Healthcare Realty Trust Inc 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Healthcare Realty Trust Incorporated Nashville, Tennessee Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Healthcare Realty Trust Incorporated (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), equity and redeemable non-controlling interests, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 19, 2025 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Asset Impairment – Plans to Sell a Real Estate Property Before its Useful Life Has Ended The Company recorded total real estate investments, net, of approximately $9.3 billion as of December 31, 2024. As described in Note 1 to the Company's consolidated financial statements, the Company assesses the potential for impairment of long-lived assets, including real estate properties, whenever events occur, or a change in circumstances indicates, that the carrying value might not be fully recoverable. Indicators of impairment may include, among others, plans to sell an asset before its useful life has ended. 50 We identified management’s assessment of plans to sell an asset before its useful life has ended as an indicator of potential impairment for real estate properties as a critical audit matter. Assessing the likelihood of the sale of an asset before its useful life has ended requires a high degree of judgment. Auditing management's judgment around these elements was especially challenging due to the nature and extent of audit effort required to address this matter. The primary procedures we performed to address this critical audit matter included: • Testing the design and operating effectiveness of controls over management’s assessment of the likelihood of plans to sell an asset before its useful life has ended. • Assessing the likelihood of plans to sell an asset before its useful life has ended using a combination of retrospective review, inquiry with management outside of the accounting department, and obtaining third party evidence. Impairment of Goodwill As described in Note 1 to the Company’s consolidated financial statements, the Company recorded a $250.5 million impairment of its goodwill in the Consolidated Statement of Operations for the year ended December 31, 2024. The Company evaluates goodwill for impairment annually as of December 31 or whenever events or changes in circumstances indicate that an impairment may exist. During 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, the Company performed a quantitative assessment, and the fair value of the Company’s single reporting unit was estimated using a combination of discounted cash flow models and earnings multiples techniques. The determination of fair value using the discounted cash flow model technique requires the use of estimates and assumptions, including revenue and expense growth rates, capitalization rate and discount rate. The determination of fair value using the earnings multiples technique requires assumptions to be made in relation to maintainable earnings and market multiples. We identified the evaluation of goodwill for impairment as a critical audit matter. Significant judgments are required to be made by management to determine the fair value for the single reporting unit, especially the assumptions of the discount rate used in the discounted cash flow model and the market multiples used in the earnings multiples technique. Auditing management’s assumptions used in the impairment assessment of goodwill involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address this matter and the extent of specialized skill or knowledge needed. The primary procedures we performed to address this critical audit matter included: • Testing the design and operating effectiveness of controls over management’s determination of the fair value of the single reporting unit, including controls over the discount rate and market multiples used in the goodwill impairment assessment. • Utilizing professionals with specialized skills and knowledge to assist in assessing the reasonableness of the discount rate and market multiples used in the goodwill impairment assessment. /s/ BDO USA, P.C. We have served as the Company's auditor since 2005. Nashville, Tennessee February 19, 2025 51 Healthcare Realty Trust Incorporated Consolidated Balance Sheets Amounts in thousands, except per share data ASSETS DECEMBER 31, 2024 2023 Real estate properties Land $ 1,143,468 $ 1,343,265 Buildings and improvements 9,707,066 10,881,373 Lease intangibles 664,867 836,302 Personal property 9,909 12,718 Investment in financing receivables, net 123,671 122,602 Financing lease right-of-use assets 77,343 82,209 Construction in progress 31,978 60,727 Land held for development 52,408 59,871 Total real estate investments 11,810,710 13,399,067 Less accumulated depreciation ( 2,483,656 ) ( 2,226,853 ) Total real estate investments, net 9,327,054 11,172,214 Cash and cash equivalents 68,916 25,699 Assets held for sale, net 12,897 8,834 Operating lease right-of-use assets 261,438 275,975 Investments in unconsolidated joint ventures 473,122 311,511 Goodwill — 250,530 Other assets, net 507,496 592,368 Total assets $ 10,650,923 $ 12,637,131 LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND STOCKHOLDERS' EQUITY DECEMBER 31, 2024 2023 Liabilities Notes and bonds payable $ 4,662,771 $ 4,994,859 Accounts payable and accrued liabilities 222,510 211,994 Liabilities of properties held for sale 1,283 295 Operating lease liabilities 224,499 229,714 Financing lease liabilities 72,346 74,503 Other liabilities 161,640 202,984 Total liabilities 5,345,049 5,714,349 Commitments and contingencies (See Footnote 15) Redeemable non-controlling interests 4,778 3,868 Stockholders' equity Preferred stock, $ 0.01 par value; 200,000 shares authorized; none issued and outstanding — — Common stock, $ 0.01 par value; 1,000,000 shares authorized; 350,532 and 380,964 shares issued and outstanding at December 31, 2024 and 2023, respectively. 3,505 3,810 Additional paid-in capital 9,118,229 9,602,592 Accumulated other comprehensive loss ( 1,168 ) ( 10,741 ) Cumulative net income attributable to common stockholders 374,309 1,028,794 Cumulative dividends ( 4,260,014 ) ( 3,801,793 ) Total stockholders’ equity 5,234,861 6,822,662 Non-controlling interest 66,235 96,252 Total equity 5,301,096 6,918,914 Total liabilities, redeemable non-controlling interests, and stockholders' equity $ 10,650,923 $ 12,637,131 See accompanying notes. 52 Healthcare Realty Trust Incorporated Consolidated Statements of Operations Amounts in thousands, except per share data YEAR ENDED DECEMBER 31, 2024 2023 2022 Revenues Rental income $ 1,232,776 $ 1,309,184 $ 907,451 Interest income 16,383 17,134 11,480 Other operating 19,157 17,451 13,706 1,268,316 1,343,769 932,637 Expenses Property operating 473,444 500,437 344,038 General and administrative 83,121 58,405 52,734 Transaction costs 3,122 2,026 3,229 Merger-related costs — ( 1,952 ) 103,380 Depreciation and amortization 675,152 730,709 453,082 1,234,839 1,289,625 956,463 Other income (expense) Gain on sales of real estate properties and other assets 109,753 77,546 270,271 Interest expense ( 242,425 ) ( 258,584 ) ( 146,691 ) (Loss) gain on extinguishment of debt ( 237 ) 62 ( 2,401 ) Impairment of real estate properties and credit loss reserves ( 313,547 ) ( 154,912 ) ( 54,427 ) Impairment of goodwill ( 250,530 ) — — Equity loss from unconsolidated joint ventures ( 135 ) ( 1,682 ) ( 687 ) Interest and other (expense) income, net ( 260 ) 1,343 ( 1,546 ) ( 697,381 ) ( 336,227 ) 64,519 Net (loss) income ( 663,904 ) ( 282,083 ) 40,693 Net loss attributable to non-controlling interests 9,419 3,822 204 Net (loss) income attributable to common stockholders $ ( 654,485 ) $ ( 278,261 ) $ 40,897 Basic earnings per common share $ ( 1.81 ) $ ( 0.74 ) $ 0.15 Diluted earnings per common share $ ( 1.81 ) $ ( 0.74 ) $ 0.15 Weighted average common shares outstanding - basic 365,553 378,928 252,356 Weighted average common shares outstanding - diluted 365,553 378,928 253,873 See accompanying notes. 53 Healthcare Realty Trust Incorporated Consolidated Statements of Comprehensive Income (Loss) Amounts in thousands YEAR ENDED DECEMBER 31, 2024 2023 2022 Net (loss) income $ ( 663,904 ) $ ( 282,083 ) $ 40,693 Other comprehensive (loss) income Interest rate swaps Reclassification adjustment for (gains) losses included in net income (interest expense) ( 13,137 ) ( 14,488 ) 1,527 Gains arising during the period on interest rate swaps 22,809 1,463 10,630 9,672 ( 13,025 ) 12,157 Comprehensive (loss) income ( 654,232 ) ( 295,108 ) 52,850 Less: Comprehensive loss attributable to non-controlling interests 9,337 3,966 168 Comprehensive (loss) income attributable to common stockholders $ ( 644,895 ) $ ( 291,142 ) $ 53,018 See accompanying notes. 54 Healthcare Realty Trust Incorporated Consolidated Statements of Equity and Redeemable Non-Controlling Interests Amounts in thousands, except per share data Common Stock Additional Paid-In Capital Accumulated Other 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 stock, net of costs 6 22,901 — — — 22,907 — 22,907 — Merger consideration transferred 2,289 5,574,174 — — — 5,576,463 110,702 5,687,165 — Common stock redemption ( 1 ) ( 2,791 ) — — — ( 2,792 ) — ( 2,792 ) — Share-based compensation 7 20,339 — — — 20,346 — 20,346 — Redemption of non-controlling interest — 97 — — — 97 ( 97 ) — — Net income (loss) — — — 40,897 — 40,897 ( 204 ) 40,693 — Reclassification adjustments for losses included in net income (interest expense) — — 1,531 — — 1,531 ( 4 ) 1,527 — Gain on interest rate swaps and treasury locks — — 10,590 — — 10,590 40 10,630 — Contributions from redeemable non-controlling interests — — — — — — — — 2,014 Dividends to common stockholders ($ 1.24 per share) — — — — ( 284,079 ) ( 284,079 ) ( 1,695 ) ( 285,774 ) — Balance at December 31, 2022 3,806 9,587,637 2,140 1,307,055 ( 3,329,562 ) 7,571,076 108,742 7,679,818 2,014 Issuance of stock, net of costs — 130 — — — 130 — 130 — Common stock redemption ( 1 ) ( 2,234 ) — — — ( 2,235 ) — ( 2,235 ) — Conversion of OP Units to common stock 2 2,774 — — — 2,776 ( 2,776 ) — — Share-based compensation 3 14,285 — — — 14,288 — 14,288 — Net loss — — — ( 278,261 ) — ( 278,261 ) ( 3,822 ) ( 282,083 ) — Reclassification adjustments for gains included in net income (interest expense) — — ( 14,315 ) — — ( 14,315 ) ( 173 ) ( 14,488 ) — Gain on interest rate swaps and treasury locks — — 1,434 — — 1,434 29 1,463 — Contributions from redeemable non-controlling interests — — — — — — — — 1,889 Adjustments to redemption value of redeemable non-controlling interests — — — — — — — — ( 35 ) Dividends to common stockholders ($ 1.24 per share) — — — — ( 472,231 ) ( 472,231 ) ( 5,748 ) ( 477,979 ) — 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 stock, net of costs — 104 — — — 104 — 104 — Common stock redemption ( 5 ) ( 8,692 ) — — — ( 8,697 ) — ( 8,697 ) — Conversion of OP Units to common stock 3 3,409 — — — 3,412 ( 3,412 ) — — 55 Share-based compensation 5 31,819 — — — 31,824 — 31,824 — Common stock repurchases ( 308 ) ( 510,115 ) — — — ( 510,423 ) — ( 510,423 ) — Redemption of non-controlling interest — — — — — — ( 11,930 ) ( 11,930 ) — Net (loss) gain — — — ( 654,485 ) — ( 654,485 ) ( 9,436 ) ( 663,921 ) 17 Reclassification adjustments for gains included in net income (interest expense) — — ( 12,954 ) — — ( 12,954 ) ( 183 ) ( 13,137 ) — Gains arising during the period on interest rate swaps — — 22,527 — — 22,527 282 22,809 — Contributions from redeemable non-controlling interests — — — — — — — — 13 Adjustments to redemption value of redeemable non-controlling interests — ( 888 ) — — — ( 888 ) — ( 888 ) 880 Dividends to common stockholders ($ 1.24 per share) — — — — ( 458,221 ) ( 458,221 ) ( 5,338 ) ( 463,559 ) — Balance at December 31, 2024 $ 3,505 $ 9,118,229 $ ( 1,168 ) $ 374,309 $ ( 4,260,014 ) $ 5,234,861 $ 66,235 $ 5,301,096 $ 4,778 See accompanying notes. 56 Healthcare Realty Trust Incorporated Consolidated Statements of Cash Flows Amounts in thousands YEAR ENDED DECEMBER 31, OPERATING ACTIVITIES 2024 2023 2022 Net (loss) income $ ( 663,904 ) $ ( 282,083 ) $ 40,693 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 675,152 730,709 453,082 Other amortization 47,165 45,181 24,695 Share-based compensation 31,824 14,288 20,346 Amortization of straight-line rent receivable (lessor) ( 29,996 ) ( 38,676 ) ( 23,498 ) Amortization of straight-line rent on operating leases (lessee) 3,880 6,084 3,374 Gain on sales of real estate properties and other assets ( 109,753 ) ( 77,546 ) ( 270,271 ) Loss (gain) on extinguishment of debt 237 ( 62 ) 2,401 Impairment of real estate properties and credit loss reserves 313,547 154,912 54,427 Impairment of goodwill 250,530 — — Equity loss from unconsolidated joint ventures 135 1,682 687 Distributions from unconsolidated joint ventures 10,498 17,880 1,881 Non-cash interest from financing and real estate notes receivable ( 1,833 ) ( 1,654 ) ( 2,257 ) Changes in operating assets and liabilities: Other assets, including right-of-use-assets ( 34,547 ) ( 55,946 ) ( 26,098 ) Accounts payable and accrued liabilities 5,199 ( 18,775 ) 24,191 Other liabilities 3,483 3,826 ( 30,906 ) Net cash provided by operating activities 501,617 499,820 272,747 INVESTING ACTIVITIES Acquisitions of real estate — ( 49,171 ) ( 402,529 ) Development of real estate ( 70,338 ) ( 41,058 ) ( 37,862 ) Additional long-lived assets ( 248,981 ) ( 231,026 ) ( 163,544 ) Funding of mortgages and notes receivable ( 5,505 ) ( 26,803 ) ( 23,325 ) Investments in unconsolidated joint ventures — ( 3,824 ) ( 99,967 ) Investment in financing receivable ( 511 ) ( 1,801 ) ( 1,002 ) Proceeds from sales of real estate properties and additional long-lived assets 1,221,083 701,434 1,201,068 Contributions from redeemable non-controlling interests 13 1,389 — Proceeds from notes receivable repayments 5,162 — 1,688 Cash assumed in Merger, including restricted cash for special dividend payment — — 1,159,837 Net cash provided by investing activities 900,923 349,140 1,634,364 FINANCING ACTIVITIES Net borrowings (repayments) on unsecured credit facility — ( 385,000 ) 40,000 Borrowings on term loans — — 666,500 Repayment on term loan ( 350,000 ) — ( 1,141,500 ) Repayments of notes and bonds payable ( 25,473 ) ( 19,143 ) ( 20,042 ) Redemption of notes and bonds payable — — ( 2,184 ) Dividends paid ( 457,853 ) ( 472,242 ) ( 283,713 ) Special dividend paid in relation to the Merger — — ( 1,123,648 ) Net proceeds from issuance of common stock 104 130 22,902 Common stock redemptions ( 8,881 ) ( 2,298 ) ( 3,192 ) Common stock repurchases ( 510,423 ) — — Distributions to non-controlling interest holders ( 5,473 ) ( 5,123 ) ( 1,695 ) Redemption of non-controlling interest ( 744 ) — — Debt issuance and assumption costs ( 563 ) ( 529 ) ( 12,753 ) Payments made on finance leases ( 17 ) ( 17 ) — Net cash used in financing activities ( 1,359,323 ) ( 884,222 ) ( 1,859,325 ) Increase (decrease) in cash and cash equivalents 43,217 ( 35,262 ) 47,786 Cash and cash equivalents cash at beginning of period 25,699 60,961 13,175 Cash and cash equivalents at end of period $ 68,916 $ 25,699 $ 60,961 See accompanying notes. Healthcare Realty Trust Incorporated Consolidated Statements of Cash Flows , cont. Amounts in thousands YEAR ENDED DECEMBER 31, Supplemental Cash Flow Information 2024 2023 2022 Interest paid $ 202,503 $ 216,033 $ 112,692 Mortgage notes payable assumed in connection with acquisition of real estate, net $ — $ 5,284 $ — Invoices accrued for construction, tenant improvements and other capitalized costs $ 39,969 $ 31,469 $ 48,292 Capitalized interest $ 4,295 $ 2,961 $ 1,410 Mortgage notes receivable taken in connection with sale of real estate $ 9,630 $ 51,000 $ — Non-controlling interest in sale of real estate $ 11,185 $ — $ — Contribution of real estate properties into unconsolidated joint venture $ 172,666 $ — $ — Real estate notes receivable assumed in Merger (adjusted to fair value) $ — $ — $ 74,819 Unsecured credit facility and term loans assumed in Merger (adjusted to fair value) $ — $ — $ 1,758,650 Senior notes assumed in Merger (adjusted to fair value) $ — $ — $ 2,232,650 Consideration transferred in relation to the Merger $ — $ — $ 5,576,463 See accompanying notes. 