Healthcare Realty Trust Inc 10-Q for FY2022 Q1
Healthcare Realty Trust Inc (HR)
10-Q
2022-05-09
For: 2022-03-31
View Original
Added on
April 07, 2026
About this 10-Q
Healthcare Realty Trust Inc filed this 10-Q on May 9, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $202M
- up 5.5% from $191.49M a year earlier
- Net income
- $18.32M
- down 16.9% from net income of $22.03M a year earlier
- Diluted EPS
- $0.08
- down 20.0% from $0.10 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2022
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-35568 (Healthcare Trust of America, Inc.)
Commission File Number: 333-190916 (Healthcare Trust of America Holdings, LP)
_________________________
(Exact name of registrant as specified in its charter)
| (Healthcare Trust of America, Inc.) | ||||||||||||||||||||
| (Healthcare Trust of America Holdings, LP) | ||||||||||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||
| (Address of Principal Executive Office and Zip Code) | (Registrant’s telephone number, including area code) | ||||||||||||||||||||||||||||||||||
www.htareit.com | ||
| (Internet address) | ||
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Healthcare Trust of America, Inc. | ☒ | ¨ No | |||||||||
| Healthcare Trust of America Holdings, LP | ☒ | ¨ No | |||||||||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Healthcare Trust of America, Inc. | ☒ | ¨ No | |||||||||
| Healthcare Trust of America Holdings, LP | ☒ | ¨ No | |||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Healthcare Trust of America, Inc. | ☒ | ☐ | Accelerated filer | ☐ | Non-accelerated filer | |||||||||||||||
| Healthcare Trust of America Holdings, LP | ☐ | Large accelerated filer | ☐ | Accelerated filer | ☒ | |||||||||||||||
| Healthcare Trust of America, Inc. | Smaller reporting company | Emerging growth company | ||||||||||||
| Healthcare Trust of America Holdings, LP | Smaller reporting company | Emerging growth company | ||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Healthcare Trust of America, Inc. | ☐ | ||||
| Healthcare Trust of America Holdings, LP | ☐ | ||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Healthcare Trust of America, Inc. | Yes | x No | |||||||||
| Healthcare Trust of America Holdings, LP | Yes | x No | |||||||||
As of April 29, 2022, there were 229,075,890 shares of Class A common stock of Healthcare Trust of America, Inc. outstanding.
Explanatory Note
This quarterly report combines the Quarterly Reports on Form 10-Q (“Quarterly Report”) for the quarter ended March 31, 2022, of Healthcare Trust of America, Inc. (“HTA”), a Maryland corporation, and Healthcare Trust of America Holdings, LP (“HTALP”), a Delaware limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this Quarterly Report to “we,” “us,” “our,” “the Company” or “our Company” refer to HTA and HTALP, collectively, and all references to “common stock” shall refer to the Class A common stock of HTA.
HTA operates as a real estate investment trust (“REIT”) and is the general partner of HTALP. As of March 31, 2022, HTA owned a 98.3% partnership interest in HTALP, and other limited partners, including some of HTA’s directors, executive officers and their affiliates, owned the remaining partnership interest (including the long-term incentive plan units (“LTIP” Units)) in HTALP. As the sole general partner of HTALP, HTA has the full, exclusive and complete responsibility for HTALP’s day-to-day management and control, including its compliance with the Securities and Exchange Commission (“SEC”) filing requirements.
We believe it is important to understand the few differences between HTA and HTALP in the context of how we operate as an integrated consolidated company. HTA operates as an umbrella partnership REIT structure in which HTALP and its subsidiaries hold substantially all of the assets. HTA’s only material asset is its ownership of partnership units of HTALP. As a result, HTA does not conduct business itself, other than acting as the sole general partner of HTALP, issuing public equity from time to time and guaranteeing certain debts of HTALP. HTALP conducts the operations of the business and issues publicly-traded debt, but has no publicly-traded equity. Except for net proceeds from public equity issuances by HTA, which are generally contributed to HTALP in exchange for partnership units of HTALP, HTALP generates the capital required for the business through its operations and by direct or indirect incurrence of indebtedness or through the issuance of its partnership units (“OP Units”).
Non-controlling interests, stockholders’ equity and partners’ capital are the primary areas of difference between the condensed consolidated financial statements of HTA and HTALP. Limited partnership units in HTALP are accounted for as partners’ capital in HTALP’s condensed consolidated balance sheets and as a non-controlling interest reflected within equity in HTA’s condensed consolidated balance sheets. The differences between HTA’s stockholders’ equity and HTALP’s partners’ capital are due to the differences in the equity issued by HTA and HTALP, respectively.
We believe combining the Quarterly Reports of HTA and HTALP, including the notes to the condensed consolidated financial statements, into this single Quarterly Report results in the following benefits:
•enhances stockholders’ understanding of HTA and HTALP by enabling stockholders to view the business as a whole in the same manner that management views and operates the business;
•eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this Quarterly Report applies to both HTA and HTALP; and
•creates time and cost efficiencies through the preparation of a single combined Quarterly Report instead of two separate Quarterly Reports.
In order to highlight the material differences between HTA and HTALP, this Quarterly Report includes sections that separately present and discuss areas that are materially different between HTA and HTALP, including:
•the condensed consolidated financial statements;
•certain accompanying notes to the condensed consolidated financial statements, including Note 8 - Debt, Note 11 - Stockholders’ Equity and Partners’ Capital, Note 13 - Per Share Data of HTA, and Note 14 - Per Unit Data of HTALP;
•as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), the Funds From Operations (“FFO”) and Normalized FFO in Part 1, Item 2 of this Quarterly Report;
•the Controls and Procedures in Part 1, Item 4 of this Quarterly Report; and
•the Certifications of the Chief Executive Officer and the Chief Financial Officer included as Exhibits 31 and 32 to this Quarterly Report.
In the sections of this Quarterly Report that combine disclosure for HTA and HTALP, this Quarterly Report refers to actions or holdings as being actions or holdings of the Company. Although HTALP (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues or incurs debt, management believes this presentation is appropriate for the reasons set forth above and because the business of the Company is a single integrated enterprise operated through HTALP.
2
HEALTHCARE TRUST OF AMERICA, INC. AND
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
TABLE OF CONTENTS
| Page | ||||||||
| Healthcare Trust of America, Inc. | ||||||||
| Healthcare Trust of America Holdings, LP | ||||||||
| Notes for Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP | ||||||||
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(Unaudited)
| March 31, 2022 | December 31, 2021 | |||||||||||||
| ASSETS | ||||||||||||||
| Real estate investments: | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Building and improvements | ||||||||||||||
| Lease intangibles | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation and amortization | ( | ( | ||||||||||||
Real estate investments, net | ||||||||||||||
| Assets held for sale, net | ||||||||||||||
| Investment in unconsolidated joint venture | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Restricted cash | ||||||||||||||
| Receivables and other assets, net | ||||||||||||||
| Right-of-use assets - operating leases, net | ||||||||||||||
| Other intangibles, net | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Liabilities: | ||||||||||||||
| Debt | $ | $ | ||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||
| Liabilities of assets held for sale | ||||||||||||||
| Derivative financial instruments - interest rate swaps | ||||||||||||||
| Security deposits, prepaid rent and other liabilities | ||||||||||||||
| Lease liabilities - operating leases | ||||||||||||||
| Intangible liabilities, net | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies | ||||||||||||||
| Equity: | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Class A common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive income (loss) | ( | |||||||||||||
| Cumulative dividends in excess of earnings | ( | ( | ||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Non-controlling interests | ||||||||||||||
| Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Rental income | $ | $ | |||||||||
Interest and other operating income | |||||||||||
| Total revenues | |||||||||||
| Expenses: | |||||||||||
| Rental | |||||||||||
| General and administrative | |||||||||||
| Merger-related costs | |||||||||||
| Transaction | |||||||||||
| Depreciation and amortization | |||||||||||
Interest expense | |||||||||||
| Total expenses | |||||||||||
| Loss on sale of real estate, net | ( | ||||||||||
| Income from unconsolidated joint venture | |||||||||||
| Other income | |||||||||||
| Net income | $ | $ | |||||||||
Net income attributable to non-controlling interests | ( | ( | |||||||||
| Net income attributable to common stockholders | $ | $ | |||||||||
Earnings per common share - basic: | |||||||||||
| Net income attributable to common stockholders | $ | $ | |||||||||
Earnings per common share - diluted: | |||||||||||
| Net income attributable to common stockholders | $ | $ | |||||||||
Weighted average common shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income | |||||||||||
| Change in unrealized gains on cash flow hedges | |||||||||||
| Total other comprehensive income | |||||||||||
| Total comprehensive income | |||||||||||
| Comprehensive income attributable to non-controlling interests | ( | ( | |||||||||
| Total comprehensive income attributable to common stockholders | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
| Class A Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Dividends in Excess of Earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Share-based award transactions, net | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Repurchase and cancellation of common stock | ( | ( | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Redemption of non-controlling interest and other | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | ( | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Dividends in Excess of Earnings | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Share-based award transactions, net | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Repurchase and cancellation of common stock | ( | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Redemption of non-controlling interest and other | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| Income from unconsolidated joint venture | ( | ( | |||||||||
| Distributions from unconsolidated joint venture | |||||||||||
| Loss on sale of real estate, net | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables and other assets, net | ( | ||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Security deposits, prepaid rent and other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Investments in real estate | ( | ( | |||||||||
| Development of real estate | ( | ( | |||||||||
| Proceeds from the sale of real estate | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Collection of real estate notes receivable | |||||||||||
| Loan origination fees | |||||||||||
| Advances on real estate notes receivable | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings on unsecured revolving credit facility | |||||||||||
| Payments on unsecured revolving credit facility | ( | ( | |||||||||
| Deferred financing costs | ( | ||||||||||
| Repurchase and cancellation of common stock | ( | ( | |||||||||
| Dividends paid | ( | ( | |||||||||
| Distributions paid to non-controlling interest of limited partners | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash - beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
(Unaudited)
| March 31, 2022 | December 31, 2021 | |||||||||||||
| ASSETS | ||||||||||||||
| Real estate investments: | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Building and improvements | ||||||||||||||
| Lease intangibles | ||||||||||||||
| Construction in progress | ||||||||||||||
| Accumulated depreciation and amortization | ( | ( | ||||||||||||
Real estate investments, net | ||||||||||||||
| Assets held for sale, net | ||||||||||||||
| Investment in unconsolidated joint venture | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Restricted cash | ||||||||||||||
| Receivables and other assets, net | ||||||||||||||
| Right-of-use assets - operating leases, net | ||||||||||||||
| Other intangibles, net | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND PARTNERS’ CAPITAL | ||||||||||||||
| Liabilities: | ||||||||||||||
| Debt | $ | $ | ||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||||
| Liabilities of assets held for sale | ||||||||||||||
| Derivative financial instruments - interest rate swaps | ||||||||||||||
| Security deposits, prepaid rent and other liabilities | ||||||||||||||
| Lease liabilities - operating leases | ||||||||||||||
| Intangible liabilities, net | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies | ||||||||||||||
| Partners’ Capital: | ||||||||||||||
Limited partners’ capital, | ||||||||||||||
General partners’ capital, | ||||||||||||||
| Total partners’ capital | ||||||||||||||
| Total liabilities and partners’ capital | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Rental income | $ | $ | |||||||||
Interest and other operating income | |||||||||||
| Total revenues | |||||||||||
| Expenses: | |||||||||||
| Rental | |||||||||||
| General and administrative | |||||||||||
| Merger-related costs | |||||||||||
| Transaction | |||||||||||
| Depreciation and amortization | |||||||||||
