Healthcare Realty Trust Inc 10-Q

Item 1. Financial Statements (Unaudited) HEALTHCARE TRUST OF AMERICA, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) (Unaudited) March 31, 2022 December 31, 2021 ASSETS Real estate investments: Land $ 644,194 $ 640,382 Building and improvements 6,744,865 6,688,516 Lease intangibles 393,756 404,714 Construction in progress 15,673 32,685 7,798,488 7,766,297 Accumulated depreciation and amortization ( 1,650,257 ) ( 1,598,468 ) Real estate investments, net 6,148,231 6,167,829 Assets held for sale, net — 27,070 Investment in unconsolidated joint venture 62,454 62,834 Cash and cash equivalents 10,944 52,353 Restricted cash 4,478 4,716 Receivables and other assets, net 350,781 334,941 Right-of-use assets - operating leases, net 228,009 229,226 Other intangibles, net 10,011 10,720 Total assets $ 6,814,908 $ 6,889,689 LIABILITIES AND EQUITY Liabilities: Debt $ 3,053,884 $ 3,028,122 Accounts payable and accrued liabilities 159,659 198,078 Liabilities of assets held for sale — 262 Derivative financial instruments - interest rate swaps — 5,069 Security deposits, prepaid rent and other liabilities 78,771 86,225 Lease liabilities - operating leases 196,226 196,286 Intangible liabilities, net 30,001 31,331 Total liabilities 3,518,541 3,545,373 Commitments and contingencies Equity: Preferred stock, $ 0.01 par value; 200,000,000 shares authorized; none issued and outstanding — — Class A common stock, $ 0.01 par value; 1,000,000,000 shares authorized; 229,076,322 and 228,879,846 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 2,291 2,289 Additional paid-in capital 5,180,579 5,178,132 Accumulated other comprehensive income (loss) 1,727 ( 7,041 ) Cumulative dividends in excess of earnings ( 1,971,904 ) ( 1,915,776 ) Total stockholders’ equity 3,212,693 3,257,604 Non-controlling interests 83,674 86,712 Total equity 3,296,367 3,344,316 Total liabilities and equity $ 6,814,908 $ 6,889,689 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per share data) (Unaudited) Three Months Ended March 31, 2022 2021 Revenues: Rental income $ 200,243 $ 191,350 Interest and other operating income 1,759 143 Total revenues 202,002 191,493 Expenses: Rental 65,884 59,579 General and administrative 12,448 10,560 Merger-related costs 6,018 — Transaction 144 96 Depreciation and amortization 75,386 76,274 Interest expense 23,940 22,986 Total expenses 183,820 169,495 Loss on sale of real estate, net ( 4 ) — Income from unconsolidated joint venture 400 392 Other income 88 3 Net income $ 18,666 $ 22,393 Net income attributable to non-controlling interests ( 351 ) ( 363 ) Net income attributable to common stockholders $ 18,315 $ 22,030 Earnings per common share - basic: Net income attributable to common stockholders $ 0.08 $ 0.10 Earnings per common share - diluted: Net income attributable to common stockholders $ 0.08 $ 0.10 Weighted average common shares outstanding: Basic 228,978 218,753 Diluted 233,046 222,268 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Net income $ 18,666 $ 22,393 Other comprehensive income Change in unrealized gains on cash flow hedges 8,817 2,792 Total other comprehensive income 8,817 2,792 Total comprehensive income 27,483 25,185 Comprehensive income attributable to non-controlling interests ( 400 ) ( 407 ) Total comprehensive income attributable to common stockholders $ 27,083 $ 24,778 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (In thousands) (Unaudited) Class A Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Cumulative Dividends in Excess of Earnings Total Stockholders’ Equity Non-controlling Interests Total Equity Shares Amount Balance as of December 31, 2020 218,578 $ 2,186 $ 4,916,784 $ ( 16,979 ) $ ( 1,727,752 ) $ 3,174,239 $ 60,680 $ 3,234,919 Share-based award transactions, net 354 3 3,334 — — 3,337 — 3,337 Repurchase and cancellation of common stock ( 119 ) ( 1 ) ( 3,247 ) — — ( 3,248 ) — ( 3,248 ) Redemption of non-controlling interest and other 11 — 255 — — 255 ( 255 ) — Dividends declared ($ 0.320 per common share) — — — — ( 70,023 ) ( 70,023 ) ( 1,183 ) ( 71,206 ) Net income — — — — 22,030 22,030 363 22,393 Other comprehensive income — — — 2,748 — 2,748 44 2,792 Balance as of March 31, 2021 218,824 2,188 $ 4,917,126 $ ( 14,231 ) $ ( 1,775,745 ) $ 3,129,338 $ 59,649 $ 3,188,987 Class A Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Cumulative Dividends in Excess of Earnings Total Stockholders’ Equity Non-controlling Interests Total Equity Shares Amount Balance as of December 31, 2021 228,880 $ 2,289 $ 5,178,132 $ ( 7,041 ) $ ( 1,915,776 ) $ 3,257,604 $ 86,712 $ 3,344,316 Issuance of common stock, net — — — — — — — — Share-based award transactions, net 154 1 2,023 — — 2,024 — 2,024 Repurchase and cancellation of common stock ( 50 ) — ( 1,640 ) — — ( 1,640 ) — ( 1,640 ) Redemption of non-controlling interest and other 92 1 2,064 — — 2,065 ( 2,065 ) — Dividends declared ($ 0.325 ) per common share) — — — — ( 74,443 ) ( 74,443 ) ( 1,373 ) ( 75,816 ) Net income — — — — 18,315 18,315 351 18,666 Other comprehensive income — — — 8,768 — 8,768 49 8,817 Balance as of March 31, 2022 229,076 $ 2,291 $ 5,180,579 $ 1,727 $ ( 1,971,904 ) $ 3,212,693 $ 83,674 $ 3,296,367 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net income $ 18,666 $ 22,393 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 71,009 71,671 Share-based compensation expense 2,025 3,337 Income from unconsolidated joint venture ( 400 ) ( 392 ) Distributions from unconsolidated joint venture 785 785 Loss on sale of real estate, net 4 — Changes in operating assets and liabilities: Receivables and other assets, net ( 3,229 ) 2,275 Accounts payable and accrued liabilities ( 34,131 ) ( 27,613 ) Security deposits, prepaid rent and other liabilities ( 5,421 ) ( 7,103 ) Net cash provided by operating activities 49,308 65,353 Cash flows from investing activities: Investments in real estate ( 19,094 ) ( 30,472 ) Development of real estate ( 10,372 ) ( 17,096 ) Proceeds from the sale of real estate 26,791 — Capital expenditures ( 28,560 ) ( 28,931 ) Collection of real estate notes receivable — 200 Loan origination fees 325 — Advances on real estate notes receivable ( 2,270 ) — Net cash used in investing activities ( 33,180 ) ( 76,299 ) Cash flows from financing activities: Borrowings on unsecured revolving credit facility 75,000 15,000 Payments on unsecured revolving credit facility ( 50,000 ) ( 15,000 ) Deferred financing costs ( 5,355 ) — Repurchase and cancellation of common stock ( 1,641 ) ( 3,248 ) Dividends paid ( 74,377 ) ( 70,000 ) Distributions paid to non-controlling interest of limited partners ( 1,402 ) ( 1,485 ) Net cash used in financing activities ( 57,775 ) ( 74,733 ) Net change in cash, cash equivalents and restricted cash ( 41,647 ) ( 85,679 ) Cash, cash equivalents and restricted cash - beginning of period 57,069 118,765 Cash, cash equivalents and restricted cash - end of period $ 15,422 $ 33,086 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents HEALTHCARE TRUST OF AMERICA HOLDINGS, LP CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except unit data) (Unaudited) March 31, 2022 December 31, 2021 ASSETS Real estate investments: Land $ 644,194 $ 640,382 Building and improvements 6,744,865 6,688,516 Lease intangibles 393,756 404,714 Construction in progress 15,673 32,685 7,798,488 7,766,297 Accumulated depreciation and amortization ( 1,650,257 ) ( 1,598,468 ) Real estate investments, net 6,148,231 6,167,829 Assets held for sale, net — 27,070 Investment in unconsolidated joint venture 62,454 62,834 Cash and cash equivalents 10,944 52,353 Restricted cash 4,478 4,716 Receivables and other assets, net 350,781 334,941 Right-of-use assets - operating leases, net 228,009 229,226 Other intangibles, net 10,011 10,720 Total assets $ 6,814,908 $ 6,889,689 LIABILITIES AND PARTNERS’ CAPITAL Liabilities: Debt $ 3,053,884 $ 3,028,122 Accounts payable and accrued liabilities 159,659 198,078 Liabilities of assets held for sale — 262 Derivative financial instruments - interest rate swaps — 5,069 Security deposits, prepaid rent and other liabilities 78,771 86,225 Lease liabilities - operating leases 196,226 196,286 Intangible liabilities, net 30,001 31,331 Total liabilities 3,518,541 3,545,373 Commitments and contingencies Partners’ Capital: Limited partners’ capital, 4,050,493 and 4,142,408 OP Units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 83,404 86,442 General partners’ capital, 229,076,322 and 228,879,846 OP Units issued and outstanding as of March 31, 2022 and December 31, 2021, respectively 3,212,963 3,257,874 Total partners’ capital 3,296,367 3,344,316 Total liabilities and partners’ capital $ 6,814,908 $ 6,889,689 The accompanying notes are an integral part of these condensed consolidated financial statements. 