SEC Form 10-Q filed by Healthcare Realty Trust Incorporated
$HR
Real Estate Investment Trusts
Real Estate
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-Q
(Mark One) | ||||||||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For the quarterly period ended: | ||||||||
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 Realty Trust Incorporated)
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices)
(615 ) 269-8175
(Registrant's telephone number, including area code)
www.healthcarerealty.com | ||
| (Internet address) | ||
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | 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.
| ☒ | ☐ | 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).
| ☒ | ☐ | 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.
| ☒ | ☐ | Accelerated filer | ☐ | Non-accelerated filer | |||||||||||||
| 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.
| ☐ | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes | ☒ | No | |||||||||
As of July 25, 2025, the Registrant had 351,606,597 shares of Common Stock outstanding.
HEALTHCARE REALTY TRUST INCORPORATED
FORM 10-Q
June 30, 2025
Table of Contents
| PART I - FINANCIAL INFORMATION | ||||||||
| PART II - OTHER INFORMATION | ||||||||
| Item 5 | Other Information | |||||||
| SIGNATURE | ||||||||
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Healthcare Realty Trust Incorporated
Condensed Consolidated Balance Sheets
Amounts in thousands, except per share data
| ASSETS | ||||||||
Unaudited JUNE 30, 2025 | DECEMBER 31, 2024 | |||||||
| Real estate properties | ||||||||
| Land | $ | $ | ||||||
| Buildings and improvements | ||||||||
| Lease intangibles | ||||||||
| Personal property | ||||||||
| Investment in financing receivable, net | ||||||||
| Financing lease right-of-use assets | ||||||||
| Construction in progress | ||||||||
| Land held for development | ||||||||
| Total real estate properties | ||||||||
| Less accumulated depreciation and amortization | ( | ( | ||||||
| Total real estate properties, net | ||||||||
| Cash and cash equivalents | ||||||||
| Assets held for sale, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Investments in unconsolidated joint ventures | ||||||||
| Other assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, AND STOCKHOLDERS' EQUITY | ||||||||
| Liabilities | ||||||||
| Notes and bonds payable | $ | $ | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Liabilities of assets held for sale | ||||||||
| Operating lease liabilities | ||||||||
| Financing lease liabilities | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Redeemable non-controlling interests | ||||||||
| Stockholders' equity | ||||||||
Preferred stock, $ | ||||||||
Class A Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
| Cumulative net income attributable to common stockholders | ||||||||
| Cumulative dividends | ( | ( | ||||||
| Total stockholders' equity | ||||||||
| Non-controlling interest | ||||||||
| Total equity | ||||||||
| Total liabilities, redeemable non-controlling interests, and stockholders' equity | $ | $ | ||||||
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are an integral part of these financial statements.
1
Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2025 and 2024
Amounts in thousands, except per share data
Unaudited
| THREE MONTHS ENDED June 30, | SIX MONTHS ENDED June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| Revenues | ||||||||||||||
| Rental income | $ | $ | $ | $ | ||||||||||
| Interest income | ||||||||||||||
| Expenses | ||||||||||||||
| Property operating | ||||||||||||||
| General and administrative | ||||||||||||||
| Transaction costs | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Other income (expense) | ||||||||||||||
| Gain on sales of real estate properties and other assets | ||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||
| Impairment of real estate properties and credit loss reserves | ( | ( | ( | ( | ||||||||||
| Impairment of goodwill | ( | |||||||||||||
| Equity income (loss) from unconsolidated joint ventures | ( | ( | ||||||||||||
| Interest and other (expense) income, net | ( | ( | ( | |||||||||||
| ( | ( | ( | ( | |||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Net loss attributable to non-controlling interests | ||||||||||||||
| Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Basic earnings per common share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Diluted earnings per common share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Weighted average common shares outstanding - basic | ||||||||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are an integral part of these financial statements.
2
Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Comprehensive Loss
For the Three and Six Months Ended June 30, 2025 and 2024
Amounts in thousands
Unaudited
| THREE MONTHS ENDED June 30, | SIX MONTHS ENDED June 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Other comprehensive loss | ||||||||||||||
| Interest rate derivatives | ||||||||||||||
| Reclassification adjustments for gains included in interest expense | ( | ( | ( | ( | ||||||||||
| (Losses) gains arising during the period on interest rate swaps | ( | ( | ||||||||||||
| ( | ( | |||||||||||||
| Comprehensive loss | ( | ( | ( | ( | ||||||||||
| Less: comprehensive loss attributable to non-controlling interests | ||||||||||||||
| Comprehensive loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are an integral part of these financial statements.
3
Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Equity and Redeemable Non-Controlling Interests
For the Three Months Ended June 30, 2025 and 2024
Amounts in thousands, except per share data
Unaudited
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Net Income | Cumulative Dividends | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | Redeemable Non-controlling Interests | |||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Common stock redemptions | ( | ( | — | — | — | ( | — | ( | — | ||||||||||||||||||||
| Conversion of OP Units to common stock | — | — | — | — | ( | — | |||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | — | ||||||||||||||||||||
| Reclassification adjustments for gains included in net income (interest expense) | — | — | ( | — | — | ( | ( | ( | — | ||||||||||||||||||||
| Losses arising during the period on interest rate swaps | — | — | ( | — | — | ( | ( | ( | — | ||||||||||||||||||||
| Adjustments to redemption value of redeemable non-controlling interests | — | — | — | — | — | ( | |||||||||||||||||||||||
Dividends to common stockholders and distributions to non-controlling interest holders ($ | — | — | — | — | ( | ( | ( | ( | — | ||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Net Income | Cumulative Dividends | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | Redeemable Non-controlling Interests | |||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
| Common stock redemptions | — | ( | — | — | — | ( | — | ( | — | ||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||
| Common stock repurchases | ( | ( | — | — | — | ( | — | ( | — | ||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | — | ||||||||||||||||||||
| Reclassification adjustments for gains included in net income (interest expense) | — | — | ( | — | — | ( | ( | ( | — | ||||||||||||||||||||
| Gains arising during the period on interest rate swaps | — | — | — | — | — | ||||||||||||||||||||||||
| Adjustments to redemption value of redeemable non-controlling interests | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||
Dividends to common stockholders and distributions to non-controlling interest holders ($ | — | — | — | — | ( | ( | ( | ( | — | ||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are an integral part of these financial statements.
4
Condensed Consolidated Statements of Equity and Redeemable Non-Controlling Interests
For the Six Months Ended June 30, 2025 and 2024
Amounts in thousands, except per share data
Unaudited
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Net Income | Cumulative Dividends | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | Redeemable Non-controlling Interests | |||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Common stock redemptions | ( | ( | — | — | — | ( | — | ( | — | ||||||||||||||||||||
| Conversion of OP Units to common stock | — | — | — | — | ( | — | |||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||
| Redemption of non-controlling interest | — | — | — | — | — | ( | ( | — | |||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||
| Reclassification adjustments for gains included in net income (interest expense) | — | — | ( | — | — | ( | ( | ( | — | ||||||||||||||||||||
| Losses arising during the period on interest rate swaps | — | — | ( | — | — | ( | ( | ( | — | ||||||||||||||||||||
| Adjustments to redemption value of redeemable non-controlling interests | — | — | — | — | — | ( | |||||||||||||||||||||||
Dividends to common stockholders and distributions to non-controlling interest holders ($ | — | — | — | — | ( | ( | ( | ( | — | ||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Net Income | Cumulative Dividends | Total Stockholders’ Equity | Non-controlling Interests | Total Equity | Redeemable Non-controlling Interests | |||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Issuance of common stock, net of issuance costs | — | — | — | — | — | — | |||||||||||||||||||||||
| Common stock redemptions | — | ( | — | — | — | ( | — | ( | — | ||||||||||||||||||||
| Conversion of OP Units to common stock | — | — | — | ( | — | — | |||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||
| Common stock repurchases | ( | ( | — | — | — | ( | — | ( | — | ||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | — | ||||||||||||||||||||
| Reclassification adjustments for gains included in net income (interest expense) | — | — | ( | — | — | ( | ( | ( | — | ||||||||||||||||||||
| Gains arising during the period on interest rate swaps | — | — | — | — | — | ||||||||||||||||||||||||
| Contributions from redeemable non-controlling interests | — | — | — | — | — | — | — | — | |||||||||||||||||||||
| Adjustments to redemption value of redeemable non-controlling interests | — | — | — | — | — | — | — | — | ( | ||||||||||||||||||||
Dividends to common stockholders and distributions to non-controlling interest holders ($ | — | — | — | — | ( | ( | ( | ( | — | ||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are an integral part of these financial statements.
5
Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2025 and 2024
Amounts in thousands
Unaudited
| OPERATING ACTIVITIES | ||||||||
| SIX MONTHS ENDED June 30, | ||||||||
| 2025 | 2024 | |||||||
| Net loss | $ | ( | $ | ( | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Other amortization | ||||||||
| Share-based compensation | ||||||||
| Amortization of straight-line rent receivable (lessor) | ( | ( | ||||||
| Amortization of straight-line rent on operating leases (lessee) | ||||||||
| Gain on sales of real estate properties and other assets | ( | ( | ||||||
| Impairment of real estate properties and credit loss reserves | ||||||||
| Impairment of goodwill | ||||||||
| Equity (income) loss from unconsolidated joint ventures | ( | |||||||
| Distributions from unconsolidated joint ventures | ||||||||
| Non-cash interest from financing and notes receivable | ( | ( | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Other assets, including right-of-use-assets | ( | ( | ||||||
| Accounts payable and accrued liabilities | ( | ( | ||||||
| Other liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| INVESTING ACTIVITIES | ||||||||
| Development of real estate | ( | ( | ||||||
| Additional long-lived assets | ( | ( | ||||||
| Funding of mortgages and notes receivable | ( | ( | ||||||
| Investments in unconsolidated joint ventures | ( | |||||||
| Proceeds from (investment in) financing receivable | ( | |||||||
| Contributions from redeemable non-controlling interests | ||||||||
| Proceeds from sales of real estate properties and additional long-lived assets | ||||||||
| Proceeds from insurance recovery | ||||||||
| Proceeds from notes receivable repayments | ||||||||
| Net cash (used in) provided by investing activities | ( | |||||||
| FINANCING ACTIVITIES | ||||||||
| Net borrowings on unsecured credit facility | ||||||||
| Repayment on term loans | ( | ( | ||||||
| Repayments of notes and bonds payable | ( | ( | ||||||
| Dividends paid | ( | ( | ||||||
| Net proceeds from issuance of common stock | ||||||||
| Common stock redemptions | ( | ( | ||||||
| Common stock repurchases | ( | |||||||
| Distributions to non-controlling interest holders | ( | ( | ||||||
| Redemption of non-controlling interest | ( | |||||||
| Debt issuance and assumption costs | ( | |||||||
| Payments made on finance leases | ( | ( | ||||||
| Net cash used in financing activities | ( | ( | ||||||
| (Decrease) increase in cash and cash equivalents | ( | |||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period, including held for sale | ||||||||
| Cash and cash equivalents held for sale | ( | |||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
6
| Supplemental Cash Flow Information | SIX MONTHS ENDED June 30, | |||||||
| 2025 | 2024 | |||||||
| Interest paid | $ | $ | ||||||
| Mortgage notes receivable taken in connection with sale of real estate | $ | $ | ||||||
| Invoices accrued for construction, tenant improvements and other capitalized costs | $ | $ | ||||||
| Capitalized interest | $ | $ | ||||||
| Proceeds from dispositions held in escrow | $ | $ | ||||||
| Contribution of real estate properties into unconsolidated joint venture | $ | $ | ||||||
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are an integral part of these financial statements.
