What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-24 compared with 2020-02-18 · 133 added, 96 removed, 368 unchanged (38% of the section changed)

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Portfolio Operating Performance

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, 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 was $53.5 million, compared to $30.8 million for the year ended December 31, 2019.

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We expect to establish this scale across 20 to 25 key markets as our portfolio expands.

During the year ended December 31, 2019 , HTA has 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, located in Hilton Head, South Carolina and Santa Fe, New Mexico for an aggregate gross sales price of $4.9 million , representing approximately 51 thousand square feet of GLA, and generating net losses of $0.2 million .

During the year ended December 31, 2019 , we 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 are expected to be more than 73% pre-leased with anticipated yields over 6.5%.

Additionally in 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.

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

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

• During the year ended December 31, 2020, we completed the disposition of one MOB located in Kansas City for an aggregate gross sales price of $16.8 million, representing approximately 69,000 square feet of GLA, and generating net gains 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.

• During the year ended December 31, 2020, we completed the initial development started by HTA.

This 127,000 SF Class A MOB development in Raleigh, North Carolina is currently 77% leased.

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, totaling approximately 244,000 square feet of GLA, and that are expected to be more than 79% pre-leased upon completion.

Additionally, 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.

Internal Growth through Proactive In-House Property Management and Leasing

We believe we have the largest full-service operating platform in the medical office sector that consists of our in-house property management and leasing which allows us to better manage and service our existing portfolio.

We believe we have the largest full-service operating platform in the medical office sector that consists of our in-house property management and leasing functions which allows us to better manage and service our existing portfolio.

In each of these markets, we have established a strong in-house asset management and leasing platform that has allowed us to develop valuable relationships with health systems, physician practices, universities, and regional development firms that have led to investment and leasing opportunities.

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

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 .

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

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

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 prior to the expiration thereof on June 7, 2020.

During the year ended December 31, 2019 , we repurchased 345,786 shares of our outstanding common stock, at an average price of $24.65 per share, for an aggregate amount of approximately $8.5 million , pursuant to this 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 .

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.

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

• During the year ended December 31, 2020, we paid down approximately $114.1 million of outstanding secured mortgage loans, resulting in our elimination of any secured borrowings.

Although not anticipated, we may finance transactions with secured borrowings or acquire buildings and assume debt if required or economically beneficial.

• 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 thereof 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.

• In November 2019, we refreshed our at the market ("ATM") offering program of common stock for an additional aggregate sales amount of up to $750.0 million.

During the year ended December 31, 2019 , we issued a total of approximately 21.6 million shares of common stock under our ATM.

Of these, 11.1 million shares settled and we received net proceeds of approximately $323.4 million , adjusted for costs to borrow equating to a net price to us of $29.14 per share of common stock.

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 in the forward equity agreements.

On February 13, 2020 , our Board of Directors announced a quarterly dividend of $0.315 per share of common stock and per OP Unit.

This program remains active as of December 31, 2020.

Upon expiration, it is our intention to refresh the existing ATM program or establish a new ATM offering program.

• During the year ended December 31, 2020, we issued approximately 1.7 million shares of our common stock under our ATM program for net proceeds of approximately $50.0 million, adjusted for costs to borrow equating to a net price to us of $29.86 per share of common stock.

Additionally, we have four outstanding forward sale arrangements pursuant to forward equity agreements, with anticipated net proceeds of $277.5 million, and with an average share price of $29.46, subject to adjustments as provided in the forward equity agreements.

All four of these forward sale arrangements mature in accordance with their applicable contract terms by the middle of 2021, however, the agreements provide for mechanisms to extend settlement upon mutual agreement by us and the counterparty/distribution agent.

Critical Accounting Policies

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Recoverability of Real Estate Investments

Real estate investments are evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

Real estate investments are evaluated for potential impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Impairment losses are recorded when indicators of impairment are present and the carrying amount of the asset is greater than the sum of future undiscounted cash flows expected to be generated by that asset over the remaining expected holding period.

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The fair value is generally based on discounted cash flow analyses.

In performing the analysis we consider executed sales agreements or management’s best estimate of market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods and capital requirements.

In performing the analysis we utilize a variety of methodologies, including undiscounted cash flow models for certain properties that meet quantitative and/or qualitative thresholds.

Our methodology contemplates in-place cash flows from existing tenants, with certain assumptions for future anticipated occupancy levels, lease-up and absorption periods after known or estimated vacating tenants, inflationary adjustments for rents and operating expenses, market lease assumptions based on in-place rents and comparative properties' rates, ordinary tenant concessions, such as free rent, and planned tenant improvement and maintenance or other capital expenditures, as well as other initial direct costs, such as leasing commissions paid to third-parties.

We also utilize capitalization rates to arrive at a final value of our property, less estimated selling costs.

Further, we also will consider executed sales agreements or management’s best estimate of market comparables in arriving at our total undiscounted cash flows.

Recently Issued or Adopted Accounting Pronouncements

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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 listed in Part I, Item 1A - Risk Factors, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the investment, management and operation of our properties.

The economic uncertainty created by the COVID-19 pandemic and the potential for new strains of SARS-CoV-2 or entirely new types of viruses and/or global propagation of communicable disease continue to present risks to the Company and the future results of our operations.

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 federal, state and local agencies or foreign governments, 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, difficulty in maintaining an active workforce, and constraints on our ability to secure capital or financing, among other factors.

Please refer to Part I, Item 1A - Risk Factors for a comprehensive summary of these and other risks associated with pandemics and other health concerns.

We are not aware of any other material trends or uncertainties, other than national economic conditions affecting real estate generally and the risk factors previously listed in Part I, Item 1A - Risk Factors, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the investment, management and operation of our properties.

Rental Income

The amount of rental income generated by our properties depends principally on our 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.

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 tenant vacancies or unscheduled lease terminations at the then applicable rental rates.

Negative trends in one or more of these factors could adversely affect our rental income in future periods.

Investment Activity

During the years ended December 31, 2019 , 2018 and 2017 , we had investments with an aggregate purchase price of $560.5 million , $17.8 million and $2.7 billion , respectively.

During the years ended December 31, 2020, 2019 and 2018, we had investments with an aggregate purchase price of $191.7 million, $560.5 million and $17.8 million, respectively.

During the years ended December 31, 2020, 2019 and 2018, we had dispositions with an aggregate gross sales price of $24.3 million, $4.9 million and $308.6 million, respectively.

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Year Ended December 31,

2020 2019 Change % Change

Rental income $ 738,414 $ 691,527 $ 46,887 6.8 %

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Total revenues 738,965 692,040 46,925 6.8

Rental 226,859 211,479 15,380 7.3

General and administrative 42,969 41,360 1,609 3.9

Transaction 965 2,350 (1,385) (58.9)

Depreciation and amortization 303,828 290,384 13,444 4.6

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Total expenses 669,234 642,205 27,029 4.2

(Loss) gain on sale of real estate, net

(Loss) gain on extinguishment of debt, net

Gain (loss) on sale of real estate, net 9,590 (154) 9,744 NM

Loss on extinguishment of debt, net (27,726) (21,646) (6,080) (28.1)

Income from unconsolidated joint venture 1,612 1,882 (270) (14.3)

Other income 301 841 (540) (64.2)

Net income $ 53,508 $ 30,758 $ 22,750 74.0 %

NOI $ 512,106 $ 480,561 $ 31,545 6.6 %

Same-Property Cash NOI $ 457,087 $ 449,850 $ 7,237 1.6 %

Comparison of the years ended December 31, 2019 and 2018, respectively, and related discussions can be found in the Item 7.

MD&A section under the Results of Operations header in our Annual Report on Form 10-K as filed on February 19, 2019 for the year ended December 31, 2018 .

MD&A section under the Results of Operations header in our Annual Report on Form 10-K as filed on February 18, 2020 for the year ended December 31, 2019 which is herein incorporated by reference.

Rental Income

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Year Ended December 31,

2020 2019 Change % Change

Contractual rental income $ 698,962 $ 658,231 $ 40,731 6.2 %

Straight-line rent and amortization of above and (below) market leases

24,115 18,653 5,462 29.3

Other rental revenue 15,337 14,643 694 4.7

Total rental income $ 738,414 $ 691,527 $ 46,887 6.8 %

Contractual rental income, which includes expense reimbursements, decreased 9.2 million for the year ended December 31, 2019 , compared to the year ended December 31, 2018 .

The decrease was primarily due to $17.4 million of reduced contractual rent as a result of buildings we sold during 2018 and 2019 and $13.9 million of tenant paid property tax recorded in 2018 that we no longer record due to the adoption of Topic 842, partially offset by $12.9 million of additional contractual rental income from our 2018 and 2019 acquisitions, and contractual rent increases for the year ended December 31, 2019 .

Contractual rental income, which includes expense reimbursements, increased $40.7 million for the year ended December 31, 2020, compared to the year ended December 31, 2019.

The increase was primarily due to $40.1 million of additional contractual rental income from our 2019 and 2020 acquisitions, and contractual rent increases for the year ended December 31, 2020.

Average starting and expiring base rents for new and renewal leases consisted of the following for the years ended December 31, 2020 and 2019, respectively (in thousands, except in average base rents per square foot of GLA):

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Year Ended December 31,

New leases 7.6 7.3

Renewal leases 5.3 7.2

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For the years ended December 31, 2020 and 2019, rental expenses attributable to our properties were $226.9 million and $211.5 million, respectively.

The decrease in rental expenses is primarily due to $13.9 million of tenant paid property taxes recorded in 2018 that we no longer record due to the adoption of Topic 842, partially offset by $4.8 million of additional rental expenses associated with our 2018 and 2019 acquisitions for the year ended December 31, 2019 .

The increase in rental expenses is primarily due to $15.2 million of additional rental expenses associated with our 2019 and 2020 acquisitions for the year ended December 31, 2020.

General and Administrative Expenses

For the years ended December 31, 2020 and 2019 general and administrative expenses were $43.0 million and $41.4 million, respectively.

These increases were primarily due to an increase in non-cash compensation expense and an overall increase in head count due to the continued growth of the company as well as initial direct costs formerly capitalized under Topic 840 that do not meet capitalization criteria under Topic 842.

These increases were primarily due to inflationary salary adjustments and normal annual vendor increases.

General and administrative expenses include such costs as salaries, corporate overhead and professional fees, among other items.

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For the years ended December 31, 2020 and 2019, transaction expenses were $1.0 million and $2.4 million, respectively.

The increase in 2019 compared to 2018 was primarily due to increased acquisition activity in 2019 as compared to 2018.

The decrease in 2020 compared to 2019 was primarily due to decreased acquisition activity in 2020 as compared to 2019.

Depreciation and Amortization Expense

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These increases were associated with our 2019 and 2020 investments, partially offset by buildings we sold during 2019 and 2020.

During the year ended December 31, 2019 , we recorded no impairment charges.

During the year ended December 31, 2018 , we recorded impairment charges of $8.9 million which related to six MOBs located in Tennessee, Texas and South Carolina.

Interest Expense

Interest expense decreased by $2.0 million during the year ended December 31, 2020 compared to 2019.

For the year ended December 31, 2019 , the decrease was primarily the result of refinancing $900 million in long-term senior unsecured notes in September 2019.

The issuance included $650.0 million in new 3.10% Senior Notes due 2030, and an additional issuance of $250.0 million in HTA's existing 3.50% Senior Notes due 2026 at a yield to maturity of 2.89%.

Net proceeds from the issuance were used to redeem the $300.0 million in 3.375% Senior Notes due 2021 and the $400.0 million in 2.95% Senior Notes due 2022, and to pay down the unsecured revolving credit facility.

For the year ended December 31, 2020, the decrease was primarily due to lower average interest rates as compared to 2019 and the payoff of secured mortgage loans.

To achieve our objectives, we borrow at both fixed and variable rates.

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We do not enter into derivative or interest rate transactions for speculative purposes.

(Loss) Gain on Sale of Real Estate

For the year ended December 31, 2019 , we realized a net loss of $0.2 million from the disposition of four MOBs located in South Carolina and New Mexico.

For the year ended December 31, 2018 , we realized a net gain on the sale of real estate of $166.0 million .

These gains were primarily the result of the Greenville Disposition.

See Note 4 - Dispositions and Impairment in the accompanying consolidated financial statements in Part IV, Item 15 for more detail on the Greenville Disposition.

Gain (loss) on Extinguishment of Debt

For the year ended December 31, 2019 , we realized a net loss on the extinguishment of debt of $21.6 million .

For the year ended December 31, 2018 , we realized a net gain on the extinguishment of debt of $0.2 million , respectively.

The loss in 2019 was related to make-whole provisions in debt we settled.

The gain in 2018 was primarily due to the prepayment of fixed rate mortgages which we had associated above market debt, partially offset by a loss on extinguishment of debt related to the Greenville Disposition.

Net income decreased $186.9 million to $30.8 million for the year ended December 31, 2019 , compared to $217.6 million for the year ended December 31, 2018 .

This decrease was primarily the result of the $21.6 million loss on extinguishment of debt for the year ended December 31, 2019 and the $166.0 million net gain on the sale of real estate we realized during the year ended December 31, 2018 offset by continued growth in our operations and improved operating efficiencies.

Gain (loss) on Sale of Real Estate

For the year ended December 31, 2020, we realized a net gain of $9.6 million from the disposition of one MOB located in Kansas as well as the sale of part of our interest in undeveloped land in Miami, Florida.

For the year ended December 31, 2019, we realized a net loss on the sale of real estate of $0.2 million from the disposition of four MOBs located in South Carolina and New Mexico.

See Note 4 - Dispositions and Impairment in the accompanying consolidated financial statements in Part IV, Item 15 for more detail on the dispositions.

Loss on Extinguishment of Debt

For the years ended December 31, 2020 and 2019, we realized a net loss on the extinguishment of debt of $27.7 million and $21.6 million, respectively, related to make-whole provisions in the redemption of senior unsecured notes.

Net income increased $22.7 million to $53.5 million for the year ended December 31, 2020, compared to $30.8 million for the year ended December 31, 2019.

This increase was primarily the result of continued new investment activity, growth in operations and improved operating efficiencies.

NOI and Same-Property Cash NOI

NOI increased $31.5 million to $512.1 million for the year ended December 31, 2020, compared to the year ended December 31, 2019.

The increase was primarily due to $10.3 million of additional NOI from our 2018 and 2019 acquisitions for the year ended December 31, 2019 , partially offset by a decrease in NOI as a result of the buildings we sold during 2018 and 2019 and a reduction in straight-line rent from properties we owned more than a year.

The increase was primarily due to $28.0 million of additional NOI from our 2019 and 2020 acquisitions for the year ended December 31, 2020.

Same-Property Cash NOI increased $7.2 million, or 1.6%, to $457.1 million for the year ended December 31, 2020, compared to $449.9 million for the year ended December 31, 2019.

These increases were primarily the result of rent escalations and improved operating efficiencies offset by a slight decrease in average occupancy.

These increases were primarily the result of contractual rent escalations and improved operating efficiencies offset by a slight decrease in average occupancy.

Non-GAAP Financial Measures

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(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.

(ii) gain or loss on extinguishment of debt;

(iii) noncontrolling 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.

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In addition, the amounts included in the calculation of FFO and Normalized FFO are generally the same for HTALP and HTA, except for net income or loss attributable to common stockholders/unitholders, noncontrolling income or loss from OP Units included in diluted shares (only applicable to the Company) and the weighted average shares of our common stock or HTALP OP Units outstanding.

The following is the reconciliation of HTA’s FFO and Normalized FFO to net income attributable to common stockholders for the years ended December 31, 2019 and 2018 , respectively (in thousands, except per share data):

The following is the reconciliation of HTA’s FFO and Normalized FFO to net income attributable to common

stockholders for the years ended December 31, 2020 and 2019, respectively (in thousands, except per share data):

Year Ended December 31,

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Depreciation and amortization expense related to investments in real estate

Loss (gain) on sale of real estate, net

299,722 287,572

(Gain) loss on sale of real estate, net (9,590) 154

Proportionate share of joint venture depreciation and amortization

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Transaction expenses 965 2,350

Gain on change in fair value of derivative financial instruments, net

Loss (gain) on extinguishment of debt, net

Loss on extinguishment of debt, net 27,726 21,646

Noncontrolling income from OP Units included in diluted shares

Other normalizing items, net

Other normalizing adjustments (1)

Normalized FFO attributable to common stockholders $ 379,311 $ 344,272

Net income attributable to common stockholders per diluted share

$ 0.24 $ 0.14

FFO adjustments per diluted share, net

FFO attributable to common stockholders per diluted share

$ 1.56 $ 1.53

Normalized FFO adjustments per diluted share, net

Normalized FFO attributable to common stockholders per diluted share

$ 1.71 $ 1.64

Weighted average diluted common shares outstanding

221,666 209,605

(1) Other normalizing adjustments includes the following:

Non-recurring bad debt of $4,672 thousand, incremental hazard pay to facilities employees of $314 thousand, and incremental personal protective equipment of $45 thousand for the year ended December 31, 2020.

The following is the reconciliation of HTALP’s FFO and Normalized FFO to net income attributable to common unitholders for the years ended December 31, 2020 and 2019, respectively (in thousands, except per unit data):

Year Ended December 31,

Net income attributable to common unitholders

Net income attributable to common OP unitholders $ 53,508 $ 30,692

Depreciation and amortization expense related to investments in real estate

Loss (gain) on sale of real estate, net

299,722 287,572

(Gain) loss on sale of real estate, net (9,590) 154

Proportionate share of joint venture depreciation and amortization

FFO attributable to common unitholders

FFO attributable to common OP unitholders $ 345,589 $ 320,276

Transaction expenses 965 2,350

Gain on change in fair value of derivative financial instruments, net

Loss (gain) on extinguishment of debt, net

Other normalizing items, net

Normalized FFO attributable to common unitholders

Net income attributable to common unitholders per diluted unit

FFO adjustments per diluted unit, net

FFO attributable to common unitholders per diluted unit

Normalized FFO adjustments per diluted unit, net

Normalized FFO attributable to common unitholders per diluted unit

Weighted average diluted common units outstanding

Loss on extinguishment of debt, net 27,726 21,646

Other normalizing adjustments (1)

Normalized FFO attributable to common OP unitholders $ 379,311 $ 344,272

Net income attributable to common OP unitholders per diluted OP unit $ 0.24 $ 0.15

FFO adjustments per diluted OP unit, net 1.32 1.38

FFO attributable to common OP unitholders per diluted OP unit $ 1.56 $ 1.53

Normalized FFO adjustments per diluted OP unit, net 0.15 0.11

Normalized FFO attributable to common OP unitholders per diluted OP unit $ 1.71 $ 1.64

Weighted average diluted common OP units outstanding 221,666 209,605

(1) Other normalizing adjustments includes the following:

NOI, Cash NOI and Same-Property Cash NOI

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(i) straight-line rent adjustments;

(ii) amortization of below and above market leases/leasehold interests;

(ii) amortization of below and above market leases/leasehold interests and other GAAP adjustments;

(iii) notes receivable interest inc ome;

and (iv) other GAAP adjustments.

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.

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Year Ended December 31,

Net income $ 53,508 $ 30,758

General and administrative expenses 42,969 41,360

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Depreciation and amortization expense

303,828 290,384

Interest expense

Loss (gain) on sale of real estate, net

Loss (gain) on extinguishment of debt, net

94,613 96,632

(Gain) loss on sale of real estate, net (9,590) 154

Loss on extinguishment of debt, net 27,726 21,646

Income from unconsolidated joint venture (1,612) (1,882)

Other income (301) (841)

NOI $ 512,106 $ 480,561

Straight-line rent adjustments, net (15,971) (9,861)

Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments (1)

(2,722) (3,347)

Notes receivable interest income (161) (96)

Other normalizing adjustments (2)

Cash NOI $ 498,283 $ 467,257

The following is the reconciliation of HTA’s and HTALP’s Same-Property Cash NOI to Cash NOI for the years ended December 31, 2020 and 2019, respectively (in thousands):

Year Ended December 31,

Cash NOI $ 498,283 $ 467,257

Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI

(36,408) (9,273)

Redevelopment Cash NOI 698 (2,635)

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Same-Property Cash NOI (3)

$ 457,087 $ 449,850

(1) The presentation includes certain adjustments to allow for the consistent treatment of items impacted by Topic 842-Leases.

(2) Other normalizing adjustments includes the following:

(3) Same-Property includes 399 buildings for the years ended December 31, 2020 and 2019.

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Investments and maturing indebtedness may require funds from the issuance of debt and/or equity securities or proceeds from sales of real estate.

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

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

In addition, we had unencumbered assets with a gross book value of $7.9 billion.

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The following is a summary of our cash flows for the years ended December 31, 2020, 2019 and 2018, respectively (in thousands):

Year Ended December 31,

Current Year Change

Prior Year Change

Year Ended December 31, Current Year Change Prior Year Change

2020 2019 2018

Cash, cash equivalents and restricted cash - beginning of year $ 37,616 $ 133,530 $ 118,560 $ (95,914) $ 14,970

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Cash, cash equivalents and restricted cash - end of year $ 118,765 $ 37,616 $ 133,530 $ 81,149 $ (95,914)

Net cash provided by operating activities increased in 2018 primarily due to the impact of our 2017 and 2018 acquisitions, contractual rent increases and improved operating efficiencies, partially offset by our 2017 and 2018 dispositions.

Net cash provided by operating activities increased in 2020 primarily due to the impact of our 2020 and 2019 acquisitions, contractual rent increases and improved operating efficiencies.

We anticipate cash flows from operating activities to increase as a result of the above items and continued leasing activity in our existing portfolio.

For the year ended December 31, 2019 , net cash used in investing activities primarily related to the investment in real estate of $553.3 million , capital expenditures of $91.5 million and development costs of $28.1 million offset by proceeds from the sale of real estate of $4.9 million .

For the year ended December 31, 2018 , net cash provided by investing activities primarily related to proceeds from the sale of real estate of $305.1 million , which was partially offset by capital expenditures of $77.9 million and development of real estate of $34.3 million .

For the year ended December 31, 2017 , net cash used in investing activities primarily related to the investment in real estate of $2.4 billion , investment in unconsolidated joint venture of $68.8 million , and capital expenditures of $64.8 million , which was partially offset by proceeds from the sale of real estate of $80.6 million .

For the year ended December 31, 2019 , net cash provided by financing activities primarily related to the proceeds from unsecured senior notes of $906.9 million , net proceeds of shares of common stock issued of $323.4 million , and net borrowings under our revolving credit facility of $100.0 million which was partially offset by payments on our unsecured senior notes of $700.0 million , dividends paid to holders of our common stock of $256.1 million , and payments on our secured mortgage loans of $97.4 million , and the repurchase and cancellation of common stock of $12.2 million .

For the year ended December 31, 2018 , net cash used in financing activities primarily related to dividends paid to holders of our common stock of $252.7 million , payments on our secured mortgage loans of $241.0 million , and repurchases of our common stock of $70.3 million , which was partially offset by net proceeds of shares of common stock issued of $72.8 million .

For the year ended December 31, 2017 , net cash provided by financing activities primarily related to the net proceeds of shares of common stock issued of $1.7 billion and net proceeds on the issuance of senior notes of $900.0 million , which was partially offset by dividends paid to holders of our common stock of $207.1 million , net payments on our unsecured revolving credit facility of $88.0 million and payments on our secured mortgage loans of $77.0 million .

For the year ended December 31, 2020, net cash used in investing activities primarily related to the investment in real estate of $185.3 million, capital expenditures of $74.7 million and development costs of $77.1 million, partially offset by proceeds from the sale of real estate of $22.9 million.

For the year ended December 31, 2019, net cash used in investing activities primarily related to investments in real estate of $553.3 million, capital expenditures of $91.5 million and development costs of $28.1 million, partially offset by proceeds from the sale of real estate of $4.9 million.

For the year ended December 31, 2018, net cash provided by investing activities primarily related to proceeds from the sale of real estate of $305.1 million, which was partially offset by capital expenditures of $77.9 million and development of costs of $34.3 million.

For the year ended December 31, 2020, net cash provided by financing activities primarily related to the proceeds from unsecured senior notes of $793.6 million and net proceeds of shares of common stock issued of $50.0 million, offset by payments on our unsecured senior notes of $300.0 million, dividends paid to holders of our common stock of $275.8 million, payments on our secured mortgage loans of $114.1 million, net payments under our revolving credit facility of $100.0 million, and the repurchase and cancellation of common stock of $5.2 million.

For the year ended December 31, 2019, net cash provided financing activities primarily related to the proceeds from unsecured senior notes of $906.9 million, net proceeds of shares of common stock issued of $323.4 million, and net borrowings under our revolving credit facility of $100.0 million which was partially offset by payments on our unsecured senior notes of $700.0 million, dividends paid to holders of our common stock of $256.1 million, payments on our secured mortgage loans of $97.4 million, and repurchase and cancellation of our common stock of $12.2 million.

For the year ended December 31, 2018, net cash used in financing activities primarily related to dividends paid to holders of our common stock of $252.7 million, payments on our secured mortgage loans of $241.0 million, and the repurchases of our common stock of $70.3 million, which was partially offset by net proceeds of shares of common stock issued of $72.8 million.

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.

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.

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It is our intention to continue to pay dividends.

However, our Board of Directors

may reduce our dividend rate and we cannot guarantee the timing and amount of dividends that we may pay in the future, if any.

However, our Board of Directors may reduce our dividend rate and we cannot guarantee the timing and amount of dividends that we may pay in the future, if any.

For the year ended December 31, 2020, we paid cash dividends of $275.8 million on our common stock.

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Unsecured Revolving Credit Facility

As of December 31, 2019 , $900.0 million was available on our $1.0 billion unsecured revolving credit facility.

As of December 31, 2020, the full $1.0 billion was available on our $1.0 billion unsecured revolving credit facility.

Our unsecured revolving credit facility matures in June 2022.

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Fixed Rate Mortgages

During the year ended December 31, 2019 , we made payments on our fixed rate mortgages of $97.4 million and have $97.4 million of principal payments due in 2020 .

During the year ended December 31, 2020, we made payments on our fixed rate mortgages of $114.1 million and as of December 31, 2020, we had no fixed rate mortgages outstanding.

Commitments and Contingencies

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Payment Due by Period

Less than 1 Year

More than 5 Years

Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Total

Debt $ — $ 300,000 $ 200,000 $ 2,550,000 $ 3,050,000

81,433 160,916 152,007 237,175 631,531

Ground lease and other operating lease obligations 11,045 22,621 20,946 642,671 697,283

Total $ 92,478 $ 483,537 $ 372,953 $ 3,429,846 $ 4,378,814

(1) Interest on variable rate debt is calculated using the forward rates in effect at December 31, 2020 and excludes the impact of our interest rate swaps.

For more detail regarding our adoption of Topic 842 as of January 1, 2019 see “Topic 842, Leases” subsection of the “Recently Issued Accounting Pronouncements” within Note 2 - Summary of Significant Accounting Policies in the accompanying consolidated financial statements in Part IV, Item 15.

Forward rates do not contemplate the transition of LIBOR to Secured Overnight Financing Rate or other rate to be used in the calculation of interest amounts.

Any differences between LIBOR and alternative rates are not deemed to be material.

Off-Balance Sheet Arrangements

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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 7. Management’s Discussion and Analysis