9 Table of Contents HEALTHCARE TRUST OF AMERICA HOLDINGS, LP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for per unit data) (Unaudited) Three Months Ended March 31, 2022 2021 Revenues: Rental income $ 200,243 $ 191,350 Interest and other operating income 1,759 143 Total revenues 202,002 191,493 Expenses: Rental 65,884 59,579 General and administrative 12,448 10,560 Merger-related costs 6,018 — Transaction 144 96 Depreciation and amortization 75,386 76,274 Interest expense 23,940 22,986 Total expenses 183,820 169,495 Loss on sale of real estate, net ( 4 ) — Income from unconsolidated joint venture 400 392 Other income 88 3 Net income $ 18,666 $ 22,393 Net income attributable to non-controlling interests — — Net income attributable to common unitholders $ 18,666 $ 22,393 Earnings per common OP Unit - basic: Net income attributable to common unitholders $ 0.08 $ 0.10 Earnings per common OP Unit - diluted: Net income attributable to common unitholders $ 0.08 $ 0.10 Weighted average common OP Units outstanding: Basic 233,046 222,268 Diluted 233,046 222,268 The accompanying notes are an integral part of these condensed consolidated financial statements. 10 Table of Contents HEALTHCARE TRUST OF AMERICA HOLDINGS, LP CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Net income $ 18,666 $ 22,393 Other comprehensive income Change in unrealized gains on cash flow hedges 8,817 2,792 Total other comprehensive income 8,817 2,792 Total comprehensive income 27,483 25,185 Comprehensive income attributable to non-controlling interests — — Total comprehensive income attributable to common unitholders $ 27,483 $ 25,185 The accompanying notes are an integral part of these condensed consolidated financial statements. 11 Table of Contents HEALTHCARE TRUST OF AMERICA HOLDINGS, LP CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS ’ CAPITAL (In thousands) (Unaudited General Partners’ Capital Limited Partners’ Capital Total Partners’ Capital Units Amount Units Amount Balance as of December 31, 2020 218,578 $ 3,174,509 3,520 $ 60,410 $ 3,234,919 Share-based award transactions, net 354 3,337 — — 3,337 Redemption and cancellation of general partner OP Units ( 119 ) ( 3,248 ) — — ( 3,248 ) Redemption of limited partner OP Units and other 11 255 ( 11 ) ( 255 ) — Distributions declared ($ 0.320 per common OP Unit) — ( 70,023 ) — ( 1,183 ) ( 71,206 ) Net income — 22,030 — 363 22,393 Other comprehensive income — 2,748 — 44 2,792 Balance as of March 31, 2021 218,824 $ 3,129,608 3,509 $ 59,379 $ 3,188,987 General Partners’ Capital Limited Partners’ Capital Total Partners’ Capital Units Amount Units Amount Balance as of December 31, 2021 228,880 $ 3,257,874 4,142 $ 86,442 $ 3,344,316 Share-based award transactions, net 154 2,024 — — 2,024 Redemption and cancellation of general partner OP Units ( 50 ) ( 1,640 ) — — ( 1,640 ) Redemption of limited partner OP Units and other 92 2,065 ( 92 ) ( 2,065 ) — Distributions declared ($ 0.325 per common OP Unit) — ( 74,443 ) — ( 1,373 ) ( 75,816 ) Net income — 18,315 — 351 18,666 Other comprehensive income — 8,768 — 49 8,817 Balance as of March 31, 2022 229,076 $ 3,212,963 4,050 $ 83,404 $ 3,296,367 The accompanying notes are an integral part of these condensed consolidated financial statements. 12 Table of Contents HEALTHCARE TRUST OF AMERICA HOLDINGS, LP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net income $ 18,666 $ 22,393 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 71,009 71,671 Share-based compensation expense 2,025 3,337 Income from unconsolidated joint venture ( 400 ) ( 392 ) Distributions from unconsolidated joint venture 785 785 Loss on sale of real estate, net 4 — Changes in operating assets and liabilities: Receivables and other assets, net ( 3,229 ) 2,275 Accounts payable and accrued liabilities ( 34,131 ) ( 27,613 ) Security deposits, prepaid rent and other liabilities ( 5,421 ) ( 7,103 ) Net cash provided by operating activities 49,308 65,353 Cash flows from investing activities: Investments in real estate ( 19,094 ) ( 30,472 ) Development of real estate ( 10,372 ) ( 17,096 ) Proceeds from the sale of real estate 26,791 — Capital expenditures ( 28,560 ) ( 28,931 ) Collection of real estate notes receivable — 200 Loan origination fees 325 — Advances on real estate notes receivable ( 2,270 ) — Net cash used in investing activities ( 33,180 ) ( 76,299 ) Cash flows from financing activities: Borrowings on unsecured revolving credit facility 75,000 15,000 Payments on unsecured revolving credit facility ( 50,000 ) ( 15,000 ) Deferred financing costs ( 5,355 ) — Repurchase and cancellation of general partner units ( 1,641 ) ( 3,248 ) Distributions paid to general partner ( 74,377 ) ( 70,000 ) Distributions paid to limited partners and redeemable non-controlling interests ( 1,402 ) ( 1,485 ) Net cash used in financing activities ( 57,775 ) ( 74,733 ) Net change in cash, cash equivalents and restricted cash ( 41,647 ) ( 85,679 ) Cash, cash equivalents and restricted cash - beginning of period 57,069 118,765 Cash, cash equivalents and restricted cash - end of period $ 15,422 $ 33,086 The accompanying notes are an integral part of these condensed consolidated financial statements. 13 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us,” or “our” refers to Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP, collectively. 1. Organization and Description of Business HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006. HTA operates as a REIT and is the general partner of HTALP, which is the operating partnership, in an umbrella partnership, or “UPREIT” structure. HTA has qualified and intends to continue to be taxed as a REIT for federal income tax purposes under the applicable sections of the Internal Revenue Code. We own real estate primarily consisting of medical office buildings (“MOBs”) located on or adjacent to hospital campuses or in off-campus, community core outpatient locations across 32 states within the United States, and we lease space to tenants primarily consisting of health systems, research and academic institutions, and various sized physician practices. Through our full-service operating platform, we provide leasing, asset management, acquisitions, development and other related services for our properties. Our primary objective is to maximize stockholder value with growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and we expect to enhance our existing portfolio. Merger with Healthcare Realty Trust Incorporated On February 28, 2022, Healthcare