What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-01 compared with 2025-10-31 · 85 added, 235 removed, 247 unchanged (56% of the section changed)

4 unchanged sentences

Disclosure Regarding Forward-Looking Statements

This report and other materials the Company has filed or may file with the SEC, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could” and other comparable terms.

This report contains disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can often be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could” and other comparable terms.

These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could materially affect the Company’s current plans and expectations and future financial condition and results.

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• The Company’s revenues depend on the ability of its tenants under its leases to generate sufficient income from their operations to make rental payments to the Company;

• The Company's results of operations have been and will continue to be impacted negatively by the Steward Health and Prospect Medical bankruptcies;

• The Company's results of operations have been and will continue to be impacted negatively by the Prospect Medical bankruptcy;

• Owning real estate and indirect interests in real estate is subject to inherent risks;

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• Covenants in the Company’s debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company’s consolidated financial condition and results of operations;

• If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company’s operations and consolidated financial position would be negatively impacted;

• If lenders under the Revolving Facility fail to meet their funding commitments, the Company’s operations and consolidated financial position would be negatively impacted;

• The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings could have an adverse effect on the Company’s ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and development activity;

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

• 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;

• Trends in the healthcare service industry, including the impact of the One Big Beautiful Bill Act passed during 2025 that is 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;

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The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.

Stockholders and investors are cautioned not to unduly rely on such forward-looking statements, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.

Liquidity and Capital Resources

Sources and Uses of Cash

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.

On July 25, 2025, the Company entered into the Unsecured Credit Facility, which, among other things, replaced the Prior Credit Facility and extended the maturity of its revolver to July 2029.

As of September 30, 2025, the Company had $1.4 billion available to be drawn on the Unsecured Credit Facility and available cash.

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.

Management believes that the Company's liquidity and sources of capital are adequate to satisfy its cash requirements.

The Company's revenues are derived from its real estate property portfolio based on contractual arrangements with its tenants.

These sources of revenue represent the Company's primary source of liquidity to fund its dividends and its operating expenses, including interest incurred on debt, principal payments on debt, general and administrative costs, capital expenditures and other expenses incurred in connection with managing its existing portfolio and investing in additional properties.

To the extent additional investments are not funded by these sources, the Company expects to fund its investment activity generally through equity or debt issuances either in the public or private markets, asset sales and joint venture contributions or through proceeds from the Revolving Facility and Commercial Paper Program.

As of March 31, 2026, the Company had $1.2 billion available to be drawn on the Revolving Facility, net of Commercial Paper Program borrowings, and available cash.

The Company expects to continue to meet its liquidity needs, including capital for additional investments, tenant improvement allowances, operating and finance lease payments, paying dividends, share repurchases, and funding debt service, through cash on hand, cash flows from operations and the cash flow sources addressed above.

Management believes that the Company's liquidity and sources of capital are adequate to satisfy our short and long-term cash requirements.

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, 2026 were funded from cash flows from operations and the Revolving 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 2026 such that dividends for the full year 2026 can be funded by cash flows from operations or other sources of liquidity described above.

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

Operating Activities

Cash flows provided by operating activities increased from $47.8 million for the three months ended March 31, 2025 to $52.9 million for the three months ended March 31, 2026.

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.

The Company may, from time to time, sell properties and redeploy cash from property sales into new investments or to repay indebtedness.

The income from the new investments or reduction in interest expense could be less than the income from properties sold which would adversely affect the Company's results of operations and cash flows.

Investing Activities

Cash flows used in investing activities for the nine months ended September 30, 2025, were approximately $184.3 million.

Cash flows used in investing activities for the three months ended March 31, 2026 and March 31, 2025, were approximately $45.3 million and $38.8 million, respectively.

Below is a summary of the investing activities.

The Company disposed of 31 medical outpatient properties and two land parcels during the nine months ended September 30, 2025 for a total sales price of $477.6 million, generating net proceeds of $447.3 million after seller financing and closing credits.

