What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-05-01 · 175 added, 61 removed, 294 unchanged (45% of the section changed)

46 unchanged sentences

• The Company's property taxes could increase due to reassessment or property tax rate changes;

• Trends in the healthcare service industry may negatively affect the demand for the Company’s properties, lease revenues and the values of its investments;

• Trends in the healthcare service industry, including the recent passage of the One Big Beautiful Bill Act which is the subject of ongoing analysis, may negatively affect the demand for the Company’s properties, lease revenues and the values of its investments;

• The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations;

11 unchanged sentences

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

As of March 31, 2025, the Company had $1.4 billion available to be drawn on its unsecured credit facility ("Unsecured Credit Facility") and available cash.

As of June 30, 2025, the Company had $1.2 billion available to be drawn on its unsecured credit facility ("Unsecured Credit Facility") and available cash.

On July 25, 2025, the Company entered into the Fifth Amended and Restated Credit Facility which extended the maturity of its revolver to July 2029.

The Company expects to continue to meet its liquidity needs, including funding additional investments, paying dividends, and funding debt service, through cash flows from operations and liquidity sources, including the Unsecured Credit Facility.

1 unchanged sentence

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

Dividends paid by the Company for the three months ended March 31, 2025 were funded from cash flows from operations and the Unsecured Credit Facility, as cash flows from operations were not adequate to fully fund dividends, primarily as a result of the timing of interest payments.

Dividends paid by the Company for the six months ended June 30, 2025 were funded from cash flows from operations and the Unsecured Credit Facility, as cash flows from operations were not adequate to fully fund dividends, primarily as a result of the timing of interest payments.

The Company expects that cash flows from operations will generate sufficient cash flows during 2025 such that dividends for the full year 2025 can be funded by cash flows from operations or other sources of liquidity described above.

Investing Activities

Cash flows used in investing activities for the three months ended March 31, 2025, were approximately $38.8 million.

Cash flows used in investing activities for the six months ended June 30, 2025, were approximately $41.9 million.

Below is a summary of the investing activities.

The Company disposed of four properties during the three months ended March 31, 2025 for a total sales price of $28.1 million, generating net proceeds of $16.4 million after seller financing and closing credits.

The following table details these dispositions for the three months ended March 31, 2025:

The Company disposed of eight medical outpatient properties and two land parcels during the six months ended June 30, 2025 for a total sales price of $81.2 million, generating net proceeds of $66.8 million after seller financing and closing credits.

The following table details these dispositions for the six months ended June 30, 2025:

Dollars in thousands Date Disposed Sale Price Square Footage

3 unchanged sentences

3/20/25 15,000 127,933

Boston, MA 4/30/25 486 —

Boston, MA 5/23/25 3,000 33,176

Jacksonville, FL 6/26/25 8,100 53,169

6/26/25 31,000 91,561

Houston, TX 6/27/25 10,500 —

Total $ 81,186 405,858

1 unchanged sentence

2 The Company provided seller financing of approximately $5.4 million in connection with this sale.

Subsequent to June 30, 2025, the Company disposed of the following properties:

Dollars in thousands Date Disposed Sale Price Square Footage

South Bend, IN 7/15/25 $ 43,100 205,573

Milwaukee, WI 1

7/29/25 42,000 147,406

Naples, FL 7/29/25 19,250 61,359

New York, NY 7/30/25 25,000 89,893

Total $ 129,350 504,231

1 Includes two medical outpatient properties.

Capital Expenditures

During the three months ended March 31, 2025, the Company incurred capital costs totaling $67.9 million for the following:

During the six months ended June 30, 2025, the Company incurred capital costs totaling $158.4 million for the following:

• $75.4 million toward development and redevelopment of properties;

3 unchanged sentences

Real Estate Notes Receivable

In January 2025, the Company received $14.9 million as payment towards the principal balance of its mortgage loan maturing on December 2, 2024.

In January 2025, the Company received $14.9 million as payment towards the principal balance of its mortgage loan that matured on December 2, 2024.

In March 2025, the Company executed a mezzanine loan receivable agreement with a maximum loan commitment of $8.5 million.

As of March 31, 2025, no amount was funded under this agreement.

As of June 30, 2025, the Company had funded $2.8 million under this agreement.

In April 2025, a mortgage loan receivable of $37.7 million maturing in February 2026 was repaid in full.

See Note 1 to the Condensed Consolidated Financial Statements accompanying this report for more information about real estate notes receivable and allowance for credit losses.

