What changed in this filing

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Item 1. Business

2024-02-16 compared with 2023-03-01 · 31 added, 33 removed, 167 unchanged (28% of the section changed)

8 unchanged sentences

Real Estate Properties

The Company had gross investments of approximately $14.1 billion in 688 real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property as of December 31, 2022.

In addition, the Company had a weighted average ownership interest of approximately 48% in 33 real estate properties held in joint ventures as of December 31, 2022.

The Company had gross investments of approximately $13.4 billion in 655 consolidated real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property as of December 31, 2023.

The Company had a weighted average ownership interest of approximately 43% in 33 real estate properties held in unconsolidated joint ventures as of December 31, 2023.

The Company provided leasing and property management services to 93% of its portfolio nationwide as of December 31, 2023.

4 unchanged sentences

Medical office/outpatient 2

$ 12,160,240 35,677 630 87.1 %

Inpatient 439,464 934 15 89.9 %

14 unchanged sentences

There was one property excluded from the table above that was classified as held for sale as of December 31, 2023.

2 Investments in financing receivables, net includes a single-tenant net lease property in San Diego, CA in a sale-leaseback transaction totaling $112.9 million.

3 Financing lease right-of-use assets includes a multi-tenant lease property in Columbus, OH in a sale-leaseback transaction totaling $16.1 million, of which $8.7 million was accounted for as an imputed lease arrangement as required under ASC 842, Leases.

The remaining $7.4 million was accounted for as a financing arrangement and is included in Investments in financing receivables, net and includes its relative portion of the square feet and occupancy.

4 Gross investment includes the Company's pro rata share of unconsolidated joint ventures, net of mortgage note payable.

Square feet has not been adjusted by the Company's ownership percentage.

2 Includes one real estate property held in a consolidated joint venture.

3 Investments in financing receivables, net includes an investment of $115.2 million in a single-tenant net lease property in San Diego, CA related to a sale-leaseback transaction.

4 Financing lease right-of-use assets includes a multi-tenant lease property in Columbus, OH related to a sale-leaseback transaction totaling $15.8 million, of which $8.4 million was accounted for as an imputed lease arrangement as required under ASC 842, Leases.

The remaining $7.4 million was accounted for as a financing arrangement and is included in investments in financing receivables, net.

5 Gross investment includes the Company's pro rata share of unconsolidated joint ventures, net of mortgage notes payable.

Square feet have not been adjusted by the Company's ownership percentage.

Financial Concentrations

4 unchanged sentences

As of December 31, 2023, the weighted average remaining years to expiration pursuant to the Company’s leases was approximately 4.2 years, with expirations through 2052.

The table below details the Company’s lease expirations as of December 31, 2022, excluding the Company's unconsolidated joint ventures, financing receivables and right-of-use assets.

The table below details the Company’s lease expirations as of December 31, 2023, excluding the Company's unconsolidated joint ventures, financing receivables, assets held for sale and right-of-use assets.

EXPIRATION YEAR NUMBER OF LEASES LEASED

22 unchanged sentences

2023 Investment Activity

In 2022, the Company acquired 33 medical office buildings through acquisitions and investments in joint ventures.

In 2023, the Company acquired two medical office buildings.

The total purchase price of the acquisitions was $43.0 million and the weighted average capitalization rate for these investments was 6.5%.

The following bullets provide further detail of the 2022 acquisition activity.

• The Company (exclusive of joint ventures) acquired 28 medical office buildings for purchase prices totaling $403.6 million.

• Through its joint ventures, the Company acquired interests in five medical office buildings for purchase prices totaling $101.0 million.

The Company disposed of 44 properties during 2022 for sales prices totaling $1.2 billion, including 10 properties contributed into joint ventures in which the Company maintained a non-controlling interest.

The weighted average capitalization rate for these properties was 4.8%.

The Company disposed of 39 properties in 2023 for sales prices totaling $787.0 million, including a regional corporate office and one property contributed into a joint venture in which the Company maintains a non-controlling interest.

These transactions yielded net cash proceeds of $687.6 million, net of $36.9 million of closing costs and related adjustments, $58.7 million in Company financed notes and $3.8 million of retained joint venture interests.

weighted average capitalization rate for these sales was 6.5%.

The Company calculates the capitalization rate for dispositions as the in-place cash net operating income divided by the sales price.

9 unchanged sentences

Private, federal and state health insurance programs and other laws and regulations may also have an effect on the utilization of the properties.

The Company’s properties operate in a competitive environment, and patients and referral sources, including physicians, may change their preferences for a healthcare facility from time to time.

Government Regulation

The facilities owned by the Company are utilized by medical tenants which are required to comply with extensive regulation and legislation at the federal, state and local levels, including, but not limited to, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), the Bipartisan Budget Act of 2015, the Medicare Access and CHIP Reauthorization Act of 2015, and laws intended to combat fraud, waste and abuse such as the Anti-Kickback Statute, Stark Law and False Claims Act, and laws intended to protect the privacy and security of patient information, such as the Health Insurance Portability and Accountability Act of 1996.

The facilities owned by the Company are utilized by medical tenants which are required to comply with extensive regulation and legislation at the federal, state and local levels, including, but not limited to, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), the Bipartisan Budget Act of 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and laws intended to combat fraud, waste and abuse such as the Anti-Kickback Statute, Stark Law and False Claims Act, and laws intended to protect the privacy and security of patient information, such as the Health Insurance Portability and Accountability Act of 1996.

These laws and regulations establish, among other things, requirements for state licensure and criteria for medical tenants to participate in government-sponsored reimbursement programs, including the Medicare and Medicaid programs.

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The Company’s medical office buildings that are located on hospital campuses could become more valuable as hospital tenants will keep their higher Medicare rates for on-campus outpatient services.

the Company has not seen a measurable impact from site-neutral Medicare payment policy, positively or negatively.

However, the Company has not seen a material impact from site-neutral Medicare payment policy, positively or negatively.

The Company cannot predict the amount of benefit from these measures or if other federal health policy will ultimately require cuts to reimbursement rates for services provided in other settings.

1 unchanged sentence

Since 2018, physicians have been required to report patient data on quality and performance measures that began to affect their Medicare payments in 2020.

Implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and the ongoing debate over the most effective payment system to use to promote value-based reimbursement, along with its budget-neutrality rule that requires any increases in payments to be offset by decreases, present the industry and its individual participants with uncertainty and financial risk.

Implementation of MACRA, and the ongoing debate over the most effective payment system to use to promote value-based reimbursement, along with its budget-neutrality rule that requires

any increases in payments to be offset by decreases, present the industry and its individual participants with uncertainty and financial risk.

The Company cannot predict the degree to which any such changes may affect the economic performance of the Company's tenants or, indirectly, the Company.

1 unchanged sentence

Taxation of Dividends

The Tax Cuts and Jobs Act of 2017 generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income).

The Tax Cuts and Jobs Act of 2017 (“TCJA”) generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income).

In addition, the deduction for ordinary REIT dividends is not subject to the wage and tax basis limitations applicable to the deduction for other qualifying pass-through income.

The Tax Cuts and Jobs Act of 2017 was a far-reaching and complex revision to the existing U.S.

The TCJA was a far-reaching and complex revision to the existing U.S.

federal income tax laws.

3 unchanged sentences

Examples of significant legislation or regulatory action recently proposed, enacted, or in the process of implementation include:

• the Coronavirus Aid, Relief and Economic Security Act of 2020, along with subsequent stimulus and COVID-19 relief bills and federal spending legislation, which provided relief funding and financial aid to businesses, individuals, and healthcare providers impacted by COVID-19, including higher Medicare reimbursement rates, forgiveness of small business loans to providers for payroll and rent, and additional resources for testing and vaccine distribution;

• the expansion of Medicaid benefits and health insurance exchanges established by the Affordable Care Act, whereby individuals and small businesses purchase health insurance with assistance from federal subsidies;

3 unchanged sentences

• annual regulatory updates to Medicare policy for healthcare providers that can broadly change reimbursement methodology under budget-neutral guidelines, with the effect of lowering payments for some services and increasing payments for others, having a varying impact, positively or negatively, on providers;

1, 2017, for services provided in off-campus, provider-based outpatient departments to the same level of rates for physician office settings;

• ongoing efforts to equalize Medicare payment rates across different facility-type settings, according to Section 603 of the Bipartisan Budget Act of 2015, which lowered Medicare payment rates, effective January 1, 2017, for services provided in off-campus, provider-based outpatient departments to the same level of rates for physician office settings;

• the continued adoption by providers of federal standards for the Medicare Promoting Interoperability Program;

22 unchanged sentences

Operations of nuclear medicine departments at some properties also involve the use and handling, and subsequent disposal of, radioactive isotopes and similar materials, activities which are closely regulated by the Nuclear Regulatory Commission and state regulatory agencies.

In addition, several of the Company's properties were built during the period that asbestos was commonly used in building construction and other such facilities may be acquired by the

Company in the future.

In addition, several of the Company's properties were built during the period that asbestos was commonly used in building construction and other such facilities may be acquired by the Company in the future.

The presence of such materials could result in significant costs in the event that any asbestos-containing materials requiring immediate removal and/or encapsulation are located in or on any facilities or in the event of any future renovation activities.

4 unchanged sentences

Human Capital Resources

We believe our employees are a critical component to achievement of our business objectives and recognition as a trusted owner and operator of medical office properties.

At December 31, 2022, the Company employed 583 people.

We believe our employees are a critical component to the achievement of our business objectives and recognition as a trusted owner and operator of medical office properties.

As of December 31, 2023, the Company employed 584 people.

Our employees are comprised of accountants, maintenance engineers, property managers, leasing personnel, architects, administrative staff, an investments team, and the corporate management team.

2 unchanged sentences

We embrace employee differences in race, color, religion, sex, sexual orientation, national origin, age, disability, veteran status, and other characteristics that make our employees unique.

To retain talented employees that contribute to the Company’s strategic objectives, we offer an attractive set of employee benefits, including:

To retain talented employees who contribute to the Company’s strategic objectives, we offer an attractive set of employee benefits, including:

• Health benefits and 401(k) starting on the first day of employment;

• Auto-enrollment of new employees in our 401(k) plan at 3%;

• Dollar-for-dollar match on 401(k) contributions up to $2,800, encouraging higher employee savings;

15 unchanged sentences

Drive positive impact across the Company while mitigating risk and creating long-term value for stakeholders, including our tenants, investors, employees, and the communities in which we live, work and invest.

Conduct business with integrity, respect and excellence, earning the right to be a preferred provider of medical office properties.

Conduct business with integrity, respect and excellence, earning the right to be a preferred provider of outpatient medical properties.

The Company’s Board of Directors is committed to overseeing the integration of our ESG principles throughout the Company.

In addition, the Company's incentive program for executive officers includes ESG performance measures.

In addition, the Company's incentive program for named executive officers includes ESG performance measures.

The Company's unsecured credit facility (described in more detail herein) contains a sustainability-linked provision that can reduce borrowing costs if the Company meets certain metrics relating to green building certifications.

Company met the metrics in 2023 and, as a result, will save one basis point on the cost of its borrowings under the unsecured credit facility in 2024.

To more effectively track and communicate the Company’s ESG performance, we have adopted various frameworks and methodologies, including participation in the annual GRESB Assessment;

3 unchanged sentences

Available Information

The Company makes available to the public free of charge through its website the Company’s Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the Securities and Exchange Commission ("SEC").

The Company’s website address is www.healthcarerealty.com .

3 unchanged sentences

Committee Charters

The Board of Directors has an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee.

The Board of Directors has an Audit Committee, Compensation and Human Capital Committee, and Nominating and Corporate Governance Committee.

The Board of Directors has adopted written charters for each committee, which are posted on the Company’s website ( www.healthcarerealty.com ) and are available in print to any stockholder who requests a copy.

2 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-K

Item 1. Business