What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-09 · 414 added, 429 removed, 22 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The use of the words “we,” “us,” or “our” refers to HTA and HTALP, collectively.

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report, as well as with the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2021 Annual Report on Form 10-K.

The information set forth below is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations.

• Forward-Looking Statements;

• Executive Summary;

• Company Highlights;

• Critical Accounting Policies;

• Recently Issued or Adopted Accounting Pronouncements;

• Factors Which May Influence Results of Operations;

• Results of Operations;

• Non-GAAP Financial Measures;

• Liquidity and Capital Resources;

• Commitments and Contingencies;

• Debt Service Requirements;

• Off-Balance Sheet Arrangements;

Forward-Looking Statements

Certain statements contained in this Quarterly Report constitute forward-looking statements within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”)).

Such statements include, in particular, statements about our plans, strategies, prospects and estimates regarding future MOB market performance.

Additionally, such statements are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially and in adverse ways from those projected or anticipated.

Therefore, such statements are not intended to be a guarantee of our performance in future periods.

Forward-looking statements are generally identifiable by the use of such terms as “expect,” “project,” “may,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “pro forma” or the negative of such terms and other comparable terminology.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Quarterly Report is filed with the SEC.

We cannot guarantee the accuracy of any such forward-looking statements contained in this Quarterly Report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Forward-looking statements regarding HR and HTA, include, but are not limited to, statements related to the Merger, including the anticipated timing, benefits and financial and operational impact thereof;

HR’s expected financing for the transaction;

other statements of management’s belief, intentions or goals;

and other statements that are not historical facts.

These forward-looking statements are based on each of the companies’ current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties.

Disclosure Regarding Forward-Looking Statements

This report and other materials the Company has filed or may file with the Securities and Exchange Commission (the "SEC"), as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could," "budget" and other comparable terms, and include, but are not limited to, statements related to the anticipated timing, financing benefits and financial and operational impact of the Merger.

These forward-looking statements are based on the Company's, and with respect to the Merger, include HTA's, current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties.

Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with:

HR’s and HTA’s ability to complete the Merger on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the Merger;

the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the Merger;

risks related to diverting the attention of HR and HTA management from ongoing business operations;

risks related to diverting the attention the Company's management from ongoing business operations;

failure to realize the expected benefits of the Merger;

significant transaction costs and/or unknown or inestimable liabilities;

significant transaction costs and/or unknown or inestimable liabilities of the Merger;

the risk of shareholder litigation in connection with the Merger, including resulting expense or delay;

the risk that HTA’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;

the ability to obtain the expected financing to consummate the Merger;

risks related to future opportunities and plans for the Company, including the

uncertainty of expected future financial performance and results of the Company following completion of the Merger;

effects relating to the announcement of the Merger or any further announcements or the consummation of the Merger on the market price of HR’s or HTA’s common stock;

the possibility that, if HR does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of HR’s common stock could decline;

the risk that the Company’s and HTA’s respective businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected;

risks related to future opportunities and plans for the Combined Company, including the uncertainty of expected future financial performance and results of the Combined Company following completion of the transaction;

the possibility that, if the Combined Company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of the Combined Company’s common stock could decline;

general adverse economic and local real estate conditions;

2 unchanged sentences

increases in operating expenses and real estate taxes;

changes in the dividend policy for HR’s common stock or its ability to pay dividends;

changes in the dividend policy for the Combined Company’s common stock or its ability to pay dividends;

impairment charges;

pandemics or other health crises, such as COVID-19;

and other risks and uncertainties affecting HR and HTA, including those described from time to time under the caption “Risk Factors” and elsewhere in HR’s and HTA’s SEC filings and reports, including HR’s Annual Report on Form 10-K for the year ended December 31, 2021, HTA’s Annual Report on Form 10-K for the year ended December 31, 2021, and other filings and reports by either company.

Moreover, other risks and uncertainties of which HR or HTA are not currently aware may also affect each of the companies’ forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated.

The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by HR or HTA on their respective websites or otherwise.

Neither HR nor HTA undertakes any obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.

Any such forward-looking statements reflect our current views about future events, are subject to unknown risks, uncertainties, and other factors, and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, all of which are difficult or impossible to predict accurately.

To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to stockholders and maintain the value of our real estate properties, may be significantly hindered.

Factors that might impair our ability to meet such forward-looking statements include, without limitation, those discussed in Part I, Item 1A - Risk Factors in our 2021 Annual Report on Form 10-K, which is incorporated herein and those discussed in Part II, Item 1A.

Risk Factors in this Quarterly Report on Form 10-Q.

Forward-looking statements express expectations of future events.

All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected.

Due to these inherent uncertainties, our stockholders are urged not to place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date made.

In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Executive Summary

We are the largest publicly-traded REIT focused on MOBs in the U.S.

as measured by the gross leasable area ("GLA") of our MOBs.

We conduct substantially all of our operations through HTALP.

We invest in MOBs that we believe will serve the future of healthcare delivery and MOBs that are primarily located on health system campuses, near university medical centers, or in core community outpatient locations.

We also focus on key markets that have certain demographic and macro-economic trends and where we can utilize our institutional full-service operating platform to generate strong tenant and health system relationships and operating cost efficiencies.

Our primary objective is to maximize stockholder value with disciplined growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow.

In pursuing this objective, we:

(i) seek internal growth through proactive asset management, leasing, building services and property management oversight;

(ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio;

and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage.

Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and could enhance our existing portfolio.

Since 2006, we have invested $7.8 billion primarily in MOBs, development projects, land and other healthcare real estate assets consisting of approximately 26.0 million square feet of GLA throughout the U.S.

Approximately 67% of our portfolio is located on the campuses of, or adjacent to, nationally and regionally recognized healthcare systems.

Our portfolio is diversified geographically across 32 states, with no state having more than 21% of our total GLA as of March 31, 2022.

We are concentrated in 20 to 25 key markets that are generally experiencing higher economic and demographic trends than other markets that we expect will drive demand for MOBs.

As of March 31, 2022, we had approximately 1 million square feet of GLA in ten of our top 20 markets and approximately 95% of our portfolio, based on GLA, is located in the top 75 Metropolitan Statistical Area ("MSAs"), with Dallas, Houston, Boston, Miami and Indianapolis being our largest markets by annualized base rent.

Merger with Healthcare Realty Trust Incorporated

On February 28, 2022, the Company, the Company OP and Merger Sub entered into a Merger Agreement with HR whereby Merger Sub will merge with and into HR, with HR continuing as the surviving corporation.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of Common Stock, $0.01 par value per share, of HR Common Stock will be converted into the right to receive 1.0 share of Class A Common Stock, $0.01 par value per share, of the Company Common Stock.

The Merger Agreement contains customary representations, warranties and covenants by each party.

The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders.

The boards of directors of the Company and HR have unanimously approved the Merger Agreement.

The Merger is expected to close during the third quarter of 2022.

Additionally, on May 2, 2022, HTA and HR filed a Form S-4 Registration Statement with the SEC in connection with the contemplated Merger.

Please review this Form S-4 for more information about the contemplated Merger.

Company Highlights

Portfolio Operating Performance

• For the three months ended March 31, 2022, our total revenue was $202.0 million, compared to $191.5 million for the three months ended March 31, 2021.

• For the three months ended March 31, 2022, our net income was $18.7 million, compared to $22.4 million, for the three months ended March 31, 2021.

• For the three months ended March 31, 2022, our net income attributable to common stockholders was $0.08 per diluted share, or $18.3 million, compared to $0.10 per diluted share, or $22.0 million, for the three months ended March 31, 2021.

• For the three months ended March 31, 2022, HTA’s FFO, as defined by NAREIT, was $93.6 million, or $0.40 per diluted share, compared to $0.44 per diluted share, or $97.8 million, for the three months ended March 31, 2021.

• For the three months ended March 31, 2022, HTALP’s FFO was $94.0 million, or $0.40 per diluted OP Unit, compared to $0.44 per diluted OP Unit, or $98.2 million, for the three months ended March 31, 2021.

• For the three months ended March 31, 2022, HTA’s and HTALP’s Normalized FFO was $0.44 per diluted share and OP Unit, or $101.5 million, compared to $0.44 per diluted share and OP Unit, or $98.3 million for the three months ended March 31, 2021.