See Note 1 to the Condensed Consolidated Financial Statements in this report for more information about real estate notes receivable and allowance for credit losses.

Financing Activities

Cash flows used in financing activities for the three months ended March 31, 2025 were approximately $52.1 million.

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

Cash flows used in financing activities for the six months ended June 30, 2025 were approximately $212.3 million.

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

Debt Activity

As of March 31, 2025, the Company had outstanding interest rate derivatives totaling $1.1 billion to hedge the one-month term Secured Overnight Financing Rate ("SOFR").

As of June 30, 2025, the Company had outstanding interest rate swaps totaling $1.1 billion to hedge the one-month term Secured Overnight Financing Rate ("SOFR").

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

7 unchanged sentences

Changes in Debt Structure

During the first quarter of 2025, the Company repaid $25.0 million of the $200 million Unsecured Term Loan due May 2025 and $10.0 million of the $300 million Unsecured Term Loan.

Subsequent Debt Activity

During the first quarter of 2025, the Company repaid $25.0 million of the $200 million Unsecured Term Loan due May 2025 and $10.0 million of the $300 million Unsecured Term Loan due October 2025.

On April 8, 2025, the Company exercised its second of two options to extend the maturity date of the $200 million Unsecured Term Loan due May 2025 to January 2026 for a fee of approximately $0.1 million.

The existing $200 million term loan facility was amended to include a four-month extension option, resulting in a latest final maturity in May 2026.

The existing $200 million term loan facility was also amended to include a four-month extension option, which would extend the final maturity to May 2026.

On May 1, 2025, the Company repaid its Senior Notes due 2025 at maturity including $250 million of principal and $4.8 million of accrued interest.

On July 25, 2025, the Company entered into the Fifth Amended and Restated Revolving Credit and Term Loan Agreement (the “ New Credit Facility ”) with Wells Fargo Bank, National Association, as Administrative Agent;

Wells Fargo Securities, LLC and JPMorgan Chase Bank, N.A.

as Joint Book Runners;

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

Bank National Association, The Bank of Nova Scotia, and BofA Securities, Inc., as Joint Lead Arrangers;

and the other lenders named therein.

The New Credit Facility provides for (i) a $1.5 billion unsecured revolving credit facility (the “Revolver”) and (ii) five individual unsecured term loan tranches totaling $1.115 billion.

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

A summary of the principal terms of the New Credit Facility and the New Credit Facility's effect on the Company's existing revolving credit term loan facilities is as follows:

• The New Credit Facility replaces the Unsecured Credit Facility.

All outstanding obligations due under the Unsecured Credit Facility were reallocated to the lenders under the New Credit Facility.

• The Company’s $1.5 billion Revolver was continued with a maturity extension from October 31, 2025 to July 25, 2029, with two six-month extension options.

The Revolver includes a sublimit of $120 million for letters of credit.

• The previously funded $175 million term loan was continued with a maturity date of January 31, 2026 and three extension options totaling 16 months.

• The previously funded $150 million term loan was continued with a maturity date of June 1, 2026, with two extension options of six months each.

• The previously funded $290 million term loan was continued with a maturity date of October 31, 2025, with four extension options totaling 24 months.

• The previously funded $200 million term loan was continued with a maturity date of July 20, 2027, with two extension options of 12 months each.

• The previously funded $300 million term loan was continued with a maturity date of January 20, 2028, with one extension option of 12 months.

Revolving loans outstanding under the New Credit Facility bear interest at a floating rate equal to the daily simple Secured Overnight Financing Rate ("SOFR"), term SOFR or base rates, as applicable, plus an applicable margin.

The applicable margin is determined based on the Borrower’s credit ratings and ranges from 0.725% per annum to 1.40% per annum (currently 0.85% per annum).

Term loans outstanding under the New Credit Facility bear interest at a rate equal to Term SOFR rates plus an applicable margin.

The applicable margin is determined based on the Borrower’s credit ratings and ranges from 0.80% per annum to 1.60% per annum (currently 0.95% per annum).

In addition, the Borrower pays a facility fee on the Revolver commitments at a rate per annum determined based on the Borrower’s credit ratings and ranging from 0.125% per annum to 0.30% per annum (currently 0.20% per annum).

Except as set forth above, the principal terms of the New Credit Facility are substantially consistent with the terms of the Unsecured Credit Facility.

Specifically, the New Credit Facility contains representations and warranties and affirmative and negative covenants that are customary for facilities of this size and type.