7
Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Business Overview
Healthcare Realty Trust Incorporated (the "Company") is a real estate investment trust ("REIT") that owns, leases, manages, acquires, finances, develops and redevelops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. As of June 30, 2025, the Company had gross investments of approximately $11.2 billion in 559 consolidated real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property, excluding held for sale assets. In addition, as of June 30, 2025, the Company had a weighted average ownership interest of approximately 30 % in 63 real estate properties held in unconsolidated joint ventures. See Note 2 below for more details regarding the Company's unconsolidated joint ventures. The Company's consolidated real estate properties are located in 32 states and total approximately 32.2 million square feet. The Company provided leasing and property management services to 93 % of its portfolio nationwide as of June 30, 2025.
The Company is structured as an umbrella partnership REIT under which substantially all of its business is conducted through the operating partnership, Healthcare Realty Holdings, L.P. (the “OP”), the day-to-day management of which is exclusively controlled by the Company. As of June 30, 2025, the Company owned 98.6 % of the issued and outstanding units of the OP (“OP Units”), with other investors owning the remaining 1.4 % of OP Units.
Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. All material intercompany transactions and balances have been eliminated in consolidation.
This interim financial information should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. In addition, the interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2025 for many reasons including, but not limited to, acquisitions, dispositions, capital financing transactions, changes in interest rates and the effects of other trends, risks and uncertainties.
Principles of Consolidation
The Company’s Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures and partnerships where the Company controls the operating activities. GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). Accounting Standards Codification (“ASC”) Topic 810, Consolidation broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary, with any minority interests reflected as non-controlling interests or redeemable non-controlling interests in the accompanying Condensed Consolidated Financial Statements.
The Company may change its original assessment of a VIE upon subsequent events, such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk, the disposition of all or a portion of an interest held by the primary beneficiary, or changes in facts and circumstances
8
Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
that impact the power to direct activities of the VIE that most significantly impacts economic performance. The Company performs this analysis on an ongoing basis.
For property holding entities not determined to be VIEs, the Company consolidates such entities in which it owns 100 % of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For an entity in which the Company owns less than 100 % of the equity interest, the Company consolidates the entity if it has the direct or indirect ability to control the entity's activities based upon the terms of the entity's ownership agreements.
As of June 30, 2025, the Company had three consolidated VIEs, in addition to the OP, consisting of joint venture investments in which the Company is the primary beneficiary of the VIE based on the combination of operational control and the rights to receive residual returns or the obligation to absorb losses arising from the joint ventures. Accordingly, such joint ventures have been consolidated, and the table below summarizes the balance sheets of consolidated VIEs, excluding the OP, in the aggregate as of June 30, 2025 and December 31, 2024:
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||
| Assets: | ||||||||
Total real estate investments, net | $ | $ | ||||||
| Cash and cash equivalents | ||||||||
Other assets, net | ||||||||
Total assets | $ | $ | ||||||
Liabilities: | ||||||||
Notes and bonds payable | $ | $ | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Other liabilities | ||||||||
Total liabilities | $ | $ | ||||||
As of June 30, 2025, the Company had four unconsolidated VIEs consisting of three notes receivable and one joint venture. The Company does not have the power or economic interests to direct the activities of these VIEs on a stand-alone basis, and therefore it was determined that the Company was not the primary beneficiary. As a result, the Company accounts for the three notes receivable as amortized cost and the joint venture arrangement under the equity method.
See below for additional information regarding the Company's unconsolidated VIEs.
| (dollars in thousands) ORIGINATION DATE | LOCATION | SOURCE | CARRYING AMOUNT | MAXIMUM EXPOSURE TO LOSS | ||||||||||
| 2021 | Charlotte, NC | Note receivable | ||||||||||||
| 2022 | Texas 1 | Equity method | ||||||||||||
| 2024 | Texas 2 | Note receivable | ||||||||||||
| 2024 | Texas 2 | Note receivable | ||||||||||||
1Includes investments in seven properties.
2The Company provided seller financing and entered into a mortgage loan and a mezzanine loan in connection with a property disposition.
9
Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Use of Estimates in the Condensed Consolidated Financial Statements
Segment Reporting
Redeemable Non-Controlling Interests
Asset Impairment
As of June 30, 2025, 11 real estate properties totaling $126.3 million were measured at fair value using level 3 fair value hierarchy. The level 3 fair value techniques included using discounted cash flow models, brokerage estimates, letters of intent, and unexecuted purchase and sale agreements, and less estimated closing costs. The determination of fair value using the discounted cash flow model technique requires the use of estimates and assumptions related to revenue and expense growth rates, capitalization rates, discount rates, capital expenditures and working capital levels.
Investments in Leases - Financing Receivables, Net
In accordance with ASC Topic 842: Leases, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option. As a result, the Company does not recognize the underlying
10
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
| (dollars in thousands) | CARRYING VALUE AS OF | |||||||||||||
| ORIGINATION DATE | LOCATION | INTEREST RATE | JUNE 30, 2025 | DECEMBER 31, 2024 | ||||||||||
| May 2021 | Poway, CA | $ | $ | |||||||||||
| November 2021 | Columbus, OH | |||||||||||||
| $ | $ | |||||||||||||
Real Estate Notes Receivable
| (dollars in thousands) | ORIGINATION | MATURITY | STATED INTEREST RATE | MAXIMUM LOAN COMMITMENT | OUTSTANDING as of JUNE 30, 2025 | INTEREST RECEIVABLE (OTHER ASSETS) | ALLOWANCE FOR CREDIT LOSSES | FAIR VALUE DISCOUNT AND FEES | CARRYING VALUE as of JUNE 30, 2025 | ||||||||||||||||||||
| Mezzanine loans | |||||||||||||||||||||||||||||
| Arizona | 12/21/2023 | 12/20/2026 | % | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Texas | 10/03/2024 | 10/02/2029 | % | ||||||||||||||||||||||||||
| Wisconsin | 3/20/2025 | 3/19/2030 | % | ||||||||||||||||||||||||||
| Mortgage loans | |||||||||||||||||||||||||||||
Texas 1 | 6/30/2021 | 12/02/2024 | % | ( | |||||||||||||||||||||||||
North Carolina 2 | 12/22/2021 | 12/22/2024 | % | ( | |||||||||||||||||||||||||
Florida 3 | 5/17/2022 | 2/27/2026 | % | ||||||||||||||||||||||||||
| California | 3/30/2023 | 3/29/2026 | % | ||||||||||||||||||||||||||
| Florida | 12/28/2023 | 12/28/2026 | % | ||||||||||||||||||||||||||
Texas | 10/03/2024 | 10/02/2029 | % | ||||||||||||||||||||||||||
Texas 4 | 3/20/2025 | 3/19/2030 | % | ||||||||||||||||||||||||||
| ( | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
1In 2024, the Company determined that an allowance for credit loss of $16.8 million was needed on this mortgage loan, which included approximately $16.3 million of principal and approximately $0.5 million of interest. In January 2025, the underlying collateral for this loan was sold and the Company received $14.9 million towards the principal balance of this loan.
2Outstanding principal and interest due upon maturity. As of the date of these financial statements, the outstanding principal and interest on this loan has not been repaid. The Company has evaluated the collectibility of the amount outstanding and has determined that an allowance for credit loss of $1.5 million was needed on this loan.
3In April 2025, this loan was repaid in full.
Allowance for Credit Losses
Pursuant to ASC Topic 326: Financial Instruments - Credit Losses, the Company adopted a policy to evaluate current expected credit losses at the inception of loans qualifying for treatment under ASC Topic 326. The Company utilizes a probability of default method approach for estimating current expected credit losses and evaluates the liquidity and creditworthiness of its borrowers on a quarterly basis to determine whether any updates to the future expected losses recognized upon inception are necessary. The Company’s evaluation considers industry and economic conditions, credit enhancements, liquidity, and other factors. The determination of the credit allowance is based on a quarterly evaluation of all outstanding loans, including general economic conditions and estimated collectability of loan payments. The Company evaluates the collectability of loan receivables based on a combination of credit quality
11
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
indicators, including, but not limited to, payment status, historical loan charge-offs, financial strength of the borrower and guarantors, and nature, extent, and value of the underlying collateral. A loan is considered to have deteriorated credit quality when, based on current information and events, it is probable that the Company will be unable to collect all amounts due as scheduled according to the contractual terms of the loan agreement. For those loans identified as having deteriorated credit quality, the amount of credit loss is determined on an individual basis. Placement on non-accrual status may be required. Consistent with this definition, all loans on non-accrual status are deemed to have deteriorated credit quality. To the extent circumstances improve and the risk of collectability is diminished, the loan may return to income accrual status. While a loan is on non-accrual status, any cash receipts are applied against the outstanding principal balance.
In the second quarter of 2025, the Company determined the risk of credit loss on one of its mortgage notes receivable was no longer remote and recorded a credit loss reserve of $1.5 million.
The following table summarizes the Company's allowance for credit losses on real estate notes receivable:
| Dollars in thousands | SIX MONTHS ENDED JUNE 30, 2025 | TWELVE MONTHS ENDED DECEMBER 31, 2024 | ||||||
| Allowance for credit losses, beginning of period | $ | $ | ||||||
| Credit loss reserves | ||||||||
| Recoveries | ( | |||||||
| Write-off | ( | |||||||
| Allowance for credit losses, end of period | $ | $ | ||||||
Interest Income
Income from Lease Financing Receivables
The Company recognized the related income from two financing receivables totaling $2.0 million and $3.9 million, respectively, for the three and six months ended June 30, 2025, and $2.1 million and $4.2 million, respectively, for the three and six months ended June 30, 2024, based on an imputed interest rate over the terms of the applicable lease. As a result, the interest recognized from the financing receivable in any particular period will not equal the cash payments from the lease agreement in that period.
Acquisition costs incurred in connection with entering into the financing receivable are treated as loan origination fees. These costs are classified with the financing receivable and are included in the balance of the net investment. Amortization of these amounts will be recognized as a reduction to interest income over the life of the lease.
Income from Real Estate Notes Receivable
The Company recognized interest income related to real estate notes receivable of $1.5 million and $3.3 million, respectively, for the three and six months ended June 30, 2025, and $1.8 million and $4.2 million, respectively, for the three and six months ended June 30, 2024. The Company recognizes interest income on an accrual basis unless the Company has determined that collectability of contractual amounts is not reasonably assured, at which point the note is placed on non-accrual status. As of June 30, 2025, the Company had two loans on non-accrual status.
Revenue from Contracts with Customers (ASC Topic 606)
The Company recognizes certain revenue under the core principle of ASC Topic 606. This topic requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease revenue is not within the scope of ASC Topic 606. To achieve the core principle, the Company applies the five-step model specified in the guidance.
12
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
| THREE MONTHS ENDED June 30, | SIX MONTHS ENDED June 30, | |||||||||||||
| in thousands | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Type of Revenue | ||||||||||||||
| Parking income | $ | $ | $ | $ | ||||||||||
Management fee income/other 1 | ||||||||||||||
| $ | $ | $ | $ | |||||||||||
The Company’s major types of revenue that are accounted for under Topic 606 that are listed above are all accounted for as the performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time, and the Company recognizes revenue monthly based on this principle.
New Accounting Pronouncements
On November 4, 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Disaggregation of Income Statement Expenses, which will require entities to provide more detailed information in the notes to the financial statements related to certain expense captions on the face of the income statement. The ASU aims to increase transparency and provide investors with more detailed information about the nature of expenses reported on the face of the income statement. The new standard does not change the requirements for the presentation of expenses on the face of the income statement.