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies 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 of America. Except as otherwise provided in the Notes to the Company’s Consolidated Financial Statements, references herein to the "Company" mean Healthcare Realty Trust Incorporated and its consolidated subsidiaries, including Healthcare Realty Holdings, L.P. (formerly known as Healthcare Trust of America Holdings, LP) (the "OP"), after giving effect to the Merger discussed in more detail in Note 2 below. As of December 31, 2024, the Company had gross real estate investments of approximately $ 11.8 billion in 589 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 real estate properties are located in 33 states and total approximately 34.2 million square feet. In addition, as of December 31, 2024, the Company had a weighted average ownership interest of approximately 31 % in 63 real estate properties held in unconsolidated joint ventures. See Note 5 below for more details regarding the Company's joint ventures. Square footage and property count disclosures in these Notes to the Company's Consolidated Financial Statements are unaudited. Principles of Consolidation The Company’s Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures and partnerships where the Company controls the operating activities. GAAP requires the Company 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”). ASC Topic 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary, with any minority interests reflected as non-controlling interests or redeemable non-controlling interests in the accompanying Consolidated Financial Statements. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk, the disposition of all or a portion of an interest held by the primary beneficiary, or changes in facts and circumstances that impact the power to direct activities of the VIE that most significantly impacts economic performance. The Company performs this analysis on an ongoing basis. For property holding entities not determined to be VIEs, the Company consolidates such entities in which it owns 100 % of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For entities in which the Company owns less than 100 % of the equity interest, the Company consolidates the entity if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements. The OP is 98.7 % 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 Consolidated Balance Sheets. Further, a portion of the earnings and losses of the OP are allocated to non-controlling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of the common stock issued and the carrying value of the OP Units converted to common stock is recorded as a component of equity. As of December 31, 2024, there were approximately 4.6 million, or 1.3 %, of OP Units issued and outstanding held by non-controlling interest holders. Additionally, the Company i s the primary beneficiary of this VIE. Accordingly, the Company consolidates its interests in the OP. 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. As of December 31, 2024, the Company had three 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 as of December 31, 2024 and 2023: DECEMBER 31, (dollars in thousands) 2024 2023 Assets: Total real estate investments, net $ 103,933 $ 85,752 Cash and cash equivalents 159 2,144 Other assets, net 4,053 2,704 Total assets $ 108,145 $ 90,600 Liabilities: Notes and bonds payable $ 60,170 $ — Accounts payable and accrued liabilities 2,786 17,835 Other liabilities 45 — Total liabilities $ 63,001 $ 17,835 As of December 31, 2024, the Company had five unconsolidated VIEs consisting of four notes receivables and one joint venture. The Company does not have the power or economic interests to direct the activities of these VIEs on a stand-alone basis, and therefore it was determined that the Company was not the primary beneficiary. As a result , the Company accounts for the four notes receivables as amortized cost and a joint venture arrangement under the equity method. See below for additional information regarding the Company's unconsolidated VIEs: (dollars in thousands) ORIGINATION DATE LOCATION SOURCE CARRYING AMOUNT MAXIMUM EXPOSURE TO LOSS 2021 Houston, TX 1 Note receivable $ 14,900 $ 14,900 2021 Charlotte, NC 1 Note receivable 7,441 7,441 2022 Texas 2 Equity method 56,586 56,586 2024 Texas 3 Note receivable 9,689 16,729 2024 Texas 3 Note receivable 1 4,500 1 Assumed mortgage note receivable in connection with the Merger. 2 Includes investments in seven properties. 3 Company provided seller financing and entered into a mortgage loan and a mezzanine loan in connection with a property disposition. As of December 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 5 for more details regarding the Company's unconsolidated joint ventures. Use of Estimates in the Consolidated Financial Statements Preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates and assumptions. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, impairments, collectability of tenant receivables, and fair value measurements, as applicable. 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Segment Reporting The Company owns, leases, acquires, manages, finances, develops and redevelops outpatient and other healthcare-related properties. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making and discloses its operating results in a single reportable segment. The Company's chief operating decision makers (“CODM”), represented by the Company's Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer, review financial information and assess the consolidated operations of the Company in order to make strategic decisions such as allocation of capital expenditures and other significant expenses. See Note 18 for additional information on segment reporting. Real Estate Properties Real estate properties are recorded at cost or at fair value if acquired in a transaction that is a business combination under ASC Topic 805, Business Combinations . Cost or fair value at the time of acquisition is allocated among land, buildings, tenant improvements, lease and other intangibles, and personal property as applicable. During 2024 and 2023, the Company eliminated against accumulated depreciation approximately $ 112.3 million and $ 51.7 million , respectively, of fully amortized real estate intangibles that were initially recorded as a component of certain real estate acquisitions. During 2024 approximately $ 3.0 million of fully depreciated tenant and capital improvements that were no longer in service were eliminated against accumulated depreciation. There were no such transactions during 2023. Depreciation expense of real estate properties for the three years ended December 31, 2024, 2023 and 2022 was $ 507.1 million, $ 518.6 million and $ 320.8 million, respectively. Depreciation and amortization of real estate assets in place as of December 31, 2024, is provided for on a straight-line basis over the asset’s estimated useful life: Land improvements 2.0 to 39.0 years Buildings and improvements 3.3 to 49.0 years Lease intangibles (including ground lease intangibles) 1.0 to 99.0 years Personal property 3.0 to 10.0 years The Company capitalizes direct costs, including costs such as construction costs and professional services, and indirect costs, including capitalized interest and overhead costs, associated with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their intended use. Capitalized interest cost is calculated using the weighted average interest rate of the Company's unsecured debt or the interest rate on project specific debt, if applicable. The Company continues to capitalize interest on the unoccupied portion of the properties in stabilization for up to one year after the buildings have been placed into service, at which time the capitalization of interest must cease. Asset Impairment The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable. Indicators of impairment may include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its useful life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its tenants. In addition, the Company reviews for possible impairment, those assets subject to purchase options and those impacted by casualty losses, such as tornadoes and hurricanes. A property value is considered impaired only if management's estimate of current and projected (undiscounted and unleveraged) operating cash flows of the property is less than the net carrying value of the property. These estimates of future cash flows include only those that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the property. These estimates, including the useful life determination which can be affected by any potential sale of the property, are based on management's assumptions about its use of the property. Therefore, significant judgment is involved in estimating the current and projected cash flows. If management determines that the carrying value of the Company’s assets may not be fully recoverable 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property. See Note 7 for additional information on impairment. Acquisitions of Real Estate Properties with In-Place Leases The Company's acquisitions of real estate properties typically do not meet the definition of a business and are accounted for as asset acquisitions. Acquisitions of real estate properties with in-place leases are accounted for at relative fair value. When a building with in-place leases is acquired, the cost of the acquisition must be allocated between the tangible real estate assets "as-if-vacant" and the intangible real estate assets related to in-place leases based on their estimated fair values. Land fair value is estimated by using an assessment of comparable transactions and other relevant data. The Company considers whether any of the in-place lease rental rates are above- or below-market. An asset (if the actual rental rate is above-market) or a liability (if the actual rental rate is below-market) is calculated and recorded in an amount equal to the present value of the future cash flows that represent the difference between the actual lease rate and the estimated market rate. If an in-place lease is identified as a below-market rental rate, the Company would also evaluate any renewal options associated with that lease to determine if the intangible should include those periods. The values related to above- or below-market in-place lease intangibles are amortized over the remaining term of the leases upon acquisition to rental income where the Company is the lessor and to property operating expense where the Company is the lessee. The Company also estimates an absorption period, which can vary by property, assuming the building is vacant and must be leased up to the actual level of occupancy when acquired. During that absorption period, the owner would incur direct costs, such as tenant improvements, and would suffer lost rental income. Likewise, the owner would have acquired a measurable asset in that, assuming the building was vacant, certain fixed costs would be avoided because the actual in-place lessees would reimburse a certain portion of fixed costs through expense reimbursements during the absorption period. These assets (above- or below-market lease, tenant improvement, leasing costs avoided, rental income lost, and expenses recovered through in-place lessee reimbursements) are estimated and recorded in amounts equal to the present value of estimated future cash flows. The actual purchase price is allocated based on the various relative asset fair values described above. The building and tenant improvement components of the purchase price are depreciated over the estimated useful life of the building or the weighted average remaining term of the in-place leases. The at-market, in-place lease intangibles are amortized to depreciation and amortization expense over the weighted average remaining term of the leases, and customer relationship assets are amortized to depreciation and amortization expense over terms applicable to each acquisition. Any goodwill recorded through a business combination would be reviewed for impairment at least annually and is not amortized. See Note 9 for more details on the Company’s intangible assets. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy: • Level 1 – quoted prices for identical instruments in active markets; • Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. • Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Executed purchase and sale agreements, which are binding agreements, are categorized as level one inputs. Fair Value of Derivative Financial Instruments Derivative financial instruments are recorded at fair value on the Company's Consolidated Balance Sheets as other assets or other liabilities. The valuation of derivative instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. Fair values of derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of the Company's forward starting interest rate swap contracts are estimated by pricing models that consider foreign trade rates and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. For derivatives designated in qualifying cash flow hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss). Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the underlying hedged transaction is recognized in earnings. As of December 31, 2024 and 2023, the Company had $ 1.2 million and $ 10.7 million recorded in accumulated other comprehensive loss, respectively, related to forward starting interest rate swaps entered into and settled during 2015 and 2020 and a hedge of the Company's variable rate debt. See Note 11 for additional information. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash includes cash held in escrow in connection with proceeds from the sales of certain real estate properties. The Company did not have any restricted cash for the years ended December 31, 2024 or 2023. Cash and cash equivalents are held in bank accounts and overnight investments. The Company maintains its bank deposits with large financial institutions in amounts that often exceed federally-insured limits. The Company has not experienced any losses in such accounts. Goodwill and Other Intangible Assets Goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present. Identifiable intangible assets of the Company are comprised of enterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and debt issuance costs. In-place lease and customer relationship intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Debt issuance costs are amortized over the term of the debt instrument on the effective interest method or the straight-line method when the effective interest method is not applicable. 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Goodwill is not amortized but is typically evaluated for impairment annually as of December 31 or whenever events or changes in circumstances indicate that an impairment may exist. However, 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 performed a quantitative assessment, and the fair value of the Company’s single reporting unit was estimated using a combination of discounted cash flow models and earnings multiples techniques. The determination of fair value using the discounted cash flow model technique requires the use of estimates and assumptions related to revenue and expense growth rates, capitalization rates, discount rates, capital expenditures and working capital levels. The determination of fair value using the earnings multiples technique requires assumptions to be made in relation to maintainable earnings and market multiples. These forecasts and assumptions are highly subjective, and while we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. The Company determined that the carrying value exceeded estimated fair value, and therefore 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 Consolidated Statements of Operations. See Note 9 for more detail on the Company’s intangible assets. Contingent Liabilities From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages. The Company continually monitors any matters that may present a contingent liability, and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are first recorded when a loss is determined to be both probable and can be reasonably estimated. Changes in estimates regarding the exposure to a contingent loss are reflected as adjustments to the related liability in the periods when they occur. Because of uncertainties inherent in the estimation of contingent liabilities, it is possible that the Company’s provision for contingent losses could change materially in the near term. To the extent that any significant losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements. Share-Based Compensation The Company has various employee and director share-based awards outstanding. These awards include non-vested common stock or other stock-based awards, including units in the OP, pursuant to the Company's Amended and Restated 2006 Incentive Plan, dated April 29, 2021 ( the "Incentive Plan"). The Company recognizes share-based payments to employees and directors in the Consolidated Statements of Operations on a straight-line basis over the requisite service period based on the fair value of the award on the measurement date. The Company recognizes the impact of forfeitures as they occur. See Note 13 for details on the Company’s share-based awards. Accumulated Other Comprehensive (Loss) Income Certain items must be included in comprehensive (loss) income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, changes in the fair value of derivative instruments and unrealized gains or losses on available-for-sale securities. As of December 31, 2024, the Company’s accumulated other comprehensive (loss) income consists of the loss for changes in the fair value of active derivatives designated as cash flow hedges and the loss on the unamortized settlement of forward starting swaps and treasury hedges. See Note 11 for more details on the Company's derivative financial instruments. Revenue from Contracts with Customers (Topic 606) The Company recognizes certain revenue under the core principle of Topic 606. This 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. To achieve the core principle, the Company applies the five-step model specified in the guidance. 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Revenue that is accounted for under Topic 606 is segregated on the Company’s Consolidated Statements of Operations in the Other operating line item. This line item includes parking income, management fee income and other miscellaneous income. Below is a detail of the amounts by category: YEAR ENDED DECEMBER 31, in thousands 2024 2023 2022 Type of Revenue Parking income $ 9,329 $ 9,903 $ 8,513 Management fee income/other 1 9,828 7,548 5,193 $ 19,157 $ 17,451 $ 13,706 1 Includes the recovery of certain expenses under the financing receivable as outlined in the management agreement . The Company’s two major types of revenue that are accounted for under Topic 606 are all accounted for as the performance obligation is satisfied. 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. In most cases, the revenue is due and payable on a monthly basis. The Company had a receivable balance of $ 1.9 million, $ 1.9 million and $ 1.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. Management fee income includes property management services provided to third parties and certain of the properties in the Company's unconsolidated joint ventures and is generally calculated, accrued and billed monthly based on a percentage of cash collections of tenant receivables for the month or a stated amount per square foot. Management fee income also includes amounts paid to the Company for its asset management services for certain of its unconsolidated joint ventures. Internal management fee income, where the Company manages its owned properties, is eliminated in consolidation. Rental Income Rental income related to non-cancelable operating leases is recognized as earned over the life of the lease agreements on a straight-line basis. The Company's lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index ("CPI"). Rental income from properties under multi-tenant office lease arrangements and rental income from properties with single-tenant lease arrangements are included in rental income on the Company's Consolidated Statements of Operations. For lessors, the standard requires a lessor to classify leases as either sales-type, direct-financing or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease. Nonlease components, such as common area maintenance, are generally accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. The combined component is accounted for under Accounting Standards Codification, Topic 842. The components of rental income are as follows: YEAR ENDED DECEMBER 31, in thousands 2024 2023 2022 Property operating income $ 1,202,780 $ 1,270,508 $ 883,953 Straight-line rent 29,996 38,676 23,498 Rental income $ 1,232,776 $ 1,309,184 $ 907,451 Federal Income Taxes The Company believes it has qualified to be taxed as a REIT and intends at all times to continue to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code. The Company must distribute at least 90 % per annum of its real estate investment trust taxable income to its stockholders and meet other requirements to continue to qualify as a real estate investment trust. As a REIT, the Company is generally not subject to federal income tax on net income it distributes to its stockholders, but may be subject to certain state and local taxes and fees. See Note 16 for further discussion. 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. If the Company fails to qualify as a REIT in any taxable year, it will be subject to U.S. federal income taxes on its taxable income and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which the qualification is lost unless the IRS grants it relief under certain statutory provisions. Such an event could have a material adverse effect on its business, financial condition, results of operations and net cash available for dividend distributions to its stockholders. The Company conducts substantially all of its operations through the OP. As a partnership, the OP generally is not liable for federal income taxes. The income and loss from the operations of the OP is included in the tax returns of its partners, including the Company, who are responsible for reporting their allocable share of the partnership income and loss. Accordingly, no provision for income tax has been made in the accompanying consolidated financial statements. The Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and administrative expenses. No such amounts were recognized during the three years ended December 31, 2024. Federal tax returns for the years 2021, 2022, 2023 and 2024 are currently subject to examination by taxing authorities. State Income Taxes The Company must pay certain state income taxes and the provisions for such taxes are generally included in general and administrative expenses on the Company’s Consolidated Statements of Operations. See Note 16 for further discussion. Sales and Use Taxes The Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in rental income in the Company’s Consolidated Statements of Operations. Assets Held for Sale Long-lived assets held for sale are reported at the lower of their carrying amount or their fair value less estimated cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as held for sale. Losses resulting from the sale of such properties are characterized as impairment losses in the Consolidated Statements of Operations. See Note 6 for more detail on assets held for sale. Earnings per Share The Company uses the two-class method of computing net earnings per common share. Earnings per common share is calculated by considering share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities. Undistributed earnings (excess net income over dividend payments) are allocated on a pro rata basis to common shareholders and restricted shareholders. Undistributed losses (dividends in excess of net income) do not get allocated to restricted stockholders as they do not have the contractual obligation to share in losses. The amount of undistributed losses that applies to the restricted stockholders is allocated to the common stockholders. Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of the outstanding stock options from the Legacy HR Employee Stock Purchase Plan using the treasury stock method and the average stock price during the period. Additionally, net income (loss) allocated to OP units has been included in the numerator and common stock related to redeemable OP units have been included in the denominator for the purpose of computing diluted earnings per share. See Note 14 for the calculations of earnings per share. 