The following table details these dispositions for the nine months ended September 30, 2025:

Dollars in thousands Date Disposed Sale Price Square Footage

Boston, MA 2/7/25 $ 4,500 30,304

2/14/25 8,600 69,715

Houston, TX 2

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 —

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

Milwaukee, WI 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

Boston, MA 8/25/25 450 9,010

Lakeland, FL 8/27/25 7,325 31,158

Salem, OR 8/29/25 4,000 21,026

Milwaukee, WI 1

9/29/25 60,000 220,747

Tampa, FL 9/30/25 22,000 47,962

Dallas, TX 2 5

The Company had no real estate acquisition activity for the three months ended March 31, 2026.

Subsequent to March 31, 2026, the Company acquired the following property:

Dollars in thousands DATE ACQUIRED PURCHASE PRICE SQUARE FOOTAGE

Charlotte, NC 1

4/24/26 $ 3,670 12,418

Chicago, IL 9/30/25 18,700 56,531

Columbus, OH 4

Represents an additional fully leased condominium unit, by Novant Health under a long-term lease in an existing building, bringing the Company's ownership of the building to 93%.

The Company disposed of three medical outpatient properties during the three months ended March 31, 2026 for a total sales price of $33.4 million, generating net proceeds of $30.0 million after closing credits.

The following table details these dispositions for the three months ended March 31, 2026:

Dollars in thousands Date Disposed Sale Price Square Footage

Atlanta, GA 1/14/26 $ 21,900 60,039

Oklahoma City, OK 1

3/3/26 11,500 186,301

Miami, FL 9/30/25 62,000 152,976

Total $ 33,400 246,340

1 Includes two medical outpatient properties.

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

3 Includes four medical outpatient properties.

4 Includes three medical outpatient properties.

5 Proceeds held in a cash escrow account and recorded in other assets.

Cash was received by the Company on October 1, 2025.

Subsequent to September 30, 2025, the Company disposed of the following land parcel and a property which was classified as held for sale as of September 30, 2025:

Dollars in thousands Date Disposed Sale Price Square Footage

New Haven, CT 10/16/25 $ 725 —

Des Moines, IA 10/29/25 7,225 152,655

Total $ 7,950 152,655

Capital Expenditures

During the nine months ended September 30, 2025, the Company incurred capital costs totaling $230.1 million for the following:

During the three months ended March 31, 2026, the Company incurred capital costs totaling $49.1 million for the following:

• $18.3 million toward development and redevelopment of properties;

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• $4.1 million toward building capital.

Investment in Unconsolidated Joint Venture

During the three months ended March 31, 2026, the Company invested additional funding of $18.6 million, of which $17.7 million related to a property acquisition, in existing joint ventures in which it holds a 20% interest.

Real Estate Notes Receivable

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 September 30, 2025, the Company had funded $6.2 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 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 nine months ended September 30, 2025 were approximately $534.5 million.

Cash flows used in financing activities for the three months ended March 31, 2026 and March 31, 2025, were approximately $7.5 million and $52.1 million, respectively.

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 September 30, 2025, the Company had 15 outstanding interest rate swaps totaling $1.0 billion to hedge the one-month term Secured Overnight Financing Rate ("SOFR").

As of September 30, 2025, seven of these swaps totaling $500 million were designated as cash flow hedges.

On February 12, 2026, Healthcare Realty established its inaugural commercial paper program, with a total size of up to $600 million.

As of March 31, 2026, the Company had a principal balance of $251.0 million outstanding.

In February 2026, the Company terminated three interest rate swaps with a total notional value of $400.0 million that were set to mature in 2026 and 2027.

The Company entered into two new interest rate swaps with a total notional value of $400.0 million, at a strike price of 3.32%, that mature in January 2029.

As of March 31, 2026, the Company had six outstanding interest rate derivatives totaling $500.0 million to hedge the one-month term Secured Overnight Financing Rate ("SOFR").