Note 2. Real Estate Investments
2025 Acquisition Activity
The Company had no real estate acquisition activity for the six months ended June 30, 2025.
Unconsolidated Joint Ventures
The Company's investment in and income (losses) recognized for the three and six months ended June 30, 2025 and 2024 related to its unconsolidated joint ventures accounted for under the equity method are shown in the table below:
| THREE MONTHS ENDED June 30, | SIX MONTHS ENDED June 30, | |||||||||||||
| Dollars in thousands | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Investments in unconsolidated joint ventures, beginning of period | $ | $ | $ | $ | ||||||||||
| New investment during the period | ||||||||||||||
| Equity income (loss) recognized during the period | ( | ( | ||||||||||||
| Owner distributions | ( | ( | ( | ( | ||||||||||
| Investments in unconsolidated joint ventures, end of period | $ | $ | $ | $ | ||||||||||
13
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
2025 Real Estate Asset Dispositions
The following table details the Company's dispositions for the six months ended June 30, 2025.
| Dollars in thousands | DATE DISPOSED | SALE PRICE | CLOSING ADJUSTMENTS | COMPANY-FINANCED MORTGAGE NOTES | NET PROCEEDS | NET REAL ESTATE INVESTMENT | OTHER (INCLUDING RECEIVABLES) | GAIN/(IMPAIRMENT) | SQUARE FOOTAGE | ||||||||||||||||||||
| Boston, MA | 2/7/25 | $ | $ | ( | $ | $ | $ | $ | $ | ||||||||||||||||||||
Denver, CO 1 | 2/14/25 | ( | ( | ||||||||||||||||||||||||||
| Houston, TX | 3/20/25 | ( | ( | ( | |||||||||||||||||||||||||
| Boston, MA | 4/30/25 | ( | |||||||||||||||||||||||||||
| Boston, MA | 5/23/25 | ( | |||||||||||||||||||||||||||
| Jacksonville, FL | 6/26/25 | ( | ( | ( | |||||||||||||||||||||||||
| Yakima, WA | 6/26/25 | ( | |||||||||||||||||||||||||||
| Houston, TX | 6/27/25 | ( | |||||||||||||||||||||||||||
| Total dispositions | $ | $ | ( | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||
1Includes two medical outpatient properties.
Subsequent to June 30, 2025, the Company disposed of the following properties, which were classified as held for sale as of June 30, 2025:
| Dollars in thousands | Date Disposed | Sale Price | Square Footage | ||||||||
| South Bend, IN | 7/15/25 | $ | |||||||||
Milwaukee, WI 1 | 7/29/25 | ||||||||||
| Naples, FL | 7/29/25 | ||||||||||
| New York, NY | 7/30/25 | ||||||||||
| Total | $ | ||||||||||
1Includes two medical outpatient properties.
Assets Held for Sale
The Company had 25 properties and a land parcel held for development classified as assets held for sale as of June 30, 2025, and three properties classified as assets held for sale as of December 31, 2024. The table below reflects the assets and liabilities classified as held for sale as of June 30, 2025 and December 31, 2024:
| Dollars in thousands | June 30, 2025 | December 31, 2024 | ||||||||||||
| Balance Sheet data: | ||||||||||||||
| Land | $ | $ | ||||||||||||
| Building and improvements | ||||||||||||||
| Lease intangibles | ||||||||||||||
| Personal property | ||||||||||||||
| Land held for development | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
Real estate assets held for sale, net 1 | ||||||||||||||
| Cash and cash equivalents | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Other assets, net | ||||||||||||||
| Assets held for sale, net | $ | $ | ||||||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other liabilities | ||||||||||||||
| Liabilities of assets held for sale | $ | $ | ||||||||||||
| Redeemable noncontrolling interest held for sale | $ | $ | ||||||||||||
14
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Note 3. Leases
Lessor Accounting
The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as the Consumer Price Index ("CPI"). In addition, most of the Company's leases include non-lease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and non-lease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases, recognized for the three and six months ended June 30, 2025 was $287.1 million and $575.9 million, respectively. Lease income for the Company's operating leases, recognized for the three and six months ended June 30, 2024 was $308.1 million and $626.2 million, respectively.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements and one sales-type lease, as of June 30, 2025, were as follows:
| Dollars in thousands | OPERATING | |||||||
| 2025 | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 and thereafter | ||||||||
| $ | ||||||||
Lessee Accounting
The Company has obligations, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of June 30, 2025, the Company had 198 ground leases associated with properties covering 14.4 million square feet. Some of the Company's ground lease renewal terms are based on fixed rent renewal terms, and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally stated in the lease or based on CPI. The Company had 68 prepaid ground leases as of June 30, 2025. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.3 million and $0.5 million of the Company's rental expense for each of the three months ended June 30, 2025 and 2024, respectively, and $0.7 million and $0.9 million for each of the six months ended June 30, 2025 and 2024, respectively.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
The Company’s future lease payments (primarily for its 130 non-prepaid ground leases), excluding amounts due for held for sale properties, as of June 30, 2025, were as follows:
| Dollars in thousands | OPERATING | FINANCING | ||||||
| 2025 | $ | $ | ||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 and thereafter | ||||||||
| Total undiscounted lease payments | ||||||||
| Discount | ( | ( | ||||||
| Lease liabilities | $ | $ | ||||||
The following table provides details of the Company's total lease expense for the three and six months ended June 30, 2025 and 2024:
| THREE MONTHS ENDED June 30, | SIX MONTHS ENDED June 30, | |||||||||||||
| Dollars in thousands | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Operating lease cost | ||||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||
| Variable lease expense | ||||||||||||||
| Finance lease cost | ||||||||||||||
| Amortization of right-of-use assets | ||||||||||||||
| Interest on lease liabilities | ||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||
| Other information | ||||||||||||||
| Operating cash flows outflows related to operating leases | $ | $ | $ | $ | ||||||||||
| Operating cash flows outflows related to financing leases | $ | $ | $ | $ | ||||||||||
| Financing cash flows outflows related to financing leases | $ | $ | $ | $ | ||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | $ | $ | ||||||||||
| Weighted-average years remaining lease term (excluding renewal options) - operating leases | ||||||||||||||
| Weighted-average years remaining lease term (excluding renewal options) - finance leases | ||||||||||||||
| Weighted-average discount rate - operating leases | % | % | ||||||||||||
| Weighted-average discount rate - finance leases | % | % | ||||||||||||
16
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Note 4. Notes and Bonds Payable
The table below details the Company’s notes and bonds payable as of June 30, 2025 and December 31, 2024.
| MATURITY DATE | BALANCE 1 AS OF | EFFECTIVE INTEREST RATE as of 6/30/2025 | ||||||||||||
| Dollars in thousands | 6/30/2025 | 12/31/2024 | ||||||||||||
$ | 10/25 | $ | $ | % | ||||||||||
$ | 1/26 | % | ||||||||||||
$ | 10/25 | % | ||||||||||||
$ | 6/26 | % | ||||||||||||
$ | 7/27 | % | ||||||||||||
$ | 1/28 | % | ||||||||||||
Senior Notes due 2025 5 | 5/25 | % | ||||||||||||
Senior Notes due 2026 | 8/26 | % | ||||||||||||
| Senior Notes due 2027 | 7/27 | % | ||||||||||||
| Senior Notes due 2028 | 1/28 | % | ||||||||||||
| Senior Notes due 2030 | 2/30 | % | ||||||||||||
| Senior Notes due 2030 | 3/30 | % | ||||||||||||
| Senior Notes due 2031 | 3/31 | % | ||||||||||||
| Senior Notes due 2031 | 3/31 | % | ||||||||||||
Mortgage notes payable | 12/25-12/26 | |||||||||||||
| $ | $ | |||||||||||||
1Balance is presented net of discounts and issuance costs and inclusive of premiums, where applicable.
2As of June 30, 2025, the Company had $1.2 billion available to be drawn on its $1.5 billion Unsecured Credit Facility.
3In January 2025, the Company repaid $25 million of the $200 million Unsecured term Loan.
4In January 2025, the Company repaid $10 million of the $300 million Unsecured term Loan due October 2025.
5In May 2025, the Company repaid its Senior Notes due 2025 at maturity including $250 million of principal and $4.8 million of accrued interest.
Changes in Debt Structure
On April 8, 2025, the Company exercised its second of two options to extend the maturity date of the $200 million Unsecured Term Loan due May 2025 to January 2026 for a fee of approximately $0.1 million. The loan also was amended to include a four-month extension option, which would extend the final maturity to May 2026.
On May 1, 2025, the Company repaid its Senior Notes due 2025 at maturity including $250 million of principal and $4.8 million of accrued interest.
On July 25, 2025, the Company entered into the Fifth Amended and Restated Revolving Credit and Term Loan Agreement (the “New Credit Facility”) with Wells Fargo Bank, National Association, as Administrative Agent; Wells Fargo Securities, LLC and JPMorgan Chase Bank, N.A. as Joint Book Runners; Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., PNC Capital Markets LLC, U.S. Bank National Association, The Bank of Nova Scotia, and BofA Securities, Inc., as Joint Lead Arrangers; and the other lenders named therein. The New Credit Facility provides for (i) a $1.5 billion unsecured revolving credit facility (the “Revolver”) and (ii) five individual unsecured term loan tranches totaling $1.115 billion. The OP is the borrower under the New Credit Facility (in such capacity, the “Borrower”). A summary of the principal terms of the New Credit Facility and the New Credit Facility's effect on the Company's existing revolving credit term loan facilities is as follows:
•The New Credit Facility replaces the Unsecured Credit Facility. All outstanding obligations due under the Unsecured Credit Facility were reallocated to the lenders under the New Credit Facility.
•The Company’s $1.5 billion Revolver was continued with a maturity extension from October 31, 2025 to July 25, 2029, with two six-month extension options. The Revolver includes a sublimit of $120 million for letters of credit.
•The previously funded $175 million term loan was continued with a maturity date of January 31, 2026 and three extension options totaling 16 months.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
•The previously funded $150 million term loan was continued with a maturity date of June 1, 2026, with two extension options of six months each.
•The previously funded $290 million term loan was continued with a maturity date of October 31, 2025, with four extension options totaling 24 months.
•The previously funded $200 million term loan was continued with a maturity date of July 20, 2027, with two extension options of 12 months each.
•The previously funded $300 million term loan was continued with a maturity date of January 20, 2028, with one extension option of 12 months.
Revolving loans outstanding under the New Credit Facility bear interest at a floating rate equal to the daily simple Secured Overnight Financing Rate ("SOFR"), term SOFR or base rates, as applicable, plus an applicable margin. The applicable margin is determined based on the Borrower’s credit ratings and ranges from 0.725 % per annum to 1.40 % per annum (currently 0.85 % per annum). Term loans outstanding under the New Credit Facility bear interest at a rate equal to Term SOFR rates plus an applicable margin. The applicable margin is determined based on the Borrower’s credit ratings and ranges from 0.80 % per annum to 1.60 % per annum (currently 0.95 % per annum). In addition, the Borrower pays a facility fee on the Revolver commitments at a rate per annum determined based on the Borrower’s credit ratings and ranging from 0.125 % per annum to 0.30 % per annum (currently 0.20 % per annum).
Note 5. Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
For derivatives designated, and that qualify, as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (Loss) ("AOCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.