Trust of America, Inc. (the “Company”), a Maryland corporation, Healthcare Trust of America Holdings, LP, a Delaware limited partnership (the “Company OP”) of which the Company is the sole general partner, HR Acquisition 2, LLC, a Maryland limited liability company and a direct, wholly owned subsidiary of the Company (“Merger Sub”), and Healthcare Realty Trust Incorporated, a Maryland corporation (“HR”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into HR, with HR surviving the merger (the “Merger”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time, each outstanding share of Common Stock, $ 0.01 par value per share, of HR (“HR Common Stock”) will be converted into the right to receive 1.0 (the “Exchange Ratio”) share of Class A Common Stock, $ 0.01 par value per share, of the Company (“Company Common Stock” and, such consideration, the “Merger Consideration”). Subject to the closing of the Merger and the other transactions contemplated therein, the holders of shares of Company Common Stock issued and outstanding on the last business day prior to the closing date of the Merger will receive a special distribution in the amount of $ 4.82 in cash per share of Company Common Stock held on such date (the “Special Distribution Payment”). Once the conditions to close the Merger have been satisfied or waived, the Merger Agreement requires HR and the Company to exchange irrevocable certifications that all such closing conditions have been satisfied or waived. At such time, the Company OP will transfer or cause the transfer, on the business day before the effective time, to HR or its designees certain of the Company OP’s assets as specified by HR for a cash purchase price equal to the reasonably equivalent fair market value of the assets transferred. To the extent the net proceeds to the Company of the asset transfer or joint venture transactions relating to such assets are insufficient to pay the full amount of the Special Distribution Payment, the Merger Agreement requires the Company to utilize new financing to fund the balance of the Special Distribution Payment. The Company has obtained a commitment letter from JPMorgan Chase Bank, N.A. for a $ 1.7 billion bridge financing facility. HTA and HR have received letters of intent from, and are in advanced negotiations with, three institutional investors for a combination of joint ventures and asset sales totaling $ 1.7 billion at a weighted average cap rate of approximately 4.8 %. Net proceeds from these transactions are expected to be approximately $ 1.6 billion. The transactions may occur in separate tranches, with the initial transactions targeted to close prior to the vote on the contemplated Merger by HR and HTA stockholders and the remainder to be completed on or around the closing date of the contemplated Merger. These transactions are subject to execution of definitive documentation and customary closing conditions. In addition, HTA and HR have secured initial commitments for amended and restated credit facilities, including the following: (i) a $ 1.5 billion revolving credit facility; (ii) $ 1.5 billion of term loans, including $ 650 million of new capacity; and (iii) a $ 1.1 billion asset sale term loan to replace the transaction bridge loan commitment and to backstop the $ 1.1 billion special dividend to HTA stockholders, if needed, depending on the timing of asset sales and joint ventures. Additionally, on May 2, 2022, HTA and HR filed a Form S-4 Registration Statement with the SEC in connection with the contemplated Merger. Please review this Form S-4 for more information about the contemplated Merger. 14 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders. The boards of directors of the Company and HR have unanimously approved the Merger Agreement. The Merger is expected to close during the third quarter of 2022. COVID-19 Pandemic On March 11, 2020 the novel coronavirus disease (“COVID-19”) was declared a pandemic by the World Health Organization. As the virus continued to spread throughout the United States and other countries across the world, Federal, state and local governments took various actions including the issuance of “stay-at-home” orders, social distancing guidelines and ordering the temporary closure of non-essential businesses to limit the spread of COVID-19. While many businesses have reopened and vaccinations are becoming more widely available to the general population, the economic uncertainty created by the COVID-19 pandemic continue to present risks to the Company and the future results of our operations. Although we did not experience significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2022, should current and planned measures, including further development and delivery of vaccines and other measures intended to reduce or eliminate the spread of COVID-19, past and/or proposed economic stimulus, and other laws, acts and orders proposed or enacted by these various governmental agencies ultimately not be successful or limited in their efficacy, our business and the broader real estate industry may experience significant adverse consequences. These consequences include loss of revenues, increased expenses, increased costs of materials, difficulty in maintaining an active workforce, and constraints on our ability to secure capital or financing, among other factors. 2. Summary of Significant Accounting Policies The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the U.S. (“GAAP”) in all material respects and have been consistently applied in preparing our accompanying condensed consolidated financial statements. Basis of Presentation Our accompanying condensed consolidated financial statements include our accounts and those of our subsidiaries and any consolidated variable interest entities (“VIEs”). All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements. Interim Unaudited Financial Data Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements (i) do not include all information and footnotes required by GAAP for complete financial statements, and (ii) reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable for the full year. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K. Principles of Consolidation The condensed consolidated financial statements include the accounts of our subsidiaries and consolidated joint venture arrangements. The portions of the HTALP operating partnership not owned by us are presented as non-controlling interests on the accompanying condensed consolidated balance sheets and statements of operations, condensed consolidated statements of comprehensive income, and condensed consolidated statements of equity and changes in partners’ capital. Holders of OP Units are considered to be non-controlling interest holders in HTALP and their ownership interests are reflected as equity on the accompanying condensed consolidated balance sheets. Further, a portion of the earnings and losses of HTALP are allocated to non-controlling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of the common stock issued and the carrying value of the OP Units converted to common stock is recorded as a component of equity. As of both March 31, 2022 and December 31, 2021, there were approximately 4.1 million of OP Units issued and outstanding held by non-controlling interest holders. VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following: (i) the power to direct the activities that most significantly impact the entity’s economic performance; (ii) the obligation to absorb the expected losses of the entity; and (iii) the right to receive the expected returns of the entity. We consolidate our investment in VIEs when