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Redeemable Non-Controlling Interests The Company accounts for redeemable equity securities in accordance with Accounting Standards Update ("ASU") 2009-04 Liabilities (Topic 480): Accounting for Redeemable Equity Instruments, which requires that equity securities contingently redeemable at the option of the holder, not solely within our control, be classified outside permanent stockholders’ equity. The Company classifies redeemable equity securities as redeemable non-controlling interests in the accompanying Consolidated Balance Sheet. Accordingly, the Company records the carrying amount at the greater of the initial carrying amount (increased or decreased for the non-controlling interest’s share of net income or loss and distributions) or the redemption value. We measure the redemption value and record an adjustment to the carrying value of the equity securities as a component of redeemable non-controlling interest. As of December 31, 2024, the Company had redeemable non-controlling interests of $ 4.8 million. Investments in Leases - Financing Receivables, Net In accordance with ASC Topic 842: Leases, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale-leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option. As a result, the Company does not recognize the underlying real estate asset but instead recognizes a financial asset in accordance with ASC Topic 310: Receivables. See below for additional information regarding the Company's financing receivables as of December 31, 2024. (dollars in thousands) ORIGINATION DATE LOCATION INTEREST RATE CARRYING VALUE as of DECEMBER 31, 2024 CARRYING VALUE as of DECEMBER 31, 2023 May 2021 Poway, CA 5.71 % $ 116,304 $ 115,239 November 2021 Columbus, OH 6.48 % 7,367 7,363 $ 123,671 $ 122,602 Real Estate Notes Receivable Real estate notes receivable consists of mezzanine and other real estate loans, which are generally collateralized by a pledge of the borrower’s ownership interest in the respective real estate owner, a mortgage or deed of trust, and/or corporate guarantees. Real estate notes receivable are intended to be held-to-maturity and are recorded at amortized cost, net of unamortized loan origination costs and fees and allowance for credit losses. As of December 31, 2024, real estate notes receivable, net, which are included in Other assets, net on the Company's Consolidated Balance Sheets totaled $ 127.6 million. (dollars in thousands) ORIGINATION MATURITY STATED INTEREST RATE MAXIMUM LOAN COMMITMENT OUTSTANDING as of DECEMBER 31, 2024 INTEREST RECEIVABLE (OTHER ASSETS) ALLOWANCE FOR CREDIT LOSSES FAIR VALUE DISCOUNT AND FEES CARRYING VALUE as of DECEMBER 31, 2024 Mezzanine loans Arizona 12/21/2023 12/20/2026 9.00 % $ 6,000 $ 6,000 $ 38 $ — $ — $ 6,038 Texas 1 10/03/2024 10/02/2029 11.00 % 4,500 1 — — — 1 10,500 6,001 38 — — 6,039 Mortgage loans Texas 2 6/30/2021 12/02/2024 7.00 % 31,150 31,150 551 ( 16,801 ) — 14,900 North Carolina 3 12/22/2021 12/22/2024 8.00 % 6,000 6,000 1,441 — — 7,441 Florida 5/17/2022 2/27/2026 6.00 % 65,000 37,661 195 — ( 24 ) 37,832 California 3/30/2023 3/29/2026 6.00 % 45,000 45,000 185 — — 45,185 Florida 12/28/2023 12/28/2026 9.00 % 7,700 6,538 — — — 6,538 Texas 1 10/03/2024 10/02/2029 7.50 % 16,729 9,629 60 — — 9,689 171,579 135,978 2,432 ( 16,801 ) ( 24 ) 121,585 $ 182,079 $ 141,979 $ 2,470 $ ( 16,801 ) $ ( 24 ) $ 127,624 1 In 2024, the Company provided seller financing of $ 9.6 million in connection with the sale of a real estate property in Houston, TX. The Company has also committed mezzanine loan funding of up to $ 4.5 million in connection with this sale. 2 In 2024, the Company determined that an allowance for credit loss of $ 16.8 million was needed on this mortgage loan, which included approximately $ 16.3 million of principal and approximately $ 0.5 million of interest. In January 2025, the underlying collateral for this loan was sold and the Company received $ 14.9 million towards the principal balance of this loan. 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 3 Outstanding principal and interest due upon maturity. As of the date of these financial statements, the outstanding principal and interest on this loan has not been repaid. The Company has evaluated the collectibility of the amount outstanding and has determined that the underlying collateral has a value that exceeds the carrying value of as of December 31, 2024, and is working with borrower on satisfaction of the mortgage loan. Allowance for Credit Losses Pursuant to ASC Topic 326, Financial Instruments - Credit Losses, the Company adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under ASC Topic 326. The Company utilizes a probability of default method approach for estimating current expected credit losses and evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis to determine whether any updates to the future expected losses recognized upon inception are necessary. The Company’s evaluation considers industry and economic conditions, credit enhancements, liquidity, and other factors. 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. In 2023, the Company determined that the risk of credit loss on two of its mezzanine loans was no longer remote and recorded a credit loss reserve of $ 5.2 million. In 2024, the Company determined that an additional allowance of $ 46.8 million was needed on these two mezzanine loans to cover the entire carrying amount for these loans. In fourth quarter of 2024, the underlying project was sold and the Company received $ 4.0 million as consideration for its mezzanine loan interests. Additionally, in 2024 the Company determined the risk of credit loss on one of its mortgage notes receivable was no longer remote and recorded a credit loss reserve of $ 16.8 million, including $ 0.5 million of accrued interest. The Company utilized the level 1 fair value hierarchy, which included an executed purchase and sale agreement on the underlying collateral of the mortgage loan, to determine the amount of credit loss reserve. The following table summarizes the Company's allowance for credit losses on real estate notes receivable: Dollars in thousands TWELVE MONTHS ENDED DECEMBER 31, 2024 TWELVE MONTHS ENDED DECEMBER 31, 2023 Allowance for credit losses, beginning of period $ 5,196 $ — Credit loss reserves 1 59,563 5,196 Recoveries 1 ( 4,000 ) — Write-off 1 ( 43,958 ) — Allowance for credit losses, end of period $ 16,801 $ 5,196 1. On June 24, 2024, the Company's two mezzanine loans in Texas with a total principal balance of $ 54.1 million matured. On July 15, 2024, the senior lender on the construction loan associated with the underlying project provided notice of foreclosure proceedings to the borrower. In 2024, the Company recorded an allowance for credit loss of $ 46.8 million to cover the entire carrying amount for these loans. In the fourth quarter of 2024, the capital for the underlying project was restructured and the Company received $ 4.0 million as consideration for its interest. As of December 31, 2024, the Company no longer has a mezzanine position in connection with these projects. Interest Income Income from Lease Finance Receivables The Company recognized the related income from two financing receivables totaling $ 8.4 million, $ 8.3 million and $ 8.1 million, respectively, for the years ended December 31, 2024, 2023 and 2022, 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. 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Acquisition costs incurred in connection with entering into the financing receivable are treated as loan origination fees. These costs are classified with the financing receivable and are included in the balance of the net investment. Amortization of these amounts will be recognized as a reduction to Interest income over the life of the lease. Income from Real Estate Notes Receivable For the years ended December 31, 2024, 2023 and 2022, the Company recognized interest income of $ 8.0 million, $ 8.8 million and $ 3.4 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. In 2023, the Company placed two of its real estate notes receivable on non-accrual status. In 2024, the Company placed one of its real estate notes receivable with a principal balance, net of credit loss, of $ 14.9 million on non-accrual status. Accordingly, the Company did not recognize any interest income for these loans subsequent to the transition to non-accrual status. 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 CODM and included within each reported measure of segment profit or loss; (ii) a requirement to 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 Company adopted this ASU, effective for the year ended December 31, 2024. The adoption has no impact on the Company’s financial position, results of operations or cash flows, but has resulted in new footnote disclosure. See Note 18 for details on Segment Reporting. On November 4, 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, that will require entities to provide more detailed information in the notes to the financial statements related to certain expense captions on the face of the income statement. The ASU aims to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the income statement. The new standard does not change the requirements for the presentation of expenses on the face of the income statement. Under this ASU, entities are required to disaggregate, in a tabular format, expense captions presented on the face of the income statement — excluding earnings or losses from equity method investments — if they include any of the following expense categories: purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation or depletion. For any remaining items within each relevant expense caption, entities must provide a qualitative description of the nature of those expenses. The new ASU is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. 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 ended December 31, 2027. Note 2. 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 (now known as HRTI, LLC) (“Legacy HR”), Healthcare Trust of America, Inc. (now known as Healthcare Realty Trust Incorporated) (“Legacy HTA”), the OP, and HR Acquisition 2, LLC (“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 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 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 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) 228,520,990 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) $ 24.37 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) 7,406 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. 69 NOTES TO THE 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) ASSETS 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 LIABILITIES 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 expected 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 was 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 was 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 was deductible for tax purposes. During 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 and the Company recorded a full impairment of its goodwill, which was recorded as a non-cash charge in “Impairment of goodwill” in the Consolidated Statements of Operations. 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Merger-related Costs The Company incurred Merger-related costs of $( 2.0 ) million and $ 103.4 million, respectively, for the years ended December 31, 2023 and 2022, which were included within Merger-related costs in results of operations. The Merger-related costs primarily consisted of legal, consulting, severance, and banking services and for the year ended December 31, 2023, including a refund of $ 17.8 million for transfer taxes paid during the year ended December 31, 2023. No Merger-related costs were incurred for the year ended December 31, 2024. 3. Property Investments The Company invests in healthcare-related properties located throughout the United States. The Company provides management, leasing, development and redevelopment services, and capital for the construction of new facilities as well as for the acquisition of existing properties. The following table summarizes the Company’s consolidated investments at December 31, 2024. Dollars in thousands NUMBER OF PROPERTIES LAND BUILDINGS AND IMPROVEMENTS LEASE INTANGIBLES PERSONAL PROPERTY TOTAL ACCUMULATED DEPRECIATION Dallas, TX 39 $ 73,030 $ 864,625 $ 40,948 $ 547 $ 979,150 $ ( 245,493 ) Seattle, WA 24 45,272 547,743 5,178 679 598,872 ( 184,304 ) Charlotte, NC 31 32,980 462,173 25,947 133 521,233 ( 134,075 ) Houston, TX 26 61,201 510,255 46,286 46 617,788 ( 106,416 ) Denver, CO 26 55,309 390,453 32,602 605 478,969 ( 106,457 ) Atlanta, GA 24 39,895 365,592 20,769 102 426,358 ( 86,861 ) Boston, MA 16 120,818 279,881 39,509 14 440,222 ( 60,469 ) Los Angeles, CA 15 49,770 265,617 3,486 401 319,274 ( 131,477 ) Phoenix, AZ 35 29,177 492,016 31,915 427 553,535 ( 84,116 ) Raleigh, NC 25 57,906 366,150 29,224 13 453,293 ( 55,468 ) Nashville, TN 11 38,057 339,417 9,840 4,422 391,736 ( 128,686 ) Miami, FL 14 22,890 265,974 17,785 176 306,825 ( 75,640 ) Tampa, FL 18 30,586 313,381 26,109 33 370,109 ( 53,946 ) Indianapolis, IN 39 50,874 274,524 23,329 13 348,740 ( 50,188 ) New York, NY 14 63,377 163,038 25,963 — 252,378 ( 26,533 ) Austin, TX 11 21,601 217,862 18,568 37 258,068 ( 46,372 ) Washington, DC 9 5,265 220,493 3,799 48 229,605 ( 59,598 ) Chicago, IL 6 13,804 217,359 7,626 81 238,870 ( 45,205 ) San Francisco, CA 6 49,181 181,860 9,915 52 241,008 ( 59,302 ) Orlando, FL 7 9,793 170,755 16,815 1 197,364 ( 29,866 ) Other (45 markets) 190 272,682 2,797,898 229,254 2,079 3,301,913 ( 713,184 ) 586 1,143,468 9,707,066 664,867 9,909 11,525,310 ( 2,483,656 ) Investment in financing receivables, net 1 — — — 123,671 — Financing lease right-of-use assets 1 — — — — 77,343 — Construction in progress 1 — — — — 31,978 — Land held for development — — — — — 52,408 — Total real estate investments 589 $ 1,143,468 $ 9,707,066 $ 664,867 $ 9,909 $ 11,810,710 $ ( 2,483,656 ) 4. Leases Lessor Accounting Under ASC 842 The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property. The Company's leases typically have escalators that are either based on a stated percentage or an index such as the CPI. In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the years ended December 31, 2024, 2023 and 2022 was $ 1.2 billion, $ 1.3 billion and $ 907.5 million, respectively. Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2024 were as follows: In thousands 2025 $ 816,029 2026 744,399 2027 634,752 2028 522,433 2029 418,455 2030 and thereafter 1,544,358 $ 4,680,426 Revenue Concentrations The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2024, 2023 and 2022. Purchase Option Provisions Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had gross investments of approximately $ 111.1 million in six real estate properties as of December 31, 2024 that were subject to purchase options that were exercisable. Lessee Accounting Under ASC 842 As of December 31, 2024, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. Contracts evaluated and treated as leases are those that convey the right to control the use of identified assets for a period of time in exchange for consideration. ASC 842 requires the recording of these leases based on the aggregate future cash flows, discounted utilizing the implicit rate in the lease, or, if not readily determinable, based upon the lessee's incremental borrowing rate, to which the Company utilizes market inputs that are both similar to the Company's credit profile and corresponding term of the leases. As of December 31, 2024, the Company had 215 properties totaling 16.1 million square feet that were held under ground leases. Some of the ground leases include fixed rent renewal terms and others have market rent renewal terms. The ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on the CPI. The Company had 73 prepaid ground leases as of December 31, 2024. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $ 1.4 million, $ 1.3 million and $ 1.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. The Company’s future lease payments (primarily for its 142 non-prepaid ground leases) as of December 31, 2024 were as follows: In thousands OPERATING FINANCING 2025 $ 12,410 $ 2,070 2026 12,540 2,106 2027 12,743 2,145 2028 12,879 2,177 2029 12,944 2,209 2030 and thereafter 657,744 383,172 Total undiscounted lease payments $ 721,260 $ 393,879 Discount ( 496,761 ) ( 321,533 ) Lease liabilities $ 224,499 $ 72,346 The following table provides details of the Company's total lease expense for the years ended December 31, 2024 and 2023: YEAR ENDED DECEMBER 31 In thousands 2024 2023 Operating lease cost Operating lease expense $ 18,076 $ 20,623 Variable lease expense 4,939 8,979 Finance lease cost Amortization of right-of-use assets 1,533 1,564 Interest on lease liabilities 3,727 3,718 Total lease expense $ 28,275 $ 34,884 Other information Operating cash flows outflows related to operating leases $ 15,545 $ 19,222 Operating cash flows outflows related to financing leases $ 2,107 $ 2,122 Financing cash flows outflows related to financing leases $ 17 $ 17 Right-of-use assets obtained in exchange for new operating lease liabilities $ 3,855 $ 1,758 Weighted-average remaining lease term (excluding renewal options) - operating leases 44.1 45.8 Weighted-average remaining lease term (excluding renewal options) - finance leases 57.8 57.9 Weighted-average discount rate - operating leases 5.7 % 5.7 % Weighted-average discount rate - finance leases 5.0 % 5.0 % 5. Acquisitions, Dispositions and Mortgage Repayments 2024 Acquisition Activity The Company had no real estate acquisition activity for the year ended December 31, 2024. Unconsolidated Joint Ventures As of December 31, 2024, the Company had a weighted average ownership interest of approximately 31 % in 63 real estate properties held in unconsolidated joint ventures. The Company recognizes distributions from unconsolidated joint ventures utilizing the nature of distribution approach and classifies the distributions based on the nature of the underlying activity that generated the distribution. The distributions from unconsolidated joint ventures for the years ended December 31, 2024 and 2023 were classified as operating activities. 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. The Company's investment in and loss recognized for the years ended December 31, 2024 and 2023 related to its unconsolidated joint ventures accounted for under the equity method are shown in the table below: DECEMBER 31, Dollars in thousands 2024 2023 Investments in unconsolidated joint ventures, beginning of period $ 311,511 $ 327,248 New investments during the period 172,244 3,824 Equity loss recognized during the period ( 135 ) ( 1,682 ) Owner distributions ( 10,498 ) ( 17,879 ) Investments in unconsolidated joint ventures, end of period $ 473,122 $ 311,511 2023 Acquisition Activity The following table details the Company's real estate acquisition activity for the year ended December 31, 2023: Dollars in thousands DATE ACQUIRED PURCHASE PRICE MORTGAGE NOTES PAYABLE, NET CASH CONSIDERATION 1 REAL 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. The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the real estate acquisitions for 2023 as of the acquisition date: ESTIMATED FAIR VALUE in millions ESTIMATED USEFUL LIFE in years Building $ 27.5 17.0 - 30.0 Tenant Improvements 3.4 5.1 - 5.9 Land 5.5 0 Land Improvements 1.1 6.0 - 10.0 Intangibles At-market lease intangibles 4.5 5.1 - 5.9 Above-market lease intangibles (lessor) 0.2 1.8 - 4.9 Below-market lease intangibles (lessor) ( 0.2 ) 6.4 - 13.9 Mortgage notes payable assumed, including fair value adjustments ( 5.3 ) Other assets acquired 0.1 Accounts payable, accrued liabilities and other liabilities assumed ( 0.3 ) Total cash paid $ 36.5 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 2024 Real Estate Asset Dispositions The following table details the Company's dispositions and joint venture dispositions for the year ended December 31, 2024: Dollars in thousands DATE DISPOSED SALE PRICE CLOSING COSTS & CREDITS COMPANY-FINANCED MORTGAGE NOTES NET CONSIDERATION NET REAL ESTATE INVESTMENT OTHER GAIN/(IMPAIR-MENT) SQUARE FOOTAGE Albany, NY 4/1/24 $ 725 $ ( 60 ) $ — $ 665 $ 765 $ ( 82 ) $ ( 18 ) 14,800 San Angelo, TX 4/12/24 5,085 ( 128 ) — 4,957 4,917 66 ( 26 ) 24,580 Houston, TX 5/20/24 250 ( 9 ) — 241 713 ( 520 ) 48 37,040 Multiple 1 5/23/24 284,348 ( 14,270 ) — 270,078 254,176 25,836 ( 9,934 ) 556,274 Denver, CO 5/30/24 19,000 ( 628 ) — 18,372 18,522 165 ( 315 ) 37,130 Austin, TX 1 6/6/24 54,858 ( 1,575 ) — 53,283 27,964 623 24,696 129,879 Minneapolis, MN 6/21/24 1,082 ( 144 ) — 938 303 43 592 50,291 Raleigh, NC 2 6/28/24 99,518 ( 2,835 ) — 96,683 86,810 906 8,967 309,424 Albany, NY 8/2/24 6,300 ( 847 ) — 5,453 5,528 486 ( 561 ) 180,000 Charlotte, NC 8/6/24 26,670 ( 395 ) — 26,275 14,853 613 10,809 90,633 Charleston, SC 8/13/24 14,500 ( 589 ) — 13,911 11,488 1 2,422 46,711 Multiple 1 8/23/24 118,000 ( 8,615 ) — 109,385 113,956 548 ( 5,119 ) 266,782 Multiple 3 8/27/24 177,250 ( 7,085 ) — 170,165 169,545 5,363 ( 4,743 ) 473,003 Austin, TX 9/13/24 42,281 ( 1,257 ) — 41,024 14,561 425 26,038 76,246 Raleigh, NC 9/26/24 1,813 ( 27 ) — 1,786 1,694 50 42 5,934 Houston, TX 4 10/3/24 12,000 ( 1,001 ) ( 9,630 ) 1,369 11,266 295 ( 563 ) 140,012 Greensboro, NC 10/9/24 12,514 ( 21 ) — 12,493 10,152 296 2,045 35,373 Des Moines, IA 10/15/24 31,750 ( 1,320 ) — 30,430 13,869 1,662 14,899 95,486 Albany, NY 10/15/24 9,500 ( 521 ) — 8,979 7,823 1,193 ( 37 ) 80,676 Salt Lake City, UT 5 10/24/24 30,712 ( 8,962 ) — 21,750 26,899 ( 9,406 ) 4,257 112,192 Miami, FL 10/25/24 36,789 ( 706 ) — 36,083 35,925 ( 209 ) 367 102,186 Miami, FL 6 10/25/24 17,767 ( 718 ) — 17,049 14,650 ( 210 ) 2,609 60,761 Cleveland, OH 12/10/24 1,000 ( 157 ) — 843 1,454 57 ( 668 ) 31,152 Boise, ID 7 12/12/24 18,350 ( 2,003 ) — 16,347 17,562 345 ( 1,560 ) 83,078 Multiple 1 12/18/24 310,250 ( 6,767 ) — 303,483 321,437 6,616 ( 24,570 ) 766,622 Atlanta, GA 12/20/24 15,900 ( 1,318 ) — 14,582 13,344 635 603 42,921 Los Angeles, CA 7 12/20/24 64,000 ( 4,805 ) — 59,195 47,322 1,676 10,197 162,554 Tampa, FL 12/27/24 37,500 ( 402 ) — 37,098 41,556 ( 1,962 ) ( 2,496 ) 95,896 Wichita Falls, TX 12/27/24 600 ( 130 ) — 470 2,530 14 ( 2,074 ) 25,133 Total dispositions $ 1,450,312 $ ( 67,295 ) $ ( 9,630 ) $ 1,373,387 $ 1,291,584 $ 35,525 $ 55,907 4,132,769 1. The Company contributed the following medical outpatient properties to a joint venture in which the Company retained 20 % ownership: one in each of Raleigh, NC, New York, NY, Philadelphia, PA, Atlanta, GA, Austin, TX, Miami, FL, Denver, CO, Memphis, TN, Indianapolis, IN, and Honolulu, HI; two MOBs in Los Angeles; three MOBs in Houston, TX and Dallas, TX; and five in Seattle, WA. Sale price and square footage reflect the total sale price paid by the joint venture and total square footage of the property. The net proceeds to the Company related to these dispositions totaled $ 584.9 million. 2. The Company sold seven MOBs in Greensboro, NC and two non-clustered single-tenant MOBs in Raleigh, NC to a single buyer in a single transaction. 3. The Company contributed the following medical outpatient properties to a joint venture in which the Company retained 20 % ownership: two in each of Nashville, TN and Denver, CO; one in each of Dallas, TX, San Antonio, TX and Atlanta, GA. Sale price and square footage reflect the total sale price paid by the joint venture and total square footage of the property. The net proceeds to the Company related to these dispositions totaled $ 148.9 million. 4. The Company provided seller financing of approximately $ 9.6 million in connection with this sale. 5. The Company sold an MOB that was included in a consolidated joint venture in which the Company held a 63 % ownership interest. Proceeds include the Company's pro-rata share of the purchase price as well as amounts due to the Company by the joint venture. 6. Includes two properties. 7. Includes three properties. 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 2023 Real Estate Asset Dispositions The following table details the Company's dispositions for the year ended December 31, 2023: Dollars in thousands Type 1 DATE DISPOSED SALE PRICE CLOSING COSTS & CREDITS COMPANY-FINANCED NOTES NET CONSIDERATION NET REAL ESTATE INVESTMENT OTHER 2 GAIN/(IMPAIR-MENT) SQUARE FOOTAGE Tampa/Miami, FL 3 MOB 1/12/23 $ 93,250 $ ( 5,875 ) $ — $ 87,375 $ 87,302 $ ( 888 ) $ 961 224,037 Dallas, TX 4 MOB 1/30/23 19,210 ( 141 ) — 19,069 18,986 43 40 36,691 St. Louis, MO MOB 2/10/23 350 ( 18 ) — 332 398 — ( 66 ) 6,500 Los Angeles, CA MOB 3/23/23 21,000 ( 526 ) — 20,474 20,610 52 ( 188 ) 37,165 Los Angeles, CA 5 MOB 3/30/23 75,000 ( 8,079 ) ( 45,000 ) 21,921 88,624 ( 803 ) ( 20,900 ) 147,078 Los Angeles, CA 6 Land 5/12/23 3,300 ( 334 ) — 2,966 3,268 — ( 302 ) — Albany, NY MOB 6/30/23 10,000 ( 1,229 ) — 8,771 2,613 ( 1,040 ) 7,198 40,870 Houston, TX MOB 8/2/23 8,320 ( 285 ) — 8,035 4,567 194 3,274 57,170 Atlanta, GA MOB 8/22/23 25,140 ( 66 ) — 25,074 23,226 ( 536 ) 2,386 55,195 Dallas, TX Inpatient 9/15/23 115,000 ( 1,504 ) — 113,496 64,183 6,094 43,219 161,264 Houston, TX MOB 9/18/23 250 ( 24 ) — 226 1,998 — ( 1,772 ) 52,040 Chicago, IL MOB 9/27/23 59,950 ( 870 ) — 59,080 74,710 ( 380 ) ( 15,250 ) 104,912 Evansville, IN 7 MOB 11/13/23 18,500 ( 63 ) — 18,437 17,807 ( 149 ) 779 260,520 Houston, TX Hospital 12/1/23 4,100 ( 6 ) — 4,094 3,486 — 608 83,223 Charleston, SC 8 Office 12/15/23 6,200 ( 401 ) — 5,799 3,415 — 2,384 15,014 Dallas, TX MOB 12/20/23 43,295 ( 764 ) — 42,531 33,882 ( 3,782 ) 12,431 77,827 Los Angeles, CA Office 12/21/23 19,000 ( 1,311 ) — 17,689 17,787 — ( 98 ) 104,377 Tucson, AZ 9,10 MOB 12/22/23 43,230 ( 3,770 ) ( 6,000 ) 33,460 39,786 ( 26 ) ( 300 ) 215,471 Miami, FL MOB 12/22/23 18,250 ( 756 ) — 17,494 17,354 643 ( 503 ) 48,000 Sebring, FL MOB 12/27/23 9,500 ( 81 ) — 9,419 10,438 ( 512 ) ( 507 ) 38,949 Boston, MA MOB 12/28/23 117,197 ( 2,079 ) — 115,118 107,803 9,828 ( 2,513 ) 161,254 Florida 11 SNF 12/29/23 77,000 ( 8,678 ) ( 7,700 ) 60,622 65,839 ( 294 ) 2,777 354,500 Total dispositions $ 787,042 $ ( 36,860 ) $ ( 58,700 ) $ 691,482 $ 708,082 $ 8,444 $ 33,658 2,282,057 1. MOB = medical outpatient building; SNF = skilled nursing facility. 2. Includes straight-line rent receivables, leasing commissions and lease inducements. 3. Includes two properties sold in two separate transactions to the same buyer on the same date. 4. 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. 5. The Company entered into a mortgage loan agreement with the buyer for $ 45.0 million. 6. The Company sold a land parcel totaling 0.34 acres. 7. Includes five properties sold in three separate transactions to the same buyer on the same date. 8. The Company sold a corporate office in Charleston, SC that was 100 % occupied by the Company. 9. Includes 12 properties sold in one transaction to the same buyer. 10. The Company entered into a mezzanine loan with the buyer for $ 6.0 million. 11. Includes three properties sold in one transaction to the same buyer. The Company entered into a separate note receivable for $ 7.7 million related to this sale. 6. Held for Sale The Company had three properties classified as assets held for sale as of December 31, 2024. The net real estate assets held for sale includes the impact of $ 24.1 million of impairment charges for the year ended December 31, 2024. The Company had one property classified as assets held for sale as of December 31, 2023. The net real estate assets held for sale included the impact of $ 5.9 million of impairment charges for the year ended December 31, 2023. 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. The table below reflects the assets and liabilities classified as held for sale as of December 31, 2024 and 2023. DECEMBER 31, Dollars in thousands 2024 2023 Balance Sheet data Land $ 10,859 $ 1,850 Buildings and improvements 3,410 6,779 Lease intangibles 3,286 1,017 17,555 9,646 Accumulated depreciation ( 5,275 ) ( 913 ) Real estate assets held for sale, net 12,280 8,733 Other assets, net 617 101 Assets held for sale, net $ 12,897 $ 8,834 Accounts payable and accrued liabilities $ 694 $ 23 Other liabilities 589 272 Liabilities of properties held for sale $ 1,283 $ 295 Subsequent Dispositions On February 7, 2025, the Company disposed of a 30,304 square foot medical office building in Boston, Massachusetts for $ 4.5 million. On February 14, 2025, the Company disposed of two medical office buildings in Denver, Colorado, with a combined total of 69,715 square feet for an aggregate purchase price of $ 8.6 million. These properties were classified as held for sale as of December 31, 2024. 7. Impairment Charges - Long-Lived Assets An asset is impaired when undiscounted cash flows expected to be generated by the asset are less than the carrying value of the asset. The Company must assess the potential for impairment of its long-lived assets, including real estate properties, whenever events occur or there is a change in circumstances, such as the sale of a property or the decision to sell a property, which indicate that the recorded value might not be fully recoverable. The Company recorded impairment charges totaling $ 249.9 million on 51 properties sold and 13 additional properties as a result of completed and planned disposition activity for the year ended December 31, 2024. The Company recorded impairment charges on 31 properties sold and six additional properties associated with planned disposition activity for the year ended December 31, 2023, totaling $ 149.7 million. Both level 1 and level 3 fair value techniques were used to derive these impairment charges. As of December 31, 2024, nine real estate properties totaling $ 61.2 million were measured at fair value using level three fair value hierarchy. The level 3 fair value techniques included brokerage estimates, letters of intent, and unexecuted purchase and sale agreements, less estimated closing costs, and are nonbinding in nature. 8. Other Assets Other assets consist primarily of real estate notes receivable, straight-line rent receivables, prepaid assets, intangible assets, accounts receivable and additional long-lived assets. Items included in "Other assets, net" on the Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023 are detailed in the table below: 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Dollars in thousands December 31, 2024 December 31, 2023 Prepaid assets $ 154,957 $ 116,455 Real estate notes receivable, net 127,624 173,614 Straight-line rent receivables 124,970 116,866 Accounts receivable, net 1 36,495 63,203 Above-market intangible assets, net 32,230 66,695 Interest rate swap assets 5,263 4,634 Project costs 4,903 6,187 Additional long-lived assets, net 4,197 20,717 Net investment in lease 2,168 2,112 Investment in securities 2 1,936 6,011 Debt issuance costs, net 1,758 3,867 Customer relationship intangible assets, net 1,011 1,066 Other 9,984 10,941 $ 507,496 $ 592,368 1 The amounts for December 31, 2024 and 2023 are net of allowance for doubtful accounts of $ 9.5 million and $ 8.4 million, respectively. 2 This amount represents the value of the Company's preferred stock investment in a data analytics platform. In 2024, a fair value measurement impairment of $ 4.1 million was recorded on this investment and is included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations. 9. Intangible Assets and Liabilities The Company has several types of intangible assets and liabilities included in its Consolidated Balance Sheets, including goodwill, debt issuance costs, above-, below-, and at-market lease intangibles, and customer relationship intangibles. For additional details on the Company's debt issuance costs, see Note 10 to the Consolidated Financial Statements. The Company’s intangible assets and liabilities, including assets held for sale and certain debt issuance costs, as of December 31, 2024 and 2023 consisted of the following: GROSS BALANCE at December 31, ACCUMULATED AMORTIZATION at December 31, WEIGHTED AVG. REMAINING LIFE in years BALANCE SHEET CLASSIFICATION Dollars in millions 2024 2023 2024 2023 Goodwill $ — $ 250.5 $ — $ — N/A Goodwill Credit facility debt issuance costs 6.9 6.9 5.2 3.1 0.9 Other assets, net Above-market lease intangibles (lessor) 74.8 98.0 42.3 31.3 4.0 Other assets, net Customer relationship intangibles (lessor) 2.1 2.1 1.1 1.1 18.6 Other assets, net Below-market lease intangibles (lessor) ( 98.3 ) ( 112.5 ) ( 53.1 ) ( 35.7 ) 5.3 Other liabilities At-market lease intangibles 668.2 837.3 353.9 301.7 5.9 Real estate properties $ 653.7 $ 1,082.3 $ 349.4 $ 301.5 5.8 For the years ended December 31, 2024, 2023 and 2022, the Company recognized approximately $ 167.7 million, $ 214.8 million, and $ 133.6 million of intangible amortization, respectively. The following table represents expected amortization over the next five years of the Company’s intangible assets and liabilities in place as of December 31, 2024: Dollars in millions FUTURE AMORTIZATION OF INTANGIBLES, NET 2025 $ 114.3 2026 68.4 2027 43.3 2028 24.7 2029 14.9 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 10. Notes and Bonds Payable DECEMBER 31, 1 MATURITY DATES CONTRACTUAL INTEREST RATES EFFECTIVE INTEREST RATES PRINCIPAL PAYMENTS INTEREST PAYMENTS Dollars in thousands 2024 2023 $ 1.5 B Unsecured Credit Facility 2 — — 10/25 SOFR + 0.95 % 5.30 % At maturity Monthly $ 350 M Unsecured Term Loan 3 — 349,798 7/25 SOFR + 1.04 % 5.59 % At maturity Monthly $ 200 M Unsecured Term Loan 4 199,896 199,903 5/25 SOFR + 1.04 % 5.59 % At maturity Monthly $ 150 M Unsecured Term Loan 149,790 149,643 6/26 SOFR + 1.04 % 5.59 % At maturity Monthly $ 300 M Unsecured Term Loan 5 299,981 299,958 10/25 SOFR + 1.04 % 5.59 % At maturity Monthly $ 200 M Unsecured Term Loan 199,641 199,502 7/27 SOFR + 1.04 % 5.59 % At maturity Monthly $ 300 M Unsecured Term Loan 298,708 298,288 1/28 SOFR + 1.04 % 5.59 % At maturity Monthly Senior Notes due 2025 249,868 249,484 5/25 3.88 % 4.12 % At maturity Semi-annual Senior Notes due 2026 586,824 579,017 8/26 3.50 % 4.94 % At maturity Semi-annual Senior Notes due 2027 488,104 483,727 7/27 3.75 % 4.76 % At maturity Semi-annual Senior Notes due 2028 298,029 297,429 1/28 3.63 % 3.85 % At maturity Semi-annual Senior Notes due 2030 586,028 575,443 2/30 3.10 % 5.30 % At maturity Semi-annual Senior Notes due 2030 297,190 296,780 3/30 2.40 % 2.72 % At maturity Semi-annual Senior Notes due 2031 296,343 295,832 3/31 2.05 % 2.25 % At maturity Semi-annual Senior Notes due 2031 667,233 649,521 3/31 2.00 % 5.13 % At maturity Semi-annual Mortgage notes payable 45,136 70,534 12/25-12/26 3.60 %- 4.77 % 3.57 %- 6.88 % Monthly Monthly $ 4,662,771 $ 4,994,859 1 Balance is presented net of discounts and issuance costs and inclusive of premiums, where applicable. 2 As of December 31, 2024, the Company had $ 1.5 billion available to be drawn on its $ 1.5 billion Unsecured Credit Facility. 3 In 2024, the Company repaid the $ 350 million Unsecured Term Loan and recognized approximately $ 0.2 million of accelerated amortization expense included in the loss on extinguishment of debt. 4 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. On January 7, 2025 the company made a partial repayment of $ 25 million on the initial $ 200 million Unsecured Term Loan. 5 On January 14, 2025, the company made a partial repayment of $ 10 million on the initial $ 300 million Unsecured Term Loan. The Company’s various debt agreements contain certain representations, warranties, and financial and other covenants customary in such loan agreements. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain limits on the Company’s ability to incur indebtedness and create liens or encumbrances. As of December 31, 2024, the Company was in compliance with its financial covenant provisions under its various debt instruments. Senior Notes The following table summarizes the Company’s aggregate Senior notes principal balance as of December 31, 2024 and 2023. DECEMBER 31, Dollars in thousands 2024 2023 Senior notes principal balance $ 3,699,285 $ 3,699,285 Unaccreted discount ( 224,759 ) ( 265,852 ) Debt issuance costs ( 4,907 ) ( 6,200 ) Senior notes carrying amount $ 3,469,619 $ 3,427,233 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Term Loans The following table summarizes the Company’s aggregate term loan principal balances as of December 31, 2024 and 2023. DECEMBER 31, Dollars in thousands 2024 2023 Term loan principal balances 1 $ 1,150,000 $ 1,500,000 Debt issuance costs ( 1,984 ) ( 2,908 ) Term Loans carrying amount $ 1,148,016 $ 1,497,092 1. In 2024, the Company repaid the $ 350 million Unsecured Term Loan and recorded approximately $ 0.2 million of accelerated amortization expense included in the loss of extinguishment of debt. Mortgage Notes Payable The following table summarizes the Company’s aggregate mortgage notes principal balance as of December 31, 2024 and 2023. DECEMBER 31, Dollars in thousands 2024 2023 Mortgage notes payable principal balance $ 45,278 $ 70,752 Unamortized premium 140 285 Unaccreted discount ( 134 ) ( 237 ) Debt issuance costs ( 148 ) ( 266 ) Mortgage notes payable carrying amount $ 45,136 $ 70,534 Mortgage Activity 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 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 of $ 5.6 million. T he mortgage note encumbered a 40,324 squ are foot property in Georgia . On September 1, 2024, the Company repaid in full at maturity a mortgage note payable bearing interest at a rate of 4.15 % per annum with an outstanding principal balance of $ 7.0 million. T he mortgage note encumbered a 64,143 squ are foot property in Minnesota . The following table details the Company’s mortgage notes payable, with related collateral. ORIGINAL BALANCE EFFECTIVE INTEREST RATE 6 MATURITY DATE COLLATERAL 7 PRINCIPAL AND INTEREST PAYMENTS 8 INVESTMENT IN COLLATERAL at December 31, BALANCE at December 31, Dollars in millions 2024 2024 2023 Life Insurance Co. 1 13.3 4.13 % 1/24 MOB Monthly/ 10 -yr amort. — — 11.3 Life Insurance Co. 2 6.8 3.96 % 2/24 MOB Monthly/ 7 -yr amort. — — 5.6 Financial Services 3 9.7 4.32 % 9/24 MOB Monthly/ 10 -yr amort. — — 7.2 Life Insurance Co. 4 16.5 3.57 % 12/25 MOB,OFC Monthly/ 7 -yr amort. 39.7 15.4 15.9 Financial Services 11.5 3.71 % 1/26 MOB Monthly/ 10 -yr amort. 42.3 7.4 7.8 Life Insurance Co. 5 6.0 6.88 % 4/26 MOB Monthly/ 7 -yr amort. 11.8 5.2 5.2 Life Insurance Co. 19.2 4.08 % 12/26 MOB Monthly/ 10 -yr amort. 46.0 17.1 17.5 $ 139.8 $ 45.1 $ 70.5 1 The unamortized portion of the $ 0.8 million premium recorded on this note upon acquisition is included in the balance above. 2 The unamortized portion of the $ 0.2 million premium recorded on this note upon acquisition is included in the balance above. 3 The unamortized portion of the $ 0.1 million premium recorded on this note upon acquisition is included in the balance above. 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 4 The unamortized portion of the $ 0.7 million premium recorded on this note upon acquisition is included in the balance above. 5 The unaccreted portion of the $ 0.3 million discount recorded on this note upon acquisition is included in the balance above. 6 The contractual interest rates for the four outstanding mortgage notes ranged from 3.6 % to 4.5 % as of December 31, 2024. 7 MOB-Medical outpatient building; OFC-Office 8 Payable in monthly installments of principal and interest with the final payment due at maturity (unless otherwise noted). Other Long-Term Debt Information Future maturities of the Company’s notes and bonds payable as of December 31, 2024, were as follows: Dollars in thousands PRINCIPAL MATURITIES NET ACCRETION/ AMORTIZATION 1 DEBT ISSUANCE COSTS 2 NOTES AND BONDS PAYABLE % 2025 $ 766,375 $ ( 43,163 ) $ ( 2,020 ) $ 721,192 15.5 % 2026 778,904 ( 41,837 ) ( 1,650 ) 735,417 15.8 % 2027 700,000 ( 36,192 ) ( 1,519 ) 662,289 14.2 % 2028 600,000 ( 35,179 ) ( 707 ) 564,114 12.1 % 2029 — ( 37,025 ) ( 674 ) ( 37,699 ) ( 0.8 ) % 2030 and thereafter 2,049,286 ( 31,357 ) ( 471 ) 2,017,458 43.2 % $ 4,894,565 $ ( 224,753 ) $ ( 7,041 ) $ 4,662,771 100.0 % 1 Includes discount accretion and premium amortization related to the Company’s Senior Notes and two mortgage notes payable. 2 Excludes approximate ly $ 1.8 million in debt issuance costs related to the Company's Unsecured Credit Facility included in other assets, net 11. Derivative Financial Instruments Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2024, 2023, and 2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. As of December 31, 2024, the Company had interest rate derivatives that were designated as cash flow hedges of interest rate risk. The table below presents the notional value and weighted average rates of the Company's derivative financial instruments as of December 31, 2024 and 2023: NOTIONAL VALUE AS OF WEIGHTED AVERAGE RATE NOTIONAL VALUE AS OF WEIGHTED AVERAGE RATE EXPIRATION DECEMBER 31, 2024 EXPIRATION DECEMBER 31, 2023 January 2024 $ 200,000 1.21 % May 2026 $ 275,000 3.74 % May 2026 275,000 3.74 % June 2026 150,000 3.83 % June 2026 150,000 3.83 % December 2026 150,000 3.84 % December 2026 150,000 3.84 % June 2027 200,000 4.27 % June 2027 200,000 4.27 % December 2027 300,000 3.93 % December 2027 300,000 3.93 % $ 1,075,000 3.92 % $ 1,275,000 3.49 % 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 Consolidated Balance Sheets as of December 31, 2024 and 2023. AS OF DECEMBER 31, 2024 AS OF DECEMBER 31, 2023 Dollars in thousands BALANCE SHEET LOCATION FAIR VALUE BALANCE SHEET LOCATION FAIR VALUE Interest rate swaps 2019 Other Assets $ 2,493 Other Assets $ 4,214 Interest rate swaps 2022 Other Assets 2,250 Interest rate swaps 2022 Other Liabilities ( 853 ) Other Liabilities ( 5,067 ) Interest rate swaps 2023 Other Assets 521 Other Assets 411 Interest rate swaps 2023 Other Liabilities ( 3,310 ) Other Liabilities ( 7,357 ) Total derivatives designated as hedging instruments $ 1,101 $ ( 7,799 ) Tabular Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss) The table below presents the effect of cash flow hedge accounting on Accumulated other comprehensive income (loss) ("AOCI") as of December 31, 2024 and 2023 related to the Company's outstanding interest rate swaps. AMOUNT OF GAIN/(LOSS) RECOGNIZED IN AOCI ON DERIVATIVE for the year ended December 31, AMOUNT OF (GAIN)/LOSS RECLASSIFIED FROM AOCI INTO INCOME for the year ended December 31, Dollars in thousands 2024 2023 2024 2023 Interest rate swaps 2019 $ — $ 1,995 Interest expense $ — $ ( 6,964 ) Interest rate swaps 2022 15,237 4,583 Interest expense ( 10,317 ) ( 6,289 ) Interest rate swaps 2023 7,572 ( 5,115 ) Interest expense ( 3,416 ) ( 1,829 ) Settled treasury hedges — — Interest expense 428 426 Settled interest rate swaps — — Interest expense 168 168 Total $ 22,809 $ 1,463 Total $ ( 13,137 ) $ ( 14,488 ) The Company estimates that an additional $ 1.4 million will be reclassified from accumulated other comprehensive loss as a net decrease to interest expense over the next 12 months. Tabular Disclosure Offsetting Derivatives The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of December 31, 2024. The net amounts of derivative liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative liabilities are presented on the Company's Consolidated Balance Sheets . 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Offsetting of Derivative Assets GROSS AMOUNTS of recognized assets GROSS AMOUNTS OFFSET in the Consolidated Balance Sheets NET AMOUNTS OF ASSETS presented in the Consolidated Balance Sheets GROSS AMOUNTS NOT OFFSET in the Consolidated Balance Sheets FINANCIAL INSTRUMENTS CASH COLLATERAL NET AMOUNT Derivatives $ 5,264 $ — $ 5,264 $ ( 5,264 ) $ — $ — Offsetting of Derivative Liabilities GROSS AMOUNTS of recognized liabilities GROSS AMOUNTS OFFSET in the Consolidated Balance Sheets NET AMOUNTS OF LIABILITIES presented in the Consolidated Balance Sheets GROSS AMOUNTS NOT OFFSET in the Consolidated Balance Sheets FINANCIAL INSTRUMENTS CASH COLLATERAL NET AMOUNT Derivatives $ ( 4,163 ) $ — $ ( 4,163 ) $ 5,264 $ — $ 1,101 Credit-risk-related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness. The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. As of December 31, 2024, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $ 2.9 million. As of December 31, 2024, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. 