18
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
As of June 30, 2025, the Company had 15 outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk:
| MATURITY | AMOUNT | WEIGHTED AVERAGE RATE | ||||||
| May 2026 | $ | % | ||||||
| June 2026 | % | |||||||
| December 2026 | % | |||||||
| June 2027 | % | |||||||
| December 2027 | % | |||||||
| $ | % | |||||||
Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company's derivative financial instruments and their classification on the Condensed Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024.
| AS OF JUNE 30, 2025 | AS OF DECEMBER 31, 2024 | |||||||||||||
| In thousands | BALANCE SHEET LOCATION | FAIR VALUE | BALANCE SHEET LOCATION | FAIR VALUE | ||||||||||
| Interest rate swaps 2019 | Other Assets | $ | Other Assets | $ | ||||||||||
| Interest rate swaps 2022 | Other Assets | Other Assets | ||||||||||||
| Interest rate swaps 2022 | Other Liabilities | ( | Other Liabilities | ( | ||||||||||
| Interest rate swaps 2023 | Other Assets | Other Assets | ||||||||||||
| Interest rate swaps 2023 | Other Liabilities | ( | Other Liabilities | ( | ||||||||||
| Total derivatives designated as hedging instruments | $ | ( | $ | |||||||||||
Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
The table below presents the effect of cash flow hedge accounting on AOCI during the three and six months ended June 30, 2025 and 2024 related to the Company's outstanding interest rate swaps.
| (GAIN)/LOSS RECOGNIZED IN AOCI ON DERIVATIVE three months ended June 30, | (GAIN)/LOSS RECLASSIFIED FROM AOCI INTO INCOME three months ended June 30, | ||||||||||||||||
| In thousands | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Interest rate swaps | $ | $ | ( | Interest expense | $ | ( | $ | ( | |||||||||
| Settled treasury hedges | Interest expense | ||||||||||||||||
| Settled interest rate swaps | Interest expense | ||||||||||||||||
| $ | $ | ( | Total interest expense | $ | ( | $ | ( | ||||||||||
| (GAIN)/LOSS RECOGNIZED IN AOCI ON DERIVATIVE six months ended June 30, | (GAIN)/LOSS RECLASSIFIED FROM AOCI INTO INCOME six months ended June 30, | ||||||||||||||||
| In thousands | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Interest rate swaps | $ | $ | ( | Interest expense | $ | ( | $ | ( | |||||||||
| Settled treasury hedges | Interest expense | ||||||||||||||||
| Settled interest rate swaps | Interest expense | ||||||||||||||||
| $ | $ | ( | Total interest expense | $ | ( | $ | ( | ||||||||||
19
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
The Company estimates that an additional $1.2 million will be reclassified from accumulated other comprehensive loss as a net decrease to interest expense over the next 12 months.
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties providing that if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of June 30, 2025, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $7.3 million. As of June 30, 2025, the Company had not posted any collateral related to these agreements and was not in breach of any agreement provisions.
Note 6. Commitments and Contingencies
Legal Proceedings
From time to time, the Company is involved in litigation arising in the ordinary course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
Note 7. Stockholders' Equity
Common Stock
The following table provides a reconciliation of the beginning and ending shares of common stock outstanding for the six months ended June 30, 2025, and the twelve months ended December 31, 2024:
| SIX MONTHS ENDED JUNE 30, 2025 | TWELVE MONTHS ENDED DECEMBER 31, 2024 | |||||||
| Balance, beginning of period | ||||||||
| Issuance of common stock | ||||||||
| Conversion of OP units to common stock | ||||||||
| Shares Repurchased | ( | |||||||
| Non-vested share-based awards, net of withheld shares and forfeitures | ||||||||
| Balance, end of period | ||||||||
Common Stock Dividends
During the six months ended June 30, 2025, the Company declared and paid common stock dividends totaling $0.62 per share. On July 31, 2025, the Company declared a quarterly common stock dividend in the amount of $0.24 per share payable on August 28, 2025 to stockholders of record on August 14, 2025.
Common Stock Repurchases
On October 29, 2024, the Company's Board of Directors authorized the repurchase of up to $300.0 million of outstanding shares of the Company's common stock, superseding the previous stock repurchase authorization. The Company has not repurchased shares in 2025. As of June 30, 2025, the Company had $237.0 million remaining under this authorization.
20
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Earnings Per Common Share
The Company uses the two-class method of computing net earnings per common share. The Company's non-vested share-based awards are considered participating securities pursuant to the two-class method.
The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2025 and 2024.
| THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||
| Dollars in thousands, except per share data | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Weighted average common shares outstanding | ||||||||||||||
| Non-vested shares | ( | ( | ( | ( | ||||||||||
| Weighted average common shares outstanding - basic | ||||||||||||||
| Weighted average common shares outstanding - basic | ||||||||||||||
| Dilutive effect of OP Units | ||||||||||||||
| Weighted average common shares outstanding - diluted | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Income allocated to participating securities | ( | ( | ( | ( | ||||||||||
| Loss attributable to non-controlling interest | ||||||||||||||
| Adjustment to loss attributable to non-controlling interest for legally outstanding restricted units | ( | ( | ( | ( | ||||||||||
| Net loss applicable to common stockholders - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Basic earnings per common share - net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
| Diluted earnings per common share - net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
The effect of OP Units redeemable for 4,161,628 shares and 3,914,997 shares of common stock for the three and six months ended June 30, 2025, respectively, were excluded from the calculation of diluted loss per common share because the effect was anti-dilutive due to the loss from continuing operations incurred during those periods.
Stock Incentive Plan
The Company's stock incentive plan (the "Incentive Plan") permits the grant of incentive awards to its employees and directors in any of the following forms: options, stock appreciation rights, restricted stock, restricted or deferred stock units, performance awards, dividend equivalents, or other stock-based awards, including units in the OP.
Equity Incentive Plans
During the six months ended June 30, 2025, the Company made the following equity awards under the Incentive Plan:
Restricted Stock
During the first quarter of 2025, the Company granted non-vested stock awards to its named executive officers and other members of senior management with an aggregate grant date fair value of $7.9 million, which consisted of an aggregate of 477,226 non-vested shares of common stock with vesting periods ranging from to eight years .
During the second quarter of 2025, the Company granted non-vested stock awards to its named executive officers and other members of senior management with an aggregate grant date fair value of $7.8 million, which consisted of an aggregate of 499,323 non-vested shares of common stock with vesting periods ranging from to four years . The Company also granted to independent directors an aggregate of 72,144 shares of non-vested stock with a grant date fair value of $1.1 million, and an aggregate of 34,586 LTIP Series D units in the OP with a grant date fair value of $0.5 million.
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Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Restricted Stock Units ("RSUs")
On February 11, 2025, the Company granted an aggregate of 275,735 RSUs to members of senior management, subject to a three-year performance period, with an aggregate grant date fair value of $5.4 million.
During the second quarter of 2025, the Company granted an aggregate of 16,038 RSUs to members of senior management, subject to a three-year performance period, with an aggregate grant date fair value of $0.3 million.
The RSUs vest based on relative total shareholder return ("TSR") performance and were valued using independent specialists. The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $19.47 for the RSU grants using the following assumptions:
| Volatility | % | ||||
| Dividend assumption | Accrued | ||||
| Expected term | |||||
| Risk-free rate | % | ||||
| Stock price (per share) | $ | ||||
LTIP Series C Units ("LTIP-C units")
On February 11, 2025, the Company granted an aggregate of 166,976 LTIP-C units in the OP to its named executive officers with three-year forward-looking performance targets, a three-year vesting period and an aggregate grant date fair value of $1.6 million.
The LTIP-C units in the OP vest based on relative TSR performance and were valued using independent specialists. The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $9.88 for the February 2025 grant using the following assumptions:
| Volatility | % | ||||
| Dividend assumption | Accrued | ||||
| Expected term | |||||
| Risk-free rate | % | ||||
| Stock price (per share) | $ | ||||
The Company records amortization expense based on the Monte Carlo simulation throughout the performance period.
On April 15, 2025, the Company granted 347,770 LTIP-C units in the OP to its newly appointed Chief Executive Officer with three-year forward-looking performance targets, a three-year vesting period and an aggregate grant date fair value of $3.4 million.
The LTIP-C units in the OP vest based on relative TSR performance and were valued using independent specialists. The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $9.83 for the April 2025 grant using the following assumptions:
| Volatility | % | ||||
| Dividend assumption | Accrued | ||||
| Expected term | |||||
| Risk-free rate | % | ||||
| Stock price (per share) | $ | ||||
The Company records amortization expense based on the Monte Carlo simulation throughout the performance period.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
The following table represents the summary of non-vested share-based awards under the Incentive Plan for the three and six months ended June 30, 2025, and 2024:
| THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| Share-based awards, beginning of period | ||||||||||||||
Granted 1 | ||||||||||||||
| Vested | ( | ( | ( | ( | ||||||||||
| Change in awards based on performance assessment | ( | ( | ( | |||||||||||
| Forfeited | ( | ( | ( | |||||||||||
| Share-based awards, end of period | ||||||||||||||
1LTIP-C units in the OP are issued at the maximum number of units of the award and are reflected as such in this table until the performance conditions have been satisfied, and the exact number of awards are determinable.
During the three months ended June 30, 2025, and 2024, the Company withheld 72,853 and 8,228 shares of common stock, respectively, from participants to pay estimated withholding taxes related to shares that vested.
The following table represents expected amortization of the Company's non-vested awards issued as of June 30, 2025:
| Dollars in millions | FUTURE AMORTIZATION of non-vested shares | ||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 and thereafter | |||||
| Total | $ | ||||
Note 8. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practical to estimate that value.
•Cash and cash equivalents - The carrying amount approximates fair value (level 1 inputs) due to the short-term maturity of these investments.
•Real estate notes receivable - Real estate notes receivable are recorded in other assets on the Company's Condensed Consolidated Balance Sheets. Fair value is estimated using cash flow analyses, based on current interest rates for similar types of arrangements using level 2 inputs in the hierarchy. However, the fair value of one note receivable was determined utilizing the fair value of the receivable's collateral, which was determined based on an executed purchase and sale agreement of the underlying collateral and therefore was classified as level 1 inputs in the hierarchy.
•Borrowings under the Unsecured Credit Facility and the Term Loans Due 2024 and 2026 - The carrying amount approximates fair value because the borrowings are based on variable market interest rates.
•Senior Notes and Mortgage Notes payable - The fair value of notes and bonds payable is estimated using cash flow analyses, based on the Company’s current interest rates for similar types of borrowing arrangements.
•Interest rate swap agreements - Interest rate swap agreements are recorded in other assets/liabilities on the Company's Condensed Consolidated Balance Sheets at fair value. Fair value is estimated by utilizing pricing models, level 2 inputs, which consider forward yield curves and discount rates. See Note 5 for additional information.
The table below details the fair values and carrying values for notes and bonds payable and real estate notes receivable as of June 30, 2025, and December 31, 2024:
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
| June 30, 2025 | December 31, 2024 | ||||||||||||||||
| Dollars in millions | CARRYING VALUE | FAIR VALUE | CARRYING VALUE | FAIR VALUE | |||||||||||||
Notes and bonds payable 1, 2 | $ | $ | $ | $ | |||||||||||||
| Real estate notes receivable | $ | $ | $ | $ | |||||||||||||
1Level 2 – model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
2Fair value for senior notes includes accrued interest as of June 30, 2025.
Note 9. Segment Reporting
The Company is a REIT that owns, leases, acquires, invests in joint ventures, manages, finances, develops and redevelops its medical outpatient properties and reports the operating results in the accompanying Condensed Consolidated Financial Statements as one reportable segment. The CODM assesses performance and allocates resources based on consolidated net income (loss) as reported on the Company's Condensed Consolidated Statements of Operations. The Company uses net income (loss) to monitor expected versus actual results to assess the segment's performance. The measure of the Company's reportable segment assets is reported on the Company's Condensed Consolidated Balance Sheets as total assets.