| Interest expense | |||||||||||
| Total expenses | |||||||||||
| Loss on sale of real estate, net | ( | ||||||||||
| Income from unconsolidated joint venture | |||||||||||
| Other income | |||||||||||
| Net income | $ | $ | |||||||||
| Net income attributable to non-controlling interests | |||||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
Earnings per common OP Unit - basic: | |||||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
Earnings per common OP Unit - diluted: | |||||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
Weighted average common OP Units outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
10
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income | |||||||||||
| Change in unrealized gains on cash flow hedges | |||||||||||
| Total other comprehensive income | |||||||||||
| Total comprehensive income | |||||||||||
| Comprehensive income attributable to non-controlling interests | |||||||||||
| Total comprehensive income attributable to common unitholders | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
11
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(In thousands)
(Unaudited
| General Partners’ Capital | Limited Partners’ Capital | Total Partners’ Capital | |||||||||||||||||||||||||||
| Units | Amount | Units | Amount | ||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ||||||||||||||||||||||||||
Share-based award transactions, net | — | — | |||||||||||||||||||||||||||
Redemption and cancellation of general partner OP Units | ( | ( | — | — | ( | ||||||||||||||||||||||||
Redemption of limited partner OP Units and other | ( | ( | |||||||||||||||||||||||||||
Distributions declared ($ | — | ( | — | ( | ( | ||||||||||||||||||||||||
| Net income | — | — | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | |||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ||||||||||||||||||||||||||
| General Partners’ Capital | Limited Partners’ Capital | Total Partners’ Capital | |||||||||||||||||||||||||||
| Units | Amount | Units | Amount | ||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ||||||||||||||||||||||||||
Share-based award transactions, net | — | — | |||||||||||||||||||||||||||
Redemption and cancellation of general partner OP Units | ( | ( | — | — | ( | ||||||||||||||||||||||||
Redemption of limited partner OP Units and other | ( | ( | |||||||||||||||||||||||||||
Distributions declared ($ | — | ( | — | ( | ( | ||||||||||||||||||||||||
Net income | — | — | |||||||||||||||||||||||||||
| Other comprehensive income | — | — | |||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
12
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| Income from unconsolidated joint venture | ( | ( | |||||||||
| Distributions from unconsolidated joint venture | |||||||||||
| Loss on sale of real estate, net | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Receivables and other assets, net | ( | ||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Security deposits, prepaid rent and other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Investments in real estate | ( | ( | |||||||||
| Development of real estate | ( | ( | |||||||||
| Proceeds from the sale of real estate | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Collection of real estate notes receivable | |||||||||||
| Loan origination fees | |||||||||||
| Advances on real estate notes receivable | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings on unsecured revolving credit facility | |||||||||||
| Payments on unsecured revolving credit facility | ( | ( | |||||||||
| Deferred financing costs | ( | ||||||||||
| Repurchase and cancellation of general partner units | ( | ( | |||||||||
| Distributions paid to general partner | ( | ( | |||||||||
| Distributions paid to limited partners and redeemable non-controlling interests | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash - beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
13
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us,” or “our” refers to Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP, collectively.
1. Organization and Description of Business
HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006. HTA operates as a REIT and is the general partner of HTALP, which is the operating partnership, in an umbrella partnership, or “UPREIT” structure. HTA has qualified and intends to continue to be taxed as a REIT for federal income tax purposes under the applicable sections of the Internal Revenue Code.
We own real estate primarily consisting of medical office buildings (“MOBs”) located on or adjacent to hospital campuses or in off-campus, community core outpatient locations across 32 states within the United States, and we lease space to tenants primarily consisting of health systems, research and academic institutions, and various sized physician practices. Through our full-service operating platform, we provide leasing, asset management, acquisitions, development and other related services for our properties.
Our primary objective is to maximize stockholder value with growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and we expect to enhance our existing portfolio.
Merger with Healthcare Realty Trust Incorporated
On February 28, 2022, Healthcare Trust of America, Inc. (the “Company”), a Maryland corporation, Healthcare Trust of America Holdings, LP, a Delaware limited partnership (the “Company OP”) of which the Company is the sole general partner, HR Acquisition 2, LLC, a Maryland limited liability company and a direct, wholly owned subsidiary of the Company (“Merger Sub”), and Healthcare Realty Trust Incorporated, a Maryland corporation (“HR”), entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into HR, with HR surviving the merger (the “Merger”).
Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time, each outstanding share of Common Stock, $0.01 par value per share, of HR (“HR Common Stock”) will be converted into the right to receive 1.0 (the “Exchange Ratio”) share of Class A Common Stock, $0.01 par value per share, of the Company (“Company Common Stock” and, such consideration, the “Merger Consideration”). Subject to the closing of the Merger and the other transactions contemplated therein, the holders of shares of Company Common Stock issued and outstanding on the last business day prior to the closing date of the Merger will receive a special distribution in the amount of $4.82 in cash per share of Company Common Stock held on such date (the “Special Distribution Payment”).
Once the conditions to close the Merger have been satisfied or waived, the Merger Agreement requires HR and the Company to exchange irrevocable certifications that all such closing conditions have been satisfied or waived. At such time, the Company OP will transfer or cause the transfer, on the business day before the effective time, to HR or its designees certain of the Company OP’s assets as specified by HR for a cash purchase price equal to the reasonably equivalent fair market value of the assets transferred. To the extent the net proceeds to the Company of the asset transfer or joint venture transactions relating to such assets are insufficient to pay the full amount of the Special Distribution Payment, the Merger Agreement requires the Company to utilize new financing to fund the balance of the Special Distribution Payment. The Company has obtained a commitment letter from JPMorgan Chase Bank, N.A. for a $1.7 billion bridge financing facility. HTA and HR have received letters of intent from, and are in advanced negotiations with, three institutional investors for a combination of joint ventures and asset sales totaling $1.7 billion at a weighted average cap rate of approximately 4.8 %. Net proceeds from these transactions are expected to be approximately $1.6 billion. The transactions may occur in separate tranches, with the initial transactions targeted to close prior to the vote on the contemplated Merger by HR and HTA stockholders and the remainder to be completed on or around the closing date of the contemplated Merger. These transactions are subject to execution of definitive documentation and customary closing conditions. In addition, HTA and HR have secured initial commitments for amended and restated credit facilities, including the following: (i) a $1.5 billion revolving credit facility; (ii) $1.5 billion of term loans, including $650 million of new capacity; and (iii) a $1.1 billion asset sale term loan to replace the transaction bridge loan commitment and to backstop the $1.1 billion special dividend to HTA stockholders, if needed, depending on the timing of asset sales and joint ventures.
Additionally, on May 2, 2022, HTA and HR filed a Form S-4 Registration Statement with the SEC in connection with the contemplated Merger. Please review this Form S-4 for more information about the contemplated Merger.
14
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders. The boards of directors of the Company and HR have unanimously approved the Merger Agreement. The Merger is expected to close during the third quarter of 2022.
COVID-19 Pandemic
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the U.S. (“GAAP”) in all material respects and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements (i) do not include all information and footnotes required by GAAP for complete financial statements, and (ii) reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable for the full year. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2021 Annual Report on Form 10-K.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of our subsidiaries and consolidated joint venture arrangements. The portions of the HTALP operating partnership not owned by us are presented as non-controlling interests on the accompanying condensed consolidated balance sheets and statements of operations, condensed consolidated statements of comprehensive income, and condensed consolidated statements of equity and changes in partners’ capital. Holders of OP Units are considered to be non-controlling interest holders in HTALP and their ownership interests are reflected as equity on the accompanying condensed consolidated balance sheets. Further, a portion of the earnings and losses of HTALP 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 both March 31, 2022 and December 31, 2021, there were approximately 4.1
VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following: (i) the power to direct the activities that most significantly impact the entity’s economic performance; (ii) the obligation to absorb the expected losses of the entity; and (iii) the right to receive the expected returns of the entity. We consolidate our investment in VIEs when we determine that we are the primary beneficiary. A primary beneficiary is one that has both: (i) the power to direct the activities
15
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Use of Estimates
Cash, Cash Equivalents and Restricted Cash
| March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
Revenue Recognition
Investments in Real Estate
Depreciation expense of buildings and improvements for the three months ended March 31, 2022 and 2021 was $62.3 million and $61.2 million, respectively.
Leases
16
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Real Estate Held for Sale
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 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 March 31, 2022, real estate notes receivable, net totaled $72.7 million. During the three months ended March 31, 2022, we recognized interest income of $1.6 million related to real estate note receivable.
The following table summarizes real estate notes receivable as of March 31, 2022 (in thousands):
| Stated Interest Rate | Maximum Loan Commitment | Outstanding Loan Amount | |||||||||||||||||||||||||||
| Origination Date | Maturity Date | March 31, 2022 | |||||||||||||||||||||||||||
Mezzanine Loans - Texas (1) | 6/24/2021 | 6/24/2024 | % | $ | $ | ||||||||||||||||||||||||
| Mezzanine Loan - North Carolina | 12/22/2021 | 12/22/2024 | % | ||||||||||||||||||||||||||
| Mortgage Loan - Texas | 6/30/2021 | 7/1/2022 | % | ||||||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||||||||
| Unamortized fees and costs | ( | ||||||||||||||||||||||||||||
| Unearned revenue | ( | ||||||||||||||||||||||||||||
| $ | |||||||||||||||||||||||||||||
| (1) Interest on these mezzanine loans is accrued and funded utilizing interest reserves, which is included in the maximum loan commitment, and such accrued interest is added to the note receivable balance. | |||||||||||||||||||||||||||||
Unconsolidated Joint Ventures
17
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Recently Issued or Adopted Accounting Pronouncements
Recently Adopted Accounting Pronouncements
ASU 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments
In July 2021, the FASB issued ASU 2021-05, which amends the lease classification requirements for lessors when classifying and accounting for a lease with variable lease payments that do not depend on a reference index or a rate. The update provides criteria, that if met, the lease would be classified and accounted for as an operating lease. The update is effective for reporting periods beginning after December 15, 2021, with early adoption permitted. We adopted ASU 2021-05 effective as of January 1, 2022. The adoption of this standard did not have a material impact on our financial statements.
Recently Issued Accounting Pronouncements
ASU 2021-01, Reference Rate Reform (Topic 848)
In January 2021, the FASB issued ASU 2021-01, which amends the scope of ASU 2020-04. The amendments of ASU 2021-01 clarify that certain optional expedients and exceptions to Topic 848 for contract modification and hedge accounting apply to derivatives that are affected by the discounting transition. For information related to the Company's current cash flow hedges, refer to Note 9 - Derivative Financial Instruments and Hedging Activities. The amendments are elective and effective immediately for contract modifications made through December 31, 2022. The Company is evaluating how the transition away from LIBOR will effect the Company and if the guidance with respect to this standard will be adopted, however, if adopted, we do not expect that this ASU will have a material impact on our financial statements.