• For additional information on FFO and Normalized FFO, see “FFO and Normalized FFO” below, which includes a reconciliation to net income attributable to common stockholders/unitholders and an explanation of why we present this non-GAAP financial measure.

• For the three months ended March 31, 2022, our Net Operating Income (“NOI”) was $136.1 million, compared to $131.9 million for the three months ended March 31, 2021.

• For the three months ended March 31, 2022, our Same-Property Cash NOI increased 0.8%, or $0.9 million, to $117.4 million, compared to $116.5 million for the three months ended March 31, 2021.

• For additional information on our NOI and Same-Property Cash NOI, see “NOI, Cash NOI and Same-Property Cash NOI” below, which includes a reconciliation from net income and an explanation of why we present these non-GAAP financial measures.

Key Market Focused Strategy and Investments

Over the last decade, we have been an active investor in the medical office sector.

This has enabled us to create a high quality portfolio focused on MOBs serving the future of healthcare with scale and significance in 20 to 25 key markets.

• Our investment strategy includes alignment with key healthcare systems, hospitals, and leading academic medical universities.

We are the largest owner of on-campus or adjacent MOBs in the country, with approximately 17.4 million square feet of GLA, or 67%, of our portfolio located in these locations.

The remaining 33% of our portfolio is located in core community outpatient locations where healthcare is increasingly being delivered.

• Over the past decade, our investments have been focused in our 20 to 25 key markets which we believe will outperform the broader U.S.

markets from an economic and demographic perspective.

As of March 31, 2022, approximately 95% of our portfolio’s GLA is located in the top 75 MSAs.

Our key markets represent top MSAs with strong growth metrics in jobs, household income and population, as well as low unemployment and mature healthcare infrastructures.

Many of our key markets are also supported by strong university systems.

• Our key market focus has enabled us to establish scale across 20 to 25 key markets and effectively utilize our asset management and leasing platform to deliver consistent same store growth and additional yield on investments, as well as cost effective service to tenants.

As of March 31, 2022, we had approximately 1 million square feet of GLA in ten of our top 20 markets and approximately 0.5 million square feet of GLA in 17 of our top 20 markets.

• During the three months ended March 31, 2022, we closed on $19.0 million worth of medical office building investments totaling approximately 44,000 square feet of GLA.

In addition, we funded $2.3 million of investments in real estate notes receivable.

Internal Growth through Proactive In-House Property Management and Leasing

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

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

Our full-service operating platform has also enabled us to focus on generating cost efficiencies as we gain scale across individual markets and regions.

• As of March 31, 2022, our in-house asset management and leasing platform operated approximately 25.0 million square feet of GLA, or 96% of our total portfolio.

• As of March 31, 2022, our leased rate (which includes leases which have been executed, but which have not yet commenced) was 89.3% by GLA and our occupancy rate was 87.3% by GLA.

• We entered into new and renewal leases on approximately 0.7 million square feet of GLA, or approximately 2.7% of the GLA of our total portfolio, during the three months ended March 31, 2022.

• During the three months ended March 31, 2022, tenant retention for the Same-Property portfolio was 69%.

Tenant retention is defined as the sum of the total leased GLA of tenants that renewed a lease during the period over the total GLA of leases that renewed or expired during the period.

Financial Strategy and Balance Sheet Flexibility

• As of March 31, 2022, we had total leverage, measured by debt less cash and cash equivalents to total capitalization, of 29.4%.

Total liquidity was approximately $1.0 billion, inclusive of $975.0 million available on our unsecured revolving credit facility and cash and cash equivalents of $10.9 million as of March 31, 2022.

• As of March 31, 2022, the weighted average remaining term of our debt portfolio was 6.2 years.

Critical Accounting Policies

The complete list of our critical accounting policies was disclosed in our 2021 Annual Report on Form 10-K.

Additionally, in light of the COVID-19 pandemic, we believe we have included all relevant information when determining our management estimates and that these estimates are in line with our established policies.

For further information on other significant accounting policies that impact us, see Note 2 - Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements.

Recently Issued or Adopted Accounting Pronouncements

For detail on recently issued accounting pronouncements see Note 2 - Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements.

Factors Which May Influence Results of Operations

We are not aware of material trends or uncertainties other than the risk factors previously discussed in Part I, Item 1A - Risk Factors, in our 2021 Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q under Item 1A.

Risk Factors below, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the investment, management and operation of our properties.

Rental Income

The amount of rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that will become available from unscheduled lease terminations at the then applicable rental rates.

Negative trends in one or more of these factors, including the ultimate collections of such rents, could adversely affect our rental income in future periods.

Investment Activity

During the three months ended March 31, 2022, we had investments with an aggregate gross purchase price of $19.1 million.

During the three months ended March 31, 2021, we had investments with an aggregate gross purchase price of $32.9 million.

The amount of any future acquisitions or dispositions could have a significant impact on our results of operations in future periods.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and 2021

As of March 31, 2022 and 2021, we owned and operated approximately 26.0 million and 25.6 million square feet of GLA, respectively, with a leased rate of 89.3% and 89.2%, respectively (including leases which have been executed, but which have not yet commenced), and an occupancy rate of 87.3% and 87.9%, respectively.

All explanations are applicable to both HTA and HTALP unless otherwise noted.

Comparison of the three months ended March 31, 2022 and 2021, respectively, is set forth below (in thousands):

Three Months Ended March 31,

2022 2021 Change % Change

Rental income $ 200,243 $ 191,350 $ 8,893 4.6 %

Interest and other operating income 1,759 143 1,616 NM

Total revenues 202,002 191,493 10,509 5.5

Rental 65,884 59,579 6,305 10.6

General and administrative 12,448 10,560 1,888 17.9

Merger-related costs 6,018 — 6,018 NM

Transaction 144 96 48 50.0

Depreciation and amortization 75,386 76,274 (888) (1.2)

Interest expense 23,940 22,986 954 4.2

Total expenses 183,820 169,495 14,325 8.5

Loss on sale of real estate, net (4) — (4) NM

Income from unconsolidated joint venture 400 392 8 2.0

Other income 88 3 85 NM

Net income $ 18,666 $ 22,393 $ (3,727) (16.6) %

NOI $ 136,118 $ 131,914 $ 4,204 3.2 %

Same-Property Cash NOI $ 117,430 $ 116,549 $ 881 0.8 %

* NM- not meaningful.

Rental Income

For the three months ended March 31, 2022 and 2021, respectively, rental income was comprised of the following (in thousands):

Three Months Ended March 31,

2022 2021 Change % Change

Contractual rental income $ 191,165 $ 182,512 $ 8,653 4.7 %

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

and other risks and uncertainties affecting the Combined Company, including those described from time to time under the caption “Risk Factors” and elsewhere in the Combined Company’s filings and reports with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Moreover, other risks and uncertainties of which the Combined Company is not currently aware may also affect the Combined Company's forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated.

The Combined Company undertakes no obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.

Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Combined Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Combined Company is pursuing.

For a detailed discussion of the Combined Company’s risk factors, please refer to Legacy HR's and Legacy HTA's filings with the SEC, including this report and Item 1A.

Risk Factors herein and Legacy HR's and Legacy HTA's Annual Report on Form 10-K for the year ended December 31, 2021.

Merger with Healthcare Trust of America

Completed Merger

On July 20, 2022, Legacy HR, Legacy HTA, the OP and Merger Sub completed the Merger in accordance with the terms of the Merger Agreement.

Immediately following the Merger, Legacy HR converted to a Maryland limited liability company and changed its name to “HRTI, LLC” and Legacy HTA changed its name to “Healthcare Realty Trust Incorporated”.

In addition, the equity interests of Legacy HR were contributed by Legacy HTA by means of a contribution and assignment agreement to the OP such that Legacy HR became a wholly-owned subsidiary of the OP.

As a result, Legacy HR became a part of an umbrella partnership REIT (“UPREIT”) structure, which is intended to align the corporate structure of the combined company after giving effect to the Merger and the UPREIT reorganization (the “Combined Company”) and to provide a platform for the Combined Company to more efficiently acquire properties in a tax-deferred manner.

The Combined Company operates under the name “Healthcare Realty Trust Incorporated” and its shares of class A common stock, $0.01 par value per share, trade on the New York Stock Exchange (the “NYSE”) under the ticker symbol “HR”.

Unless expressly stated otherwise, the discussion in this Item 2 refers to Legacy HR's financial condition and results of operations on a stand-alone basis prior to giving effect to the Merger.

Because Legacy HR was the accounting acquirer under GAAP in the transaction, its historical financial statements become the historical financial statements for the Company.

For additional information, please refer to the Explanatory Note in this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

Sources and Uses of Cash

The Company’s primary sources of cash include rent receipts from its real estate portfolio based on contractual arrangements with its tenants, proceeds from the sales of real estate properties, joint ventures, and proceeds from public or private debt or equity offerings.

Prior to the refinancing of its bank facilities in connection with the Merger, as of June 30, 2022, the Company had $209.5 million available to be drawn on its unsecured credit facility under the Amended and Restated Credit Agreement, dated as of May 31, 2019 (the "Unsecured Credit Facility") and $34.3 million in cash.

The Combined Company expects to continue to meet its liquidity needs, including funding additional investments, paying dividends, and funding debt service, through cash flows from operations and liquidity sources described in Note 9 to the Condensed Consolidated Financial Statements included in this report.

The Combined Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements.

The Combined Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Combined Company in sufficient amounts to meet its liquidity needs.

Financings in Connection with the Merger

Credit Facilities

In connection with the effectiveness of the Merger, Legacy HR (in a limited capacity), Legacy HTA and the OP entered into the Fourth Amended and Restated Credit and Term Loan Agreement (the “Credit Facility”) with Wells Fargo Bank, National Association, as Administrative Agent;

Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., and Citibank, N.A., as Joint Book Runners;

Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., U.S.

Bank National Association, Citibank, N.A., The Bank of Nova Scotia, Capital One, National Association, U.S.

Bank National Association, and PNC Capital Markets LLC, as Joint Lead Arrangers;

and the other lenders named therein.

The Credit Facility restructures the parties’ existing bank facilities and adds additional borrowing capacities for the Combined Company following the Merger.

See Note 9 to the Condensed Consolidated Financial Statements for additional information.

Investing Activities

Cash flows used in investing activities for the six months ended June 30, 2022 were approximately $281.2 million.

Below is a summary of significant investing activities.

Company Acquisitions

The following table details the Company's acquisitions for the six months ended June 30, 2022:

Dollars in thousands ASSOCIATED HEALTH SYSTEM/TENANCY 1

DATE ACQUIRED PURCHASE PRICE SQUARE FOOTAGE MILES TO CAMPUS

Dallas, TX Texas Health Resources 2/11/22 $ 8,175 18,000 0.19

San Francisco, CA 2

Kaiser/Sutter Health 3/7/22 114,000 166,396 0.90 to 3.30

Atlanta, GA Wellstar Health 4/7/22 6,912 21,535 0.00

Denver, CO Centura Health 4/13/22 6,320 12,207 2.40

Colorado Springs, CO 3

Centura Health 4/13/22 13,680 25,800 0.80 to 1.70

Seattle, WA UW Medicine 4/28/22 8,350 13,256 0.05

Houston, TX CommonSpirit 4/28/22 36,250 76,781 1.70

Los Angeles, CA Cedars-Sinai Health Systems 4/29/22 35,000 34,282 0.11

Oklahoma City, OK Mercy Health 4/29/22 11,100 34,944 0.18

Raleigh, NC 2

WakeMed/None 5/31/22 27,500 85,113 0.25 to 12.30

BayCare Health 6/9/22 18,650 55,788 0.23

Total real estate acquisitions $ 285,937 544,102

1 Includes buildings located on-campus, adjacent and off-campus that are anchored by healthcare systems or located within two miles of a hospital campus.

2 Includes three properties.

3 Includes two properties.

Subsequent to June 30, 2022 and unrelated to the Merger, the Company acquired the following property:

Dollars in thousands ASSOCIATED HEALTH SYSTEM/TENANCY 1

DATE ACQUIRED PURCHASE PRICE SQUARE FOOTAGE MILES TO CAMPUS

Seattle, WA EvergreenHealth 8/1/22 $ 4,850 10,593 0.24

TIAA Joint Venture Acquisitions

The following table details the TIAA Joint Venture's acquisitions for the six months ended June 30, 2022:

Dollars in thousands ASSOCIATED HEALTH SYSTEM/TENANCY 1

DATE ACQUIRED PURCHASE PRICE SQUARE FOOTAGE MILES TO CAMPUS COMPANY OWNERSHIP %

San Francisco, CA 2

MarinHealth/Kaiser 3/7/22 $ 67,175 110,865 0.00 to 3.30 50 %

Los Angeles, CA 3

Valley Presbyterian Health 3/7/22 33,800 103,259 1.30 50 %

Total TIAA Joint Venture acquisitions $ 100,975 214,124

1 Includes buildings located on-campus, adjacent and off-campus that are anchored by healthcare systems or located within two miles of a hospital campus.

2 Includes three properties.

3 Includes two properties.

The Company disposed of four properties during the six months ended June 30, 2022 for a total sales price of $110.5 million, including cash proceeds of $108.1 million.

The following table details these dispositions for the six months ended June 30, 2022:

Dollars in thousands Date Disposed Sales Price Square Footage

Loveland, CO 1

2/24/22 $ 84,950 150,291

Other rental revenue 4,834 3,591 1,243 34.6

Total rental income $ 200,243 $ 191,350 $ 8,893 4.6 %

Contractual rental income, which includes expense reimbursements, increased $8.7 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The increase was primarily due to additional contractual rental income of $8.2 million from our 2021 and 2022 acquisitions, and contractual rent increases for the three months ended March 31, 2022, partially offset by $2.8 million of reduced contractual rental income as a result of the buildings we sold during 2021 and 2022 for the three months ended March 31, 2022, respectively.

Average starting and expiring base rents for new and renewal leases consisted of the following for the three months ended March 31, 2022 and 2021, respectively (in thousands, except in average base rents per square foot of GLA):

Three Months Ended March 31,

New an d renewal leases:

Average starting base rents $ 28.92 $ 24.75

Average expiring base rents 25.99 22.99

Square feet of GLA 713 705

Lease rates can vary across markets, and lease rates that are considered above or below current market rent may change over time.

Leases that expired in 2022 had rents that we believed were at market rates.

In general, leasing concessions vary depending on lease type, term, geography, and supply/demand dynamics.

Tenant improvements, leasing commissions and tenant concessions for new and renewal leases consisted of the following for the three months ended March 31, 2022 and 2021, respectively (in per square foot of GLA):

Three Months Ended March 31,

Tenant improvements $ 35.09 $ 22.34

Leasing commissions

Tenant concessions 0.41 7.14

Renewal leases:

Tenant improvements $ 7.01 $ 5.03

Leasing commissions

Tenant concessions 0.00 0.16

The average term for new and renewal leases executed consisted of the following for the three months ended March 31, 2022 and 2021, respectively (in years):

Three Months Ended March 31,

New leases 6.5 4.4

Renewal leases 4.3 4.2

Rental Expenses

For the three months ended March 31, 2022 and 2021, rental expenses attributable to our properties were $65.9 million and $59.6 million, respectively.

The increase in rental expenses was primarily due to $3.8 million of additional rental expenses associated with our 2021 and 2022 acquisitions for the three months ended March 31, 2022, respectively.

General and Administrative Expenses

For the three months ended March 31, 2022 and 2021, general and administrative expenses were $12.4 million and $10.6 million, respectively.

The increase was driven primarily by the following:

(i) increased board expenses of $0.4 million, which includes additional board meeting fees of $0.2 million incurred primarily as a result of the Merger Agreement and the process related thereto, and $0.2 million of board member retainer fees for the board chairman and new board members;

(ii) increased legal and professional fees of $0.4 million, primarily driven by costs incurred as a result of the previously disclosed whistleblower investigation, employee retention and strategic review matters;

and (iii) increased costs for general corporate matters.

Merger-related costs

For the three months ended March 31, 2022, merger-related costs as a result of the contemplated Merger with HR were $6.0 million and included the following:

(i) financial advisor fees of $3.8 million;

(ii) legal fees of $1.8 million;

(iii) merger and integration consulting fees of $0.3 million;

and (iv) travel costs of $0.1 million.

No such costs were incurred for the three months ended March 31, 2021.

Depreciation and Amortization Expense

For the three months ended March 31, 2022 and 2021, depreciation and amortization expense was $75.4 million and $76.3 million, respectively.

The slight decrease in expense was associated with our buildings we disposed of during 2021 and 2022, offset by 2021 and 2022 acquisitions.

Interest Expense

For the three months ended March 31, 2022 and 2021, interest expense was $23.9 million and $23.0 million, respectively.

The increase in interest expense is primarily related to amortization of commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the contemplated Merger with HR.

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

From time to time, we also enter into derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a related financial instrument.

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

Loss on Sale of Real Estate, net

For the three months ended March 31, 2022, we realized a net loss of approximately $4 thousand, as a result of the sale of a tenant purchase option on 1 of our MOBs located in Georgia.

For the three months ended March 31, 2021, we had no property dispositions.

For the three months ended March 31, 2022 and 2021, net income was $18.7 million and $22.4 million, respectively.

The decrease is primarily the result of the merger-related costs incurred as a result of the contemplated Merger with HR.

NOI and Same-Property Cash NOI

For the three months ended March 31, 2022 and 2021, NOI was $136.1 million and $131.9 million, respectively.

The increases in NOI was primarily due to additional NOI from our 2021 and 2022 acquisitions of $5.6 million for the three months ended March 31, 2022, respectively, partially offset by $1.6 million of reduced NOI as a result of the buildings we sold during 2021 and 2022 for the three months ended March 31, 2022, respectively, and a reduction in straight-line rent from properties we owned for more than a year.

Same-Property Cash NOI increased 0.8% to $117.4 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The increase was primarily the result of rent escalations, offset by a slight decrease in average occupancy.

Non-GAAP Financial Measures

FFO and Normalized FFO

We compute FFO in accordance with the current standards established by NAREIT.

FFO is defined as net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property and impairment write-downs of depreciable assets, plus depreciation and amortization related to investments in real estate, and after adjustments for unconsolidated partnerships and joint ventures.

Additionally, with respect to gains and losses on the sale of assets incidental to the main business of a REIT, the REIT has the option to include or exclude such gains and losses in the calculation of FFO.

Since FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders/unitholders.

We also compute Normalized FFO, which excludes from FFO:

(i) transaction expenses;

(ii) gain or loss on extinguishment of debt;

(iii) non-controlling income or loss from OP Units included in diluted shares (only applicable to the Company);

and (iv) other normalizing adjustments, which include items that are unusual and infrequent in nature.

Our methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs.

We present FFO and Normalized FFO because we consider them important supplemental measures of our operating performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.

Historical cost accounting assumes that the value of real estate assets diminishes ratably over time.

Since real estate values have historically risen or fallen based on market conditions, many industry investors have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

FFO and Normalized FFO should not be considered as alternatives to net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP) as indicators of our financial performance, nor are they indicative of cash available to fund cash needs.

FFO and Normalized FFO should be reviewed in connection with other GAAP measurements.

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

The following is the reconciliation of HTA’s FFO and Normalized FFO to net income attributable to common stockholders for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per share data):

Three Months Ended March 31,

Net income attributable to common stockholders $ 18,315 $ 22,030

Depreciation and amortization expense related to investments in real estate

San Antonio, TX 1

4/15/22 25,500 201,523

Loss on sale of real estate, net 4 —

Proportionate share of joint venture depreciation and amortization

FFO attributable to common stockholders $ 93,606 $ 97,849

Transaction expenses 144 96

Merger-related costs (1)

Commitment fee amortization (2)

Non-controlling income from OP Units included in diluted shares 351 363

Other normalizing adjustments (3)

Normalized FFO attributable to common stockholders $ 101,525 $ 98,308

Net income attributable to common stockholders per diluted share $ 0.08 $ 0.10

FFO adjustments per diluted share, net

FFO attributable to common stockholders per diluted share

Total dispositions $ 110,450 351,814

1 Includes two properties.

Capital Funding

During the six months ended June 30, 2022, capital funding included the following:

• $17.2 million toward the following development and redevelopment of properties:

◦ Memphis, Tennessee redevelopment totaled $2.1 million;

◦ Dallas, Texas redevelopments totaled $3.3 million;

◦ Tacoma, Washington redevelopment totaled $5.4 million;

◦ Nashville, Tennessee development totaled $5.6 million;

◦ reposition properties capital and tenant improvements totaled $0.1 million;

◦ tenant improvement funding for previously completed projects totaled $0.7 million.

• $14.6 million toward first generation tenant improvements and planned capital expenditures for acquisitions;

• $9.9 million toward second generation tenant improvements;

• $7.2 million toward capital expenditures.

Financing Activities

Cash flows provided by financing activities for the six months ended June 30, 2022 were approximately $188.2 million.

Inflows from equity proceeds related to the Company's common stock issuances totaled $22.8 million, net of issuance costs incurred, and net borrowing totaled $262.3 million.

Aggregate cash outflows totaled approximately $96.9 million primarily associated with dividends paid to common stockholders.

See Notes 4 and 7 to the Condensed Consolidated Financial Statements accompanying this report for more information about capital markets and financing activities.

Common Stock Issuances

At-The-Market Equity Offering Program

On August 6, 2021 and November 5, 2021, the Company entered into equity distribution agreements with 12 investment banks to allow for issuance and sale under its at-the-market equity offering program of up to an aggregate of $750.0 million of common stock.

These agreements are no longer in effect following the closing of the Merger on July 20, 2022.

The following table details the Company's forward at-the-market activity:

WEIGHTED AVERAGE SALE PRICE

per share FORWARD SHARE CONTRACTS SHARES SETTLED SHARES REMAINING TO BE SETTLED NET PROCEEDS

Balance at December 31, 2021 $ — — — 727,400 $ —

1Q 2022 $ 31.73 — 727,400 — $ 22.3

2Q 2022 $ — — — — $ —

Debt Activity

On February 18, 2022, the Company repaid in full a mortgage note payable bearing interest at a rate of 4.70% that encumbered a 56,762 square foot property in California.

The aggregate payoff price of $12.6 million consisted of outstanding principal of $11.0 million and a "make-whole" amount of approximately $1.6 million.

The unamortized premium of $0.8 million and the unamortized cost on this note of $0.1 million were written off upon payoff.

On February 24, 2022, the Company repaid in full a mortgage note payable bearing interest at a rate of 6.17% that encumbered a 80,153 square foot property in Colorado, in conjunction with the disposition of the property.

The aggregate payoff price of $6.4 million consisted of outstanding principal of $5.8 million and a "make-whole" amount of approximately $0.6 million.

The unamortized premium of $0.1 million was written off upon payoff.

As of June 30, 2022, the Company has outstanding interest rate derivatives from Legacy HR totaling $175.0 million to hedge one-month LIBOR.

The following details the amount and rate of each swap (dollars in thousands):

EFFECTIVE DATE AMOUNT WEIGHTED

AVERAGE RATE EXPIRATION DATE

December 18, 2017 $ 25,000 2.18 % December 16, 2022

February 1, 2018 50,000 2.46 % December 16, 2022

May 1, 2019 50,000 2.33 % May 1, 2026

June 3, 2019 50,000 2.13 % May 1, 2026

$ 175,000 2.29 %

Normalized FFO adjustments per diluted share, net

Normalized FFO attributable to common stockholders per diluted share

Operating Activities

Cash flows provided by operating activities increased from $105.6 million for the six months ended June 30, 2021 to $114.1 million for the six months ended June 30, 2022.

Items impacting cash flows from operations include, but are not limited to, cash generated from property operations, interest payments and the timing related to the payment of invoices and other expenses.

The Company may, from time to time, sell properties and redeploy cash from property sales into new investments.

To the extent revenues related to the properties being sold exceed income from these new investments, the Company's results of operations and cash flows could be adversely affected.

New Accounting Pronouncements

See Note 1 to the Condensed Consolidated Financial Statements accompanying this report for information on new accounting standards.

Trends and Matters Impacting Operating Results

Management monitors factors and trends important to the Company and the REIT industry to gauge the potential impact on the operations of the Company.

In addition to the matters discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, below are some of the factors and trends that management believes may impact future operations of the Company.

Expiring Leases

The Company expects that approximately 15% to 20% of the leases will expire each year in the ordinary course of business.

There are 540 leases totaling 1.9 million square feet that will expire during the remainder of 2022.

Approximately 87% of the leases expiring in 2022 are in buildings located on or adjacent to hospital campuses, are distributed throughout the portfolio, and are not concentrated with any one tenant, health system or market area.

The Company typically expects to retain 75% to 90% of tenants upon expiration, and the retention ratio for the first six months of the year was within this range.

Operating Expenses

The Company historically has experienced increases in property taxes throughout its portfolio as a result of increasing assessments and tax rates levied across the country.

The Company continues its efforts to appeal property tax increases and manage the impact of the increases.

In addition, the Company historically has incurred variability in portfolio utilities expense based on seasonality, with the first and third quarters usually reflecting greater amounts.

The effects of these operating expense increases are mitigated in leases that have provisions for operating expense reimbursement.

As of June 30, 2022, leases for 90% of the Company's multi-tenant leased square footage allow for some recovery of operating expenses, with 30% having modified gross lease structures and 60% having net lease structures.

General and Administrative Expense

Prior to 2022, the Company granted long-term incentive awards, comprised of restricted stock, based on backward-looking performance measured at the end of the calendar year.

The Company adopted a new incentive compensation structure, effective January 2022, comprised of RSUs.

RSUs are granted at the beginning of the year with three-year forward-looking performance targets.

With this change in the timing and structure of incentive awards, the expense associated with the 2021 backward-looking awards will overlap the expense associated with the January 2022 forward-looking awards.

The new plan is expected to increase total general and administrative expense by $3.5 million in 2022.

Purchase Options

Information about the Company's unexercised purchase options and the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):

NUMBER OF PROPERTIES GROSS REAL ESTATE INVESTMENT AS OF JUNE 30, 2022

YEAR EXERCISABLE MOB INPATIENT FAIR MARKET

VALUE METHOD 1

NON FAIR MARKET

VALUE METHOD 2

2 1 $ 55,146 $ — $ 55,146

Weighted average diluted common shares outstanding

2023 — — — — —

(1) For the three months ended March 31, 2022, merger-related costs include the following:

(i) financial advisor fees of $3.8 million;

(ii) legal fees of $1.8 million;

(iii) merger and integration consulting fees of $0.3 million;

and (iv) travel costs of $0.1 million.

(2) For the three months ended March 31, 2022, commitment fee amortization relates to commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the pending transaction with HR.

(3) For the three months ended March 31, 2022, other normalizing adjustments include the following:

(i) additional board meeting fees of $159,000;

(ii) legal and professional fees related to the whistleblower investigation of $143,000;

(iii) legal fees related to employee retention matters of $131,000;

and (iv) professional fees related to strategic review matters of $81,000 .

The following is the reconciliation of HTALP’s FFO and Normalized FFO to net income attributable to common unitholders for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per unit data):

Three Months Ended March 31,

Net income attributable to common unitholders $ 18,666 $ 22,393

Depreciation and amortization expense related to investments in real estate

2024 — — — — —

Loss on sale of real estate, net 4 —

Proportionate share of joint venture depreciation and amortization

FFO attributable to common unitholders $ 93,957 $ 98,212

Transaction expenses 144 96

Merger-related costs (1)

Commitment fee amortization (2)

Other normalizing adjustments (3)

Normalized FFO attributable to common unitholders $ 101,525 $ 98,308

Net income attributable to common unitholders per diluted share $ 0.08 $ 0.10

FFO adjustments per diluted OP Unit, net 0.32 0.34

FFO attributable to common unitholders per diluted OP Unit $ 0.40 $ 0.44

Normalized FFO adjustments per diluted OP Unit, net 0.04 0.00

Normalized FFO attributable to common unitholders per diluted OP Unit $ 0.44 $ 0.44

Weighted average diluted common OP Units outstanding 233,046 222,268

(1) For the three months ended March 31, 2022, merger-related costs include the following:

(i) financial advisor fees of $3.8 million;

(ii) legal fees of $1.8 million;

(iii) merger and integration consulting fees of $0.3 million;

and (iv) travel costs of $0.1 million.

(3) For the three months ended March 31, 2022, other normalizing adjustments include the following:

(i) additional board meeting fees of $159,000;

(ii) legal and professional fees related to the whistleblower investigation of $143,000;

(iii) legal fees related to employee retention matters of $131,000;

and (iv) professional fees related to strategic review matters of $81,000 .

NOI, Cash NOI and Same-Property Cash NOI

NOI is a non-GAAP financial measure that is defined as net income or loss (computed in accordance with GAAP) before:

(i) general and administrative expenses;

(ii) transaction expenses;

(iii) depreciation and amortization expense;

(iv) impairment;

(v) interest expense;

(vi) gain or loss on sales of real estate and corporate assets;

(vii) gain or loss on extinguishment of debt;

(viii) income or loss from unconsolidated joint venture;

and (ix) other income or expense.

We believe that NOI provides an accurate measure of the operating performance of our operating assets because NOI excludes certain items that are not associated with the management of our properties.

Additionally, we believe that NOI is a widely accepted measure of comparative operating performance of REITs.

However, our use of the term NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount.

NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance.

NOI should be reviewed in connection with other GAAP measurements.

Cash NOI is a non-GAAP financial measure which excludes from NO I:

(i) straight-line rent adjustments;

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

(iii) notes receivable interest inc ome;

and (iv) other normalizing adjustments.

Contractual base rent, contractual rent increases, contractual rent concessions and changes in occupancy or lease rates upon commencement and expiration of leases are a primary driver of our revenue performance.

We believe that Cash NOI, which removes the impact of straight-line rent adjustments, provides another measurement of the operating performance of our operating assets.

Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance of REITs.

However, our use of the term Cash NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount.

Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance.

Cash NOI should be reviewed in connection with other GAAP measurements.

To facilitate the comparison of Cash NOI between periods, we calculate comparable amounts for a subset of our owned and operational properties referred to as “Same-Property”.

Same-Property Cash NOI excludes (i) properties which have not been owned and operated by us during the entire span of all periods presented and disposed properties, (ii) our share of unconsolidated joint ventures, (iii) development, redevelopment and land parcels, (iv) properties intended for disposition in the near term which have (a) been approved by the Board of Directors, (b) is actively marketed for sale, and (c) an offer has been

received at prices we would transact and the sales process is ongoing, and (v) certain non-routine items.

Same-Property Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance.

Same-Property Cash NOI should be reviewed in connection with other GAAP measurements.

The following is the reconciliation of HTA’s and HTALP’s NOI, Cash NOI and Same-Property Cash NOI to net income for the three months ended March 31, 2022 and 2021, respectively (in thousands):

Three Months Ended March 31,

2025 4 — 48,298 19,459 67,757

2026 1 — 21,109 — 21,109

2027 — — — — —

2028 1 — 41,101 — 41,101

2029 2 — 51,437 — 51,437

2030 — — — — —

2031 3 — 84,570 — 84,570

2032 and thereafter 4

7 — 255,071 — 255,071

Total 20 1 $ 556,732 $ 19,459 $ 576,191

1 The purchase option price includes a fair market value component that is determined by an appraisal process.

2 Includes properties with stated purchase prices or prices based on fixed capitalization rates.

3 These purchase options have been exercisable for an average of 14.9 years.

4 Includes the medical office building that is recorded in the line item Investment in financing receivable, net on the Company's Condensed Consolidated Balance Sheet.

Non-GAAP Financial Measures and Key Performance Indicators

Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance.

A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP.

Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of these measures to the most directly comparable GAAP financial measures.

The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions.

These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs.

Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Condensed Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Funds from Operations ("FFO"), Normalized FFO and Funds Available for Distribution ("FAD")

FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts (“NAREIT”).

NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, impairment, and after adjustments for unconsolidated partnerships and joint ventures.”

In addition to FFO, the Company presents Normalized FFO and FAD.

Normalized FFO is presented by adding to FFO acquisition-related costs, acceleration of debt issuance costs, debt extinguishment costs and other Company-defined normalizing items to evaluate operating performance.

FAD is presented by adding to Normalized FFO non-

real estate depreciation and amortization, non-cash financing receivable amortization, loan origination cost amortization, deferred financing fees amortization, stock-based compensation expense and provision for bad debts, net;

and subtracting maintenance capital expenditures, including second generation tenant improvements and leasing commissions paid and straight-line rent income, net of expense.

The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts.

FFO, Normalized FFO and FAD should not be considered as an alternative to net income as an indicator of the Company's financial performance or to cash flow from operating activities as an indicator of the Company's liquidity.

FFO, Normalized FFO and FAD should be reviewed in connection with GAAP financial measures.

Management believes FFO, Normalized FFO, FFO per common share, Normalized FFO per share and FAD ("Non-GAAP Measures") provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense.

Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time.

However, real estate values instead have historically risen or fallen with market conditions.

The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, Non-GAAP Measures can facilitate comparisons of operating performance between periods.

The Company reports Non-GAAP Measures because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs.

For these reasons, management deems it appropriate to disclose and discuss these Non-GAAP Measures.

However, none of these measures represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs.

Further, these measures should not be considered as an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.

The table below reconciles net income to FFO, Normalized FFO and FAD for the three and six months ended June 30, 2022 and 2021.

THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,

Amounts in thousands, except per share data 2022 2021 2022 2021

Net income $ 6,130 $ 23,096 $ 48,357 $ 47,118

General and administrative expenses 12,448 10,560

Gain on sales of real estate properties (8,496) (20,970) (53,280) (39,860)

Impairment of real estate properties — 5,078 (25) 5,912

Real estate depreciation and amortization 57,334 51,199 112,991 102,510

Proportionate share of unconsolidated joint ventures 2,807 1,354 5,176 2,168

FFO attributable to common stockholders $ 57,775 $ 59,757 $ 113,219 $ 117,848

Acquisition and pursuit costs 1

1,352 670 2,655 1,414

Merger-related costs 2

Transaction expenses 144 96

Depreciation and amortization expense

7,085 — 13,201 —

Interest expense

Lease intangible amortization 584 (6) 893 (78)

Non-routine legal costs/forfeited earnest money received 3

140 — 231 (500)

Loss on sale of real estate, net 4 —

Income from unconsolidated joint venture (400) (392)

Other income (88) (3)

NOI $ 136,118 $ 131,914

Straight-line rent adjustments, net (2,828) (3,774)

Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments (407) (475)

Notes receivable interest income

Cash NOI $ 131,223 $ 127,659

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

Debt financing costs — 283 1,429 283

Unconsolidated JV normalizing items 4

Normalized FFO attributable to common stockholders $ 67,019 $ 60,759 $ 131,806 $ 119,049

Non-real estate depreciation and amortization 556 641 1,016 1,314

Non-cash interest amortization 5

747 897 1,458 1,791

Redevelopment Cash NOI (2,105) (2,650)

Intended for sale Cash NOI (5,408) (6,280)

Same-Property Cash NOI (1)

Provision for bad debt, net 16 57 159 (22)

Straight-line rent, net (1,327) (1,194) (2,536) (2,289)

Stock-based compensation 3,356 2,627 7,055 5,647

Unconsolidated JV non-cash items 6

(242) (354) (513) (711)

(1) Same-Property includes 424 buildings for the three months ended March 31, 2022 and 2021, respectively.

Liquidity and Capital Resources

Our primary sources of cash include:

(i) cash flow from operations;

(ii) borrowings under our unsecured revolving credit facility;

(iii) net proceeds from the issuances of debt and equity securities;

and (iv) proceeds from our dispositions.

During the next 12 months our primary uses of cash are expected to include:

(a) the funding of acquisitions of MOBs, development properties and other facilities that serve the healthcare industry;

(b) capital expenditures;

(d) debt service payments, including principal payments;

and (e) the payment of dividends to our stockholders.

We anticipate cash flow from operations, restricted cash and reserve accounts and our unsecured revolving credit facility, if needed, will be sufficient to fund our operating expenses, capital expenditures and dividends to stockholders.

Investments and maturing indebtedness may require funds from borrowings under our unsecured revolving credit facility, the issuance of debt and/or equity securities or proceeds from sales of real estate.

As of March 31, 2022, we had total liquidity of $1.0 billion, inclusive of $975.0 million available on our unsecured revolving credit facility and cash and cash equivalents of $10.9 million.

As of March 31, 2022, we had unencumbered assets with a gross book value of $7.9 billion.

The unencumbered properties may be used as collateral to secure additional financings in future periods or refinance our current debt as it becomes due.

Our ability to raise funds from future debt and equity issuances is dependent on our investment grade credit ratings, general economic and market conditions, and our operating performance.

When we acquire a property, we prepare a capital plan that contemplates the estimated capital needs of that investment.

In addition to operating expenses, capital needs may also include costs of refurbishment, tenant improvements or other major capital expenditures.

The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs.

As of March 31, 2022, we estimate that our expenditures for capital improvements including lease commissions for the remainder of the year will range from approximately $75 million to $100 million depending on leasing activity.

In addition, we have approximately $150 million inclusive of costs to complete active development projects and incremental tenant improvements as part of our recently completed development projects.

Although we cannot provide assurance that we will not exceed these estimated expenditure levels, we believe our liquidity of $1.0 billion allows us the flexibility to fund such capital expenditures.

If we experience lower occupancy levels, reduced rental rates, reduced revenues as a result of asset sales, or increased capital expenditures and leasing costs compared to historical levels due to competitive market conditions for new and renewal leases, the effect would be a reduction of net cash provided by operating activities.

If such a reduction of net cash provided by operating activities is realized, we may have a cash flow deficit in subsequent periods.

Our estimate of net cash available is based on various assumptions which are difficult to predict, including the levels of our leasing activity and related leasing costs.

Any changes in these assumptions could impact our financial results and our ability to fund working capital and unanticipated cash needs.

The following is a summary of our cash flows for the three months ended March 31, 2022 and 2021, respectively (in thousands):

Three Months Ended March 31,

2022 2021 Change

Cash, cash equivalents and restricted cash - beginning of period $ 57,069 $ 118,765 $ (61,696)

Net cash provided by operating activities 49,308 65,353 (16,045)

Net cash used in investing activities (33,180) (76,299) 43,119

Net cash used in financing activities (57,775) (74,733) 16,958

Cash, cash equivalents and restricted cash - end of period $ 15,422 $ 33,086 $ (17,664)

Net cash provided by operating activities decreased in 2022 primarily due to the impact of our 2021 and 2022 dispositions, partially offset by our 2021 and 2022 acquisitions and contractual rent increases.

We anticipate cash flows from operating activities to increase as a result of the growth in our portfolio through new acquisitions and continued leasing activity in our existing portfolio.

For the three months ended March 31, 2022, net cash used in investing activities primarily related to capital expenditures of $28.6 million, investments in real estate of $19.1 million, development of real estate of $10.4 million, and advances on real estate notes receivable of $2.3 million, partially offset by proceeds from the sale of real estate of $26.8 million.

For the three months ended March 31, 2021, net cash used in investing activities primarily related to investments in real estate of $30.5 million, capital expenditures of $28.9 million and development of real estate of $17.1 million.

For the three months ended March 31, 2022, net cash used in financing activities primarily related to dividends paid to holders of our common stock of $74.4 million, and deferred financing costs of $5.4 million, partially offset by net borrowings under our revolving credit facility of $25.0 million.

For the three months ended March 31, 2021, net cash used in financing activities primarily related to dividends paid to holders of our common stock of $70.0 million, and the repurchase and cancellation of common stock of $3.2 million.

The amount of dividends we pay to our stockholders is determined by our Board of Directors, in their sole discretion, and is dependent on a number of factors, including funds available, our financial condition, capital expenditure requirements and annual dividend distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended.

We have paid monthly or quarterly dividends since February 2007, and if our investments produce sufficient cash flow, we expect to continue to pay dividends to our stockholders.

Because our cash available for dividend distributions in any year may be less than 90% of our taxable income for the year, we may obtain the necessary funds through borrowings, issuing new securities or selling assets to pay out enough of our taxable income to satisfy our dividend distribution requirement.

Our organizational documents do not establish a limit on dividends that may constitute a return of capital for federal income tax purposes.

The dividend we pay to our stockholders is equal to the distributions received from HTALP in accordance with the terms of the HTALP partnership agreement.

It is our intention to continue to pay dividends.

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

For the three months ended March 31, 2022, we paid cash dividends of $74.4 million on our common stock.

In April 2022 for the quarter ended March 31, 2022, we paid cash dividends on our common stock of $74.4 million.

We have historically maintained a low leveraged balance sheet and intend to continue to maintain this structure in the long term.

However, our total leverage may fluctuate on a short-term basis as we execute our business strategy.

As of March 31, 2022, our leverage ratio, measured by debt less cash and cash equivalents to total capitalization, was 29.4%.

As of March 31, 2022, we had debt outstanding of $3.1 billion and the weighted average interest rate therein was 2.86% per annum, inclusive of the impact of our cash flow hedges.

The following is a summary of our unsecured and secured debt.

See Note 8 - Debt in the accompanying condensed consolidated financial statements for a further discussion of our debt.

Unsecured Revolving Credit Facility

As of March 31, 2022, $975.0 million was available on our $1.0 billion unsecured revolving credit facility maturing in October 2025.

Unsecured Term Loans

As of March 31, 2022, we had $500.0 million of unsecured term loans outstanding, comprised of $300.0 million under our Unsecured Credit Agreement maturing in 2025, and $200.0 million under our unsecured term loan maturing in 2024.

Unsecured Senior Notes

As of March 31, 2022, we had $2.55 billion of unsecured senior notes outstanding, comprised of $600.0 million of senior notes maturing in 2026, $500.0 million of senior notes maturing in 2027, $650.0 million of senior notes maturing in 2030 and $800.0 million of senior notes maturing in 2031.

Debt Service Requirements

We are required by the terms of our applicable loan agreements to meet certain financial covenants, such as minimum net worth and liquidity, and reporting requirements, among others.

As of March 31, 2022, we believe that we were in compliance with all such covenants and we are not aware of any covenants that it is reasonably likely that we would not be able to meet in accordance with our loan agreements.

Off-Balance Sheet Arrangements

As of and during the three months ended March 31, 2022, we had no material off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We are exposed to inflation risk as income from future long-term leases is the primary source of our cash flows from operations.

There are provisions in the majority of our tenant leases that protect us from the impact of normal inflation.

These provisions include rent escalations, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements on a per square foot allowance.

However, due to the long-term nature of our leases, among other factors, the leases may not reset frequently enough to cover inflation.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in our 2021 Annual Report on Form 10-K.

Normalized FFO adjusted for non-cash items $ 70,125 $ 63,433 $ 138,445 $ 124,779

2nd generation TI (5,051) (4,748) (9,950) (9,937)

Leasing commissions paid (3,475) (3,804) (7,242) (4,997)

Capital additions (4,557) (6,077) (7,177) (8,096)

FAD $ 57,042 $ 48,804 $ 114,076 $ 101,749

FFO per common share - diluted $ 0.38 $ 0.42 $ 0.75 $ 0.83

Normalized FFO per common share - diluted $ 0.45 $ 0.43 $ 0.88 $ 0.84

FFO weighted average common shares outstanding - diluted 7

150,545 142,914 150,203 141,323

1 Acquisition and pursuit costs include third-party and travel costs related to the pursuit of acquisitions and developments.

2 Includes costs incurred related to the Merger.

3 Non-routine legal costs include expenses related to two separate disputes;

one with a contractor on a $59 million completed construction project and another with a tenant on a violation of use restrictions.

Forfeited earnest money received related to a disposition that did not materialize.

4 Includes the Company's proportionate share of acquisition and pursuit costs related to unconsolidated joint ventures.

5 Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.

6 Includes the Company's proportionate share of straight-line rent, net related to unconsolidated joint ventures.

7 The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 806,310 and 806,487, respectively for the three and six months ended June 30, 2022.

Cash Net Operating Income ("NOI") and Same Store Cash NOI

Cash NOI and Same Store Cash NOI are key performance indicators.

Management considers these to be supplemental measures that allow investors, analysts and Company management to measure unlevered property-level operating results.

The Company defines Cash NOI as rental income, interest from financing receivables and property lease guaranty income less property operating expenses.

Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, financing receivable amortization, tenant improvement amortization and leasing commission amortization.

The Company also excludes cash lease termination fees.

Cash NOI is historical and not necessarily indicative of future results.

Same Store Cash NOI compares Cash NOI for stabilized properties.

Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented.

Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale, properties undergoing redevelopment, and newly redeveloped or developed properties.

The Company utilizes the redevelopment classification for properties where management has approved a change in strategic direction for such properties through the application of additional resources including an amount of capital expenditures significantly above routine maintenance and capital improvement expenditures.

These properties are described in additional detail in Note 6 to the Condensed Consolidated Financial Statements included elsewhere in this report.

Any recently acquired property will be included in the same store pool once the Company has owned the property for eight full quarters.

Newly developed or redeveloped properties will be included in the same store pool eight full quarters after substantial completion.

The following table reflects the Company's same store cash NOI for the three months ended June 30, 2022 and 2021.

NUMBER OF PROPERTIES GROSS INVESTMENT

at June 30, 2022 SAME STORE CASH NOI for the three months ended June 30,

Dollars in thousands 2022 2021

Same store properties 181 $ 3,891,809 $ 70,808 $ 68,574

The following tables reconcile net income to same store NOI and the same store property metrics to the total owned real estate portfolio for the three months ended June 30, 2022 and 2021:

Reconciliation of Same Store Cash NOI

THREE MONTHS ENDED JUNE 30,

Dollars in thousands 2022 2021

Net income $ 6,130 $ 23,096

Other income (expense) 7,479 (2,223)

General and administrative expense 10,540 8,545

Depreciation and amortization expense 55,731 49,826

Other expenses 1

Straight-line rent revenue (1,327) (1,194)

Joint venture properties 2,551 1,035

Other revenue 2

(1,961) (2,075)

Cash NOI 90,177 79,850

Cash NOI not included in same store (19,369) (11,276)

Same store cash NOI $ 70,808 $ 68,574

1 Includes acquisition and pursuit costs, merger-related costs, bad debt, above and below market ground lease intangible amortization, leasing commission amortization and ground lease straight-line rent expense.

2 Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization.

Reconciliation of Same Store Properties

AS OF JUNE 30, 2022

Dollars in thousands PROPERTY COUNT GROSS INVESTMENT 1

FEET OCCUPANCY

Same store properties 181 $ 3,891,809 13,506,008 89.3 %

Acquisitions 67 1,188,042 2,947,903 91.1 %

Development completions 1 37,360 110,883 98.9 %

Redevelopments 6 145,676 647,978 64.6 %

Total owned real estate properties 255 $ 5,262,887 17,212,772 88.7 %

1 Excludes construction in progress, land held for development, corporate property and financing lease right-of-use assets unrelated to an imputed lease arrangement as a result of a sale leaseback transaction.

Results of Operations

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

The Company’s results of operations for the three months ended June 30, 2022 compared to the same period in 2021 were impacted by acquisitions, developments, dispositions, gains on sale, and capital markets transactions.

Rental income increased $12.1 million, or 9.5%, for the three months ended June 30, 2022 compared to the prior year period.

This increase is comprised of the following:

• Acquisitions in 2021 and 2022 contributed $13.8 million.

• Leasing activity, including contractual rent increases, contributed $3.1 million.

• Dispositions in 2021 and 2022 resulted in a decrease of $4.8 million.

Interest from financing receivables, net increased $1.4 million, or 283.7%, from the prior year period as a result of two financing receivables acquired during 2021.

Other operating income increased $0.3 million, or 12.8%, from the prior year period primarily as a result of variable parking and asset management fees.

Property operating expenses increased $5.5 million, or 10.7%, for the three months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• Acquisitions in 2021 and 2022 resulted in an increase of $5.7 million.

• Increases in portfolio operating expenses as follows:

◦ Utilities expense of $0.7 million;

◦ Administrative, leasing commissions, and other legal expense of $0.5 million;

◦ Janitorial expense of $0.3 million;

◦ Compensation expense of $0.3 million;

◦ Security expense of $0.1 million;

◦ Insurance expense of $0.1 million.

• Dispositions in 2021 and 2022 resulted in a decrease of $2.2 million.

General and administrative expenses increased approximately $2.0 million, or 23.3%, for the three months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• Incentive-based awards increases of $0.7 million.

• Compensation expense increases of $1.2 million, including $0.7 million of non-cash expense.

• Net increases, including professional fees and other administrative costs, of $0.1 million.

Merger-related costs totaled $7.1 million for the three months ended June 30, 2022.

These costs, consisting primarily of legal, consulting, and banking services, were incurred in connection with the Merger with HTA.

Depreciation and amortization expense increased $5.9 million, or 11.9%, for the three months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• Acquisitions in 2021 and 2022 resulted in an increase of $7.1 million.

• Various building and tenant improvement expenditures resulted in an increase of $2.7 million.

• Dispositions in 2021 and 2022 resulted in a decrease of $1.5 million.

• Assets that became fully depreciated resulted in a decrease of $2.4 million.

Other Income (Expense)

Gains on sale of real estate properties

In the second quarter of 2022, the Company recognized gains of approximately $8.5 million on the sale of two properties.

In the second quarter of 2021, the Company recognized gains of approximately $21.0 million primarily related to the sale of two properties.

Interest expense

Interest expense increased $2.3 million, or 17.2%, for the three months ended June 30, 2022 compared to the prior year period.

The components of interest expense are as follows:

THREE MONTHS ENDED JUNE 30, CHANGE

Dollars in thousands 2022 2021 $ %

Contractual interest $ 13,950 $ 12,148 $ 1,802 14.8 %

Net discount/premium accretion 79 49 30 61.2 %

Deferred financing costs amortization 708 704 4 0.6 %

Interest rate swap amortization 42 42 — — %

Treasury hedge amortization 107 107 — — %

Interest cost capitalization (108) (36) (72) 200.0 %

Right-of-use assets financing amortization 765 247 518 209.7 %

Total interest expense $ 15,543 $ 13,261 $ 2,282 17.2 %

Contractual interest expense increased $1.8 million, or 14.8%, for the three months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• The Company's Unsecured Term Loan due 2026, net of swaps, accounted for a decrease of approximately $0.1 million.

• The Company's Unsecured Term Loan due 2024, net of swaps, accounted for an increase of approximately $0.2 million.

• The Unsecured Credit Facility accounted for an increase of approximately $2.0 million due to an increased weighted average balance outstanding and an increase in the weighted average interest rate.

• Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.3 million.

Impairment of Real Estate Properties

Impairment of real estate properties in 2021 totaling approximately $5.1 million was associated with a redevelopment project in Nashville, Tennessee.

Equity loss from unconsolidated joint ventures

The Company recognized its proportionate share of losses from its unconsolidated joint ventures, including the TIAA Joint Venture during the second quarter of 2022.

These losses are primarily attributable to non-cash depreciation expense.

See Note 2 to the Condensed Consolidated Financial Statements accompanying this report for more details regarding the Company's unconsolidated joint ventures.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

The Company’s results of operations for the six months ended June 30, 2022 compared to the same period in 2021 were impacted by acquisitions, developments, dispositions, gains on sale, and capital markets transactions.

Rental income increased $22.2 million, or 8.7%, for the six months ended June 30, 2022 compared to the prior year period.

This increase is comprised of the following:

• Acquisitions in 2021 and 2022 contributed $24.1 million.

• Leasing activity, including contractual rent increases, contributed $7.4 million.

• Dispositions in 2021 and 2022 resulted in a decrease of $9.3 million.

Interest from financing receivables, net increased $3.4 million, or 662.2%, from the prior year period as the result of two financing receivables acquired during 2021.

Other operating income increased $0.8 million, or 19.1%, from the prior year period primarily as a result of variable parking and asset management fees.

Property operating expenses increased $10.8 million, or 10.4%, for the six months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• Acquisitions in 2021 and 2022 resulted in an increase of $10.3 million.

• Increases in portfolio operating expenses as follows:

◦ Utilities expense of $1.6 million;

◦ Administrative, leasing commissions, and other legal expense of $1.1 million;

◦ Janitorial expense of $0.6 million;

◦ Property tax expense increase of $0.5 million;

◦ Compensation expense of $0.4 million;

◦ Maintenance and repair expense of $0.3 million;

◦ Security expense of $0.3 million;

◦ Insurance expense of $0.2 million.

• Dispositions in 2021 and 2022 resulted in a decrease of $4.5 million.

General and administrative expenses increased approximately $4.5 million, or 26.6%, for the six months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• Incentive-based awards increases of $1.5 million.

• Compensation expense increases of $2.6 million, including $1.4 million of non-cash expense.

• Net increases, including professional fees and other administrative costs, of $0.4 million.

Merger-related costs totaled $13.2 million for the six months ended June 30, 2022.

These costs consisted primarily of legal, consulting, and banking services incurred in connection with the Merger with HTA.

Depreciation and amortization expense increased $9.9 million, or 9.9%, for the six months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• Acquisitions in 2021 and 2022 resulted in an increase of $12.6 million.

• Various building and tenant improvement expenditures resulted in an increase of $5.5 million.

• Dispositions in 2021 and 2022 resulted in a decrease of $3.2 million.

• Assets that became fully depreciated resulted in a decrease of $5.0 million.

Other Income (Expense)

Gains on sale of real estate properties

Gains on the sale of real estate properties in 2022 totaling approximately $53.3 million primarily related to the sale of four real estate properties.

Gains on the sale of real estate properties in 2021 totaling approximately $39.9 million primarily related to the sale of four real estate properties.

Interest expense

Interest expense increased $2.7 million, or 10.1%, for the six months ended June 30, 2022 compared to the prior year period.

The components of interest expense are as follows:

SIX MONTHS ENDED JUNE 30, CHANGE

Dollars in thousands 2022 2021 $ %

Contractual interest $ 26,452 $ 24,389 $ 2,063 8.5 %

Net discount/premium accretion 129 96 33 34.4 %

Deferred financing costs amortization 1,419 1,402 17 1.2 %

Interest rate swap amortization 84 84 — — %

Treasury hedge amortization 213 213 — — %

Interest cost capitalization (145) (154) 9 (5.8) %

Right-of-use assets financing amortization 1,052 493 559 113.4 %

Total interest expense $ 29,204 $ 26,523 $ 2,681 10.1 %

Contractual interest expense increased $2.1 million, or 8.5%, for the six months ended June 30, 2022 compared to the prior year period primarily as a result of the following activity:

• The Company's Unsecured Term Loan due 2026, net of swaps, accounted for a decrease of approximately $0.3 million.

• The Company's Unsecured Term Loan due 2024, net of swaps, accounted for an increase of approximately $0.2 million.

• The Unsecured Credit Facility accounted for an increase of approximately $2.7 million due to an increased weighted average balance outstanding and an increase in the weighted average interest rate.

• Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.5 million.

Impairment of Real Estate Properties

Impairment of real estate properties in 2021 totaling approximately $5.9 million was associated with the disposal of one property totaling $0.8 million and $5.1 million associated with a redevelopment project in Nashville, Tennessee.

Equity loss from unconsolidated joint ventures

The Company recognized its proportionate share of losses from its unconsolidated joint ventures, including the TIAA Joint Venture during the first quarter of 2022.

These losses are primarily attributable to non-cash depreciation expense.

See Note 2 to the Condensed Consolidated Financial Statements accompanying this report for more details regarding the Company's unconsolidated joint ventures.

Interest and other income (expense), net

In the first quarter of 2021, the Company recorded approximately $0.5 million from a forfeited earnest money deposit.

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-Q

Item 2. Management’s Discussion and Analysis