Pursuant to ASU 2023-07, Segment Reporting (Topic 280), public entities are required to disclose more detailed information about significant reportable segment expenses that are regularly provided to the CODM.
The table below details the significant expenses for the three and six months ended June 30, 2025, and 2024.
| THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||
| Dollars in thousands | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Significant Segment Expenses: | ||||||||||||||
| Property taxes | $ | $ | $ | $ | ||||||||||
| Personnel | ||||||||||||||
| Utilities | ||||||||||||||
| Maintenance | ||||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||
The following schedule reconciles net loss to segment expenses for the three and six months ended June 30, 2025, and 2024.
| THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||
| Dollars in thousands | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||
| Property taxes | ( | ( | ( | ( | ||||||||||
| Personnel | ( | ( | ( | ( | ||||||||||
| Utilities | ( | ( | ( | ( | ||||||||||
| Maintenance | ( | ( | ( | ( | ||||||||||
Other segment expenses 1 | ( | ( | ( | ( | ||||||||||
| Transaction costs | ( | ( | ( | ( | ||||||||||
| Depreciation and amortization | ( | ( | ( | ( | ||||||||||
| Gain on sales of real estate properties and other assets | ||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||
| Impairment of real estate properties and credit loss reserves | ( | ( | ( | ( | ||||||||||
| Impairment of goodwill | ( | |||||||||||||
| Equity income (loss) from unconsolidated joint ventures | ( | ( | ||||||||||||
| Interest and other (expense) income, net | ( | ( | ( | |||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read together with the Condensed Consolidated Financial Statements and related Notes thereto included in Item 1 of this Quarterly Report on Form 10-Q. Other important factors are identified in our Annual Report on Form 10-K for the year ended December 31, 2024, including factors identified under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations."
Unless stated otherwise or the context otherwise requires, references to the "Company," "we," "us," and "our" are to Healthcare Realty Trust and its consolidated subsidiaries, including the OP.
Disclosure Regarding Forward-Looking Statements
This report and other materials the Company has filed or may file with the SEC, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could” and other comparable terms. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could materially affect the Company’s current plans and expectations and future financial condition and results. Such risks and uncertainties as more fully discussed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and in other reports filed by the Company with the SEC from time to time include, among other things, the following:
Risks relating to our business and operations
•The Company's expected results may not be achieved;
•The Company’s revenues depend on the ability of its tenants under its leases to generate sufficient income from their operations to make rental payments to the Company;
•The Company's results of operations have been and will continue to be impacted negatively by the Steward Health and Prospect Medical bankruptcies;
•Owning real estate and indirect interests in real estate is subject to inherent risks;
•The Company may incur impairment charges on its real estate properties or other assets;
•The Company has properties subject to purchase options that expose it to reinvestment risk and reduction in expected investment returns;
•If the Company is unable to promptly re-let its properties, if the rates upon such re-letting are significantly lower than the previous rates or if the Company is required to undertake significant expenditures or make significant leasing concessions to attract new tenants, then the Company’s business, consolidated financial condition and results of operations would be adversely affected;
•Certain of the Company’s properties are special purpose healthcare facilities and may not be easily adaptable to other uses;
•The Company has, and in the future may have more exposure to fixed rent escalators, which could lag behind inflation and the growth in operating expenses such as real estate taxes, utilities, insurance, and maintenance expense;
•The Company’s real estate investments are illiquid and the Company may not be able to sell properties strategically targeted for disposition;
•The Company is subject to risks associated with the development and redevelopment of properties;
•The Company may make material acquisitions and undertake developments and redevelopments that may involve the expenditure of significant funds and may not perform in accordance with management’s expectations;
•The Company is exposed to risks associated with geographic concentration;
•Many of the Company’s leases are dependent on the viability of associated health systems. Revenue concentrations relating to these leases expose the Company to risks related to the financial condition of the associated health systems;
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•Many of the Company’s properties are held under ground leases. These ground leases contain provisions that may limit the Company’s ability to lease, sell, or finance these properties;
•The Company may experience uninsured or underinsured losses;
•Damage from catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in losses to the Company;
•The Company faces risks associated with security breaches through cyber attacks, cyber intrusions, or otherwise, as well as other significant disruptions of its information technology networks and related systems;
•The Company has structured and may in the future structure acquisitions of property in exchange for limited partnership units of the OP on terms that could limit its liquidity or flexibility;
•Healthcare Realty Trust is a holding company with no direct operations and, as such, it relies on funds received from the OP to pay liabilities, and the interests of its stockholders will be structurally subordinated to all liabilities and obligations of the OP and its subsidiaries;
•The Company cannot assure you that it will be able to continue paying dividends at or above the rates previously paid;
•Pandemics, and measures intended to prevent their spread or mitigate their severity could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition; and
•The Company's success depends, in part, on its ability to attract and retain talented employees. The loss of any one of the Company's key personnel or the inability to maintain appropriate staffing could adversely impact the Company's business.
Risks relating to our capital structure and financings
•The Company has incurred significant debt obligations and may incur additional debt and increase leverage in the future;
•Covenants in the Company’s debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company’s consolidated financial condition and results of operations;
•If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company’s operations and consolidated financial position would be negatively impacted;
•The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings could have an adverse effect on the Company’s ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and development activity;
•Increases in interest rates could have a material adverse effect on the Company's cost of capital;
•The Company's swap agreements may not effectively reduce its exposure to changes in interest rates;
•The Company has entered into joint venture agreements that limit its flexibility with respect to jointly owned properties and expects to enter into additional such agreements in the future;
•The U.S. federal income tax treatment of the cash that the Company might receive from cash settlement of a forward equity agreement is unclear and could jeopardize the Company's ability to meet the REIT qualification requirements; and
•In case of our bankruptcy or insolvency, any forward equity agreements will automatically terminate, and the Company would not receive the expected proceeds from any forward sale of shares of its common stock.
Risks relating to government regulations
•The Company's property taxes could increase due to reassessment or property tax rate changes;
•Trends in the healthcare service industry, including the recent passage of the One Big Beautiful Bill Act which is the subject of ongoing analysis, may negatively affect the demand for the Company’s properties, lease revenues and the values of its investments;
•The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations;
•Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code;
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•If the Company fails to remain qualified as a REIT, the Company will be subject to significant adverse consequences, including adversely affecting the value of its common stock;
•The Company’s articles of incorporation, as well as provisions of the MGCL, contain limits and restrictions on transferability of the Company’s common stock which may have adverse effects on the value of the Company’s common stock;
•Complying with the REIT requirements may cause the Company to forego otherwise attractive opportunities;
•The prohibited transactions tax may limit the Company's ability to sell properties;
•New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Company to qualify as a REIT; and
•New and increased transfer tax rates may reduce the value of the Company’s properties.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.
Liquidity and Capital Resources
Sources and Uses of Cash
The Company’s primary sources of cash include rent receipts from its real estate portfolio based on contractual arrangements with its tenants, proceeds from the sales of real estate properties, joint ventures, and proceeds from public or private debt or equity offerings. As of June 30, 2025, the Company had $1.2 billion available to be drawn on its unsecured credit facility ("Unsecured Credit Facility") and available cash. On July 25, 2025, the Company entered into the Fifth Amended and Restated Credit Facility which extended the maturity of its revolver to July 2029.
The Company expects to continue to meet its liquidity needs, including funding additional investments, paying dividends, and funding debt service, through cash flows from operations and liquidity sources, including the Unsecured Credit Facility. Management believes that the Company's liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.
Dividends paid by the Company for the six months ended June 30, 2025 were funded from cash flows from operations and the Unsecured Credit Facility, as cash flows from operations were not adequate to fully fund dividends, primarily as a result of the timing of interest payments. The Company expects that cash flows from operations will generate sufficient cash flows during 2025 such that dividends for the full year 2025 can be funded by cash flows from operations or other sources of liquidity described above.
Investing Activities
Cash flows used in investing activities for the six months ended June 30, 2025, were approximately $41.9 million. Below is a summary of the investing activities.
Dispositions
The Company disposed of eight medical outpatient properties and two land parcels during the six months ended June 30, 2025 for a total sales price of $81.2 million, generating net proceeds of $66.8 million after seller financing and closing credits. The following table details these dispositions for the six months ended June 30, 2025:
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| Dollars in thousands | Date Disposed | Sale Price | Square Footage | ||||||||
| Boston, MA | 2/7/25 | $ | 4,500 | 30,304 | |||||||
Denver, CO 1 | 2/14/25 | 8,600 | 69,715 | ||||||||
Houston, TX 2 | 3/20/25 | 15,000 | 127,933 | ||||||||
| Boston, MA | 4/30/25 | 486 | — | ||||||||
| Boston, MA | 5/23/25 | 3,000 | 33,176 | ||||||||
| Jacksonville, FL | 6/26/25 | 8,100 | 53,169 | ||||||||
Yakima, WA 1 | 6/26/25 | 31,000 | 91,561 | ||||||||
| Houston, TX | 6/27/25 | 10,500 | — | ||||||||
| Total | $ | 81,186 | 405,858 | ||||||||
1Includes two medical outpatient properties.
2The Company provided seller financing of approximately $5.4 million in connection with this sale.
Subsequent to June 30, 2025, the Company disposed of the following properties:
| Dollars in thousands | Date Disposed | Sale Price | Square Footage | ||||||||
| South Bend, IN | 7/15/25 | $ | 43,100 | 205,573 | |||||||
Milwaukee, WI 1 | 7/29/25 | 42,000 | 147,406 | ||||||||
| Naples, FL | 7/29/25 | 19,250 | 61,359 | ||||||||
| New York, NY | 7/30/25 | 25,000 | 89,893 | ||||||||
| Total | $ | 129,350 | 504,231 | ||||||||
1Includes two medical outpatient properties.
Capital Expenditures
During the six months ended June 30, 2025, the Company incurred capital costs totaling $158.4 million for the following:
•$75.4 million toward development and redevelopment of properties;
•$40.8 million toward first generation tenant improvements and planned capital expenditures for acquisitions;
•$26.8 million toward second generation tenant improvements; and
•$15.4 million toward building capital.
Real Estate Notes Receivable
In January 2025, the Company received $14.9 million as payment towards the principal balance of its mortgage loan that matured on December 2, 2024.
In March 2025, the Company executed a mezzanine loan receivable agreement with a maximum loan commitment of $8.5 million. As of June 30, 2025, the Company had funded $2.8 million under this agreement.
In April 2025, a mortgage loan receivable of $37.7 million maturing in February 2026 was repaid in full.
See Note 1 to the Condensed Consolidated Financial Statements in this report for more information about real estate notes receivable and allowance for credit losses.
Financing Activities
Cash flows used in financing activities for the six months ended June 30, 2025 were approximately $212.3 million. See Notes 4 and 7 to the Condensed Consolidated Financial Statements in this report for more information about capital markets and financing activities.
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Debt Activity
As of June 30, 2025, the Company had outstanding interest rate swaps totaling $1.1 billion to hedge the one-month term Secured Overnight Financing Rate ("SOFR"). The following table details the amount and rate of each swap (dollars in thousands):
| EXPIRATION DATE | AMOUNT | WEIGHTED AVERAGE RATE | ||||||
| May 2026 | $ | 275,000 | 3.74 | % | ||||
| June 2026 | 150,000 | 3.83 | % | |||||
| December 2026 | 150,000 | 3.84 | % | |||||
| June 2027 | 200,000 | 4.27 | % | |||||
| December 2027 | 300,000 | 3.93 | % | |||||
| $ | 1,075,000 | 3.92 | % | |||||
Changes in Debt Structure
During the first quarter of 2025, the Company repaid $25.0 million of the $200 million Unsecured Term Loan due May 2025 and $10.0 million of the $300 million Unsecured Term Loan due October 2025.
