What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2023-11-03 · 188 added, 395 removed, 483 unchanged (55% of the section changed)

3 unchanged sentences

Amounts in thousands, except per share data

SEPTEMBER 30, 2023

MARCH 31, 2024

DECEMBER 31, 2023

34 unchanged sentences

1,000,000 shares authorized;

380,860 and 380,590 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

381,502 and 380,964 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 9,609,530 9,602,592

Accumulated other comprehensive income 17,079 2,140

Accumulated other comprehensive income (loss) 4,791 ( 10,741 )

Cumulative net income attributable to common stockholders 717,958 1,028,794

7 unchanged sentences

Condensed Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

Amounts in thousands, except per share data

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

2023 2022 2023 2022

Rental income $ 318,076 $ 324,093

4 unchanged sentences

General and administrative 14,787 14,935

Acquisition and pursuit costs 769 482 1,725 3,137

Transaction costs 395 287

Merger-related costs — 4,855

4 unchanged sentences

Interest expense ( 61,054 ) ( 63,759 )

Gain (loss) on extinguishment of debt 62 ( 1,091 ) 62 ( 2,520 )

Impairment of real estate properties and credit loss reserves ( 15,937 ) ( 31,422 )

Impairment of goodwill ( 250,530 ) —

Equity loss from unconsolidated joint ventures ( 422 ) ( 780 )

Interest and other income (expense), net 139 ( 172 ) 1,278 ( 378 )

Interest and other income, net 275 547

( 327,646 ) ( 94,407 )

Net (loss) income $ ( 68,604 ) $ 28,616 $ ( 240,408 ) $ 76,973

Net loss (income) attributable to non-controlling interests 760 ( 312 ) 2,680 ( 312 )

Net (loss) income attributable to common stockholders $ ( 67,844 ) $ 28,304 $ ( 237,728 ) $ 76,661

Net loss $ ( 315,220 ) $ ( 88,078 )

Net loss attributable to non-controlling interests 4,384 953

Net loss attributable to common stockholders $ ( 310,836 ) $ ( 87,125 )

Basic earnings per common share $ ( 0.82 ) $ ( 0.23 )

4 unchanged sentences

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Comprehensive Income

For the Three and Nine Months Ended September 30, 2023 and 2022

Condensed Consolidated Statements of Comprehensive Loss

For the Three Months Ended March 31, 2024 and 2023

Amounts in thousands

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

2023 2022 2023 2022

Net (loss) income $ ( 68,604 ) $ 28,616 $ ( 240,408 ) $ 76,973

Net loss $ ( 315,220 ) $ ( 88,078 )

Other comprehensive income

Interest rate swaps

Reclassification adjustments for (gains) losses included in net income (interest expense) ( 4,168 ) 763 ( 9,874 ) 2,672

Gains arising during the period on interest rate swaps 12,016 6,083 24,999 12,905

Interest rate derivatives

Reclassification adjustments for gains included in interest expense ( 3,865 ) ( 2,284 )

Gains (losses) arising during the period on interest rate swaps 19,611 ( 8,541 )

15,746 ( 10,825 )

Comprehensive (loss) income ( 60,756 ) 35,462 ( 225,283 ) 92,550

comprehensive loss (income) attributable to non-controlling interests 663 ( 384 ) 2,494 ( 384 )

Comprehensive (loss) income attributable to common stockholders $ ( 60,093 ) $ 35,078 $ ( 222,789 ) $ 92,166

Comprehensive loss ( 299,474 ) ( 98,903 )

comprehensive loss attributable to non-controlling interests 4,170 1,084

Comprehensive loss attributable to common stockholders $ ( 295,304 ) $ ( 97,819 )

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, 2023, are an integral part of these financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Equity and Redeemable Non-Controlling Interests

For the Three Months Ended September 30, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

Amounts in thousands, except per share data

8 unchanged sentences

Equity Redeemable Non-controlling Interests

Balance at June 30, 2023 $ 3,808 $ 9,595,033 $ 9,328 $ 1,137,171 $ ( 3,565,941 ) $ 7,179,399 $ 104,018 $ 7,283,417 $ 2,487

Balance at December 31, 2023 $ 3,810 $ 9,602,592 $ ( 10,741 ) $ 1,028,794 $ ( 3,801,793 ) $ 6,822,662 $ 96,252 $ 6,918,914 $ 3,868

Issuance of common stock, net of issuance costs — 104 — — — 104 — 104 —

Common stock redemptions — ( 135 ) — — — ( 135 ) — ( 135 ) —

Conversion of OP Units to common stock 2 3,410 — — — 3,412 ( 3,412 ) — —

Share-based compensation 3 3,559 — — — 3,562 — 3,562 —

5 unchanged sentences

Contributions from redeemable non-controlling interests — — — — — — — — 13

Dividends to common stockholders and distributions to non-controlling interest holders ($ 0.31 per share)

— — — — ( 118,203 ) ( 118,203 ) ( 1,467 ) ( 119,670 ) —

Adjustments to redemption value of redeemable non-controlling interests — — — — — — — — ( 1 )

Balance at September 30, 2023 $ 3,809 $ 9,597,629 $ 17,079 $ 1,069,327 $ ( 3,684,144 ) $ 7,003,700 $ 101,888 $ 7,105,588 $ 3,195

Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Cumulative

Net Income Cumulative

Dividends Total

Stockholders’

Equity Non-controlling Interests Total

Equity Redeemable Non-controlling Interests

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

Issuance of common stock, net of issuance costs — 84 — — — 84 — 84 —

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 — ( 41 ) — — — ( 41 ) — ( 41 ) —

Share-based compensation 1 9,716 — — — 9,717 — 9,717 —

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)

— — 755 — — 755 8 763 —

Gains arising during the period on interest rate swaps

— — 6,019 — — 6,019 64 6,083 —

Dividends to common stockholders and distributions to non-controlling interest holders ($ 0.31 per share)

— — — — ( 118,406 ) ( 118,406 ) ( 1,427 ) ( 119,833 ) —

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 $ —

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.

