. Based on our initial assessment the other listed provisions will not have a material impact on our consolidated financial statements and related notes resulting from the adoption of this standard. |
ASU 2016-18
Statement of Cash Flows: Restricted Cash
(Issued November 2016)
| | ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
| | ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
| | We will adopt ASU 2016-18 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. Restricted cash and escrow deposits consist primarily of cash escrowed for real estate acquisitions, real estate taxes, property insurance and capital improvements. We will provide a reconciliation of the changes in cash and cash equivalents and restricted cash and escrow deposits within our consolidated balance sheets to the consolidated statement of cash flows. |
ASU 2017-05
Other Income: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
(Issued February 2017)
| | ASU 2017-05 defines an in-substance nonfinancial asset, unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing the sales of real estate, removes exception to the financial asset derecognition model and clarifies the accounting for contributions of nonfinancial assets to joint ventures. | | ASU 2017-05 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. | | We will adopt ASU 2017-05 as of January 1, 2018. We do not anticipate there to be a material impact on our consolidated financial statements, as we currently do not have this type of income. However, going forward we will continue to monitor any future impact. |
ASU 2017-09
Compensation - Stock Compensation (Topic 718): Clarifying the Scope of Modification (Issued May 2017)
| | ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms and conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. | | ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. | | We will adopt ASU 2017-09 as of January 1, 2018. We do not anticipate there to be a material impact on our consolidated financial statements. |
ASU 2017-12
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Issued August 2017)
| | ASU 2017-12 expands and refines hedge accounting for both financial (e.g., interest rate) and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. | | ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. | | We do not anticipate early adoption, however, we are evaluating the impact of adopting ASU 2017-12 on our consolidated financial statements. |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
3. Investments in Real Estate
Our investments, includingFor the Duke Acquisition, brings our total investments for the ninethree months ended September 30, 2017, toMarch 31, 2022, our investments had an aggregate purchase price of $2.7 billion.$19.1 million. As part of these investments, we incurred $17.2approximately $0.1 million of costs attributable to these investments, which were capitalized in accordance with the adoption of ASU 2017-01 during the nine months ended September 30, 2017. In addition, as part of an acquisition, we issued 20,687 OP Units with a market value at the time of issuance of $0.6 million.
costs. The allocations for these investments, in which we own a controlling financial interest, are set forth below in the aggregate for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Land | $ | 3,812 | | | $ | 1,093 | |
Building and improvements | 13,189 | | | 26,819 | |
In place leases | 2,121 | | | 3,449 | |
Below market leases | (28) | | | (79) | |
Above market leases | — | | | 66 | |
ROU assets | — | | | (876) | |
Net real estate assets acquired | 19,094 | | | 30,472 | |
Other, net | — | | | 2,397 | |
Aggregate purchase price | $ | 19,094 | | | $ | 32,869 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Land | $ | 93,064 |
| | $ | 77,949 |
|
Building and improvements | 2,336,544 |
| | 505,138 |
|
In place leases | 187,890 |
| | 50,997 |
|
Below market leases | (27,817 | ) | | (12,790 | ) |
Above market leases | 11,718 |
| | 4,413 |
|
Below market leasehold interests | 54,252 |
| | 4,188 |
|
Above market leasehold interests | (8,978 | ) | | (50 | ) |
Below market debt | — |
| | 360 |
|
Interest rate swaps | — |
| | (779 | ) |
Net assets acquired | 2,646,673 |
| | 629,426 |
|
Other, net (1) | 60,781 |
| | 3,540 |
|
Aggregate purchase price | $ | 2,707,454 |
| | $ | 632,966 |
|
| | | |
(1) For the nine months ended September 30, 2017, other, net, consisted primarily of capital expenditures and tenant improvements received as credits at the time of acquisition. |
Subsequent to September 30, 2017, we completed an investment with a purchase price of $8.3 million. As part of the acquisition, we issued to the seller as a part of the acquisition consideration a total of 16,972 OP Units with a market value at the time of issuance of $0.5 million. The purchase price of this investment was subject to certain post-closing adjustments. Due to the recent timing of this investment, we have not yet completed our purchase price allocation with respect to this investment and, therefore, we cannot provide disclosures at this time similar to those set forth above in Note 3 - Investments in Real Estate to our condensed consolidated financial statements.
The acquired intangible assets and liabilities referenced above had weighted average lives of the following terms for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in years): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Acquired intangible assets | 4.4 | | 6.4 |
Acquired intangible liabilities | 4.3 | | 5.7 |
|
| | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Acquired intangible assets | 20.6 | | 9.1 |
Acquired intangible liabilities | 19.9 | | 8.3 |
4. ImpairmentDispositions and Impairment
Dispositions
During the ninethree months ended September 30, 2017,March 31, 2022, we completedclosed the dispositionsale of an MOBa tenant purchase option on 1 of our MOBs located in TexasGeorgia for a gross sales price of $5.0$26.8 million, representingresulting in a net loss to us of approximately 48,000 square feet of GLA. In addition, during$4 thousand. During the ninethree months ended September 30, 2017,March 31, 2021, we recorded impairment charges of $5.1 million related to one MOB located in Massachusetts. had no dispositions.
Impairment
During the ninethree months ended September 30, 2016, we completed a disposition of four senior care facilities for an aggregate gross sales price of $26.5 million. During the nine months ended September 30, 2016,March 31, 2022, and 2021, we recorded no impairment charges.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
5. Intangible Assets and Liabilities
Intangible assets and liabilities consisted of the following as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively (in thousands, except with respect to the weighted average remaining amortization)amortization terms): | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| Balance | | Weighted Average Remaining Amortization in Years | | Balance | | Weighted Average Remaining Amortization in Years |
Assets: | | | | | | | |
In place leases | $ | 341,978 | | | 9.3 | | $ | 349,863 | | | 9.3 |
Tenant relationships | 51,778 | | | 10.9 | | 54,851 | | | 10.8 |
Above market leases | 20,824 | | | 6.8 | | 21,537 | | | 6.9 |
| 414,580 | | | | | 426,251 | | | |
Accumulated amortization | (211,034) | | | | | (213,801) | | | |
Total | $ | 203,546 | | | 9.3 | | $ | 212,450 | | | 9.3 |
| | | | | | | |
Liabilities: | | | | | | | |
Below market leases | $ | 54,040 | | | 14.5 | | $ | 55,073 | | | 14.3 |
Accumulated amortization | (24,039) | | | | | (23,742) | | | |
Total | $ | 30,001 | | | 14.5 | | $ | 31,331 | | | 14.3 |
| | | | | | | |
|
| | | | | | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| Balance | | Weighted Average Remaining Amortization in Years | | Balance | | Weighted Average Remaining Amortization in Years |
Assets: | | | | | | | |
In place leases | $ | 478,052 |
| | 9.7 | | $ | 294,597 |
| | 9.7 |
Tenant relationships | 170,539 |
| | 10.7 | | 172,974 |
| | 10.6 |
Above market leases | 39,724 |
| | 6.3 | | 28,401 |
| | 6.3 |
Below market leasehold interests | 92,362 |
| | 63.4 | | 38,136 |
| | 60.4 |
| 780,677 |
| | | | 534,108 |
| | |
Accumulated amortization | (299,398 | ) | | | | (256,305 | ) | | |
Total | $ | 481,279 |
| | 19.2 | | $ | 277,803 |
| | 16.1 |
| | | | | | | |
Liabilities: | | | | | | | |
Below market leases | $ | 61,788 |
| | 14.7 | | $ | 34,370 |
| | 18.6 |
Above market leasehold interests | 20,610 |
| | 50.3 | | 11,632 |
| | 53.0 |
| 82,398 |
| | | | 46,002 |
| | |
Accumulated amortization | (12,546 | ) | | | | (8,946 | ) | | |
Total | $ | 69,852 |
| | 24.9 | | $ | 37,056 |
| | 28.5 |
The following is a summary of the net intangible amortization for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Amortization recorded against rental income related to above and (below) market leases | $ | (649) | | | $ | (591) | |
Amortization expense related to in place leases and tenant relationships | 10,315 | | | 11,886 | |
| | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Amortization recorded against rental income related to above and (below) market leases | $ | (108 | ) | | $ | (115 | ) | | $ | (371 | ) | | $ | 202 |
|
Rental expense related to above and (below) market leasehold interests | 322 |
| | 118 |
| | 617 |
| | 321 |
|
Amortization expense related to in place leases and tenant relationships | 18,757 |
| | 15,266 |
| | 45,944 |
| | 39,483 |
|
6. Receivables and Other Assets
Receivables and other assets consisted of the following as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively (in thousands): | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Tenant receivables, net | $ | 3,009 | | | $ | 10,477 | |
Other receivables, net | 7,402 | | | 6,098 | |
Deferred financing costs, net | 11,057 | | | 7,055 | |
Deferred leasing costs, net | 47,612 | | | 45,008 | |
Straight-line rent receivables, net | 146,378 | | | 142,604 | |
Prepaid expenses, deposits, equipment and other, net | 42,734 | | | 38,301 | |
Derivative financial instruments - interest rate swaps | 3,692 | | | — | |
Real estate notes receivable, net | 72,701 | | | 69,114 | |
Finance ROU asset, net | 16,196 | | | 16,284 | |
| | | |
| | | |
Total | $ | 350,781 | | | $ | 334,941 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Tenant receivables, net | $ | 14,417 |
| | $ | 8,722 |
|
Other receivables, net | 10,161 |
| | 9,233 |
|
Deferred financing costs, net | 8,190 |
| | 4,198 |
|
Deferred leasing costs, net | 23,794 |
| | 20,811 |
|
Straight-line rent receivables, net | 83,133 |
| | 74,052 |
|
Prepaid expenses, deposits, equipment and other, net | 65,383 |
| | 55,904 |
|
Derivative financial instruments - interest rate swaps | 952 |
| | 541 |
|
Total | $ | 206,030 |
| | $ | 173,461 |
|
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following is a summary of the amortization of deferred leasing costs and financing costs for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Amortization expense related to deferred leasing costs | $ | 2,227 | | | $ | 2,223 | |
Interest expense related to deferred financing costs | 1,353 | | | 431 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Amortization expense related to deferred leasing costs | $ | 1,445 |
| | $ | 1,224 |
| | $ | 4,179 |
| | $ | 3,368 |
|
Interest expense related to deferred financing costs | 398 |
| | 331 |
| | 1,061 |
| | 994 |
|
7. Leases
For the three months ended March 31, 2022, we added 1 new office lease that commences in April 2022.
Lessee - Maturity of Lease Liabilities
The following table summarizes the future minimum lease obligations of our operating and finance leases as of March 31, 2022 (in thousands): | | | | | | | | | | | | | | |
Year | | Operating Leases | | Finance Leases |
2022 | | $ | 8,028 | | | $ | 473 | |
2023 | | 10,846 | | | 635 | |
2024 | | 10,370 | | | 640 | |
2025 | | 9,857 | | | 645 | |
2026 | | 9,860 | | | 656 | |
2027 | | 9,845 | | | 668 | |
Thereafter | | 590,018 | | | 36,856 | |
Total undiscounted lease payments | | $ | 648,824 | | | $ | 40,573 | |
Less: Interest | | (452,598) | | | (23,665) | |
Present value of lease liabilities | | $ | 196,226 | | | $ | 16,908 | |
Lessor - Lease Revenues and Maturity of Future Minimum Rents
For the three months ended March 31, 2022 and 2021, we recognized $199.3 million and $190.4 million, respectively, of rental and other lease-related income related to our operating leases, of which $48.1 million and $45.1 million, respectively, were variable lease payments.
The following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of March 31, 2022 (in thousands): | | | | | | | | |
Year | | Amount |
2022 | | $ | 432,329 | |
2023 | | 537,159 | |
2024 | | 479,252 | |
2025 | | 418,300 | |
2026 | | 369,927 | |
2027 | | 301,521 | |
Thereafter | | 1,044,334 | |
Total | | $ | 3,582,822 | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
8. Debt
Debt consisted of the following as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively (in thousands):
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
Unsecured revolving credit facility | $ | 75,000 |
| | $ | 88,000 |
|
Unsecured term loans | 500,000 |
| | 500,000 |
|
Unsecured senior notes | 1,850,000 |
| | 950,000 |
|
Fixed rate mortgages loans | 415,853 |
| | 204,562 |
|
Variable rate mortgages loans | 38,169 |
| | 38,904 |
|
| 2,879,022 |
| | 1,781,466 |
|
Deferred financing costs, net | (16,552 | ) | | (9,527 | ) |
Discount, net | (5,712 | ) | | (3,034 | ) |
Total | $ | 2,856,758 |
| | $ | 1,768,905 |
|
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Unsecured revolving credit facility | $ | 25,000 | | | $ | — | |
Unsecured term loans | 500,000 | | | 500,000 | |
Unsecured senior notes | 2,550,000 | | | 2,550,000 | |
Fixed rate mortgages | — | | | — | |
| $ | 3,075,000 | | | $ | 3,050,000 | |
Deferred financing costs, net | (17,199) | | | (17,975) | |
Discount, net | (3,917) | | | (3,903) | |
Total | $ | 3,053,884 | | | $ | 3,028,122 | |
Unsecured Credit Agreement
Unsecured Revolving Credit Facility due 20222025
On July 27, 2017, HTALPOctober 6, 2021, we entered into ana third amended and restated $1.3 billion unsecuredrevolving credit and term loan agreement (the “Unsecured Credit“Credit Agreement”), which increased the amount available under theincludes an unsecured revolving credit facility toin an aggregate maximum principal amount of $1.0 billion (the “Revolver”) and a term loan facility in an aggregate maximum principal amount of $300.0 million (the “Term Loan”). The Credit Agreement extended the maturities of the unsecured revolving credit facility to June 30, 2022 and for the $300.0 million unsecured term loan referenced below until February 1, 2023.to October 31, 2025. The maximum principal amount of the Unsecured Credit Agreement may be increased by up to $750.0 million, subject to certain conditions, for a total principal amount of $2.05 billion.
Borrowings under the unsecured revolving credit facility accrueRevolver bear interest at a per annum rate equal to adjusted LIBOR, plus a margin ranging from 0.83%0.725% to 1.55% per annum1.40% based on our credit rating. We are also required to pay a facility fee ranging from 0.13% to 0.30% per annum on the aggregate commitments under the Revolver at a per annum rate ranging from 0.125% to 0.30% based on our credit rating. We incurred financing costs of $6.2 million in relation to the credit facility, which are being amortized through the maturity date. As of March 31, 2022, we had $25.0 million outstanding under this unsecured revolving credit facility. As of September 30, 2017, theThe margin associated with our borrowings was 1.00%0.85% per annum and the facility fee was 0.20% per annum.
Unsecured Term Loan due 20232025
On July 27, 2017, we entered into an amended and restatedUnder the Unsecured Credit Agreement as noted above. As part of this agreement,above, we obtainedhave a $300.0 million unsecured term loan, that was guaranteed by usHTA, with a maturity date of February 1, 2023.October 31, 2025. Borrowings under this unsecured term loan accruebear interest at a per annum rate equal to adjusted LIBOR, plus a margin ranging from 0.90%0.80% to 1.75%1.60% per annum based on our credit rating. The margin associated with our borrowings as of September 30, 2017March 31, 2022 was 1.10%0.95% per annum. IncludingWe incurred financing costs of $1.8 million in relation to the impact ofunsecured term loan, which are being amortized through the maturity date. We have interest rate swaps associated with our unsecured term loan,hedging the floating interest rate, was 2.40%which resulted in a fixed rate of 2.37% per annum, based on our current credit rating. The current hedging arrangement matures on February 1, 2023. As of September 30, 2017, HTALPMarch 31, 2022, we had $300.0 million under this unsecured term loan outstanding.