we determine that we are the primary beneficiary. A primary beneficiary is one that has both: (i) the power to direct the activities 15 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) of the VIE that most significantly impacts the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The HTALP operating partnership and our other joint venture arrangements are VIEs because the limited partners in those partnerships, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights. Additionally, we determined that we are the primary beneficiary of our VIEs. Accordingly, we consolidate our interests in the HTALP operating partnership and in our other joint venture arrangements. However, because we hold what is deemed a majority voting interest in the HTALP operating partnership and our other joint venture arrangements, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs. Use of Estimates The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent asset and liabilities. These estimates are made and evaluated on an ongoing basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in adverse ways, and those estimates could be different under different assumptions or conditions. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents consist of all highly liquid investments with a maturity of three months or less when purchased. Restricted cash is typically comprised of: (i) reserve accounts for property taxes, insurance, capital and tenant improvements; (ii) collateral accounts for debt and interest rate swaps; (iii) 1031 exchange funds; and (iv) deposits for future investments. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed consolidated balance sheets to the combined amounts shown on the accompanying condensed consolidated statements of cash flows (in thousands): March 31, 2022 2021 Cash and cash equivalents $ 10,944 $ 29,990 Restricted cash 4,478 3,096 Total cash, cash equivalents and restricted cash $ 15,422 $ 33,086 Revenue Recognition Minimum annual rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). Differences between rental income recognized and amounts contractually due under the lease agreements are recorded as straight-line rent receivables. Tenant reimbursements, which is comprised of additional amounts recoverable from tenants for real estate taxes, common area maintenance and other certain operating expenses are recognized as revenue on a gross basis in the period in which the related recoverable expenses are incurred. We accrue revenue corresponding to these expenses on a quarterly basis to adjust recorded amounts to our best estimate of the final annual amounts to be billed. Subsequent to year-end, on a calendar year basis, we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences between the estimated expenses we billed and the actual expenses that were incurred. We recognize lease termination fees when there is a signed termination letter agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property. Rental income is reported net of amortization of inducements. The revenue recognition process is based on a five-step model to account for revenue arising from contracts with customers as outlined in Topic 606. We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We have identified all of our revenue streams and we have concluded that rental income from leasing arrangements represents a substantial portion of our revenue and is governed and evaluated with the adoption of Topic 842. Investments in Real Estate Depreciation expense of buildings and improvements for the three months ended March 31, 2022 and 2021 was $ 62.3 million and $ 61.2 million, respectively. Leases As a lessor, we lease space in our MOBs primarily to medical enterprises for terms generally ranging from three to seven years in length. The assets underlying these leases consist of buildings and associated land which are included as real estate investments on our accompanying condensed consolidated balance sheets. All of our leases for which we are the lessor are classified as operating leases under Topic 842. 16 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Leases, for which we are the lessee, are classified as separate components on our accompanying condensed consolidated balance sheets. Operating leases are included as right-of-use (“ROU”) assets - operating leases, net, with a corresponding lease liability. Financing lease assets are included in receivables and other assets, net, with a corresponding lease liability in security deposits, prepaid rent and other liabilities. A lease liability is recognized for our obligation related to the lease and an ROU asset represents our right to use the underlying asset over the lease term. Refer to Note 7 - Leases in the accompanying notes to the condensed consolidated financial statements for more detail relating to our leases. Real Estate Held for Sale We consider properties held for sale once management commits to a plan to sell the property and has determined that the sale is probable and expected to occur within one year. Upon classification as held for sale, we record the property at the lower of its carrying amount or fair value, less costs to sell, and cease depreciation and amortization. The fair value is generally based on a discounted cash flow analysis, which involves management's best estimate of market participants' holding periods, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods and capital requirements. As of March 31, 2022, the Company had no properties classified as held for sale. As of December 31, 2021, the Company had one property classified as held for sale. Real Estate Notes Receivable Real estate notes receivable consists of mezzanine and other real estate loans, which are generally collateralized by a pledge of the borrower’s ownership interest in the respective real estate owner and/or corporate guarantees . Real estate notes receivable are intended to be held-to-maturity and are recorded at amortized cost, net of unamortized loan origination costs and fees and allowance for credit losses. As of March 31, 2022, real estate notes receivable, net totaled $ 72.7 million. During the three months ended March 31, 2022, we recognized interest income of $ 1.6 million related to real estate note receivable. The following table summarizes real estate notes receivable as of March 31, 2022 (in thousands): Stated Interest Rate Maximum Loan Commitment Outstanding Loan Amount Origination Date Maturity Date March 31, 2022 Mezzanine Loans - Texas (1) 6/24/2021 6/24/2024 8 % $ 54,119 $ 52,662 Mezzanine Loan - North Carolina 12/22/2021 12/22/2024 8 % 6,000 6,000 Mortgage Loan - Texas 6/30/2021 7/1/2022 10 % 15,000 15,000 73,662 Accrued interest receivable 159 Unamortized fees and costs ( 762 ) Unearned revenue ( 358 ) $ 72,701 (1) Interest on these mezzanine loans is accrued and funded utilizing interest reserves, which is included in the maximum loan commitment, and such accrued interest is added to the note receivable balance. Pursuant to Topic 326 - Financial Instruments - Credit Losses, we adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under Topic 326. We utilize a probability of default method approach for estimating current expected credit losses and have determined that the current risk of credit loss is remote. Accordingly, we have recorded no reserve for credit loss as of March 31, 2022. Unconsolidated Joint Ventures We account for our investments in unconsolidated joint ventures using the equity method of accounting because we have the ability to exercise significant influence, but not control, over the financial and operational policy decisions of the investments. Using the equity method of accounting, the initial investment is recognized at cost and subsequently adjusted for our share of the net income and any distributions from the joint venture. As of March 31, 2022 and December 31, 2021, we had a 50 % interest in one such investment with a carrying value and maximum exposure to risk of $ 62.5 million and $ 62.8 million, respectively, which is recorded in investment in unconsolidated joint venture on the accompanying condensed consolidated balance sheets. We record our share of net income in income from unconsolidated joint venture on the accompanying condensed consolidated statements of operations. For each of the three months ended March 31, 2022 and 2021, we recognized income of $ 0.4 million. 