As of March 31, 2026, all six of these swaps were designated as cash flow hedges.

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

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May 2026 $ 100,000 2.15 %

June 2026 150,000 3.83 %

December 2026 150,000 3.84 %

June 2027 200,000 4.27 %

December 2027 300,000 3.93 %

January 2029 400,000 3.32 %

$ 500,000 3.09 %

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 due October 2025.

On April 8, 2025, the Company exercised its final option 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 also amended to include a four-month extension option, which would extend the final maturity to May 2026.

On October 7, 2025, the Company fully repaid its $200 million Unsecured Term Loan due January 2026, which had a remaining principal balance of $151.3 million.

On September 26, 2025, the Company exercised an option to extend the maturity date of the $300 million Term Loan to January 2026 for a fee of approximately $0.1 million.

The Company has three additional options to extend the maturity date of this term loan.

As of September 30, 2025, the principal balance was $268.7 million.

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 Unsecured Credit Facility, which replaced the Prior Credit Facility.

See Note 4 to the Condensed Consolidated Financial Statements in this report for more information about the Unsecured Credit Facility and the Prior Credit Facility.

Supplemental Guarantor Information

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All unsecured notes are fully and unconditionally guaranteed by the Company, and the OP is 98.8% owned by the Company.

Effective January 4, 2021, the Securities and Exchange Commission (the “SEC”) adopted amendments to the financial disclosure requirements which permit subsidiary issuers of

obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent.

Effective January 4, 2021, the Securities and Exchange Commission (the “SEC”) adopted amendments to the financial disclosure requirements which permit subsidiary issuers of obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent.

Accordingly, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, the Company has excluded the summarized financial information for the OP because the assets, liabilities, and results of operations of the OP are not materially different than the corresponding amounts in the Company's consolidated financial statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

Operating Activities

Cash flows provided by operating activities decreased from $363.6 million for the nine months ended September 30, 2024 to $324.8 million for the nine months ended September 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.

The Company may, from time to time, sell properties and redeploy cash from property sales into new investments or to repay indebtedness.

Trends and Matters Impacting Operating Results

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Economic and Market Conditions

Rising interest rates and increased volatility in the capital markets have increased the Company’s cost and availability of debt and equity capital.

Increased volatility in interest rates and in the capital markets have increased the Company’s cost and impacted the availability of debt and equity capital.

Limited availability and increases in the cost of capital could adversely impact the Company’s ability to finance operations and acquire, develop, and redevelop properties.

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Approximately 72% of the leases expiring during the remainder of 2026 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 nine months of the year was within this range.

Prospect Medical

On January 11, 2025, Prospect Medical Holdings (“Prospect”) filed petitions for relief under Chapter 11 of the U.S.

Bankruptcy Code in the U.S.

Bankruptcy Court for the Northern District of Texas.

Prospect leases approximately 80,912 square feet of space from the Company, accounting for approximately $2.9 million of annual revenue.

The Company moved to cash basis accounting for these leases and recorded a reserve of $0.7 million in the fourth quarter of 2024.

On October 16, 2025, Prospect designated ECHN Holdings, Inc., a subsidiary of Hartford HealthCare (“Hartford Health”) as the successful bidder for the Prospect assets most closely associated with the Company’s Prospect leases.

While the Company owns approximately 220,000 square feet of space currently leased by Hartford Health, there can be no assurances that Hartford Health will assume Prospect’s leases with the Company.

During the nine months ended September 30, 2025, the Company received rent payments due from Prospect totaling approximately $2.4 million.

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.

Operating Expenses

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

As of September 30, 2025, leases for approximately 92% of the Company's total leased square footage allow for some recovery of operating expenses, with approximately 30% having modified gross lease structures and approximately 62% having net lease structures.

As of March 31, 2026, leases for approximately 92% of the Company's total leased square footage allow for some recovery of operating expenses, with approximately 30% having modified gross lease structures and approximately 62% having net lease structures.