Bridge Loan Facility
In connection with the Duke Acquisition, in May 2017, we entered into a senior unsecured bridge loan facility (the “Bridge Loan Facility”) which provided to us up to $2.47 billion, less the aggregate amount of net proceeds from debt or equity capital raises or a senior term loan facility. The Bridge Loan Facility was made available to us on the closing of the Duke Acquisition and was scheduled to mature 364 days from the closing. In June 2017, we terminated the Bridge Loan Facility and no proceeds were used because we elected to fund the Duke Acquisition through other equity and debt offerings. In connection with the execution and subsequent termination of the Bridge Loan Facility, we incurred $10.4 million in related fees, which we recorded in income (loss) on extinguishment of debt in the accompanying condensed consolidated statements of operations.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
$200.0 Million Unsecured Term Loan due 20232024
AsIn 2018, HTALP entered into a modification of September 30, 2017, HTALP had aour $200.0 million unsecured term loan outstanding, which matures on September 26,previously due in 2023. The modification decreased pricing at our current credit rating by 65 basis points and extended the maturity date to January 15, 2024. The other material terms of the unsecured term loan prior to the modification remained substantially unchanged. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 1.50%0.75% to 2.45%1.65% per annum based on our credit rating. The margin associated with our borrowings as of September 30, 2017March 31, 2022 was 1.65%1.00% per annum. HTALP had interest rate swaps on the balance, which resulted in place thata fixed the interest rate at 2.93%2.32% per annum, based on our current credit rating.annum. As of March 31, 2022, we had $200.0 million under this unsecured term loan outstanding.
$300.0600.0 Million Unsecured Senior Notes due 20212026
As of In September 30, 2017, HTALP had $300.02019, in connection with the $650.0 million of unsecured senior notes outstanding thatdue 2030 referenced below, HTALP issued $250.0 million as additional unsecured senior notes to the $350.0 million aggregate principal of senior notes issued on July 12, 2016, all of which are guaranteed by us.HTA. These unsecured senior notes are registered under the Securities Act, of 1933, as amended (the “Securities Act”),and bear interest at 3.38%3.50% per annum and arewhich is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.21%103.66% and 99.72%, respectively, of the principal amount thereof, with an effective yield to maturity of 3.50%2.89% and 3.53% per annum.annum, respectively. As of September 30, 2017, HTALPMarch 31, 2022, we had $300.0 million of these unsecured senior notes outstanding that mature on July 15, 2021.
$400.0 Million Unsecured Senior Notes due 2022
In June 2017, in connection with the Duke Acquisition and the $500.0 million unsecured senior notes due 2027 referenced below, HTALP issued $400.0 million of unsecured senior notes that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 2.95% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.94% of the principal amount thereof, with an effective yield to maturity of 2.96% per annum. As of September 30, 2017, HTALP had $400.0 million of these unsecured senior notes outstanding that mature on July 1, 2022.
$300.0 Million Unsecured Senior Notes due 2023
As of September 30, 2017, HTALP had $300.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.70% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.19% of the principal amount thereof, with an effective yield to maturity of 3.80% per annum. As of September 30, 2017, HTALP had $300.0 million of these unsecured senior notes outstanding that mature on April 15, 2023.
$350.0 Million Unsecured Senior Notes due 2026
As of September 30, 2017, HTALP had $350.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.50% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.72% of the principal amount thereof, with an effective yield to maturity of 3.53% per annum. As of September 30, 2017, HTALP had $350.0$600.0 million of these unsecured senior notes outstanding that mature on August 1, 2026.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
$500.0 Million Unsecured Senior Notes due 2027
In June 2017, in connection with the Duke Acquisition and the $400.0 million unsecured senior notes due 2022 referenced above, HTALP issued $500.0 million of unsecured senior notes that are guaranteed by us.HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.75% per annum and arewhich is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.49% of the principal amount thereof, with an effective yield to maturity of 3.81% per annum. As of September 30, 2017, HTALPMarch 31, 2022, we had $500.0 million of these unsecured senior notes outstanding that mature on July 1, 2027.
Fixed and Variable Rate Mortgages$650.0 million Unsecured Senior Notes due 2030
In June 2017, as partSeptember 2019, in connection with the $250.0 million additional unsecured senior notes due 2026 referenced above, HTALP issued $650.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.10% per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.66% of the Duke Acquisition, weprincipal amount thereof, with an effective yield to maturity of 3.14% per annum. Proceeds from the issuance of $900.0 million of these notes were used, in part, to redeem a total of $700.0 million of unsecured senior notes. During the year ended December 31, 2019, the make-whole fees required byper the seller to execute as the borrower for a partterms of the purchase price a senior secured first lien loan, subject to customary non-recourse carve-outs,indenture agreements upon our calling the notes totaling $18.3 million was recorded in loss on extinguishment of debt in the amountaccompanying consolidated statements of $286.0operations. As of March 31, 2022, HTALP had $650.0 million (the “Promissory Note”). The Promissory Note bearsof these unsecured senior notes outstanding that mature on February 15, 2030.
$800.0 million Unsecured Senior Notes due 2031
In September 2020, HTALP issued $800.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 4.0%2.00% per annum andwhich is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.20% of the principal amount thereof, with an effective yield to maturity of 2.09% per annum. We incurred financing costs of $6.8 million in three equal payments maturingrelation to this transaction, which are being amortized through the maturity date. Proceeds from the issuance of these unsecured notes were used, in part, to redeem $300.0 million of unsecured senior notes. During the year ended December 31, 2020, the make-whole fee that was required per the terms of the indenture agreement upon our calling the notes of $24.7 million was recorded in loss on January 10, 2020 and is guaranteed by us.
extinguishment of debt in the accompanying consolidated statements of operations. As of September 30, 2017, HTALP and its subsidiariesMarch 31, 2022, we had fixed and variable rate mortgages loans with interest rates ranging from 2.70% to 6.39% per annum and a weighted average interest rate$800.0 million of 4.31% per annum. Including the impact of the interest rate swap associated with our variable rate mortgages, the weighted average interest rate was 4.46% per annum.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
these unsecured senior notes outstanding that mature on March 15, 2031.
Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of September 30, 2017March 31, 2022 (in thousands): |
| | | | |
Year | | Amount |
Remainder of 2017 | | $ | 1,166 |
|
2018 | | 100,827 |
|
2019 | | 105,940 |
|
2020 | | 144,892 |
|
2021 | | 303,933 |
|
Thereafter | | 2,222,264 |
|
Total | | $ | 2,879,022 |
|
| | | | | | | | |
Year | | Amount |
2022 | | $ | — | |
2023 | | — | |
2024 | | 200,000 | |
2025 | | 325,000 | |
2026 | | 600,000 | |
Thereafter | | 1,950,000 | |
Total | | $ | 3,075,000 | |
Deferred Financing Costs
As part of the $1.7 billion bridge financing commitment secured in connection with the pending Merger with HR as further described in Note 1 - Organization and Description of Business, we incurred commitment fees of approximately $5.4 million, which are being amortized through the commitment expiration date of September 2, 2022.
As of September 30, 2017,March 31, 2022, the future amortization of our deferred financing costs is as follows (in thousands): | | | | | | | | |
Year | | Amount |
2022 | | $ | 2,330 | |
2023 | | 3,106 | |
2024 | | 2,724 | |
2025 | | 2,603 | |
2026 | | 1,839 | |
Thereafter | | 4,597 | |
Total | | $ | 17,199 | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
| | | | |
Year | | Amount |
Remainder of 2017 | | $ | 618 |
|
2018 | | 2,821 |
|
2019 | | 2,826 |
|
2020 | | 2,804 |
|
2021 | | 2,610 |
|
Thereafter | | 4,873 |
|
Total | | $ | 16,552 |
|
Debt CovenantsWe are required by the terms of our applicable loan agreements to meet various affirmative and negative covenants that we believe are customary for these types of facilities, such as limitations on the incurrence of debt by us and our subsidiaries that own unencumbered assets, limitations on the nature of HTALP’s business, and limitations on distributions by HTALP and its subsidiaries that own unencumbered assets. Our loan agreements also impose various financial covenants on us, such as a maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a minimum tangible net worth covenant, a maximum ratio of unsecured indebtedness to unencumbered asset value, rent coverage ratios and a minimum ratio of unencumbered net operating incomeNet Operating Income to unsecured interest expense. As of September 30, 2017,March 31, 2022, we believe that we were in compliance with all such financial covenants and reporting requirements. In addition, certain of our loan agreements include events of default provisions that we believe are customary for these types of facilities, including restricting us from making dividend distributions to our stockholders in the event we are in default thereunder, except to the extent necessary for us to maintain our REIT status. We have also concluded as of March 31, 2022, that we were not aware of non-compliance with any of our financial or non-financial covenants in light of the ongoing COVID-19 pandemic.
8.9. Derivative Financial Instruments and Hedging Activities
Risk Management Objective of Using Derivative Financial Instruments
We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, ourthe fair value of interest rate swap derivative liabilities isfinancial instruments designated as cash flow hedges are adjusted to reflect the impact of our credit quality.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and treasury locks as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without an exchange of the underlying notional amount. A treasury lock is a synthetic forward sale of a U.S. treasury note, which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2017, such derivatives were used to hedge the variable cash flows associated with variable rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and nine months ended September 30, 2017, we recorded approximately $4,000 and $31,000, respectively, of hedge ineffectiveness in earnings. We designated our derivative financial instruments as cash flow hedges in March 2017.
During the nine months ended September 30, 2017, we entered into and settled two treasury locks designated as cash flow hedges with an aggregate notional amount of $250.0 million to hedge future fixed rate debt issuances, which fixed the 10-year swap rates at an average rate of 2.26% per annum. Upon settlement of these contracts during the nine months ended September 30, 2017, we paid and reported a loss of $0.7 million which was recorded in accumulated other comprehensive loss in our accompanying condensed consolidated statements of comprehensive income (loss) and a gain of $25,000 which was recorded in the change in fair value of our derivative financial instruments in our accompanying condensed consolidated statements of operations.
Amounts reported in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. During the next twelve months, we estimate that an additional $0.4$1.2 million will be reclassified from other comprehensive income in the accompanying condensed consolidated balance sheets as an increase to interest related to derivative financial instruments in the accompanying condensed consolidated statements of operations.
As of September 30, 2017,March 31, 2022, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments): | | | | | | | | |
Interest Rate Swaps | | March 31, 2022 |
Number of instruments | | 7 | |
Notional amount | | $ | 500,000 | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
|
| | | | |
Interest Rate Swaps | | September 30, 2017 |
Number of instruments | | 5 |
|
Notional amount | | $ | 189,751 |
|
The table below presents the fair value of our derivative financial instruments designated as a hedgecash flow hedges as well as ourthe classification in the accompanying condensed consolidated balance sheets as of September 30, 2017March 31, 2022 and December 31, 2021, respectively (in thousands). In March 2017, we designated our derivative financial instruments as cash flow hedges. As such, prior to March 2017 we did not have derivatives designated as hedging instruments.: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| | | | Fair Value at: | | | | Fair Value at: |
Derivatives Designated as Hedging Instruments: | | Balance Sheet Location | | March 31, 2022 | | December 31, 2021 | | Balance Sheet Location | | March 31, 2022 | | December 31, 2021 |
Interest rate swaps | | Receivables and other assets | | $ | 3,692 | | | $ | — | | | Derivative financial instruments | | $ | — | | | $ | 5,069 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| | | | Fair Value at: | | | | Fair Value at: |
Derivatives Designated as Hedging Instruments: | | Balance Sheet Location | | September 30, 2017 | | December 31, 2016 | | Balance Sheet Location | | September 30, 2017 | | December 31, 2016 |
Interest rate swaps | | Receivables and other assets | | $ | 952 |
| | $ | — |
| | Derivative financial instruments | | $ | 1,441 |
| | $ | — |
|
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The tablestable below presentpresents the gain or loss recognized on our derivative financial instruments designated as cash flow hedges as well as ourthe classification in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2017March 31, 2022 and 2016 (in thousands). In March 2017, we designated our derivative financial instruments as cash flow hedges. As such, prior to March 2017 we did not have derivatives designated as hedging instruments.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gain (Loss) Recognized in OCI on Derivative (Effective Portion): | | | | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion): | | | | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing): |
| | Three Months Ended September 30, | | | | Three Months Ended September 30, | | | | Three Months Ended September 30, |
Derivatives Cash Flow Hedging Relationships: | | 2017 | | 2016 | | Statement of Operations Location | | 2017 | | 2016 | | Statement of Operations Location | | 2017 | | 2016 |
Interest rate swaps | | $ | 9 |
| | $ | — |
| | Interest related to derivative financial instruments | | $ | (196 | ) | | $ | — |
| | Interest related to derivative financial instruments | | $ | (4 | ) | | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gain (Loss) Recognized in OCI on Derivative (Effective Portion): | | | | Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion): | | | | Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing): |
| | Nine Months Ended September 30, | | | | Nine Months Ended September 30, | | | | Nine Months Ended September 30, |
Derivatives Cash Flow Hedging Relationships: | | 2017 | | 2016 | | Statement of Operations Location | | 2017 | | 2016 | | Statement of Operations Location | | 2017 | | 2016 |
Interest rate swaps | | $ | (1,196 | ) | | $ | — |
| | Interest related to derivative financial instruments | | $ | (565 | ) | | — |
| | Interest related to derivative financial instruments | | $ | (31 | ) | | $ | — |
|
Non-Designated Hedges
Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements of ASC 815 - Derivatives and Hedging. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly to gain or loss on change in fair value of derivative financial instruments in the accompanying condensed consolidated statements of operations. For the nine months ended September 30, 2017, we recorded a gain on change in fair value of derivative financial instruments of $0.9 million. For the three months ended September 30, 2017, we did not record a gain or loss on change in fair value of derivative financial instruments as we did not have any derivative financial instruments classified as non-designated hedges.
The table below presents the fair value of our derivative financial instruments not designated as hedges as well as our classification in the accompanying condensed consolidated balance sheets as of December 31, 2016 (in thousands). In March 2017, we designated our derivative financial instruments as cash flow hedges. As such, as of March 2017 we did not have derivatives not designated as hedging instruments.
|
| | | | | | | | | | | | | | | | | | | | |
| | Asset Derivatives | | Liability Derivatives |
| | | | Fair Value at: | | | | Fair Value at: |
Derivatives NOT Designated as Hedging Instruments: | | Balance Sheet Location | | September 30, 2017 | | December 31, 2016 | | Balance Sheet Location | | September 30, 2017 | | December 31, 2016 |
Interest rate swaps | | Receivables and other assets | | $ | — |
| | $ | 541 |
| | Derivative financial instruments | | $ | — |
| | $ | 1,920 |
|
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Tabular Disclosure of Offsetting Derivatives
The table below sets forth the net effects of offsetting and net presentation of our derivatives as of September 30, 2017 and December 31, 2016,2021, respectively (in thousands). The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets or liabilities are presented in the consolidated balance sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Offsetting of Derivative Assets |
| | Gross Amounts of Recognized Assets | | Gross Amounts in the Consolidated Balance Sheets | | Net Amounts of Assets Presented in the Consolidated Balance Sheets | | Financial Instruments | | Cash Collateral Received | | Net Amount |
September 30, 2017 | | $ | 952 |
| | $ | — |
| | $ | 952 |
| | $ | — |
| | $ | — |
| | $ | 952 |
|
December 31, 2016 | | 541 |
| | — |
| | 541 |
| | — |
| | — |
| | 541 |
|
: | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
Effect of Derivative Instruments | | Location in Statement of Operations and Comprehensive Income (Loss) | | 2022 | | 2021 |
Gain (loss) recognized in OCI | | Change in unrealized losses on cash flow hedges | | $ | 7,218 | | | $ | 1,163 | |
Gain (loss) reclassified from accumulated OCI into income | | Interest expense | | (1,599) | | | (1,629) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Offsetting of Derivative Liabilities |
| | Gross Amounts of Recognized Liabilities | | Gross Amounts in the Consolidated Balance Sheets | | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | | Financial Instruments | | Cash Collateral Received | | Net Amount |
September 30, 2017 | | $ | 1,441 |
| | $ | — |
| | $ | 1,441 |
| | $ | — |
| | $ | — |
| | $ | 1,441 |
|
December 31, 2016 | | 1,920 |
| | — |
| | 1,920 |
| | — |
| | — |
| | 1,920 |
|
Credit Risk Related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision that if we default on any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations.
We also have agreements with each of our derivative counterparties that incorporate provisions from our indebtedness with a lender affiliate of the derivative counterparty requiring it to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by these agreements.
As of September 30, 2017,March 31, 2022, the fair value of derivatives in a net liabilityasset position, including accrued interest, but excluding any adjustment for nonperformance risk related to these agreements, was $1.5$3.6 million. As of September 30, 2017,March 31, 2022, we have not posted any collateral related to these agreements and we were not in breach of any of the provisions of these agreements. If we had breached any of thesethe provisions of these agreements, we could have been required to settle our obligations, if any, under these agreements at an aggregate termination value of $1.5 million at September 30, 2017.agreements.
9.10. Commitments and Contingencies
Litigation
On May 6, 2022, a purported stockholder of the Company filed a lawsuit in the United States District Court for the Southern District of New York against us and 7 of our current directors, captioned Shiva Stein v. Healthcare Trust of America, Inc., et al., Case No. 1:22-cv-03703 (the “Complaint”).
The Complaint alleges that the preliminary proxy statement issued in connection with the Merger omits material information or contains misleading disclosures and that, as a result, (i) all of the defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act) and (ii) our directors violated section 20(a) of the Exchange Act. The Complaint seeks, among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages to the extent the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) an accounting to plaintiff for all damages suffered as a result of the alleged wrongdoing; and (v) an award of plaintiff’s expenses, including attorneys’ and experts’ fees. We engagebelieve the claims asserted in litigationthe Complaint are without merit.
Additional lawsuits may be filed against us, our Board of Directors, and/or other parties to the Merger in connection with the transactions contemplated by the Merger Agreement.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In addition, we are, from time to time, with various parties as a routine part of our business, including tenant defaults. However, we are not presentlyalso subject to claims and litigation arising in the ordinary course of business with respect to tenant litigation and threatened or asserted labor matters.
We do not believe liability from any materialreasonably foreseeable disposition of the aforementioned claims and litigation, nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us,individually or in the aggregate, would have a material effect on our condensed consolidated financial position, results of operations or cash flows.
Environmental Matters
We follow the policy of monitoringroutinely monitor our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our condensed consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability at our properties that we believe would require additional disclosure or the recording of a loss contingency.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In our opinion, these matters are not expected to have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows.
10.11. Stockholders’ Equity and Partners’ Capital
HTALP’s operating partnership agreement provides that it will distribute cash flow from operations and net sale proceeds to its partners in accordance with their overall ownership interests at such times and in such amounts as the general partner thereof determines. Dividend distributions are made such that a holder of one1 OP Unit in HTALP will receive distributions from HTALP in an amount equal to the dividend distributions paid to the holder of one share of our common stock. In addition, for each share of common stock issued or redeemed by us,HTA, HTALP issues or redeems a corresponding number of OP Units.
During the nine months ended September 30, 2017, we issued $1.7 billion of equity at an average price of $28.70 per share.
Common Stock Offerings
In September 2017,March 2021, we entered into new equity distribution agreements with our various sales agents with respect to our at-the-market (“ATM”) offering program of common stock with an aggregate sales amount of up to $500.0 million. We contemporaneously terminated$750.0 million, which replaced our prior ATM equity distribution agreements. During the nine months ended September 30, 2017, and under the previous ATM, we issued and sold 3,998,000 shares of our common stock for $125.7 million of gross proceeds at an average price of $31.45 per share.offering program that expired in February 2021. As of September 30, 2017, $500.0March 31, 2022, $750.0 million remained available for issuance by us under the September 2017our current ATM.
DuringStock Repurchase Plan
In September 2020, our Board of Directors approved the nine months ended September 30, 2017, we, in connection with the Duke Acquisition, completed an underwritten public offeringreactivation of 54,625,000 sharesa stock repurchase plan authorizing us to purchase up to $300.0 million of our common stock for $1.6 billionfrom time to time prior to the expiration thereof on September 22, 2023. As of gross proceeds at a price of $28.50 per share.
Subsequent to September 30, 2017, we issued $200.0 millionMarch 31, 2022, the remaining amount of common stock available for repurchase under the ATM, including $75.0 million on a forward basis which will be issued over the next six months.
Common Unit Offerings
During the nine months ended September 30, 2017, we issued 20,687 OP Units in HTALP for approximately $0.6 million in connection with an acquisition transaction.
Subsequent to September 30, 2017, as part of an acquisition, we issued to the seller as a part of the acquisition consideration 16,972 OP Units in HTALP for approximately $0.5our stock repurchase plan was $300.0 million.
Common Stock Dividends
See our accompanying condensed consolidated statements of operationsequity and condensed statements of changes in partners’ capital for the dividends declared during the three and nine months ended September 30, 2017March 31, 2022 and 2016.2021. As of March 31, 2022, declared, but unpaid, dividends totaling $75.8 million were included in accounts payable and accrued liabilities. On October 24, 2017,May 5, 2022, our Board of Directors announced a quarterly cash dividend of $0.305$0.325 per share of common stock. The dividends arestock and per OP Unit to be paid on January 9, 2018July 15, 2022 to stockholders and unitholders of record of our common stock on January 2, 2018.July 6, 2022.
Incentive Plan
Our Amended and Restated 2006 Incentive Plan (the “Plan”) permits the grant of incentive awards to our employees, officers, non-employee directors and consultants as selected by our Board of Directors. TheThis Plan authorizes us to grant awards in any of the following forms: options; stock appreciation rights; restricted stock; restricted or deferred stock units; performance awards; dividend equivalents; other stock-based awards, including units in HTALP; and cash-based awards. Subject to adjustment as provided in the Plan, the aggregate number of awards reserved and available for issuance under the Plan is 5,000,00010,000,000 shares. As of September 30, 2017,March 31, 2022, there were 1,689,5859,646,504 awards available for grant under the Plan.
LTIP Units
Awards under the LTIP consist of Series C units in HTALP and were subject to the achievement of certain performance and market conditions in order to vest. Once vested, the Series C units were converted into common units of HTALP, which may be converted into shares of our common stock. The LTIP awards were fully expensed or forfeited in 2015.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Restricted Common Stock
We recognized compensation expense, equal to the fair market value of HTA’s stock on the grant date, over the service period which is generally three to four years. For the three and nine months ended September 30, 2017,March 31, 2022 and 2021 we recognized compensation expense of $1.7$2.0 million and $5.5$3.3 million, respectively. For the three and nine months ended September 30, 2016, we recognizedSubstantially all compensation expense of $2.1 million and $5.1 million, respectively. Compensation expense for the three and nine months ended September 30, 2017 and 2016 werewas recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of September 30, 2017,March 31, 2022, we had $9.1$7.9 million of unrecognized compensation expense, net of estimated forfeitures, which we will recognize over a remaining weighted average period of 1.81.9 years.
The following is a summary of our restricted common stock activity as of September 30, 2017March 31, 2022 and 2016,2021, respectively: | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | March 31, 2021 |
| Restricted Common Stock | | Weighted Average Grant Date Fair Value | | Restricted Common Stock | | Weighted Average Grant Date Fair Value |
Beginning balance | 529,862 | | | $ | 28.83 | | | 436,399 | | | $ | 28.27 | |
Granted | 158,543 | | | 30.81 | | | 354,288 | | | 26.20 | |
Vested | (123,958) | | | 27.37 | | | (258,000) | | | 27.50 | |
Forfeited | (4,437) | | | 29.60 | | | (333) | | | 30.07 | |
Ending balance | 560,010 | | | $ | 29.71 | | | 532,354 | | | $ | 27.45 | |
|
| | | | | | | | | | | | | |
| September 30, 2017 | | September 30, 2016 |
| Restricted Common Stock | | Weighted Average Grant Date Fair Value | | Restricted Common Stock | | Weighted Average Grant Date Fair Value |
Beginning balance | 640,870 |
| | $ | 27.36 |
| | 487,850 |
| | $ | 23.13 |
|
Granted | 292,109 |
| | 29.75 |
| | 417,110 |
| | 29.82 |
|
Vested | (278,821 | ) | | 25.31 |
| | (236,749 | ) | | 23.27 |
|
Forfeited | (58,384 | ) | | 28.86 |
| | (24,391 | ) | | 25.93 |
|
Ending balance | 595,774 |
| | $ | 29.39 |
| | 643,820 |
| | $ | 27.35 |
|
11.12. Fair Value of Financial Instruments
Financial Instruments Reported at Fair Value - Recurring
The table below presents the carrying amounts and fair values of our assets and liabilities measured at fair valuefinancial instruments on a recurring basis as of September 30, 2017, aggregated by the applicable level in the fair value hierarchyMarch 31, 2022 and December 31, 2021, respectively (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Level 2 - Assets: | | | | | | | | |
Real estate notes receivable, net | | $ | 72,701 | | | $ | 70,135 | | | $ | 69,114 | | | $ | 68,476 | |
Derivative financial instruments | | 3,692 | | | 3,692 | | | — | | | — | |
Level 2 - Liabilities: | | | | | | | | |
Derivative financial instruments | | $ | — | | | $ | — | | | $ | 5,069 | | | $ | 5,069 | |
Debt | | 3,053,884 | | | 2,944,166 | | | 3,028,122 | | | 3,117,602 | |
|
| | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
Derivative financial instruments | | $ | — |
| | $ | 952 |
| | $ | — |
| | $ | 952 |
|
Liabilities: | | | | | | | | |
Derivative financial instruments | | $ | — |
| | $ | 1,441 |
| | $ | — |
| | $ | 1,441 |
|
The table below presents our assetscarrying amounts of cash and cash equivalents, tenant and other receivables, restricted cash, accounts payable, and accrued liabilities measured atapproximate fair value on a recurring basis as of December 31, 2016, aggregated by the applicable level in the fair value hierarchy (in thousands):
|
| | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
Derivative financial instruments | | $ | — |
|
| $ | 541 |
|
| $ | — |
| | $ | 541 |
|
Liabilities: | | | | | | | | |
Derivative financial instruments | | $ | — |
| | $ | 1,920 |
| | $ | — |
| | $ | 1,920 |
|
Financial Instruments Reported at Fair Value - Non-Recurring
The table below presents our assets measured at fair value on a non-recurring basis as of September 30, 2017, aggregated by the applicable level in the fair value hierarchy (in thousands): |
| | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
MOB (1) | | $ | — |
| | $ | 1,423 |
| | $ | — |
| | $ | 1,423 |
|
| | | | | | | | |
(1) During the nine months ended September 30, 2017, we recognized a $5.1 million impairment charge to one MOB. The estimated fair value as of September 30, 2017 for this MOB was based upon real estate market comparables. |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below presents our assets measured at fair value on a non-recurring basis as of December 31, 2016, aggregated by the applicable level in the fair value hierarchy (in thousands):
|
| | | | | | | | | | | | | | | | |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets: | | | | | | | | |
MOB (1) | | $ | — |
| | $ | 8,191 |
| | $ | — |
| | $ | 8,191 |
|
| | | | | | | | |
(1) During the year ended December 31, 2016, we recognized impairment charges of $1.3 million and $1.8 million to the carrying value of two MOBs. The estimated fair value as of December 31, 2016 for these two MOBs was based upon a pending sales agreement and real estate market comparables. |
value. There have been no transfers of assets or liabilities between levels. We will record any such transfers at the end of the reporting period in which a change of event occurs that results in a transfer. Although we have determined that the majority of the inputs used to value our interest rate swap derivativescash flow hedges fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap derivativecash flow hedge positions and have determined that the credit valuation adjustments are not significant to their overall valuation. As a result, we have determined that our interest rate swap derivativecash flow hedge valuations in their entirety are classified in Level 2 of the fair value hierarchy.For further discussion of the assumptions considered, refer to Note 2 - Summary of Significant Accounting Policies.
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Financial Instruments DisclosedReported at Fair Value - Non-Recurring
We consider the carrying values of cash and cash equivalents, tenant and other receivables, restricted cash and escrow deposits and accounts payable, and accrued liabilities,also have assets that under certain conditions are subject to approximatemeasurement at fair value for these financial instruments because of the short period of time between origination of the instruments and their expected realization. All of these financial instruments are considered Level 2.
Theon a non-recurring basis. This category generally includes assets subject to impairment. We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the contractual sales price, if applicable. Such projected cash flows are comprised of debt is estimatedcontractual rental revenues and forecasted rental revenues and expenses based on market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based on these inputs, we determined that our valuation of properties using borrowing rates available to us with similar terms and maturities, which is considered a discounted cash flow or a direct capitalization model were classified within Level 2 input. As3 of September 30, 2017, the fair value ofhierarchy. For assets for which the debtestimated fair value was $2,913.3 million compared to the carrying valuebased on contractual sales prices, we determined that our valuation was classified within Level 2 of $2,856.8 million. As of December 31, 2016, the fair value hierarchy. As of the debt was $1,784.0 million comparedMarch 31, 2022 we had no assets subject to the carryingimpairment.
The table below presents our assets measured at fair value on a non-recurring basis as of $1,768.9 million.March 31, 2022 and December 31, 2021 (in thousands): | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2022 | | | | December 31, 2021 |
| | | | Fair Value | | | | Fair Value |
Level 2 - Assets: | | | | | | | | |
Real estate investment | | | | $ | — | | | | | $ | 26,768 | |
Level 3 - Assets: | | | | | | | | |
Real estate investments | | | | $ | — | | | | | $ | 4,970 | |
| | | | | | | | |
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13. Per Share Data of HTA
We include unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” pursuant to the two-class method. The resulting classes are our common stock and restricted stock. For the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, all of our earnings were distributed and the calculated earnings per share amount would be the same for all classes.
The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per share of HTA for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands, except per share data): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Numerator: | | | |
Net income | $ | 18,666 | | | $ | 22,393 | |
Net income attributable to non-controlling interests | (351) | | | (363) | |
Net income attributable to common stockholders | $ | 18,315 | | | $ | 22,030 | |
Denominator: | | | |
Weighted average shares outstanding - basic | 228,978 | | | 218,753 | |
Dilutive shares - OP Units convertible into common stock | 4,068 | | | 3,515 | |
| | | |
Adjusted weighted average shares outstanding - diluted | 233,046 | | | 222,268 | |
Earnings per common share - basic | | | |
Net income attributable to common stockholders | $ | 0.08 | | | $ | 0.10 | |
Earnings per common share - diluted | | | |
Net income attributable to common stockholders | $ | 0.08 | | | $ | 0.10 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Numerator: | | | | | | | |
Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
|
Net income attributable to noncontrolling interests | (194 | ) | | (212 | ) | | (715 | ) | | (830 | ) |
Net income attributable to common stockholders | $ | 13,763 |
| | $ | 6,427 |
| | $ | 21,390 |
| | $ | 29,361 |
|
Denominator: | | | | | | | |
Weighted average shares outstanding - basic | 200,674 |
| | 138,807 |
| | 173,189 |
| | 134,905 |
|
Dilutive shares | 4,121 |
| | 4,331 |
| | 4,221 |
| | 3,409 |
|
Weighted average shares outstanding - diluted | 204,795 |
| | 143,138 |
| | 177,410 |
| | 138,314 |
|
Earnings per common share - basic | | | | | | | |
Net income attributable to common stockholders | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
|
Earnings per common share - diluted | | | | | | | |
Net income attributable to common stockholders | $ | 0.07 |
| | $ | 0.04 |
| | $ | 0.12 |
| | $ | 0.21 |
|
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13.14. Per Unit Data of HTALP
The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per unit of HTALP for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands, except per unit data): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Numerator: | | | |
Net income | $ | 18,666 | | | $ | 22,393 | |
Net income attributable to non-controlling interests | — | | | — | |
Net income attributable to common unitholders | $ | 18,666 | | | $ | 22,393 | |
Denominator: | | | |
Weighted average OP Units outstanding - basic | 233,046 | | | 222,268 | |
Dilutive units - OP Units convertible into common units | — | | | — | |
| | | |
Adjusted weighted average units outstanding - diluted | 233,046 | | | 222,268 | |
Earnings per common unit - basic: | | | |
Net income attributable to common unitholders | $ | 0.08 | | | $ | 0.10 | |
Earnings per common unit - diluted: | | | |
Net income attributable to common unitholders | $ | 0.08 | | | $ | 0.10 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Numerator: | | | | | | | |
Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
|
Net income attributable to noncontrolling interests | (28 | ) | | (1 | ) | | (80 | ) | | (28 | ) |
Net income attributable to common unitholders | $ | 13,929 |
| | $ | 6,638 |
| | $ | 22,025 |
| | $ | 30,163 |
|
Denominator: | | | | | | | |
Weighted average units outstanding - basic | 204,795 |
| | 143,137 |
| | 177,410 |
| | 138,314 |
|
Dilutive units | — |
| | — |
| | — |
| | — |
|
Weighted average units outstanding - diluted | 204,795 |
| | 143,137 |
| | 177,410 |
| | 138,314 |
|
Earnings per common unit - basic: | | | | | | | |
Net income attributable to common unitholders | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
|
Earnings per common unit - diluted: | | | | | | | |
Net income attributable to common unitholders | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
|
14.HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15. Supplemental Cash Flow Information
The following is the supplemental cash flow information for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Supplemental Disclosure of Cash Flow Information: | | | |
Interest paid, net of capitalized interest | $ | 39,025 | | | $ | 38,605 | |
Cash paid for operating leases | 4,335 | | | 4,554 | |
| | | |
Supplemental Disclosure of Noncash Investing and Financing Activities: | | | |
Accrued capital expenditures | $ | 7,620 | | | $ | 19,013 | |
Dividend distributions declared, but not paid | 75,766 | | | 71,146 | |
| | | |
| | | |
Redemption of non-controlling interest | 2,065 | | | 255 | |
| | | |
ROU assets obtained in exchange for lease obligations | — | | | 3,995 | |
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 |
Supplemental Disclosure of Cash Flow Information: | | | |
Interest paid | $ | 51,066 |
| | $ | 39,321 |
|
Income taxes paid | 997 |
| | 934 |
|
| | | |
Supplemental Disclosure of Noncash Investing and Financing Activities: | | | |
Accrued capital expenditures | $ | 4,185 |
| | $ | 2,868 |
|
Debt and interest rate swaps assumed and entered into in connection with an acquisition | 286,000 |
| | 21,156 |
|
Dividend distributions declared, but not paid | 62,494 |
| | 43,530 |
|
Issuance of operating partnership units in connection with an acquisition | 610 |
| | 71,754 |
|
Note receivable included in the consideration of a disposition | — |
| | 3,000 |
|
Note receivable retired in connection with an acquisition | 2,494 |
| | — |
|
Redeemable noncontrolling interest assumed in connection with an acquisition | — |
| | 5,449 |
|
Redemption of noncontrolling interest | 5,694 |
| | 5,709 |
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The use of the words “we,” “us”“us,” or “our” refers to HTA and HTALP, collectively.
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report, as well as with the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 20162021 Annual Report on Form 10-K. Such condensed consolidated financial statements and information have been prepared to reflect HTA and HTALP’s financial position as of September 30, 2017 and December 31, 2016, together with results of operations and cash flows for the three and nine months ended September 30, 2017 and 2016.
The information set forth below is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations.
•Forward-Looking Statements;
•Executive Summary;
•Company Highlights;
•Critical Accounting Policies;
•Recently Issued or Adopted Accounting Pronouncements;
•Factors Which May Influence Results of Operations;
•Results of Operations;
•Non-GAAP Financial Measures;
•Liquidity and Capital Resources;
•Commitments and Contingencies;
•Debt Service Requirements;
•Off-Balance Sheet Arrangements; and
•Inflation.
Forward-Looking Statements
Certain statements contained in this Quarterly Report constitute forward-looking statements within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”)). Such statements include, in particular, statements about our plans, strategies, prospects and estimates regarding future MOB market performance. Additionally, such statements are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially and in adverse ways from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Forward-looking statements are generally identifiable by the use of such terms as “expect,” “project,” “may,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “pro forma” or the negative of such terms and other comparable terminology. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Quarterly Report is filed with the SEC. We cannot guarantee the accuracy of any such forward-looking statements contained in this Quarterly Report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Forward-looking statements regarding HR and HTA, include, but are not limited to, statements related to the Merger, including the anticipated timing, benefits and financial and operational impact thereof; HR’s expected financing for the transaction; other statements of management’s belief, intentions or goals; and other statements that are not historical facts. These forward-looking statements are based on each of the companies’ current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with: HR’s and HTA’s ability to complete the Merger on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the Merger; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the Merger; risks related to diverting the attention of HR and HTA management from ongoing business operations; failure to realize the expected benefits of the Merger; significant transaction costs and/or unknown or inestimable liabilities; the risk of shareholder litigation in connection with the Merger, including resulting expense or delay; the risk that HTA’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the ability to obtain the expected financing to consummate the Merger; risks related to future opportunities and plans for the Company, including the
uncertainty of expected future financial performance and results of the Company following completion of the Merger; effects relating to the announcement of the Merger or any further announcements or the consummation of the Merger on the market price of HR’s or HTA’s common stock; the possibility that, if HR does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of HR’s common stock could decline; general adverse economic and local real estate conditions; the inability of significant tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; increases in interest rates; increases in operating expenses and real estate taxes; changes in the dividend policy for HR’s common stock or its ability to pay dividends; impairment charges; pandemics or other health crises, such as COVID-19; and other risks and uncertainties affecting HR and HTA, including those described from time to time under the caption “Risk Factors” and elsewhere in HR’s and HTA’s SEC filings and reports, including HR’s Annual Report on Form 10-K for the year ended December 31, 2021, HTA’s Annual Report on Form 10-K for the year ended December 31, 2021, and other filings and reports by either company. Moreover, other risks and uncertainties of which HR or HTA are not currently aware may also affect each of the companies’ forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by HR or HTA on their respective websites or otherwise. Neither HR nor HTA undertakes any obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.
Any such forward-looking statements reflect our current views about future events, are subject to unknown risks, uncertainties, and other factors, and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to stockholders and maintain the value of our real estate properties, may be significantly hindered. Factors that might impair our ability to meet such forward-looking statements include, without limitation, those discussed in Part I, Item 1A - Risk Factors in our 20162021 Annual Report on Form 10-K, which is incorporated herein.
herein and those discussed in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.
Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, our stockholders are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date made. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Executive Summary
HTA isWe are the largest publicly-traded REIT focused on MOBs in the U.S. as measured by the GLAgross leasable area ("GLA") of itsour MOBs. HTA conductsWe conduct substantially all of itsour operations through HTALP. We invest in MOBs that we believe will serve the future of healthcare delivery and MOBs that are primarily located on health system campuses, near university medical centers, or in core community outpatient locations. We also focus on our key markets that have certain demographic and macro-economic trends and where we can utilize our institutional property management and leasingfull-service operating platform to generate strong tenant and health system relationships and operating cost efficiencies. Our primary objective is to maximize stockholder value with disciplined growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and could enhance our existing portfolio.
Since 2006, we have invested $7.0$7.8 billion to create a portfolio ofprimarily in MOBs, development projects, land and other healthcare real estate assets consisting of approximately 24.226.0 million square feet of GLA throughout the U.S. As of September 30, 2017, our portfolio included $2.24 billion of investments, net of development credits received at closing in connection with our Duke Acquisition, which includes a 50% ownership interest in an unconsolidated joint venture for $68.8 million as of the date of acquisition. Our only remaining obligations related to the Duke Acquisition are the potential acquisition of a land parcel in Miami, FL and a single property in Texas that are each currently excluded from our purchase obligations due to current outstanding physical condition issues.
As of September 30, 2017, approximately 96%Approximately 67% of our portfolio based on GLA, wasis located on the campuses of, or aligned with,adjacent to, nationally orand regionally recognized healthcare systems. Our portfolio is diversified geographically across 3332 states, with no state having more than 19%21% of our total GLA as of September 30, 2017.March 31, 2022. We are concentrated in 20 to 25 key markets that are generally experiencing higher economic and demographic trends than other markets on average, that we expect will drive demand for MOBs. Approximately 92%As of March 31, 2022, we had approximately 1 million square feet of GLA in ten of our top 20 markets and approximately 95% of our portfolio, based on GLA, is located in the top 75 MSAsMetropolitan Statistical Area ("MSAs"), with Atlanta, Boston, Dallas, Houston, Boston, Miami and TampaIndianapolis being our largest markets by investment.annualized base rent.
Merger with Healthcare Realty Trust Incorporated
On February 28, 2022, the Company, the Company OP and Merger Sub entered into a Merger Agreement with HR whereby Merger Sub will merge with and into HR, with HR continuing as the surviving corporation. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of Common Stock, $0.01 par value per share, of HR Common Stock will be converted into the right to receive 1.0 share of Class A Common Stock, $0.01 par value per share, of the Company Common Stock. The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders. The boards of directors of the Company and HR have unanimously approved the Merger Agreement. The Merger is expected to close during the third quarter of 2022.
Additionally, on May 2, 2022, HTA and HR filed a Form S-4 Registration Statement with the SEC in connection with the contemplated Merger. Please review this Form S-4 for more information about the contemplated Merger.
Company Highlights
Portfolio Operating Performance
•For the three months ended September 30, 2017,March 31, 2022, our total revenue increased 48.7%, or $57.7 million, to $176.0was $202.0 million, compared to $191.5 million for the three months ended September 30, 2016. For the nine months ended September 30, 2017, our total revenue increased 29.9%, or $101.3 million, to $440.2 million, compared to the nine months ended September 30, 2016.March 31, 2021.
•For the three months ended September 30, 2017,March 31, 2022, our net income was $18.7 million, compared to $22.4 million, for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, our net income attributable to common stockholders was $0.07$0.08 per diluted share, or $13.8$18.3 million, compared to $0.04$0.10 per diluted share, or $6.4$22.0 million, for the three months ended September 30, 2016. For the nine months ended September 30, 2017, net income attributable to common stockholders was $0.12 per diluted share, or $21.4 million, compared to $0.21 per diluted share, or $29.4 million, for the nine months ended September 30, 2016.March 31, 2021.
•For the three months ended September 30, 2017,March 31, 2022, HTA’s FFO, as defined by NAREIT, was $0.41$93.6 million, or $0.40 per diluted share, compared to $0.44 per diluted share, or $84.2$97.8 million, an increase of $0.03 per diluted share, or 7.9%, compared tofor the three months ended September 30, 2016. For the nine months ended September 30, 2017, HTA’s FFO was $198.7 million, or $1.12 per diluted share, consistent with the per diluted share for the nine months ended September 30, 2016.March 31, 2021.
•For the three months ended September 30, 2017,March 31, 2022, HTALP’s FFO was $0.41$94.0 million, or $0.40 per diluted unit, or $84.4 million, an increase of $0.03OP Unit, compared to $0.44 per diluted unit,OP Unit, or 7.9%, compared to$98.2 million, for the three months ended September 30, 2016. For the nine months ended September 30, 2017, HTALP’s FFO was $199.3 million, or $1.12 per diluted unit, consistent with the per diluted unit for the nine months ended September 30, 2016.March 31, 2021.
•For the three months ended September 30, 2017,March 31, 2022, HTA’s and HTALP’s Normalized FFO was $0.42$0.44 per diluted share and unit,OP Unit, or $85.4$101.5 million, an increase of $0.02compared to $0.44 per diluted share and unit,OP Unit, or 5.0%, compared to$98.3 million for the three months ended September 30, 2016. For the nine months ended September 30, 2017, HTA’s and HTALP’s Normalized FFO was $1.21 per diluted share and unit, or $215.2 million, an increase of $0.01 per diluted share and unit, or 0.8%, compared to the nine months ended September 30, 2016.March 31, 2021.
•For additional information on FFO and Normalized FFO, see “FFO and Normalized FFO” below, which includes a reconciliation to net income attributable to common stockholders/unitholders and an explanation of why we present this non-GAAP financial measure.
•For the three months ended September 30, 2017,March 31, 2022, our Net Operating Income (“NOI”) increased 46.9%, or $38.2 million, to $119.7was $136.1 million, compared to $131.9 million for the three months ended September 30, 2016. For the nine months ended September 30, 2017, our NOI increased 29.0%, or $67.8 million, to $301.3 million, compared to the nine months ended September 30, 2016.March 31, 2021.
•For the three months ended September 30, 2017,March 31, 2022, our Same-Property Cash NOI increased 2.9%0.8%, or $2.2$0.9 million, to $80.3$117.4 million, compared to $116.5 million for the three months ended September 30, 2016. For the nine months ended September 30, 2017, our Same-Property Cash NOI increased 3.1%, or $6.6 million, to $217.8 million, compared to the nine months ended September 30, 2016.March 31, 2021.
•For additional information on our NOI and Same-Property Cash NOI, see “NOI, Cash NOI and Same-Property Cash NOI” below, which includes a reconciliation from net income and an explanation of why we present these non-GAAP financial measures.
Internal Growth through Proactive Asset Management Leasing and Property Management
We believe we have the largest operating platform in the medical office space that consists of asset management, leasing and in-house property management which allows us to better manage and service our existing portfolio.
As of September 30, 2017, our in-house property management and leasing platform operated approximately 22.2 million square feet of GLA, or 92%, of our total portfolio.
As of September 30, 2017, our leased rate (includes leases which have been executed, but which have not yet commenced) was 91.7% by GLA and our occupancy rate was 90.6% by GLA.
We entered into new and renewal leases on approximately 745,000 square feet of GLA and 2.0 million square feet of GLA, or 3.1% and 8.4%, respectively, of our portfolio, during the three and nine months ended September 30, 2017, respectively.
Tenant retention for the Same-Property portfolio was 75% and 78%, which included approximately 289,000 square feet of GLA and 1.3 million square feet of GLA of expiring leases, for the quarter and year-to-date, respectively, which we believe is indicative of our commitment to maintaining buildings in desirable locations and fostering strong tenant relationships. Tenant retention is defined as the sum of the total leased GLA of tenants that renewed a lease during the period over the total GLA of leases that renewed or expired during the period.
Key Market Focused Strategy and Investments
We believeOver the last decade, we have been one of the mostan active investorsinvestor in the medical office sector oversector. This has enabled us to create a high quality portfolio focused on MOBs serving the last decadefuture of healthcare with scale and have developed a presence acrosssignificance in 20 to 25 key markets. In each
•Our investment strategy includes alignment with key healthcare systems, hospitals, and leasing platform that has allowed us to develop valuable relationshipsleading academic medical universities. We are the largest owner of on-campus or adjacent MOBs in the country, with health systems, physician practices, universities, and regional development firms that have led to investment and leasing opportunities. Our local platforms have also enabled us to focus on generating cost efficiencies as we gain scale across individual markets and regions.
As of September 30, 2017, we had an average of 1.1approximately 17.4 million square feet of GLA, in eachor 67%, of our top ten markets. We expect to establish this scale acrossportfolio located in these locations. The remaining 33% of our portfolio is located in core community outpatient locations where healthcare is increasingly being delivered.
•Over the past decade, our investments have been focused in our 20 to 25 key markets aswhich we believe will outperform the broader U.S. markets from an economic and demographic perspective. As of March 31, 2022, approximately 95% of our portfolio expands.
portfolio’s GLA is located in the top 75 MSAs. Our key markets represent top MSAs with strong growth metrics in jobs, household income and population, as well as low unemployment and mature healthcare infrastructures. Many of our key markets are also supported by strong university systems.
•Our investment strategy includes alignment with key healthcare systems, hospitals and leading academic medical universities.
Over the last several years, our investments have been focused in our key markets, with the majority of our investments also being located either on the campuses of, or aligned with, nationally and regionally recognized healthcare systems.
During the nine months ended September 30, 2017, we acquired investments totaling $2.7 billion, including the Duke Acquisition of $2.24 billion, net of development credits we received at closing, which were located substantially in certain of ourmarket focus has enabled us to establish scale across 20 to 25 key markets and effectively utilize our asset management and leasing platform to deliver consistent same store growth and additional yield on investments, as well as cost effective service to tenants. As of March 31, 2022, we had approximately 1 million square feet of GLA in ten of our top 20 markets and approximately 0.5 million square feet of GLA in 17 of our top 20 markets.
•During the ninethree months ended September 30, 2017,March 31, 2022, we completedclosed on $19.0 million worth of medical office building investments totaling approximately 44,000 square feet of GLA. In addition, we funded $2.3 million of investments in real estate notes receivable.
Internal Growth through Proactive In-House Property Management and Leasing
We believe we have one of the dispositionlargest full-service operating platforms in the medical office sector that consists of an MOB located in Texasour in-house asset management and leasing platform which allows us to better manage and service our existing portfolio. In each of these markets, we have established a strong in-house asset management and leasing platform that has allowed us to develop valuable relationships with health systems, physician practices, universities, and regional development firms that have led to investment and leasing opportunities for us. Our full-service operating platform has also enabled us to focus on generating cost efficiencies as we gain scale across individual markets and regions.
•As of March 31, 2022, our in-house asset management and leasing platform operated approximately 25.0 million square feet of GLA, or 96% of our total portfolio.
•As of March 31, 2022, our leased rate (which includes leases which have been executed, but which have not yet commenced) was 89.3% by GLA and our occupancy rate was 87.3% by GLA.
•We entered into new and renewal leases on approximately 0.7 million square feet of GLA, or approximately 2.7% of the GLA of our total portfolio, during the three months ended March 31, 2022.
•During the three months ended March 31, 2022, tenant retention for the Same-Property portfolio was 69%. Tenant retention is defined as the sum of the total leased GLA of tenants that renewed a gross sales pricelease during the period over the total GLA of $5.0 million.leases that renewed or expired during the period.
Financial Strategy and Balance Sheet Flexibility
•As of September 30, 2017,March 31, 2022, we had total leverage, measured by debt less cash and cash equivalents to total capitalization, of 31.9%29.4%. Total liquidity was $928.9 million, including cash and cash equivalentsapproximately $1.0 billion, inclusive of $9.4 million and $919.5$975.0 million available on our unsecured revolving credit facility (includes the impactand cash and cash equivalents of $5.5$10.9 million of outstanding letters of credit) as of September 30, 2017.March 31, 2022.
During•As of March 31, 2022, the nine months ended September 30, 2017, we issued and sold $1.7 billionweighted average remaining term of equity at an average price of $28.70 per share. This consisted of $1.6 billion from the sale of common stock in an underwritten public offering at an average price of $28.50 per share, $125.7 million from the sale of common stock under our previous ATM at an average price of $31.45 per share, and $0.6 million from the issuance of OP Units in connection with an acquisition transaction.
In September 2017, we entered into new equity distribution agreements with our various sales agents with respect to our ATM offering program of common stock with an aggregate sales amount of up to $500.0 million.
In June 2017, we issued in a public offering (i) $400.0 million of 5-year unsecured senior notes, with a coupon of 2.95% per annum and (ii) $500.0 million of 10-year unsecured senior notes, with a coupon of 3.75% per annum.
In addition, as part of the Duke Acquisition, we were required by the seller to execute as the borrower a $286.0 million Promissory Note with an interest rate of 4.0% per annum, maturing in 2020.
On July 27, 2017, we entered into an amended and restated $1.3 billion Unsecured Credit Agreement which increased the amount available under the unsecured revolving credit facility to $1.0 billion and extended the maturities of the unsecured revolving credit facility to June 30, 2022 and for the $300.0 million unsecured term loan until February 1, 2023. The interest rate on the unsecured revolving credit facility is adjusted LIBOR plus a margin ranging from 0.83% to 1.55% per annum based on HTA’s credit rating.
On October 24, 2017, our Board of Directors announced a quarterly dividend of $0.305 per share of common stock.debt portfolio was 6.2 years.
Critical Accounting Policies
The complete list of our critical accounting policies was disclosed in our 20162021 Annual Report on Form 10-K. ThereAdditionally, in light of the COVID-19 pandemic, we believe we have been no material changes toincluded all relevant information when determining our criticalmanagement estimates and that these estimates are in line with our established policies. For further information on other significant accounting policies as disclosed therein.
Recently Issued or Adopted Accounting Pronouncements
Seethat impact us, see Note 2 - Summary of Significant Accounting Policies to ourin the accompanying condensed consolidated financial statements for a discussion ofstatements.
Recently Issued or Adopted Accounting Pronouncements
For detail on recently issued or adopted accounting pronouncements.pronouncements see Note 2 - Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements.
Factors Which May Influence Results of Operations
We are not aware of any material trends or uncertainties other than national economic conditions affecting real estate generally and the risk factors previously listeddiscussed in Part I, Item 1A - Risk Factors, in our 20162021 Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q under Item 1A. Risk Factors below, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the investment, management and operation of our properties.
Rental Income
The amount of rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that will become available from unscheduled lease terminations at the then applicable rental rates. Negative trends in one or more of these factors, including the ultimate collections of such rents, could adversely affect our rental income in future periods.
Investment Activity
IncludingDuring the Duke Acquisition, during the ninethree months ended September 30, 2017, we had investments with an aggregate purchase price of $2.7 billion, which included a 50% ownership in an unconsolidated joint venture as of the date of the acquisition, and a disposition with a gross sales price of $5.0 million. During the nine months ended September 30, 2016,March 31, 2022, we had investments with an aggregate gross purchase price of $633.0 million and a disposition$19.1 million. During the three months ended March 31, 2021, we had investments with aan aggregate gross salespurchase price of $26.5$32.9 million. The amount of any future acquisitions or dispositions could have a significant impact on our results of operations in future periods.
Results of Operations
Comparison of the three months ended September 30, 2017Three Months Ended March 31, 2022 and 2016, respectively, is set forth below: |
| | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | Change | | % Change |
Revenues: | | | | | | | |
Rental income | $ | 175,431 |
| | $ | 118,252 |
| | $ | 57,179 |
| | 48.4 | % |
Interest and other operating income | 563 |
| | 88 |
| | 475 |
| | NM |
|
Total revenues | 175,994 |
| | 118,340 |
| | 57,654 |
| | 48.7 |
|
Expenses: | | | | | | | |
Rental | 56,331 |
| | 36,885 |
| | 19,446 |
| | 52.7 |
|
General and administrative | 8,283 |
| | 7,293 |
| | 990 |
| | 13.6 |
|
Transaction | 261 |
| | 1,122 |
| | (861 | ) | | (76.7 | ) |
Depreciation and amortization | 70,491 |
| | 47,864 |
| | 22,627 |
| | 47.3 |
|
Total expenses | 135,366 |
| | 93,164 |
| | 42,202 |
| | 45.3 |
|
Income before other income (expense) | 40,628 |
| | 25,176 |
| | 15,452 |
| | 61.4 |
|
Interest expense: | | | | | | | |
Interest related to derivative financial instruments | (264 | ) | | (552 | ) | | 288 |
| | 52.2 |
|
Gain (loss) on change in fair value of derivative financial instruments, net | — |
| | 1,306 |
| | (1,306 | ) | | (100.0 | ) |
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments | (264 | ) | | 754 |
| | (1,018 | ) | | (135.0 | ) |
Interest related to debt | (25,924 | ) | | (16,386 | ) | | (9,538 | ) | | (58.2 | ) |
Loss on extinguishment of debt, net | (774 | ) | | (3,000 | ) | | 2,226 |
| | 74.2 |
|
Income from unconsolidated joint venture | 318 |
| | — |
| | 318 |
| | NM |
|
Other (expense) income | (27 | ) | | 95 |
| | (122 | ) | | NM |
|
Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 7,318 |
| | 110.2 | % |
| | | | | | | |
NOI | $ | 119,663 |
| | $ | 81,455 |
| | $ | 38,208 |
| | 46.9 | % |
Same-Property Cash NOI | $ | 80,285 |
| | $ | 78,043 |
| | $ | 2,242 |
| | 2.9 | % |
Comparison of the nine months ended September 30, 2017 and 2016, respectively, is set forth below:
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 | | Change | | % Change |
Revenues: | | | | | | | |
Rental income | $ | 438,949 |
| | $ | 338,646 |
| | $ | 100,303 |
| | 29.6 | % |
Interest and other operating income | 1,271 |
| | 243 |
| | 1,028 |
| | NM |
|
Total revenues | 440,220 |
| | 338,889 |
| | 101,331 |
| | 29.9 |
|
Expenses: | | | | | | | |
Rental | 138,874 |
| | 105,299 |
| | 33,575 |
| | 31.9 |
|
General and administrative | 25,178 |
| | 20,879 |
| | 4,299 |
| | 20.6 |
|
Transaction | 5,618 |
| | 4,997 |
| | 621 |
| | 12.4 |
|
Depreciation and amortization | 172,900 |
| | 130,430 |
| | 42,470 |
| | 32.6 |
|
Impairment | 5,093 |
| | — |
| | 5,093 |
| | NM |
|
Total expenses | 347,663 |
| | 261,605 |
| | 86,058 |
| | 32.9 |
|
Income before other income (expense) | 92,557 |
| | 77,284 |
| | 15,273 |
| | 19.8 |
|
Interest expense: | | | | | | | |
Interest related to derivative financial instruments | (827 | ) | | (1,856 | ) | | 1,029 |
| | 55.4 |
|
Gain (loss) on change in fair value of derivative financial instruments, net | 884 |
| | (2,144 | ) | | 3,028 |
| | 141.2 |
|
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments | 57 |
| | (4,000 | ) | | 4,057 |
| | 101.4 |
|
Interest related to debt | (59,688 | ) | | (44,503 | ) | | (15,185 | ) | | (34.1 | ) |
Gain on sale of real estate, net | 3 |
| | 4,212 |
| | (4,209 | ) | | (99.9 | ) |
Loss on extinguishment of debt, net | (11,192 | ) | | (3,022 | ) | | (8,170 | ) | | NM |
|
Income from unconsolidated joint venture | 381 |
| | — |
| | 381 |
| | NM |
|
Other (expense) income | (13 | ) | | 220 |
| | (233 | ) | | (105.9 | ) |
Net income | $ | 22,105 |
| | $ | 30,191 |
| | $ | (8,086 | ) | | (26.8 | )% |
| | | | | | | |
NOI | $ | 301,346 |
| | $ | 233,590 |
| | $ | 67,756 |
| | 29.0 | % |
Same-Property Cash NOI | $ | 217,758 |
| | $ | 211,128 |
| | $ | 6,630 |
| | 3.1 | % |
2021As of September 30, 2017March 31, 2022 and 2016,2021, we owned and operated approximately 24.226.0 million and 17.625.6 million square feet of GLA, respectively, with a leased rate of 91.7%89.3% and 91.8%89.2%, respectively (includes(including leases which have been executed, but which have not yet commenced), and an occupancy rate of 90.6%87.3% and 91.3%87.9%, respectively. All explanations are applicable to both HTA and HTALP unless otherwise noted.
Comparison of the three months ended March 31, 2022 and 2021, respectively, is set forth below (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 | | Change | | % Change |
Revenues: | | | | | | | |
Rental income | $ | 200,243 | | | $ | 191,350 | | | $ | 8,893 | | | 4.6 | % |
Interest and other operating income | 1,759 | | | 143 | | | 1,616 | | | NM |
Total revenues | 202,002 | | | 191,493 | | | 10,509 | | | 5.5 | |
Expenses: | | | | | | | |
Rental | 65,884 | | | 59,579 | | | 6,305 | | | 10.6 | |
General and administrative | 12,448 | | | 10,560 | | | 1,888 | | | 17.9 | |
Merger-related costs | 6,018 | | | — | | | 6,018 | | | NM |
Transaction | 144 | | | 96 | | | 48 | | | 50.0 | |
Depreciation and amortization | 75,386 | | | 76,274 | | | (888) | | | (1.2) | |
Interest expense | 23,940 | | | 22,986 | | | 954 | | | 4.2 | |
| | | | | | | |
Total expenses | 183,820 | | | 169,495 | | | 14,325 | | | 8.5 | |
Loss on sale of real estate, net | (4) | | | — | | | (4) | | | NM |
| | | | | | | |
Income from unconsolidated joint venture | 400 | | | 392 | | | 8 | | | 2.0 | |
Other income | 88 | | | 3 | | | 85 | | | NM |
Net income | $ | 18,666 | | | $ | 22,393 | | | $ | (3,727) | | | (16.6) | % |
| | | | | | | |
NOI | $ | 136,118 | | | $ | 131,914 | | | $ | 4,204 | | | 3.2 | % |
Same-Property Cash NOI | $ | 117,430 | | | $ | 116,549 | | | $ | 881 | | | 0.8 | % |
*NM- not meaningful.
Rental Income
For the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively, rental income was comprised of the following (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 | | Change | | % Change |
Contractual rental income | $ | 191,165 | | | $ | 182,512 | | | $ | 8,653 | | | 4.7 | % |
Straight-line rent and amortization of above and (below) market leases | 4,244 | | | 5,247 | | | (1,003) | | | (19.1) | |
Other rental revenue | 4,834 | | | 3,591 | | | 1,243 | | | 34.6 | |
Total rental income | $ | 200,243 | | | $ | 191,350 | | | $ | 8,893 | | | 4.6 | % |
34
|
| | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| 2017 | | 2016 | | Change | | % Change |
Contractual rental income | $ | 169,099 |
| | $ | 114,202 |
| | $ | 54,897 |
| | 48.1 | % |
Straight-line rent and amortization of above and (below) market leases | 4,269 |
| | 2,299 |
| | 1,970 |
| | 85.7 |
|
Other operating revenue | 2,063 |
| | 1,751 |
| | 312 |
| | 17.8 |
|
Total rental income | $ | 175,431 |
| | $ | 118,252 |
| | $ | 57,179 |
| | 48.4 | % |
|
| | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2017 | | 2016 | | Change | | % Change |
Contractual rental income | $ | 423,696 |
| | $ | 327,779 |
| | $ | 95,917 |
| | 29.3 | % |
Straight-line rent and amortization of above and (below) market leases | 9,475 |
| | 6,503 |
| | 2,972 |
| | 45.7 |
|
Other operating revenue | 5,778 |
| | 4,364 |
| | 1,414 |
| | 32.4 |
|
Total rental income | $ | 438,949 |
| | $ | 338,646 |
| | $ | 100,303 |
| | 29.6 | % |
Contractual rental income, which includes expense reimbursements, increased $54.9 million and $95.9$8.7 million for the three and nine months ended September 30, 2017, respectively,March 31, 2022, compared to the three and nine months ended September 30, 2016.March 31, 2021. The increases wereincrease was primarily due to $53.2 million and $94.6 million of additional contractual rental income of $8.2 million from our 20162021 and 20172022 acquisitions, (including properties owned during both periods) for the three and nine months ended September 30, 2017, respectively, and contractual rent increases for the three months ended March 31, 2022, partially offset by a decrease in$2.8 million of reduced contractual rentrental income as a result of the buildings we sold during 20162021 and 2017.2022 for the three months ended March 31, 2022, respectively.
Average starting and ending annualexpiring base rents for GLA entered into for new and renewal leases consisted of the following for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in square feet andthousands, except in average base rents per square foot of GLA):
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
New and renewal leases: | | | | | | | |
Average starting annual base rents | $ | 22.34 |
| | $ | 25.17 |
| | $ | 22.46 |
| | $ | 22.67 |
|
Average ending annual base rents | 21.94 |
| | 24.60 |
| | 22.47 |
| | 22.54 |
|
| | | | | | | |
Square feet of GLA | 745,000 |
| | 339,000 |
| | 2,040,000 |
| | 1,125,000 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
New and renewal leases: | | | |
Average starting base rents | $ | 28.92 | | | $ | 24.75 | |
Average expiring base rents | 25.99 | | | 22.99 | |
| | | |
Square feet of GLA | 713 | | | 705 | |
Lease rates can vary across markets, and lease rates that are considered above or below current market rent may change over time. Leases that expired in 20172022 had rents that we believed were at market rates. In general, leasing concessions vary depending on lease type, term, geography, and term.supply/demand dynamics.
Tenant improvements, leasing commissions and tenant concessions for new and renewal leases consisted of the following for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in per square foot of GLA): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
New leases: | | | |
Tenant improvements | $ | 35.09 | | | $ | 22.34 | |
Leasing commissions | 5.11 | | | 3.63 | |
Tenant concessions | 0.41 | | | 7.14 | |
Renewal leases: | | | |
Tenant improvements | $ | 7.01 | | | $ | 5.03 | |
Leasing commissions | 4.12 | | | 2.21 | |
Tenant concessions | 0.00 | | | 0.16 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
New leases: | | | | | | | |
Tenant improvements | $ | 17.18 |
| | $ | 20.28 |
| | $ | 18.18 |
| | $ | 21.10 |
|
Leasing commissions | 1.92 |
| | 4.91 |
| | 2.01 |
| | 4.29 |
|
Tenant concessions | 1.93 |
| | 3.81 |
| | 2.68 |
| | 3.92 |
|
Renewal leases: | | | | | | | |
Tenant improvements | $ | 8.58 |
| | $ | 9.46 |
| | $ | 7.50 |
| | $ | 6.19 |
|
Leasing commissions | 1.02 |
| | 2.32 |
| | 1.09 |
| | 1.57 |
|
Tenant concessions | 0.80 |
| | 1.71 |
| | 1.45 |
| | 1.06 |
|
The average term for new and renewal leases executed consisted of the following for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in years): |
| | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
New leases | 6.2 | | 5.4 | | 5.8 | | 5.4 |
Renewal leases | 5.5 | | 4.5 | | 5.0 | | 4.8 |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
New leases | 6.5 | | 4.4 |
Renewal leases | 4.3 | | 4.2 |
Rental Expenses
For the three months ended September 30, 2017March 31, 2022 and 2016,2021, rental expenses attributable to our properties were $56.3$65.9 million and $36.9 million, respectively. For the nine months ended September 30, 2017 and 2016, rental expenses attributable to our properties were $138.9 million and $105.3$59.6 million, respectively. The increasesincrease in rental expenses werewas primarily due to $20.9 million and $34.8$3.8 million of additional rental expenses associated with our 20162021 and 20172022 acquisitions for the three and nine months ended September 30, 2017, respectively, partially offset by improved operating efficiencies and a decrease in rental expenses as a resultMarch 31, 2022, respectively.
General and Administrative Expenses
For the three months ended September 30, 2017 and 2016, general and administrative expenses were $8.3 million and $7.3 million, respectively. For the nine months ended September 30, 2017 and 2016, general and administrative expenses were $25.2 million and $20.9 million, respectively. General and administrative expenses include such costs as salaries, corporate overhead and professional fees, among other items.
Transaction Expenses
For the three months ended September 30, 2017March 31, 2022 and 2016, transaction2021, general and administrative expenses were $0.3$12.4 million and $1.1$10.6 million, respectively. The increase was driven primarily by the following: (i) increased board expenses of $0.4 million, which includes additional board meeting fees of $0.2 million incurred primarily as a result of the Merger Agreement and the process related thereto, and $0.2 million of board member retainer fees for the board chairman and new board members; (ii) increased legal and professional fees of $0.4 million, primarily driven by costs incurred as a result of the previously disclosed whistleblower investigation, employee retention and strategic review matters; and (iii) increased costs for general corporate matters.
Merger-related costs
For the ninethree months ended September 30, 2017 and 2016, transaction expensesMarch 31, 2022, merger-related costs as a result of the contemplated Merger with HR were $5.6$6.0 million and $5.0included the following: (i) financial advisor fees of $3.8 million; (ii) legal fees of $1.8 million; (iii) merger and integration consulting fees of $0.3 million; and (iv) travel costs of $0.1 million. No such costs were incurred for the three months ended March 31, 2021.
Depreciation and Amortization Expense
For the three months ended March 31, 2022 and 2021, depreciation and amortization expense was $75.4 million and $76.3 million, respectively. The slight decrease in expense was associated with our buildings we disposed of during 2021 and 2022, offset by 2021 and 2022 acquisitions.
Interest Expense
For the three months ended March 31, 2022 and 2021, interest expense was $23.9 million and $23.0 million, respectively. The increase in transaction expenses, which have been adjustedinterest expense is primarily related to reflectamortization of commitment fees on the prospective presentation of the early adoption of ASU 2017-01 as of January 1, 2017, include $4.6 million of compensation and severance payments to Duke employees pursuant to the Duke Purchase Agreements$1.7 billion bridge loan financing commitment secured in connection with the Duke Acquisition. As a result of the adoption, a significant portion of these expenses are now capitalized as part of our investment allocations.
Depreciation and Amortization Expense
For the three months ended September 30, 2017 and 2016, depreciation and amortization expense was $70.5 million and $47.9 million, respectively. For the nine months ended September 30, 2017 and 2016, depreciation and amortization expense was $172.9 million and $130.4 million, respectively. The increases in depreciation and amortization expense were primarily due to the increase in the size of our portfolio.
Impairment
During the nine months ended September 30, 2017, we recorded an impairment charge of $5.1 million that related to an MOB in our portfolio located in Massachusetts. We did not record any impairment charges for the three months ended September 30, 2017 or the three and nine months ended September 30, 2016.
Interest Expense and Net Change in Fair Value of Derivative Financial Instruments
Interest expense, excluding the impact of the net change in fair value of derivative financial instruments, increased by $9.3 million and $14.2 million, during the three and nine months ended September 30, 2017, respectively, compared to the three and nine months ended September 30, 2016. The increases were primarily the result of higher average debt outstanding during the three and nine months ended September 30, 2017, as a result of partially funding our investments over the last 12 monthscontemplated Merger with debt and a change in the composition of debt, driven by an increase in long-term senior unsecured notes, including the $350.0 million 10-year senior unsecured notes issued in July 2016 at a coupon rate of 3.50% per annum, the $400.0 million and $500.0 million 5-year and 10-year senior unsecured notes issued in June 2017 at a coupon rate of 2.95% per annum and 3.75% per annum, respectively.
During the three months ended September 30, 2017, no gain or loss on change in fair value was recorded as we did not have any derivative financial instruments classified as non-designated hedges. During the three months ended September 30, 2016, the fair market value of our derivatives had a net increase of $1.3 million. During the nine months ended September 30, 2017, the fair market value of our derivatives increased $0.9 million, compared to a net decrease of $2.1 million during the nine months ended September 30, 2016.HR.
To achieve our objectives, we borrow at both fixed and variable rates. From time to time, we also enter into derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes. Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements.
Gain or Loss on ExtinguishmentSale of DebtReal Estate, net
For the three months ended September 30, 2017 and 2016,March 31, 2022, we realized a net loss of approximately $4 thousand, as a result of the sale of a tenant purchase option on extinguishment1 of debt of $0.8our MOBs located in Georgia. For the three months ended March 31, 2021, we had no property dispositions.
Net Income
For the three months ended March 31, 2022 and 2021, net income was $18.7 million and $3.0 million, respectively. For the nine months ended September 30, 2017 and 2016, we realized a net loss on extinguishment of debt of $11.2 million and $3.0$22.4 million, respectively. The increase wasdecrease is primarily due to fees we incurred in connection with the execution and our terminationresult of the Bridge Loan Facilitymerger-related costs incurred as parta result of the Duke Acquisition.contemplated Merger with HR.
NOI and Same-Property Cash NOI
For the three months ended March 31, 2022 and 2021, NOI increased $38.2was $136.1 million and $131.9 million, respectively. The increases in NOI was primarily due to $119.7additional NOI from our 2021 and 2022 acquisitions of $5.6 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. NOI increased $67.8 million to $301.3 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. These increases were primarily due to $35.5 million and $66.3 million of additional NOI from our 2016 and 2017 acquisitions for the three and nine months ended September 30, 2017,March 31, 2022, respectively, partially offset by a decrease in$1.6 million of reduced NOI as a result of the buildings we sold during 20162021 and 2017,2022 for the three months ended March 31, 2022, respectively, and a reduction in straight-line rent from properties we owned for more than a year.
Same-Property Cash NOI increased $2.2 million0.8% to $80.3$117.4 million for the three months ended September 30, 2017,March 31, 2022 compared to the three months ended September 30, 2016. Same-Property Cash NOI increased $6.6 million to $217.8 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. These increases wereMarch 31, 2021. The increase was primarily the result of rent escalations, an increaseoffset by a slight decrease in average occupancy and improved operating efficiencies.
occupancy.
Non-GAAP Financial Measures
FFO and Normalized FFO
We compute FFO in accordance with the current standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT definesNAREIT. FFO is defined as net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property and impairment write-downs of depreciable assets, plus depreciation and amortization related to investments in real estate, and after adjustments for unconsolidated partnerships and joint ventures. Additionally, with respect to gains and losses on the sale of assets incidental to the main business of a REIT, the REIT has the option to include or exclude such gains and losses in the calculation of FFO. Since FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders/unitholders.
We also compute Normalized FFO, which excludes from FFO: (i) transaction expenses; (ii) gain or loss on extinguishment of debt; (iii) non-controlling income or loss from OP Units included in diluted shares (only applicable to the Company); and (iv) other normalizing adjustments, which include items that are unusual and infrequent in nature. Our methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs.
We present this non-GAAP financial measureFFO and Normalized FFO because we consider it anthem important supplemental measuremeasures of our operating performance and believe it isthey are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Historical cost accounting assumes that the value of real estate assets diminishes ratably over time. Since real estate values have historically risen or fallen based on market conditions, many industry investors have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Because FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders/unitholders.
We also compute Normalized FFO, which excludes from FFO: (i) transaction expenses; (ii) gain or loss on change in fair value of derivative financial instruments; (iii) gain or loss on extinguishment of debt; (iv) noncontrolling income or loss from OP Units included in diluted shares (only applicable to the Company); and (v) other normalizing items, which include items that are unusual and infrequent in nature. We present this non-GAAP financial measure because it allows for the comparison of our operating performance to other REITs and between periods on a consistent basis. Our methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs. Normalized FFO should not be considered as an alternativealternatives to net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP) as an indicatorindicators of our financial performance, nor is itare they indicative of cash available to fund cash needs. FFO and Normalized FFO should be reviewed in connection with other GAAP measurements.
TheIn addition, the amounts included in the calculation of FFO and Normalized FFO are generally the same for HTALP and HTA, except for net income or loss attributable to common stockholders/unitholders, noncontrollingnon-controlling income or loss from OP Units included in diluted shares (only applicable to the Company) and the weighted average shares of our common stock or HTALP OP Units outstanding.
The following is the reconciliation of HTA’s FFO and Normalized FFO to net income attributable to common stockholders for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands, except per share data): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Net income attributable to common stockholders | $ | 18,315 | | | $ | 22,030 | |
Depreciation and amortization expense related to investments in real estate | 74,799 | | | 75,331 | |
Loss on sale of real estate, net | 4 | | | — | |
| | | |
Proportionate share of joint venture depreciation and amortization | 488 | | | 488 | |
FFO attributable to common stockholders | $ | 93,606 | | | $ | 97,849 | |
Transaction expenses | 144 | | | 96 | |
Merger-related costs (1) | 6,018 | | | — | |
Commitment fee amortization (2) | 892 | | | — | |
| | | |
Non-controlling income from OP Units included in diluted shares | 351 | | | 363 | |
Other normalizing adjustments (3) | 514 | | | — | |
Normalized FFO attributable to common stockholders | $ | 101,525 | | | $ | 98,308 | |
| | | |
Net income attributable to common stockholders per diluted share | $ | 0.08 | | | $ | 0.10 | |
FFO adjustments per diluted share, net | 0.32 | | | 0.34 | |
FFO attributable to common stockholders per diluted share | $ | 0.40 | | | $ | 0.44 | |
Normalized FFO adjustments per diluted share, net | 0.04 | | | 0.00 | |
Normalized FFO attributable to common stockholders per diluted share | $ | 0.44 | | | $ | 0.44 | |
| | | |
Weighted average diluted common shares outstanding | 233,046 | | | 222,268 | |
(1) For the three months ended March 31, 2022, merger-related costs include the following: (i) financial advisor fees of $3.8 million; (ii) legal fees of $1.8 million; (iii) merger and integration consulting fees of $0.3 million; and (iv) travel costs of $0.1 million.
(2) For the three months ended March 31, 2022, commitment fee amortization relates to commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the pending transaction with HR.
(3) For the three months ended March 31, 2022, other normalizing adjustments include the following: (i) additional board meeting fees of $159,000; (ii) legal and professional fees related to the whistleblower investigation of $143,000; (iii) legal fees related to employee retention matters of $131,000; and (iv) professional fees related to strategic review matters of $81,000.
37
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to common stockholders | $ | 13,763 |
| | $ | 6,427 |
| | $ | 21,390 |
| | $ | 29,361 |
|
Depreciation and amortization expense related to investments in real estate | 70,021 |
| | 47,545 |
| | 171,678 |
| | 129,477 |
|
Gain on sale of real estate, net | — |
| | — |
| | (3 | ) | | (4,212 | ) |
Impairment | — |
| | — |
| | 5,093 |
| | — |
|
Proportionate share of joint venture depreciation, amortization and other adjustments | 464 |
| | — |
| | 506 |
| | — |
|
FFO attributable to common stockholders | $ | 84,248 |
| | $ | 53,972 |
| | $ | 198,664 |
| | $ | 154,626 |
|
Transaction expenses (1) | 261 |
| | 1,122 |
| | 975 |
| | 4,997 |
|
(Gain) loss on change in fair value of derivative financial instruments, net | — |
| | (1,306 | ) | | (884 | ) | | 2,144 |
|
Loss on extinguishment of debt, net | 774 |
| | 3,000 |
| | 11,192 |
| | 3,022 |
|
Noncontrolling income from partnership units included in diluted shares | 166 |
| | 211 |
| | 635 |
| | 802 |
|
Other normalizing items, net (2) | — |
| | 133 |
| | 4,643 |
| | 117 |
|
Normalized FFO attributable to common stockholders | $ | 85,449 |
| | $ | 57,132 |
| | $ | 215,225 |
| | $ | 165,708 |
|
| | | | | | | |
Net income attributable to common stockholders per diluted share | $ | 0.07 |
| | $ | 0.04 |
| | $ | 0.12 |
| | $ | 0.21 |
|
FFO adjustments per diluted share, net | 0.34 |
| | 0.34 |
| | 1.00 |
| | 0.91 |
|
FFO attributable to common stockholders per diluted share | $ | 0.41 |
| | $ | 0.38 |
| | $ | 1.12 |
| | $ | 1.12 |
|
Normalized FFO adjustments per diluted share, net | 0.01 |
| | 0.02 |
| | 0.09 |
| | 0.08 |
|
Normalized FFO attributable to common stockholders per diluted share | $ | 0.42 |
| | $ | 0.40 |
| | $ | 1.21 |
| | $ | 1.20 |
|
| | | | | | | |
Weighted average diluted common shares outstanding | 204,795 |
| | 143,138 |
| | 177,410 |
| | 138,314 |
|
| | | | | | | |
(1) For the three and nine months ended September 30, 2017, amounts have been adjusted to reflect the prospective presentation of the early adoption of ASU 2017-01 as of January 1, 2017. |
(2) For the nine months ended September 30, 2017, other normalizing items include $4.6 million of compensation and severance payments to Duke employees pursuant to the Duke purchase agreements in connection with the Duke Acquisition that were included in transaction expenses on HTA’s condensed consolidated statements of operations. In addition, other normalizing items excludes lease termination fees as they are deemed to be generated in the ordinary course of business. |
The following is the reconciliation of HTALP’s FFO and Normalized FFO to net income attributable to common unitholders for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands, except per unit data): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Net income attributable to common unitholders | $ | 18,666 | | | $ | 22,393 | |
Depreciation and amortization expense related to investments in real estate | 74,799 | | | 75,331 | |
Loss on sale of real estate, net | 4 | | | — | |
| | | |
Proportionate share of joint venture depreciation and amortization | 488 | | | 488 | |
FFO attributable to common unitholders | $ | 93,957 | | | $ | 98,212 | |
Transaction expenses | 144 | | | 96 | |
Merger-related costs (1) | 6,018 | | | — | |
Commitment fee amortization (2) | 892 | | | — | |
| | | |
Other normalizing adjustments (3) | 514 | | | — | |
Normalized FFO attributable to common unitholders | $ | 101,525 | | | $ | 98,308 | |
| | | |
Net income attributable to common unitholders per diluted share | $ | 0.08 | | | $ | 0.10 | |
FFO adjustments per diluted OP Unit, net | 0.32 | | | 0.34 | |
FFO attributable to common unitholders per diluted OP Unit | $ | 0.40 | | | $ | 0.44 | |
Normalized FFO adjustments per diluted OP Unit, net | 0.04 | | | 0.00 | |
Normalized FFO attributable to common unitholders per diluted OP Unit | $ | 0.44 | | | $ | 0.44 | |
| | | |
Weighted average diluted common OP Units outstanding | 233,046 | | | 222,268 | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income attributable to common unitholders | $ | 13,929 |
| | $ | 6,638 |
| | $ | 22,025 |
| | $ | 30,163 |
|
Depreciation and amortization expense related to investments in real estate | 70,021 |
| | 47,545 |
| | 171,678 |
| | 129,477 |
|
Gain on sale of real estate, net | — |
| | — |
| | (3 | ) | | (4,212 | ) |
Impairment | — |
| | — |
| | 5,093 |
| | — |
|
Proportionate share of joint venture depreciation, amortization and other adjustments | 464 |
| | — |
| | 506 |
| | — |
|
FFO attributable to common unitholders | $ | 84,414 |
| | $ | 54,183 |
| | $ | 199,299 |
| | $ | 155,428 |
|
Transaction expenses (1) | 261 |
| | 1,122 |
| | 975 |
| | 4,997 |
|
(Gain) loss on change in fair value of derivative financial instruments, net | — |
| | (1,306 | ) | | (884 | ) | | 2,144 |
|
Loss on extinguishment of debt, net | 774 |
| | 3,000 |
| | 11,192 |
| | 3,022 |
|
Other normalizing items, net (2) | — |
| | 133 |
| | 4,643 |
| | 117 |
|
Normalized FFO attributable to common unitholders | 85,449 |
| | 57,132 |
| | 215,225 |
| | 165,708 |
|
| | | | | | | |
Net income attributable to common unitholders per diluted unit | $ | 0.07 |
| | $ | 0.05 |
| | $ | 0.12 |
| | $ | 0.22 |
|
FFO adjustments per diluted unit, net | 0.34 |
| | 0.33 |
| | 1.00 |
| | 0.90 |
|
FFO attributable to common unitholders per diluted unit | 0.41 |
| | 0.38 |
| | 1.12 |
| | 1.12 |
|
Normalized FFO adjustments per diluted unit, net | 0.01 |
| | 0.02 |
| | 0.09 |
| | 0.08 |
|
Normalized FFO attributable to common unitholders per diluted unit | $ | 0.42 |
| | $ | 0.40 |
| | $ | 1.21 |
| | $ | 1.20 |
|
| | | | | | | |
Weighted average diluted common units outstanding | 204,795 |
| | 143,137 |
| | 177,410 |
| | 138,314 |
|
| | | | | | | |
(1) For the three and nine months ended September 30, 2017, amounts have been adjusted to reflect the prospective presentation of the early adoption of ASU 2017-01 as of January 1, 2017. |
(2) For the nine months ended September 30, 2017, other normalizing items include $4.6 million of compensation and severance payments to Duke employees pursuant to the Duke purchase agreements in connection with the Duke Acquisition that were included in transaction expenses on HTA’s condensed consolidated statements of operations. In addition, other normalizing items excludes lease termination fees as they are deemed to be generated in the ordinary course of business. |
(1) For the three months ended March 31, 2022, merger-related costs include the following: (i) financial advisor fees of $3.8 million; (ii) legal fees of $1.8 million; (iii) merger and integration consulting fees of $0.3 million; and (iv) travel costs of $0.1 million.(2) For the three months ended March 31, 2022, commitment fee amortization relates to commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the pending transaction with HR.
(3) For the three months ended March 31, 2022, other normalizing adjustments include the following: (i) additional board meeting fees of $159,000; (ii) legal and professional fees related to the whistleblower investigation of $143,000; (iii) legal fees related to employee retention matters of $131,000; and (iv) professional fees related to strategic review matters of $81,000.
NOI, Cash NOI and Same-Property Cash NOI
NOI is a non-GAAP financial measure that is defined as net income or loss (computed in accordance with GAAP) before: (i) general and administrative expenses; (ii) transaction expenses; (iii) depreciation and amortization expense; (iv) impairment; (v) interest expense and net change in fair value of derivative financial instruments;expense; (vi) gain or loss on sales of real estate;estate and corporate assets; (vii) gain or loss on extinguishment of debt; (viii) income or loss from unconsolidated joint venture; and (ix) other income or expense. We believe that NOI provides an accurate measure of the operating performance of our operating assets because NOI excludes certain items that are not associated with the management of our properties. Additionally, we believe that NOI is a widely accepted measure of comparative operating performance of REITs. However, our use of the term NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. NOI should be reviewed in connection with other GAAP measurements.
Cash NOI is a non-GAAP financial measure which excludes from NOI: (i) straight-line rent adjustments andadjustments; (ii) amortization of below and above market leases/leasehold interests and lease termination fees.other GAAP adjustments; (iii) notes receivable interest income; and (iv) other normalizing adjustments. Contractual base rent, contractual rent increases, contractual rent concessions and changes in occupancy or lease rates upon commencement and expiration of leases are a primary driver of our revenue performance. We believe that Cash NOI, which removes the impact of straight-line rent adjustments, provides another measurement of the operating performance of our operating assets. Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance of REITs. However, our use of the term Cash NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. Cash NOI should be reviewed in connection with other GAAP measurements.
To facilitate the comparison of Cash NOI between periods, we calculate comparable amounts for a subset of our owned and operational properties referred to as “Same-Property”. Same-Property Cash NOI excludes (i) properties which have not been owned and operated by us during the entire span of all periods presented excludingand disposed properties, (ii) our share of unconsolidated joint ventures, (iii) development, redevelopment and land parcels, (iv) properties intended for disposition in the near term notes receivable interest incomewhich have (a) been approved by the Board of Directors, (b) is actively marketed for sale, and (c) an offer has been
received at prices we would transact and the sales process is ongoing, and (v) certain non-routine items. Same-Property Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. Same-Property Cash NOI should be reviewed in connection with other GAAP measurements.
The following is the reconciliation of HTA’s and HTALP’s NOI, Cash NOI and Same-Property Cash NOI to net income for the three and nine months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands): | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Net income | $ | 18,666 | | | $ | 22,393 | |
General and administrative expenses | 12,448 | | | 10,560 | |
Merger-related costs | 6,018 | | | — | |
Transaction expenses | 144 | | | 96 | |
Depreciation and amortization expense | 75,386 | | | 76,274 | |
| | | |
Interest expense | 23,940 | | | 22,986 | |
Loss on sale of real estate, net | 4 | | | — | |
| | | |
Income from unconsolidated joint venture | (400) | | | (392) | |
Other income | (88) | | | (3) | |
NOI | $ | 136,118 | | | $ | 131,914 | |
Straight-line rent adjustments, net | (2,828) | | | (3,774) | |
Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments | (407) | | | (475) | |
Notes receivable interest income | (1,660) | | | (6) | |
| | | |
Cash NOI | $ | 131,223 | | | $ | 127,659 | |
Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI | (6,280) | | | (2,180) | |
Redevelopment Cash NOI | (2,105) | | | (2,650) | |
Intended for sale Cash NOI | (5,408) | | | (6,280) | |
Same-Property Cash NOI (1) | $ | 117,430 | | | $ | 116,549 | |
| | | |
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 13,957 |
| | $ | 6,639 |
| | $ | 22,105 |
| | $ | 30,191 |
|
General and administrative expenses | 8,283 |
| | 7,293 |
| | 25,178 |
| | 20,879 |
|
Transaction expenses (1) | 261 |
| | 1,122 |
| | 5,618 |
| | 4,997 |
|
Depreciation and amortization expense | 70,491 |
| | 47,864 |
| | 172,900 |
| | 130,430 |
|
Impairment | — |
| | — |
| | 5,093 |
| | — |
|
Interest expense and net change in fair value of derivative financial instruments | 26,188 |
| | 15,632 |
| | 59,631 |
| | 48,503 |
|
Gain on sale of real estate, net | — |
| | — |
| | (3 | ) | | (4,212 | ) |
Loss on extinguishment of debt, net | 774 |
| | 3,000 |
| | 11,192 |
| | 3,022 |
|
Income from unconsolidated joint venture | (318 | ) | | — |
| | (381 | ) | | — |
|
Other expense (income) | 27 |
| | (95 | ) | | 13 |
| | (220 | ) |
NOI | $ | 119,663 |
| | $ | 81,455 |
| | $ | 301,346 |
| | $ | 233,590 |
|
Straight-line rent adjustments, net | (3,009 | ) | | (1,161 | ) | | (5,834 | ) | | (3,636 | ) |
Amortization of (below) and above market leases/leasehold interests, net and lease termination fees | 214 |
| | 3 |
| | 246 |
| | 497 |
|
Cash NOI | $ | 116,868 |
| | $ | 80,297 |
| | $ | 295,758 |
| | $ | 230,451 |
|
Notes receivable interest income | (503 | ) | | (68 | ) | | (1,089 | ) | | (68 | ) |
Non Same-Property Cash NOI | (36,080 | ) | | (2,186 | ) | | (76,911 | ) | | (19,255 | ) |
Same-Property Cash NOI (2) | $ | 80,285 |
| | $ | 78,043 |
| | $ | 217,758 |
| | $ | 211,128 |
|
| | | | | | | |
(1) For the three and nine months ended September 30, 2017, transaction costs have been adjusted to reflect the prospective presentation of the early adoption of ASU 2017-01 as of January 1, 2017. For the nine months ended September 30, 2017, transactions costs included $4.6 million of compensation and severance payments to Duke employees pursuant to the Duke purchase agreements in connection with the Duke Acquisition. |
(2) Same-Property includes 338 and 296 buildings for the three and nine months ended September 30, 2017 and 2016, respectively. |
(1) Same-Property includes 424 buildings for the three months ended March 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
Our primary sources of cash include: (i) cash flow from operations; (ii) borrowings under our unsecured revolving credit facility; (iii) net proceeds from the issuances of debt and equity securities; and (iv) proceeds from our dispositions. During the next 12 months our primary uses of cash are expected to include: (a) the funding of acquisitions of MOBs, development properties and other facilities that serve the healthcare industry; (b) capital expenditures; (c) the payment of operating expenses; (d) debt service payments, including principal payments; and (e) the payment of dividends to our stockholders. We anticipate cash flow from operations, restricted cash and reserve accounts and our unsecured revolving credit facility, if needed, will be sufficient to fund our operating expenses, capital expenditures and dividends to stockholders. Investments and maturing indebtedness may require funds from borrowings under our unsecured revolving credit facility, the issuance of debt and/or equity securities or proceeds from sales of real estate.
As of September 30, 2017,March 31, 2022, we had total liquidity of $928.9 million, including $919.5$1.0 billion, inclusive of $975.0 million available underon our unsecured revolving credit facility (which includes the impact of $5.5 million of outstanding letters of credit) and $9.4 million of cash and cash equivalents.equivalents of $10.9 million.
In addition,As of March 31, 2022, we had unencumbered assets with a gross book value of $6.2$7.9 billion. The unencumbered properties may be used as collateral to secure additional financings in future periods or refinance our current debt as it becomes due. Our ability to raise funds from future debt and equity issuances is dependent on our investment grade credit ratings, general economic and market conditions, and our operating performance.
When we acquire a property, we prepare a capital plan that contemplates the estimated capital needs of that investment. In addition to operating expenses, capital needs may also include costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of September 30, 2017,March 31, 2022, we estimate that our expenditures for capital improvements including lease commissions for the remainder of 2017the year will range from $10.0approximately $75 million to $15.0$100 million depending on leasing activity. AsIn addition, we have approximately $150 million inclusive of September 30, 2017,costs to complete active development projects and incremental tenant improvements as part of our recently completed development projects. Although we had $2.9 million of restricted cash and reserve accounts for such capital expenditures. We cannot provide assurance however, that we will not exceed these estimated expenditure levels.levels, we believe our liquidity of $1.0 billion allows us the flexibility to fund such capital expenditures.
If we experience lower occupancy levels, reduced rental rates, reduced revenues as a result of asset sales, or increased capital expenditures and leasing costs compared to historical levels due to competitive market conditions for new and renewal leases, the effect would be a reduction of net cash provided by operating activities. If such a reduction of net cash provided by operating activities is realized, we may have a cash flow deficit in subsequent periods. Our estimate of net cash available is based on various assumptions which are difficult to predict, including the levels of our leasing activity and related leasing costs. Any changes in these assumptions could impact our financial results and our ability to fund working capital and unanticipated cash needs.
Cash Flows
The following is a summary of our cash flows for the ninethree months ended September 30, 2017March 31, 2022 and 2016,2021, respectively (in thousands): | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 | | Change |
Cash, cash equivalents and restricted cash - beginning of period | $ | 57,069 | | | $ | 118,765 | | | $ | (61,696) | |
Net cash provided by operating activities | 49,308 | | | 65,353 | | | (16,045) | |
Net cash used in investing activities | (33,180) | | | (76,299) | | | 43,119 | |
Net cash used in financing activities | (57,775) | | | (74,733) | | | 16,958 | |
Cash, cash equivalents and restricted cash - end of period | $ | 15,422 | | | $ | 33,086 | | | $ | (17,664) | |
|
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2017 | | 2016 | | Change |
Cash and cash equivalents - beginning of period | $ | 11,231 |
| | $ | 13,070 |
| | $ | (1,839 | ) |
Net cash provided by operating activities | 228,542 |
| | 148,257 |
| | 80,285 |
|
Net cash used in investing activities | (2,487,471 | ) | | (541,080 | ) | | (1,946,391 | ) |
Net cash provided by financing activities | 2,257,108 |
| | 397,691 |
| | 1,859,417 |
|
Cash and cash equivalents - end of period | $ | 9,410 |
| | $ | 17,938 |
| | $ | (8,528 | ) |
Net cash provided by operating activities increaseddecreased in 20172022 primarily due to the impact of our 20162021 and 2017 acquisitions, contractual rent increases and improved operating efficiencies,2022 dispositions, partially offset by our 20162021 and 2017 dispositions.2022 acquisitions and contractual rent increases. We anticipate cash flows from operating activities to increase as a result of the above itemsgrowth in our portfolio through new acquisitions and continued leasing activity in our existing portfolio.
For the ninethree months ended September 30, 2017,March 31, 2022, net cash used in investing activities primarily related to the investmentcapital expenditures of $28.6 million, investments in real estate was $2.4 billion, investment in unconsolidated joint venture was $68.8of $19.1 million, development of real estate of $10.4 million, and capital expenditures was $43.0advances on real estate notes receivable of $2.3 million, partially offset by proceeds from the sale of real estate of $4.7$26.8 million. For the ninethree months ended September 30, 2016,March 31, 2021, net cash used in investing activities primarily related to the investmentinvestments in real estate was $532.5of $30.5 million, capital expenditures of $28.9 million and capital expenditures was $34.1 million, partially offset by proceeds from the saledevelopment of real estate of $23.4$17.1 million. We anticipate cash flows used in investing activities to increase as we continue to acquire more properties.
For the ninethree months ended September 30, 2017,March 31, 2022, net cash provided byused in financing activities primarily related to the net proceeds of shares of common stock issued was $1.6 billion and net proceeds on the issuance of senior notes was $900.0 million, partially offset by dividends paid to holders of our common stock of $145.9$74.4 million, and payments ondeferred financing costs of $5.4 million, partially offset by net borrowings under our secured mortgage loansrevolving credit facility of $75.4$25.0 million. For the ninethree months ended September 30, 2016,March 31, 2021, net cash provided byused in financing activities primarily related to the net proceeds of shares of common stock issued of $418.9 million and proceeds from unsecured senior notes of $347.7 million, partially offset by net payments on our unsecured revolving credit facility of $191.0 million, dividends paid to holders of our common stock of $116.7$70.0 million, and payments on our secured mortgage loansthe repurchase and cancellation of $98.5common stock of $3.2 million.
Dividends
The amount of dividends we pay to our stockholders is determined by our Board of Directors, in their sole discretion, and is dependent on a number of factors, including funds available, our financial condition, capital expenditure requirements and annual dividend distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended. We have paid monthly or quarterly dividends since February 2007, and if our investments produce sufficient cash flow, we expect to continue to pay dividends to our stockholders. Because our cash available for dividend distributions in any year may be less than 90% of our taxable income for the year, we may obtain the necessary funds through borrowings, issuing new securities or selling assets to pay out enough of our taxable income to satisfy our dividend distribution requirement. Our organizational documents do not establish a limit on dividends that may constitute a return of capital for federal income tax purposes. The dividend we pay to our stockholders is equal to the distributions received from HTALP in accordance with the terms of HTALP’sthe HTALP partnership agreement. It is our intention to continue to pay dividends. However, our Board of Directors may reduce our dividend rate and we cannot guarantee the timing and amount of dividends that itwe may pay in the future, if any.
For the ninethree months ended September 30, 2017,March 31, 2022, we paid cash dividends of $145.9 million.$74.4 million on our common stock. In October 2017,April 2022 for the quarter ended March 31, 2022, we paid cash dividends of $61.2 million for the quarter ended September 30, 2017. On October 24, 2017, our Board of Directors announced a dividend of $0.305 per share of common stock. The dividends are to be paid on January 9, 2018 to stockholders of record of our common stock on January 2, 2018.of $74.4 million.
Financing
We have historically maintained a low leveraged balance sheet and intend to continue to maintain this structure in the long term. However, our total leverage may fluctuate on a short-term basis as we execute our business strategy. As of September 30, 2017,March 31, 2022, our leverage ratio, measured by debt less cash and cash equivalents to total capitalization, was 31.9%29.4%.
As of September 30, 2017,March 31, 2022, we had debt outstanding of $2.9$3.1 billion and the weighted average interest rate therein was 3.44%2.86% per annum, inclusive of the impact of our interest rate swaps.cash flow hedges. The following is a summary of our unsecured and secured debt. See Note 78 - Debt to ourin the accompanying condensed consolidated financial statements for a further discussion of our debt.
Unsecured Revolving Credit Facility
As of September 30, 2017, $919.5March 31, 2022, $975.0 million was available on our $1.0 billion unsecured revolving credit facility. Our unsecured revolving credit facility maturesmaturing in June 2022.October 2025.
Unsecured Term Loans
As of September 30, 2017,March 31, 2022, we had $500.0 million of unsecured term loans outstanding, comprised of $300.0 million under our Unsecured Credit Agreement maturing in 2023,2025, and $200.0 million alsounder our unsecured term loan maturing in 2023.2024.
Unsecured Senior Notes
As of September 30, 2017,March 31, 2022, we had $1.85$2.55 billion of unsecured senior notes outstanding, comprised of $300.0$600.0 million maturing in 2021, $400.0 million maturing in 2022, $300.0 million maturing in 2023, $350.0 millionof senior notes maturing in 2026, and $500.0 million of senior notes maturing in 2027.
Mortgage Loans
In June 2017, as a part of the Duke Acquisition pursuant to a requirement of the seller, we entered as the borrower a $286.0 million Promissory Note which matures in 2020. During the nine months ended September 30, 2017, we made payments of $75.4 million on our mortgage loans and have $1.22027, $650.0 million of principal payments due during the remaindersenior notes maturing in 2030 and $800.0 million of 2017.
Commitments and Contingencies
There have been no material changes from the commitments and contingencies disclosedsenior notes maturing in our 2016 Annual Report on Form 10-K.
2031.
Debt Service Requirements
We are required by the terms of our applicable loan agreements to meet certain financial covenants, such as minimum net worth and liquidity, and reporting requirements, among others. As of September 30, 2017,March 31, 2022, we believe that we were in compliance with all such covenants and we are not aware of any covenants that it is reasonably likely that we would not be able to meet in accordance with our loan agreements.
Off-Balance Sheet Arrangements
As of September 30, 2017,and during the three months ended March 31, 2022, we havehad no material off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Inflation
We are exposed to inflation risk as income from future long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that protect us from the impact of normal inflation. These provisions include rent escalations, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements on a per square foot allowance. However, due to the long-term nature of our leases, among other factors, the leases may not reset frequently enough to cover inflation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There werehave been no material changes infrom the information regardingquantitative and qualitative disclosures about market risk that was providedpreviously disclosed in our 20162021 Annual Report on Form 10-K. The table below presents, as of September 30, 2017, the principal amounts of our fixed and variable debt and the weighted average interest rates, excluding the impact of interest rate swaps, by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes (in thousands, except interest rates):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Expected Maturity Date |
| 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | Thereafter | | Total |
Fixed rate debt | $ | 915 |
| | $ | 99,777 |
| | $ | 104,821 |
| | $ | 117,769 |
| | $ | 303,424 |
| | $ | 1,639,147 |
| | $ | 2,265,853 |
|
Weighted average interest rate on fixed rate debt (per annum) | 5.43 | % | | 4.05 | % | | 4.19 | % | | 4.41 | % | | 3.40 | % | | 3.57 | % | | 3.64 | % |
Variable rate debt | $ | 251 |
| | $ | 1,050 |
| | $ | 1,119 |
| | $ | 27,123 |
| | $ | 509 |
| | $ | 583,117 |
| | $ | 613,169 |
|
Weighted average interest rate on variable rate debt based on forward rates in effect as of September 30, 2017 (per annum) | 3.14 | % | | 3.27 | % | | 3.65 | % | | 3.40 | % | | 4.58 | % | | 3.64 | % | | 2.58 | % |
As of September 30, 2017, we had $2.9 billion of fixed and variable rate debt with interest rates ranging from 2.30% to 6.39% per annum and a weighted average interest rate of 3.41% per annum, excluding the impact of interest rate swaps. We had $2.3 billion (excluding net premium/discount and deferred financing costs) of fixed rate debt with a weighted average interest rate of 3.64% per annum and $613.2 million (excluding net premium/discount and deferred financing costs) of variable rate debt with a weighted average interest rate of 2.58% per annum as of September 30, 2017, excluding the impact of interest rate swaps.
As of September 30, 2017, the fair value of our fixed rate debt was $2.3 billion and the fair value of our variable rate debt was $615.1 million based upon prevailing market rates as of September 30, 2017.
As of September 30, 2017, we had interest rate swaps outstanding that effectively fix $189.8 million of our variable rate debt. Including the impact of these interest rate swaps, the effective rate on our variable rate and total debt is 2.70% and 3.44% per annum, respectively.
In addition to changes in interest rates, the value of our future properties is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt if necessary.
Item 4. Controls and Procedures
Healthcare Trust of America, Inc.
HTA’s management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including HTA’s Chief Executive Officer (as the principal executive officer) and Chief Financial Officer (as the principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosures.
As of September 30, 2017,March 31, 2022, an evaluation was conducted by HTA under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, HTA’s Chief Executive Officer and Chief Financial Officer each concluded that HTA’s disclosure controls and procedures were effective as of September 30, 2017.March 31, 2022.
We acquired the Duke assets during the nine months ended September 30, 2017 and have integrated the assets and development platform on to our existing internal controls over financial reporting. Except for any changes in internal controls related to the integration of the Duke assets, thereThere were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017March 31, 2022 that have materially affected, or are reasonably believed to be likely to materially affect, our internal control over financial reporting. This determination was reached after careful evaluation of the effects COVID-19 has had on our operations.
October��25, 2017
May 6, 2022
Healthcare Trust of America Holdings, LP
HTALP’s management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including HTA’s Chief Executive Officer (as the principal executive officer) and Chief Financial Officer (as the principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosures.
As of September 30, 2017,March 31, 2022, an evaluation was conducted by HTALP under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, HTA’s Chief Executive Officer and Chief Financial Officer, on behalf of HTA in its capacity as general partner of HTALP, each concluded that HTALP’s disclosure controls and procedures were effective as of September 30, 2017.March 31, 2022.
We acquired the Duke assets during the nine months ended September 30, 2017 and have integrated the assets and development platform on to our existing internal controls over financial reporting. Except for any changes in internal controls related to the integration of the Duke assets, thereThere were no changes in HTALP’s internal control over financial reporting that occurred during the quarter ended September 30, 2017March 31, 2022 that have materially affected, or are reasonably believed to be likely to materially affect, HTALP’s internal control over financial reporting. This determination was reached after careful evaluation of the effects COVID-19 has had on our operations.
October 25, 2017
May 6, 2022
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 6, 2022, a purported stockholder of the Company filed a lawsuit in the United States District Court for the Southern District of New York against us and seven of our current directors, captioned Shiva Stein v. Healthcare Trust of America, Inc., et al., Case No. 1:22-cv-03703 (the “Complaint”).
The Complaint alleges that the preliminary proxy statement issued in connection with the Merger omits material information or contains misleading disclosures and that, as a result, (i) all of the defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act) and (ii) our directors violated section 20(a) of the Exchange Act. The Complaint seeks, among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages to the extent the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) an accounting to plaintiff for all damages suffered as a result of the alleged wrongdoing; and (v) an award of plaintiff’s expenses, including attorneys’ and experts’ fees. We believe the claims asserted in the Complaint are without merit. Additional lawsuits may be filed against us, our Board of Directors, and/or other parties to the Merger in connection with the transactions contemplated by the Merger Agreement.
In addition, we are, from time to time, also subject to claims and litigation arising in the ordinary course of business. business with respect to tenant litigation and threatened or asserted labor matters.
We do not believe any liability from any reasonably foreseeable disposition of suchthe aforementioned claims and litigation, individually or in the aggregate, would have a material adverse effect on our accompanying condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in our 2016the Company’s 2021 Annual Report on Form 10-K.10-K, filed with the SEC on March 1, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the three months ended September 30, 2017,March 31, 2022, we repurchased shares of our common stock as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (1) (2) | | Average Price Paid per Share (1) (2) | | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
January 1, 2022 to January 31, 2022 | | 42,834 | | | $ | 33.55 | | | — | | | — | |
February 1, 2022 to February 28, 2022 | | 672 | | | 30.33 | | | — | | | — | |
March 1, 2022 to March 31, 2022 | | 6,041 | | | 30.40 | | | — | | | — | |
| | | | | | | | |
(1) Purchases represent shares of common stock withheld by us to satisfy withholding obligations on the vesting of restricted shares. The price paid per share was the then closing price of our common stock on the NYSE. |
(2) For each share of common stock redeemed by HTA, HTALP redeems a corresponding number of OP Units in the HTALP operating partnership. Therefore, the OP Units in the HTALP operating partnership repurchased by HTALP are the same as the shares of common stock repurchased by HTA as shown above. |
|
| | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (1) (2) | | Average Price Paid per Share (1) (2) | | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs |
July 1, 2017 to July 31, 2017 | | — |
| | $ | — |
| | — |
| | — |
|
August 1, 2017 to August 31, 2017 | | 2,466 |
| | 30.64 |
| | — |
| | — |
|
September 1, 2017 to September 30, 2017 | | — |
| | — |
| | — |
| | — |
|
| | | | | | | | |
(1) Purchases mainly represent shares withheld to satisfy withholding obligations on the vesting of restricted shares. The price paid per share was the then closing price of our common stock on the NYSE. |
(2) For each share of common stock redeemed by HTA, HTALP redeems a corresponding number of OP Units in the HTALP operating partnership. Therefore, the OP Units in the HTALP operating partnership repurchased by HTALP are the same as the shares of common stock repurchased by HTA as shown above. |
Item 6. Exhibits
The exhibits listed on the Exhibit Index (following the signatures section of this Quarterly Report) are included, and incorporated by reference, in this Quarterly Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
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| | | |
| Healthcare Trust of America, Inc. |
| | | |
By: | /s/ Scott D. Peters | | Chief Executive Officer, President and Chairman |
| Scott D. Peters | | (Principal Executive Officer) |
Date: | October 25, 2017 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | October 25, 2017 | | |
| | | |
|
| | | |
| Healthcare Trust of America Holdings, LP |
| | | |
By: | Healthcare Trust of America, Inc., |
| our General Partner | | |
| | | |
By: | /s/ Scott D. Peters | | Chief Executive Officer, President and Chairman |
| Scott D. Peters | | (Principal Executive Officer) |
Date: | October 25, 2017 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | October 25, 2017 | | |
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit Index immediately precedes the exhibits.
The following exhibits are included, or incorporated by reference, in this Quarterly Report for the quarter ended September 30, 2017March 31, 2022 (and are numbered in accordance with Item 601 of Regulation S-K).
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| | | | |
1.12.1 | Underwriting Agreement and Plan of Merger, dated May 2, 2017, by andas of February 28, 2022, among Healthcare Realty Trust Incorporated, Healthcare Trust of America, Inc., Healthcare Trust of America Holdings, LP, on the one hand, and Wells Fargo Securities,HR Acquisition 2, LLC J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein, on the other hand (included as Exhibit 1.1 to our Current Report on Form 8-K filed on May 8, 2017 and incorporated herein by reference). |
1.2 | Underwriting Agreement, dated June 1, 2017, among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., and Wells Fargo Securities, LLC, J.P. Morgan Securities LLC and U.S. Bancorp Investments, Inc., as representatives of the several underwriters named therein (included as Exhibit 1.1 to our Current Report on Form 8-K filed on June 7, 2017 and incorporated herein by reference). |
1.3 | |
1.4 | |
2.1 | |
2.2 | |
2.3 | |
2.4 | |
2.5 | |
2.6 | |
2.7 | |
2.8 | |
2.9 | |
2.10 | |
2.11 | |
2.12 | |
2.13 | |
2.14 | |
2.15 | |
|
| |
2.16 | |
3.110.1† | |
4.1 | |
4.2 | |
5.1 | |
5.2 | |
5.3 | |
5.4 | |
8.1 | |
8.2 | |
10.1 | |
10.2 | |
10.310.2† | |
10.410.3 | CreditForm of Indemnification Agreement executed by and among Healthcare Trust of America Holdings, LP, Healthcare Trust of America, Inc., JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association, U.S. Bank National Association, Capital One, N.A., PNC Bank, National Association and Bank of America, N.A., as syndication agents, Bank of Montreal, The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Comaps Bank, Fifth Third Bank and Morgan Stanley Senior Funding, Inc., as documentation agents, Regions Bank, as managing agent, and the lenders named therein, dated July 27, 2017Constance B. Moore (included as Exhibit 10.110.46 to our CurrentAmended Annual Report on Form 8-K10-K/A filed on July 31, 2017April 12, 2022 and incorporate d herein by reference). |
10.4 | |
10.531.1* | |
23.1 | |
23.2 | |
23.3 | |
23.4 | |
23.5 | |
23.6 | |
23.7 | |
23.8 | |
|
| |
31.1* | |
31.2* | |
31.3* | |
31.4* | |
32.1** | |
32.2** | |
32.3** | |
32.4** | |
101.INS* | Inline XBRL Instance Document. |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* | Filed herewith. |
* | Filed herewith. |
** | Furnished herewith. |
† | Compensatory plan or arrangement. |
SIGNATURES
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 Trust of America, Inc. |
| | | |
By: | /s/ Peter N. Foss | | Interim President and Chief Executive Officer |
| Peter N. Foss | | (Principal Executive Officer) |
Date: | May 6, 2022 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | May 6, 2022 | | |
| | | |
| | | | | | | | | | | |
| Healthcare Trust of America Holdings, LP |
| | | |
By: | Healthcare Trust of America, Inc., | | |
| its General Partner | | |
| | | |
By: | /s/ Peter N. Foss | | Interim President and Chief Executive Officer |
| Peter N. Foss | | (Principal Executive Officer) |
Date: | May 6, 2022 | | |
| | | |
By: | /s/ Robert A. Milligan | | Chief Financial Officer |
| Robert A. Milligan | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | May 6, 2022 | | |