17 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Recently Issued or Adopted Accounting Pronouncements Recently Adopted Accounting Pronouncements ASU 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments In July 2021, the FASB issued ASU 2021-05, which amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on a reference index or a rate. The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease. The update is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. We adopted ASU 2021-05 effective as of January 1, 2022. The adoption of this standard did not have a material impact on our financial statements. Recently Issued Accounting Pronouncements ASU 2021-01, Reference Rate Reform (Topic 848) In January 2021, the FASB issued ASU 2021-01, which amends the scope of ASU 2020-04. The amendments of ASU 2021-01 clarify that certain optional expedients and exceptions to Topic 848 for contract modification and hedge accounting apply to derivatives that are affected by the discounting transition. For information related to the Company's current cash flow hedges, refer to Note 9 - Derivative Financial Instruments and Hedging Activities. The amendments are elective and effective immediately for contract modifications made through December 31, 2022. The Company is evaluating how the transition away from LIBOR will effect the Company and if the guidance with respect to this standard will be adopted, however, if adopted, we do not expect that this ASU will have a material impact on our financial statements. 3. Investments in Real Estate For the three months ended March 31, 2022, our investments had an aggregate purchase price of $ 19.1 million. As part of these investments, we incurred approximately $ 0.1 million of capitalized costs. The allocations for these investments, in which we own a controlling financial interest, are set forth below in the aggregate for the three months ended March 31, 2022 and 2021, respectively (in thousands): Three Months Ended March 31, 2022 2021 Land $ 3,812 $ 1,093 Building and improvements 13,189 26,819 In place leases 2,121 3,449 Below market leases ( 28 ) ( 79 ) Above market leases — 66 ROU assets — ( 876 ) Net real estate assets acquired 19,094 30,472 Other, net — 2,397 Aggregate purchase price $ 19,094 $ 32,869 The acquired intangible assets and liabilities referenced above had weighted average lives of the following terms for the three months ended March 31, 2022 and 2021, respectively (in years): Three Months Ended March 31, 2022 2021 Acquired intangible assets 4.4 6.4 Acquired intangible liabilities 4.3 5.7 4. Dispositions and Impairment Dispositions During the three months ended March 31, 2022, we closed the sale of a tenant purchase option on one of our MOBs located in Georgia for a gross sales price of $ 26.8 million, resulting in a net loss to us of approximately $ 4 thousand. During the three months ended March 31, 2021, we had no dispositions. Impairment During the three months ended March 31, 2022, and 2021, we recorded no impairment charges. 18 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 5. Intangible Assets and Liabilities Intangible assets and liabilities consisted of the following as of March 31, 2022 and December 31, 2021, respectively (in thousands, except with respect to the weighted average remaining amortization terms): March 31, 2022 December 31, 2021 Balance Weighted Average Remaining Amortization in Years Balance Weighted Average Remaining Amortization in Years Assets: In place leases $ 341,978 9.3 $ 349,863 9.3 Tenant relationships 51,778 10.9 54,851 10.8 Above market leases 20,824 6.8 21,537 6.9 414,580 426,251 Accumulated amortization ( 211,034 ) ( 213,801 ) Total $ 203,546 9.3 $ 212,450 9.3 Liabilities: Below market leases $ 54,040 14.5 $ 55,073 14.3 Accumulated amortization ( 24,039 ) ( 23,742 ) Total $ 30,001 14.5 $ 31,331 14.3 The following is a summary of the net intangible amortization for the three months ended March 31, 2022 and 2021, respectively (in thousands): Three Months Ended March 31, 2022 2021 Amortization recorded against rental income related to above and (below) market leases $ ( 649 ) $ ( 591 ) Amortization expense related to in place leases and tenant relationships 10,315 11,886 6. Receivables and Other Assets Receivables and other assets consisted of the following as of March 31, 2022 and December 31, 2021, respectively (in thousands): March 31, 2022 December 31, 2021 Tenant receivables, net $ 3,009 $ 10,477 Other receivables, net 7,402 6,098 Deferred financing costs, net 11,057 7,055 Deferred leasing costs, net 47,612 45,008 Straight-line rent receivables, net 146,378 142,604 Prepaid expenses, deposits, equipment and other, net 42,734 38,301 Derivative financial instruments - interest rate swaps 3,692 — Real estate notes receivable, net 72,701 69,114 Finance ROU asset, net 16,196 16,284 Total $ 350,781 $ 334,941 19 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following is a summary of the amortization of deferred leasing costs and financing costs for the three months ended March 31, 2022 and 2021, respectively (in thousands): Three Months Ended March 31, 2022 2021 Amortization expense related to deferred leasing costs $ 2,227 $ 2,223 Interest expense related to deferred financing costs 1,353 431 7. Leases For the three months ended March 31, 2022, we added one new office lease that commences in April 2022. Lessee - Maturity of Lease Liabilities The following table summarizes the future minimum lease obligations of our operating and finance leases as of March 31, 2022 (in thousands): Year Operating Leases Finance Leases 2022 $ 8,028 $ 473 2023 10,846 635 2024 10,370 640 2025 9,857 645 2026 9,860 656 2027 9,845 668 Thereafter 590,018 36,856 Total undiscounted lease payments $ 648,824 $ 40,573 Less: Interest ( 452,598 ) ( 23,665 ) Present value of lease liabilities $ 196,226 $ 16,908 Lessor - Lease Revenues and Maturity of Future Minimum Rents For the three months ended March 31, 2022 and 2021, we recognized $ 199.3 million and $ 190.4 million, respectively, of rental and other lease-related income related to our operating leases, of which $ 48.1 million and $ 45.1 million, respectively, were variable lease payments. The following table summarizes the future minimum rent contractually due under operating leases, excluding tenant reimbursements of certain costs, as of March 31, 2022 (in thousands): Year Amount 2022 $ 432,329 2023 537,159 2024 479,252 2025 418,300 2026 369,927 2027 301,521 Thereafter 1,044,334 Total $ 3,582,822 20 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 8. Debt Debt consisted of the following as of March 31, 2022 and December 31, 2021, respectively (in thousands): March 31, 2022 December 31, 2021 Unsecured revolving credit facility $ 25,000 $ — Unsecured term loans 500,000 500,000 Unsecured senior notes 2,550,000 2,550,000 Fixed rate mortgages — — $ 3,075,000 $ 3,050,000 