Healthcare Realty Trust Incorporated

Condensed Consolidated Statements of Equity and Redeemable Non-Controlling Interests

For the Nine Months Ended September 30, 2023 and 2022

Amounts in thousands, except per share data

Balance at March 31, 2024 $ 3,815 $ 9,609,530 $ 4,791 $ 717,958 $ ( 3,920,199 ) $ 6,415,895 $ 87,243 $ 6,503,138 $ 3,880

Stock Additional

14 unchanged sentences

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

Gains arising during the period on interest rate swaps

— — 24,696 — — 24,696 303 24,999 —

Contributions from redeemable non-controlling interests — — — — — — — — 1,210

Dividends to common stockholders and distributions to non-controlling interest holders ($ 0.93 per share)

Losses arising during the period on interest rate swaps

— — ( 8,438 ) — — ( 8,438 ) ( 103 ) ( 8,541 ) —

Adjustments to redemption value of redeemable non-controlling interests — — — — — — — — ( 14 )

Balance at September 30, 2023 $ 3,809 $ 9,597,629 $ 17,079 $ 1,069,327 $ ( 3,684,144 ) $ 7,003,700 $ 101,888 $ 7,105,588 $ 3,195

Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Cumulative

Net Income Cumulative

Dividends Total

Stockholders’

Equity Non-controlling Interests Total

Equity Redeemable Non-controlling Interests

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 8 22,847 — — — 22,855 — 22,855 —

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 — ( 248 ) — — — ( 248 ) — ( 248 ) —

Share-based compensation 4 16,768 — — — 16,772 — 16,772 —

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

Net income — — — 76,661 — 76,661 312 76,973 —

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

— — 2,664 — — 2,664 8 2,672 —

Gains arising during the period on interest rate swaps

— — 12,841 — — 12,841 64 12,905 —

Dividends to common stockholders and distributions to non-controlling interest holders ($ 0.31 per share)

— — — — ( 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 $ 2,000

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

Amounts in thousands

OPERATING ACTIVITIES

NINE MONTHS ENDED

September 30,

Net (loss) income $ ( 240,408 ) $ 76,973

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

THREE MONTHS ENDED

Net loss $ ( 315,220 ) $ ( 88,078 )

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

Depreciation and amortization 178,119 184,479

4 unchanged sentences

Gain on sales of real estate properties ( 22 ) ( 1,007 )

(Gain) loss on extinguishment of debt ( 62 ) 2,520

Impairment of real estate properties and credit loss reserves 15,937 31,422

Impairment of goodwill 250,530 —

Equity loss from unconsolidated joint ventures 422 780

16 unchanged sentences

Proceeds from notes receivable repayments 277 336

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

Net cash provided by investing activities 112,463 1,425,834

Net cash (used in) provided by investing activities ( 58,561 ) 41,560

FINANCING ACTIVITIES

Net repayments on unsecured credit facility ( 149,000 ) ( 154,400 )

Borrowings on term loans — 666,500

Repayment on term loan — ( 718,500 )

Net borrowings on unsecured credit facility 120,000 —

Repayments of notes and bonds payable ( 17,326 ) ( 667 )

Redemption of notes and bonds payable — ( 2,184 )

Dividends paid ( 118,269 ) ( 118,052 )

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

Net proceeds from issuance of common stock 104 51

1 unchanged sentence

Distributions to non-controlling interest holders ( 1,199 ) ( 1,272 )

Debt issuance and assumption costs ( 529 ) ( 12,753 )

Payments made on finance leases ( 110 ) ( 101 )

Net cash used in financing activities ( 17,118 ) ( 121,770 )

(Decrease) increase in cash and cash equivalents ( 36,293 ) 44,408

Increase (decrease) in cash and cash equivalents 473 ( 11,020 )

Cash and cash equivalents at beginning of period 25,699 60,961

Cash and cash equivalents at end of period $ 26,172 $ 49,941

Supplemental Cash Flow Information NINE MONTHS ENDED

September 30,

Supplemental Cash Flow Information

Interest paid $ 73,518 $ 75,082

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

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

Invoices accrued for construction, tenant improvements and other capitalized costs $ 35,777 $ 28,138

Mortgage note payable assumed in connection with acquisition of real estate, net $ 5,284 $ —

Capitalized interest $ 942 $ 570

3 unchanged sentences

Business Overview

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, 2023, the Company had gross investments of approximately $ 13.6 billion in 663 wholly-owned real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property.

Healthcare Realty Trust Incorporated ("Company") 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 March 31, 2024, the Company had gross investments of approximately $ 13.4 billion in 654 consolidated real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property, excluding held for sale assets.

The Company's re al estate properties are located in 35 states and total approxima tely 38.4 million square feet.

The Company provided leasing and property management services to approximat ely 38.6 million sq uare feet nationwide.

In addition, as of September 30, 2023, the Company had a weighted average ownership interest of approxima tely 44 % in 34 re al estate properties held in joint ventures.

The Company provided leasing and property management services to 92 % of its portfolio nationwide as of March 31, 2024.

On July 20, 2022, pursuant to that certain Agreement and Plan of Merger dated as of February 28, 2022, 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”).

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 under the ticker symbol “HR”.

The Company is structured as an umbrella partnership REIT under which substantially all of its business is conducted through the OP, the day-to-day management of which is exclusively controlled by the Company.

As of March 31, 2024, the Company owned 98.6 % of the issued and outstanding units of the OP, with other investors owning the remaining 1.4 % of outstanding units.

In addition, as of March 31, 2024, the Company had a weighted average ownership interest of approxima tely 43 % in 33 re al estate properties held in unconsolidated joint ventures.

See Note 2 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 as the combined company after giving effect to the Merger.

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

The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

They do not include all of the information and footnotes required by GAAP for complete financial statements.

However, except as disclosed herein and specific disclosures included as a result of the Merger, management believes there has been no material change in the information disclosed in 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.

All material intercompany transactions and balances have been eliminated in consolidation.

5 unchanged sentences

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 (“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.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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:

1 unchanged sentence

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.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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

3 unchanged sentences

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., a Delaware limited partnership (the "OP"), is 98.8 % owned by the Company.

The OP is 98.6 % 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, 2023, there were approximately 4.7 million OP Units, or 1.2 % of OP units issued and outstanding, held by non-controlling interest holders.

As of March 31, 2024, there were approximately 5.2 million OP Units, or 1.4 % 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.

As of September 30, 2023, the Company had four consolidated VIEs, in addition to the OP, consisting of joint venture investments in which the Company 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, the Company consolidates its interests in the OP.

As of March 31, 2024, the Company had four consolidated VIEs, in addition to the OP, consisting of joint venture investments in which the Company 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) SEPTEMBER 30, 2023

(dollars in thousands) MARCH 31, 2024

Net real estate investments $ 92,028

3 unchanged sentences

Total liabilities and equity

As of September 30, 2023, the Company had three unconsolidated VIEs consisting of two notes receivables and one joint venture.

As of March 31, 2024, the Company had three unconsolidated VIEs consisting of two notes receivables and one joint venture.

The Company does not have the power or economic interests 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.

1 unchanged sentence

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

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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

6 unchanged sentences

2 Includes investments in seven properties.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

As of September 30, 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.

As of March 31, 2024, 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 2 below for more details regarding the Company's unconsolidated joint ventures.

2 unchanged sentences

Actual results may differ from those estimates.

Reclassifications

Certain reclassifications have been made on the Company's prior year Condensed Consolidated Balance Sheet to conform to current year presentation.

Previously, the Company's Lease intangibles were included in Building, improvements and lease intangibles and Goodwill was included with Other assets, net.

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

Redeemable Non-Controlling Interests

4 unchanged sentences

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 September 30, 2023, the Company had redeemable non-controlling interests of $ 3.2 million.

As of March 31, 2024, the Company had redeemable non-controlling interests of $ 3.9 million.

Asset Impairment

5 unchanged sentences

or significant negative economic trends or negative industry trends for the Company or its tenants.

During the three and nine months ended September 30, 2023, the Company recognized real estate impairments totaling $ 56.9 million and $ 138.3 million, respectively, as a result of completed or planned disposition activity.

During the three months ended March 31, 2024, the Company recognized real estate impairments totaling $ 15.9 million as a result of planned disposition activity.

As of March 31, 2024, three properties totaling $ 2.9 million were measured at fair value using level 3 fair value hierarchy.

The level 3 fair value techniques included brokerage estimates and unexecuted purchase and sale agreements, less estimated closing costs.

Goodwill Impairment

During the first quarter of 2024, the Company experienced a sustained decline in the price per share of its common stock, which was identified as an indicator of goodwill impairment.

As a result, a goodwill evaluation was performed.

The Company's current operations are carried out through a single reporting unit with a carrying value of approximately $ 12.0 billion.

The Company determined that the carrying value exceeded estimated fair value and therefore an impairment of goodwill was recorded.

The Company recorded a $ 250.5 million full impairment of its goodwill, which is recorded as a non-cash charge in “Impairment of goodwill” in the Condensed Consolidated Statements of Operations.

Investments in Leases - Financing Receivables, Net

3 unchanged sentences

See below for additional information regarding the Company's financing receivables.

(dollars in thousands) ORIGINATION DATE LOCATION INTEREST RATE CARRYING VALUE as of SEPTEMBER 30, 2023

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

(dollars in thousands) ORIGINATION DATE LOCATION INTEREST RATE CARRYING VALUE as of MARCH 31, 2024

May 2021 Poway, CA 5.73 % $ 114,643

November 2021 Columbus, OH 6.48 % 7,358

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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, 2023, real estate notes receivable, net, which are included in Other assets on the Company's Condensed Consolidated Balance Sheets, totaled $ 155.0 million.

As of March 31, 2024, real estate notes receivable, net, which are included in Other assets on the Company's Condensed Consolidated Balance Sheets, totaled $ 174.4 million.

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

SEPT 30, 2023 ALLOWANCE FOR CREDIT LOSSES FAIR VALUE DISCOUNT AND FEES CARRYING VALUE as of SEPT 30, 2023

MAR 31, 2024 ALLOWANCE FOR CREDIT LOSSES FAIR VALUE DISCOUNT AND FEES CARRYING VALUE as of MAR 31, 2024

Mezzanine loans

Texas 6/24/2021 6/24/2024 8.00 % $ 54,119 $ 54,119 $ ( 5,196 ) $ ( 3,067 ) $ 45,856

Arizona 12/21/2023 12/20/2026 9.00 % 6,000 6,000 — — 6,000

60,119 60,119 ( 5,196 ) ( 3,067 ) 51,856

Mortgage loans

3 unchanged sentences

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

Florida 12/28/2023 12/28/2026 9.00 % 7,700 7,423 — — 7,423

154,850 122,782 — ( 191 ) 122,591

4 unchanged sentences

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 first quarter of 2023, the Company determined that the risk of credit loss on its mezzanine loans was no longer remote and recorded a credit loss reserve of $ 5.2 million.