Purchase Options

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YEAR EXERCISABLE NUMBER OF PROPERTIES GROSS REAL ESTATE INVESTMENT AS OF

SEPTEMBER 30, 2025 1

MARCH 31, 2026 1

2026 (remaining) 5 152,129

2027 6 171,785

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Total 40 $ 1,137,349

1 Includes three properties totaling $87.6 million with stated purchase prices or prices based on fixed capitalization rates.

1 Purchase option prices are based on fair market value components that are determined by an appraisal process, except fo r two p roperties totaling $42.6 million with stated prices or prices based on fixed capitalization rates.

2 These purchase options have been exercisable for an average of 21.7 years.

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In addition to FFO, the Company presents Normalized FFO and FAD.

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;

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

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

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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 and nine months ended September 30, 2025 and 2024:

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

The table below reconciles net loss to FFO, Normalized FFO and FAD for the three months ended March 31, 2026 and 2025:

THREE MONTHS ENDED MARCH 31,

Amounts in thousands, except per share data 2026 2025

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Unconsolidated JV depreciation and amortization 6,604 6,717

FFO adjustments $ 176,660 $ 170,311 $ 623,530 $ 635,254

FFO adjustments per common share - diluted

$ 0.50 $ 0.47 $ 1.76 $ 1.70

FFO attributable to common stockholders $ 123,698 $ 123,774

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Transaction costs 937 1,011

Lease intangible amortization (203) (10) (652) 294

Non-routine legal costs 9 306 564 771

Debt financing costs 116 —

3,493 — 3,493 —

Restructuring and severance-related charges 7,562 502

Credit losses and losses on other assets, net 3

— 46,600 3,407 55,125

Impairment of goodwill — — — 250,530

Merger-related fair value of debt instruments 10,991 10,446

Unconsolidated JV normalizing items 4

233 101 599 277

Normalized FFO adjustments $ 26,418 $ 64,761 $ 63,730 $ 345,756

Normalized FFO adjustments per common share - diluted

$ 0.07 $ 0.18 $ 0.18 $ 0.92

Other 1,078 1,989

Normalized FFO attributable to common stockholders $ 144,382 $ 137,722

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Non-cash interest amortization, net 1,367 1,217

1,384 1,319 3,731 3,862

Rent reserves, net 146 (27) 370 1,083

Straight-line rent, net (10,291) (7,891)

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Unconsolidated JV non-cash items (89) (253)

(463) (376) (1,073) (646)

Normalized FFO adjusted for non-cash items $ 144,008 $ 141,534 $ 420,882 $ 429,550

2nd generation TI (9,398) (16,951) (36,319) (49,443)

Leasing commissions paid (7,438) (10,266) (24,019) (35,493)

Building capital (10,319) (7,389) (26,117) (25,587)

Rent reserves, net — 94

Maintenance capex (27,101) (32,966)

FAD $ 112,858 $ 102,220

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

2 Includes loss on debt extinguishment, loss on derivatives, and legal fees related to the amended credit facility.

3 For the nine months ended September 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 nine months ended September 30, 2024, includes a $5.1 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 $58.0 million credit loss reserve on three notes receivable included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations.

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

5 Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.

6 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 472,119 and

760,552, respectively, for the three months ended September 30, 2025 and 2024, and the dilutive impact of 4,253,989 and 4,213,402 OP Units outstanding for the three and nine months ended September 30, 2025, respectively.