These covenants include, among others:

limitations on the incurrence of additional indebtedness;

limitations on mergers, investments and acquisitions;

limitations on dividends and redemptions of capital stock;

limitations on transactions with affiliates;

and requirements to comply with certain financial covenants, including a maximum consolidated leverage ratio, a maximum consolidated secured leverage ratio, a maximum consolidated unencumbered leverage ratio, a minimum fixed charge coverage ratio and a minimum unsecured coverage ratio.

Supplemental Guarantor Information

4 unchanged sentences

Operating Activities

Cash flows provided by operating activities decreased from $76.2 million for the three months ended March 31, 2024 to $47.8 million for the three months ended March 31, 2025.

Cash flows provided by operating activities decreased from $244.3 million for the six months ended June 30, 2024 to $211.0 million for the six months ended June 30, 2025.

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

13 unchanged sentences

Approximately 70.2% of the leases expiring during the remainder of 2025 are for space in buildings located on or adjacent to hospital campuses, are distributed throughout the portfolio, and are not concentrated with any one tenant, health system or market area.

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

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

Prospect Medical

5 unchanged sentences

While it is early in the bankruptcy proceedings and the Company is in discussions with Prospect regarding its leases with the Company, there can be no assurance that the Company will recover unpaid rent from Prospect.

Through March 2025, the Company received rent payments of approximately $0.7 million.

Additionally, the Company received payment of approximately $0.3 million for April rent.

During the six months ended June 30, 2025, the Company received rent payments of approximately $1.6 million.

Operating Expenses

3 unchanged sentences

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

As of March 31, 2025, leases for approximately 91% of the Company's total leased square footage allow for some recovery of operating expenses, with approximately 28% having modified gross lease structures and approximately 63% having net lease structures.

As of June 30, 2025, leases for approximately 92% of the Company's total leased square footage allow for some recovery of operating expenses, with approximately 29% having modified gross lease structures and approximately 63% having net lease structures.

Purchase Options

1 unchanged sentence

YEAR EXERCISABLE NUMBER OF PROPERTIES GROSS REAL ESTATE INVESTMENT AS OF

MARCH 31, 2025 1

JUNE 30, 2025 1

2026 5 142,819

13 unchanged sentences

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

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

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

5 unchanged sentences

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

FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, non-cash financing receivable amortization, loan origination cost amortization, deferred financing fees amortization, stock-based compensation expense and rent reserves, net;

FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, non-cash financing receivable amortization, loan origination cost

amortization, deferred financing fees amortization, stock-based compensation expense and rent reserves, net;

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

10 unchanged sentences

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

The table below reconciles net income to FFO, Normalized FFO and FAD for the three months ended March 31, 2025, and 2024:

THREE MONTHS ENDED MARCH 31,

The table below reconciles net income to FFO, Normalized FFO and FAD for the three and six months ended June 30, 2025, and 2024:

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

Amounts in thousands, except per share data 2025 2024 2025 2024

12 unchanged sentences

FFO attributable to common stockholders per common share - diluted $ 0.34 $ 0.33 $ 0.69 $ 0.03

$ 0.35 $ (0.30)

Transaction costs 593 431 1,604 826

3 unchanged sentences

Credit losses and losses on other assets, net 2

1,471 8,525 3,407 8,525

Impairment of goodwill — — — 250,530

1 unchanged sentence

Unconsolidated JV normalizing items 3

163 89 367 176

Normalized FFO adjustments $ 23,365 $ 19,703 $ 37,313 $ 280,995

5 unchanged sentences

Non-cash interest amortization, net 4

1,130 1,267 2,348 2,543

Rent reserves, net 130 1,261 224 1,110

2 unchanged sentences

Unconsolidated JV non-cash items 5

(356) (148) (609) (270)

Normalized FFO adjusted for non-cash items $ 141,689 $ 142,777 $ 276,875 $ 288,015

6 unchanged sentences

1 Potential common shares are not included in diluted earnings per share when a loss exists as the effect would be antidilutive.

2 For the three months ended March 31, 2024, basic weighted average common shares outstanding was the denominator used in the per share calculation.

3 For the three months ended March 31, 2025, represents a $1.9 million loss on other assets included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations.

2 For the six months ended June 30, 2025, represents a $1.5 million credit loss reserve on a mortgage note receivable and a $1.9 million loss on other assets included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations.