The determination of the credit allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments.

The Company evaluates the collectability of loan receivables based on a combination of credit quality indicators, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent, and value of the underlying collateral.

A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that the Company will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement.

For those loans identified as having deteriorated credit quality, the amount of credit loss is determined on an individual basis.

Placement on non-accrual status may be required.

Consistent with this definition, all loans on non-accrual status are deemed to have deteriorated credit quality.

To the extent circumstances improve and the risk of collectability is diminished, the loan may return to income accrual status.

While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.

During the first quarter of 2023, the Company determined that the risk of credit loss on a few of its mezzanine loans were no longer remote and recorded a credit loss reserve of $ 5.2 million.

During the three months ended March 31, 2024, the Company determined that no additional credit loss reserve was needed for its real estate notes receivable.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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

Dollars in thousands NINE MONTHS ENDED SEPTEMBER 30, 2023 TWELVE MONTHS ENDED DECEMBER 31, 2022

Dollars in thousands THREE MONTHS ENDED MARCH 31, 2024 TWELVE MONTHS ENDED DECEMBER 31, 2023

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

3 unchanged sentences

Income from Lease Financing Receivables

The Company recognized the related income from two financing receivables totaling $ 2.0 million and $ 6.2 million, respectively, for the three and nine months ended September 30, 2023, and $ 2.0 million and $ 5.9 million, respectively for the three and nine months ended September 30, 2022, based on an imputed interest rate over the terms of the applicable lease.

The Company recognized the related income from two financing receivables totaling $ 2.1 million for each of the three months ended March 31, 2024 and 2023, based on an imputed interest rate over the terms of the applicable lease.

As a result, the interest recognized from the financing receivable in any particular period will not equal the cash payments from the lease agreement in that period.

2 unchanged sentences

Amortization of these amounts will be recognized as a reduction to Interest income over the life of the lease.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Income from Real Estate Notes Receivable

During the three and nine months ended September 30, 2023, the Company recognized interest income of $ 2.3 million and $ 6.5 million, respectively, related to real estate notes receivable.

During the three months ended March 31, 2024 and 2023, the Company recognized interest income of $ 2.4 million and $ 2.1 million, respectively, 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 January 1, 2023, the Company placed two of its real estate notes receivable with principal balances of $ 48.9 million on non-accrual status and accordingly did not recognize any interest income for the three and nine month periods ended September 30, 2023.

In 2023, the Company placed two of its real estate notes receivable with principal balances, net of credit loss, of $ 48.9 million on non-accrual status and accordingly did not recognize any interest income for the three months ended March 31, 2024.

Revenue from Contracts with Customers (ASC Topic 606)

The Company recognizes certain revenue under the core principle of Topic 606.

The Company recognizes certain revenue under the core principle of ASC Topic 606.

This topic requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Lease revenue is not within the scope of Topic 606.

Lease revenue is not within the scope of ASC Topic 606.

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 Operations in the Other operating line item.

Revenue that is accounted for under ASC 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 2024 2023

1 unchanged sentence

Parking income $ 2,545 $ 2,391

Management fee income 1

1,552 1,426 5,122 2,864

Miscellaneous 358 203 875 306

Management fee income/other 1

$ 4,191 $ 4,618

2 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.

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”), 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.

Per the terms of the Merger Agreement, Legacy HTA declared a special dividend of $ 4.82 (the “Special Dividend”) for each outstanding share of Legacy HTA class A common stock, $ 0.01 par value per share ( the “Legacy HTA Common Stock”), and the OP declared a corresponding distribution to the holders of its partnership units, payable to Legacy HTA stockholders and OP unitholders of record on July 19, 2022.

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

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

The Company operates under the

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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 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 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, Business Combinations, 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:

Dollars in thousands, except for per share data

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

Exchange ratio 1.00

Implied shares of Legacy HR Common Stock issued 228,520,990

Adjusted closing price of Legacy HR Common Stock on July 20, 2022 (b)

Value of implied Legacy HR Common Stock issued $ 5,569,057

Fair value of Legacy HTA restricted stock awards attributable to pre-Merger services (c)

Consideration transferred $ 5,576,463

(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 Legacy 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.

(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.

Final Purchase Price Allocation

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

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

(as adjusted)

Real estate investments

Land $ 985,926 $ 18,359 $ 1,004,285

Buildings and improvements 6,960,418 ( 119,135 ) 6,841,283

Lease intangible assets (a)

831,920 1,839 833,759

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

Construction in progress 10,071 ( 6,744 ) 3,327

Land held for development 46,538 — 46,538

Total real estate investments $ 8,844,747 $ ( 102,535 ) $ 8,742,212

Assets held for sale, net 707,442 ( 7,946 ) 699,496

Investments in unconsolidated joint ventures 67,892 — 67,892

Cash and cash equivalents 26,034 11,403 37,437

Restricted cash 1,123,647 ( 1,247 ) 1,122,400

Operating lease right-of-use assets 198,261 16,370 214,631

Other assets, net (b) (c)

209,163 ( 3,840 ) 205,323

Total assets acquired $ 11,177,186 $ ( 87,795 ) $ 11,089,391

Notes and bonds payable $ 3,991,300 $ — $ 3,991,300

Accounts payable and accrued liabilities 1,227,570 17,374 1,244,944

Liabilities of assets held for sale 28,677 ( 3,939 ) 24,738

Operating lease liabilities 173,948 10,173 184,121

Financing lease liabilities 10,720 ( 855 ) 9,865

Other liabilities 203,210 ( 8,909 ) 194,301

Total liabilities assumed $ 5,635,425 $ 13,844 $ 5,649,269

Net identifiable assets acquired $ 5,541,761 $ ( 101,639 ) $ 5,440,122

Non-controlling interest $ 110,702 $ — $ 110,702

Goodwill $ 145,404 $ 101,639 $ 247,043

(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.

The cumulative measurement period adjustments recorded through June 30, 2023 are final and 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 $ 101.6 million.

Based on the final purchase price allocation of fair value, approximately $ 247.0 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 and vendor relationships following the closing of the Merger.

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

During the third quarter of 2023, the Company experienced a sustained decline in the price per share of its common stock, which it identified as an indicator of goodwill impairment.

As a result, the Company performed an interim goodwill evaluation.

The fair value of the Company’s single reporting unit

New Accounting Pronouncements

On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting ( Topic 280) .

Some of the main provisions of this update to segment reporting include;

(i) a requirement to disclose significant segment expenses, on an annual and interim basis, that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss;

(ii) a requirement to

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

was estimated using a combination of discounted cash flow models and earnings multiples techniques.

The quantitative assessment as of September 30, 2023 indicated goodwill was not impaired.

Merger-related Costs

The Company incurred Merger-related costs of $ 7.5 million and $( 3.4 ) million, respectively, during the three and nine months ended September 30, 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 and for the nine months ended September 30, 2023 including a refund of $ 17.8 million for transfer taxes paid during the year ended December 31, 2022.

disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources, and (iii) a requirement that an entity that has a single reportable segment provide all the disclosures required by the amendments in this update.

The update is effective for annual reporting periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

Early adoption is permitted.

At this time, the Company does not expect that the adoption of this ASU will have a material impact on its consolidated financial statements and compliance of these new disclosure requirements will begin with the Company's Annual Report on Form 10-K for the year ending December 31, 2024.

Real Estate Investments

2024 Acquisition Activity

The following table details the Company's real estate acquisition activity for the nine months ended September 30, 2023:

Dollars in thousands DATE ACQUIRED PURCHASE PRICE MORTGAGE NOTES PAYABLE, NET CASH

CONSIDERATION 1

ESTATE OTHER 2

SQUARE FOOTAGE

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

Colorado Springs, CO 7/28/23 11,450 ( 5,284 ) 6,024 11,416 ( 108 ) 42,770

Total real estate acquisitions $ 42,950 $ ( 5,284 ) $ 36,523 $ 42,012 $ ( 205 ) 158,637

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.

In the third quarter of 2023, the Company acquired a parcel of land previously under a ground lease for $ 0.8 million and an additional interest in an operating property for $ 0.6 million.

The Company had no real estate acquisition activity for the three months ended March 31, 2024.

Unconsolidated Joint Ventures

The Company's investment in and loss recognized for the three and nine months ended September 30, 2023 and 2022 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, 2024 and 2023 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 2024 2023

1 unchanged sentence

New investment during the period 1

— 117,880 3,824 167,479

Equity loss recognized during the period ( 422 ) ( 780 )

3 unchanged sentences

The investment consisted of the Company's sale of a property in Dallas, Texas to the joint venture.

See 2023 Real Estate Asset Dispositions below for additional information.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

2024 Real Estate Asset Dispositions

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

Tampa/Miami, FL 2

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

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

Los Angeles, CA 4

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

Los Angeles, CA 5

5/12/23 3,300 ( 334 ) — 2,966 3,268 — ( 302 ) —

Albany, NY 6/30/23 10,000 ( 1,229 ) — 8,771 2,613 ( 1,040 ) 7,198 40,870

Houston, TX 8/2/23 8,320 ( 285 ) — 8,035 4,567 194 3,274 57,170

Atlanta, GA 8/22/23 25,142 ( 66 ) — 25,076 23,226 ( 536 ) 2,386 55,195

Dallas, TX 9/15/23 115,000 ( 1,504 ) — 113,496 64,183 6,094 43,219 161,264

Houston, TX 9/18/23 250 ( 24 ) — 226 1,998 — ( 1,772 ) 52,040

Chicago, IL 9/27/23 59,950 ( 870 ) — 59,080 74,710 ( 380 ) ( 15,250 ) 104,912

Total dispositions $ 430,772 $ ( 18,951 ) $ ( 45,000 ) $ 366,821 $ 390,485 $ 2,736 $ 18,600 922,922

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

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.

5 The Company sold a land parcel totaling 0.34 acres.

The Company had no real estate dispositions for the three months ended March 31, 2024.

Subsequent to March 31, 2024, the Company disposed of two medical outpatient buildings totaling 39,000 square feet for an aggregate of $ 5.8 million.

The two properties were classified as held for sale as of March 31, 2024.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Assets Held for Sale

The Company had 17 properties and one corporate entity classified as assets held for sale as of September 30, 2023.

The net real estate assets held for sale includes the impact of $ 15.9 million and $ 46.4 million, respectively, of impairment charges for the three and nine months ended September 30, 2023.

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 September 30, 2023 and December 31, 2022:

Dollars in thousands September 30, 2023 December 31, 2022

The table below reflects the assets and liabilities classified as held for sale as of March 31, 2024 and December 31, 2023:

Dollars in thousands March 31, 2024 December 31, 2023

Balance Sheet data:

2 unchanged sentences

Lease intangibles 2,001 1,017

68,758 18,850

Accumulated depreciation ( 2,050 ) ( 913 )

Real estate assets held for sale, net 1

Cash and cash equivalents 260 —

Operating lease right-of-use assets 193 —

5 unchanged sentences

Liabilities of assets held for sale $ 700 $ 295

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

1 Net real estate assets held for sale includes the impact of $ 1.5 million of impairment charges for the three months ended March 31, 2024.

Lessor Accounting

8 unchanged sentences

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, 2023 was $ 333.3 million and $ 987.1 million, respectively.

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.

Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sale-type lease, as of September 30, 2023 were as follows:

Lease income for the Company's operating leases recognized for the three months ended March 31, 2024 was $ 318.1 million.

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

Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sale-type lease, as of March 31, 2024 were as follows:

Dollars in thousands OPERATING

1 unchanged sentence

2029 and thereafter 1,665,663

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Lessee Accounting

As of September 30, 2023, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases.

As of September 30, 2023, the Company had 240 properties totaling 17.4 million square feet that were held under ground leases.

As of March 31, 2024, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases.

As of March 31, 2024, the Company had 231 properties totaling 16.9 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, 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 September 30, 2023 and 2022, respectively, and $ 1.0 million and $ 0.4 million for the nine months ended September 30, 2023 and 2022, respectively.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The Company’s future lease payments (primarily for its 165 non-prepaid ground leases) as of September 30, 2023 were as follows:

The Company had 75 prepaid ground leases as of March 31, 2024.

The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $ 0.3 million of the Company’s rental expense for the three months ended March 31, 2024 and March 31, 2023.

The Company’s future lease payments (primarily for its 156 non-prepaid ground leases) as of March 31, 2024 were as follows:

Dollars in thousands OPERATING FINANCING

8 unchanged sentences

Lease liabilities $ 229,223 $ 74,769

The following table provides details of the Company's total lease expense for the three and nine months ended September 30, 2023 and 2022:

The following table provides details of the Company's total lease expense for the three months ended March 31, 2024 and 2023:

THREE MONTHS ENDED

September 30, NINE MONTHS ENDED

September 30,

Dollars in thousands 2024 2023

10 unchanged sentences

Financing cash flows outflows related to financing leases $ 110 $ 101

Right-of-use assets obtained in exchange for new finance lease liabilities $ — $ 9,874 $ — $ 50,463

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

Weighted-average years remaining lease term (excluding renewal options) - operating leases 45.8 47.4

4 unchanged sentences

Notes and Bonds Payable

The table below details the Company’s notes and bonds payable as of September 30, 2023 and December 31, 2022.

The table below details the Company’s notes and bonds payable as of March 31, 2024 and December 31, 2023.

MATURITY DATES BALANCE 1 AS OF

29 unchanged sentences

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

2 On April 26, 2023, the Company exercised its option to extend the maturity date for one year for a fee of approximately $ 0.4 million.

2 In April 2024, the Company exercised its option to extend the maturity date for one year to May 2025 for a fee of approximately $ 0.3 million.

Changes in Mortgage Notes Payable

On July 28, 2023, the Company assumed a mortgage note payable of $ 5.6 million in connection with the acquisition of a 42,770 square foot property in Colorado Springs, Colorado.

The note bears interest at a rate of 4.5 % per annum and matures on April 1, 2026.

On August 1, 2023, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 3.31 % per annum with an outstanding principal of $ 9.8 million.

The mortgage note encumbered a 66,984 square foot property in Marietta, Georgia.

On January 6, 2024, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 4.77 % per annum with an outstanding principal balance of $ 11.3 million.

The mortgage note encumbered a 63,012 square foot property in California .

On February 1, 2024, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 4.12 % per annum with an outstanding principal balance of $ 5.6 million.

T he mortgage note encumbered a 40,324 squ are foot property in Georgia .

Derivative Financial Instruments

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

EXPIRATION DATE AMOUNT WEIGHTED

January 15, 2024 $ 200,000 1.21 %

As of March 31, 2024, the Company had 15 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

AMOUNT WEIGHTED

May 2026 275,000 3.74 %

4 unchanged sentences

$ 1,075,000 3.92 %

Subsequent Activity

On October 19, 2023, the Company entered into two swap transactions totaling $ 100.0 million.

The notional amounts were $ 50.0 million each with fixed rates of 4.71 % and 4.67 %.

The swap agreements have effective dates of November 1, 2023 and termination dates of June 1, 2027 and December 1, 2027, respectively.

On October 23, 2023, the Company entered into two swap transactions totaling $ 100.0 million with an aggregate fixed rate of 4.73 %.

The swap agreements have effective dates of November 1, 2023 and termination dates of May 31, 2026.

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, 2023.

BALANCE AT SEPTEMBER 30, 2023

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, 2024.

BALANCE AT MARCH 31, 2024

In thousands BALANCE SHEET LOCATION FAIR VALUE

Derivatives designated as hedging instruments

Interest rate swaps Other liabilities $ ( 2,973 )

Interest rate swaps Other assets $ 10,603

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Total derivatives designated as hedging instruments $ 7,630

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, 2023 and 2022 related to the Company's outstanding interest rate swaps.

(GAIN)/LOSS RECOGNIZED IN

AOCI ON DERIVATIVE

three months ended September 30, (GAIN)/LOSS RECLASSIFIED FROM

AOCI INTO INCOME

three months ended September 30,

In thousands 2023 2022 2023 2022

Interest rate swaps $ ( 12,016 ) $ ( 6,083 ) Interest expense $ ( 4,317 ) $ 614

Settled treasury hedges — — Interest expense 107 107

Settled interest rate swaps — — Interest expense 42 42

$ ( 12,016 ) $ ( 6,083 ) Total interest expense $ ( 4,168 ) $ 763

The table below presents the effect of cash flow hedge accounting on AOCI during the three months ended March 31, 2024 and 2023 related to the Company's outstanding interest rate swaps.

(GAIN)/LOSS RECOGNIZED IN

AOCI ON DERIVATIVE

nine months ended September 30, (GAIN)/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 2024 2023 2024 2023

6 unchanged sentences

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, 2023, 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 $ 21.5 million.

As of September 30, 2023, the Company had not posted any collateral related to these agreements and was not in breach of any agreement.

As of March 31, 2024, 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 $ 7.6 million.

As of March 31, 2024, the Company had not posted any collateral related to these agreements and was not in breach of any agreement.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Commitments and Contingencies

3 unchanged sentences

Development and Redevelopment Activity

For the nine months ended September 30, 2023, the Company invested $ 55.3 million and $ 15.4 million toward active development and redevelopment of properties, respectively, and $ 9.2 million toward recently completed development and redevelopment projects.

In the second quarter of 2023, the Company entered into a joint venture agreement for the development of a medical office building in Scottsdale, Arizona.

The Company holds a 90 % interest in the joint venture and determined the arrangement meets the criteria to be consolidated.

The joint venture acquired an $ 8.8 million land parcel to be developed with the Company contributing cash of $ 8.3 million.

This is included in the Company's investment toward active development properties for the nine months ended September 30, 2023.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

For the three months ended March 31, 2024, the Company invested $ 7.7 million and $ 2.8 million toward active development and redevelopment of properties, respectively, and $ 11.1 million toward recently completed development and redevelopment projects.

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, 2023 and the twelve months ended December 31, 2022:

NINE MONTHS ENDED SEPTEMBER 30, 2023 TWELVE MONTHS ENDED DECEMBER 31, 2022

The following table provides a reconciliation of the beginning and ending shares of common stock outstanding for the three months ended March 31, 2024 and the twelve months ended December 31, 2023:

THREE MONTHS ENDED MARCH 31, 2024 TWELVE MONTHS ENDED DECEMBER 31, 2023

Balance, beginning of period 380,964,433 380,589,894

Issuance of common stock 8,623 8,627

Non-vested share-based awards, net of withheld shares 262,821 514,157

Conversion of OP unit to Common stock 194,767 190,544

Non-vested share-based awards, net of withheld shares and forfeitures 333,679 175,368

Balance, end of period 381,501,502 380,964,433

At-The-Market Equity Offering Program

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

As of September 30, 2023, $ 750.0 million remained available for issuance under our current ATM equity offering program.

During the nine months ended September 30, 2023, the Company did not sell any shares or enter into any forward sale agreements to sell shares of common stock through its ATM equity offering program.

Common Stock Dividends

During the nine months ended September 30, 2023, the Company declared and paid common stock dividends totaling $ 0.93 per share.

On October 30, 2023, the Company declared a quarterly common stock dividend in the amount of $ 0.31 per share payable on November 30, 2023 to stockholders of record on November 14, 2023.

During the three months ended March 31, 2024, the Company declared and paid common stock dividends totaling $ 0.31 per share.

On April 30, 2024, the Company declared a quarterly common stock dividend in the amount of $ 0.31 per share payable on May 23, 2024 to stockholders of record on May 13, 2024.

Authorization to Repurchase Common Stock

On May 31, 2023, the Company’s Board of Directors authorized the repurchase of up to $ 500.0 million of outstanding shares of the Company’s common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints, and other customary conditions.

The Company is not obligated under this authorization to repurchase any specific number of shares.

This authorization supersedes all previous stock repurchase authorizations.

In April 2024, the Company repurch ased 2,966,764 shares of its common stock at a weighted average price of $ 14.07 for a total of $ 41.7 million under this authorization.

On April 30, 2024, the Company's Board of directors authorized the repurchase of up to $ 500.0 million of outstanding shares of the Company's common stock, superseding the previous stock repurchase authorization.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

Earnings Per Common Share

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

The following table sets forth the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2023 and 2022.

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, 2024 and 2023.

THREE MONTHS ENDED MARCH 31,

Dollars in thousands, except per share data 2024 2023

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Weighted average common shares outstanding - diluted 379,454,807 378,840,420

Net (loss) income $ ( 68,604 ) $ 28,616 $ ( 240,408 ) $ 76,973

Net loss $ ( 315,220 ) $ ( 88,078 )

Income allocated to participating securities ( 693 ) ( 625 )

Loss (income) attributable to non-controlling interest 760 ( 312 ) 2,680 ( 312 )

Loss attributable to non-controlling interest 4,384 953

Adjustment to loss attributable to non-controlling interest for legally outstanding restricted units ( 1,341 ) ( 16 )

Net (loss) income applicable to common stockholders - basic $ ( 68,509 ) $ 27,694 $ ( 239,718 ) $ 74,844

Basic earnings per common share - net income $ ( 0.18 ) $ 0.08 $ ( 0.63 ) $ 0.36

Diluted earnings per common share - net income $ ( 0.18 ) $ 0.08 $ ( 0.63 ) $ 0.35

The effect of OP units totaling 4,042,993 shares and options under the Company's Employee Stock Purchase Plan (the "ESPP") to purchase the Company's common stock totaling 26,678 shares for the three months ended September 30,

Net loss applicable to common stockholders - basic $ ( 312,870 ) $ ( 87,766 )

Basic earnings per common share - net loss $ ( 0.82 ) $ ( 0.23 )

Diluted earnings per common share - net loss $ ( 0.82 ) $ ( 0.23 )

The effect of OP Units redeemable for 3,681,225 shares and options under the Company's Employee Stock Purchase Plan (the "ESPP") to purchase 23,140 shares of the Company's common stock for the three months ended March 31, 2024 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.

Stock Incentive Plan

The Company's stock incentive plan ("Incentive Plan") permits the grant of incentive awards to its employees and directors in any of the following forms:

options, stock appreciation rights, restricted stock, restricted or deferred stock units, performance awards, dividend equivalents, or other stock-based awards, including units in the OP.

Equity Incentive Plans

During the three months ended March 31, 2024, the Company made the following equity awards:

• Restricted Stock

During the first quarter of 2024, the Company granted non-vested stock awards to its named executive officers and other members of senior management and employees with an aggregate grant date fair value of $ 5.6 million, which consisted of an aggregate of 361,712 non-vested shares with vesting periods ranging from three to eight years .

• Restricted Stock Units ("RSUs")

On February 13, 2024, the Company granted an aggregate of 208,055 RSUs to members of senior management, with an aggregate grant date fair value of $ 3.5 million and a five-year vesting period.

Approximately 36 % of the RSUs vest based on relative total shareholder return ("TSR") and were valued using independent specialists.

The Company utilized a Monte Carlo simulation to calculate the weighted

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

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

Equity Awards

During the nine months ended September 30, 2023, the Company made the following equity awards:

• During the first quarter of 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 .

• During the second quarter of 2023, the Company granted to its 12 independent directors an aggregate of 42,768 shares of non-vested stock awards with a grant date fair value of $ 0.7 million, and an aggregate of 57,868 LTIP Series D units with a grant date fair value of $ 1.1 million.

The Company also granted a non-vested stock award to a new employee, which consisted of 508 non-vested shares.

A summary of the activity under the Company's share-based incentive plans for the three and nine months ended September 30, 2023 and 2022 is included in the table below.

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

2023 2022 2023 2022

Share-based awards, beginning of period 1,932,221 1,941,709 1,795,128 1,562,028

Granted — 71,852 313,770 513,876

Vested — ( 7,434 ) ( 152,314 ) ( 68,481 )

Forfeited — ( 4,130 ) ( 24,363 ) ( 5,426 )

Share-based awards, end of period 1,932,221 2,001,997 1,932,221 2,001,997

During the nine months ended September 30, 2023 and 2022, the Company withheld 38,632 and 8,745 shares of common stock, respectively, from participants to pay estimated withholding taxes related to shares that vested.

Restricted Stock Units

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

The Company adopted a new incentive compensation structure effective January 2022, comprised of restricted stock and restricted stock units ("RSUs").

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

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.

Relative and absolute total shareholder return ("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 $ 24.23 for the absolute TSR component and $ 27.84 for the relative TSR component for the January 2023 grant using the following assumptions:

average grant date fair value of $ 19.10 for the relative TSR component for the February 2024 grant using the following assumptions:

THREE MONTHS ENDED MARCH 31,

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The remaining 64 % 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 RSUs was $ 22.55 per share.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The following is a summary of the RSU activity during the three and nine months ended September 30, 2023:

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

Non-vested, beginning of period 363,250 $ 28.57 294,932 $ 33.04

Granted — — 165,174 22.55

Vested/Forfeited — — ( 17,606 ) 33.04

Probability adjustment of 2022 & 2023 RSUs ( 47,196 ) 20.21 ( 126,446 ) 27.40

Non-vested, end of period 316,054 $ 27.77 316,054 $ 27.77

With respect to the operating performance conditions of the February 13, 2024 grant, the grant date fair value was $ 15.22 based on the Company's share price on the date of grant.

• 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 were 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 assumption:

On February 13, 2024, the Company granted an aggregate of 906,044 LTIP Series C units ("LTIP-C units) in the OP with three-year forward-looking performance targets, a five-year vesting period and an aggregate grant date fair value of $ 7.5 million.

Approximately 36 % of the LTIP-C units vest based on relative TSR and were valued using independent specialists.

The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $ 9.62 for the relative TSR component for the February 2024 grant using the following assumptions:

THREE MONTHS ENDED MARCH 31,

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The remaining 64 % 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.

With respect to the operating performance conditions of the February 13, 2024 grant, the grant date fair value was $ 15.22 based on the Company's share price on the date of grant.

The Company records amortization expense based on the probability of achieving certain operating performance conditions, which is evaluated throughout the performance period.

Employee Stock Purchase Plan

Legacy HR maintained an ESPP prior to the completion of the Merger.

The outstanding options to purchase shares of the common stock of Legacy HR became options to purchase class A common stock of the Company upon completion of the Merger.

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, 2023 and 2022 is included in the table below.

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

The following table represents the summary of non-vested share-based awards under the Incentive Plans for the three months ended March 31, 2024 and 2023:

THREE MONTHS ENDED MARCH 31,

Share-based awards, beginning of period 2,615,562 2,090,060

1,475,811 1,075,261

Outstanding and exercisable, beginning of period 179,369 405,534 340,976 348,514

Granted — — — 255,960

Exercised ( 2,580 ) ( 4,576 ) ( 7,397 ) ( 17,094 )

Vested ( 28,414 ) ( 113,766 )

Forfeited ( 19,805 ) ( 26,063 )

Expired — — ( 132,999 ) ( 140,633 )

Outstanding and exercisable, end of period 172,109 363,330 172,109 363,330

Share-based awards, end of period 4,043,154 3,025,492

LTIP-C units are issued at the maximum possible value of the award and are reflected as such in this table until the performance period has been satisfied and the exact number of awards are determinable.

During the three months ended March 31, 2024 and 2023, the Company withheld 8,228 and 38,632 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.

The following table represents expected amortization of the Company's non-vested shares issued as of September 30, 2023:

The following table represents expected amortization of the Company's non-vested shares issued as of March 31, 2024:

Dollars in millions FUTURE AMORTIZATION

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• 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, level 2 inputs, that consider forward yield curves and discount rates.

The table below details the fair values and carrying values for notes and bonds payable and real estate notes receivable at September 30, 2023 and December 31, 2022.

September 30, 2023 December 31, 2022

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

See Note 5 for additional information.

The table below details the fair values and carrying values for notes and bonds payable and real estate notes receivable at March 31, 2024 and December 31, 2023.

March 31, 2024 December 31, 2023

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