2 The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 493,403 and 317,511, respectively, for the three months ended March 31, 2026 and 2025, and the dilutive impact of 4,278,028 OP Units outstanding for the three months ended March 31, 2026,

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

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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 nine months ended September 30, 2025 and 2024:

The following table reflects the Company's Same Store Cash NOI for the three months ended March 31, 2026 and 2025:

NUMBER OF PROPERTIES GROSS INVESTMENT

as of September 30, 2025 SAME STORE CASH NOI for the nine months ended September 30,

as of March 31, 2026 SAME STORE CASH NOI for the three months ended March 31,

Dollars in thousands 2026 2025

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Joint venture same store properties 58 $ 497,342 $ 7,479 $ 7,206

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 nine months ended September 30, 2025 and 2024:

The following tables reconcile net income (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, 2026 and 2025:

Reconciliation of Same Store Cash NOI

SAME STORE RECONCILIATION

NINE MONTHS ENDED SEPTEMBER 30,

THREE MONTHS ENDED MARCH 31,

Dollars in thousands 2026 2025

Net loss $ (264,076) $ (555,692)

Net income (loss) $ 21 $ (45,389)

Other expense 31,646 63,893

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Other expenses 1

22,676 16,388

Straight-line rent, net (7,896) (6,844)

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Includes transaction costs, rent reserves, above and below market ground lease intangible amortization, leasing commission amortization and ground lease straight-line rent expense.

Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization.

Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease termination fees and tenant improvement overage amortization.

Reconciliation of Same Store Properties

AS OF SEPTEMBER 30, 2025

AS OF MARCH 31, 2026

Dollars and square feet in thousands PROPERTY COUNT GROSS INVESTMENT 1

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Results of Operations

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

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

Rental income decreased $19.1 million, or 6.2%, for the three months ended September 30, 2025, compared to the prior year period.

Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025

The Company’s results of operations for the three months ended March 31, 2026, compared to the same period in 2025 were impacted by developments, dispositions, gain on sales and impairment charges recorded on real estate properties, and capital markets transactions.

Rental income decreased $21.3 million, or 7.4%, for the three months ended March 31, 2026, compared to the prior year period.

This decrease is primarily comprised of the following:

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• Developments completed in 2025 resulted in an increase of $0.6 million.

Interest income decreased $0.4 million, or 10.9% for the three months ended September 30, 2025, compared to the prior year period primarily as a result of the repayment and maturity of note receivables, partially offset by the addition of new mortgages receivables.

Other operating income increased $1.9 million, or 37.2%, for the three months ended September 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 $6.8 million, or 5.6%, for the three months ended September 30, 2025, compared to the prior year period primarily as a result of the following activity:

Other operating income increased $1.3 million, or 20.6%, for the three months ended March 31, 2026, compared to the prior year period primarily as a result of income from management fees.

Property operating expenses decreased $9.8 million, or 9.0%, for the three months ended March 31, 2026, compared to the prior year period primarily as a result of the following activity:

• Dispositions in 2025 and 2026 resulted in a decrease of $12.8 million.

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▪ Property tax expense of $0.2 million;

◦ Insurance expense of $0.2 million.

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

▪ Other administrative and legal expenses of $0.2 million;

• Increases in portfolio operating expenses as follows:

◦ Leasing commissions and other administrative and legal expenses of $1.1 million;

◦ Utilities expense of $1.5 million;

◦ Compensation expense of $0.9 million;

◦ Janitorial expense of $0.3 million;

◦ Maintenance and repair expense of $0.7 million;

General and administrative expenses increased approximately $1.6 million, or 8.2%, for the three months ended September 30, 2025, compared to the prior year period primarily as a result of the following activity:

◦ Janitorial expense of $0.1 million.

• Developments completed in 2025 resulted in an increase of $0.2 million.

General and administrative expenses increased approximately $3.8 million, or 28.2%, for the three months ended March 31, 2026, compared to the prior year period primarily as a result of the following activity:

• Increase in restructuring and severance-related charges of $7.1 million and non-cash incentive compensation expense of $0.9 million.

• Decreases in the following expenses:

• Cash compensation expense of $3.1 million;

◦ Non-cash incentive compensation expense of $0.7 million;

◦ Incentive based cash compensation expense of $0.4 million;

◦ Other decreases include legal and other administrative costs of $0.7 million.

• Increase in restructuring and severance-related charges of $5.2 million.