For the three and six months ended June 30, 2024, includes a $4.9 million gain on sale of corporate assets included in "Gains on sales of real estate and other assets" on the Statement of Operations, a $2.2 million straight line rent reversed included in "Rental income" on the Statement of Operations, and a $11.2 million credit loss reserve on a note receivable included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations.

3 Includes the Company's proportionate share of lease intangible amortization related to unconsolidated joint ventures.

1 unchanged sentence

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

7 The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 317,511 and 254,261, respectively, for the three months ended March 31, 2025 and 2024, and the dilutive impact of 3,665,625 OP units outstanding for the three months ended March 31, 2025.

6 The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstand ing of 287,797 and 420,687, respectively, for the three months ended June 30, 2025 and 2024, and the dilutive impact of 4,161,628 and 3,914,997 OP Units outstanding for the three and six months ended June 30, 2025, respectively.

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

11 unchanged sentences

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

The following table reflects the Company's Same Store Cash NOI for the three months ended March 31, 2025 and 2024:

The following table reflects the Company's Same Store Cash NOI for the six months ended June 30, 2025 and 2024:

NUMBER OF PROPERTIES GROSS INVESTMENT

as of March 31, 2025 SAME STORE CASH NOI for the three months ended March 31,

as of June 30, 2025 SAME STORE CASH NOI for the six months ended June 30,

Dollars in thousands 2025 2024

1 unchanged sentence

Joint venture same store properties 30 $ 330,690 $ 8,806 $ 9,036

The following tables reconcile net loss to Same Store NOI and the same store property metrics to the total owned real estate portfolio for the three months ended March 31, 2025 and 2024:

The following tables reconcile net loss to Same Store NOI and the same store property metrics to the total owned real estate portfolio for the six months ended June 30, 2025 and 2024:

Reconciliation of Same Store Cash NOI

SAME STORE RECONCILIATION

THREE MONTHS ENDED MARCH 31,

SIX MONTHS ENDED JUNE 30,

Dollars in thousands 2025 2024

16 unchanged sentences

Reconciliation of Same Store Properties

AS OF MARCH 31, 2025

AS OF JUNE 30, 2025

Dollars and square feet in thousands PROPERTY COUNT GROSS INVESTMENT 1

11 unchanged sentences

Results of Operations

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

The Company’s results of operations for the three months ended March 31, 2025, compared to the same period in 2024 were impacted by developments, dispositions, gains on sale, and capital markets transactions.

Rental income decreased $29.2 million, or 9.2%, for the three months ended March 31, 2025, compared to the prior year period.

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024

The Company’s results of operations for the three months ended June 30, 2025, compared to the same period in 2024 were impacted by developments, dispositions, gains on sale, and capital markets transactions.

Rental income decreased $21.1 million, or 6.8%, for the three months ended June 30, 2025, compared to the prior year period.

This decrease is primarily comprised of the following:

2 unchanged sentences

• Developments completed in 2024 resulted in an increase of $1.8 million.

Other operating income increased $2.2 million, or 52.4%, for the three months ended March 31, 2025, compared to the prior year period primarily as a result of income from management fees related to unconsolidated joint ventures.

Property operating expenses decreased $6.1 million, or 5.1%, for the three months ended March 31, 2025, compared to the prior year period primarily as a result of the following activity:

Other operating income increased $2.7 million, or 61.6%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of income from management fees related to unconsolidated joint ventures.

Property operating expenses decreased $7.8 million, or 6.6%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:

• Dispositions in 2024 and 2025 resulted in a decrease of $12.7 million.

• Increases in portfolio operating expenses as follows:

◦ Maintenance and repair expense of $2.0 million;

◦ Utilities expense of $1.4 million;

◦ Leasing commissions and other administrative and legal expenses of $1.3 million;

◦ Property taxes of $1.4 million;

◦ Compensation expense of $1.2 million;

◦ Utilities expense of $0.7 million;

◦ Janitorial expense of $0.6 million.

• Developments completed in 2024 resulted in an increase of $0.4 million.

General and administrative expenses decreased approximately $1.3 million, or 8.5%, for the three months ended March 31, 2025, compared to the prior year period primarily as a result of the following activity:

General and administrative expenses increased approximately $9.5 million, or 67.7%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:

• Decreases in the following expenses:

◦ Cash compensation expense of $0.5 million;

◦ Travel expenses of $0.3 million;

◦ Non-cash compensation incentive expense of $0.5 million;

◦ Other decreases include legal and other administrative costs of $1.6 million.

• Increases in the following expenses:

◦ Restructuring and severance-related charges of $10.3 million;

◦ Cash incentive compensation expense of $1.1 million;

◦ Other decreases including legal and other administrative costs of $0.5 million.

• Increases related to restructuring and severance-related charges of $0.5 million.

Depreciation and amortization expense decreased $27.2 million, or 15.2%, for the three months ended March 31, 2025, compared to the prior year period primarily as a result of the following activity:

• Various building and tenant improvement expenditures resulted in an increase of $7.4 million.

◦ Non-cash incentive compensation expense of 0.5 million.

Depreciation and amortization expense decreased $25.7 million, or 14.8%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:

• Dispositions in 2024 and 2025 resulted in a decrease of $17.3 million.

• Assets that became fully depreciated resulted in a decrease of $17.2 million.

• Various building and tenant improvement expenditures resulted in an increase of $8.3 million.

• Developments completed in 2024 resulted in an increase of $0.5 million.

1 unchanged sentence

Gains on sale of real estate properties and other assets

In the first quarter of 2025, the Company recognized gains on sale of real estate properties and other assets of approximately $2.9 million.

In the first quarter of 2024, the Company had no real estate dispositions.

In the three months ended June 30, 2025 , the Company recognized gains on sale of real estate properties and other assets of approximately $20.0 million.

In the three months ended June 30, 2024, the Company recognized gains on sale of real estate properties and other assets of approximately $38.3 million.

Interest expense

Interest expense decreased $6.2 million, or 10.2%, for the three months ended March 31, 2025, compared to the prior year period.

Interest expense decreased $9.1 million, or 14.6%, for the three months ended June 30, 2025, compared to the prior year period.

The components of interest expense are as follows:

THREE MONTHS ENDED MARCH 31, CHANGE

THREE MONTHS ENDED JUNE 30, CHANGE

Dollars in thousands 2025 2024 $ %

4 unchanged sentences

Amortization of treasury hedge settlement 107 107 — — %

Fair value derivative — 177 (177) (100.0) %

Interest cost capitalization (3,751) (974) (2,777) 285.1 %

1 unchanged sentence

Total interest expense $ 53,346 $ 62,457 $ (9,111) (14.6) %

Contractual interest expense decreased $6.6 million, or 13.3%, for the three months ended March 31, 2025, compared to the prior year period primarily as a result of the following activity:

Contractual interest expense decreased $6.7 million, or 13.1%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:

• The unsecured term loans accounted for a decrease of approximately $8.8 million due to a decreased aggregate balance.

• The Unsecured Credit Facility accounted for a decrease of approximately $0.4 million as a result of a decreased weighted average balance outstanding.

• Active interest rate derivatives accounted for an increase of $2.8 million, while expired interest rate derivatives accounted for an increase of $0.3 million.

• The Unsecured Credit Facility accounted for an increase of approximately $1.1 million as a result of an increased weighted average balance outstanding.

• The redemption of the Senior Notes due 2025 accounted for a decrease of $1.6 million.

• Active interest rate swaps accounted for an increase of $2.7 million.

• Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.1 million.

Impairment of real estate properties and credit loss reserves

In the first quarter of 2025, the Company recognized impairments totaling $5.4 million on four properties sold and $4.8 million on three properties with changes in the expected holding periods.

In addition, the Company recorded a $1.9 million fair value adjustment for an equity investment in other assets.

In the first quarter of 2024, the Company recognized impairments totaling $15.9 million on four properties with changes in the expected holding periods, including one property reclassified to held for sale.

In the second quarter of 2025, the Company recognized impairments totaling $15.0 million on two properties sold and $125.9 million on thirteen properties with changes in the expected holding periods.

In addition, the Company recorded a $1.5 million credit loss reserve related to one of its mortgage notes receivables.

In the second quarter of 2024, the Company recognized impairments totaling $10.2 million on 15 properties sold and $110.7 million on 17 properties with changes in the expected holding periods.

In addition, the Company recorded a $11.2 million credit loss reserve to one of its mortgage note receivables.

Equity loss from unconsolidated joint ventures

1 unchanged sentence

Losses are primarily attributable to non-cash depreciation expense.

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

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

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

The Company’s results of operations for the six months ended June 30, 2025 compared to the same period in 2024 were impacted by developments, dispositions, gains on sale, and capital markets transactions.

Rental income decreased $50.3 million, or 8.0%, for the six months ended June 30, 2025 compared to the prior year period.

This decrease is primarily comprised of the following:

• Dispositions in 2024 and 2025 resulted in a decrease of $75.2 million.

• Leasing activity, including contractual rent increases, resulted in an increase of $21.3 million.

• Developments completed in 2024 resulted in an increase of $3.6 million.

Other operating income increased $4.9 million, or 57.1%, for the six months ended June 30, 2025, compared to the prior year period primarily as a result of income from management fees related to unconsolidated joint ventures.

Property operating expenses decreased $13.9 million, or 5.8%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:

• Dispositions in 2024 and 2025 resulted in a decrease of $26.4 million.

• Increases in portfolio operating expenses as follows:

◦ Administrative, leasing commissions, and other legal expense of $2.7 million;

◦ Compensation expense of $2.5 million

◦ Utilities expense of $2.2 million;

◦ Maintenance and repair expense of $1.8 million;

◦ Property tax expense of $1.5 million;

◦ Janitorial expense of $0.9 million.

◦ Developments completed in 2024 resulted in an increase of $0.9 million.

General and administrative expenses increased approximately $8.2 million, or 28.6%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:

• Increase in restructuring and severance-related charges of $10.8 million.

• Increase in cash incentive compensation expense of $1.1 million.

• Decrease in payroll and payroll related expenses of approximately $0.7 million.

• Decrease in travel-related expenses of 0.7 million.

• Other decreases include legal and other administrative costs of $2.3 million.

Depreciation and amortization expense decreased $52.9 million, or 15.0%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:

• Dispositions in 2024 and 2025 resulted in a decrease of $37.3 million.

• Assets that became fully depreciated resulted in a decrease of $32.1 million.

• Developments completed in 2024 resulted in an increase of $1.1 million.

• Various building and tenant improvement expenditures resulted in an increase of $15.4 million.

Other Income (Expense)

Gains on sale of real estate properties and other assets

Gains on the sale of real estate properties and other assets for the six months ended June 30, 2025 and 2024, totaled $22.9 million and $38.4 million, respectively.

Interest expense

Interest expense decreased $15.4 million, or 12.4%, for the six months ended June 30, 2025 compared to the prior year period.

The components of interest expense are as follows:

SIX MONTHS ENDED JUNE 30, CHANGE

Dollars in thousands 2025 2024 $ %

Contractual interest $ 87,154 $ 100,414 $ (13,260) (13.2) %

Net discount/premium accretion 21,312 20,265 1,047 5.2 %

Debt issuance costs amortization 2,196 2,392 (196) (8.2) %

Amortization of interest rate swap settlement 53 84 (31) (36.9) %

Amortization of treasury hedge settlement 213 213 — — %

Fair value derivative — 178 (178) (100.0) %

Interest cost capitalization (4,608) (1,916) (2,692) 140.5 %

Interest on lease liabilities 1,837 1,880 (43) (2.3) %

Total interest expense $ 108,157 $ 123,510 $ (15,353) (12.4) %

Contractual interest expense decreased $13.3 million, or 13.2%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:

• The unsecured term loans accounted for a decrease of approximately $6.9 million.

• The unsecured term loan repayments accounted for a decrease of approximately $11.1 million

• The Unsecured Credit Facility accounted for an increase of approximately $0.8 million as a result of an increased weighted average balance outstanding.

• Active interest rate swaps accounted for an increase of $5.5 million, while expired interest rate swaps accounted for an increase of $0.3 million.

• Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.2 million.

• The redemption of the Senior Note due 2025 accounted for a decrease of $1.6 million.

Impairment of real estate properties and credit loss reserves

During the six months ended June 30, 2025 , the Company recognized impairments totaling $151.0 million on six properties sold and 17 properties with changes in the expected holding periods.

In addition, the Company recorded $1.5 million in credit loss reserves relating to a mortgage notes receivable and a $1.9 million fair value adjustment for an equity investment in other assets.

During the six months ended June 30, 2024, the Company recognized impairments totaling $136.9 million on 15 properties sold and 18 properties with changes in the expected holding periods, including one property reclassified to held for sale.

In addition, the Company recorded $11.2 million in credit loss reserves related to one of its mortgage notes receivable.

Impairment of Goodwill

During the three months ended March 31, 2024, the Company determined that the carrying value of its single reporting unit exceeded estimated fair value and therefore 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 1 to the Condensed Consolidated Financial Statements in this report for more details.

Equity loss from unconsolidated joint ventures

The Company recognized its proportionate share of losses from its unconsolidated joint ventures.

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

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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis