What changed in this filing

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Item 1. Business

2021-02-24 compared with 2020-02-18 · 135 added, 89 removed, 296 unchanged (43% of the section changed)

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HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006.

HTA is a publicly-traded REIT and one of the leading owners and operators of medical office buildings (“MOBs”) in the United States (“U.S.”).

HTA is a publicly-traded REIT and is the largest dedicated owner and operator of medical office buildings (“MOBs”) in the United States (“U.S.”).

We focus on owning and operating MOBs that serve the future of healthcare delivery and are located on health system campuses, near university medical centers, or in community core outpatient locations.

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We maintain a website at www.htareit.com where additional information about us can be accessed.

The contents of the site are not incorporated by reference in, or otherwise a part of this filing.

The contents of our website are not incorporated by reference in, or otherwise a part of this filing.

We make our periodic and current reports, as well as any amendments to such reports, available free of charge at www.htareit.com as soon as reasonably practicable after such materials are electronically filed with the SEC.

These reports are also available in hard copy to any stockholder upon request by contacting our investor relations staff at the number above or via email at info@htareit.com.

For the year ended December 31, 2019 , total revenue decreased 0.6% , or $4.4 million , to $692.0 million , compared to $696.4 million for the year ended December 31, 2018 .

For the year ended December 31, 2019 , net income was $30.8 million , compared to $217.6 million for the year ended December 31, 2018 .

• For the year ended December 31, 2020, total revenue increased 6.8%, or $46.9 million, to $739.0 million, compared to $692.0 million for the year ended December 31, 2019.

• For the year ended December 31, 2020, net income increased 73.8%, or $22.7 million, to $53.5 million, compared to $30.8 million for the year ended December 31, 2019.

• For the year ended December 31, 2020, net income attributable to common stockholders was $0.24 per diluted share, or $52.6 million, compared to $0.14 per diluted share, or $30.2 million, for the year ended December 31, 2019.

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• For the year ended December 31, 2020, HTALP’s FFO, as defined by NAREIT, was $345.6 million, or $1.56 per diluted OP Unit, compared to $1.53 per diluted OP Unit, or $320.3 million, for the year ended December 31, 2019.

For the year ended December 31, 2019 , HTA’s and HTALP’s Normalized FFO was $1.64 per diluted share and OP Unit, or $344.3 million , compared to $1.62 per diluted share and OP Unit, or $340.4 million , for the year ended December 31, 2018 .

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-generally accepted accounting principles (“GAAP”) financial measure.

• For the year ended December 31, 2020, HTA’s and HTALP’s Normalized FFO was a record $1.71 per diluted share and OP Unit, or $379.3 million, compared to $1.64 per diluted share and OP Unit, or $344.3 million, for the year ended December 31, 2019, an increase of 4.3%.

• 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 financial measure which is not a financial measure based on generally accepted accounting principles (“GAAP”).

• For the year ended December 31, 2020, Net Operating Income (“NOI”) increased 6.6%, or $31.5 million, to $512.1 million, compared to $480.6 million for the year ended December 31, 2019.

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• For additional information on 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.

As of year ended December 31, 2019 , our leased rate (which includes leases which have been executed, but which have not yet commenced) was 90.8% by GLA, a decrease of 120 basis points, compared to the year ended December 31, 2018 , and our occupancy rate was 89.9% by GLA.

Portfolio Performance

• For the year ended December 31, 2020, our leased rate (which includes leases which have been executed, but which have not yet commenced) was 89.8% by GLA, and our occupancy rate was 89.1% by GLA.

The leased rate for our Same-Property portfolio was 90.5%.

• During the year ended December 31, 2020, we executed 3.9 million square feet of GLA of new and renewal leases, or 15.2%, of the total GLA of our portfolio.

Tenant retention for the Same-Property portfolio was 83% as of December 31, 2019 .

Re-leasing spreads increased to 4.7% and tenant retention continued to be strong at 87% for the Same-Property portfolio as of December 31, 2020.

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.

During the year ended December 31, 2019 , we paid down approximately $97.4 million of our outstanding secured mortgage loans.

Additionally, in September 2019, HTALP refinanced $900.0 million in debt at 3.04% per annum blended interest rates by issuing notes due in 2026 and 2030 and paying off notes due in 2021 and 2022.

As of December 31, 2019 , we had total leverage, measured as debt less cash and cash equivalents to total capitalization, of 28.9% .

Total liquidity was $1.2 billion , inclusive of $900.0 million available on our unsecured revolving credit facility, $306.2 million of forward equity agreements, and cash and cash equivalents of $32.7 million as of December 31, 2019 .

For the year, HTA has now closed $560.5 million of investments totaling approximately 1.6 million square feet of GLA, with expected year-one contractual yields of approximately 6.1%, after operating synergies.

These properties were approximately 93% occupied as of closing, and are located within HTA's key markets.

Over 55% of these properties are located on or adjacent to hospital campuses, and, all were acquired on a fee-simple basis.

During the year ended December 31, 2019 , HTA completed the disposition of 4 MOBs for an aggregate gross sales price of $4.9 million , representing approximately 51,000 square feet of total GLA, and generating net losses of approximately $0.2 million .

In August 2018, our Board of Directors approved a stock repurchase plan authorizing us to purchase up to $300.0 million of our common stock from time to time.

During the year ended December 31, 2019 , we repurchased 345,786 shares of our outstanding common stock, for an aggregate amount of approximately $8.5 million under the stock repurchase plan.

As of December 31, 2019 , the remaining amount of common stock available for repurchase under the stock repurchase plan was approximately $224.3 million .

During 2019, HTA issued a total of approximately 21.6 million shares of common stock under its at-the-market (“ATM”) offering program.

Of these, approximately $11.1 million shares settled and the Company received net proceeds of approximately $323.4 million , adjusted for costs to borrow.

Accordingly, approximately 10.5 million shares are expected to settle in 2020 for net proceeds of approximately $306.2 million , subject to adjustments as provided for in the forward equity agreements.

• For the year ended December 31, 2020, HTA closed on approximately $191.7 million of MOB investments totaling approximately 600,000 square feet of GLA, with expected year-one contractual yields of approximately 6.0%.

These properties were approximately 94% leased as of closing, and are located within HTA's key markets.

• During 2020, HTA had the following development and redevelopment projects in place:

During 2020, HTA completed its initial ground-up development in Raleigh, North Carolina.

Total construction costs on this development were approximately $44 million and totaled approximately 127,000 square feet of GLA and is currently 77% leased.

◦ Developments:

During 2019, HTA announced agreements to develop two new on-campus MOBs located in the key markets of Dallas, Texas and Bakersfield, California with anticipated costs of approximately $90 million totaling approximately 191,000 square feet of GLA.

The new development projects have anticipated yields of over 6.5%.

In total, HTA now has development projects of approximately $112 million totaling approximately 242,000 square feet of GLA and are expected to be more than 72% pre-leased upon completion.

During 2020, HTA continued to develop three new on-campus MOBs located in the key markets of Miami, Florida;

Bakersfield, California;

and Dallas, Texas.

In total, HTA has development projects in process of approximately $110 million and totaling approximately 244,000 square feet of GLA.

They are expected to be more than 79% pre-leased upon completion.

◦ Redevelopments:

During 2019, HTA announced plans to redevelop two MOBs located in Los Angeles, California with estimated costs of approximately $20 million totaling approximately 105,000 square feet of GLA.

In total, HTA’s redevelopment projects have anticipated costs of approximately $64 million, covering approximately 230,000 square feet of GLA.

During 2020, HTA continued to redevelop two MOBs located in Los Angeles, California with estimated costs of approximately $20 million and totaling approximately 105,000 square feet of GLA.

• During the year ended December 31, 2020, HTA completed the disposition of one MOB for an aggregate gross sales price of $16.8 million, representing approximately 69,000 square feet of total GLA, and generating a net gain of approximately $7.6 million.

Additionally, during the year ended December 31, 2020, we sold part of our interest in undeveloped land in Miami, Florida for a gross sales price of $7.6 million, which resulted in a net gain of approximately $2.0 million.

Capital Asset and Liquidity

• During the year ended December 31, 2020, we remained focused on positioning our balance sheet to be poised for future investments.

In September 2020, HTALP issued $800.0 million of unsecured senior notes due 2031 at 2.00% per annum, allowing us to eliminate short-term revolver borrowings and near-term debt maturities until 2023 and beyond.

• As of December 31, 2020, we had total leverage, measured as debt less cash and cash equivalents to total capitalization, of 32.3%.

Total liquidity was $1.4 billion, inclusive of $1.0 billion available on our unsecured revolving credit facility, $277.5 million of forward equity agreements, and cash and cash equivalents of $115.4 million as of December 31, 2020.

• During 2020, HTA issued approximately 1.7 million shares of common stock under its at-the-market (“ATM”) offering program for net proceeds of approximately $50.0 million, adjusted for costs to borrow.

Approximately 9.4 million shares are expected to settle in 2021 for net proceeds of approximately $277.5 million, subject to adjustments as provided for in the applicable forward equity agreements.

• In September 2020, our Board of Directors approved a stock repurchase plan authorizing us to purchase up to $300.0 million of our common stock from time to time prior to the expiration of the plan on September 23, 2023.

As of December 31, 2020, the remaining amount of common stock available for repurchase under the stock repurchase plan was $300.0 million.

• For the year ended December 31, 2020, we declared dividends of $1.27 per share of common stock.

This marks the 7th consecutive year of dividend increases to our stockholders.

BUSINESS STRATEGIES

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To date, we have invested $7.5 billion to create one of the largest portfolios (based on GLA) of healthcare real estate that is focused on the MOB sector in the U.S.

We look to allocate capital to properties that exhibit the following key attributes:

We intend to allocate capital to properties that exhibit the following key attributes:

• Located on the campuses of, or aligned with, nationally and regionally recognized healthcare systems in the U.S .

We seek to invest in properties that have long-term value for healthcare providers, including those that benefit from their proximity to and/or affiliation with prominent healthcare systems.

We seek to invest in properties that we believe have long-term value for healthcare providers, including those that benefit from their proximity to and/or affiliation with prominent healthcare systems.

These healthcare systems typically possess high credit quality and are capable of investing capital into their campuses.

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• Located in core community outpatient locations .

We seek to invest in properties that will have long-term value for healthcare providers, including those that are located in key outpatient medical hubs.

We seek to invest in properties that we believe will have long-term value for healthcare providers, including those that are located in key outpatient medical hubs.

These properties benefit from their proximity to attractive patient populations, maintain a mix of physician practices and specialties, and are convenient for patients and physicians alike.

In addition, these properties and medical hubs can be centers for healthcare away from hospital campuses while benefiting from the advancement of healthcare technology, which allow for lower cost settings, more services and procedures to be performed away from hospitals, and the growing requirement for convenient healthcare.

We believe these factors ensure long-term tenant demand.

We believe these factors support long-term tenant demand.

At December 31, 2020, approximately 33% of our portfolio was located in core community outpatient locations.

• Attractive markets where we can maximize efficiencies through our asset management and leasing platform .

We seek to own MOBs in markets with attractive demographics, economic growth and high barriers to entry which support growing tenant demand.

We seek to own MOBs in markets that we believe possess attractive demographics, economic growth and high barriers to entry which support growing tenant demand.

We have developed a strong presence across 20 to 25 key markets since our inception, with approximately 94% of our total GLA located in the top 75 MSAs as of December 31, 2020.

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Our scale in markets has allowed us to create the largest, institutionally owned asset management platform in the sector, which includes leasing, property management, building maintenance, construction, and development capabilities.

In each of these markets, we have established a strong full-service operating 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.

In each of these markets, we have established a strong full-service operating platform that has allowed us to develop valuable relationships with health systems, physician practices, universities and regional development companies that have led to investment and leasing opportunities for us.

Our asset management platform utilizes our scale to provide services to our properties at cost effective rates and with a focus on generating cost efficiencies and superior service for our tenants.

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We actively invest in both multi-tenant properties, which generally have shorter-term leases in smaller spaces, and single-tenant properties, which generally have longer-term leases in larger spaces.

The multi-tenant buildings provide for lower lease rollover risks in any particular year and typically allow rents to reset to current market rates that may be higher than the in-place rental rates.

The multi-tenant buildings typically provide for lower lease rollover risks in any particular year and typically allow rents to reset to current market rates that may be higher than the in-place rental rates.

We believe single-tenant buildings provide steady long-term cash flow, but generally provide for more limited long-term growth.

• Credit-worthy tenants .

Our primary tenants are healthcare systems, academic medical centers and leading physician groups.

Our primary tenants are healthcare systems, university medical centers and leading physician groups.

These groups typically have strong and stable financial performance, which we believe helps ensure stability in our long-term rental income and tenant retention.

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A significant amount of our remaining rent comes from physician groups and medical healthcare system tenants that are credit-worthy based on our internal underwriting and due diligence, but do not have the size to benefit from a formal credit rating by a nationally recognized rating agency.

Key Market Focused Strategy and Investments

We plan to continue to grow externally through targeted investments and developments that improve the quality of our portfolio and are accretive to our cost of capital.

To achieve this growth in competitive markets we seek:

• Targeted property investments, generally located within our key markets where we have in-place scale where we expect to see continued growth and synergies.

These transactions allow us to focus on the quality of individual properties and to seek to ensure that they are accretive to our cost of capital.

• Long-term relationships with key industry participants.

We will continue our emphasis on long-term relationship building as we have since inception.

These relationships are cultivated by our senior management team with key industry participants, including health systems as well as local and regional developers, each of whom have traditionally provided us with valuable investment opportunities.

• Local knowledge through our internal full-service operating platform.

Our local personnel participate in local industry activities that can provide insights and access to potential opportunities.

Internal Growth through Proactive In-House Property Management and Leasing

Our asset management and leasing platform operated approximately 23.5 million square feet of GLA, or 95% of our total portfolio.

This is a significant increase since our public listing on the New York Stock Exchange (“NYSE”) in 2012 when we managed approximately 8.8 million square feet, or 70% , of our GLA.

Our asset management and leasing platform manages directly approximately 24.6 million square feet of GLA, or 97% of our total portfolio.

This is a significant increase since our public listing on the New York Stock Exchange (“NYSE”) in 2012 when we managed directly approximately 8.8 million square feet, or 70%, of our GLA.

We believe this direct asset management approach allows us to maximize our internal growth by improving occupancy, achieving operating efficiencies and creating long-term tenant relationships at our properties, resulting in optimized rental rates.

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• Maintaining regional offices in markets where we have a significant presence.

HTA has 31 local offices primarily located within our key markets across the U.S., including its corporate headquarters in Scottsdale, Arizona.

HTA has 31 local offices primarily located within our key markets across the U.S., including our corporate headquarters in Scottsdale, Arizona.

• Creating local relationships with local healthcare providers, including national and regional healthcare systems, physicians and other providers.

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• Utilizing local and regional economies of scale to focus on operating cost efficiencies for our properties and utilizing our building service operations to generate profits for our stockholders while providing more efficient services.

Key Market Focused Strategy and Investments

We plan to grow externally through targeted investments and developments that improve the quality of our portfolio and are accretive to our cost of capital.

To achieve this growth in competitive markets we seek:

Targeted property investments, generally located within our key markets.

These transactions allow us to focus on the quality of individual properties and ensure they are accretive to our cost of capital.

They also allow us to exhibit meaningful growth given our current size.

Long-term relationships with key industry participants.

We will continue our emphasis on long-term relationship building as we have since inception.

These relationships are cultivated by our senior management team, with key industry participants, including health systems as well as local and regional developers, which have traditionally provided us with valuable investment opportunities.

Local knowledge through our internal full-service operating platform.

Our local personnel participate in local industry activities that can provide insightful information with respect to potential opportunities.

Actively Maintain Conservative Capital Structure

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• Maintain a high level of liquidity.

As of December 31, 2019 , we had approximately $1.2 billion of liquidity, primarily consisting of $900.0 million available on our unsecured revolving credit facility, $306.2 million of forward equity agreements, and $32.7 million of cash and cash equivalents.

Utilize multiple capital sources, including public debt and equity, unsecured bank loans and secured property level debt.

As of December 31, 2020, we had approximately $1.4 billion of liquidity, primarily consisting of $1.0 billion available on our unsecured revolving credit facility, $277.5 million of forward equity agreements, and $115.4 million of cash and cash equivalents.

• Utilize multiple capital sources, including public debt and equity, and unsecured bank loans.

• Maintain well-laddered debt maturities, which extend through 2031 with no significant exposure in any one year.

As of December 31, 2019 , the weighted average remaining term of our debt portfolio was 6.3 years, including extension options.

As of December 31, 2020, the weighted average remaining term of our debt portfolio was 7.2 years.

HEALTHCARE INDUSTRY

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The older population group will increasingly require treatment and management of chronic and acute health ailments.

We believe much of this increased care will take place in lower cost outpatient settings, which should continue to support MOB demand in the long term.

We believe much of this increased care will take place in lower cost outpatient settings, which we believe should continue to support MOB demand in the long term.

In addition, the large millennial generation is just now starting to reach their thirties and form families.

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has increased over 24%.

Although the current political administration has sought to unsuccessfully repeal the Affordable Care Act, Medicaid expansion remains in place with some states seeking to expand coverage.

In November 2020, Joseph Biden was elected President, and in January 2021, the Democratic Party obtained control of the Senate.

As a result of these electoral developments, we believe that it is unlikely that continued legislative efforts will be pursued to repeal the Affordable Care Act.

Instead, we believe that it is possible that legislation will be pursued to enhance or reform the Affordable Care Act.

We are not able to state with certainty at this time what the impact of potential legislation will be on our business.

Thus far, the removal of the individual mandate in the Tax Cuts and Jobs Act (the “TCJA”) has seen limited impact.

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• Healthcare delivery continues to shift to outpatient settings driven by technological advancements, shifting consumer preferences and lower costs.

For 2021, Centers for Medicare & Medicaid Services ("CMS") added eleven new procedures to the list of ambulatory surgery center covered surgical procedures.

Additionally, CMS is increasing payment rates for certain qualifying ambulatory surgery centers resulting in a total estimated payment increase of approximately $120 million to ambulatory surgery centers for 2021 compared to 2020 Medicare payments, further supporting the shift of healthcare delivery to outpatient settings.

By 2021, the volume of procedures performed in ambulatory surgery centers is expected to increase by 35% when compared to 2015.

• An increase in medical office visits due to the overall rise in healthcare utilization which in turn has driven hiring within the healthcare sector.

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In addition, new development is primarily focused on off campus locations and in markets with growing populations.

Medical Office Buildings and COVID-19

During 2020, the novel coronavirus ("COVID-19") pandemic had a dramatic impact on the delivery of outpatient care.

In response to state and local restrictions and in an effort to accommodate community mitigation measures, many healthcare practices postponed elective visits and increased their use of telemedicine.

While the evolution of healthcare delivery began prior to the pandemic, we believe COVID-19 has highlighted the need for dynamic healthcare providers with the ability to shift with changes in market conditions.

In addition, we believe that the pandemic has accelerated the shift in medical care towards lower-cost outpatient settings.

Although outpatient visits fell by approximately 60% in the spring of 2020, by late summer 2020, many restrictions on travel and nonessential services were lifted.

By September 2020, outpatient visits had rebounded, returning to pre-pandemic levels.

However, future impacts to market dynamics as a result of the COVID-19 pandemic are not certain at this time.

PORTFOLIO OF PROPERTIES

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The Company is the largest owner of on-campus or adjacent MOBs in the country, with approximately 17.0 million square feet of GLA, or 67%, of our portfolio located in these locations.

The remaining 34% are located in core community outpatient locations where healthcare is increasingly being delivered.

Portfolio Diversification by Type

Annualized Base Rent (1)(2)

The remaining 33% are located in core community outpatient locations where we believe healthcare is increasingly being delivered.

Portfolio Diversification by Type Number of

Buildings Number of

States GLA (1)

Total GLA Annualized Base Rent (1)(2)

Percent of Annualized Base Rent

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Single-tenant 118 21 6,260 24.6 % $ 139,410 24.8 %

Multi-tenant 333 31 17,862 70.2 383,491 68.3

Other Healthcare Facilities

Hospitals 15 7 954 3.8 33,375 5.9

Senior care 3 1 354 1.4 5,645 1.0

Total 469 32 25,430 100 % $ 561,921 100 %

(1) Amounts presented in thousands.

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As of December 31, 2020, none of the tenants at our properties accounted for more than 4.2% of our annualized base rent.

The table below shows our key health system relationships as of December 31, 2019 .

The table below shows our key health system tenant relationships as of December 31, 2020.

Health System (1)

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Total Leased GLA (3)

Percent of Leased GLA

Annualized Base Rent (3)(4)

Percent of Leased GLA Annualized Base Rent (3)(4)

Percent of Annualized Base Rent

Highmark-Allegheny Health Network

Baylor Scott & White Health 6 819 3.6 % $ 23,095 4.1 %

HCA Healthcare 6 715 3.1 20,332 3.6

Highmark-Allegheny Health Network 9 927 4.0 17,382 3.1

Tenet Healthcare Corporation 7 562 2.5 13,724 2.4

Ascension 6 482 2.1 11,542 2.1

Tufts Medical Center 7 255 1.1 11,260 2.0

Steward Health Care 9 380 1.7 10,374 1.9

AdventHealth 5 400 1.7 9,599 1.7

Community Health Systems 8 385 1.7 7,754 1.4

CommonSpirit Health

Emblem Health 14 281 1.2 7,462 1.3

CommonSpirit Health 9 339 1.5 7,361 1.3

Harbin Clinic 7 316 1.4 7,097 1.3

Atrium Health

UNC Health Care

(1) The amounts in this table illustrate only direct leases with selected top health systems in our portfolio and are not inclusive of all health system tenants.

Mercy Health 6 270 1.2 6,960 1.2

Trinity Health 6 247 1.1 6,468 1.2

Community Health Network 3 289 1.3 6,258 1.1

6,667 29.2 % $ 166,668 29.7 %

(1) The amounts in this table illustrate only direct leases with selected leading health systems in our portfolio and are not inclusive of all health system tenants.

(2) Amounts presented in years.

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GEOGRAPHIC CONCENTRATION

As of December 31, 2019 , our portfolio was concentrated in key markets that we have determined to be strategic based on demographic trends, projected demand for healthcare and overall asset management efficiencies.

Investment (1)

Percent of Investment

Total GLA (1)

Percent of Portfolio

Annualized Base Rent (1)(2)

As of December 31, 2020, our portfolio was concentrated in key markets that we believe are strategic based on demographic trends, projected demand for healthcare and overall asset management efficiencies.

Key Markets Investment (1)

Percent of Investment Total GLA (1)

Percent of Portfolio Annualized Base Rent (1)(2)

Percent of Annualized Base Rent

Dallas, TX $ 868,274 11.6 % 2,101 8.3 % $ 54,498 9.7 %

Houston, TX 465,869 6.2 1,665 6.5 34,639 6.2

Boston, MA 397,693 5.3 965 3.8 35,000 6.2

Tampa, FL 347,764 4.6 954 3.8 24,566 4.4

Hartford/New Haven, CT 347,104 4.6 1,165 4.6 25,218 4.5

Atlanta, GA 338,886 4.5 1,120 4.4 24,911 4.4

Orange County/Los Angeles, CA 326,070 4.4 719 2.8 17,202 3.1

Miami, FL 286,127 3.8 1,172 4.6 26,905 4.8

Indianapolis, IN 281,769 3.8 1,396 5.5 26,035 4.6

Phoenix, AZ 267,781 3.6 1,316 5.2 24,787 4.4

Denver, CO 265,807 3.6 607 2.4 12,024 2.1

New York, NY 256,144 3.4 615 2.4 15,621 2.8

Chicago, IL 231,178 3.1 454 1.8 13,675 2.4

Charlotte, NC 214,887 2.9 922 3.6 18,535 3.3

Raleigh, NC 211,805 2.8 749 2.9 18,165 3.2

Albany, NY 170,071 2.3 833 3.3 15,569 2.8

Austin, TX 164,425 2.2 409 1.6 9,172 1.6

Orlando, FL 156,300 2.1 513 2.0 12,466 2.2

Pittsburgh, PA 148,612 2.0 1,094 4.3 19,901 3.6

Milwaukee, WI

El Paso, TX 121,409 1.6 475 1.9 8,800 1.6

Top 20 MSAs 5,867,975 78.4 19,244 75.7 437,689 77.9

Additional Top MSAs 1,192,037 15.9 4,450 17.5 88,747 15.8

Total Key Markets & Top 75 MSAs

Total Key Markets in Top 75 MSAs $ 7,060,012 94.3 % 23,694 93.2 % $ 526,436 93.7 %

(1) Amounts presented in thousands.

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However, President Trump and Congressional Republicans promised they would seek the repeal of the ACA.

On January 20, 2017, newly-sworn-in President Trump issued an executive order aimed at seeking the prompt repeal of the ACA, and directed the heads of all executive departments and agencies to minimize the economic and regulatory burdens of the ACA to the maximum extent permitted by law.

In addition, there have been and continue to be numerous Congressional attempts to amend and repeal the ACA.

While no full repeal bills have passed both chambers of Congress, the 2017 Tax Cuts and Jobs Act eliminated the tax penalty associated with a key provision of the ACA known as the “individual mandate” beginning January 1, 2019.

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Court of Appeals for the Fifth Circuit ruled that the ACA’s “individual mandate” was unconstitutional but sent the case back to the District Court for further analysis of whether the entire ACA is also rendered unconstitutional.

The ACA will remain law while the case proceeds through the appeals process;

however, the case creates additional uncertainty as to whether any or all of the ACA could be struck down, which creates risk for the health care industry.

We cannot predict whether any future attempts to amend or repeal the ACA will be successful.

The future of the ACA is uncertain and any changes to existing laws and regulations, including the ACA’s repeal, modification or replacement, could have a long-term financial impact on the delivery of and payment for healthcare.

Both our tenants and us may be adversely affected by the law or its repeal, modification or replacement.

In November 2020, Joseph Biden was elected President, and in January 2021, the Democratic Party obtained control of the Senate.

As a result of these electoral developments, we believe it is unlikely that continued legislative efforts will be pursued to repeal the ACA.

Instead, we believe it is possible that legislation will be pursued to enhance or reform the ACA.

We are not able to state with certainty at this time what the impact of potential legislation will be on our business.

Reimbursement Programs.

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Further, revenue realizable under third-party payor agreements can change after examination and retroactive adjustment by payors during the claims settlement processes or as a result of post-payment audits.

Payors may disallow requests for reimbursement based on

determinations that certain costs are not reimbursable or reasonable, because additional documentation is necessary or because certain services were not covered or were not medically necessary.

Amendments to or repeal of the ACA and regulatory changes could impose further limitations on government and private payments to healthcare providers.

Payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable, because additional documentation is necessary or because certain services were not covered or were not medically necessary.

Amendments to the ACA and regulatory changes could impose further limitations on government and private payments to healthcare providers.

The ACA expanded Medicaid coverage to all individuals under age 65 with incomes up to 133% of the federal poverty level.

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Further, the U.S.

Supreme Court held in 2012 that states could not be required to expand their Medicaid programs, which has resulted in some states deciding not to expand their Medicaid programs.

More recently, the Trump administration has enacted, or is considering enacting, measures designed to reduce Medicaid expenditures.

Supreme Court held in

2012 that states could not be required to expand their Medicaid programs, which has resulted in some states deciding not to expand their Medicaid programs.

In some other cases, states have enacted or are considering enacting measures designed to reduce their Medicaid expenditures and to make changes to private healthcare insurance.

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Although their impact is difficult to predict, these laws, initiatives and CMS rules may adversely impact medical providers’ reimbursement and our tenants’ ability to make rent payments to us.

In November 2020, Joseph Biden was elected President, and in January 2021, the Democratic Party obtained control of the Senate.

At this time, we are not able to state with certainty what the impact of any potential legislation may have on our business.

Fraud and Abuse Laws.

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These types of actions may result in monetary penalties, punitive sanctions, damage assessments, imprisonment, increased governmental oversight, denial of Medicare and Medicaid payments and/or exclusion from the Medicare and Medicaid programs.

Investigation by a federal or state governmental body for violation

of fraud and abuse laws, imposition of any of these penalties upon one of our tenants, and civil litigation could jeopardize that tenant’s ability to operate or to make rent payments to us.

Investigation by a federal or state governmental body for violation of fraud and abuse laws, imposition of any of these penalties upon one of our tenants, and civil litigation could jeopardize that tenant’s ability to operate or to make rent payments to us.

Healthcare Licensure and Certification.

Some of our medical properties and our tenants may require a license, multiple licenses, a certificate of need (“CON”), or other certification to operate.

Failure to obtain a license, CON, other certification, or loss of a required license, CON, or some other certification would prevent a facility from operating in the manner intended by the tenant.

Failure to obtain a license, CON, other certification, or loss of a required license, CON, or some other certification would prevent a facility from operating in the manner intended by

This event could adversely affect our tenants’ ability to make rent payments to us.

State and local laws also may regulate plant expansion, including the addition of new beds or services or acquisition of medical equipment and the construction of healthcare-related facilities, by requiring a CON or other similar approval.

State and local laws also may regulate physical plant expansion, including the addition of new beds or services or acquisition of medical equipment and the construction of healthcare-related facilities, by requiring a CON or other similar approval.

State CON laws are not uniform throughout the U.S.

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However, if we were required to make significant expenditures under applicable regulations, our financial condition, results of operations, cash flow, ability to satisfy our debt service obligations and to pay distributions to our stockholders could be adversely affected.

HUMAN CAPITAL

As of December 31, 2020, we had 333 employees, of which less than 1% are subject to a collective bargaining agreement.

Our commitment to our employees continues to be a high priority for us.

In addition to base salary, our annual compensation and benefit plans includes short-term incentive bonuses, long-term incentive stock plans, a 401(k) plan, healthcare and insurance benefits, health savings accounts, paid time off, tuition assistance, employee assistance programs, among other benefits.

We are committed to the health, safety and well-being of all of our employees.

In response to the COVID-19 pandemic, we have taken additional precautionary measures to adjust our business operations and to address the needs of our employees.

In addition to our ongoing sponsorship of various health and wellness initiatives to aid in the overall well-being of our employees, we have provided hazard pay, deployed comprehensive personal protective equipment, and have implemented many new protocols both in our tenant buildings and regional office locations based on the Center for Disease Control and other government mandated or recommended guidelines.

We support employee development through numerous company-sponsored training programs and professional development opportunities.

Our employees regularly participate in various industry-specific training programs and conferences, and are encouraged to seek out relevant certifications or accreditations that provide additional expertise in real estate and other relevant sector-specific subjects.

In addition, we provide internal cross-functional training opportunities in order that our employees may familiarize themselves with multiple aspects of our business.

We filed an election with our 2007 federal income tax return to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business