Depreciation and amortization expense decreased $25.4 million, or 15.6%, for the three months ended September 30, 2025, compared to the prior year period primarily as a result of the following activity:

Depreciation and amortization expense decreased $27.1 million, or 17.3%, for the three months ended March 31, 2026, compared to the prior year period primarily as a result of the following activity:

• Dispositions in 2025 and 2026 resulted in a decrease of $19.9 million.

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Gains on sale of real estate properties and other assets

In the three months ended September 30, 2025 , the Company recognized gains on sale of real estate properties and other assets of approximately $76.8 million.

In the three months ended September 30, 2024, the Company recognized gains on sale of real estate properties and other assets of approximately $39.3 million.

In the three months ended March 31, 2026 , the Company recognized gains on sale of real estate properties and other assets of approximately $10.8 million.

In the three months ended March 31, 2025, the Company recognized gains on sale of real estate properties and other assets of approximately $2.9 million.

Interest expense

Interest expense decreased $8.0 million, or 13.2%, for the three months ended September 30, 2025, compared to the prior year period.

Interest expense decreased $10.9 million, or 19.9%, for the three months ended March 31, 2026, compared to the prior year period.

The components of interest expense are as follows:

THREE MONTHS ENDED SEPTEMBER 30, CHANGE

THREE MONTHS ENDED MARCH 31, CHANGE

Dollars in thousands 2026 2025 $ %

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Total interest expense $ 43,890 $ 54,812 $ (10,922) (19.9) %

Contractual interest expense decreased $5.8 million, or 11.8%, for the three months ended September 30, 2025, compared to the prior year period primarily as a result of the following activity:

Contractual interest expense decreased $9.3 million, or 21.6%, for the three months ended March 31, 2026, compared to the prior year period primarily as a result of the following activity:

• The unsecured term loans accounted for a decrease of approximately $9.2 million as a result of a decreased aggregate balance.

• The unsecured credit facility accounted for an increase of approximately $1.8 million as a result of an increased weighted average balance outstanding.

• The Revolving Facility accounted for an increase of approximately $1.4 million as a result of an increased weighted average balance outstanding.

• The repayment of the Senior Notes due 2025 accounted for a decrease of $2.4 million.

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

Debt extinguishment costs

In the third quarter of 2025, the Company recorded approximately $0.3 million in debt extinguishment costs related to the replacement of the Prior Credit Facility with the Unsecured Credit Facility.

Interest and other income (expense)

In the third quarter of 2025, the Company reclassified approximately $2.8 million from AOCI to other expense related to ineffectiveness on eight interest rate swaps.

See Note 5 to the Condensed Consolidated Financial Statements in this report for more details regarding the Company's derivative accounting.

• The commercial paper program accounted for an increase of approximately $0.4 million.

Impairment of real estate properties and credit loss reserves

In the third quarter of 2025, the Company recognized impairments totaling $1.6 million on five properties sold and $102.8 million on eight properties with changes in the expected holding periods.

In the third quarter of 2024, the Company recognized impairments totaling $10.8 million on 13 properties sold and $26.8 million on 12 properties with changes in the expected holding periods.

In addition, the Company recorded $46.8 million in credit loss reserves relating to notes receivable.

In the first quarter of 2026, the Company recognized a $1.0 million credit loss recovery on one of its previously settled mortgage notes receivable.

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.

Equity loss from unconsolidated joint ventures

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

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

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

Rental income decreased $69.4 million, or 7.4%, for the nine months ended September 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 $104.0 million.

• Leasing activity, including contractual rent increases, resulted in an increase of $29.0 million.

• Developments completed in 2024 resulted in an increase of $5.6 million.

Interest income decreased $1.6 million, or 13.4%, for the nine months ended September 30, 2025, compared to the prior year period primarily as a result of the repayment and maturity of note receivables, partially offset by the addition of new mortgages receivables.

Other operating income increased $6.7 million, or 49.7%, for the nine months ended September 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 $20.7 million, or 5.8%, for the nine months ended September 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 $35.6 million.

• Decreases in portfolio operating expenses including insurance expense of $0.5 million.

• Developments completed in 2024 resulted in an increase of $1.4 million.

• Increases in portfolio operating expenses as follows:

◦ Administrative, leasing commissions, and other legal expense of $3.8 million;

◦ Compensation expense of $3.4 million;

◦ Utilities expense of $3.0 million;

◦ Maintenance and repair expense of $1.8 million;

◦ Janitorial expense of $1.2 million;

◦ Property tax expense of $0.6 million;

◦ Security expense of $0.2 million.

• General and administrative expenses increased approximately $9.9 million, or 20.2%, for the nine months ended September 30, 2025 compared to the prior year period primarily as a result of the following activity:

• Increase in restructuring and severance-related charges of $16.0 million.

• Increase in cash incentive compensation expense of $1.6 million.

• Decrease in payroll and payroll related expenses of approximately $2.8 million.

• Decrease in travel-related expenses of $1.0 million.

• Decrease in non-cash incentive compensation of $0.7 million.

• Other decreases include legal and other administrative costs of $3.2 million.

Depreciation and amortization expense decreased $78.3 million, or 15.2%, for the nine months ended September 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 $55.6 million.

• Assets that became fully depreciated resulted in a decrease of $47.0 million.

• Developments completed in 2024 resulted in an increase of $1.7 million.

• Various building and tenant improvement expenditures resulted in an increase of $22.6 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 nine months ended September 30, 2025 and 2024, totaled $99.7 million and $77.7 million, respectively.

Interest expense

Interest expense decreased $23.4 million, or 12.7%, for the nine months ended September 30, 2025 compared to the prior year period.

The components of interest expense are as follows:

NINE MONTHS ENDED SEPTEMBER 30, CHANGE

Dollars in thousands 2025 2024 $ %

Contractual interest $ 130,639 $ 149,712 $ (19,073) (12.7) %

Net discount/premium accretion 32,169 30,592 1,577 5.2 %

Debt issuance costs amortization 3,446 3,619 (173) (4.8) %

Amortization of interest rate swap settlement 53 126 (73) (57.9) %

Amortization of treasury hedge settlement 320 320 — — %

Fair value derivative — 187 (187) (100.0) %

Interest cost capitalization (8,591) (3,211) (5,380) 167.5 %

Interest on lease liabilities 2,764 2,814 (50) (1.8) %

Total interest expense $ 160,800 $ 184,159 $ (23,359) (12.7) %

Contractual interest expense decreased $19.1 million, or 12.7%, for the nine months ended September 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 $11.1 million.

• The unsecured term loan repayments accounted for a decrease of approximately $14.7 million

• The Unsecured Credit Facility accounted for an increase of approximately $2.6 million as a result of an increased weighted average balance outstanding.

• Active interest rate swaps accounted for an increase of $8.1 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 $0.3 million.

• The repayment of the Senior Note due 2025 accounted for a decrease of $4.0 million.

Debt extinguishment costs

During the nine months ended September 30, 2025, the Company recorded approximately $0.3 million in debt extinguishment costs related to the replacement of the Prior Credit Facility with the Unsecured Credit Facility.

Interest and other income (expense)

During the nine months ended September 30, 2025, the Company reclassified approximately $2.8 million from AOCI to other expense related to ineffectiveness on eight interest rate swaps.

See Note 5 to the Condensed Consolidated Financial Statements in this report for more details regarding the Company's derivative accounting.

Impairment of real estate properties and credit loss reserves

During the nine months ended September 30, 2025 , the Company recognized impairments totaling $255.4 million on 12 properties sold and 25 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 nine months ended September 30, 2024, the Company recognized impairments totaling $174.5 million on 28 properties sold and 30 properties with changes in the expected holding periods, including one property reclassified to held for sale.

In addition, the Company recorded $58.0 million in credit loss reserves related to three of its notes receivable.

Impairment of Goodwill

During the nine months ended September 30, 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis