What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-03-01 compared with 2021-02-24 · 105 added, 12 removed, 537 unchanged (18% of the section changed)

11 unchanged sentences

• the continued involvement and contributions of our Board members and certain key personnel;

• significant stockholders attempt to effect changes at our company or acquire control over our company;

• material failures of our information technology and related infrastructure;

• internal investigations related to the whistleblower policy;

• pandemics and other health concerns, including the ongoing COVID-19 pandemic, and measures intended to prevent or limit their spread.

19 unchanged sentences

• the impact of unfavorable real estate market conditions on our mortgage or real-estate loans;

• the impact of risks related to our investments in, or originations of, mezzanine loans;

• the impact to us of the variability of market lease rates, including those on longer-term leases or for leases with contractual lease rates;

30 unchanged sentences

• in case of our bankruptcy or insolvency we would not receive the expected proceeds from any forward sales of our common stock.

Risks Related to the Merger

We face risks related to the proposed merger with Healthcare Realty Trust Incorporated, including those related to:

• the effect of the announcement and pendency of the merger agreement on our business;

• the satisfaction or waiver of certain conditions;

• litigation or other legal proceedings relating to the merger agreement;

• the fact that the exchange ratio will not be adjusted in the event of changes in stock prices.

This section highlights significant factors, events and uncertainties that could create risk with an investment in our securities.

58 unchanged sentences

If we cannot obtain capital from third-party sources, we may not be able to acquire properties when strategic opportunities exist, satisfy our principal and interest obligations to our lenders or make the cash distributions to our stockholders necessary to maintain our qualification as a REIT.

Our success depends to a significant degree upon the continued contributions of our Board members, and certain of our key personnel, each of whom would be difficult to replace.

If we were to lose the benefit of the experience, efforts and abilities of one or more of these individuals, our operating results could suffer.

Our success depends to a significant degree upon the continued contributions of our Board members, our interim Chief Executive Officer and other key personnel, each of whom would be difficult to replace.

If we are unable to employ a satisfactory successor to our interim Chief Executive Officer or if we were to lose the benefit of the experience, efforts and abilities of one or more of these individuals, our operating results could suffer.

Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of our Board of Directors, our executive officers and our other employees.

A special committee of our Board is currently engaged in a search process to identify and employ a successor to our interim Chief Executive Officer who was appointed following the resignation of our former Chairman and Chief Executive Officer effective August 2, 2021.

If we are unable to employ a satisfactory replacement Chief Executive Officer or are unable to do so on a timely basis, our operating results could suffer.

Our Board of Directors establishes important policies, governance objectives and strategic goals, and our management team serves a critical role in the identification and acquisition of investments, the determination and finalization of our financing arrangements, the asset management of our investments, and the operation of our day-to-day activities.

Our stockholders will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments that are not described in this Annual Report or other periodic filings with the SEC.

Our stockholders will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments that are not described in our 2020 from 10-K or other filings with the Securities and Exchange Commission.

We rely primarily on the management ability of our executive officers and the governance by the members of our Board of Directors, each of whom would be difficult to replace.

4 unchanged sentences

As a result of the foregoing, we may be unable to achieve our investment objectives or to pay distributions to our stockholders.

Significant stockholders may attempt to effect changes at our company or acquire control over our company, which could impact the pursuit of business strategies and adversely affect our results of operations and financial condition.

We recently received communications from an investor regarding our governance and strategic direction.

Other investors could take steps to involve themselves in our governance and strategic direction.

Activist investors may attempt to effect changes in our strategic direction and how we are governed, or to acquire control over the company.

Some investors seek to increase short-term stockholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases, or even sales of assets or the entire company.

While we welcome varying opinions from all shareholders, activist campaigns that contest or conflict with our strategic direction could have an adverse effect on our results of operations and financial condition as responding to proxy contests and other actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert the attention of our board and senior management from the pursuit of business strategies.

In addition, perceived uncertainties as to our future direction as a result of changes to the composition of our board may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, may cause concern to our current or potential customers, may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners.

These types of actions could cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

We rely on information technology in our operations;

4 unchanged sentences

Any failure to maintain proper function, security and availability of our information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could have an adverse effect on our business, results of operations and financial condition.

Our recently substantially completed internal investigation into circumstances relating to reports pursuant to our whistleblower policy could result in adverse consequences that would adversely affect our financial condition or results of operations.

We, with the assistance of outside legal counsel, and our board’s audit committee, with the assistance of independent legal counsel, recently substantially completed an internal investigation into circumstances relating to reports pursuant to our whistleblower policy.

On November 4, 2021, we filed a Current Report on Form 8-K in which we reported on the results of the internal investigation.

Although we concluded that the matters that were the subject of the ongoing investigation have not had a material adverse impact on the Company’s financial condition or results of operations, we cannot exclude the possibility of unanticipated adverse consequences of the internal investigation, including, but not limited to, the possibility that the Securities and Exchange Commission or other governmental authorities or regulators may commence investigations into the facts underlying our internal investigation;

the consequences of any such government investigations, including the imposition of civil or criminal penalties;

the risk that we may become subject to shareholder lawsuits, the defense of which may be costly;

potential reputational harm resulting from the facts underlying the internal investigation;

the possibility that executives or other employees may resign or be terminated;

the impact of the investigation on historical financial statements;

the effect of the internal investigation on our conclusions regarding the effectiveness of our internal control over financial reporting and our disclosure controls and procedures and on our ability to timely file the reports we are required to file with the Securities and Exchange Commission.

Pandemics and other health concerns, including the currently ongoing COVID-19 pandemic, and the measures intended to prevent their spread, could have a material adverse effect on our business, results of operations, cash flows and financial condition.

7 unchanged sentences

(v) move-outs and potential early termination of leases thereunder could increase;

(vi) operating expenses, including the costs of certain essential

services or supplies, including payments to third-party contractors, service providers, and employees essential to ensure continuity in our building operations may increase;

(vi) operating expenses, including the costs of certain essential services or supplies, including payments to third-party contractors, service providers, and employees essential to ensure continuity in our building operations may increase;

and (vii) costs of development, including expenditures for materials utilized in construction and labor essential to complete existing developments in progress may increase substantively.

144 unchanged sentences

For instance, if we are required to liquidate mortgage loans at a time when prevailing interest rates are higher than the interest rates of such mortgage loans, we would likely sell such loans at a discount to their stated principal values.

Any inability to sell a property or liquidation of a mortgage investment prior to maturity could adversely impact our business, financial condition and results of operation, the market price of our common stock and ability to pay distributions to our stockholders.

inability to sell a property or liquidation of a mortgage investment prior to maturity could adversely impact our business, financial condition and results of operation, the market price of our common stock and ability to pay distributions to our stockholders.

The mortgage or other real estate-related loans in which we have in the past, and may in the future, invest may be impacted by unfavorable real estate market conditions and delays in liquidation, which could decrease their value.

8 unchanged sentences

If the values of the underlying properties decline, our risk will increase and the value of our interests may decrease.

Our investments in, or originations of, mezzanine loans will be subject to specific risks relating to the particular property or entity obligated to repay the loan, and our loan assets will involve greater risks of loss than senior loans secured by income-producing properties.

Mezzanine loan investments involve special risks relating to the particular borrower, including its financial condition, liquidity, results of operations, business, and prospects.

We may also originate other real estate-related investments which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property or other properties.

These types of assets involve a higher degree of risk than long-term senior mortgage lending secured by income producing real property because the loan may become unsecured as a result of foreclosure by the senior lender and because it is in a subordinated position and there may not be adequate equity in the property.

In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy such loan.

If a borrower defaults on a loan or debt senior to our loan, or in the event of a borrower bankruptcy, such loan will be satisfied only after the senior debt.

We may be unable to enforce guaranties of payment and/or performance given as security for some loans.

As a result, we may not recover some or all of our initial expenditure.

Mezzanine and term loans may partially finance the construction of real estate projects and so involve additional risks inherent in the construction process, such as adherence to budgets and construction schedules.

In addition, mezzanine and term loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal.

Significant losses related to our mezzanine and term loans would result in operating losses for us and may limit our ability to make distributions to our stockholders.

Lease rates under our long-term leases may be lower than fair market lease rates over time.

89 unchanged sentences

If any of our properties are foreclosed upon due to a default by us, our ability to pay cash distributions to our stockholders could be adversely affected.

Changes to, or the elimination of, LIBOR may adversely affect interest expense related to our indebtedness.

We expect current and future borrowings under our unsecured term loans, which are hedged, and our unsecured revolving credit facility to be based on LIBOR.

In July 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), a regulator of financial services firms and financial markets in the United Kingdom, stated that it will plan for a phase out of regulatory oversight of LIBOR interest rates indices with support lasting through 2021.

If LIBOR ceases to exist, we may need to renegotiate any credit agreements or hedge transactions extending beyond 2021 that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established.

Also, if we intend to hedge our LIBOR denominated debt, we cannot predict whether hedging opportunities will exist on acceptable terms.

The elimination of LIBOR may adversely affect interest expense related to our indebtedness.

Current borrowings under our unsecured term loans, which are hedged, and our unsecured revolving credit facility is based on LIBOR.

On March 5, 2021, the United Kingdom Financial Conduct Authority (“FCA”), a regulator of financial services firms and financial markets in the United Kingdom, formally announced the cessation of LIBOR as of June 30, 2023.

The Alternative Reference Rates Committee, a group of private-market participant convened by the U.S.

Federal Reserve Board and the New York Federal Reserve, has recommended Secured Overnight Financing Rate (“SOFR”) as a more robust reference rate alternative to U.S.

dollar LIBOR.

Concurrent with the FCA’s announcement, the International Swaps and Derivatives Association (“ISDA”) determined that the announcement constituted an index cessation event and consequently the fallback spread adjustments were fixed and published, with the spread adjustment between U.S.

dollar 1-Month LIBOR and SOFR at 0.11%.

If we intend to hedge our LIBOR denominated debt, we cannot predict whether hedging opportunities will exist on acceptable terms.

Covenants in the instruments governing our existing indebtedness limit our operational flexibility and a covenant breach could adversely affect our operations.

57 unchanged sentences

Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To preserve our qualification as a REIT, our charter contains ownership limits with respect to our capital stock that may delay, defer or prevent a change of control of HTA or other transaction that may be benefit our stockholders.

To assist us in preserving our qualification as a REIT, among other purposes, our charter contains a limitation on ownership that prohibits any individual, entity or group, unless exempted prospectively or retroactively by our Board of Directors, from directly acquiring beneficial ownership of more than 9.8% of the value of HTA’s then outstanding capital stock (which includes common stock and any preferred stock HTA may issue) or more than 9.8% of the value or number of shares, whichever is more restrictive, of HTA’s then outstanding common stock.

78 unchanged sentences

Therefore, to the extent that there are any of our common stock with respect to which any forward sale agreement has not been settled at the time of the commencement of any such bankruptcy or insolvency proceedings, we would not receive the relevant forward sale price per share in respect of those common stock.

Risks Related to the Merger

The announcement and pendency of the Merger Agreement could have an adverse effect on our business.

On February 28, 2022, Healthcare Trust of America, Inc.

(the “Company”), a Maryland corporation, Healthcare Trust of America Holdings, LP, a Delaware limited partnership (the “ Company OP ”) of 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”).

The announcement and pendency of the Merger could cause disruption in our business, including the potential loss or disruption of commercial relationships prior to the completion of the Merger.

For example, some of our tenants, prospective tenants or vendors may delay or defer decisions, which could negatively affect our revenues, earnings, cash flows and expenses, regardless of whether the Merger is completed.

Similarly, our current and prospective employees may experience uncertainty about their future roles with the combined company following the Merger, which may adversely affect our ability to attract and retain key personnel during the pendency of the Merger.

The Merger Agreement generally requires us to use commercially reasonable efforts to operate our business in the ordinary course of business pending consummation of the Merger, but includes certain contractual restrictions on the conduct of our business prior to completion of the Merger.

Due to these operating restrictions, during the pendency of the Merger Agreement we may be unable to pursue strategic transactions, undertake significant capital projects, undertake certain financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

The Merger Agreement also contains provisions that limit our ability to pursue alternatives to the Merger and that could discourage a potential competing acquirer of us from making a favorable alternative transaction proposal.

In addition, matters relating to the Merger (including integration planning) will require substantial commitments of time and resources by our management, which could divert their time and attention.

We have also incurred, and will continue to incur, significant non-recurring costs in connection with the Merger that we may be unable to recover.

Further, the Merger Agreement requires us to pay a substantial termination fee to HR in certain circumstances or if our stockholders do not approve the transaction.

The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the Merger or termination of the Merger Agreement.

Completion of the Merger is subject to the satisfaction or waiver of certain conditions.

Completion of the Merger is subject to the satisfaction or waiver of certain conditions, including:

(1) approval by the Company’s stockholders of the issuance of Company Common Stock to HR’s stockholders pursuant to the terms of the Merger Agreement and approval by HR’s stockholders of the Merger and the transactions contemplated under the Merger Agreement;

(2) the effectiveness of the registration statement on Form S-4 to be filed with the SEC by the Company in connection with the transactions contemplated by the Merger Agreement;

(3) approval for listing on the NYSE of the shares of Company Common Stock to be issued in the Merger or reserved for issuance in connection therewith;

(4) no injunction or law prohibiting the Merger;

(5) accuracy of each party’s representations, subject in most cases to materiality or material adverse effect qualifications;

(6) material compliance with each party’s covenants;

(7) receipt by each of HR and us of an opinion to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code, and (8) receipt by each of HR and us of an opinion that the other party qualifies as a REIT under the Code.

We cannot provide assurance that these conditions to completing the Merger will be satisfied or waived, and accordingly, that our pending Merger with HR will be completed on the timeline that we anticipate or at all.

Failure to complete the Merger could negatively affect our stock price and our future business and financial results.

An adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement could have a material adverse impact on our business and our ability to consummate the transactions contemplated by the Merger Agreement.

Transactions like the Merger are frequently the subject of litigation or other legal proceedings, including actions alleging that either our board of directors breached their respective duties to their stockholders by entering into the Merger Agreement, by failing to obtain a greater value in the transaction for their stockholders or otherwise.

We believe that any such litigation or proceedings would be without merit, but there can be no assurance that they will not be brought.

If litigation or other legal proceedings are brought against us or against our board in connection with the Merger Agreement, we will defend against it, but we might not be successful in doing so.

An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on our business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.

The exchange ratio will not be adjusted in the event of any change in the stock prices of either us or HR.

Upon the consummation of the Merger, each outstanding share of HR Common Stock will be converted automatically into the right to receive one share of Company Common Stock, with cash paid in lieu of any fractional shares.

The exchange ratio of 1.0 will not be adjusted for changes in the market prices of either shares of our Common Stock or shares of HR Common Stock.

Changes in the market price of shares of HR Common Stock prior to the effective time of the Merger will affect the market value of the merger consideration that HR’s stockholders will receive on the closing date of the Merger.

Stock price changes may result from a variety of factors (many of which are beyond our or HR’s control), including the following factors:

• market reaction to the announcement of the Merger and the prospects of the combined company;

• changes in the respective businesses, operations, assets, liabilities and prospects of us and HR;

• changes in market assessments of the business, operations, financial position and prospects of either company or the combined company;

• market assessments of the likelihood that the Merger will be completed;

• interest rates, general market and economic conditions and other factors generally affecting the market prices of our Common Stock and HR Common Stock;

• federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and HR operate;

• other factors beyond the control of us and HR, including those described or referred to in this “Risk Factors” section.

The market price of shares of HR Common Stock at the closing of the Merger may vary from its price on the date the Merger Agreement was executed, on the date of the proxy statement/prospectus and on the date of our special meeting.

As a result, the market value of the merger consideration represented by the exchange ratio will also vary.

If the market price of shares of Company Common Stock increases between the date the Merger Agreement was signed, the date of the proxy statement/prospectus or the date of our special meeting and the closing of the Merger, HR’s stockholders could receive shares of Company Common Stock that have a market value upon completion of the Merger that is greater than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed, the date of the proxy statement/prospectus or on the date of the special meeting, respectively.

Alternatively, if the market price of shares of Company Common Stock declines between the date the Merger Agreement was signed, the date of the proxy

statement/prospectus or the date of our special meeting and the closing of the Merger, HR’s stockholders could receive shares of Company Common Stock that have a market value upon completion of the Merger that is less than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed, the date of the proxy statement/prospectus or on the date of the special meeting, respectively.

Therefore, while the number of shares of Company Common Stock to be issued per share of our Common Stock is fixed, HR’s stockholders cannot be sure of the market value of the merger consideration they will receive upon completion of the Merger.

However, subject to the closing of the Merger and the other transactions contemplated therein, the holders of shares of Company Common Stock issued and outstanding on the last business day prior to the closing date of the Merger will receive a special distribution in the amount of $4.82 in cash per share of Company Common Stock held on such date (the “Special Distribution Payment”), regardless of the fluctuation in the market prices of shares of HR Common Stock and Company Common Stock.

Unresolved Staff Comments

1 unchanged sentence

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 1A. Risk Factors