3. Investments in Real Estate
For the three months ended March 31, 2022, our investments had an aggregate purchase price of $19.1 million. As part of these investments, we incurred approximately $0.1 million of capitalized costs. The allocations for these investments, in which we own a controlling financial interest, are set forth below in the aggregate for the three months ended March 31, 2022 and 2021, respectively (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Land | $ | $ | |||||||||
| Building and improvements | |||||||||||
| In place leases | |||||||||||
| Below market leases | ( | ( | |||||||||
| Above market leases | |||||||||||
| ROU assets | ( | ||||||||||
| Net real estate assets acquired | |||||||||||
| Other, net | |||||||||||
| Aggregate purchase price | $ | $ | |||||||||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Acquired intangible assets | |||||||||||
| Acquired intangible liabilities | |||||||||||
4. Dispositions and Impairment
Dispositions
During the three months ended March 31, 2022, we closed the sale of a tenant purchase option on one of our MOBs located in Georgia for a gross sales price of $26.8 million, resulting in a net loss to us of approximately $4 thousand. During the three months ended March 31, 2021, we had no dispositions.
Impairment
18
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
5. Intangible Assets and Liabilities
| March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Balance | Weighted Average Remaining Amortization in Years | Balance | Weighted Average Remaining Amortization in Years | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
In place leases | $ | $ | |||||||||||||||||||||
Tenant relationships | |||||||||||||||||||||||
Above market leases | |||||||||||||||||||||||
| Accumulated amortization | ( | ( | |||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Below market leases | $ | $ | |||||||||||||||||||||
| Accumulated amortization | ( | ( | |||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
Amortization recorded against rental income related to above and (below) market leases | $ | ( | $ | ( | |||||||
Amortization expense related to in place leases and tenant relationships | |||||||||||
6. Receivables and Other Assets
| March 31, 2022 | December 31, 2021 | ||||||||||
Tenant receivables, net | $ | $ | |||||||||
Other receivables, net | |||||||||||
Deferred financing costs, net | |||||||||||
Deferred leasing costs, net | |||||||||||
| Straight-line rent receivables, net | |||||||||||
| Prepaid expenses, deposits, equipment and other, net | |||||||||||
| Derivative financial instruments - interest rate swaps | |||||||||||
| Real estate notes receivable, net | |||||||||||
| Finance ROU asset, net | |||||||||||
| Total | $ | $ | |||||||||
19
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
Amortization expense related to deferred leasing costs | $ | $ | |||||||||
| Interest expense related to deferred financing costs | |||||||||||
7. Leases
For the three months ended March 31, 2022, we added one new office lease that commences in April 2022.
Lessee - Maturity of Lease Liabilities
| Year | Operating Leases | Finance Leases | ||||||||||||
| 2022 | $ | $ | ||||||||||||
| 2023 | ||||||||||||||
| 2024 | ||||||||||||||
| 2025 | ||||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total undiscounted lease payments | $ | $ | ||||||||||||
| Less: Interest | ( | ( | ||||||||||||
| Present value of lease liabilities | $ | $ | ||||||||||||
Lessor - Lease Revenues and Maturity of Future Minimum Rents
For the three months ended March 31, 2022 and 2021, we recognized $199.3 million and $190.4 million, respectively, of rental and other lease-related income related to our operating leases, of which $48.1 million and $45.1 million, respectively, were variable lease payments.
| Year | Amount | |||||||
| 2022 | $ | |||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
20
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
8. Debt
| March 31, 2022 | December 31, 2021 | ||||||||||
| Unsecured revolving credit facility | $ | $ | |||||||||
| Unsecured term loans | |||||||||||
| Unsecured senior notes | |||||||||||
| Fixed rate mortgages | |||||||||||
| $ | $ | ||||||||||
| Deferred financing costs, net | ( | ( | |||||||||
| Discount, net | ( | ( | |||||||||
| Total | $ | $ | |||||||||
Unsecured Credit Agreement
Unsecured Revolving Credit Facility due 2025
On October 6, 2021, we entered into a third amended and restated revolving credit and term loan agreement (the “Credit Agreement”), which includes an unsecured revolving credit facility in an aggregate maximum principal amount of $1.0 billion (the “Revolver”) and a term loan facility in an aggregate maximum principal amount of $300.0 million (the “Term Loan”). The Credit Agreement extended the maturities of the unsecured revolving credit facility and the unsecured term loan to October 31, 2025. The maximum principal amount of the Unsecured Credit Agreement may be increased by up to $750.0 million, subject to certain conditions, for a total principal amount of $2.05 billion. Borrowings under the Revolver bear interest at a per annum rate equal to LIBOR plus a margin ranging from 0.725 % to 1.40 % based on our credit rating. We are also required to pay a facility fee on the aggregate commitments under the Revolver at a per annum rate ranging from 0.125 % to 0.30 % based on our credit rating. We incurred financing costs of $6.2 million in relation to the credit facility, which are being amortized through the maturity date. As of March 31, 2022, we had $25.0 million outstanding under this unsecured revolving credit facility. The margin associated with our borrowings was 0.85 % per annum and the facility fee was 0.20 % per annum.
Unsecured Term Loan due 2025
Under the Unsecured Credit Agreement as noted above, we have a $300.0 million unsecured term loan, guaranteed by HTA, with a maturity date of October 31, 2025. Borrowings under this unsecured term loan bear interest at a per annum rate equal to LIBOR, plus a margin ranging from 0.80 % to 1.60 % per annum based on our credit rating. The margin associated with our borrowings as of March 31, 2022 was 0.95 % per annum. We incurred financing costs of $1.8 million in relation to the unsecured term loan, which are being amortized through the maturity date. We have interest rate swaps hedging the floating interest rate, which resulted in a fixed rate of 2.37 % per annum, based on our current credit rating. The current hedging arrangement matures on February 1, 2023. As of March 31, 2022, we had $300.0 million under this unsecured term loan outstanding.
$200.0 Million Unsecured Term Loan due 2024
In 2018, HTALP entered into a modification of our $200.0 million unsecured term loan previously due in 2023. The modification decreased pricing at our current credit rating by 65 basis points and extended the maturity date to January 15, 2024. The other material terms of the unsecured term loan prior to the modification remained substantially unchanged. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 0.75 % to 1.65 % per annum based on our credit rating. The margin associated with our borrowings as of March 31, 2022 was 1.00 % per annum. HTALP had interest rate swaps on the balance, which resulted in a fixed interest rate at 2.32 % per annum. As of March 31, 2022, we had $200.0 million under this unsecured term loan outstanding.
$600.0 Million Unsecured Senior Notes due 2026
In September 2019, in connection with the $650.0 million unsecured senior notes due 2030 referenced below, HTALP issued $250.0 million as additional unsecured senior notes to the $350.0 million aggregate principal of senior notes issued on July 12, 2016, all of which are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.50 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 103.66 % and 99.72 %, respectively, of the principal amount thereof, with an effective yield to maturity of 2.89 % and 3.53 % per annum, respectively. As of March 31, 2022, we had $600.0 million of these unsecured senior notes outstanding that mature on August 1, 2026.
21
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
$500.0 Million Unsecured Senior Notes due 2027
In 2017, HTALP issued $500.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.75 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.49 % of the principal amount thereof, with an effective yield to maturity of 3.81 % per annum. As of March 31, 2022, we had $500.0 million of these unsecured senior notes outstanding that mature on July 1, 2027.
$650.0 million Unsecured Senior Notes due 2030
In September 2019, in connection with the $250.0 million additional unsecured senior notes due 2026 referenced above, HTALP issued $650.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 3.10 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.66 % of the principal amount thereof, with an effective yield to maturity of 3.14 % per annum. Proceeds from the issuance of $900.0 million of these notes were used, in part, to redeem a total of $700.0 million of unsecured senior notes. During the year ended December 31, 2019, the make-whole fees required per the terms of the indenture agreements upon our calling the notes totaling $18.3 million was recorded in loss on extinguishment of debt in the accompanying consolidated statements of operations. As of March 31, 2022, HTALP had $650.0 million of these unsecured senior notes outstanding that mature on February 15, 2030.
$800.0 million Unsecured Senior Notes due 2031
In September 2020, HTALP issued $800.0 million of unsecured senior notes that are guaranteed by HTA. These unsecured senior notes are registered under the Securities Act, and bear interest at 2.00 % per annum which is payable semi-annually. Additionally, these unsecured senior notes were offered at 99.20 % of the principal amount thereof, with an effective yield to maturity of 2.09 % per annum. We incurred financing costs of $6.8 million in relation to this transaction, which are being amortized through the maturity date. Proceeds from the issuance of these unsecured notes were used, in part, to redeem $300.0 million of unsecured senior notes. During the year ended December 31, 2020, the make-whole fee that was required per the terms of the indenture agreement upon our calling the notes of $24.7 million was recorded in loss on extinguishment of debt in the accompanying consolidated statements of operations. As of March 31, 2022, we had $800.0 million of these unsecured senior notes outstanding that mature on March 15, 2031.
Future Debt Maturities
| Year | Amount | |||||||
| 2022 | $ | |||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
Deferred Financing Costs
As part of the $1.7 billion bridge financing commitment secured in connection with the pending Merger with HR as further described in Note 1 - Organization and Description of Business, we incurred commitment fees of approximately $5.4 million, which are being amortized through the commitment expiration date of September 2, 2022.
| Year | Amount | |||||||
| 2022 | $ | |||||||
| 2023 | ||||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
22
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. Derivative Financial Instruments and Hedging Activities
Risk Management Objective of Using Derivative Financial Instruments
We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, the fair value of derivative financial instruments designated as cash flow hedges are adjusted to reflect the impact of our credit quality.
Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and treasury locks as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without an exchange of the underlying notional amount. A treasury lock is a synthetic forward sale of a U.S. treasury note, which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance.
Amounts reported in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. During the next twelve months, we estimate that an additional $1.2 million will be reclassified from other comprehensive income in the accompanying condensed consolidated balance sheets as an increase to interest related to derivative financial instruments in the accompanying condensed consolidated statements of operations.
| Interest Rate Swaps | March 31, 2022 | |||||||
| Number of instruments | ||||||||
| Notional amount | $ | |||||||
23
HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The table below presents the fair value of our derivative financial instruments designated as cash flow hedges as well as the classification in the accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively (in thousands):
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||||||||||
| Fair Value at: | Fair Value at: | |||||||||||||||||||||||||||||||||||||
| Derivatives Designated as Hedging Instruments: | Balance Sheet Location | March 31, 2022 | December 31, 2021 | Balance Sheet Location | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||
| Interest rate swaps | Receivables and other assets | $ | $ | Derivative financial instruments | $ | $ | ||||||||||||||||||||||||||||||||
The table below presents the gain or loss recognized on our derivative financial instruments designated as cash flow hedges as well as the classification in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, respectively (in thousands):
| Three Months Ended March 31, | ||||||||||||||||||||
| Effect of Derivative Instruments | Location in Statement of Operations and Comprehensive Income (Loss) | 2022 | 2021 | |||||||||||||||||
| Gain (loss) recognized in OCI | Change in unrealized losses on cash flow hedges | $ | $ | |||||||||||||||||
| Gain (loss) reclassified from accumulated OCI into income | Interest expense | ( | ( | |||||||||||||||||
Credit Risk Related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision that if we default on any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations.
We also have agreements with each of our derivative counterparties that incorporate provisions from our indebtedness with a lender affiliate of the derivative counterparty requiring it to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by these agreements.
10. Commitments and Contingencies
Litigation
On May 6, 2022, a purported stockholder of the Company filed a lawsuit in the United States District Court for the Southern District of New York against us and seven of our current directors, captioned Shiva Stein v. Healthcare Trust of America, Inc., et al., Case No. 1:22-cv-03703 (the “Complaint”).
The Complaint alleges that the preliminary proxy statement issued in connection with the Merger omits material information or contains misleading disclosures and that, as a result, (i) all of the defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act) and (ii) our directors violated section 20(a) of the Exchange Act. The Complaint seeks, among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages to the extent the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) an accounting to plaintiff for all damages suffered as a result of the alleged wrongdoing; and (v) an award of plaintiff’s expenses, including attorneys’ and experts’ fees. We believe the claims asserted in the Complaint are without merit.
Additional lawsuits may be filed against us, our Board of Directors, and/or other parties to the Merger in connection with the transactions contemplated by the Merger Agreement.
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HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
In addition, we are, from time to time, also subject to claims and litigation arising in the ordinary course of business with respect to tenant litigation and threatened or asserted labor matters.
We do not believe liability from any reasonably foreseeable disposition of the aforementioned claims and litigation, individually or in the aggregate, would have a material effect on our consolidated financial position, results of operations or cash flows.
Environmental Matters
We routinely monitor our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our condensed consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability at our properties that we believe would require additional disclosure or the recording of a loss contingency.
Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In our opinion, these matters are not expected to have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows.
11. Stockholders’ Equity and Partners’ Capital
HTALP’s operating partnership agreement provides that it will distribute cash flow from operations and net sale proceeds to its partners in accordance with their overall ownership interests at such times and in such amounts as the general partner thereof determines. Dividend distributions are made such that a holder of one OP Unit in HTALP will receive distributions from HTALP in an amount equal to the dividend distributions paid to the holder of one share of our common stock. In addition, for each share of common stock issued or redeemed by HTA, HTALP issues or redeems a corresponding number of OP Units.
Common Stock Offerings
In March 2021, we entered into equity distribution agreements with various sales agents with respect to our at-the-market (“ATM”) offering program of common stock with an aggregate sales amount of up to $750.0 million, which replaced our prior ATM offering program that expired in February 2021. As of March 31, 2022, $750.0 million remained available for issuance by us under our current ATM.
Stock Repurchase Plan
In September 2020, our Board of Directors approved the reactivation of a stock repurchase plan authorizing us to purchase up to $300.0 million of our common stock from time to time prior to the expiration thereof on September 22, 2023. As of March 31, 2022, the remaining amount of common stock available for repurchase under our stock repurchase plan was $300.0 million.
Common Stock Dividends
See our accompanying condensed consolidated statements of equity and condensed statements of changes in partners’ capital for the dividends declared during the three months ended March 31, 2022 and 2021. As of March 31, 2022, declared, but unpaid, dividends totaling $75.8 million were included in accounts payable and accrued liabilities. On May 5, 2022, our Board of Directors announced a quarterly cash dividend of $0.325 per share of common stock and per OP Unit to be paid on July 15, 2022 to stockholders and unitholders of record on July 6, 2022.
Incentive Plan
Our Incentive Plan permits the grant of incentive awards to our employees, officers, non-employee directors and consultants as selected by our Board of Directors. This Plan authorizes us to grant awards in any of the following forms: options; stock appreciation rights; restricted stock; restricted or deferred stock units; performance awards; dividend equivalents; other stock-based awards, including units in HTALP; and cash-based awards. Subject to adjustment as provided in the Plan, the aggregate number of awards reserved and available for issuance under the Plan is 10,000,000 shares. As of March 31, 2022, there were 9,646,504 awards available for grant under the Plan.
Restricted Common Stock
We recognized compensation expense, equal to the fair market value of HTA’s stock on the grant date, over the service period which is generally to four years . For the three months ended March 31, 2022 and 2021 we recognized compensation expense of $2.0 million and $3.3 million, respectively. Substantially all compensation expense was recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations.
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HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
As of March 31, 2022, we had $7.9 million of unrecognized compensation expense, net of estimated forfeitures, which we will recognize over a remaining weighted average period of 1.9 years.
| March 31, 2022 | March 31, 2021 | ||||||||||||||||||||||
| Restricted Common Stock | Weighted Average Grant Date Fair Value | Restricted Common Stock | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Beginning balance | $ | $ | |||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Vested | ( | ( | |||||||||||||||||||||
| Forfeited | ( | ( | |||||||||||||||||||||
| Ending balance | $ | $ | |||||||||||||||||||||
12. Fair Value of Financial Instruments
Financial Instruments Reported at Fair Value - Recurring
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||
| Level 2 - Assets: | ||||||||||||||||||||||||||
| Real estate notes receivable, net | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative financial instruments | ||||||||||||||||||||||||||
| Level 2 - Liabilities: | ||||||||||||||||||||||||||
| Derivative financial instruments | $ | $ | $ | $ | ||||||||||||||||||||||
| Debt | ||||||||||||||||||||||||||
The carrying amounts of cash and cash equivalents, tenant and other receivables, restricted cash, accounts payable, and accrued liabilities approximate fair value. There have been no transfers of assets or liabilities between levels. We will record any such transfers at the end of the reporting period in which a change of event occurs that results in a transfer. Although we have determined that the majority of the inputs used to value our cash flow hedges fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our cash flow hedge positions and have determined that the credit valuation adjustments are not significant to their overall valuation. As a result, we have determined that our cash flow hedge valuations in their entirety are classified in Level 2 of the fair value hierarchy. For further discussion of the assumptions considered, refer to Note 2 - Summary of Significant Accounting Policies.
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HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Financial Instruments Reported at Fair Value - Non-Recurring
We also have assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. This category generally includes assets subject to impairment. We estimate fair value relating to impairment assessments based upon discounted cash flow and direct capitalization models that include all projected cash inflows and outflows over a specific holding period, or the contractual sales price, if applicable. Such projected cash flows are comprised of contractual rental revenues and forecasted rental revenues and expenses based on market conditions and expectations for growth. Capitalization rates and discount rates utilized in these models are based on a reasonable range of current market rates for each property analyzed. Based on these inputs, we determined that our valuation of properties using a discounted cash flow or a direct capitalization model were classified within Level 3 of the fair value hierarchy. For assets for which the estimated fair value was based on contractual sales prices, we determined that our valuation was classified within Level 2 of the fair value hierarchy. As of March 31, 2022 we had no assets subject to impairment.
| March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
| Fair Value | Fair Value | |||||||||||||||||||||||||
| Level 2 - Assets: | ||||||||||||||||||||||||||
| Real estate investment | $ | $ | ||||||||||||||||||||||||
| Level 3 - Assets: | ||||||||||||||||||||||||||
| Real estate investments | $ | $ | ||||||||||||||||||||||||
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HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
13. Per Share Data of HTA
For the three months ended March 31, 2022 and 2021, all of our earnings were distributed and the calculated earnings per share amount would be the same for all classes.
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Numerator: | |||||||||||
| Net income | $ | $ | |||||||||
| Net income attributable to non-controlling interests | ( | ( | |||||||||
| Net income attributable to common stockholders | $ | $ | |||||||||
| Denominator: | |||||||||||
| Weighted average shares outstanding - basic | |||||||||||
| Dilutive shares - OP Units convertible into common stock | |||||||||||
| Adjusted weighted average shares outstanding - diluted | |||||||||||
Earnings per common share - basic | |||||||||||
| Net income attributable to common stockholders | $ | $ | |||||||||
Earnings per common share - diluted | |||||||||||
| Net income attributable to common stockholders | $ | $ | |||||||||
14. Per Unit Data of HTALP
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Numerator: | |||||||||||
| Net income | $ | $ | |||||||||
| Net income attributable to non-controlling interests | |||||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
Denominator: | |||||||||||
| Weighted average OP Units outstanding - basic | |||||||||||
| Dilutive units - OP Units convertible into common units | |||||||||||
| Adjusted weighted average units outstanding - diluted | |||||||||||
Earnings per common unit - basic: | |||||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
Earnings per common unit - diluted: | |||||||||||
| Net income attributable to common unitholders | $ | $ | |||||||||
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HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
15. Supplemental Cash Flow Information
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Supplemental Disclosure of Cash Flow Information: | |||||||||||
| Interest paid, net of capitalized interest | $ | $ | |||||||||
| Cash paid for operating leases | |||||||||||
| Supplemental Disclosure of Noncash Investing and Financing Activities: | |||||||||||
Accrued capital expenditures | $ | $ | |||||||||
Dividend distributions declared, but not paid | |||||||||||
| Redemption of non-controlling interest | |||||||||||
ROU assets obtained in exchange for lease obligations | |||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The use of the words “we,” “us,” or “our” refers to HTA and HTALP, collectively.
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report, as well as with the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2021 Annual Report on Form 10-K.
The information set forth below is intended to provide readers with an understanding of our financial condition, changes in financial condition and results of operations.
•Forward-Looking Statements;
•Executive Summary;
•Company Highlights;
•Critical Accounting Policies;
•Recently Issued or Adopted Accounting Pronouncements;
•Factors Which May Influence Results of Operations;
•Results of Operations;
•Non-GAAP Financial Measures;
•Liquidity and Capital Resources;
•Commitments and Contingencies;
•Debt Service Requirements;
•Off-Balance Sheet Arrangements; and
•Inflation.
Forward-Looking Statements
Certain statements contained in this Quarterly Report constitute forward-looking statements within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”)). Such statements include, in particular, statements about our plans, strategies, prospects and estimates regarding future MOB market performance. Additionally, such statements are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially and in adverse ways from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Forward-looking statements are generally identifiable by the use of such terms as “expect,” “project,” “may,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “pro forma” or the negative of such terms and other comparable terminology. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Quarterly Report is filed with the SEC. We cannot guarantee the accuracy of any such forward-looking statements contained in this Quarterly Report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Forward-looking statements regarding HR and HTA, include, but are not limited to, statements related to the Merger, including the anticipated timing, benefits and financial and operational impact thereof; HR’s expected financing for the transaction; other statements of management’s belief, intentions or goals; and other statements that are not historical facts. These forward-looking statements are based on each of the companies’ current plans, objectives, estimates, expectations and intentions and inherently involve significant risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks and uncertainties associated with: HR’s and HTA’s ability to complete the Merger on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary shareholder approvals and satisfaction of other closing conditions to consummate the Merger; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the Merger; risks related to diverting the attention of HR and HTA management from ongoing business operations; failure to realize the expected benefits of the Merger; significant transaction costs and/or unknown or inestimable liabilities; the risk of shareholder litigation in connection with the Merger, including resulting expense or delay; the risk that HTA’s business will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the ability to obtain the expected financing to consummate the Merger; risks related to future opportunities and plans for the Company, including the
30
uncertainty of expected future financial performance and results of the Company following completion of the Merger; effects relating to the announcement of the Merger or any further announcements or the consummation of the Merger on the market price of HR’s or HTA’s common stock; the possibility that, if HR does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial analysts or investors, the market price of HR’s common stock could decline; general adverse economic and local real estate conditions; the inability of significant tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; increases in interest rates; increases in operating expenses and real estate taxes; changes in the dividend policy for HR’s common stock or its ability to pay dividends; impairment charges; pandemics or other health crises, such as COVID-19; and other risks and uncertainties affecting HR and HTA, including those described from time to time under the caption “Risk Factors” and elsewhere in HR’s and HTA’s SEC filings and reports, including HR’s Annual Report on Form 10-K for the year ended December 31, 2021, HTA’s Annual Report on Form 10-K for the year ended December 31, 2021, and other filings and reports by either company. Moreover, other risks and uncertainties of which HR or HTA are not currently aware may also affect each of the companies’ forward-looking statements and may cause actual results and the timing of events to differ materially from those anticipated. The forward-looking statements made in this communication are made only as of the date hereof or as of the dates indicated in the forward-looking statements, even if they are subsequently made available by HR or HTA on their respective websites or otherwise. Neither HR nor HTA undertakes any obligation to update or supplement any forward-looking statements to reflect actual results, new information, future events, changes in its expectations or other circumstances that exist after the date as of which the forward-looking statements were made, except as required by law.
Any such forward-looking statements reflect our current views about future events, are subject to unknown risks, uncertainties, and other factors, and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to stockholders and maintain the value of our real estate properties, may be significantly hindered. Factors that might impair our ability to meet such forward-looking statements include, without limitation, those discussed in Part I, Item 1A - Risk Factors in our 2021 Annual Report on Form 10-K, which is incorporated herein and those discussed in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.
Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, our stockholders are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date made. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Executive Summary
We are the largest publicly-traded REIT focused on MOBs in the U.S. as measured by the gross leasable area ("GLA") of our MOBs. We conduct substantially all of our operations through HTALP. We invest in MOBs that we believe will serve the future of healthcare delivery and MOBs that are primarily located on health system campuses, near university medical centers, or in core community outpatient locations. We also focus on key markets that have certain demographic and macro-economic trends and where we can utilize our institutional full-service operating platform to generate strong tenant and health system relationships and operating cost efficiencies. Our primary objective is to maximize stockholder value with disciplined growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and could enhance our existing portfolio.
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Since 2006, we have invested $7.8 billion primarily in MOBs, development projects, land and other healthcare real estate assets consisting of approximately 26.0 million square feet of GLA throughout the U.S. Approximately 67% of our portfolio is located on the campuses of, or adjacent to, nationally and regionally recognized healthcare systems. Our portfolio is diversified geographically across 32 states, with no state having more than 21% of our total GLA as of March 31, 2022. We are concentrated in 20 to 25 key markets that are generally experiencing higher economic and demographic trends than other markets that we expect will drive demand for MOBs. As of March 31, 2022, we had approximately 1 million square feet of GLA in ten of our top 20 markets and approximately 95% of our portfolio, based on GLA, is located in the top 75 Metropolitan Statistical Area ("MSAs"), with Dallas, Houston, Boston, Miami and Indianapolis being our largest markets by annualized base rent.
Merger with Healthcare Realty Trust Incorporated
On February 28, 2022, the Company, the Company OP and Merger Sub entered into a Merger Agreement with HR whereby Merger Sub will merge with and into HR, with HR continuing as the surviving corporation. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, each outstanding share of Common Stock, $0.01 par value per share, of HR Common Stock will be converted into the right to receive 1.0 share of Class A Common Stock, $0.01 par value per share, of the Company Common Stock. The Merger Agreement contains customary representations, warranties and covenants by each party. The Merger is subject to certain conditions which are set forth in the Merger Agreement, including the approval of both companies’ stockholders. The boards of directors of the Company and HR have unanimously approved the Merger Agreement. The Merger is expected to close during the third quarter of 2022.
Additionally, on May 2, 2022, HTA and HR filed a Form S-4 Registration Statement with the SEC in connection with the contemplated Merger. Please review this Form S-4 for more information about the contemplated Merger.
Company Highlights
Portfolio Operating Performance
•For the three months ended March 31, 2022, our total revenue was $202.0 million, compared to $191.5 million for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, our net income was $18.7 million, compared to $22.4 million, for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, our net income attributable to common stockholders was $0.08 per diluted share, or $18.3 million, compared to $0.10 per diluted share, or $22.0 million, for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, HTA’s FFO, as defined by NAREIT, was $93.6 million, or $0.40 per diluted share, compared to $0.44 per diluted share, or $97.8 million, for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, HTALP’s FFO was $94.0 million, or $0.40 per diluted OP Unit, compared to $0.44 per diluted OP Unit, or $98.2 million, for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, HTA’s and HTALP’s Normalized FFO was $0.44 per diluted share and OP Unit, or $101.5 million, compared to $0.44 per diluted share and OP Unit, or $98.3 million for the three months ended March 31, 2021.
•For additional information on FFO and Normalized FFO, see “FFO and Normalized FFO” below, which includes a reconciliation to net income attributable to common stockholders/unitholders and an explanation of why we present this non-GAAP financial measure.
•For the three months ended March 31, 2022, our Net Operating Income (“NOI”) was $136.1 million, compared to $131.9 million for the three months ended March 31, 2021.
•For the three months ended March 31, 2022, our Same-Property Cash NOI increased 0.8%, or $0.9 million, to $117.4 million, compared to $116.5 million for the three months ended March 31, 2021.
•For additional information on our NOI and Same-Property Cash NOI, see “NOI, Cash NOI and Same-Property Cash NOI” below, which includes a reconciliation from net income and an explanation of why we present these non-GAAP financial measures.
Key Market Focused Strategy and Investments
Over the last decade, we have been an active investor in the medical office sector. This has enabled us to create a high quality portfolio focused on MOBs serving the future of healthcare with scale and significance in 20 to 25 key markets.
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•Our investment strategy includes alignment with key healthcare systems, hospitals, and leading academic medical universities. We are the largest owner of on-campus or adjacent MOBs in the country, with approximately 17.4 million square feet of GLA, or 67%, of our portfolio located in these locations. The remaining 33% of our portfolio is located in core community outpatient locations where healthcare is increasingly being delivered.
•Over the past decade, our investments have been focused in our 20 to 25 key markets which we believe will outperform the broader U.S. markets from an economic and demographic perspective. As of March 31, 2022, approximately 95% of our portfolio’s GLA is located in the top 75 MSAs. Our key markets represent top MSAs with strong growth metrics in jobs, household income and population, as well as low unemployment and mature healthcare infrastructures. Many of our key markets are also supported by strong university systems.
•Our key market focus has enabled us to establish scale across 20 to 25 key markets and effectively utilize our asset management and leasing platform to deliver consistent same store growth and additional yield on investments, as well as cost effective service to tenants. As of March 31, 2022, we had approximately 1 million square feet of GLA in ten of our top 20 markets and approximately 0.5 million square feet of GLA in 17 of our top 20 markets.
•During the three months ended March 31, 2022, we closed on $19.0 million worth of medical office building investments totaling approximately 44,000 square feet of GLA. In addition, we funded $2.3 million of investments in real estate notes receivable.
Internal Growth through Proactive In-House Property Management and Leasing
We believe we have one of the largest full-service operating platforms in the medical office sector that consists of our in-house asset management and leasing platform which allows us to better manage and service our existing portfolio. In each of these markets, we have established a strong in-house asset management and leasing platform that has allowed us to develop valuable relationships with health systems, physician practices, universities, and regional development firms that have led to investment and leasing opportunities for us. Our full-service operating platform has also enabled us to focus on generating cost efficiencies as we gain scale across individual markets and regions.
•As of March 31, 2022, our in-house asset management and leasing platform operated approximately 25.0 million square feet of GLA, or 96% of our total portfolio.
•As of March 31, 2022, our leased rate (which includes leases which have been executed, but which have not yet commenced) was 89.3% by GLA and our occupancy rate was 87.3% by GLA.
•We entered into new and renewal leases on approximately 0.7 million square feet of GLA, or approximately 2.7% of the GLA of our total portfolio, during the three months ended March 31, 2022.
•During the three months ended March 31, 2022, tenant retention for the Same-Property portfolio was 69%. Tenant retention is defined as the sum of the total leased GLA of tenants that renewed a lease during the period over the total GLA of leases that renewed or expired during the period.
Financial Strategy and Balance Sheet Flexibility
•As of March 31, 2022, we had total leverage, measured by debt less cash and cash equivalents to total capitalization, of 29.4%. Total liquidity was approximately $1.0 billion, inclusive of $975.0 million available on our unsecured revolving credit facility and cash and cash equivalents of $10.9 million as of March 31, 2022.
•As of March 31, 2022, the weighted average remaining term of our debt portfolio was 6.2 years.
Critical Accounting Policies
The complete list of our critical accounting policies was disclosed in our 2021 Annual Report on Form 10-K. Additionally, in light of the COVID-19 pandemic, we believe we have included all relevant information when determining our management estimates and that these estimates are in line with our established policies. For further information on other significant accounting policies that impact us, see Note 2 - Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements.
Recently Issued or Adopted Accounting Pronouncements
For detail on recently issued accounting pronouncements see Note 2 - Summary of Significant Accounting Policies in the accompanying condensed consolidated financial statements.
Factors Which May Influence Results of Operations
We are not aware of material trends or uncertainties other than the risk factors previously discussed in Part I, Item 1A - Risk Factors, in our 2021 Annual Report on Form 10-K, and this Quarterly Report on Form 10-Q under Item 1A. Risk Factors below, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the investment, management and operation of our properties.
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Rental Income
The amount of rental income generated by our properties depends principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that will become available from unscheduled lease terminations at the then applicable rental rates. Negative trends in one or more of these factors, including the ultimate collections of such rents, could adversely affect our rental income in future periods.
Investment Activity
During the three months ended March 31, 2022, we had investments with an aggregate gross purchase price of $19.1 million. During the three months ended March 31, 2021, we had investments with an aggregate gross purchase price of $32.9 million. The amount of any future acquisitions or dispositions could have a significant impact on our results of operations in future periods.
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
As of March 31, 2022 and 2021, we owned and operated approximately 26.0 million and 25.6 million square feet of GLA, respectively, with a leased rate of 89.3% and 89.2%, respectively (including leases which have been executed, but which have not yet commenced), and an occupancy rate of 87.3% and 87.9%, respectively. All explanations are applicable to both HTA and HTALP unless otherwise noted.
Comparison of the three months ended March 31, 2022 and 2021, respectively, is set forth below (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | Change | % Change | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Rental income | $ | 200,243 | $ | 191,350 | $ | 8,893 | 4.6 | % | |||||||||||||||
| Interest and other operating income | 1,759 | 143 | 1,616 | NM | |||||||||||||||||||
| Total revenues | 202,002 | 191,493 | 10,509 | 5.5 | |||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Rental | 65,884 | 59,579 | 6,305 | 10.6 | |||||||||||||||||||
| General and administrative | 12,448 | 10,560 | 1,888 | 17.9 | |||||||||||||||||||
| Merger-related costs | 6,018 | — | 6,018 | NM | |||||||||||||||||||
| Transaction | 144 | 96 | 48 | 50.0 | |||||||||||||||||||
| Depreciation and amortization | 75,386 | 76,274 | (888) | (1.2) | |||||||||||||||||||
| Interest expense | 23,940 | 22,986 | 954 | 4.2 | |||||||||||||||||||
| Total expenses | 183,820 | 169,495 | 14,325 | 8.5 | |||||||||||||||||||
| Loss on sale of real estate, net | (4) | — | (4) | NM | |||||||||||||||||||
| Income from unconsolidated joint venture | 400 | 392 | 8 | 2.0 | |||||||||||||||||||
| Other income | 88 | 3 | 85 | NM | |||||||||||||||||||
| Net income | $ | 18,666 | $ | 22,393 | $ | (3,727) | (16.6) | % | |||||||||||||||
| NOI | $ | 136,118 | $ | 131,914 | $ | 4,204 | 3.2 | % | |||||||||||||||
| Same-Property Cash NOI | $ | 117,430 | $ | 116,549 | $ | 881 | 0.8 | % | |||||||||||||||
*NM- not meaningful.
Rental Income
For the three months ended March 31, 2022 and 2021, respectively, rental income was comprised of the following (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2022 | 2021 | Change | % Change | ||||||||||||||||||||
| Contractual rental income | $ | 191,165 | $ | 182,512 | $ | 8,653 | 4.7 | % | |||||||||||||||
Straight-line rent and amortization of above and (below) market leases | 4,244 | 5,247 | (1,003) | (19.1) | |||||||||||||||||||
| Other rental revenue | 4,834 | 3,591 | 1,243 | 34.6 | |||||||||||||||||||
| Total rental income | $ | 200,243 | $ | 191,350 | $ | 8,893 | 4.6 | % | |||||||||||||||
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Contractual rental income, which includes expense reimbursements, increased $8.7 million for the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The increase was primarily due to additional contractual rental income of $8.2 million from our 2021 and 2022 acquisitions, and contractual rent increases for the three months ended March 31, 2022, partially offset by $2.8 million of reduced contractual rental income as a result of the buildings we sold during 2021 and 2022 for the three months ended March 31, 2022, respectively.
Average starting and expiring base rents for new and renewal leases consisted of the following for the three months ended March 31, 2022 and 2021, respectively (in thousands, except in average base rents per square foot of GLA):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
New and renewal leases: | |||||||||||
| Average starting base rents | $ | 28.92 | $ | 24.75 | |||||||
| Average expiring base rents | 25.99 | 22.99 | |||||||||
| Square feet of GLA | 713 | 705 | |||||||||
Lease rates can vary across markets, and lease rates that are considered above or below current market rent may change over time. Leases that expired in 2022 had rents that we believed were at market rates. In general, leasing concessions vary depending on lease type, term, geography, and supply/demand dynamics.
Tenant improvements, leasing commissions and tenant concessions for new and renewal leases consisted of the following for the three months ended March 31, 2022 and 2021, respectively (in per square foot of GLA):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| New leases: | |||||||||||
| Tenant improvements | $ | 35.09 | $ | 22.34 | |||||||
Leasing commissions | 5.11 | 3.63 | |||||||||
| Tenant concessions | 0.41 | 7.14 | |||||||||
| Renewal leases: | |||||||||||
| Tenant improvements | $ | 7.01 | $ | 5.03 | |||||||
Leasing commissions | 4.12 | 2.21 | |||||||||
| Tenant concessions | 0.00 | 0.16 | |||||||||
The average term for new and renewal leases executed consisted of the following for the three months ended March 31, 2022 and 2021, respectively (in years):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| New leases | 6.5 | 4.4 | |||||||||
| Renewal leases | 4.3 | 4.2 | |||||||||
Rental Expenses
For the three months ended March 31, 2022 and 2021, rental expenses attributable to our properties were $65.9 million and $59.6 million, respectively. The increase in rental expenses was primarily due to $3.8 million of additional rental expenses associated with our 2021 and 2022 acquisitions for the three months ended March 31, 2022, respectively.
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General and Administrative Expenses
For the three months ended March 31, 2022 and 2021, general and administrative expenses were $12.4 million and $10.6 million, respectively. The increase was driven primarily by the following: (i) increased board expenses of $0.4 million, which includes additional board meeting fees of $0.2 million incurred primarily as a result of the Merger Agreement and the process related thereto, and $0.2 million of board member retainer fees for the board chairman and new board members; (ii) increased legal and professional fees of $0.4 million, primarily driven by costs incurred as a result of the previously disclosed whistleblower investigation, employee retention and strategic review matters; and (iii) increased costs for general corporate matters.
Merger-related costs
For the three months ended March 31, 2022, merger-related costs as a result of the contemplated Merger with HR were $6.0 million and included the following: (i) financial advisor fees of $3.8 million; (ii) legal fees of $1.8 million; (iii) merger and integration consulting fees of $0.3 million; and (iv) travel costs of $0.1 million. No such costs were incurred for the three months ended March 31, 2021.
Depreciation and Amortization Expense
For the three months ended March 31, 2022 and 2021, depreciation and amortization expense was $75.4 million and $76.3 million, respectively. The slight decrease in expense was associated with our buildings we disposed of during 2021 and 2022, offset by 2021 and 2022 acquisitions.
Interest Expense
For the three months ended March 31, 2022 and 2021, interest expense was $23.9 million and $23.0 million, respectively. The increase in interest expense is primarily related to amortization of commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the contemplated Merger with HR.
To achieve our objectives, we borrow at both fixed and variable rates. From time to time, we also enter into derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes.
Loss on Sale of Real Estate, net
For the three months ended March 31, 2022, we realized a net loss of approximately $4 thousand, as a result of the sale of a tenant purchase option on 1 of our MOBs located in Georgia. For the three months ended March 31, 2021, we had no property dispositions.
Net Income
For the three months ended March 31, 2022 and 2021, net income was $18.7 million and $22.4 million, respectively. The decrease is primarily the result of the merger-related costs incurred as a result of the contemplated Merger with HR.
NOI and Same-Property Cash NOI
For the three months ended March 31, 2022 and 2021, NOI was $136.1 million and $131.9 million, respectively. The increases in NOI was primarily due to additional NOI from our 2021 and 2022 acquisitions of $5.6 million for the three months ended March 31, 2022, respectively, partially offset by $1.6 million of reduced NOI as a result of the buildings we sold during 2021 and 2022 for the three months ended March 31, 2022, respectively, and a reduction in straight-line rent from properties we owned for more than a year.
Same-Property Cash NOI increased 0.8% to $117.4 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily the result of rent escalations, offset by a slight decrease in average occupancy.
Non-GAAP Financial Measures
FFO and Normalized FFO
We compute FFO in accordance with the current standards established by NAREIT. FFO is defined as net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property and impairment write-downs of depreciable assets, plus depreciation and amortization related to investments in real estate, and after adjustments for unconsolidated partnerships and joint ventures. Additionally, with respect to gains and losses on the sale of assets incidental to the main business of a REIT, the REIT has the option to include or exclude such gains and losses in the calculation of FFO. Since FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders/unitholders.
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We also compute Normalized FFO, which excludes from FFO: (i) transaction expenses; (ii) gain or loss on extinguishment of debt; (iii) non-controlling income or loss from OP Units included in diluted shares (only applicable to the Company); and (iv) other normalizing adjustments, which include items that are unusual and infrequent in nature. Our methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs.
We present FFO and Normalized FFO because we consider them important supplemental measures of our operating performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Historical cost accounting assumes that the value of real estate assets diminishes ratably over time. Since real estate values have historically risen or fallen based on market conditions, many industry investors have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. FFO and Normalized FFO should not be considered as alternatives to net income or loss attributable to common stockholders/unitholders (computed in accordance with GAAP) as indicators of our financial performance, nor are they indicative of cash available to fund cash needs. FFO and Normalized FFO should be reviewed in connection with other GAAP measurements.
In addition, the amounts included in the calculation of FFO and Normalized FFO are generally the same for HTALP and HTA, except for net income or loss attributable to common stockholders/unitholders, non-controlling income or loss from OP Units included in diluted shares (only applicable to the Company) and the weighted average shares of our common stock or HTALP OP Units outstanding.
The following is the reconciliation of HTA’s FFO and Normalized FFO to net income attributable to common stockholders for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per share data):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income attributable to common stockholders | $ | 18,315 | $ | 22,030 | |||||||
Depreciation and amortization expense related to investments in real estate | 74,799 | 75,331 | |||||||||
| Loss on sale of real estate, net | 4 | — | |||||||||
Proportionate share of joint venture depreciation and amortization | 488 | 488 | |||||||||
| FFO attributable to common stockholders | $ | 93,606 | $ | 97,849 | |||||||
| Transaction expenses | 144 | 96 | |||||||||
Merger-related costs (1) | 6,018 | — | |||||||||
Commitment fee amortization (2) | 892 | — | |||||||||
| Non-controlling income from OP Units included in diluted shares | 351 | 363 | |||||||||
Other normalizing adjustments (3) | 514 | — | |||||||||
| Normalized FFO attributable to common stockholders | $ | 101,525 | $ | 98,308 | |||||||
| Net income attributable to common stockholders per diluted share | $ | 0.08 | $ | 0.10 | |||||||
FFO adjustments per diluted share, net | 0.32 | 0.34 | |||||||||
FFO attributable to common stockholders per diluted share | $ | 0.40 | $ | 0.44 | |||||||
Normalized FFO adjustments per diluted share, net | 0.04 | 0.00 | |||||||||
Normalized FFO attributable to common stockholders per diluted share | $ | 0.44 | $ | 0.44 | |||||||
Weighted average diluted common shares outstanding | 233,046 | 222,268 | |||||||||
(1) For the three months ended March 31, 2022, merger-related costs include the following: (i) financial advisor fees of $3.8 million; (ii) legal fees of $1.8 million; (iii) merger and integration consulting fees of $0.3 million; and (iv) travel costs of $0.1 million.
(2) For the three months ended March 31, 2022, commitment fee amortization relates to commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the pending transaction with HR.
(3) For the three months ended March 31, 2022, other normalizing adjustments include the following: (i) additional board meeting fees of $159,000; (ii) legal and professional fees related to the whistleblower investigation of $143,000; (iii) legal fees related to employee retention matters of $131,000; and (iv) professional fees related to strategic review matters of $81,000.
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The following is the reconciliation of HTALP’s FFO and Normalized FFO to net income attributable to common unitholders for the three months ended March 31, 2022 and 2021, respectively (in thousands, except per unit data):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income attributable to common unitholders | $ | 18,666 | $ | 22,393 | |||||||
Depreciation and amortization expense related to investments in real estate | 74,799 | 75,331 | |||||||||
| Loss on sale of real estate, net | 4 | — | |||||||||
Proportionate share of joint venture depreciation and amortization | 488 | 488 | |||||||||
| FFO attributable to common unitholders | $ | 93,957 | $ | 98,212 | |||||||
| Transaction expenses | 144 | 96 | |||||||||
Merger-related costs (1) | 6,018 | — | |||||||||
Commitment fee amortization (2) | 892 | — | |||||||||
Other normalizing adjustments (3) | 514 | — | |||||||||
| Normalized FFO attributable to common unitholders | $ | 101,525 | $ | 98,308 | |||||||
| Net income attributable to common unitholders per diluted share | $ | 0.08 | $ | 0.10 | |||||||
| FFO adjustments per diluted OP Unit, net | 0.32 | 0.34 | |||||||||
| FFO attributable to common unitholders per diluted OP Unit | $ | 0.40 | $ | 0.44 | |||||||
| Normalized FFO adjustments per diluted OP Unit, net | 0.04 | 0.00 | |||||||||
| Normalized FFO attributable to common unitholders per diluted OP Unit | $ | 0.44 | $ | 0.44 | |||||||
| Weighted average diluted common OP Units outstanding | 233,046 | 222,268 | |||||||||
(1) For the three months ended March 31, 2022, merger-related costs include the following: (i) financial advisor fees of $3.8 million; (ii) legal fees of $1.8 million; (iii) merger and integration consulting fees of $0.3 million; and (iv) travel costs of $0.1 million.
(2) For the three months ended March 31, 2022, commitment fee amortization relates to commitment fees on the $1.7 billion bridge loan financing commitment secured in connection with the pending transaction with HR.
(3) For the three months ended March 31, 2022, other normalizing adjustments include the following: (i) additional board meeting fees of $159,000; (ii) legal and professional fees related to the whistleblower investigation of $143,000; (iii) legal fees related to employee retention matters of $131,000; and (iv) professional fees related to strategic review matters of $81,000.
NOI, Cash NOI and Same-Property Cash NOI
NOI is a non-GAAP financial measure that is defined as net income or loss (computed in accordance with GAAP) before: (i) general and administrative expenses; (ii) transaction expenses; (iii) depreciation and amortization expense; (iv) impairment; (v) interest expense; (vi) gain or loss on sales of real estate and corporate assets; (vii) gain or loss on extinguishment of debt; (viii) income or loss from unconsolidated joint venture; and (ix) other income or expense. We believe that NOI provides an accurate measure of the operating performance of our operating assets because NOI excludes certain items that are not associated with the management of our properties. Additionally, we believe that NOI is a widely accepted measure of comparative operating performance of REITs. However, our use of the term NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. NOI should be reviewed in connection with other GAAP measurements.
Cash NOI is a non-GAAP financial measure which excludes from NOI: (i) straight-line rent adjustments; (ii) amortization of below and above market leases/leasehold interests and other GAAP adjustments; (iii) notes receivable interest income; and (iv) other normalizing adjustments. Contractual base rent, contractual rent increases, contractual rent concessions and changes in occupancy or lease rates upon commencement and expiration of leases are a primary driver of our revenue performance. We believe that Cash NOI, which removes the impact of straight-line rent adjustments, provides another measurement of the operating performance of our operating assets. Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance of REITs. However, our use of the term Cash NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. Cash NOI should be reviewed in connection with other GAAP measurements.
To facilitate the comparison of Cash NOI between periods, we calculate comparable amounts for a subset of our owned and operational properties referred to as “Same-Property”. Same-Property Cash NOI excludes (i) properties which have not been owned and operated by us during the entire span of all periods presented and disposed properties, (ii) our share of unconsolidated joint ventures, (iii) development, redevelopment and land parcels, (iv) properties intended for disposition in the near term which have (a) been approved by the Board of Directors, (b) is actively marketed for sale, and (c) an offer has been
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received at prices we would transact and the sales process is ongoing, and (v) certain non-routine items. Same-Property Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of our financial performance. Same-Property Cash NOI should be reviewed in connection with other GAAP measurements.
The following is the reconciliation of HTA’s and HTALP’s NOI, Cash NOI and Same-Property Cash NOI to net income for the three months ended March 31, 2022 and 2021, respectively (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net income | $ | 18,666 | $ | 22,393 | |||||||
| General and administrative expenses | 12,448 | 10,560 | |||||||||
| Merger-related costs | 6,018 | — | |||||||||
| Transaction expenses | 144 | 96 | |||||||||
Depreciation and amortization expense | 75,386 | 76,274 | |||||||||
Interest expense | 23,940 | 22,986 | |||||||||
| Loss on sale of real estate, net | 4 | — | |||||||||
| Income from unconsolidated joint venture | (400) | (392) | |||||||||
| Other income | (88) | (3) | |||||||||
| NOI | $ | 136,118 | $ | 131,914 | |||||||
| Straight-line rent adjustments, net | (2,828) | (3,774) | |||||||||
| Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments | (407) | (475) | |||||||||
Notes receivable interest income | (1,660) | (6) | |||||||||
| Cash NOI | $ | 131,223 | $ | 127,659 | |||||||
Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI | (6,280) | (2,180) | |||||||||
| Redevelopment Cash NOI | (2,105) | (2,650) | |||||||||
| Intended for sale Cash NOI | (5,408) | (6,280) | |||||||||
Same-Property Cash NOI (1) | $ | 117,430 | $ | 116,549 | |||||||
(1) Same-Property includes 424 buildings for the three months ended March 31, 2022 and 2021, respectively.
Liquidity and Capital Resources
Our primary sources of cash include: (i) cash flow from operations; (ii) borrowings under our unsecured revolving credit facility; (iii) net proceeds from the issuances of debt and equity securities; and (iv) proceeds from our dispositions. During the next 12 months our primary uses of cash are expected to include: (a) the funding of acquisitions of MOBs, development properties and other facilities that serve the healthcare industry; (b) capital expenditures; (c) the payment of operating expenses; (d) debt service payments, including principal payments; and (e) the payment of dividends to our stockholders. We anticipate cash flow from operations, restricted cash and reserve accounts and our unsecured revolving credit facility, if needed, will be sufficient to fund our operating expenses, capital expenditures and dividends to stockholders. Investments and maturing indebtedness may require funds from borrowings under our unsecured revolving credit facility, the issuance of debt and/or equity securities or proceeds from sales of real estate.
As of March 31, 2022, we had total liquidity of $1.0 billion, inclusive of $975.0 million available on our unsecured revolving credit facility and cash and cash equivalents of $10.9 million.
As of March 31, 2022, we had unencumbered assets with a gross book value of $7.9 billion. The unencumbered properties may be used as collateral to secure additional financings in future periods or refinance our current debt as it becomes due. Our ability to raise funds from future debt and equity issuances is dependent on our investment grade credit ratings, general economic and market conditions, and our operating performance.
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When we acquire a property, we prepare a capital plan that contemplates the estimated capital needs of that investment. In addition to operating expenses, capital needs may also include costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan for each investment will be adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of March 31, 2022, we estimate that our expenditures for capital improvements including lease commissions for the remainder of the year will range from approximately $75 million to $100 million depending on leasing activity. In addition, we have approximately $150 million inclusive of costs to complete active development projects and incremental tenant improvements as part of our recently completed development projects. Although we cannot provide assurance that we will not exceed these estimated expenditure levels, we believe our liquidity of $1.0 billion allows us the flexibility to fund such capital expenditures.
If we experience lower occupancy levels, reduced rental rates, reduced revenues as a result of asset sales, or increased capital expenditures and leasing costs compared to historical levels due to competitive market conditions for new and renewal leases, the effect would be a reduction of net cash provided by operating activities. If such a reduction of net cash provided by operating activities is realized, we may have a cash flow deficit in subsequent periods. Our estimate of net cash available is based on various assumptions which are difficult to predict, including the levels of our leasing activity and related leasing costs. Any changes in these assumptions could impact our financial results and our ability to fund working capital and unanticipated cash needs.
Cash Flows
The following is a summary of our cash flows for the three months ended March 31, 2022 and 2021, respectively (in thousands):
| Three Months Ended March 31, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| Cash, cash equivalents and restricted cash - beginning of period | $ | 57,069 | $ | 118,765 | $ | (61,696) | |||||||||||
| Net cash provided by operating activities | 49,308 | 65,353 | (16,045) | ||||||||||||||
| Net cash used in investing activities | (33,180) | (76,299) | 43,119 | ||||||||||||||
| Net cash used in financing activities | (57,775) | (74,733) | 16,958 | ||||||||||||||
| Cash, cash equivalents and restricted cash - end of period | $ | 15,422 | $ | 33,086 | $ | (17,664) | |||||||||||
Net cash provided by operating activities decreased in 2022 primarily due to the impact of our 2021 and 2022 dispositions, partially offset by our 2021 and 2022 acquisitions and contractual rent increases. We anticipate cash flows from operating activities to increase as a result of the growth in our portfolio through new acquisitions and continued leasing activity in our existing portfolio.
For the three months ended March 31, 2022, net cash used in investing activities primarily related to capital expenditures of $28.6 million, investments in real estate of $19.1 million, development of real estate of $10.4 million, and advances on real estate notes receivable of $2.3 million, partially offset by proceeds from the sale of real estate of $26.8 million. For the three months ended March 31, 2021, net cash used in investing activities primarily related to investments in real estate of $30.5 million, capital expenditures of $28.9 million and development of real estate of $17.1 million.
For the three months ended March 31, 2022, net cash used in financing activities primarily related to dividends paid to holders of our common stock of $74.4 million, and deferred financing costs of $5.4 million, partially offset by net borrowings under our revolving credit facility of $25.0 million. For the three months ended March 31, 2021, net cash used in financing activities primarily related to dividends paid to holders of our common stock of $70.0 million, and the repurchase and cancellation of common stock of $3.2 million.
Dividends
The amount of dividends we pay to our stockholders is determined by our Board of Directors, in their sole discretion, and is dependent on a number of factors, including funds available, our financial condition, capital expenditure requirements and annual dividend distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended. We have paid monthly or quarterly dividends since February 2007, and if our investments produce sufficient cash flow, we expect to continue to pay dividends to our stockholders. Because our cash available for dividend distributions in any year may be less than 90% of our taxable income for the year, we may obtain the necessary funds through borrowings, issuing new securities or selling assets to pay out enough of our taxable income to satisfy our dividend distribution requirement. Our organizational documents do not establish a limit on dividends that may constitute a return of capital for federal income tax purposes. The dividend we pay to our stockholders is equal to the distributions received from HTALP in accordance with the terms of the HTALP partnership agreement. It is our intention to continue to pay dividends. However, our Board of Directors may reduce our dividend rate and we cannot guarantee the timing and amount of dividends that we may pay in the future, if any.
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For the three months ended March 31, 2022, we paid cash dividends of $74.4 million on our common stock. In April 2022 for the quarter ended March 31, 2022, we paid cash dividends on our common stock of $74.4 million.
Financing
We have historically maintained a low leveraged balance sheet and intend to continue to maintain this structure in the long term. However, our total leverage may fluctuate on a short-term basis as we execute our business strategy. As of March 31, 2022, our leverage ratio, measured by debt less cash and cash equivalents to total capitalization, was 29.4%.
As of March 31, 2022, we had debt outstanding of $3.1 billion and the weighted average interest rate therein was 2.86% per annum, inclusive of the impact of our cash flow hedges. The following is a summary of our unsecured and secured debt. See Note 8 - Debt in the accompanying condensed consolidated financial statements for a further discussion of our debt.
Unsecured Revolving Credit Facility
As of March 31, 2022, $975.0 million was available on our $1.0 billion unsecured revolving credit facility maturing in October 2025.
Unsecured Term Loans
As of March 31, 2022, we had $500.0 million of unsecured term loans outstanding, comprised of $300.0 million under our Unsecured Credit Agreement maturing in 2025, and $200.0 million under our unsecured term loan maturing in 2024.
Unsecured Senior Notes
As of March 31, 2022, we had $2.55 billion of unsecured senior notes outstanding, comprised of $600.0 million of senior notes maturing in 2026, $500.0 million of senior notes maturing in 2027, $650.0 million of senior notes maturing in 2030 and $800.0 million of senior notes maturing in 2031.
Debt Service Requirements
We are required by the terms of our applicable loan agreements to meet certain financial covenants, such as minimum net worth and liquidity, and reporting requirements, among others. As of March 31, 2022, we believe that we were in compliance with all such covenants and we are not aware of any covenants that it is reasonably likely that we would not be able to meet in accordance with our loan agreements.
Off-Balance Sheet Arrangements
As of and during the three months ended March 31, 2022, we had no material off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Inflation
We are exposed to inflation risk as income from future long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that protect us from the impact of normal inflation. These provisions include rent escalations, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements on a per square foot allowance. However, due to the long-term nature of our leases, among other factors, the leases may not reset frequently enough to cover inflation.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in our 2021 Annual Report on Form 10-K.
Item 4. Controls and Procedures
Healthcare Trust of America, Inc.
HTA’s management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including HTA’s Chief Executive Officer (as the principal executive officer) and Chief Financial Officer (as the principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosures.
As of March 31, 2022, an evaluation was conducted by HTA under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, HTA’s Chief Executive Officer and Chief Financial Officer each concluded that HTA’s disclosure controls and procedures were effective as of March 31, 2022.
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably believed to be likely to materially affect, our internal control over financial reporting. This determination was reached after careful evaluation of the effects COVID-19 has had on our operations.
May 6, 2022
Healthcare Trust of America Holdings, LP
HTALP’s management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including HTA’s Chief Executive Officer (as the principal executive officer) and Chief Financial Officer (as the principal financial officer and principal accounting officer), to allow timely decisions regarding required disclosures.
As of March 31, 2022, an evaluation was conducted by HTALP under the supervision and with the participation of its management, including HTA’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, HTA’s Chief Executive Officer and Chief Financial Officer, on behalf of HTA in its capacity as general partner of HTALP, each concluded that HTALP’s disclosure controls and procedures were effective as of March 31, 2022.
There were no changes in HTALP’s internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably believed to be likely to materially affect, HTALP’s internal control over financial reporting. This determination was reached after careful evaluation of the effects COVID-19 has had on our operations.
May 6, 2022
42
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 6, 2022, a purported stockholder of the Company filed a lawsuit in the United States District Court for the Southern District of New York against us and seven of our current directors, captioned Shiva Stein v. Healthcare Trust of America, Inc., et al., Case No. 1:22-cv-03703 (the “Complaint”).
The Complaint alleges that the preliminary proxy statement issued in connection with the Merger omits material information or contains misleading disclosures and that, as a result, (i) all of the defendants violated Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act) and (ii) our directors violated section 20(a) of the Exchange Act. The Complaint seeks, among other things, (i) injunctive relief preventing the consummation of the transactions contemplated by the Merger Agreement; (ii) rescission or rescissory damages to the extent the transactions contemplated by the Merger Agreement have been implemented; (iii) dissemination of a proxy statement that does not omit material information or contain any misleading disclosures; (iv) an accounting to plaintiff for all damages suffered as a result of the alleged wrongdoing; and (v) an award of plaintiff’s expenses, including attorneys’ and experts’ fees. We believe the claims asserted in the Complaint are without merit. Additional lawsuits may be filed against us, our Board of Directors, and/or other parties to the Merger in connection with the transactions contemplated by the Merger Agreement.
In addition, we are, from time to time, also subject to claims and litigation arising in the ordinary course of business with respect to tenant litigation and threatened or asserted labor matters.
We do not believe liability from any reasonably foreseeable disposition of the aforementioned claims and litigation, individually or in the aggregate, would have a material effect on our accompanying condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on March 1, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the three months ended March 31, 2022, we repurchased shares of our common stock as follows:
| Period | Total Number of Shares Purchased (1) (2) | Average Price Paid per Share (1) (2) | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| January 1, 2022 to January 31, 2022 | 42,834 | $ | 33.55 | — | — | |||||||||||||||||||||
| February 1, 2022 to February 28, 2022 | 672 | 30.33 | — | — | ||||||||||||||||||||||
| March 1, 2022 to March 31, 2022 | 6,041 | 30.40 | — | — | ||||||||||||||||||||||
| (1) Purchases represent shares of common stock withheld by us to satisfy withholding obligations on the vesting of restricted shares. The price paid per share was the then closing price of our common stock on the NYSE. | ||||||||||||||||||||||||||
(2) For each share of common stock redeemed by HTA, HTALP redeems a corresponding number of OP Units in the HTALP operating partnership. Therefore, the OP Units in the HTALP operating partnership repurchased by HTALP are the same as the shares of common stock repurchased by HTA as shown above. | ||||||||||||||||||||||||||
Item 6. Exhibits
The exhibits listed on the Exhibit Index are included, and incorporated by reference, in this Quarterly Report.
43
EXHIBIT INDEX
Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit Index immediately precedes the exhibits.
The following exhibits are included, or incorporated by reference, in this Quarterly Report for the quarter ended March 31, 2022 (and are numbered in accordance with Item 601 of Regulation S-K).
| 2.1 | |||||
| 10.1† | |||||
| 10.2† | |||||
| 10.3 | |||||
| 10.4 | |||||
| 31.1* | |||||
| 31.2* | |||||
| 31.3* | |||||
| 31.4* | |||||
| 32.1** | |||||
| 32.2** | |||||
| 32.3** | |||||
| 32.4** | |||||
| 101.INS* | Inline XBRL Instance Document. | ||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | ||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
| * | Filed herewith. | ||||
| ** | Furnished herewith. | ||||
| † | Compensatory plan or arrangement. | ||||
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Healthcare Trust of America, Inc. | |||||||||||
| By: | /s/ Peter N. Foss | Interim President and Chief Executive Officer | |||||||||
| Peter N. Foss | (Principal Executive Officer) | ||||||||||
| Date: | May 6, 2022 | ||||||||||
| By: | /s/ Robert A. Milligan | Chief Financial Officer | |||||||||
| Robert A. Milligan | (Principal Financial Officer and Principal Accounting Officer) | ||||||||||
| Date: | May 6, 2022 | ||||||||||
| Healthcare Trust of America Holdings, LP | |||||||||||
| By: | Healthcare Trust of America, Inc., | ||||||||||
| its General Partner | |||||||||||
| By: | /s/ Peter N. Foss | Interim President and Chief Executive Officer | |||||||||
| Peter N. Foss | (Principal Executive Officer) | ||||||||||
| Date: | May 6, 2022 | ||||||||||
| By: | /s/ Robert A. Milligan | Chief Financial Officer | |||||||||
| Robert A. Milligan | (Principal Financial Officer and Principal Accounting Officer) | ||||||||||
| Date: | May 6, 2022 | ||||||||||
45
Exhibit 31.1
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Peter N. Foss, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust of America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Peter N. Foss | ||||||||||
| Peter N. Foss | |||||||||||
| Interim President and Chief Executive Officer | |||||||||||
Date: May 6, 2022
Exhibit 31.2
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert A. Milligan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust of America, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Robert A. Milligan | ||||||||||
| Robert A. Milligan | |||||||||||
| Chief Financial Officer | |||||||||||
Date: May 6, 2022
Exhibit 31.3
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Peter N. Foss, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust of America Holdings, LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Peter N. Foss | ||||||||||
| Peter N. Foss | |||||||||||
| Interim President and Chief Executive Officer of Healthcare Trust of America, Inc., general partner of Healthcare Trust of America Holdings, LP | |||||||||||
Date: May 6, 2022
Exhibit 31.4
CERTIFICATION
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert A. Milligan, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Healthcare Trust of America Holdings, LP;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| By: | /s/ Robert A. Milligan | ||||||||||
| Robert A. Milligan | |||||||||||
| Chief Financial Officer of Healthcare Trust of America, Inc., general partner of Healthcare Trust of America Holdings, LP | |||||||||||
Date: May 6, 2022
Exhibit 32.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Healthcare Trust of America, Inc., or the Company, for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, or the Report, I, Peter N. Foss, Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Peter N. Foss | ||||||||||
| Peter N. Foss | |||||||||||
| Interim President and Chief Executive Officer | |||||||||||
Date: May 6, 2022
A signed original of this written statement required by Section 906 has been provided to Healthcare Trust of America, Inc. and will be retained by Healthcare Trust of America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Healthcare Trust of America, Inc., or the Company, for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, or the Report, I, Robert A. Milligan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Robert A. Milligan | ||||||||||
| Robert A. Milligan | |||||||||||
| Chief Financial Officer | |||||||||||
Date: May 6, 2022
A signed original of this written statement required by Section 906 has been provided to Healthcare Trust of America, Inc. and will be retained by Healthcare Trust of America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.3
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Healthcare Trust of America Holdings, LP, or the Company, for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, or the Report, I, Peter N. Foss, Interim President and Chief Executive Officer of Healthcare Trust of America, Inc., general partner of Healthcare Trust of America Holdings, LP, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Peter N. Foss | ||||||||||
| Peter N. Foss | |||||||||||
| Interim President and Chief Executive Officer of Healthcare Trust of America, Inc., general partner of Healthcare Trust of America Holdings, LP | |||||||||||
Date: May 6, 2022
A signed original of this written statement required by Section 906 has been provided to Healthcare Trust of America, Inc. and will be retained by Healthcare Trust of America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.4
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Healthcare Trust of America Holdings, LP, or the Company, for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, or the Report, I, Robert A. Milligan, Chief Financial Officer of Healthcare Trust of America, Inc., general partner of Healthcare Trust of America Holdings, LP, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| By: | /s/ Robert A. Milligan | ||||||||||
| Robert A. Milligan | |||||||||||
| Chief Financial Officer of Healthcare Trust of America, Inc., general partner of Healthcare Trust of America Holdings, LP | |||||||||||
Date: May 6, 2022
A signed original of this written statement required by Section 906 has been provided to Healthcare Trust of America, Inc. and will be retained by Healthcare Trust of America, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.