Deferred financing costs, net ( 17,199 ) ( 17,975 ) Discount, net ( 3,917 ) ( 3,903 ) Total $ 3,053,884 $ 3,028,122 Unsecured Credit Agreement Unsecured Revolving Credit Facility due 2025 On October 6, 2021, we entered into a third amended and restated revolving credit and term loan agreement (the “Credit Agreement”), which includes an unsecured revolving credit facility in an aggregate maximum principal amount of $ 1.0 billion (the “Revolver”) and a term loan facility in an aggregate maximum principal amount of $ 300.0 million (the “Term Loan”). The Credit Agreement extended the maturities of the unsecured revolving credit facility and the unsecured term loan to October 31, 2025. The maximum principal amount of the Unsecured Credit Agreement may be increased by up to $ 750.0 million, subject to certain conditions, for a total principal amount of $ 2.05 billion. Borrowings under the Revolver bear interest at a per annum rate equal to LIBOR plus a margin ranging from 0.725 % to 1.40 % based on our credit rating. We are also required to pay a facility fee on the aggregate commitments under the Revolver at a per annum rate ranging from 0.125 % to 0.30 % based on our credit rating. We incurred financing costs of $ 6.2 million in relation to the credit facility, which are being amortized through the maturity date. As of March 31, 2022, we had $ 25.0 million outstanding under this unsecured revolving credit facility. The margin associated with our borrowings was 0.85 % per annum and the facility fee was 0.20 % per annum. Unsecured Term Loan due 2025 Under the Unsecured Credit Agreement as noted above, we have a $ 300.0 million unsecured term loan, guaranteed by HTA, with a maturity date of October 31, 2025. Borrowings under this unsecured term loan bear interest at a per annum rate equal to LIBOR, plus a margin ranging from 0.80 % to 1.60 % per annum based on our credit rating. The margin associated with our borrowings as of March 31, 2022 was 0.95 % per annum. We incurred financing costs of $ 1.8 million in relation to the unsecured term loan, which are being amortized through the maturity date. We have interest rate swaps hedging the floating interest rate, which resulted in a fixed rate of 2.37 % per annum, based on our current credit rating. The current hedging arrangement matures on February 1, 2023. As of March 31, 2022, we had $ 300.0 million under this unsecured term loan outstanding. $ 200.0 Million Unsecured Term Loan due 2024 In 2018, HTALP entered into a modification of our $ 200.0 million unsecured term loan previously due in 2023. The modification decreased pricing at our current credit rating by 65 basis points and extended the maturity date to January 15, 2024. The other material terms of the unsecured term loan prior to the modification remained substantially unchanged. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 0.75 % to 1.65 % per annum based on our credit rating. The margin associated with our borrowings as of March 31, 2022 was 1.00 % per annum. HTALP had interest rate swaps on the balance, which resulted in a fixed interest rate at 2.32 % per annum. As of March 31, 2022, we had $ 200.0 million under this unsecured term loan outstanding. $ 600.0 Million Unsecured Senior Notes due 2026 In September 2019, in connection with the $ 650.0 million unsecured senior notes due 2030 referenced below, HTALP issued $ 250.0 million as additional unsecured senior notes to the $ 350.0 million aggregate principal of senior notes issued on July 12, 2016, all of which are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.50 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 103.66 % and 99.72 %, respectively, of the principal amount thereof, with an effective yield to maturity of 2.89 % and 3.53 % per annum, respectively. As of March 31, 2022, we had $ 600.0 million of these unsecured senior notes outstanding that mature on August 1, 2026. 21 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) $ 500.0 Million Unsecured Senior Notes due 2027 In 2017, HTALP issued $ 500.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.75 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.49 % of the principal amount thereof, with an effective yield to maturity of 3.81 % per annum. As of March 31, 2022, we had $ 500.0 million of these unsecured senior notes outstanding that mature on July 1, 2027. $ 650.0 million Unsecured Senior Notes due 2030 In September 2019, in connection with the $ 250.0 million additional unsecured senior notes due 2026 referenced above, HTALP issued $ 650.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.10 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.66 % of the principal amount thereof, with an effective yield to maturity of 3.14 % per annum. Proceeds from the issuance of $ 900.0 million of these notes were used, in part, to redeem a total of $ 700.0 million of unsecured senior notes. During the year ended December 31, 2019, the make-whole fees required per the terms of the indenture agreements upon our calling the notes totaling $ 18.3 million was recorded in loss on extinguishment of debt in the accompanying consolidated statements of operations. As of March 31, 2022, HTALP had $ 650.0 million of these unsecured senior notes outstanding that mature on February 15, 2030. $ 800.0 million Unsecured Senior Notes due 2031 In September 2020, HTALP issued $ 800.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 2.00 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.20 % of the principal amount thereof, with an effective yield to maturity of 2.09 % per annum. We incurred financing costs of $ 6.8 million in relation to this transaction, which are being amortized through the maturity date. Proceeds from the issuance of these unsecured notes were used, in part, to redeem $ 300.0 million of unsecured senior notes. During the year ended December 31, 2020, the make-whole fee that was required per the terms of the indenture agreement upon our calling the notes of $ 24.7 million was recorded in loss on extinguishment of debt in the accompanying consolidated statements of operations. As of March 31, 2022, we had $ 800.0 million of these unsecured senior notes outstanding that mature on March 15, 2031. Future Debt Maturities The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of March 31, 2022 (in thousands): Year Amount 2022 $ — 2023 — 2024 200,000 2025 325,000 2026 600,000 Thereafter 1,950,000 Total $ 3,075,000 Deferred Financing Costs As part of the $ 1.7 billion bridge financing commitment secured in connection with the pending Merger with HR as further described in Note 1 - Organization and Description of Business, we incurred commitment fees of approximately $ 5.4 million, which are being amortized through the commitment expiration date of September 2, 2022. As of March 31, 2022, the future amortization of our deferred financing costs is as follows (in thousands): Year Amount 2022 $ 2,330 2023 3,106 2024 2,724 2025 2,603 2026 1,839 Thereafter 4,597 Total $ 17,199 22 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Debt Covenants We are required by the terms of our applicable loan agreements to meet various affirmative and negative covenants that we believe are customary for these types of facilities, such as limitations on the incurrence of debt by us and our subsidiaries that own unencumbered assets, limitations on the nature of HTALP’s business, and limitations on distributions by HTALP and its subsidiaries that own unencumbered assets. Our loan agreements also impose various financial covenants on us, such as a maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a minimum tangible net worth covenant, a maximum ratio of unsecured indebtedness to unencumbered asset value, rent coverage ratios and a minimum ratio of unencumbered Net Operating Income to unsecured interest expense. As of March 31, 2022, we believe that we were in compliance with all such financial covenants and reporting requirements. In addition, certain of our loan agreements include events of default provisions that we believe are customary for these types of facilities, including restricting us from making dividend distributions to our stockholders in the event we are in default thereunder, except to the extent necessary for us to maintain our REIT status. We have also concluded as of March 31, 2022, that we were not aware of non-compliance with any of our financial or non-financial covenants in light of the ongoing COVID-19 pandemic. 9. Derivative Financial Instruments and Hedging Activities Risk Management Objective of Using Derivative Financial Instruments We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, the fair value of derivative financial instruments designated as cash flow hedges are adjusted to reflect the impact of our credit quality. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and treasury locks as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without an exchange of the underlying notional amount. A treasury lock is a synthetic forward sale of a U.S. treasury note, which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance. Amounts reported in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. During the next twelve months, we estimate that an additional $ 1.2 million will be reclassified from other comprehensive income in the accompanying condensed consolidated balance sheets as an increase to interest related to derivative financial instruments in the accompanying condensed consolidated statements of operations. As of March 31, 2022, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments): Interest Rate Swaps March 31, 2022 Number of instruments 7 Notional amount $ 500,000 23 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The table below presents the fair value of our derivative financial instruments designated as cash flow hedges as well as the classification in the accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively (in thousands): Asset Derivatives Liability Derivatives Fair Value at: Fair Value at: Derivatives Designated as Hedging Instruments: Balance Sheet Location March 31, 2022 December 31, 2021 Balance Sheet Location March 31, 2022 December 31, 2021 Interest rate swaps Receivables and other assets $ 3,692 $ — Derivative financial instruments $ — $ 5,069 The table below presents the gain or loss recognized on our derivative financial instruments designated as cash flow hedges as well as the classification in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, respectively (in thousands): Three Months Ended March 31, Effect of Derivative Instruments Location in Statement of Operations and Comprehensive Income (Loss) 2022 2021 Gain (loss) recognized in OCI Change in unrealized losses on cash flow hedges $ 7,218 $ 1,163 Gain (loss) reclassified from accumulated OCI into income Interest expense ( 1,599 ) ( 1,629 ) Credit Risk Related Contingent Features We have agreements with each of our derivative counterparties that contain a provision that if we default on any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations. We also have agreements with each of our derivative counterparties that incorporate provisions from our indebtedness with a lender affiliate of the derivative counterparty requiring it to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by these agreements. As of March 31, 2022, the fair value of derivatives in a net asset position, including accrued interest, but excluding any adjustment for nonperformance risk related to these agreements, was $ 3.6 million. As of March 31, 2022, we have not posted any collateral related to these agreements and we were not in breach of any of the provisions of these agreements. If we had breached any of the provisions of these agreements, we could have been required to settle our obligations, if any, under these agreements. 10. Commitments and Contingencies Litigation On May 6, 2022, a purported stockholder of the Company filed a lawsuit in the United States District Court for the Southern District of New York against us and seven of our current directors, captioned Shiva Stein v. Healthcare Trust of America, Inc., et al., Case No. 1:22-cv-03703 (the “Complaint”). The Complaint alleges that the preliminary proxy statement issued in connection with the Merger omits material information or contains misleading disclosures and that, as a result, (i) all of the defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act) and (ii) our directors violated section 20(a) of the Exchange Act. The Complaint seeks, among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages to the extent the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) an accounting to plaintiff for all damages suffered as a result of the alleged wrongdoing; and (v) an award of plaintiff’s expenses, including attorneys’ and experts’ fees. We believe the claims asserted in the Complaint are without merit. Additional lawsuits may be filed against us, our Board of Directors, and/or other parties to the Merger in connection with the transactions contemplated by the Merger Agreement. 24 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) In addition, we are, from time to time, also subject to claims and litigation arising in the ordinary course of business with respect to tenant litigation and threatened or asserted labor matters. We do not believe liability from any reasonably foreseeable disposition of the aforementioned claims and litigation, individually or in the aggregate, would have a material effect on our consolidated financial position, results of operations or cash flows. Environmental Matters We routinely monitor our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our condensed consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability at our properties that we believe would require additional disclosure or the recording of a loss contingency. Other Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In our opinion, these matters are not expected to have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows. 11. Stockholders’ Equity and Partners’ Capital HTALP’s operating partnership agreement provides that it will distribute cash flow from operations and net sale proceeds to its partners in accordance with their overall ownership interests at such times and in such amounts as the general partner thereof determines. Dividend distributions are made such that a holder of one OP Unit in HTALP will receive distributions from HTALP in an amount equal to the dividend distributions paid to the holder of one share of our common stock. In addition, for each share of common stock issued or redeemed by HTA, HTALP issues or redeems a corresponding number of OP Units. Common Stock Offerings In March 2021, we entered into equity distribution agreements with various sales agents with respect to our at-the-market (“ATM”) offering program of common stock with an aggregate sales amount of up to $ 750.0 million, which replaced our prior ATM offering program that expired in February 2021. As of March 31, 2022, $ 750.0 million remained available for issuance by us under our current ATM. Stock Repurchase Plan In September 2020, our Board of Directors approved the reactivation of 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 22, 2023. As of March 31, 2022, the remaining amount of common stock available for repurchase under our stock repurchase plan was $ 300.0 million. Common Stock Dividends See our accompanying condensed consolidated statements of equity and condensed statements of changes in partners’ capital for the dividends declared during the three months ended March 31, 2022 and 2021. As of March 31, 2022, declared, but unpaid, dividends totaling $ 75.8 million were included in accounts payable and accrued liabilities. On May 5, 2022, our Board of Directors announced a quarterly cash dividend of $ 0.325 per share of common stock and per OP Unit to be paid on July 15, 2022 to stockholders and unitholders of record on July 6, 2022. Incentive Plan Our Incentive Plan permits the grant of incentive awards to our employees, officers, non-employee directors and consultants as selected by our Board of Directors. This Plan authorizes us to grant awards in any of the following forms: options; stock appreciation rights; restricted stock; restricted or deferred stock units; performance awards; dividend equivalents; other stock-based awards, including units in HTALP; and cash-based awards. Subject to adjustment as provided in the Plan, the aggregate number of awards reserved and available for issuance under the Plan is 10,000,000 shares. As of March 31, 2022, there were 9,646,504 awards available for grant under the Plan. Restricted Common Stock We recognized compensation expense, equal to the fair market value of HTA’s stock on the grant date, over the service period which is generally three to four years . For the three months ended March 31, 2022 and 2021 we recognized compensation expense of $ 2.0 million and $ 3.3 million, respectively. Substantially all compensation expense was recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations. 25 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) As of March 31, 2022, we had $ 7.9 million of unrecognized compensation expense, net of estimated forfeitures, which we will recognize over a remaining weighted average period of 1.9 years. The following is a summary of our restricted common stock activity as of March 31, 2022 and 2021, respectively: March 31, 2022 March 31, 2021 Restricted Common Stock Weighted Average Grant Date Fair Value Restricted Common Stock Weighted Average Grant Date Fair Value Beginning balance 529,862 $ 28.83 436,399 $ 28.27 Granted 158,543 30.81 354,288 26.20 Vested ( 123,958 ) 27.37 ( 258,000 ) 27.50 Forfeited ( 4,437 ) 29.60 ( 333 ) 30.07 Ending balance 560,010 $ 29.71 532,354 $ 27.45 12. Fair Value of Financial Instruments Financial Instruments Reported at Fair Value - Recurring The table below presents the carrying amounts and fair values of our financial instruments on a recurring basis as of March 31, 2022 and December 31, 2021, respectively (in thousands): March 31, 2022 December 31, 2021 Carrying Amount Fair Value Carrying Amount Fair Value Level 2 - Assets: Real estate notes receivable, net $ 72,701 $ 70,135 $ 69,114 $ 68,476 Derivative financial instruments 3,692 3,692 — — Level 2 - Liabilities: Derivative financial instruments $ — $ — $ 5,069 $ 5,069 Debt 3,053,884 2,944,166 3,028,122 3,117,602 The carrying amounts of cash and cash equivalents, tenant and other receivables, restricted cash, accounts payable, and accrued liabilities approximate fair value. There have been no transfers of assets or liabilities between levels. We will record any such transfers at the end of the reporting period in which a change of event occurs that results in a transfer. Although we have determined that the majority of the inputs used to value our cash flow hedges fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our cash flow hedge positions and have determined that the credit valuation adjustments are not significant to their overall valuation. As a result, we have determined that our cash flow hedge valuations in their entirety are classified in Level 2 of the fair value hierarchy. For further discussion of the assumptions considered, refer to Note 2 - Summary of Significant Accounting Policies. 26 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Financial Instruments Reported at Fair Value - Non-Recurring We also have assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. This category generally includes assets subject to impairment. We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the contractual sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based on market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based on these inputs, we determined that our valuation of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For assets for which the estimated fair value was based on contractual sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy. As of March 31, 2022 we had no assets subject to impairment. The table below presents our assets measured at fair value on a non-recurring basis as of March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 December 31, 2021 Fair Value Fair Value Level 2 - Assets: Real estate investment $ — $ 26,768 Level 3 - Assets: Real estate investments $ — $ 4,970 27 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 13. Per Share Data of HTA For the three months ended March 31, 2022 and 2021, all of our earnings were distributed and the calculated earnings per share amount would be the same for all classes. The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per share of HTA for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per share data): Three Months Ended March 31, 2022 2021 Numerator: Net income $ 18,666 $ 22,393 Net income attributable to non-controlling interests ( 351 ) ( 363 ) Net income attributable to common stockholders $ 18,315 $ 22,030 Denominator: Weighted average shares outstanding - basic 228,978 218,753 Dilutive shares - OP Units convertible into common stock 4,068 3,515 Adjusted weighted average shares outstanding - diluted 233,046 222,268 Earnings per common share - basic Net income attributable to common stockholders $ 0.08 $ 0.10 Earnings per common share - diluted Net income attributable to common stockholders $ 0.08 $ 0.10 14. Per Unit Data of HTALP The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per unit of HTALP for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per unit data): Three Months Ended March 31, 2022 2021 Numerator: Net income $ 18,666 $ 22,393 Net income attributable to non-controlling interests — — Net income attributable to common unitholders $ 18,666 $ 22,393 Denominator: Weighted average OP Units outstanding - basic 233,046 222,268 Dilutive units - OP Units convertible into common units — — Adjusted weighted average units outstanding - diluted 233,046 222,268 Earnings per common unit - basic: Net income attributable to common unitholders $ 0.08 $ 0.10 Earnings per common unit - diluted: Net income attributable to common unitholders $ 0.08 $ 0.10 28 Table of Contents HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 15. Supplemental Cash Flow Information The following is the supplemental cash flow information for the three months ended March 31, 2022 and 2021, respectively (in thousands): Three Months Ended March 31, 2022 2021 Supplemental Disclosure of Cash Flow Information: Interest paid, net of capitalized interest $ 39,025 $ 38,605 Cash paid for operating leases 4,335 4,554 Supplemental Disclosure of Noncash Investing and Financing Activities: Accrued capital expenditures $ 7,620 $ 19,013 Dividend distributions declared, but not paid 75,766 71,146 Redemption of non-controlling interest 2,065 255 ROU assets obtained in exchange for lease obligations — 3,995 29 Table of Contents