On April 8, 2025, the Company exercised its second of two options to extend the maturity date of the $200 million Unsecured Term Loan due May 2025 to January 2026 for a fee of approximately $0.1 million. The existing $200 million term loan facility was also amended to include a four-month extension option, which would extend the final maturity to May 2026.
On May 1, 2025, the Company repaid its Senior Notes due 2025 at maturity including $250 million of principal and $4.8 million of accrued interest.
On July 25, 2025, the Company entered into the Fifth Amended and Restated Revolving Credit and Term Loan Agreement (the “New Credit Facility”) with Wells Fargo Bank, National Association, as Administrative Agent; Wells Fargo Securities, LLC and JPMorgan Chase Bank, N.A. as Joint Book Runners; Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A., PNC Capital Markets LLC, U.S. Bank National Association, The Bank of Nova Scotia, and BofA Securities, Inc., as Joint Lead Arrangers; and the other lenders named therein. The New Credit Facility provides for (i) a $1.5 billion unsecured revolving credit facility (the “Revolver”) and (ii) five individual unsecured term loan tranches totaling $1.115 billion. The OP is the borrower under the New Credit Facility (in such capacity, the “Borrower”). A summary of the principal terms of the New Credit Facility and the New Credit Facility's effect on the Company's existing revolving credit term loan facilities is as follows:
•The New Credit Facility replaces the Unsecured Credit Facility. All outstanding obligations due under the Unsecured Credit Facility were reallocated to the lenders under the New Credit Facility.
•The Company’s $1.5 billion Revolver was continued with a maturity extension from October 31, 2025 to July 25, 2029, with two six-month extension options. The Revolver includes a sublimit of $120 million for letters of credit.
•The previously funded $175 million term loan was continued with a maturity date of January 31, 2026 and three extension options totaling 16 months.
•The previously funded $150 million term loan was continued with a maturity date of June 1, 2026, with two extension options of six months each.
•The previously funded $290 million term loan was continued with a maturity date of October 31, 2025, with four extension options totaling 24 months.
•The previously funded $200 million term loan was continued with a maturity date of July 20, 2027, with two extension options of 12 months each.
•The previously funded $300 million term loan was continued with a maturity date of January 20, 2028, with one extension option of 12 months.
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Revolving loans outstanding under the New Credit Facility bear interest at a floating rate equal to the daily simple Secured Overnight Financing Rate ("SOFR"), term SOFR or base rates, as applicable, plus an applicable margin. The applicable margin is determined based on the Borrower’s credit ratings and ranges from 0.725% per annum to 1.40% per annum (currently 0.85% per annum). Term loans outstanding under the New Credit Facility bear interest at a rate equal to Term SOFR rates plus an applicable margin. The applicable margin is determined based on the Borrower’s credit ratings and ranges from 0.80% per annum to 1.60% per annum (currently 0.95% per annum). In addition, the Borrower pays a facility fee on the Revolver commitments at a rate per annum determined based on the Borrower’s credit ratings and ranging from 0.125% per annum to 0.30% per annum (currently 0.20% per annum).
Except as set forth above, the principal terms of the New Credit Facility are substantially consistent with the terms of the Unsecured Credit Facility. Specifically, the New Credit Facility contains representations and warranties and affirmative and negative covenants that are customary for facilities of this size and type. These covenants include, among others: limitations on the incurrence of additional indebtedness; limitations on mergers, investments and acquisitions; limitations on dividends and redemptions of capital stock; limitations on transactions with affiliates; and requirements to comply with certain financial covenants, including a maximum consolidated leverage ratio, a maximum consolidated secured leverage ratio, a maximum consolidated unencumbered leverage ratio, a minimum fixed charge coverage ratio and a minimum unsecured coverage ratio.
Supplemental Guarantor Information
The OP has issued unsecured notes described in Note 4 to the Company's Condensed Consolidated Financial Statements included in this report. All unsecured notes are fully and unconditionally guaranteed by the Company, and the OP is 98.6% owned by the Company. Effective January 4, 2021, the Securities and Exchange Commission (the “SEC”) adopted amendments to the financial disclosure requirements which permit subsidiary issuers of obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent.
Accordingly, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, the Company has excluded the summarized financial information for the OP because the assets, liabilities, and results of operations of the OP are not materially different than the corresponding amounts in the Company's consolidated financial statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
Operating Activities
Cash flows provided by operating activities decreased from $244.3 million for the six months ended June 30, 2024 to $211.0 million for the six months ended June 30, 2025. Items impacting cash flows from operations include, but are not limited to, cash generated from property operations, interest payments and the timing of the payment of invoices and other expenses.
The Company may, from time to time, sell properties and redeploy cash from property sales into new investments or to repay indebtedness. The income from the new investments or reduction in interest expense could be less than the income from properties sold which would adversely affect the Company's results of operations and cash flows.
Trends and Matters Impacting Operating Results
Management monitors factors and trends important to the Company and the REIT industry to gauge the potential impact on Company operations. In addition to the matters discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, some of the factors and trends that management believes may impact future operations of the Company are outlined below.
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Economic and Market Conditions
Rising interest rates and increased volatility in the capital markets have increased the Company’s cost and availability of debt and equity capital. Limited availability and increases in the cost of capital could adversely impact the Company’s ability to finance operations and acquire and develop properties. To the extent the Company’s tenants experience increased costs or financing difficulties due to the economic and market conditions, they may be unable or unwilling to make payments or perform their obligations when due. Additionally, increased interest rates may also result in less liquid property markets, limiting the Company’s ability to sell existing assets or obtain joint venture capital.
Expiring Leases
The Company expects that approximately 15% of its leases will expire each year in the ordinary course of business. There are 722 multi-tenant and single-tenant leases totaling 2.5 million square feet that will expire during the remainder of 2025. Approximately 70.2% of the leases expiring during the remainder of 2025 are for space in buildings located on or adjacent to hospital campuses, are distributed throughout the portfolio, and are not concentrated with any one tenant, health system or market area. The Company typically expects to retain 75% to 90% of tenants upon expiration, and the retention ratio for the first six months of the year was within this range.
Prospect Medical
On January 11, 2025, Prospect Medical Holdings (“Prospect”) filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas. Prospect leases approximately 80,912 square feet of space from the Company, accounting for approximately $2.9 million of annual revenue. The Company moved to cash basis accounting for these leases and recorded a reserve of $0.7 million in the fourth quarter of 2024. While it is early in the bankruptcy proceedings and the Company is in discussions with Prospect regarding its leases with the Company, there can be no assurance that the Company will recover unpaid rent from Prospect. During the six months ended June 30, 2025, the Company received rent payments of approximately $1.6 million.
Operating Expenses
The Company historically has experienced increases in property taxes throughout its portfolio as a result of increasing assessments and tax rates levied across the country. The Company continues its efforts to appeal property tax increases and manage the impact of the increases. In addition, the Company historically has incurred variability in portfolio utilities expenses based on seasonality, with the first and third quarters usually reflecting greater amounts. The effects of these operating expense increases are mitigated in leases that have provisions for operating expense reimbursement. As of June 30, 2025, leases for approximately 92% of the Company's total leased square footage allow for some recovery of operating expenses, with approximately 29% having modified gross lease structures and approximately 63% having net lease structures.
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Purchase Options
Information about the Company's unexercised purchase options and the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):
| YEAR EXERCISABLE | NUMBER OF PROPERTIES | GROSS REAL ESTATE INVESTMENT AS OF JUNE 30, 2025 1 | ||||||
Current 2 | 5 | $ | 100,677 | |||||
| 2025 | 1 | 2,522 | ||||||
| 2026 | 5 | 142,819 | ||||||
| 2027 | 5 | 140,488 | ||||||
| 2028 | 5 | 137,290 | ||||||
| 2029 | 3 | 82,148 | ||||||
| 2030 | — | — | ||||||
| 2031 | 4 | 106,635 | ||||||
| 2032 | 2 | 24,384 | ||||||
| 2033 | — | — | ||||||
| 2034 | — | — | ||||||
2035 and thereafter 3 | 11 | 378,643 | ||||||
| Total | 41 | $ | 1,115,606 | |||||
1Includes three properties totaling $51.8 million with stated purchase prices or prices based on fixed capitalization rates.
2These purchase options have been exercisable for an average of 18.1 years.
3Includes two medical outpatient properties that are recorded in the line item Investment in financing receivable, net on the Company's Condensed Consolidated Balance Sheets.
Non-GAAP Financial Measures and Key Performance Indicators
Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of these measures to the most directly comparable GAAP financial measures.
The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Condensed Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.
Funds from Operations ("FFO"), Normalized FFO and Funds Available for Distribution ("FAD")
FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, impairment, and after adjustments for unconsolidated partnerships and joint ventures.”
In addition to FFO, the Company presents Normalized FFO and FAD. Normalized FFO is presented by adding to FFO acquisition-related costs, acceleration of debt issuance costs, debt extinguishment costs and other Company-defined normalizing items to evaluate operating performance. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, non-cash financing receivable amortization, loan origination cost
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amortization, deferred financing fees amortization, stock-based compensation expense and rent reserves, net; and subtracting maintenance capital expenditures, including second generation tenant improvements and leasing commissions paid and straight-line rent income, net of expense. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO and FAD should not be considered as an alternative to net income as an indicator of the Company's financial performance or to cash flow from operating activities as an indicator of the Company's liquidity. FFO, Normalized FFO and FAD should be reviewed in connection with GAAP financial measures.
Management believes FFO, Normalized FFO, FFO per common share, Normalized FFO per share and FAD ("Non-GAAP Measures") provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, all of which are based on historical costs, and which may be of limited relevance in evaluating current performance, Non-GAAP Measures can facilitate comparisons of operating performance between periods. The Company reports Non-GAAP Measures because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these Non-GAAP Measures. However, none of these measures represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. Further, these measures should not be considered as an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.
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The table below reconciles net income to FFO, Normalized FFO and FAD for the three and six months ended June 30, 2025, and 2024:
| THREE MONTHS ENDED JUNE 30, | SIX MONTHS ENDED JUNE 30, | |||||||||||||
| Amounts in thousands, except per share data | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Net loss attributable to common stockholders | $ | (157,851) | $ | (143,780) | $ | (202,724) | $ | (454,616) | ||||||
Net loss attributable to common stockholders per diluted share 1 | $ | (0.45) | $ | (0.39) | $ | (0.58) | $ | (1.22) | ||||||
| Gain on sales of real estate properties | (20,004) | (33,431) | (22,907) | (33,453) | ||||||||||
| Impairment of real estate properties | 140,877 | 120,917 | 151,022 | 136,854 | ||||||||||
| Real estate depreciation and amortization | 152,936 | 177,350 | 308,224 | 358,511 | ||||||||||
| Non-controlling loss from operating partnership units | (2,293) | (2,077) | (2,892) | (6,355) | ||||||||||
| Unconsolidated JV depreciation and amortization | 6,706 | 4,818 | 13,422 | 9,386 | ||||||||||
| FFO adjustments | $ | 278,222 | $ | 267,577 | $ | 446,869 | $ | 464,943 | ||||||
FFO adjustments per common share - diluted | $ | 0.79 | $ | 0.71 | $ | 1.26 | $ | 1.22 | ||||||
| FFO attributable to common stockholders | $ | 120,371 | $ | 123,797 | $ | 244,145 | $ | 10,327 | ||||||
| FFO attributable to common stockholders per common share - diluted | $ | 0.34 | $ | 0.33 | $ | 0.69 | $ | 0.03 | ||||||
| Transaction costs | 593 | 431 | 1,604 | 826 | ||||||||||
| Lease intangible amortization | (222) | 129 | (449) | 304 | ||||||||||
| Non-routine legal costs | 478 | 465 | 555 | 465 | ||||||||||
| Restructuring and severance-related charges | 10,302 | — | 10,804 | — | ||||||||||
Credit losses and losses on other assets, net 2 | 1,471 | 8,525 | 3,407 | 8,525 | ||||||||||
| Impairment of goodwill | — | — | — | 250,530 | ||||||||||
| Merger-related fair value of debt instruments | 10,580 | 10,064 | 21,025 | 20,169 | ||||||||||
Unconsolidated JV normalizing items 3 | 163 | 89 | 367 | 176 | ||||||||||
| Normalized FFO adjustments | $ | 23,365 | $ | 19,703 | $ | 37,313 | $ | 280,995 | ||||||
Normalized FFO adjustments per common share - diluted | $ | 0.07 | $ | 0.05 | $ | 0.11 | $ | 0.74 | ||||||
| Normalized FFO attributable to common stockholders | $ | 143,736 | $ | 143,500 | $ | 281,458 | $ | 291,322 | ||||||
| Normalized FFO attributable to common stockholders per common share - diluted | $ | 0.41 | $ | 0.38 | $ | 0.80 | $ | 0.77 | ||||||
| Non-real estate depreciation and amortization | 207 | 313 | 428 | 798 | ||||||||||
Non-cash interest amortization, net 4 | 1,130 | 1,267 | 2,348 | 2,543 | ||||||||||
| Rent reserves, net | 130 | 1,261 | 224 | 1,110 | ||||||||||
| Straight-line rent, net | (7,045) | (6,799) | (13,889) | (14,432) | ||||||||||
| Stock-based compensation | 3,887 | 3,383 | 6,915 | 6,944 | ||||||||||
Unconsolidated JV non-cash items 5 | (356) | (148) | (609) | (270) | ||||||||||
| Normalized FFO adjusted for non-cash items | $ | 141,689 | $ | 142,777 | $ | 276,875 | $ | 288,015 | ||||||
| 2nd generation TI | (12,036) | (12,287) | (26,921) | (32,491) | ||||||||||
| Leasing commissions paid | (5,187) | (10,012) | (16,581) | (25,227) | ||||||||||
| Building capital | (9,112) | (12,835) | (15,799) | (18,198) | ||||||||||
| FAD | $ | 115,354 | $ | 107,643 | $ | 217,574 | $ | 212,099 | ||||||
FFO weighted average common shares outstanding - diluted 6 | 354,078 | 376,556 | 353,814 | 379,979 | ||||||||||
1Potential common shares are not included in diluted earnings per share when a loss exists as the effect would be antidilutive.
2For the six months ended June 30, 2025, represents a $1.5 million credit loss reserve on a mortgage note receivable and a $1.9 million loss on other assets included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations. For the three and six months ended June 30, 2024, includes a $4.9 million gain on sale of corporate assets included in "Gains on sales of real estate and other assets" on the Statement of Operations, a $2.2 million straight line rent reversed included in "Rental income" on the Statement of Operations, and a $11.2 million credit loss reserve on a note receivable included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations.
3Includes the Company's proportionate share of lease intangible amortization related to unconsolidated joint ventures.
4Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
5Includes the Company's proportionate share of straight-line rent, net related to unconsolidated joint ventures.
6The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 287,797 and 420,687, respectively, for the three months ended June 30, 2025 and 2024, and the dilutive impact of 4,161,628 and 3,914,997 OP Units outstanding for the three and six months ended June 30, 2025, respectively.
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Cash Net Operating Income ("NOI") and Same Store Cash NOI
Cash NOI and Same Store Cash NOI are key performance indicators. Management considers these to be supplemental measures that allow investors, analysts and Company management to measure unlevered property-level operating results. The Company defines Cash NOI as rental income plus interest from financing receivables less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, financing receivable amortization, tenant improvement amortization and leasing commission amortization. The Company also excludes cash lease termination fees. Cash NOI is historical and not necessarily indicative of future results.
Same Store Cash NOI compares Cash NOI for stabilized properties. Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale or intended for sale, properties undergoing redevelopment, and newly redeveloped or developed properties.
The Company utilizes the redevelopment classification for properties where management has approved a change in strategic direction through the application of additional resources, including an amount of capital expenditures significantly above routine maintenance and capital improvement expenditures.
Any recently acquired property will be included in the same store pool once the Company has owned the property for five full quarters. Newly developed or redeveloped properties will be included in the same store pool five full quarters after substantial completion.
The following table reflects the Company's Same Store Cash NOI for the six months ended June 30, 2025 and 2024:
| NUMBER OF PROPERTIES | GROSS INVESTMENT as of June 30, 2025 | SAME STORE CASH NOI for the six months ended June 30, | ||||||||||||
| Dollars in thousands | 2025 | 2024 | ||||||||||||
| Same store properties | 537 | $ | 10,250,272 | $ | 325,785 | $ | 313,126 | |||||||
| Joint venture same store properties | 30 | $ | 330,690 | $ | 8,806 | $ | 9,036 | |||||||
The following tables reconcile net loss to Same Store NOI and the same store property metrics to the total owned real estate portfolio for the six months ended June 30, 2025 and 2024:
Reconciliation of Same Store Cash NOI
| SAME STORE RECONCILIATION | ||||||||
| SIX MONTHS ENDED JUNE 30, | ||||||||
| Dollars in thousands | 2025 | 2024 | ||||||
| Net loss | $ | (205,532) | $ | (461,157) | ||||
| Other expense | 239,791 | 484,276 | ||||||
| General and administrative expense | 37,011 | 28,788 | ||||||
| Depreciation and amortization expense | 298,717 | 351,596 | ||||||
Other expenses 1 | 15,385 | 9,953 | ||||||
| Straight-line rent, net | (13,888) | (12,199) | ||||||
| Joint venture properties | 16,507 | 10,462 | ||||||
Other revenue 2 | (19,252) | (12,439) | ||||||
| Cash NOI | 368,739 | 399,280 | ||||||
| Cash NOI not included in same store | (34,148) | (77,118) | ||||||
| Same store cash NOI | 334,591 | 322,162 | ||||||
| Same store joint venture properties | (8,806) | (9,036) | ||||||
| Same store cash NOI (excluding JVs) | $ | 325,785 | $ | 313,126 | ||||
1.Includes transaction costs, rent reserves, above and below market ground lease intangible amortization, leasing commission amortization and ground lease straight-line rent expense.
2.Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization.
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Reconciliation of Same Store Properties
| AS OF JUNE 30, 2025 | ||||||||||||||
| Dollars and square feet in thousands | PROPERTY COUNT | GROSS INVESTMENT 1 | SQUARE FEET | OCCUPANCY | ||||||||||
Same store properties | 537 | $ | 10,250,272 | 30,110 | 90.0 | % | ||||||||
| Joint venture same store properties | 30 | 330,690 | 1,673 | 88.9 | % | |||||||||
| Wholly owned and joint venture acquisitions | 30 | 182,401 | 2,193 | 94.4 | % | |||||||||
| Development completions | 3 | 96,269 | 230 | 62.4 | % | |||||||||
| Redevelopments | 19 | 645,948 | 1,876 | 74.2 | % | |||||||||
| Total | 619 | $ | 11,505,580 | 36,082 | 89.2 | % | ||||||||
| Joint venture properties | 65 | 620,616 | 4,254 | 88.3 | % | |||||||||
| Total owned real estate properties | 554 | $ | 10,884,964 | 31,828 | 89.4 | % | ||||||||
1Excludes assets held for sale, construction in progress, land held for development, corporate property and financing lease right-of-use assets unrelated to an imputed lease arrangement as a result of a sale leaseback transaction.
Results of Operations
Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024
The Company’s results of operations for the three months ended June 30, 2025, compared to the same period in 2024 were impacted by developments, dispositions, gains on sale, and capital markets transactions.
Revenues
Rental income decreased $21.1 million, or 6.8%, for the three months ended June 30, 2025, compared to the prior year period. This decrease is primarily comprised of the following:
•Dispositions in 2024 and 2025 resulted in a decrease of $36.3 million.
•Leasing activity resulted in an increase of $13.4 million.
•Developments completed in 2024 resulted in an increase of $1.8 million.
Other operating income increased $2.7 million, or 61.6%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of income from management fees related to unconsolidated joint ventures.
Expenses
Property operating expenses decreased $7.8 million, or 6.6%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:
•Dispositions in 2024 and 2025 resulted in a decrease of $12.7 million.
•Increases in portfolio operating expenses as follows:
◦Utilities expense of $1.4 million;
◦Leasing commissions and other administrative and legal expenses of $1.3 million;
◦Compensation expense of $1.2 million; and
◦Janitorial expense of $0.6 million.
•Developments completed in 2024 resulted in an increase of $0.4 million.
General and administrative expenses increased approximately $9.5 million, or 67.7%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:
•Decreases in the following expenses:
◦Cash compensation expense of $0.5 million;
◦Travel expenses of $0.3 million; and
◦Other decreases include legal and other administrative costs of $1.6 million.
•Increases in the following expenses:
◦Restructuring and severance-related charges of $10.3 million;
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◦Cash incentive compensation expense of $1.1 million; and
◦Non-cash incentive compensation expense of 0.5 million.
Depreciation and amortization expense decreased $25.7 million, or 14.8%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:
•Dispositions in 2024 and 2025 resulted in a decrease of $17.3 million.
•Assets that became fully depreciated resulted in a decrease of $17.2 million.
•Various building and tenant improvement expenditures resulted in an increase of $8.3 million.
•Developments completed in 2024 resulted in an increase of $0.5 million.
Other Income (Expense)
Gains on sale of real estate properties and other assets
In the three months ended June 30, 2025, the Company recognized gains on sale of real estate properties and other assets of approximately $20.0 million. In the three months ended June 30, 2024, the Company recognized gains on sale of real estate properties and other assets of approximately $38.3 million.
Interest expense
Interest expense decreased $9.1 million, or 14.6%, for the three months ended June 30, 2025, compared to the prior year period. The components of interest expense are as follows:
| THREE MONTHS ENDED JUNE 30, | CHANGE | |||||||||||||
| Dollars in thousands | 2025 | 2024 | $ | % | ||||||||||
| Contractual interest | $ | 44,269 | $ | 50,956 | $ | (6,687) | (13.1) | % | ||||||
| Net discount/premium accretion | 10,722 | 10,198 | 524 | 5.1 | % | |||||||||
| Debt issuance costs amortization | 1,067 | 1,186 | (119) | (10.0) | % | |||||||||
| Amortization of interest rate swap settlement | 11 | 42 | (31) | (73.8) | % | |||||||||
| Amortization of treasury hedge settlement | 107 | 107 | — | — | % | |||||||||
| Interest cost capitalization | (3,751) | (974) | (2,777) | 285.1 | % | |||||||||
| Interest on lease liabilities | 921 | 942 | (21) | (2.2) | % | |||||||||
| Total interest expense | $ | 53,346 | $ | 62,457 | $ | (9,111) | (14.6) | % | ||||||
Contractual interest expense decreased $6.7 million, or 13.1%, for the three months ended June 30, 2025, compared to the prior year period primarily as a result of the following activity:
•The unsecured term loans accounted for a decrease of approximately $8.8 million due to a decreased aggregate balance.