12. Stockholders’ Equity Common Stock The Company had no preferred shares outstanding and had common shares outstanding for the years ended December 31, 2024, 2023, and 2022 as follows: YEAR ENDED DECEMBER 31, 2024 2023 2022 Balance, beginning of year 380,964,433 380,589,894 150,457,433 Issuance of common stock 8,623 8,627 229,618,304 Conversion of OP units to common stock 194,767 190,544 — Shares repurchased ( 30,794,250 ) — — Non-vested share-based awards, net of withheld shares and forfeitures 158,433 175,368 514,157 Balance, end of year 350,532,006 380,964,433 380,589,894 Dividends Declared During 2024, the Company declared and paid common stock dividends aggregating $ 1.24 per share ($ 0.31 per share per quarter). On February 18, 2025, the Company declared a quarterly common stock dividend in the amount of $ 0.31 per share payable on March 19, 2025, to stockholders of record on March 3, 2025. Authorization to Repurchase Common Stock During 2024, the Company repurchased 30.8 million shares of its common stock at an average price of $ 16.56 per share for a total of $ 509.8 million. As of December 31, 2024, the Company had $ 237.0 million of authorized share repurchases remaining. 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Accumulated Other Comprehensive (Loss) Income The following table represents the changes in accumulated other comprehensive (loss) income during the years ended December 31, 2024 and 2023: INTEREST RATE SWAPS as of December 31, Dollars in thousands 2024 2023 Beginning balance $ ( 10,741 ) $ 2,140 Other comprehensive income (loss) before reclassifications 22,527 1,434 Amounts reclassified from accumulated other comprehensive (loss) income ( 12,954 ) ( 14,315 ) Net current-period other comprehensive income (loss) 9,573 ( 12,881 ) Ending balance $ ( 1,168 ) $ ( 10,741 ) The following table represents the details regarding the reclassifications from accumulated other comprehensive (loss) income during the year ended December 31, 2024 (dollars in thousands): DETAILS ABOUT ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) COMPONENTS AMOUNT RECLASSIFIED from accumulated other comprehensive income (loss) AFFECTED LINE ITEM in the statement where net income is presented Amounts reclassified from accumulated other comprehensive income (loss) related to settled interest rate swaps $ 596 Interest Expense Amounts reclassified from accumulated other comprehensive income (loss) related to current interest rate swaps ( 13,733 ) Interest Expense $ ( 13,137 ) 13. Stock and Other Incentive Plans Stock Incentive Plan The Company's 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. The Incentive Plan replaced the Legacy HR Incentive Plan as of the Merger date. Unvested awards under the Legacy HR Incentive Plan were assumed according to their existing terms by the Company in connection with the Merger. As of the Merger date, 9,647,839 share-based awards were available for grant under the Incentive Plan. As of December 31, 2024 and 2023, the Company had share-based awards available for grant under the Incentive Plan of 6,140,496 and 8,102,861 shares, respectively. Non-vested shares issued to employees under the Incentive Plan are generally subject to fixed vesting periods varying from three to eight years beginning on the date of issue. If a recipient voluntarily terminates his or her relationship with the Company or is terminated for cause before the end of the vesting period, the shares are forfeited, at no cost to the Company. Once the shares have been issued, the recipient has the right to receive dividends and the right to vote the shares through the vesting period. Compensation expense, included in general and administrative expense, recognized during the years ended December 31, 2024, 2023 and 2022 from the amortization of the value of shares over the vesting period issued to employees and directors was $ 31.8 million, $ 14.6 million and $ 13.9 million, respectively. In 2024, the Company accelerated the amortization of certain outstanding awards, including in connection with the termination without cause of its CEO and CFO, totaling $ 17.8 million. The following table represents expected amortization of the Company's non-vested shares issued as of December 31, 2024: Dollars in millions FUTURE AMORTIZATION of non-vested shares 2025 $ 8.4 2026 5.5 2027 3.2 2028 1.3 2029 and thereafter 0.4 Total $ 18.8 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Executive Incentive Plan The Compensation Committee has adopted an executive incentive plan pursuant to the Incentive Plan (the "Executive Incentive Plan") to provide specific award criteria with respect to incentive awards made under the Incentive Plan subject to the discretion of the Compensation Committee. Under the terms of the Executive Incentive Plan, the Company's named executive officers and certain other members of senior management may earn incentive awards in the form of cash, non-vested stock, restricted stock units ("RSUs"), and units in the OP ("OP Units"). For 2024, 2023 and 2022, compensation expense, included in general and administrative expense, resulting from the amortization of the Executive Incentive Plan non-vested share, RSU, and OP Unit grants to officers was approximately $ 16.8 million, $ 9.0 million, and $ 9.8 million, respectively. In 2024, the Company accelerated the amortization of certain outstanding non-vested stock and RSU awards, including in connection with the termination without cause of its CEO and CFO, totaling $ 8.5 million. Details of equity awards that have been issued under this plan are as follows: • During the first quarter of 2024, the Company granted non-vested stock awards to its named executive officers and other members of senior management with an aggregate grant date fair value of $ 4.3 million, which consisted of an aggregate of 283,320 non-vested shares with a vesting period of five years . • During the second quarter of 2024, the Company granted non-vested stock to other members of senior management with an aggregate grant date fair value of $ 0.1 million, which consisted of an aggregate of 9,350 non-vested shares with a vesting period of five years . • 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. These awards are subject to a three-year performance period and if the performance criteria is met, the awards are then subject to employment for two additional years with ratable vesting of 50 % in year four and 50 % in year five. The expense will be recognized on the straight-line basis over the 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 average grant date fair value of $ 19.10 for the relative TSR component for the February grants using the following assumptions: Volatility 28.0 % Dividend assumption Accrued Expected term 3 years Risk-free rate 4.44 % Stock price (per share) $ 15.22 ▪ The remaining 64 % of the RSU awards are subject to certain operating performance conditions. With respect to the operating performance conditions of the February 2024 grants, 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. ▪ The combined weighted average grant date fair value of the February 2024 RSUs was $ 16.61 per share. ◦ On April 30, 2024, the Company granted an aggregate of 21,816 RSUs to members of senior management, with an aggregate grant date fair value of $ 0.3 million. These awards are subject to a three-year performance period and if the performance criteria is met, the awards are then subject to employment for two additional years with ratable vesting of 50 % in year four and 50 % in year five. The expense will be recognized on the straight-line basis over the five-year vesting period. • Approximately 36 % of the RSUs 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 $ 14.94 for the relative TSR component for the April grants using the following assumptions: 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Volatility 29.0 % Dividend assumption Accrued Expected term 3 years Risk-free rate 4.85 % Stock price (per share) $ 14.23 ◦ The remaining 64 % of the RSU awards are subject to certain operating performance conditions. With respect to the operating performance conditions of the April 2024 grants, the grant date fair value was $ 14.23 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. ◦ The combined weighted average grant date fair value of the April 2024 RSUs was $ 14.48 per share. LTIP Series C Units On February 13, 2024, the Company granted an aggregate of 906,044 LTIP Series C units ("LTIP-C units) in the OP to its named executive officers with an aggregate grant date fair value of $ 7.5 million. LTIP-C units are granted notionally at the maximum value of the award. These awards are subject to a three-year performance period and if the performance criteria is met, the awards are then subject to two additional years of employment with ratable vesting of 50 % in year four and 50 % in year five. The expense will be recognized on the straight-line basis over the five-year vesting period. • 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: Volatility 28.0 % Dividend assumption Accrued Expected term 3 years Risk-free rate 4.44 % Stock price (per share) $ 15.22 • The remaining 64 % of the LTIP-C units vest based upon certain operating performance conditions. 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. • The combined weighted average grant date fair value of the February 2024 LTIP-C units was $ 13.22 per share. For 2024, compensation expense resulting from the amortization of LTIP-C units awarded to officers was approximately $ 8.8 million. The Company accelerated the amortization of certain outstanding LTIP-C awards, including in connection with the termination without cause of its CEO and CFO, totaling $ 7.2 million. Officer Incentive Program In 2024 the Company granted a performance-based award to certain non-executive officers totaling approximately $ 0.7 million, which was granted in the form of 48,490 non-vested shares. The shares have vesting periods ranging from three to eight years with a weighted average vesting period of approximately five years . For 2024, 2023 and 2022, compensation expense resulting from the amortization of these non-vested share grants awarded to officers was approximately $ 0.5 million, $ 0.6 million, and $ 0.9 million, respectively. The Company accelerated the amortization of certain outstanding awards, including in connection with the termination without cause of its CEO and CFO, totaling $ 0.1 million. 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Salary Deferral Plan The Company's salary deferral plan allows certain of its officers to elect to defer up to 50 % of their base salary in the form of non-vested shares subject to long-term vesting. The number of shares will be increased through a Company match depending on the length of the vesting period selected by the officer. The officer's vesting period choices are: three years for a 30 % match; five years for a 50 % match; and eight years for a 100 % match. During 2024, 2023 and 2022, the Company issued 29,902 shares, 31,792 shares and 17,381 shares, respectively, to its officers through the salary deferral plan. For 2024, 2023 and 2022, compensation expense resulting from the amortization of non-vested share grants to officers was approximately $ 1.1 million, $ 0.9 million, and $ 0.9 million, respectively. Non-employee Directors Incentive Plan The Company grants non-vested share-based awards to its non-employee directors under the Incentive Plan. The directors’ awards typically have a one-year vesting period and are subject to forfeiture prior to such date upon termination of the director’s service, at no cost to the Company. For each of the years 2024, 2023 and 2022, compensation expense resulting from the amortization of non-vested share-based grants to directors was approximately $ 2.4 million, $ 2.1 million, and $ 1.5 million, respectively. • During the second quarter of 2024, the Company granted non-vested stock awards to certain of its independent directors, with a grant date fair value of $ 0.9 million, which consisted of an aggregate of 58,910 non-vested shares, with a one-year vesting period. • During the second quarter of 2024, the Company also granted LTIP-D units in the OP to certain of its independent directors, with a grant fair value of $ 0.8 million, which consisted of an aggregate of 45,982 non-vested units, with a one-year vesting period. Other Grants The Company granted an aggregate of 51,884 non-vested shares to other members of senior management, with an aggregate grant date fair value of $ 0.9 million and a three-year vesting period. In 2024, the Company granted 69,022 non-vested shares to its interim Chief Executive Officer with a grant date fair value of $ 1.2 million with vesting the earlier of the appointment of a permanent CEO or one-year . The Company issued one-time non-vested share grants related to executive management transition in 2016. For 2024, 2023, and 2022, compensation expense resulting from the amortization of these non-vested share grants to officers was approximately $ 2.2 million, $ 0.8 million, and $ 0.8 million. The Company accelerated the amortization of these outstanding awards, including in connection with the termination without cause of its CEO and CFO, totaling $ 1.6 million. The following table represents the summary of non-vested share-based awards (including restricted stock, RSUs, LTIP-C units and LTIP-D units) under the Incentive Plans and related information for the years ended December 31, 2024, 2023, and 2022: 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. YEAR ENDED DECEMBER 31, Dollars in thousands, except per share data 2024 2023 2022 Share-based awards, beginning of year 2,615,562 2,090,060 1,562,028 Granted 1 1,732,484 1,164,359 952,407 Vested ( 2,284,767 ) ( 403,266 ) ( 418,949 ) Change in awards based on performance assessment 2 ( 47,202 ) ( 205,668 ) — Forfeited ( 216,340 ) ( 29,923 ) ( 5,426 ) Share-based awards, end of year 1,799,737 2,615,562 2,090,060 Weighted-average grant date fair value of Share-based awards, beginning of year $ 25.56 $ 30.35 $ 31.10 Share-based awards granted during the year $ 15.49 $ 18.70 $ 29.64 Share-based awards vested during the year $ 21.43 $ 28.38 $ 31.52 Share-based awards change in performance assessment during the year $ 20.21 $ 29.05 $ — Stock-based awards forfeited during the year $ 16.87 $ 31.16 $ 31.48 Share-based awards, end of year $ 22.30 $ 25.56 $ 30.35 Grant date fair value of shares granted during the year $ 26,844 $ 22,171 $ 28,225 1 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. 2 The Company's RSUs that are based on operating performance metrics are evaluated on the probability of those performance metrics being achieved. During 2023, the Company determined that the operating performance goals related to the RSUs issued in 2022 are not probable of being achieved and reversed all of the outstanding amortization expense for that grant. In addition, the Company lowered the probability of achieving the operating performance goals related to the RSUs issued in 2023. The vesting periods for the non-vested shares granted during 2024 ranged from one to eight years with a weighted-average amortization period remaining as of December 31, 2024 of approximately 3.9 years. During 2024, 2023 and 2022, the Company withheld 485,209 s hares, 126,085 shares and 137,892 shares, respectively, of common stock from its officers to pay estimated withholding taxes related to the vesting of shares. 401(k) Plan The Company maintains a 401(k) plan that allows eligible employees to defer salary, subject to certain limitations imposed by the Internal Revenue Code. The Company provides a matching contribution up to $ 2,800 per employee, subject to certain limitations. The Company’s matching contributions were approximately $ 1.4 million for 2024, $ 1.5 million for 2023 and $ 1.2 million for 2022. 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. 14. Earnings Per Share The Company uses the two-class method of computing net earnings per common share. The Company's non-vested share-based awards are considered participating securities pursuant to the two-class method. The table below sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2024, 2023, and 2022. YEAR ENDED DECEMBER 31, Dollars in thousands, except per share data 2024 2023 2022 Weighted average common shares outstanding Weighted average common shares outstanding 367,444,706 380,850,967 254,296,810 Non-vested shares ( 1,891,650 ) ( 1,923,096 ) ( 1,940,607 ) Weighted average common shares outstanding - basic 365,553,056 378,927,871 252,356,203 Weighted average common shares outstanding - basic 365,553,056 378,927,871 252,356,203 Dilutive effect of OP Units — — 1,451,599 Dilutive effect of employee stock purchase plan — — 65,519 Weighted average common shares outstanding - diluted 365,553,056 378,927,871 253,873,321 Net (loss) income $ ( 663,904 ) $ ( 282,083 ) $ 40,693 Income allocated to participating securities ( 3,122 ) ( 2,504 ) ( 2,437 ) Net loss attributable to non-controlling interest 9,419 3,822 204 Adjustment to loss attributable to non-controlling interest for legally outstanding restricted units ( 2,798 ) ( 851 ) — Net (loss) income applicable to common stockholders - basic $ ( 660,405 ) $ ( 281,616 ) $ 38,460 Net income attributable to OP Units — — 81 Net income applicable to common stockholders - diluted $ ( 660,405 ) $ ( 281,616 ) $ 38,541 Basic earnings per common share - net income $ ( 1.81 ) $ ( 0.74 ) $ 0.15 Diluted earnings per common share - net income $ ( 1.81 ) $ ( 0.74 ) $ 0.15 The effect of OP units convertible into 3,652,553 shares and options to purchase 4,751 sha res under the Company's Employee Stock Purchase Plan for the year ended December 31, 2024 were excluded from the calculation of diluted loss per common share because the effect was anti-dilutive as a result of the loss from continuing operations incurred during the year. 15. Commitments and Contingencies Tenant Improvements The Company may provide a tenant improvement allowance in new or renewal leases for the purpose of refurbishing or renovating tenant space. As of December 31, 2024, the Company had commitments of approximately $ 212.8 million that are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction. Land Held for Development Land held for development includes parcels of land owned by the Company, upon which the Company intends to develop and own outpatient healthcare facilities. The Company's land held for development included 15 parcels as of December 31, 2024 and 17 parcels as of December 31, 2023. The Company’s investments in land held for development totaled approximately $ 52.4 million as of December 31, 2024 and $ 59.9 million as of December 31, 2023. The current land held for development is located adjacent to certain of the Company's existing medical office buildings in Colorado, Connecticut, Florida, Georgia, Massachusetts, New York, Tennessee, Texas, and Washington. 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. Security Deposits and Letters of Credit As of December 31, 2024, the Company held approximately $ 33.4 million in letters of credit and security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon these instruments if there are any defaults under the leases. 16. Other Data Taxable Income (unaudited) The Company has elected to be taxed as a REIT, as defined under the Internal Revenue Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its taxable income to its stockholders. As a REIT, the Company generally will not be subject to federal income tax on taxable income it distributes currently to its stockholders. Accordingly, no provision for federal income taxes has been made in the accompanying Consolidated Financial Statements. If the Company fails to qualify as a REIT for any taxable year, then it will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum tax, and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies as a REIT, it may be subject to certain state and local taxes on its income and property and to federal income and excise tax on its undistributed taxable income. Earnings and profits (as defined under the Internal Revenue Code), the current and accumulated amounts of which determine the taxability of distributions to stockholders, vary from net income attributable to common stockholders and taxable income because of different depreciation recovery periods, depreciation methods, and other items. While Legacy HR was considered the accounting acquirer in the Merger for GAAP purposes, Legacy HR’s separate tax existence ceased with the Merger and Legacy HTA continues as the tax successor. On a tax basis, the Company’s gross real estate assets totaled approximately $ 11.1 billion, $ 12.6 billion and $ 13.0 billion as of December 31, 2024, 2023 and 2022, respectively. Characterization of Distributions (unaudited) Distributions in excess of earnings and profits generally constitute a return of capital. The table below gives the characterization of the distributions of the Company’s common stock for the years ended December 31, 2024, 2023 and 2022. For the years ended December 31, 2024, 2023 and 2022, there were no preferred shares outstanding. As such, no dividends were distributed related to preferred shares for those periods. 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. YEAR ENDED DECEMBER 31, 2024 2023 2022 PER SHARE PER SHARE PER SHARE Tax Treatment of Dividends Pre-Merger Healthcare Trust of America Ordinary income 1 $ — $ — $ 0.5862 Return of capital — — 4.0162 Capital gain — — 1.2216 Common stock distributions $ — $ — $ 5.8240 Tax Treatment of Dividends Pre-Merger Healthcare Realty Ordinary income 1 $ — $ — $ 0.2655 Return of capital — — 0.5555 Capital gain — — — Common stock distributions $ — $ — $ 0.8210 Tax Treatment of Dividends Post-Merger Healthcare Realty Ordinary income 1 $ 0.4335 $ 0.5482 $ 0.0422 Return of capital 0.7558 0.5031 0.2889 Capital gain 0.0507 0.1887 0.0879 Common stock distributions $ 1.2400 $ 1.2400 $ 0.4190 1 Reporting year ordinary income is also Code Section 199A eligible per the The Tax Cut and Jobs Act of 2017. State Income Taxes The Company must pay certain state income taxes, which are typically included in general and administrative expense on the Company’s Consolidated Statements of Operations. The State of Texas gross margins tax on gross receipts from operations is disclosed in the table below as an income tax. State income tax expense and state income tax payments for the years ended December 31, 2024, 2023 and 2022 are detailed in the table below: YEAR ENDED DECEMBER 31, Dollars in thousands 2024 2023 2022 State income tax expense Texas gross margins tax $ 1,674 $ 1,206 $ 1,693 Other 126 133 151 Total state income tax expense $ 1,800 $ 1,339 $ 1,844 State income tax payments, net of refunds and collections $ 1,787 $ 1,324 $ 1,834 17. Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practical to estimate that value. • Cash, cash equivalents and restricted cash - The carrying amount approximates fair value (level 1 inputs) due to the short-term maturity of these investments. • Real estate notes receivabl e - Real estate notes receivable is recorded in other assets on the Company's Condensed Consolidated Balance Sheets. Fair value is estimated using cash flow analyses, based on current interest rates for similar types of arrangements using level 2 inputs in the hierarchy. However, the fair value of one note receivable was determined utilizing the fair value of the receivable's collateral, which was determined based on an executed purchase and sale agreement of the underlying collateral, and therefore was classified as level 1 inputs in the hierarchy. • Borrowings under the Unsecured Credit Facility and the Term Loans due 2024 and 2026 - The carrying amount approximates fair value because the borrowings are based on variable market interest rates. • Senior Notes and Mortgage notes payable - The fair value of notes and bonds payable is estimated using cash flow analyses, based on the Company’s current interest rates for similar types of borrowing arrangements. 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. • Interest rate swap agreements - Interest rate swap agreements are recorded in other assets/liabilities on the Company's Consolidated Balance Sheets at fair value. Fair value is estimated by utilizing pricing models, level 2 inputs, which consider forward yield curves and discount rates. See Note 11 for additional information. The table below details the fair value and carrying values for our other financial instruments as of December 31, 2024 and 2023. December 31, 2024 December 31, 2023 Dollars in millions CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE Notes and bonds payable 1, 2 $ 4,662.8 $ 4,578.4 $ 4,994.9 $ 4,872.7 Real estate notes receivable $ 127.2 $ 122.4 $ 173.6 $ 172.5 1 Level 2 – model-derived valuations in which significant inputs and significant value drivers are observable in active markets. 2 Fair value for senior notes includes accrued interest as of December 31, 2024. 18. Segment Reporting The Company’s current business strategy with a single reportable segment related to its medical outpatient properties. Within this portfolio, the Company owns, leases, acquires, invests in joint ventures, manages, finances, develops and redevelops its properties and reports the operating results in the accompanying Consolidated Financial Statements. The CODM assess performance and allocate resources based on consolidated net income (loss) as reported on the Company's Statements of Operations. The Company uses net income to monitor expected versus actual results to assess the segment's performance. The measure of the Company's reportable segment assets is reported on the Company's Consolidated Balance Sheets as total assets. Pursuant to ASU 2023-07, Segment Reporting (Topic 280), public entities are required to disclose more detailed information about significant reportable segment expenses that are regularly provided to the CODM. The table below details the significant expenses for the years ended December 31, 2024, 2023 and 2022. YEAR ENDED DECEMBER 31, Dollars in thousands 2024 2023 2022 Significant Segment Expenses: Property taxes $ 126,692 $ 137,634 $ 98,101 Personnel 92,935 94,775 79,222 Utilities 97,889 101,840 65,999 Maintenance 110,962 117,969 80,527 Totals $ 428,478 $ 452,218 $ 323,849 92 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, cont. The following schedule reconciles net income to segment expenses. YEAR ENDED DECEMBER 31, Dollars in thousands 2024 2023 2022 Revenue $ 1,268,316 $ 1,343,769 $ 932,637 Property taxes ( 126,692 ) ( 137,634 ) ( 98,101 ) Personnel ( 92,935 ) ( 94,775 ) ( 79,222 ) Utilities ( 97,889 ) ( 101,840 ) ( 65,999 ) Maintenance ( 110,962 ) ( 117,969 ) ( 80,527 ) Other segment expenses ( 128,087 ) ( 106,624 ) ( 72,923 ) Transaction costs ( 3,122 ) ( 2,026 ) ( 3,229 ) Merger-related costs — 1,952 ( 103,380 ) Depreciation and amortization ( 675,152 ) ( 730,709 ) ( 453,082 ) Gain on sales of real estate properties and other assets 109,753 77,546 270,271 Interest expense ( 242,425 ) ( 258,584 ) ( 146,691 ) (Loss) gain on extinguishment of debt ( 237 ) 62 ( 2,401 ) Impairment of real estate properties and credit loss reserves ( 313,547 ) ( 154,912 ) ( 54,427 ) Impairment of goodwill ( 250,530 ) — — Equity loss from unconsolidated joint ventures ( 135 ) ( 1,682 ) ( 687 ) Interest and other (expense) income, net ( 260 ) 1,343 ( 1,546 ) Net (loss) income $ ( 663,904 ) $ ( 282,083 ) $ 40,693 Other segment expenses are primarily related to administrative costs, travel, legal, technology, and insurance. 19. Related-Party Transactions In the ordinary course of conducting its business, the Company enters into agreements with affiliates in relation to the management and leasing of its real estate assets, including real estate assets owned through joint ventures. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.