What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-09 · 259 added, 482 removed, 519 unchanged (59% of the section changed)

3 unchanged sentences

Amounts in thousands, except per share data

SEPTEMBER 30, 2022

MARCH 31, 2023

DECEMBER 31, 2022

27 unchanged sentences

Commitments and contingencies

Redeemable non-controlling interests 2,000 2,014

Stockholders' equity

4 unchanged sentences

1,000,000 shares authorized;

380,572 and 150,457 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

380,816 and 380,590 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 9,591,194 9,587,637

Accumulated other comprehensive income (loss) 5,524 ( 9,981 )

Accumulated other comprehensive (loss) income ( 8,554 ) 2,140

Cumulative net income attributable to common stockholders 1,219,930 1,307,055

6 unchanged sentences

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Income

For the Three and Nine Months Ended September 30, 2022 and 2021

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31, 2023 and 2022

Amounts in thousands, except per share data

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

2022 2021 2022 2021

Rental income $ 324,093 $ 138,489

12 unchanged sentences

Loss on extinguishment of debt — ( 1,429 )

Impairment of real estate properties — ( 10,669 ) 25 ( 16,581 )

Impairment of real estate properties and credit loss reserves ( 31,422 ) 25

Equity loss from unconsolidated joint ventures ( 780 ) ( 345 )

Interest and other (expense) income, net ( 172 ) — ( 378 ) 239

Interest and other income (expense), net 547 ( 81 )

( 94,407 ) 29,293

Net income (loss) $ 28,616 $ ( 2,066 ) $ 76,973 $ 45,052

Net income attributable to non-controlling interests ( 312 ) — ( 312 ) —

Net income (loss) attributable to common stockholders $ 28,304 $ ( 2,066 ) $ 76,661 $ 45,052

Net (loss) income $ ( 88,078 ) $ 42,227

Net loss attributable to non-controlling interests 953 —

Net (loss) income attributable to common stockholders $ ( 87,125 ) $ 42,227

Basic earnings per common share $ ( 0.23 ) $ 0.28

5 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income

For the Three and Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

Amounts in thousands

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

2022 2021 2022 2021

Net income (loss) $ 28,616 $ ( 2,066 ) $ 76,973 $ 45,052

Net (loss) income $ ( 88,078 ) $ 42,227

Other comprehensive income

Interest rate swaps

Reclassification adjustments for losses included in net income (interest expense) 763 1,131 2,672 3,340

Gains arising during the period on interest rate swaps 6,083 36 12,905 2,079

Reclassification adjustments for (gains) losses included in net income (interest expense) ( 2,284 ) 1,086

(Losses) gains arising during the period on interest rate swaps ( 8,541 ) 5,159

( 10,825 ) 6,245

Comprehensive income (loss) 35,462 ( 899 ) 92,550 50,471

comprehensive income attributable to non-controlling interests ( 384 ) — ( 384 ) —

Comprehensive income (loss) attributable to common stockholders $ 35,078 $ ( 899 ) $ 92,166 $ 50,471

Comprehensive (loss) income ( 98,903 ) 48,472

comprehensive loss attributable to non-controlling interests 1,084 —

Comprehensive (loss) income attributable to common stockholders $ ( 97,819 ) $ 48,472

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, are an integral part of these financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Equity

For the Three Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

Amounts in thousands, except per share data

7 unchanged sentences

Equity Non-controlling Interests Total

Balance at June 30, 2022 $ 1,516 $ 4,002,525 $ ( 1,250 ) $ 1,314,515 $ ( 3,139,440 ) $ 2,177,866 $ — $ 2,177,866

Balance at December 31, 2022 $ 3,806 $ 9,587,637 $ 2,140 $ 1,307,055 $ ( 3,329,562 ) $ 7,571,076 $ 108,742 $ 7,679,818

Issuance of common stock, net of issuance costs — 51 — — — 51 — 51

Merger consideration transferred 2,289 5,574,174 — — — 5,576,463 110,702 5,687,165

Non-controlling interests acquired — — — — — — 1,266 1,266

Common stock redemptions ( 1 ) ( 1,483 ) — — — ( 1,484 ) — ( 1,484 )

Share-based compensation 3 4,989 — — — 4,992 — 4,992

Redemption of non-controlling interest — 98 — — — 98 ( 97 ) 1

Net income — — — 28,304 — 28,304 312 28,616

Reclassification adjustments for losses included in net income (interest expense)

Net loss — — — ( 87,125 ) — ( 87,125 ) ( 953 ) ( 88,078 )

Reclassification adjustments for gains included in net income (interest expense)

— — ( 2,256 ) — — ( 2,256 ) ( 28 ) ( 2,284 )

5 unchanged sentences

— — — — ( 118,188 ) ( 118,188 ) ( 1,447 ) ( 119,635 )

Balance at September 30, 2022 $ 3,806 $ 9,586,556 $ 5,524 $ 1,342,819 $ ( 3,211,492 ) $ 7,727,213 $ 111,813 $ 7,839,026

Balance at March 31, 2023 $ 3,808 $ 9,591,194 $ ( 8,554 ) $ 1,219,930 $ ( 3,447,750 ) $ 7,358,628 $ 106,211 $ 7,464,839

Stock Additional

6 unchanged sentences

Equity Non-controlling Interests Total

Balance at June 30, 2021 $ 1,455 $ 3,818,592 $ ( 13,580 ) $ 1,246,617 $ ( 2,956,830 ) $ 2,096,254 $ — $ 2,096,254

Issuance of common stock, net of issuance costs 20 61,442 — — — 61,462 — 61,462

Common stock redemptions — — — — — — — —

Share-based compensation — 2,538 — — — 2,538 — 2,538

Net loss — — — ( 2,066 ) — ( 2,066 ) — ( 2,066 )

Reclassification adjustments for losses included in net income (interest expense)

— — 1,131 — — 1,131 — 1,131

Losses arising during the period on interest rate swaps

— — 36 — — 36 — 36

Dividends to common stockholders ($ 0.3025 per share)

— — — — ( 44,022 ) ( 44,022 ) — ( 44,022 )

Balance at September 30, 2021 $ 1,475 $ 3,882,572 $ ( 12,413 ) $ 1,244,551 $ ( 3,000,852 ) $ 2,115,333 $ — $ 2,115,333

The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, are an integral part of these financial statements.

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Equity

For the Nine Months Ended September 30, 2022 and 2021

Amounts in thousands, except per share data

Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Cumulative

Net Income Cumulative

Dividends Total

Stockholders’

Equity Non-controlling Interest Total Equity

Balance at December 31, 2021 $ 1,505 $ 3,972,917 $ ( 9,981 ) $ 1,266,158 $ ( 3,045,483 ) $ 2,185,116 $ — $ 2,185,116

Issuance of common stock, net of issuance costs 7 22,654 — — — 22,661 — 22,661

Merger consideration transferred 2,289 5,574,174 — — — 5,576,463 110,702 5,687,165

Non-controlling interests acquired — — — — — — 1,266 1,266

Common stock redemptions — ( 206 ) — — — ( 206 ) — ( 206 )

Share-based compensation 4 3,695 — — — 3,699 — 3,699

Redemption of non-controlling interest — 98 — — — 98 ( 97 ) 1

Net income — — — 42,227 — 42,227 — 42,227

1 unchanged sentence

— — 1,086 — — 1,086 — 1,086

Gains arising during the period on

interest rate swaps — — 12,841 — — 12,841 64 12,905

Dividends to common stockholders

($ 0.93 per share)

— — — — ( 166,009 ) ( 166,009 ) ( 442 ) ( 166,451 )

Balance at September 30, 2022 $ 3,806 $ 9,586,556 $ 5,524 $ 1,342,819 $ ( 3,211,492 ) $ 7,727,213 $ 111,813 $ 7,839,026

Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Cumulative

Net Income Cumulative

Dividends Total

Stockholders’

Equity Non-controlling Interest Total Equity

Balance at December 31, 2020 $ 1,395 $ 3,635,341 $ ( 17,832 ) $ 1,199,499 $ ( 2,870,027 ) $ 1,948,376 $ — $ 1,948,376

Issuance of common stock, net of issuance costs 78 240,660 — — — 240,738 — 240,738

Common stock redemptions — ( 1,610 ) — — — ( 1,610 ) — ( 1,610 )

Share-based compensation 2 8,181 — — — 8,183 — 8,183

Net income — — — 45,052 — 45,052 — 45,052

Reclassification adjustments for losses included in net income (interest expense)

— — 3,340 — — 3,340 — 3,340

Gains arising during the period on interest rate swaps

Losses arising during the period on interest rate swaps

— — 5,159 — — 5,159 — 5,159

1 unchanged sentence

— — — — ( 46,860 ) ( 46,860 ) — ( 46,860 )

Balance at September 30, 2021 $ 1,475 $ 3,882,572 $ ( 12,413 ) $ 1,244,551 $ ( 3,000,852 ) $ 2,115,333 $ — $ 2,115,333

Balance at March 31, 2022 $ 1,516 $ 3,999,060 $ ( 3,736 ) $ 1,308,385 $ ( 3,092,343 ) $ 2,212,882 $ — $ 2,212,882

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

Amounts in thousands

OPERATING ACTIVITIES

NINE MONTHS ENDED

September 30,

Net income $ 76,973 $ 45,052

THREE MONTHS ENDED

Net (loss) income $ ( 88,078 ) $ 42,227

Adjustments to reconcile net income to net cash provided by operating activities:

6 unchanged sentences

Loss on extinguishment of debt — 1,429

Impairment of real estate properties ( 25 ) 16,581

Impairment of real estate properties and credit loss reserves 31,422 ( 25 )

Equity loss from unconsolidated joint ventures 780 345

15 unchanged sentences

Proceeds from notes receivable repayments 336 —

Cash assumed in Merger, including restricted cash for special dividend payment 1,149,681 —

Net cash provided by (used in) investing activities 41,560 ( 113,267 )

FINANCING ACTIVITIES

Net (repayments)/borrowings on unsecured credit facility ( 154,400 ) 90,500

Borrowings on term loans 666,500 —

Repayment on term loan ( 718,500 ) —

Net borrowings on unsecured credit facility — 124,000

Repayments of notes and bonds payable ( 667 ) ( 17,573 )

1 unchanged sentence

Dividends paid ( 118,052 ) ( 46,768 )

Special dividend paid in relation to the Merger ( 1,123,648 ) —

Net proceeds from issuance of common stock 51 22,649

1 unchanged sentence

Distributions to non-controlling interest holders ( 1,272 ) —

Debt issuance and assumption costs ( 12,753 ) ( 252 )

Payments made on finance leases ( 101 ) ( 257 )

Net cash (used in) provided by financing activities ( 121,770 ) 79,015

Increase in cash and cash equivalents 44,408 697

(Decrease) increase in cash and cash equivalents ( 11,020 ) 9,519

Cash and cash equivalents at beginning of period 60,961 13,175

1 unchanged sentence

Supplemental Cash Flow Information

NINE MONTHS ENDED

September 30,

Interest paid $ 75,082 $ 16,227

Mortgage note receivable taken in connection with sale of real estate $ 45,000 $ —

Invoices accrued for construction, tenant improvements and other capitalized costs $ 28,138 $ 13,516

5 unchanged sentences

Healthcare Realty Trust Incorporated is a real estate investment trust ("REIT") that owns, leases, manages, acquires, finances, develops and redevelops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States.

As of September 30, 2022, the Company had gross investments of approximately $ 14.2 billion in 695 real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property.

As of March 31, 2023, the Company had gross investments of approximately $ 13.9 billion in 681 real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property.

The Company's 681 real estate properties are located in 35 states and total approximately 39.9 million square feet.

The Company provided leasing and property management services to approximately 39.5 million square feet nationwide.

As of September 30, 2022, the Company had a weighted average ownership interest of approximately 49 % in 33 real estate properties held in joint ventures.

As of March 31, 2023, the Company had a weighted average ownership interest of approximately 44 % in 34 real estate properties held in joint ventures.

See Note 3 below for more details regarding the Company's unconsolidated joint ventures.

1 unchanged sentence

Basis of Presentation

For purposes of this Quarterly Report on Form 10-Q, references to the “Company” are to Legacy HR for periods prior to the closing of the Merger and thereafter to Legacy HR and Legacy HTA after giving effect to the Merger.

The Merger is described in more detail in Note 2 to these Condensed Consolidated Financial Statements.

5 unchanged sentences

Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included.

In addition, the interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2022 for many reasons including, but not limited to, the Merger (as discussed in more detail in Note 2 below), acquisitions, dispositions, capital financing transactions, changes in interest rates and the effects of other trends, risks and uncertainties.

In addition, the interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2023 for many reasons including, but not limited to, acquisitions, dispositions, capital financing transactions, changes in interest rates and the effects of other trends, risks and uncertainties.

Principles of Consolidation

The Company’s Condensed Consolidated Financial Statements include, as of September 30, 2022, the accounts of the Company, its wholly owned subsidiaries, and joint ventures and partnerships where the Company controls the operating activities.

The interests not owned by the Company 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.

The Company’s Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures and partnerships where the Company controls the operating activities.

GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”).

Accounting Standards Codification 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.

Accounting Standards Codification (“ASC”) Topic 810, Consolidation broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support.

The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics:

(i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance;

and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity.

The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary.

The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary.

The Company performs this analysis on an ongoing basis.

As of September 30, 2022, the Company

(i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity.

The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary, with any minority interests reflected as non-controlling interests or redeemable non-controlling interests in the accompanying Condensed Consolidated Financial Statements.

The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk, the disposition of all or a portion of an interest held by the primary beneficiary, or changes in facts and circumstances

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

identified three entities that qualified as VIE's because the limited partners in these partnerships, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights.

Two of the entities are consolidated and one is unconsolidated.

that impact the power to direct activities of the VIE that most significantly impacts economic performance.

The Company performs this analysis on an ongoing basis.

For property holding entities not determined to be VIEs, the Company consolidates such entities in which it owns 100 % of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest.

All intercompany balances and transactions are eliminated in consolidation.

For entities in which the Company owns less than 100 % of the equity interest, the Company consolidates the entity if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements.

Healthcare Realty Holdings, L.P.

(the "OP") is 98.8 % owned by the Company.

Holders of operating partnership units (“OP Units”) are considered to be non-controlling interest holders in the OP and their ownership interests are reflected as equity on the accompanying Condensed Consolidated Balance Sheets.

1 unchanged sentence

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 September 30, 2022, there were approximately 4.0 million, or 1.1 %, of OP Units issued and outstanding held by non-controlling interest holders.

As of March 31, 2023, there were approximately 4.7 million, or 1.2 %, of OP Units issued and outstanding held by non-controlling interest holders.

Additionally, the Company is the primary beneficiary of this VIE.

Accordingly, the Company consolidates the interests in the OP.

However, because the Company holds what is deemed to be significantly all of the OP, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs.

All intercompany balances and transactions are eliminated in consolidation.

As of September 30, 2022, the Company's unconsolidated joint venture arrangements were accounted for using the equity method of accounting as the Company exercised significant influence over but did not control these entities.

As of March 31, 2023, the Company had three consolidated VIEs in addition to the OP where it is the primary beneficiary of the VIE based on the combination of operational control and the rights to receive residual returns or the obligation to absorb losses arising from the joint ventures.

Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs, excluding the OP, in the aggregate:

(dollars in thousands) MARCH 31, 2023

Net real estate investments $ 48,079

Cash and cash equivalents 1,517

Receivables and other assets

Accrued expenses and other liabilities

Total liabilities and equity

As of March 31, 2023, the Company had three unconsolidated VIEs consisting of two notes receivables and one joint venture.

The Company does not have the power or economics to direct the activities of the VIEs on a stand-alone basis, and therefore it was determined that the Company was not the primary beneficiary.

As a result , the Company accounts for the two notes receivables as amortized cost and a joint venture arrangement under the equity method.

See below for additional information regarding the Company's unconsolidated VIEs.

(dollars in thousands) ORIGINATION DATE LOCATION SOURCE CARRYING AMOUNT MAXIMUM EXPOSURE TO LOSS

2021 Houston, TX 1

Note receivable $ 30,839 $ 31,150

2021 Charlotte, NC 1

Note receivable 5,639 6,000

Joint venture 66,038 66,038

1 Assumed mortgage note receivable in connection with the Merger.

2 Includes investments in seven properties.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

As of March 31, 2023, the Company's unconsolidated joint venture arrangements were accounted for using the equity method of accounting as the Company exercised significant influence over but did not control these entities.

See Note 3 below for more details regarding the Company's unconsolidated joint ventures.

6 unchanged sentences

These amounts are now classified as separate line items on the Company's Condensed Consolidated Balance Sheets.

Redeemable Non-Controlling Interests

The Company accounts for redeemable equity securities in accordance with Accounting Standards Codification Topic 480:

Accounting for Redeemable Equity Instruments, which requires that equity securities redeemable at the option of the holder, not solely within our control, be classified outside permanent stockholders’ equity.

The Company classifies redeemable equity securities as redeemable non-controlling interests in the accompanying Condensed Consolidated Balance Sheet.

Accordingly, the Company records the carrying amount at the greater of the initial carrying amount (increased or decreased for the non-controlling interest’s share of net income or loss and distributions) or the redemption value.

We measure the redemption value and record an adjustment to the carrying value of the equity securities as a component of redeemable non-controlling interest.

As of March 31, 2023, the Company had redeemable non-controlling interests of $ 2.0 million.

Investments in Leases - Financing Receivables, Net

In accordance with Accounting Standards Codification ("ASC") 842, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option.

In accordance with ASC 842, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option.

As a result, the Company does not recognize the underlying real estate asset but instead recognizes a financial asset in accordance with ASC 310 “Receivables”.

During the first quarter of 2022, the Company reclassified the two medical office buildings in Nashville, Tennessee that were acquired in separate sale-leaseback transactions in the fourth quarter of 2021.

The leases with the sellers commenced in the first quarter, which resulted in the allocation of the financing receivable totaling $ 73.9 million to land and building and improvements.

Real Estate Notes Receivable

1 unchanged sentence

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 September 30, 2022, real estate notes receivable, net totaled $ 79.0 million.

As of March 31, 2023, real estate notes receivable, net, which are included in Other assets on the Company's Condensed Consolidated Balance Sheets, totaled $ 147.3 million.

(dollars in thousands) ORIGINATION MATURITY STATED INTEREST RATE MAXIMUM LOAN COMMITMENT OUTSTANDING as of

MARCH 31, 2023

Mezzanine loan

Texas 6/24/2021 6/24/2024 8.00 % 54,119 54,119

Mortgage loans

Texas 6/30/2021 12/31/2023 7.00 % 31,150 31,150

North Carolina 12/22/2021 12/22/2024 8.00 % 6,000 6,000

Florida 5/17/2022 2/27/2026 6.00 % 65,000 19,367

California 3/30/2023 3/29/2026 6.00 % 45,000 45,000

$ 147,150 $ 101,517

Accrued interest 1,428

Allowance for credit losses ( 5,196 )

Fair-value discount and fees ( 4,542 )

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Allowance for Credit Losses

Pursuant to ASC Topic 326, Financial Instruments - Credit Losses, the Company adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under Topic 326.

The Company utilizes a probability of default method approach for estimating current expected credit losses and evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis to determine whether any updates to the future expected losses recognized upon inception are necessary.

The Company’s evaluation considers industry and economic conditions, credit enhancements, liquidity, and other factors.

In its assessment of current expected credit losses for real estate notes receivable, the Company utilizes past payment history of its borrowers, current economic conditions, and forecasted economic conditions through the maturity date of each note to estimate a probability of default and a resulting loss for each real estate note receivable.

During the three months ended March 31, 2023, the Company determined that the risk of credit loss on its mezzanine loans was no longer remote.

Consequently, the Company recorded a credit loss reserve of $ 5.2 million for the three months ended March 31, 2023.

The following table summarizes the Company's allowance for credit losses on real estate notes receivable:

Dollars in thousands March 31, 2023 December 31, 2022

Allowance for credit losses, beginning of period $ — $ —

Credit loss reserves $ 5,196 —

Allowance for credit losses, end of period $ 5,196 $ —

Interest Income

Income from Lease Financing Receivables

For the three and nine months ended September 30, 2022, the Company recognized the related income from two financing receivables totaling $ 2.0 million and $ 5.9 million, respectively, based on an imputed interest rate over the

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

terms of the applicable lease.

For the three months ended March 31, 2023, the Company recognized the related income from two financing receivables totaling $ 1.5 million based on an imputed interest rate over the terms of the applicable lease.

As a result, the interest recognized from the financing receivable will not equal the cash payments from the lease agreement.

3 unchanged sentences

Income from Real Estate Notes Receivable

During the three and nine months ended September 30, 2022, the Company recognized interest income of $ 1.3 million related to real estate notes receivable.

Unpaid interest is capitalized, with principal and any unpaid interest due on the maturity date.

During the three months ended March 31, 2023, the Company recognized interest income of $ 2.0 million related to real estate notes receivable.

The Company recognizes interest income on an accrual basis unless the Company has determined that collectability of contractual amounts is not reasonably assured, at which point the note is placed on non-accrual status and interest income is recognized on a cash basis.

As of March 31, 2023, the Company placed two of its real estate notes receivable with a principal balance of $ 54.1 million on non-accrual status and accordingly did not recognize any interest income for the quarter.

Revenue from Contracts with Customers (Topic 606)

3 unchanged sentences

To achieve the core principle, the Company applies the five step model specified in the guidance.

Revenue that is accounted for under Topic 606 is segregated on the Company’s Condensed Consolidated Statements of Income in the Other operating line item.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Revenue that is accounted for under Topic 606 is segregated on the Company’s Condensed Consolidated Statements of Operations in the Other operating line item.

This line item includes parking income, management fee income and other miscellaneous income.

1 unchanged sentence

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

in thousands 2023 2022

2 unchanged sentences

Management fee income 1

1,426 723 2,864 1,381

Miscellaneous 254 67

3 unchanged sentences

The performance obligations that are identified for each of these items are satisfied over time, and the Company recognizes revenue monthly based on this principle.

New Accounting Pronouncements

Accounting Standards Update No.

On March 12, 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848) .

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR and Term SOFR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

Management continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Merger with HTA

On July 20, 2022 (the “Closing Date”), pursuant to the Agreement and Plan of Merger dated as of February 28, 2022 (the “Merger Agreement”), by and among Healthcare Realty Trust Incorporated, a Maryland corporation (now known as HRTI, LLC, a Maryland limited liability company) (“Legacy HR”), Healthcare Trust of America, Inc., a Maryland corporation (now known as Healthcare Realty Trust Incorporated) (“Legacy HTA”), Healthcare Trust of America Holdings, LP, a Delaware limited partnership (now known as Healthcare Realty Holdings, L.P.) (the “OP”), and HR Acquisition 2, LLC, a Maryland limited liability company (“Merger Sub”), Merger Sub merged with and into Legacy HR, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA (the “Merger”).

On July 20, 2022 (the “Closing Date”), pursuant to the Agreement and Plan of Merger dated as of February 28, 2022 (the “Merger Agreement”), by and among Healthcare Realty Trust Incorporated, a Maryland corporation (now known as HRTI, LLC, a Maryland limited liability company) (“Legacy HR”), Healthcare Trust of America, Inc., a Maryland corporation (now known as Healthcare Realty Trust Incorporated) (“Legacy HTA”), the OP, and HR Acquisition 2, LLC, a Maryland limited liability company (“Merger Sub”), Merger Sub merged with and into Legacy HR, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA (the “Merger”).

On the Closing Date, each outstanding share of Legacy HR common stock, $ 0.01 par value per share (the “Legacy HR Common Stock”), was cancelled and converted into the right to receive one share of Legacy HTA class A common stock at a fixed ratio of 1.00 to 1.00.

2 unchanged sentences

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 UPREIT reorganization (the “Combined Company”).

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”.

The primary reason for the Merger was to expand the Company’s size, scale, diversification, liquidity and access to capital, in order to further enhance its competitive advantages and accelerate its investment activities.

The 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”.

For accounting purposes, the Merger was treated as a “reverse acquisition” in which Legacy HTA was considered the legal acquirer and Legacy HR was considered the accounting acquirer based on various factors, including, but not limited to:

(i) the composition of the board of directors of the Combined Company, (ii) the composition of senior management of the Combined Company, and (iii) the premium transferred to the Legacy HTA stockholders.

As a result, the historical financial statements of the accounting acquirer, Legacy HR, became the historical financial statements of the Combined Company.

The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, the assets acquired and the liabilities assumed to be recognized at their acquisition date fair value.

The consideration transferred on the Closing Date is as follows:

Dollars in thousands

(i) the composition of the board of directors of the combined company following the Merger, (ii) the composition of senior management of the combined company following the Merger, and (iii) the premium transferred to the Legacy HTA stockholders.

As a result, the historical financial statements of the accounting acquirer, Legacy HR, became the historical financial statements of the Company.

The acquisition was accounted for using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, the assets acquired and the liabilities assumed and non-controlling interests, if any, to be recognized at their acquisition date fair value.

The implied consideration transferred on the Closing Date is as follows:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Dollars in thousands, except for per share data

Shares of Legacy HTA Common Stock outstanding as of July 20, 2022 as adjusted (a)

5 unchanged sentences

Consideration transferred $ 5,576,463

(a) Includes 228,520,990 shares of Legacy HTA Common Stock as of July 20, 2022.

The number of shares of HTA Common Stock presented above was based on 228,857,717 total shares of Legacy HTA Common Stock outstanding as of the Closing Date, less 192 HTA fractional shares that were paid in cash less 336,535 shares of Legacy HTA restricted stock (net of 215,764 shares of Legacy HTA restricted stock withheld).

For accounting purposes, these shares and units were converted to Legacy HR Common Stock, at an exchange ratio of 1.00 per share of HTA Common Stock.

(a) The number of shares of Legacy HTA Common Stock presented above was based on 228,857,717 total shares of Legacy HTA Common Stock outstanding as of the Closing Date, less 192 HTA fractional shares that were cancelled in lieu of cash and less 336,535 shares of Legacy HTA restricted stock (net of 215,764 shares of Legacy HTA restricted stock withheld).

For accounting purposes, these shares were converted to Legacy HR Common Stock, at an exchange ratio of 1.00 share of Legacy HR Common Stock per share of Legacy HTA Common Stock.

(b) For accounting purposes, the fair value of Legacy HR Common Stock issued to former holders of Legacy HTA Common Stock was based on the per share closing price of Legacy HR Common Stock on July 20, 2022.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

(c) Represents the fair value of Legacy HTA restricted shares which fully vested prior to the closing of the Merger or became fully vested as a result of the closing of the Merger and which are attributable to pre-combination services.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Preliminary Purchase Price Allocation

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the Closing Date:

Dollars in thousands

Dollars in thousands PRELIMINARY AMOUNTS RECOGNIZED ON THE CLOSING DATE MEASUREMENT PERIOD ADJUSTMENTS PRELIMINARY AMOUNTS RECOGNIZED ON THE CLOSING DATE

(as adjusted)

Real estate investments

2 unchanged sentences

Lease intangible assets (a)

831,920 1,847 833,767

Financing lease right-of-use assets 9,874 3,146 13,020

8 unchanged sentences

Other assets, net (b) (c)

209,163 ( 3,840 ) 205,323

Total assets acquired $ 11,177,186 $ ( 100,723 ) $ 11,076,463

9 unchanged sentences

Goodwill $ 145,404 $ 111,932 $ 257,336

(a) The weighted average amortization period for the acquired lease intangible assets is 5.5 years.

(b) Includes $ 34.6 million of gross contractual accounts receivable, which approximates fair value, of which the Company preliminarily did not expect $ 12.3 million to be collected as of Closing Date.

(a) The weighted average amortization period for the acquired lease intangible assets is approximately 6 years.

(b) Includes $ 15.9 million of contractual accounts receivable, which approximates fair value.

(c) Includes $ 78.7 million of gross contractual real estate notes receivable, the fair value of which was $ 74.8 million, and the Company preliminarily expects to collect substantially all of the real estate notes receivable proceeds as of the Closing Date.

As of September 30, 2022, the Company had not finalized the determination of fair value of certain tangible and intangible assets acquired and liabilities assumed including, but not limited to real estate assets and liabilities, notes receivables and goodwill.

The cumulative measurement period adjustments recorded through March 31, 2023 primarily resulted from updated valuations related to the Company’s real estate assets and liabilities and additional information obtained by the Company related to the properties acquired in the Merger and their respective tenants, and resulted in an increase to goodwill of $ 111.9 million.

As of March 31, 2023, the Company had not finalized the determination of fair value of certain tangible and intangible assets acquired and liabilities assumed, including, but not limited to real estate assets and liabilities, notes receivables and goodwill.

As such, the assessment of fair value of assets acquired and liabilities assumed is preliminary and was based on information that was available at the time the Condensed Consolidated Financial Statements were prepared.

The finalization of the purchase accounting assessment could result in material changes in the Company’s determination of the fair value of assets acquired and liabilities assumed, which will be recorded as measurement period adjustments in the period in which they are identified, up to one year from the Closing Date.

The finalization of the purchase accounting assessment could result in material changes to the Company’s determination of the fair value of assets acquired and liabilities assumed, which will be recorded as measurement period adjustments in the period in which they are identified, up to one year from the Closing Date.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

A preliminary estimate of approximately $ 257.3 million has been allocated to goodwill.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and liabilities assumed.

The recognized goodwill is attributable to expected synergies and benefits arising from the Merger, including anticipated general and administrative cost savings and potential economies of scale benefits in both tenant

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

and vendor relationships following the closing of the Merger.

None of the goodwill recognized is expected to be deductible for tax purposes.

Merger-related Costs

In conjunction with the Merger, the Company incurred Merger-related costs of $ 79.4 million during the three months ended September 30, 2022 and $ 92.6 million during the nine months ended September 30, 2022, which were included within Merger-related costs in results of operations.

The Merger-related costs primarily consist of legal, consulting, banking services, and other Merger-related costs.

Unaudited Pro Forma Financial Information

The Condensed Consolidated Statements of Income for the three months ended September 30, 2022 include $ 157.4 million of revenues and $ 20.6 million of net loss and for the nine months ended September 30, 2022 include $ 157.4 million of revenues and $ 20.6 million of net loss associated with the results of operations of Legacy HTA from the Merger closing date to September 30, 2022.

The following unaudited pro forma information presents a summary of our Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2022 and 2021, as if the Merger had occurred on January 1, 2021.

Adjustments in the pro forma financial information include but are not limited to the following:

(i) additional depreciation and amortization expense related to the acquired tangible and intangible assets,

(ii) additional interest expense on transaction-related borrowings, including assumed debt in connection with the Merger,

(iii) additional rental income related to the assumed above and below-market leases, and straight-line rent and

(iv) Merger-related costs and other one-time, non-recurring costs.

The pro forma financial information excludes adjustments for estimated cost synergies or other effects of the integration of the Merger.

The following pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the pro forma information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

Dollars in thousands 2022 2021 2022 2021

Total revenues $ 352,744 $ 332,465 $ 1,054,809 $ 982,192

Net income $ 115,496 $ ( 14,930 ) $ 160,120 $ ( 79,754 )

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The Company incurred Merger-related costs of $ 4.9 million during the three months ended March 31, 2023, which were included within Merger-related costs in results of operations.

The Merger-related costs primarily consist of legal, consulting, severance, and banking services.

Subsequent to March 31, 2023, the Company received a refund of $ 17.8 million for transfer taxes paid during the year ended December 31, 2022 in connection with the Merger.

The Company will record this as a reduction of Merger-related costs in the second quarter of 2023.

Real Estate Investments

2022 Company Acquisitions

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

Dollars in thousands DATE ACQUIRED PURCHASE PRICE CASH

CONSIDERATION 1

SQUARE FOOTAGE

Dallas, TX 2/11/22 $ 8,175 $ 8,185 $ 8,202 $ ( 17 ) 18,000

San Francisco, CA 4

3/7/22 114,000 112,986 108,687 4,299 166,396

Q1 2022 subtotal 122,175 121,171 116,889 4,282 184,396

Atlanta, GA 4/7/22 6,912 7,054 7,178 ( 124 ) 21,535

Denver, CO 4/13/22 6,320 5,254 5,269 ( 15 ) 12,207

Colorado Springs, CO 5

4/13/22 13,680 13,686 13,701 ( 15 ) 25,800

Seattle, WA 4/28/22 8,350 8,334 8,370 ( 36 ) 13,256

Houston, TX 4/28/22 36,250 36,299 36,816 ( 517 ) 76,781

Los Angeles, CA 4/29/22 35,000 35,242 25,400 9,842 34,282

Oklahoma City, OK 4/29/22 11,100 11,259 11,334 ( 75 ) 34,944

Raleigh, NC 4

5/31/22 27,500 26,710 27,127 ( 417 ) 85,113

6/9/22 18,650 18,619 18,212 407 55,788

Q2 2022 subtotal 163,762 162,457 153,407 9,050 359,706

Seattle, WA 8/1/22 4,850 4,806 4,882 ( 76 ) 10,593

Raleigh, NC 8/9/22 3,783 3,878 3,932 ( 54 ) 11,345

Jacksonville, FL 8/9/22 18,195 18,508 18,583 ( 75 ) 34,133

Atlanta, GA 8/10/22 11,800 11,525 12,038 ( 513 ) 43,496

Denver, CO 8/11/22 14,800 13,902 13,918 ( 16 ) 34,785

Raleigh, NC 8/18/22 11,375 10,670 10,547 123 31,318

Nashville, TN 9/15/22 21,000 20,764 20,572 192 61,932

Austin, TX 9/29/22 5,450 5,449 5,572 ( 123 ) 15,000

Q3 2022 subtotal 91,253 89,502 90,044 ( 542 ) 242,602

Total real estate acquisitions $ 377,190 $ 373,130 $ 360,340 $ 12,790 786,704

1 Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.

2 Excludes financing right of use assets.

3 Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.

4 Includes three properties.

5 Includes two properties.

Subsequent to September 30, 2022, the Company acquired the following property:

Dollars in thousands DATE ACQUIRED PURCHASE PRICE SQUARE FOOTAGE

Jacksonville, FL 10/12/22 $ 3,600 6,200

2022 Joint Venture Acquisitions

The following table details the joint venture acquisitions for the nine months ended September 30, 2022.

These joint venture acquisitions are not consolidated for purposes of the Company's Condensed Consolidated Financial Statements.

2023 Acquisition Activity

The following table details the Company's real estate acquisition activity for the three months ended March 31, 2023:

Dollars in thousands DATE ACQUIRED PURCHASE PRICE CASH

1 unchanged sentence

ESTATE OTHER 2

SQUARE FOOTAGE COMPANY OWNERSHIP %

San Francisco, CA 3

3/7/22 $ 67,175 $ 66,789 $ 65,179 $ 1,610 110,865 50 %

Los Angeles, CA 4

3/7/22 33,800 32,384 32,390 ( 6 ) 103,259 50 %

Total joint venture acquisitions $ 100,975 $ 99,173 $ 97,569 $ 1,604 214,124

SQUARE FOOTAGE

Tampa, FL 3/10/23 $ 31,500 $ 30,499 $ 30,596 $ ( 97 ) 115,867

1 Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.

2 Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.

3 Includes three properties.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

4 Includes two properties.

Unconsolidated Joint Ventures

The Company's investment in and loss recognized for the three and nine months ended September 30, 2022 and 2021 related to its unconsolidated joint ventures accounted for under the equity method are shown in the table below:

The Company's investment in and loss recognized for the three months ended March 31, 2023 and 2022 related to its unconsolidated joint ventures accounted for under the equity method are shown in the table below:

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

Dollars in thousands 2023 2022

Investments in unconsolidated joint ventures, beginning of period $ 327,248 $ 161,942

New investments during the period 1

117,880 4,593 167,479 49,612

New investment during the period 1

Equity loss recognized during the period ( 780 ) ( 345 )

1 unchanged sentence

Investments in unconsolidated joint ventures, end of period $ 327,746 $ 211,195

$ 327,752 $ 122,345 $ 327,752 $ 122,345

1 Includes unconsolidated joint ventures acquired as part of the Merger, as well as investments in two joint ventures representing a 20 % and 40 % ownership interest in portfolios in Los Angeles, California and Dallas, Texas, respectively.

1 This was an additional investment in an existing joint venture representing a 40 % ownership interest in a property in Dallas, Texas.

Also, see 2023 Real Estate Asset Dispositions below for additional information.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

2023 Real Estate Asset Dispositions

The following table details the Company's dispositions for the nine months ended September 30, 2022:

Dollars in thousands DATE DISPOSED SALE PRICE CLOSING ADJUSTMENTS NET PROCEEDS NET REAL ESTATE INVESTMENT OTHER (INCLUDING RECEIVABLES) 1

The following table details the Company's dispositions for the three months ended March 31, 2023:

Dollars in thousands DATE DISPOSED SALE PRICE CLOSING ADJUSTMENTS COMPANY-FINANCED MORTGAGE NOTES NET PROCEEDS NET REAL ESTATE INVESTMENT OTHER (INCLUDING RECEIVABLES) 1

GAIN/(IMPAIRMENT) SQUARE FOOTAGE

Loveland, CO 2

2/24/22 $ 84,950 $ ( 45 ) $ 84,905 $ 40,095 $ 4 $ 44,806 150,291

San Antonio, TX 2

4/15/22 25,500 ( 2,272 ) 23,228 14,381 284 8,563 201,523

GA, FL, PA 3, 8

Tampa, FL & Miami, FL 2

1/12/23 $ 93,250 $ ( 5,875 ) $ — $ 87,375 $ 87,302 $ ( 888 ) $ 961 224,037

GA, FL, TX 5, 8

1/30/23 19,210 ( 141 ) — 19,069 18,986 43 40 36,691

Louis, MO 2/10/23 350 ( 18 ) — 332 398 — ( 66 ) 6,500

Los Angeles, CA 3/23/23 21,000 ( 526 ) — 20,474 20,610 52 ( 188 ) 37,165

8/5/22 134,845 ( 3,102 ) 131,743 131,332 411 — 283,780

Dallas, TX 5, 7, 8

8/30/22 114,290 ( 682 ) 113,608 113,608 — — 189,385

Indianapolis, IN 4, 9

Los Angeles, CA 4

3/30/23 75,000 ( 8,079 ) ( 45,000 ) 21,921 88,624 ( 803 ) ( 20,900 ) 147,078

1 unchanged sentence

1 Includes straight-line rent receivables, leasing commissions and lease inducements.

2 Includes two properties.

3 Includes four properties.

4 Includes five properties.

5 Includes six properties.

6 Values and square feet are represented at 100 %.

The Company retained a 20 % ownership interest in the joint venture that purchased these properties.

7 Values and square feet are represented at 100 %.

The Company retained a 40 % ownership interest in the joint venture that purchased these properties.

8 These properties were acquired as part of the Merger and were included as assets held for sale in the purchase price allocation.

9 Two of the five properties included in this portfolio were acquired in the Merger and were included as assets held for sale in the purchase price allocation.

Subsequent to September 30, 2022, the Company disposed of the following properties:

Dollars in thousands DATE DISPOSED SALE PRICE SQUARE FOOTAGE

Dallas, TX 1, 2

10/4/22 $ 104,025 291,328

Houston, TX 2

10/21/22 32,000 134,910

Total dispositions $ 136,025 426,238

1 Includes two properties.

2 These properties were classified as assets held for sale as of September 30, 2022.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

2 Includes two properties, sold in two separate transactions to the same buyer on the same date.

3 The Company sold this property to a joint venture in which it retained a 40 % interest.

Sales price and square footage reflect the total sales price paid by the joint venture and total square footage of the property.

4 The Company entered into a mortgage note agreement with the buyer for $ 45 million.

Assets Held for Sale

The Company had six properties classified as assets held for sale as of September 30, 2022 and no properties classified as assets held for sale as of December 31, 2021.

The table below reflects the assets and liabilities of the properties classified as held for sale as of September 30, 2022 and December 31, 2021:

Dollars in thousands September 30, 2022 December 31, 2021

The Company had three properties and one land parcel classified as assets held for sale as of March 31, 2023.

The net real estate assets held for sale includes $ 5.1 million of impairment charges.

As of December 31, 2022, the Company had one property classified as assets held for sale as of December 31, 2022, which was sold in the first quarter of 2023.

The table below reflects the assets and liabilities classified as held for sale as of March 31, 2023 and December 31, 2022:

Dollars in thousands March 31, 2023 December 31, 2022

Balance Sheet data:

2 unchanged sentences

Lease intangibles 2,242 1,986

Personal property 211 —

Financing lease right-of-use assets 307 —

Land held for development 3,251 —

Accumulated depreciation ( 4,183 ) —

Real estate assets held for sale, net 3,251 18,850

Operating lease right-of-use assets 1,193 —

Other assets, net 328 43

1 unchanged sentence

Accounts payable and accrued liabilities $ 277 $ 282

Operating lease liabilities $ 864 $ —

Financing lease liabilities $ 2,427 $ —

Other liabilities — 155

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In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment.

The Company adopted an accounting policy to combine lease and nonlease components.

The Company adopted an accounting policy to combine lease and nonlease

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments.

Variable payments are recognized in the period earned.

Lease income for the Company's operating leases recognized for the three and nine months ended September 30, 2022 was $ 298.9 million and $ 578.1 million, respectively.

Lease income for the Company's operating leases recognized for the three and nine months ended September 30, 2021 was $ 131.7 million and $ 388.6 million, respectively.

On March 30, 2022, the Company executed a lease as a ground lessor for a 1.9 acre parcel of land in Texas previously recorded in land held for development.

The lease is classified as a sales-type lease under Topic 842 as the present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset.

The land value of $ 1.8 million was reclassified from Land held for development to Other assets.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Future lease payments under the non-cancelable operating leases, excluding any reimbursements and the sale-type lease, as of September 30, 2022 were as follows:

Lease income for the Company's operating leases recognized for the three months ended March 31, 2023 was $ 324.1 million.

Lease income for the Company's operating leases recognized for the three months ended March 31, 2022 was $ 138.5 million.

Future lease payments under the non-cancelable operating leases, excluding any reimbursements and the sale-type lease, as of March 31, 2023 were as follows:

Dollars in thousands OPERATING

2 unchanged sentences

Lessee Accounting

As of September 30, 2022, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases.

As of September 30, 2022, the Company had 243 properties totaling 17.8 million square feet that were held under ground leases.

As of March 31, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases.

As of March 31, 2023, the Company had 242 properties totaling 17.8 million square feet that were held under ground leases.

Some of the ground lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms.

1 unchanged sentence

Any rental increases related to the Company’s ground leases are generally either stated or based on CPI.

The Company had 75 prepaid ground leases as of September 30, 2022.

The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $ 0.5 million and $ 0.1 million of the Company’s rental expense for the three months ended September 30, 2022 and 2021, respectively, and $ 0.8 million and $ 0.4 million for the nine months ended September 30, 2022 and 2021, respectively.

The Company’s future lease payments (primarily for its 168 non-prepaid ground leases) as of September 30, 2022 were as follows:

The Company had 75 prepaid ground leases as of March 31, 2023.

The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $ 0.3 million and $ 0.1 million of the Company’s rental expense for the three months ended March 31, 2023 and 2022, respectively.

The Company’s future lease payments (primarily for its 167 non-prepaid ground leases) as of March 31, 2023 were as follows:

Dollars in thousands OPERATING FINANCING

9 unchanged sentences

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The following table provides details of the Company's total lease expense for the three and nine months ended September 30, 2022 and 2021:

The following table provides details of the Company's total lease expense for the three months ended March 31, 2023 and 2022:

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

Dollars in thousands 2023 2022

11 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities $ — $ 40,589

Right-of-use assets obtained in exchange for new operating lease liabilities $ 198,261 $ 8,298 $ 198,261 $ 8,298

Weighted-average years remaining lease term (excluding renewal options) - operating leases 47.4 47.6

2 unchanged sentences

Weighted-average discount rate - finance leases 5.0 % 5.0 %

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Other Assets and Liabilities

Other Assets and Liabilitie s

Other assets consist primarily of intangible assets, prepaid assets, real estate notes receivable, straight-line rent receivables, accounts receivable, additional long-lived assets and interest rate swaps.

Items included in "Other assets, net" on the Company's Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 are detailed in the table below:

Dollars in thousands September 30, 2022 December 31, 2021

Above-market intangible assets, net $ 86,410 $ 4,966

Prepaid assets 85,053 58,618

Items included in "Other assets, net" on the Company's Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 are detailed in the table below:

Dollars in thousands March 31, 2023 December 31, 2022

Real estate notes receivable, net 1

$ 147,326 $ 99,643

Straight-line rent receivables 98,923 88,868

Prepaid assets 88,694 81,900

Above-market intangible assets, net 85,100 80,720

Accounts receivable, net

48,676 47,498

Additional long-lived assets, net 22,173 21,446

Interest rate swap assets 9,767 14,512

Ground lease modification, net 8,170 8,511

Investment in securities 2

Other receivables, net 5,962 7,169

5 unchanged sentences

$ 534,420 $ 469,990

1 In October 2022, an additional amount of $ 15.0 million was funded for a real estate loan transaction.

1 This amount includes an allowance for credit losses.

See Note 1 for additional information.

2 This amount represents the value of the Company's preferred stock investment in a data analytics platform.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Accounts Payable and Accrued Liabilities

The following table provides details of the items included in "Accounts payable and accrued liabilities" on the Company's Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021:

Dollars in thousands September 30, 2022 December 31, 2021

The following table provides details of the items included in "Accounts payable and accrued liabilities" on the Company's Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022:

Dollars in thousands March 31, 2023 December 31, 2022

Accrued property taxes $ 48,629 $ 78,185

1 unchanged sentence

Accrued interest 28,483 50,037

Accrued income and franchise taxes 2,685 983

Retainage accrued on construction invoices 1,304 2,215

Other operating accruals 42,970 58,459

1 unchanged sentence

Other Liabilities

The following table provides details of the items included in "Other liabilities" on the Company's Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021:

Dollars in thousands September 30, 2022 December 31, 2021

The following table provides details of the items included in "Other liabilities" on the Company's Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022:

Dollars in thousands March 31, 2023 December 31, 2022

Below-market intangible liabilities, net $ 96,214 $ 97,935

4 unchanged sentences

$ 232,029 $ 218,668

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Notes and Bonds Payable

The table below details the Company’s notes and bonds payable as of September 30, 2022 and December 31, 2021.

MATURITY DATES 1

BALANCE 2 AS OF

The table below details the Company’s notes and bonds payable as of March 31, 2023 and December 31, 2022.

MATURITY DATES BALANCE 1 AS OF

EFFECTIVE INTEREST RATE

3 unchanged sentences

10/25 $ 385,000 $ 385,000 5.76 %

$ 700 million Unsecured Credit Facility 3

5/23 — 210,000 — %

$ 1.125 billion Asset Sale Term Loan 4

7/24 421,919 — 4.07 %

$ 350 million Unsecured Term Loan 2

14 unchanged sentences

Senior Notes due 2027 7/27 480,578 479,553 4.76 %

7/27 478,541 — 4.76 %

Senior Notes due 2028 1/28 296,995 296,852 3.85 %

Senior Notes due 2030 2/30 567,863 565,402 5.30 %

2/30 562,974 — 5.30 %

Senior Notes due 2030 3/30 296,479 296,385 2.72 %

Senior Notes due 2031 3/31 295,671 295,547 2.25 %

3/31 628,617 — 5.13 %

Senior Notes due 2031 3/31 636,819 632,693 5.13 %

1 unchanged sentence

8/23-12/26 83,612 84,247 3.57 %- 4.84 %

1 Includes extension options.

2 Balance is presented net of discounts and issuance costs and inclusive of premiums, where applicable.

3 On July 20, 2022, the Company entered into an amended and restated credit facility which included a $ 1.5 billion revolving credit facility, replacing Legacy HR's $ 700 million credit facility.

4 Debt instruments assumed as part of the Merger with Legacy HTA on July 20, 2022.

Amounts shown represent fair value adjustments.

5 The effective interest rate includes the impact of interest rate swaps on $ 675.0 million at a weighted average rate of 1.57 % (plus the applicable margin rate, currently 105 basis points).

Changes in Debt Structure

Mortgage payoffs

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.

Exchange Offer

In connection with the Merger, the OP offered to exchange all validly tendered and accepted notes of each series previously issued by Legacy HR (the “Old HR Notes”) for (i) up to $ 250,000,000 of 3.875 % Senior Notes due 2025 (the “2025 Notes”), (ii) up to $ 300,000,000 of 3.625 % Senior Notes due 2028 (the “2028 Notes”), (iii) up to $ 300,000,000 of 2.400 % Senior Notes due 2030 (the “2030 Notes”) and (iv) up to $ 300,000,000 of 2.050 % Senior Notes due 2031 to be issued by the OP (the “2031 Notes” and, collectively, the “New HR Notes”) and solicited consents from holders of the Old HR Notes to amend the indenture governing the Old HR Notes to eliminate substantially all of the restrictive covenants in such indenture (the “Exchange Offers”).

The New HR Notes were issued pursuant to an indenture dated July 22, 2022, among the OP, Legacy HTA and U.S.

Bank Trust Company, National Association, as trustee, as

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

supplemented by the first supplemental indenture, dated as of July 22, 2022, the second supplemental indenture, dated as of July 22, 2022, the third supplemental indenture, dated as of July 22, 2022 and the fourth supplemental indenture, dated as of July 22, 2022.

Legacy HTA guaranteed the New HR Notes pursuant to (i) a guarantee of the 2025 Notes, (ii) a guarantee of the 2028 Notes, (iii) a guarantee of the 2030 Notes, and (iv) a guarantee of the 2031 Notes, each dated July 22, 2022.

Legacy HTA and the OP filed a registration statement on Form S-4 (File No.

333-265593) relating to the issuance of the New HR Notes with the Securities and Exchange Commission (the “SEC”) on June 14, 2022, which was declared effective by the SEC on June 28, 2022.

The following sets forth the results of the Exchange Offers:

Series of Old HR Notes Tenders and Consents Received as of the Expiration Date Percentage of Total Outstanding Principal Amount of Such Series of Old HR Notes

3.875 % Senior Notes due 2025

$ 5,361,699 $ 5,351,827

3.625 % Senior Notes due 2028

$ 290,246,000 96.75 %

2.400 % Senior Notes due 2030

$ 297,507,000 99.17 %

2.050 % Senior Notes due 2031

$ 298,858,000 99.62 %

Senior Notes Assumed with the Merger

In connection with the Merger, the Company assumed senior notes ("Legacy Senior Notes") that were originated on various dates prior to the date of the Merger by the OP (formerly, Healthcare Trust of America Holdings, LP).

These notes are all fully and unconditionally guaranteed by the Company and have semi-annual payment requirements.

In addition, the Legacy Senior Notes carry customary restrictive financial covenants, including limitations on our ability to incur additional indebtedness and requirements to maintain a pool of unencumbered assets.

In addition, the corresponding indentures provide for the ability to redeem the Legacy Senior Notes, subject to certain "make whole" call provisions.

The Legacy Senior Notes assumed by the Company consist of the following:

COUPON PRINCIPAL OUTSTANDING AS OF

Dollars in thousands FACE VALUE 9/30/2022 12/31/2021

Senior Notes due 2026 3.50 % $ 600,000 $ 600,000 $ —

Senior Notes due 2027 3.75 % 500,000 500,000 —

Senior Notes due 2030 3.10 % 650,000 650,000 —

Senior Notes due 2031 2.00 % 800,000 800,000 —

$ 2,550,000 $ 2,550,000 $ —

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 restructured the parties’ existing bank facilities and added additional borrowing capacities for the Company following the Merger.

The OP is the borrower under the Credit Facility (in such capacity, the “Borrower”).

• Legacy HR’s existing $ 700.0 million revolving credit facility under the Amended and Restated Credit Agreement, dated as of May 31, 2019 (as amended, restated, replaced, supplemented, or otherwise modified from time to time prior to July 20, 2022, the “Existing HR Revolving Credit Agreement”), by and among Legacy HR, the lenders party thereto from time to time and their assignees, as lenders, and Wells Fargo Bank, National Association, as the administrative agent (the “WF Administrative Agent”), was terminated, all outstanding obligations in respect thereof were deemed paid in full and all commitments thereunder were permanently reduced to zero and terminated.

1 Balance is presented net of discounts and issuance costs and inclusive of premiums, where applicable.

2 Subsequent to March 31, 2023, the Company exercised its option to extend the maturity date for one year for a fee of approximately $ 0.4 million.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

• Legacy HR’s existing $ 200.0 million term loan facility and existing $ 150.0 million term loan facility under the Amended and Restated Term Loan Agreement, dated as of May 31, 2019 (as amended, restated, replaced, supplemented, or otherwise modified from time to time prior to July 20, 2022, the “Existing HR Term Loan Agreement”), by and among Legacy HR, the lenders party thereto from time to time and their assignees, as lenders, and the WF Administrative Agent, in each, case, were deemed continued and assumed by the Borrower under the Credit Facility, and the Existing HR Term Loan Agreement was terminated.

◦ The existing $ 200.0 million term loan facility was amended to:

(a) conform to the terms of the Borrower’s other term loan facilities under the Credit Facility;

(b) include two one-year extension options, resulting in a latest final maturity in May 2026;

and (c) reprice to align with the pricing for the Borrower’s other term loan facilities under the Credit Facility;

◦ The existing $ 150.0 million term loan facility was amended to conform to the terms of the Borrower’s other term loan facilities under the Credit Facility, and the existing maturity in June 2026 remains unchanged under the Credit Facility.

• Legacy HTA’s and the OP’s existing $ 1.0 billion revolving credit facility was upsized to $ 1.5 billion (the “Revolver”) pursuant to the Credit Facility.

The Revolver currently matures in October 2025, and the Credit Facility adds an additional one-year extension option for the Revolver, for a total of two one-year extension options.

• Legacy HTA’s and the OP’s existing $ 300.0 million term loan facility was deemed continued pursuant to the Credit Facility and was amended to conform to the terms of the Borrower’s other term loan facilities under the Credit Facility.

The existing maturity in October 2025 remains unchanged under the Credit Facility.

• Legacy HTA’s and the OP’s existing $ 200.0 million term loan facility was deemed continued pursuant to the Credit Facility and was amended to (a) conform to the terms of the Borrower’s other term loan facilities under the Credit Facility;

(b) extend the maturity from January 2024 to July 20, 2027;

and (c) reprice to align with the pricing for the Borrower’s other term loan facilities under the Credit Facility.

• The Credit Facility provides for a new $ 350.0 million delayed-draw term loan facility that is available to be drawn for 12 months after July 20, 2022 and has an initial maturity date of July 20, 2023, with two one-year extension options.

As of September 30, 2022, the $ 350.0 million Credit Facility was drawn in full.

The terms of any delayed draw term loans funded thereunder conform to the terms of the Borrower’s other term loan facilities under the Credit Facility, and the pricing for such delayed draw term loans aligns with the pricing for the Borrower’s other term loan facilities under the Credit Facility.

• The Credit Facility provides for a new $ 300.0 million term loan facility that was funded on July 20, 2022 and has a maturity date of January 20, 2028, with no extension options.

The terms of such term loan facility conform to the terms of the Borrower’s other term loan facilities under the Credit Facility, and the pricing for such term loan facility aligns with the pricing for the Borrower’s other term loan facilities under the Credit Facility.

Derivative Financial Instruments

5 unchanged sentences

The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Cash Flow Hedges of Interest Rate Risk

5 unchanged sentences

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.

As of September 30, 2022, the Company had 15 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

As of March 31, 2023, the Company had 14 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

EXPIRATION DATE AMOUNT WEIGHTED

December 16, 2022 75,000 2.37 %

January 15, 2024 $ 200,000 1.21 %

January 15, 2024 1

200,000 1.21 %

May 1, 2026 100,000 2.15 %

100,000 2.15 %

June 1, 2026 150,000 3.83 %

December 1, 2026 150,000 3.84 %

June 1, 2027 150,000 4.13 %

December 1, 2027 250,000 3.79 %

$ 1,000,000 3.17 %

1 Derivatives hedge one-month term SOFR.

Subsequent to September 30, 2022, the Company entered into two additional interest rate swaps totaling $ 250.0 million with multiple counterparties, with both expiring in 2027.

The Company designated these interest rate swaps as cash flow hedges of interest rate risk in the fourth quarter of 2022.

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company's derivative financial instruments, as well as their classification on the Condensed Consolidated Balance Sheet as of September 30, 2022.

BALANCE AT SEPTEMBER 30, 2022

The table below presents the fair value of the Company's derivative financial instruments, as well as their classification on the Condensed Consolidated Balance Sheet as of March 31, 2023.

BALANCE AT MARCH 31, 2023

In thousands BALANCE SHEET LOCATION FAIR VALUE

Derivatives designated as hedging instruments

Interest rate swaps Other liabilities $ ( 11,927 )

Interest rate swaps Other assets $ 9,767

Total derivatives designated as hedging instruments $ ( 2,160 )

Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)

The table below presents the effect of cash flow hedge accounting on AOCI during the three and nine months ended September 30, 2022 and 2021 related to the Company's outstanding interest rate swaps.

GAIN RECOGNIZED IN

AOCI ON DERIVATIVE

three months ended September 30, LOSS RECLASSIFIED FROM

AOCI INTO INCOME

three months ended September 30,

In thousands 2022 2021 2022 2021

Interest rate swaps $ ( 6,083 ) $ ( 36 ) Interest expense $ 614 $ 982

Settled treasury hedges — — Interest expense 107 107

Settled interest rate swaps — — Interest expense 42 42

$ ( 6,083 ) $ ( 36 ) Total interest expense $ 763 $ 1,131

The table below presents the effect of cash flow hedge accounting on AOCI during the three months ended March 31, 2023 and 2022 related to the Company's outstanding interest rate swaps.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

GAIN RECOGNIZED IN

(GAIN)/LOSS RECOGNIZED IN

AOCI ON DERIVATIVE

nine months ended September 30, LOSS RECLASSIFIED FROM

three months ended March 31, (GAIN)/LOSS RECLASSIFIED FROM

AOCI INTO INCOME

nine months ended September 30,

three months ended March 31,

In thousands 2023 2022 2023 2022

3 unchanged sentences

$ 8,541 $ ( 5,159 ) Total interest expense $ ( 2,284 ) $ 1,086

The Company estimates that $ 4.8 million related to active interest rate swaps will be reclassified from AOCI as a decrease to interest expense over the next 12 months, and that $ 0.6 million related to settled interest rate swaps will be amortized from AOCI as an increase to interest expense over the next 12 months.

The Company estimates that an additional $ 9.5 million related to active interest rate swaps will be reclassified from AOCI as a decrease to interest expense over the next 12 months, and that an additional $ 0.6 million related to settled interest rate swaps will be amortized from AOCI as an increase to interest expense over the next 12 months.

Credit-risk-related Contingent Features

The Company's agreements with each of its derivative counterparties contain a cross-default provision under which the Company could be declared in default of its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.

As of September 30, 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 $ 16.5 million.

As of September 30, 2022, the Company has not posted any collateral related to these agreements and was not in breach of any agreement.

As of March 31, 2023, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $ 7.0 million.

As of March 31, 2023, the Company has not posted any collateral related to these agreements and was not in breach of any agreement.

Commitments and Contingencies

3 unchanged sentences

Development and Redevelopment Activity

During the third quarter of 2022, the Company continued the redevelopment of a 217,114 square foot medical office building in Dallas, Texas.

As of September 30, 2022, the Company had funded approximately $ 11.1 million in project costs.

The building continues to operate with in-place leases during construction.

The first new tenant lease of the redevelopment commenced in the first quarter of 2022.

During the third quarter of 2022, the Company continued the redevelopment of a medical office building in Tacoma, Washington.

As of September 30, 2022, the Company had funded approximately $ 10.3 million in project costs.

The redevelopment includes interior and exterior improvements to the existing building, plus the addition of 23,000 square feet.

The Company expects the 23,000 square foot tenant lease for the expansion space to commence in the fourth quarter of 2022.

The Company continued the development of a medical office building in Nashville, Tennessee.

The Company is constructing a new 106,194 square foot medical office building with the initial tenant lease expected to commence in the third quarter of 2023.

As of September 30, 2022, the Company had funded approximately $ 15.3 million in project costs.

The redevelopment includes the demolition of an existing 81,000 square foot medical office building.

The Company recognized an impairment charge of $ 5.0 million related to the existing building in 2021.

The Company is financing the construction of a two building medical office complex in Orlando, Florida.

The 156,566 square foot development is expected to be complete in the second quarter of 2024.

As of September 30, 2022, the Company had funded approximately $ 10.6 million towards the project costs.

The Company, through a joint venture partnership, continued the development of a medical office building in Raleigh, North Carolina.

This joint venture expects to construct a new 120,694 square foot medical office building that is projected to be complete in the fourth quarter of 2024.

As of September 30, 2022, the joint venture had funded approximately $ 15.3 million towards the project costs.

The Company is redeveloping three medical office buildings totaling 259,290 square feet in Washington, DC.

The Company has approved a leasing plan with a capital outlay that is expected to be completed in the second quarter of

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

As of September 30, 2022, the Company had funded $ 2.0 million in project costs .

During the first quarter of 2023, the Company funded $ 16.9 million toward the development and redevelopment of properties.

Stockholders' Equity

The following table provides a reconciliation of the beginning and ending shares of common stock outstanding for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021:

NINE MONTHS ENDED SEPTEMBER 30, 2022 TWELVE MONTHS ENDED DECEMBER 31, 2021

The following table provides a reconciliation of the beginning and ending shares of common stock outstanding for the three months ended March 31, 2023 and the twelve months ended December 31, 2022:

THREE MONTHS ENDED MARCH 31, 2023 TWELVE MONTHS ENDED DECEMBER 31, 2022

Balance, beginning of period 380,589,894 150,457,433

4 unchanged sentences

The Company has equity distribution agreements with various sales agents with respect to the at-the-market (“ATM”) offering program of common stock with an aggregate sales amount of up to $ 750.0 million.

As of September 30, 2022, $ 750.0 million remained available for issuance under our current ATM offering program.

As of March 31, 2023, $ 750.0 million remained available for issuance under our current ATM offering program.

During the three months ended March 31, 2023, the Company did not sell any shares or enter into any forward sale agreements to sell shares of common stock through its ATM offering program.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Common Stock Dividends

During the nine months ended September 30, 2022, the Company declared and paid common stock dividends totaling $ 0.93 per share.

On November 2, 2022, the Company declared a quarterly common stock dividend in the amount of $ 0.31 per share payable on November 30, 2022 to stockholders of record on November 15, 2022.

During the three months ended March 31, 2023, the Company declared and paid common stock dividends totaling $ 0.31 per share.

On May 2, 2023, the Company declared a quarterly common stock dividend in the amount of $ 0.31 per share payable on June 2, 2023 to stockholders of record on May 16, 2023.

Earnings Per Common Share

1 unchanged sentence

The Company's non-vested share-based awards are considered participating securities pursuant to the two-class method.

During the three and nine months ended September 30, 2022, the Company did not enter into any forward sale agreements to sell shares of common stock through the Company's ATM offering program.

The following table sets forth the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2022 and 2021.

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2023 and 2022.

THREE MONTHS ENDED MARCH 31,

Dollars in thousands, except per share data 2023 2022

4 unchanged sentences

Weighted average common shares outstanding - basic 378,840,420 148,963,030

Dilutive effect of forward equity shares — — — 14,036

Dilutive effect of OP Units 3,167,668 — 1,067,493 —

Dilutive effect of employee stock purchase plan — 88,234

Weighted average common shares outstanding - diluted 378,840,420 149,051,264

Net Income (loss) attributable to common stockholders $ 28,304 $ ( 2,066 ) $ 76,661 $ 45,052

Net (loss) income attributable to common stockholders $ ( 87,125 ) $ 42,227

Dividends paid on nonvested share-based awards ( 605 ) ( 605 )

Net income (loss) applicable to common stockholders- basic $ 27,694 $ ( 2,603 ) $ 74,844 $ 43,435

Net income attributable to OP units 312 — 312 —

Net income (loss) applicable to common stockholders - diluted $ 28,006 $ ( 2,603 ) $ 75,156 $ 43,435

Net (loss) income applicable to common stockholders - basic $ ( 87,730 ) $ 41,622

Basic earnings per common share - net income $ ( 0.23 ) $ 0.28

Diluted earnings per common share - net income $ ( 0.23 ) $ 0.28

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The effect of non-vested stock awards totaling 911,594 shares, options under the Company's Employee Stock Purchase Plan (the "ESPP") to purchase the Company's stock totaling 63,383 shares, and the dilutive impact of forward-equity contracts outstanding for 14,734 shares of common stock for the three months ended September 30, 2021 were excluded from the calculation of diluted loss per common share because the effect was anti-dilutive due to the loss from continuing operations incurred during that period.

The effect of OP units totaling 4,042,993 shares, non-vested stock awards totaling 401,937 shares, and options under the Company's Employee Stock Purchase Plan (the "ESPP") to purchase the Company's common stock totaling 49,322 shares for the three months ended March 31, 2023 were excluded from the calculation of diluted loss per common share because the effect was anti-dilutive due to the loss from continuing operations incurred during that period.

Incentive Plans

Restricted Common Shares

During the nine months ended September 30, 2022, the Company made the following stock awards:

• During the first quarter of 2022, the Company granted non-vested stock awards to its named executive officers and other members of senior management and employees with a grant date fair value of $ 13.0 million, which consisted of an aggregate of 415,184 non-vested shares with vesting periods ranging from three to eight years .

• During the second quarter of 2022, the Company granted non-vested stock awards to eight of its directors with a grant date fair value of $ 0.8 million, which consisted of an aggregate of 26,840 non-vested shares, with a one-year vesting period.

• During the third quarter of 2022, the Company granted non-vested stock awards to its 12 non-employee directors with a grant date fair value of $ 1.8 million, which consisted of an aggregate of 70,816 non-vested shares, with vesting periods ranging from one to three years .

The Company also granted non-vested stock awards to an employee, which consisted of 1,036 non-vested shares as a discretionary grant.

A summary of the activity under the Company's share-based incentive plans for the three and nine months ended September 30, 2022 and 2021 is included in the table below.

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,

2022 2021 2022 2021

During the three months ended March 31, 2023, the Company granted non-vested stock awards to its named executive officers and other members of senior management and employees with a grant date fair value of $ 5.4 million, which consisted of an aggregate of 270,494 non-vested shares with vesting periods ranging from three to eight years .

A summary of the activity under the Company's share-based incentive plans for the three months ended March 31, 2023 and 2022 is included in the table below.

THREE MONTHS ENDED MARCH 31,

Share-based awards, beginning of period 1,795,128 1,562,028

3 unchanged sentences

Share-based awards, end of period 1,955,445 1,951,551

During the nine months ended September 30, 2022 and 2021, the Company withheld 8,745 and 51,972 shares of common stock, respectively, from participants to pay estimated withholding taxes related to shares that vested.

During the three months ended March 31, 2023 and 2022, the Company withheld 38,632 and 6,727 shares of common stock, respectively, from participants to pay estimated withholding taxes related to shares that vested.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Restricted Stock Units

2 unchanged sentences

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

On January 3, 2022, the Company granted RSUs to its named executive officers and certain other officers, with a grant date fair value of $ 9.7 million, which consisted of an aggregate 294,932 RSUs with a five-year vesting period.

On January 4, 2023, the Company granted RSUs to members of senior management, with a grant date fair value of $ 3.7 million, which consisted of an aggregate 165,174 RSUs with a five-year vesting period.

Approximately 43 % of the RSUs vest based on two market performance conditions.

1 unchanged sentence

The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair values of $ 24.23 for the absolute TSR component and $ 27.84 for the relative TSR component for the January 2023 grant using the following assumptions:

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

THREE MONTHS ENDED MARCH 31,

4 unchanged sentences

Stock price (per share) $ 20.21

The remaining 57 % of the restricted stock units vest upon certain operating performance conditions.

The remaining 57 % of the RSUs vest based upon certain operating performance conditions.

With respect to the operating performance conditions of the January 4, 2023 grant, the grant date fair value was $ 20.21 based on the Company's share price on the date of grant.

The combined weighted average grant date fair value of the January restricted stock units was $ 33.04 per share.

The following is a summary of the RSU activity during the three and nine months ended September 30, 2022:

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,

Restricted Stock Units Weighted Average Grant Date Fair Value Restricted Stock Units Weighted Average Grant Date Fair Value

The combined weighted average grant date fair value of the January RSUs was $ 22.55 per share.

The following is a summary of the RSU activity during the three months ended March 31, 2023:

Restricted Stock Units Weighted Average Grant Date Fair Value

Non-vested, beginning of period 294,932 $ 33.04

Granted 165,174 22.55

Vested — — — —

Non-vested as of September 30, 2022 294,932 294,932

Vested/Forfeited ( 17,606 ) 33.04

Probability adjustment of 2022 RSUs ( 79,250 ) 31.68

Non-vested, end of period 363,250 $ 28.57

LTIP Series C Units

In January 2023, the Company modified its incentive compensation structure to award LTIP Series C units ("LTIP-C units) in the OP to named executive officers in lieu of RSUs.

The LTIP-C units are granted with three-year forward-looking performance targets, with a grant date fair value of $ 7.1 million, which consisted of an aggregate 448,249 LTIP-C units with a five-year vesting period.

Approximately 43 % of the LTIP-C units vest based on two market performance conditions.

Relative and absolute TSR awards containing these market performance conditions were valued using independent specialists.

The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair values of $ 12.24 for the absolute TSR component and $ 13.98 for the relative TSR component for the January 2023 grant using the following assumptions:

THREE MONTHS ENDED MARCH 31,

Volatility 34.0 %

Dividend assumption Accrued

Expected term 3 years

Risk-free rate 4.42 %

Stock price (per share) $ 20.21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The remaining 57 % of the LTIP-C units vest based upon certain operating performance conditions.

With respect to the operating performance conditions of the January 4, 2023 grant, the grant date fair value was $ 20.21 based on the Company's share price on the date of grant.

The combined weighted average grant date fair value of the January LTIP-C units was $ 15.85 per share.

Employee Stock Purchase Plan

2 unchanged sentences

No new options will be granted under the ESPP.

A summary of the activity under the ESPP for the three and nine months ended September 30, 2022 and 2021 is included in the table below.

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,

2022 2021 2022 2021

A summary of the activity under the ESPP for the three months ended March 31, 2023 and 2022 is included in the table below.

THREE MONTHS ENDED MARCH 31,

Outstanding and exercisable, beginning of period 340,976 348,514

4 unchanged sentences

Outstanding and exercisable, end of period 183,426 427,802

The following table represents expected amortization of the Company's non-vested shares issued as of March 31, 2023:

Dollars in millions FUTURE AMORTIZATION

of non-vested shares

2028 and thereafter 0.5

Fair Value of Financial Instruments

6 unchanged sentences

• Interest rate swap agreements - Interest rate swap agreements are recorded in other liabilities on the Company's Condensed Consolidated Balance Sheets at fair value.

Fair value is estimated by utilizing pricing models that consider forward yield curves and discount rates.

Fair value is estimated by utilizing pricing models, level 2 inputs, that consider forward yield curves and discount rates.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The table below details the fair values and carrying values for notes and bonds payable and real estate notes receivable at September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

The table below details the fair values and carrying values for notes and bonds payable and real estate notes receivable at March 31, 2023 and December 31, 2022.

March 31, 2023 December 31, 2022

Dollars in millions CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE

5 unchanged sentences

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 1. Financial Statements