•The Unsecured Credit Facility accounted for an increase of approximately $1.1 million as a result of an increased weighted average balance outstanding.
•The redemption of the Senior Notes due 2025 accounted for a decrease of $1.6 million.
•Active interest rate swaps accounted for an increase of $2.7 million.
•Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.1 million.
Impairment of real estate properties and credit loss reserves
In the second quarter of 2025, the Company recognized impairments totaling $15.0 million on two properties sold and $125.9 million on thirteen properties with changes in the expected holding periods. In addition, the Company recorded a $1.5 million credit loss reserve related to one of its mortgage notes receivables. In the second quarter of 2024, the Company recognized impairments totaling $10.2 million on 15 properties sold and $110.7 million on 17 properties with changes in the expected holding periods. In addition, the Company recorded a $11.2 million credit loss reserve to one of its mortgage note receivables.
Equity loss from unconsolidated joint ventures
The Company recognized its proportionate share of income or losses from its unconsolidated joint ventures. Losses are primarily attributable to non-cash depreciation expense. See Note 2 to the Condensed Consolidated Financial Statements in this report for more details regarding the Company's unconsolidated joint ventures.
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Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
The Company’s results of operations for the six months ended June 30, 2025 compared to the same period in 2024 were impacted by developments, dispositions, gains on sale, and capital markets transactions.
Revenues
Rental income decreased $50.3 million, or 8.0%, for the six months ended June 30, 2025 compared to the prior year period. This decrease is primarily comprised of the following:
•Dispositions in 2024 and 2025 resulted in a decrease of $75.2 million.
•Leasing activity, including contractual rent increases, resulted in an increase of $21.3 million.
•Developments completed in 2024 resulted in an increase of $3.6 million.
Other operating income increased $4.9 million, or 57.1%, for the six months ended June 30, 2025, compared to the prior year period primarily as a result of income from management fees related to unconsolidated joint ventures.
Expenses
Property operating expenses decreased $13.9 million, or 5.8%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:
•Dispositions in 2024 and 2025 resulted in a decrease of $26.4 million.
•Increases in portfolio operating expenses as follows:
◦Administrative, leasing commissions, and other legal expense of $2.7 million;
◦Compensation expense of $2.5 million
◦Utilities expense of $2.2 million;
◦Maintenance and repair expense of $1.8 million;
◦Property tax expense of $1.5 million; and
◦Janitorial expense of $0.9 million.
◦Developments completed in 2024 resulted in an increase of $0.9 million.
General and administrative expenses increased approximately $8.2 million, or 28.6%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:
•Increase in restructuring and severance-related charges of $10.8 million.
•Increase in cash incentive compensation expense of $1.1 million.
•Decrease in payroll and payroll related expenses of approximately $0.7 million.
•Decrease in travel-related expenses of 0.7 million.
•Other decreases include legal and other administrative costs of $2.3 million.
Depreciation and amortization expense decreased $52.9 million, or 15.0%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:
•Dispositions in 2024 and 2025 resulted in a decrease of $37.3 million.
•Assets that became fully depreciated resulted in a decrease of $32.1 million.
•Developments completed in 2024 resulted in an increase of $1.1 million.
•Various building and tenant improvement expenditures resulted in an increase of $15.4 million.
Other Income (Expense)
Gains on sale of real estate properties and other assets
Gains on the sale of real estate properties and other assets for the six months ended June 30, 2025 and 2024, totaled $22.9 million and $38.4 million, respectively.
Interest expense
Interest expense decreased $15.4 million, or 12.4%, for the six months ended June 30, 2025 compared to the prior year period. The components of interest expense are as follows:
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| SIX MONTHS ENDED JUNE 30, | CHANGE | |||||||||||||
| Dollars in thousands | 2025 | 2024 | $ | % | ||||||||||
| Contractual interest | $ | 87,154 | $ | 100,414 | $ | (13,260) | (13.2) | % | ||||||
| Net discount/premium accretion | 21,312 | 20,265 | 1,047 | 5.2 | % | |||||||||
| Debt issuance costs amortization | 2,196 | 2,392 | (196) | (8.2) | % | |||||||||
| Amortization of interest rate swap settlement | 53 | 84 | (31) | (36.9) | % | |||||||||
| Amortization of treasury hedge settlement | 213 | 213 | — | — | % | |||||||||
| Fair value derivative | — | 178 | (178) | (100.0) | % | |||||||||
| Interest cost capitalization | (4,608) | (1,916) | (2,692) | 140.5 | % | |||||||||
| Interest on lease liabilities | 1,837 | 1,880 | (43) | (2.3) | % | |||||||||
| Total interest expense | $ | 108,157 | $ | 123,510 | $ | (15,353) | (12.4) | % | ||||||
Contractual interest expense decreased $13.3 million, or 13.2%, for the six months ended June 30, 2025 compared to the prior year period primarily as a result of the following activity:
•The unsecured term loans accounted for a decrease of approximately $6.9 million.
•The unsecured term loan repayments accounted for a decrease of approximately $11.1 million
•The Unsecured Credit Facility accounted for an increase of approximately $0.8 million as a result of an increased weighted average balance outstanding.
•Active interest rate swaps accounted for an increase of $5.5 million, while expired interest rate swaps accounted for an increase of $0.3 million.
•Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.2 million.
•The redemption of the Senior Note due 2025 accounted for a decrease of $1.6 million.
Impairment of real estate properties and credit loss reserves
During the six months ended June 30, 2025, the Company recognized impairments totaling $151.0 million on six properties sold and 17 properties with changes in the expected holding periods. In addition, the Company recorded $1.5 million in credit loss reserves relating to a mortgage notes receivable and a $1.9 million fair value adjustment for an equity investment in other assets. During the six months ended June 30, 2024, the Company recognized impairments totaling $136.9 million on 15 properties sold and 18 properties with changes in the expected holding periods, including one property reclassified to held for sale. In addition, the Company recorded $11.2 million in credit loss reserves related to one of its mortgage notes receivable.
Impairment of Goodwill
During the three months ended March 31, 2024, the Company determined that the carrying value of its single reporting unit exceeded estimated fair value and therefore recorded a $250.5 million full impairment of its goodwill, which is recorded as a non-cash charge in “Impairment of goodwill” in the consolidated statements of operations. See Note 1 to the Condensed Consolidated Financial Statements in this report for more details.
Equity loss from unconsolidated joint ventures
The Company recognized its proportionate share of losses from its unconsolidated joint ventures. These losses are primarily attributable to non-cash depreciation expense. See Note 2 to the Condensed Consolidated Financial Statements in this report for more details regarding the Company's unconsolidated joint ventures.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk in the form of changing interest rates on its debt and mortgage notes. Management uses regular monitoring of market conditions and analysis techniques to manage this risk. During the six months ended June 30, 2025, there were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files or submits under the Exchange Act.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is, from time to time, involved in litigation arising in the ordinary course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
Item 1A. Risk Factors
In addition to the other information set forth in this report and the risk factor discussed below, an investor should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect the Company’s business, financial condition or future results. The risks, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, are not the only risks facing the Company. Additional risks and uncertainties not currently known to management or that management currently deems immaterial also may materially adversely affect the Company’s business, financial condition, operating results or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the six months ended June 30, 2025, the Company repurchased shares of its common stock as follows:
| PERIOD | TOTAL NUMBER OF SHARES PURCHASED (1) | AVERAGE PRICE PAID per share | TOTAL NUMBER OF SHARES purchased as part of publicly announced plans or programs | MAXIMUM NUMBER (or Approximate DOLLAR VALUE) OF SHARES that may yet be purchased under the plans or programs | ||||||||||
| October 2024 Authorization | ||||||||||||||
January 1 - January 31 | 4,029 | $ | 16.27 | — | $ | 236,957,114 | ||||||||
February 1 - February 28 | 9,034 | 16.56 | — | 236,957,114 | ||||||||||
March 1 - March 31 | — | — | — | 236,957,114 | ||||||||||
| April 1 - April 30 | 18,877 | 15.83 | — | 236,957,114 | ||||||||||
| May 1 - May 31 | 4,535 | 14.50 | — | 236,957,114 | ||||||||||
| June 1 - June 30 | 49,441 | 15.48 | — | 236,957,114 | ||||||||||
| Total | 85,916 | $ | 15.66 | — | $ | 236,957,114 | ||||||||
1Share purchases in the six months ended June 30, 2025 represent shares of Company common stock withheld and cancelled to satisfy employee tax withholding obligations payable upon the vesting of non-vested shares.
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Item 5. Other Information
During the three months ended June 30, 2025, no director or officer of the Company adopted terminated
On July 31, 2025, the Company and Julie F. Wilson determined that Ms. Wilson would depart from her position as Executive Vice President and Chief Administrative Officer, effective December 31, 2025. Ms. Wilson’s separation is governed pursuant to the “termination without cause” provisions of her employment agreement with the Company, a copy of which previously has been filed with the SEC.
On July 31, 2025, the Company and John M. Bryant, Jr. determined that Mr. Bryant would depart from his position as Senior Vice President, Legal Affairs, effective December 31, 2025. Mr. Bryant’s separation is governed pursuant to the “termination without cause” provisions of his employment agreement with the Company, a copy of which previously has been filed with the SEC. Mr. Bryant previously served as the Company's Executive Vice President and General Counsel and was reported as a Named Executive Officer in the Company's Proxy Statement relating to its Annual Meeting of Shareholders held on May 20, 2025.
Item 6. Exhibits
| EXHIBIT | DESCRIPTION | |||||||
| Exhibit 3.1 | ||||||||
| Exhibit 3.2 | ||||||||
| Exhibit 3.3 | ||||||||
| Exhibit 3.4 | ||||||||
| Exhibit 10.1 | ||||||||
| Exhibit 10.2 | ||||||||
| Exhibit 10.3 | ||||||||
| Exhibit 101.INS | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| Exhibit 101.SCH | XBRL Taxonomy Extension Schema Document (furnished electronically herewith) | |||||||
| Exhibit 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (furnished electronically herewith) | |||||||
| Exhibit 101.LAB | XBRL Taxonomy Extension Labels Linkbase Document (furnished electronically herewith) | |||||||
| Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (furnished electronically herewith) | |||||||
| Exhibit 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (furnished electronically herewith) | |||||||
| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
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1 Filed as an exhibit to the Company's (File No. 001-35568) Quarterly Report on Form 10-Q filed with the SEC on August 8, 2023, and hereby incorporated by reference.
2 Filed as an exhibit to the Company's (File No. 001-35568) Current Report on Form 8-K filed with the SEC on April 29, 2020, and hereby incorporated by reference.
3 Filed as an exhibit to the Company's (File No. 001-35568) Current Report on Form 8-K filed with the SEC on July 26, 2022, and hereby incorporated by reference.
4 Filed as an exhibit to the Company's (File No. 001-35568) Current Report on Form 10-Q filed with the SEC on May 1, 2025, and hereby incorporated by reference.
5 Filed as an exhibit to the Company's (File No. 001-35568) Current Report on Form 8-K filed with the SEC on July 31, 2025, and hereby incorporated by reference.
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SIGNATURE
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 REALTY TRUST INCORPORATED | ||||||||
| By: | /s/ AUSTEN B. HELFRICH | |||||||
| Austen B. Helfrich | ||||||||
| Executive Vice President and Chief Financial Officer | ||||||||
| August 1, 2025 | ||||||||
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