HEALTHPEAK PROPERTIES, INC. [DOC] Filings

10-Q 1 peak-20240630.htm 10-Q peak-20240630

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 June 30, 2024


☐			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 001-08895

Healthpeak Properties, Inc.

(Exact name of registrant as specified in its charter)



Maryland						33-0091377
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

4600 South Syracuse Street, Suite 500

Denver, CO 80237

(Address of principal executive offices) (Zip Code)

(720) 428-5050

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	DOC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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. Yes ☒ 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). Yes ☒ 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.


Large accelerated filer	☒	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 24, 2024, there were 699,291,414 shares of the registrant’s $1.00 par value common stock outstanding.

Table of Contents

HEALTHPEAK PROPERTIES, INC.

INDEX


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Comprehensive Income (Loss)	5

	Consolidated Statements of Equity and Redeemable Noncontrolling Interests	6

	Consolidated Statements of Cash Flows	8

	Notes to the Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67

Item 4.	Controls and Procedures	68

PART II. OTHER INFORMATION



Item 1A.	Risk Factors	69

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69

Item 5.	Other Information	69

Item 6.	Exhibits	70

Signatures		71

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Healthpeak Properties, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)


	June 30, 2024		December 31, 2023
ASSETS
Real estate:
Buildings and improvements	$	16,448,690	$	13,329,464
Development costs and construction in progress	739,318		643,217
Land and improvements	3,005,974		2,647,633
Accumulated depreciation and amortization	(3,796,108)		(3,591,951)
Net real estate	16,397,874		13,028,363

Loans receivable, net of reserves of $9,143 and $2,830	275,478		218,450
Investments in and advances to unconsolidated joint ventures	927,204		782,853
Accounts receivable, net of allowance of $2,751 and $2,282	59,658		55,820
Cash and cash equivalents	106,886		117,635
Restricted cash	52,409		51,388
Intangible assets, net	1,076,087		314,156
Assets held for sale, net	—		117,986
Right-of-use asset, net	440,558		240,155
Other assets, net	843,554		772,044
Total assets	$	20,179,708	$	15,698,850

LIABILITIES AND EQUITY
Bank line of credit and commercial paper	$	25,000	$	720,000
Term loans	1,645,456		496,824
Senior unsecured notes	6,551,155		5,403,378
Mortgage debt	381,416		256,097
Intangible liabilities, net	227,370		127,380
Liabilities related to assets held for sale, net	—		729
Lease liability	313,469		206,743
Accounts payable, accrued liabilities, and other liabilities	709,219		657,196
Deferred revenue	907,852		905,633
Total liabilities	10,760,937		8,773,980

Commitments and contingencies (Note 11)

Redeemable noncontrolling interests	1,433		48,828


Common stock, $1.00 par value: 1,500,000,000 and 750,000,000 shares authorized; 700,316,807 and 547,156,311 shares issued and outstanding	700,317		547,156
Additional paid-in capital	12,859,567		10,405,780
Cumulative dividends in excess of earnings	(4,844,683)		(4,621,861)
Accumulated other comprehensive income (loss)	42,297		19,371
Total stockholders’ equity	8,757,498		6,350,446
Joint venture partners	324,681		310,998
Non-managing member unitholders	335,159		214,598
Total noncontrolling interests	659,840		525,596
Total equity	9,417,338		6,876,042
Total liabilities and equity	$	20,179,708	$	15,698,850

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues:
Rental and related revenues	$	546,781	$	409,967	$	1,008,814	$	802,398
Resident fees and services	140,891		130,184		279,667		257,268
Interest income and other	7,832		5,279		13,583		11,442

Total revenues	695,504		545,430		1,302,064		1,071,108
Costs and expenses:
Interest expense	74,910		49,074		135,817		97,037
Depreciation and amortization	283,498		197,573		502,717		376,798
Operating	273,827		221,837		517,556		444,925
General and administrative	26,718		25,936		50,017		50,483
Transaction and merger-related costs	7,759		637		114,979		3,062

Impairments and loan loss reserves (recoveries), net	(553)		2,607		10,905		394
Total costs and expenses	666,159		497,664		1,331,991		972,699
Other income (expense):
Gain (loss) on sales of real estate, net	122,044		4,885		125,299		86,463

Other income (expense), net	4,004		1,955		82,520		2,727
Total other income (expense), net	126,048		6,840		207,819		89,190
Income (loss) before income taxes and equity income (loss) from unconsolidated joint ventures	155,393		54,606		177,892		187,599
Income tax benefit (expense)	(2,728)		(1,136)		(16,426)		(1,438)
Equity income (loss) from unconsolidated joint ventures	51		2,729		2,427		4,545


Net income (loss)	152,716		56,199		163,893		190,706
Noncontrolling interests’ share in earnings	(6,669)		(4,300)		(11,170)		(19,855)

Net income (loss) attributable to Healthpeak Properties, Inc.	146,047		51,899		152,723		170,851

Participating securities’ share in earnings	(214)		(149)		(414)		(1,402)
Net income (loss) applicable to common shares	$	145,833	$	51,750	$	152,309	$	169,449









Earnings (loss) per common share:
Basic	$	0.21	$	0.09	$	0.23	$	0.31
Diluted	$	0.21	$	0.09	$	0.23	$	0.31
Weighted average shares outstanding:
Basic	702,382		547,026		651,642		546,936
Diluted	703,268		547,294		652,113		547,204

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	152,716	$	56,199	$	163,893	$	190,706
Other comprehensive income (loss):
Net unrealized gains (losses) on derivatives	3,690		12,668		22,798		3,191
Change in Supplemental Executive Retirement Plan obligation and other	64		64		128		128

Total other comprehensive income (loss)	3,754		12,732		22,926		3,319
Total comprehensive income (loss)	156,470		68,931		186,819		194,025
Total comprehensive (income) loss attributable to noncontrolling interests	(6,669)		(4,300)		(11,170)		(19,855)

Total comprehensive income (loss) attributable to Healthpeak Properties, Inc.	$	149,801	$	64,631	$	175,649	$	174,170

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS

(In thousands, except per share data)

(Unaudited)

For the three months ended June 30, 2024:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


April 1, 2024	703,733	$	703,733	$	12,918,936	$	(4,779,599)	$	38,543	$	8,881,613	$	663,038	$	9,544,651	$	54,848
Net income (loss)	—	—		—		146,047		—		146,047		6,709		152,756		(40)
Other comprehensive income (loss)	—	—		—		—		3,754		3,754		—		3,754		—

Issuance of common stock, net	76	76		192		—		—		268		—		268		—
Conversion of DownREIT units to common stock	96	96		2,276		—		—		2,372		(2,372)		—		—
Repurchase of common stock	(3,588)	(3,588)		(64,646)		—		—		(68,234)		—		(68,234)		—

Stock-based compensation	—	—		2,367		—		—		2,367		2,923		5,290		—
Common dividends ($0.30 per share)	—	—		—		(211,131)		—		(211,131)		—		(211,131)		—
Distributions to noncontrolling interests	—	—		—		—		—		—		(10,458)		(10,458)		(49)
Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		2
Purchase of noncontrolling interests	—	—		—		—		—		—		—		—		(52,886)

Adjustments to redemption value of redeemable noncontrolling interests	—	—		442		—		—		442		—		442		(442)


June 30, 2024	700,317	$	700,317	$	12,859,567	$	(4,844,683)	$	42,297	$	8,757,498	$	659,840	$	9,417,338	$	1,433

For the three months ended June 30, 2023:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


April 1, 2023	546,995	$	546,995	$	10,360,058	$	(4,316,038)	$	18,721	$	6,609,736	$	527,997	$	7,137,733	$	85,902
Net income (loss)	—	—		—		51,899		—		51,899		4,153		56,052		147
Other comprehensive income (loss)	—	—		—		—		12,732		12,732		—		12,732		—
Issuance of common stock, net	51	51		132		—		—		183		—		183		—
Conversion of DownREIT units to common stock	7	7		216		—		—		223		(223)		—		—
Repurchase of common stock	—	—		(7)		—		—		(7)		—		(7)		—

Stock-based compensation	—	—		2,256		—		—		2,256		3,138		5,394		—
Common dividends ($0.30 per share)	—	—		—		(164,284)		—		(164,284)		—		(164,284)		—
Distributions to noncontrolling interests	—	—		—		—		—		—		(8,269)		(8,269)		(54)



Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		124

Adjustments to redemption value of redeemable noncontrolling interests	—	—		22,327		—		—		22,327		—		22,327		(22,327)
June 30, 2023	547,053	$	547,053	$	10,384,982	$	(4,428,423)	$	31,453	$	6,535,065	$	526,796	$	7,061,861	$	63,792

Table of Contents

For the six months ended June 30, 2024:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


January 1, 2024	547,156	$	547,156	$	10,405,780	$	(4,621,861)	$	19,371	$	6,350,446	$	525,596	$	6,876,042	$	48,828
Net income (loss)	—	—		—		152,723		—		152,723		11,027		163,750		143
Other comprehensive income (loss)	—	—		—		—		22,926		22,926		—		22,926		—
Shares issued as part of the Merger	162,231	162,231		2,611,916		—		—		2,774,147		—		2,774,147		—
Issuance of common stock, net	375	375		201		—		—		576		—		576		—
Conversion of DownREIT units to common stock	96	96		2,276		—		—		2,372		(2,372)		—		—
Repurchase of common stock	(9,541)	(9,541)		(160,688)		—		—		(170,229)		—		(170,229)		—

Stock-based compensation	—	—		4,194		—		—		4,194		6,315		10,509		—
Common dividends ($0.60 per share)	—	—		—		(375,545)		—		(375,545)		—		(375,545)		—

Distributions to noncontrolling interests	—	—		—		—		—		—		(17,453)		(17,453)		(312)
Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		12
Purchase of noncontrolling interests	—	—		—		—		—		—		—		—		(52,886)

Noncontrolling interests acquired as part of the Merger	—	—		—		—		—		—		136,727		136,727		1,536
Adjustments to redemption value of redeemable noncontrolling interests	—	—		(4,112)		—		—		(4,112)		—		(4,112)		4,112



June 30, 2024	700,317	$	700,317	$	12,859,567	$	(4,844,683)	$	42,297	$	8,757,498	$	659,840	$	9,417,338	$	1,433

For the six months ended June 30, 2023:


	Common Stock			Additional Paid-In Capital		Cumulative Dividends In Excess Of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Total Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests
	Shares	Amount


January 1, 2023	546,642	$	546,642	$	10,349,614	$	(4,269,689)	$	28,134	$	6,654,701	$	527,897	$	7,182,598	$	105,679
Net income (loss)	—	—		—		170,851		—		170,851		19,542		190,393		313
Other comprehensive income (loss)	—	—		—		—		3,319		3,319		—		3,319		—
Issuance of common stock, net	642	642		(285)		—		—		357		—		357		—
Conversion of DownREIT units to common stock	7	7		216		—		—		223		(223)		—		—
Repurchase of common stock	(238)	(238)		(6,236)		—		—		(6,474)		—		(6,474)		—

Stock-based compensation	—	—		(621)		—		—		(621)		10,580		9,959		—
Common dividends ($0.60 per share)	—	—		—		(329,585)		—		(329,585)		—		(329,585)		—

Distributions to noncontrolling interests	—	—		—		—		—		—		(31,000)		(31,000)		(126)


Contributions from noncontrolling interests	—	—		—		—		—		—		—		—		220
Adjustments to redemption value of redeemable noncontrolling interests	—	—		42,294		—		—		42,294		—		42,294		(42,294)


June 30, 2023	547,053	$	547,053	$	10,384,982	$	(4,428,423)	$	31,453	$	6,535,065	$	526,796	$	7,061,861	$	63,792

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	163,893	$	190,706
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of real estate, in-place lease, and other intangibles	502,717		376,798
Stock-based compensation amortization expense	8,180		7,532
Merger-related post-combination stock compensation expense	16,223		—
Amortization of deferred financing costs and debt discounts (premiums)	11,840		5,774
Straight-line rents	(22,545)		(5,431)

Amortization of nonrefundable entrance fees and above (below) market lease intangibles	(58,415)		(54,910)
Equity loss (income) from unconsolidated joint ventures	(2,427)		(4,545)
Distributions of earnings from unconsolidated joint ventures	7,761		352


Deferred income tax expense (benefit)	11,066		(901)
Impairments and loan loss reserves (recoveries), net	10,905		394

Loss (gain) on sales of real estate, net	(125,299)		(86,463)
Loss (gain) upon change of control, net	(77,978)		(234)
Casualty-related loss (recoveries), net	(1,257)		(266)


Other non-cash items	(841)		2,505
Changes in:
Decrease (increase) in accounts receivable and other assets, net	19,334		9,656
Increase (decrease) in accounts payable, accrued liabilities, and deferred revenue	5,607		30,770
Net cash provided by (used in) operating activities	468,764		471,737
Cash flows from investing activities:
Acquisitions of real estate	—		(15,770)
Development, redevelopment, and other major improvements of real estate	(229,544)		(394,141)
Leasing costs, tenant improvements, and recurring capital expenditures	(53,235)		(42,233)
Proceeds from sales of real estate, net	369,475		141,651

Proceeds from the Callan Ridge JV transaction, net	125,662		—

Investments in unconsolidated joint ventures	(37,423)		(28,214)
Distributions in excess of earnings from unconsolidated joint ventures	15,757		6,420
Proceeds from insurance recovery	4,090		14,265




Proceeds from sales/principal repayments on loans receivable and marketable debt securities	86,210		184,299
Investments in loans receivable and other	(12,031)		(4,946)
Cash paid in connection with the Merger, net	(179,215)		—

Net cash provided by (used in) investing activities	89,746		(138,669)
Cash flows from financing activities:
Borrowings under bank line of credit and commercial paper	3,146,000		6,014,005
Repayments under bank line of credit and commercial paper	(3,841,000)		(6,680,611)
Issuances and borrowings of term loans, senior unsecured notes, and mortgage debt	750,000		743,778
Repayments and repurchases of term loans, senior unsecured notes, and mortgage debt	(1,963)		(2,619)

Payments for deferred financing costs	(5,438)		(7,322)

Issuance of common stock and exercise of options, net of offering costs	174		(298)
Repurchase of common stock	(170,229)		(6,474)
Dividends paid on common stock	(375,143)		(328,930)

Distributions to and purchase of noncontrolling interests	(70,651)		(31,126)
Contributions from and issuance of noncontrolling interests	12		220
Net cash provided by (used in) financing activities	(568,238)		(299,377)

Net increase (decrease) in cash, cash equivalents, and restricted cash	(9,728)		33,691
Cash, cash equivalents, and restricted cash, beginning of period	169,023		126,834
Cash, cash equivalents, and restricted cash, end of period	$	159,295	$	160,525

See accompanying Notes to the Unaudited Consolidated Financial Statements.

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Healthpeak Properties, Inc.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. Business

Overview

Healthpeak Properties, Inc., a Standard & Poor’s 500 company, is a Maryland corporation that is organized to qualify as a real estate investment trust (“REIT”) and that, together with its consolidated entities (collectively, “Healthpeak” or the “Company”), owns, operates, and develops high-quality real estate focused on healthcare discovery and delivery in the United States (“U.S.”). Healthpeak® has a diverse portfolio comprised of investments in the following reportable healthcare segments: (i) outpatient medical; (ii) lab; and (iii) continuing care retirement community (“CCRC”).

The Company’s corporate headquarters are in Denver, Colorado, and it has additional corporate offices in California, Tennessee, Wisconsin, and Massachusetts, and property management offices in several locations throughout the U.S.

On February 10, 2023, the Company completed its corporate reorganization (the “Reorganization”) into an umbrella partnership REIT (“UPREIT”). Substantially all of the Company’s business is conducted through Healthpeak OP, LLC (“Healthpeak OP”). The Company is the managing member of Healthpeak OP and does not have material assets or liabilities, other than through its investment in Healthpeak OP. For additional information on the UPREIT Reorganization, see the Company’s Current Report on Form 8-K12B filed with the U.S. Securities and Exchange Commission (“SEC”) on February 10, 2023.

On March 1, 2024, the Company completed its planned merger with Physicians Realty Trust (see Note 3).

NOTE 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Management is required to make estimates and assumptions in the preparation of financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from management’s estimates.

The consolidated financial statements include the accounts of Healthpeak Properties, Inc., its wholly-owned subsidiaries, joint ventures (“JVs”), and variable interest entities (“VIEs”) that it controls through voting rights or other means. Intercompany transactions and balances have been eliminated upon consolidation. All adjustments (consisting of normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations, and cash flows have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying unaudited interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC.

Government Grant Income

On March 27, 2020, the federal government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to provide financial aid to individuals, businesses, and state and local governments. During the three and six months ended June 30, 2023, the Company received government grants under the CARES Act primarily to cover increased expenses and lost revenues during the coronavirus pandemic. Grant income is recognized to the extent that qualifying expenses and lost revenues exceed grants received and the Company will comply with all conditions attached to the grant. As of June 30, 2024, the amount of qualifying expenditures and lost revenues exceeded grant income recognized and the Company believes it has complied and will continue to comply with all grant conditions. In the event of non-compliance, all such amounts received are subject to recapture.

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The following table summarizes information related to government grant income received and recognized by the Company (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Government grant income recorded in other income (expense), net	$	—	$	47	$	—	$	184
Government grant income recorded in equity income (loss) from unconsolidated joint ventures	—		—		—		229

Total government grants received	$	—	$	47	$	—	$	413

Recent Accounting Pronouncements

Adopted

Reference Rate Reform. From March 2020 to December 2022, the Financial Accounting Standards Board (“FASB”) issued a series of Accounting Standards Updates (“ASUs”) that provide optional expedients that may be elected through December 31, 2024 to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The amendments in these ASUs were effective immediately upon issuance. During the first quarter of 2023, the Company amended certain of its variable rate mortgage debt and the related interest rate swap agreements to change the interest rate benchmark from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”) and accordingly, the Company elected to apply certain practical expedients provided by these ASUs related to cash flow hedges. These expedients and the effects of reference rate reform have not had a material impact on the Company’s consolidated financial position, results of operations, cash flows, or disclosures.

Not Yet Adopted

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements so that investors can better understand an entity’s overall performance and assess potential future cash flows. The amendments in ASU 2023-07 include, but are not limited to: (i) disclosure of, on an annual basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (ii) disclosure of, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition (the other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss); (iii) disclosure of, on an interim basis, all currently required annual disclosures about a reportable segment’s profit (loss) and assets; (iv) clarification that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures of segment profit; and (v) disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is evaluating the impact ASU 2023-07 will have on its disclosures.

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), to provide disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. One of the amendments in ASU 2023-09 includes disclosure of, on an annual basis, a tabular rate reconciliation (using both percentages and reporting currency amounts) of (i) the reported income tax expense (or benefit) from continuing operations, to (ii) the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate of the jurisdiction of domicile using specific categories, including separate disclosure for any reconciling items within certain categories that are equal to or greater than a specified quantitative threshold of 5%. ASU 2023-09 also requires disclosure of, on an annual basis, the year to date amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign jurisdictions, including additional disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5% of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The Company is evaluating the impact ASU 2023-09 will have on its disclosures.

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NOTE 3. The Merger

On March 1, 2024 (the “Closing Date”), pursuant to the Agreement and Plan of Merger dated October 29, 2023 (the “Merger Agreement”), by and among the Company, DOC DR Holdco, LLC (formerly known as Alpine Sub, LLC), a wholly owned subsidiary of the Company (“DOC DR Holdco”), DOC DR, LLC (formerly known as Alpine OP Sub, LLC), a wholly owned subsidiary of Healthpeak OP (“DOC DR OP Sub”), Physicians Realty Trust, and Physicians Realty L.P. (the “Physicians Partnership”): (i) Physicians Realty Trust merged with and into DOC DR Holdco (the “Company Merger”), with DOC DR Holdco surviving as a wholly owned subsidiary of the Company (the “Company Surviving Entity”); (ii) immediately following the effectiveness of the Company Merger, the Company contributed all of the outstanding equity interests in the Company Surviving Entity to Healthpeak OP (the “Contribution”); and (iii) immediately following the Contribution, Physicians Partnership merged with and into DOC DR OP Sub (the “Partnership Merger” and, together with the Company Merger, the “Merger”), with DOC DR OP Sub surviving as a subsidiary of Healthpeak OP (the “Partnership Surviving Entity”). Subsequent to the Closing Date, the “Combined Company” means the Company and its subsidiaries.

On the Closing Date and in connection with the Merger, (i) each outstanding common share of beneficial interest of Physicians Realty Trust (“Physicians Realty Trust common shares”) (other than Physicians Realty Trust common shares that were canceled in accordance with the Merger Agreement) was automatically converted into the right to receive 0.674 (the “Exchange Ratio”) shares of the Company’s common stock, and (ii) each outstanding common unit of the Physicians Partnership was converted into common units in the Partnership Surviving Entity equal to the Exchange Ratio.

As a result of the Merger, the Company acquired 299 outpatient medical buildings. The primary reason for the Merger was to expand the Company’s size, scale, and diversification, in order to further enhance the Company’s competitive advantages and accelerate investment activities.

The Merger was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), which requires, among other things, the assets acquired and the liabilities assumed to be recognized at their acquisition date fair value. For accounting purposes, the Company was treated as the accounting acquirer of Physicians Realty Trust. The Company was considered to be the accounting acquirer primarily because: (i) the Company is the entity that transferred consideration to consummate the Merger; (ii) the Company’s stockholders as a group retained the largest portion of the voting rights of the Combined Company and have the ability to elect, appoint, or remove a majority of the members of the Combined Company’s board of directors; and (iii) its senior management constitutes the majority of management of the Combined Company.

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The consideration transferred on the Closing Date is as follows (in thousands, except per share data):


	March 1, 2024
Physicians Realty Trust common shares and Physicians Realty Trust restricted shares, PSUs, and RSUs exchanged(1)	240,699
Exchange Ratio	0.674
Shares of Healthpeak common stock issued	162,231
Closing price of Healthpeak common stock on March 1, 2024(2)	$	17.10
Fair value of Healthpeak common stock issued to the former holders of Physicians Realty Trust common shares, restricted shares, PSUs, and RSUs	$	2,774,147

Less: Fair value of preliminary share consideration attributable to the post-combination period(3)	(16,223)

Physicians Realty Trust revolving credit facility termination(4)	$	175,411
Settlement of Physicians Realty Trust’s transaction costs	23,913
Payments made in connection with share settlement(5)	11,315

Preliminary cash consideration	$	210,639

Consideration transferred	$	2,968,563

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(1)Includes 241 million Physicians Realty Trust common shares and Physicians Realty Trust restricted shares outstanding as of March 1, 2024, inclusive of: (i) 200 thousand Physicians Realty Trust restricted shares; (ii) 1 million Physicians Realty Trust common shares issuable pursuant to outstanding Physicians Realty Trust performance-based restricted stock unit (“PSUs”) (reflected at the maximum level of performance); and (iii) 300 thousand Physicians Realty Trust common shares issuable pursuant to outstanding Physicians Realty Trust restricted stock units (“RSUs”).

(2)The fair value of Healthpeak common stock issued to former holders of Physicians Realty Trust common shares and Physicians Realty Trust restricted shares, PSUs, and RSUs was based on the per share closing price of Healthpeak common stock on March 1, 2024.

(3)Represents the fair value of unvested Physicians Realty Trust restricted shares, PSUs, and RSUs attributable to post-combination services that were converted into Healthpeak common stock on the Closing Date in accordance with the Merger Agreement. Although no future service after the Closing Date is required, the value attributable to post-combination services reflected the incremental fair value provided to the Physicians Realty Trust equity award holders and the accelerated vesting of such awards at the Closing Date in accordance with the Merger Agreement. This amount was recognized as transaction and merger-related costs on the Consolidated Statements of Operations.

(4)Represents the Company’s cash repayment of all outstanding balances under Physicians Realty Trust’s revolving credit facility on the Closing Date in connection with the related termination.

(5)Includes cash settlement of: (i) tax liability related to holdback elections made under the pre-existing terms and conditions of Physicians Realty Trust’s equity programs and (ii) fractional share consideration.

Preliminary Purchase Price Allocation

For the Company’s real estate acquisitions that are accounted for as business combinations, the Company allocates the acquisition consideration (excluding acquisition costs) to the assets acquired, liabilities assumed, and noncontrolling interests at fair value as of the acquisition date. Any excess of the consideration transferred relative to the fair value of the net assets acquired is accounted for as goodwill. Acquisition costs related to business combinations are expensed as incurred. The preliminary estimated fair values of the assets acquired, liabilities assumed, and noncontrolling interests were based on information that was available at the Closing Date. The fair values were determined using standard valuation methodologies, such as the cost, market, and income approach. These methodologies require various assumptions, including those of a market participant.

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The following table summarizes the preliminary estimated fair values of the assets acquired, liabilities assumed, and noncontrolling interests at the Closing Date (in thousands):


	March 1, 2024
ASSETS
Real estate:
Buildings and improvements	$	3,199,884
Development costs and construction in progress	68,171
Land and improvements	435,353
Real estate	3,703,408
Loans receivable	118,908
Investments in and advances to unconsolidated joint ventures	58,636
Accounts receivable, net(1)	9,536
Cash and cash equivalents	30,417
Restricted cash	1,007
Intangible assets(2)	890,827
Right-of-use asset	191,415
Other assets	44,691
Total assets	$	5,048,845

LIABILITIES AND EQUITY
Term loans	$	402,320
Senior unsecured notes	1,139,760
Mortgage debt	127,176
Intangible liabilities(3)	149,875
Lease liability	97,160
Accounts payable, accrued liabilities, and other liabilities	72,864

Total liabilities	$	1,989,155

Redeemable noncontrolling interests	1,536

Joint venture partners(4)	20,109
Non-managing member unitholders(5)	116,618
Total noncontrolling interests	$	136,727

Fair value of net assets acquired and liabilities assumed, net of noncontrolling interests	$	2,921,427

Goodwill	47,136

Total purchase price	$	2,968,563

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(1)Includes $14 million of gross contractual accounts receivable.

(2)The intangible assets acquired had a weighted average amortization period of 6 years (see Note 9).

(3)The intangible liabilities acquired had a weighted average amortization period of 9 years (see Note 9).

(4)Includes six consolidated joint ventures in which the Company held ownership interests ranging from 56.7% to 99.7%.

(5)In connection with the Merger, Physicians Partnership merged with and into DOC DR OP Sub with DOC DR OP Sub surviving as the Partnership Surviving Entity. The Company controls the Partnership Surviving Entity via its ownership of its managing member, and the Partnership Surviving Entity is consolidated by the Company.

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As of June 30, 2024, the Company had not finalized the determination of fair value of certain tangible and intangible assets acquired and liabilities assumed including, but not limited to, real estate assets, loans receivable, investments in and advances to unconsolidated joint ventures, intangible assets and liabilities, noncontrolling interests, and goodwill. As such, the assessment of fair value of assets acquired and liabilities assumed is preliminary and was based on information that was available at the time the Consolidated Financial Statements were prepared. The finalization of the purchase accounting assessment could result in material changes in the Company’s determination of the fair value of assets acquired and liabilities assumed, which will be recorded as measurement period adjustments in the period in which they are identified, up to one year from the Closing Date.

A preliminary estimate of approximately $47 million has been allocated to goodwill. The recognized goodwill is attributable to expected synergies, cost savings, acquired workforce, and potential economies of scale benefits from outpatient medical property management and tenant and vendor relationships following the closing of the Merger. None of the goodwill recognized is expected to be deductible for tax purposes.

Merger-Related Costs

During the three months ended June 30, 2024, the Company incurred approximately $7 million of merger-related costs, including $5 million of legal, accounting, tax, and other costs of combining operations with Physicians Realty Trust and $3 million of severance expense related to legacy Healthpeak employees. During the six months ended June 30, 2024, the Company incurred approximately $114 million of merger-related costs, which primarily related to advisory, legal, accounting, tax, post-combination severance and stock compensation expense, and other costs of combining operations with Physicians Realty Trust. Included in this amount is: (i) $38 million of fees paid to investment banks and advisors to help the Company negotiate the terms of the transactions contemplated by the Merger Agreement and to advise the Company on other merger-related matters, inclusive of $21 million of success-based fees incurred upon consummation of the Merger, (ii) $26 million of severance expense due to certain Physicians Realty Trust dual-trigger severance arrangements that are required to be recognized as post-combination expense in accordance with ASC 805, (iii) $16 million of post-combination stock compensation expense for the accelerated vesting of Physicians Realty Trust equity awards pursuant to the terms of the Merger Agreement, based on the fair value of Healthpeak common stock issued to holders of Physicians Realty Trust equity awards, (iv) $23 million of legal, accounting, tax, and other costs, and (v) $10 million of severance expense related to legacy Healthpeak employees.

The Company expects to incur approximately $2 million of additional severance expense related to legacy Healthpeak employees through the end of 2024. These merger-related costs are included in transaction and merger-related costs on the Consolidated Statements of Operations.

Unaudited Pro Forma Financial Information

The Consolidated Statements of Operations for the three months ended June 30, 2024 include $146 million of revenues and $18 million of net loss applicable to common shares associated with the results of operations of legacy Physicians Realty Trust. The Consolidated Statements of Operations for the six months ended June 30, 2024 include $194 million of revenues and $38 million of net loss applicable to common shares associated with the results of operations of legacy Physicians Realty Trust from the Closing Date to June 30, 2024.

The following unaudited pro forma information presents a summary of the results of operations for the Combined Company, as if the Merger had been consummated on January 1, 2023 (in thousands). The following unaudited pro forma financial information is not necessarily indicative of the results of operations had the acquisition been effected on the assumed date, nor is it necessarily an indication of trends in future results for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma financial information, cost savings from operating efficiencies, potential synergies, and the impact of incremental costs incurred in integrating the businesses.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total revenues	$	688,293	$	692,852	$	1,386,995	$	1,366,516
Net income (loss) applicable to common shares	154,577		7,484		242,286		(28,192)

The unaudited pro forma financial information above includes nonrecurring significant adjustments made to account for certain costs incurred as if the Merger had been completed on January 1, 2023. Transaction and merger-related costs of $7 million and $114 million that were incurred during the three and six months ended June 30, 2024, respectively, were excluded from the unaudited pro forma financial information for the three and six months ended June 30, 2024, respectively, but included for the six months ended June 30, 2023. The six months ended June 30, 2023 also includes $11 million of transaction and merger-related costs that were recognized during the year ended December 31, 2023.

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NOTE 4. Real Estate Investments

2023 Real Estate Investment Acquisitions

60 Loomis Land Parcel

In January 2023, the Company acquired a lab land parcel in Cambridge, Massachusetts for $9 million.

Wylie Outpatient Medical Building

In April 2023, the Company acquired the remaining 80% interest in one of the outpatient medical buildings in the Ventures IV unconsolidated joint venture for $4 million (see Note 8). Concurrent with the acquisition, the Company began consolidating the building and recognized a gain upon change of control of $0.2 million, which is recorded in other income (expense), net.

Development Activities

The Company’s commitments, which are primarily related to development and redevelopment projects and Company-owned tenant improvements, decreased by $10 million to $169 million at June 30, 2024, when compared to December 31, 2023, primarily as a result of additional construction spend on projects in development and redevelopment during the first half of 2024, thereby decreasing the remaining commitment, partially offset by: (i) additional commitments on projects placed into development and redevelopment during the period and (ii) commitments related to development projects acquired as part of the Merger.

NOTE 5. Dispositions of Real Estate

2024 Dispositions of Real Estate

During the three months ended March 31, 2024, the Company sold two outpatient medical buildings for $29 million, resulting in total gain on sales of $3 million.

During the three months ended June 30, 2024, the Company sold a portfolio of seven lab buildings for $180 million, resulting in total gain on sales of $55 million. Also during the three months ended June 30, 2024, the Company sold 11 outpatient medical buildings for $179 million, resulting in total gain on sales of $67 million.

In July 2024, the Company completed negotiations and subsequently closed the sale of a portfolio of 59 outpatient medical buildings for $674 million and provided the buyer with a mortgage loan secured by the real estate sold for $405 million (see Note 7).

2023 Dispositions of Real Estate

During the three months ended March 31, 2023, the Company sold two lab buildings in Durham, North Carolina for $113 million, resulting in total gain on sales of $60 million. Also during the three months ended March 31, 2023, the Company sold two outpatient medical buildings for $32 million, resulting in total gain on sales of $21 million.

Held for Sale

As of June 30, 2024, no assets were classified as held for sale. As of December 31, 2023, two lab buildings and one outpatient medical building were classified as held for sale, with a carrying value of $118 million, primarily comprised of net real estate assets. As of December 31, 2023, liabilities related to the assets held for sale were $1 million. During the three months ended March 31, 2024, the Company sold the outpatient medical building and a 65% interest in the two lab buildings (see Note 8) held for sale as of December 31, 2023.

Impairments of Real Estate

During the three and six months ended June 30, 2024 and 2023, the Company did not recognize any impairment charges.

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NOTE 6. Leases

Lease Income

The following table summarizes the Company’s lease income (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Fixed income from operating leases	$	404,225	$	311,663	$	747,639	$	606,179
Variable income from operating leases	142,556		98,304		261,175		196,219

Initial Direct Costs

Initial direct costs incurred in connection with successful property leasing are capitalized as deferred leasing costs and consist of leasing commissions paid to external third party brokers. Initial direct costs include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. Initial direct costs are included in other assets, net in the Consolidated Balance Sheets and amortized in depreciation and amortization in the Consolidated Statements of Operations using the straight-line method over the lease term. At each of June 30, 2024 and December 31, 2023, net initial direct costs were $172 million.

Straight-Line Rents

For operating leases with minimum scheduled rent increases, the Company recognizes income on a straight-line basis over the lease term when collectibility of future minimum lease payments is probable. If the Company determines that collectibility of future minimum lease payments is not probable, the straight-line rent receivable balance is written off and recognized as a decrease in revenue in that period and future revenue recognition is limited to amounts contractually owed and paid. The Company does not resume recognition of income on a straight-line basis unless it determines that collectibility of future payments related to these leases is probable. For the Company’s portfolio of operating leases that are deemed probable of collection but exhibit a certain level of collectibility risk, the Company may also recognize an incremental allowance as a reduction to revenue. At June 30, 2024 and December 31, 2023, straight-line rent receivable, net of allowance, was $319 million and $310 million, respectively. Straight-line rent receivable is included in other assets, net in the Consolidated Balance Sheets.

Tenant Updates

During the first quarter of 2023, the Company wrote off $9 million of straight-line rent receivable associated with four in-place operating leases with Sorrento Therapeutics, Inc. (“Sorrento”), which commenced voluntary reorganization proceedings (the “Filing”) under Chapter 11 of the U.S. Bankruptcy Code during the period. This write-off was recognized as a reduction in rental and related revenues on the Consolidated Statements of Operations. Subsequent to the write-off, revenue related to this tenant is recognized on a cash basis. Sorrento also had a single development lease with the Company, but had not taken occupancy at the time of the Filing. The Company has filed proofs of claims for damages related to its rejected leases, which include the development lease and three of the four operating leases. During the three months ended June 30, 2023, the Company received $2 million by drawing on Sorrento's letter of credit. These cash proceeds of $2 million were recognized as lease termination fee income, which is included in rental and related revenues on the Consolidated Statements of Operations. In April 2024, the U.S. Bankruptcy Court approved the assignment and assumption of the remaining operating lease by the buyer of Sorrento’s assets. Given the nature of bankruptcy proceedings, the probability, timing, and amount of the additional proceeds, if any, that the Company may ultimately receive in connection with the claims are uncertain. Accordingly, the Company has not recorded any estimated recoveries associated with these claims as of June 30, 2024 or December 31, 2023.

On October 26, 2023, the Company amended its lease with Graphite Bio, Inc., which later merged with LENZ Therapeutics, Inc. in March 2024 (“Graphite Bio”), at one of its lab buildings in South San Francisco, California. Under the terms of the amended lease agreement, Graphite Bio’s lease expiration date was accelerated from April 2033 to December 2024 in exchange for an upfront cash payment of $37 million, comprised of a $21 million termination fee and $16 million prepayment of Graphite Bio’s contractual rent through the amended term. The $37 million is being recognized as rental and related revenues on the Consolidated Statements of Operations on a straight-line basis through the amended term of the lease.

In July 2024, the Company executed an early lease renewal for approximately 2 million square feet leased by CommonSpirit Health (“CommonSpirit”). The renewal, which is subject to a master agreement, extends the weighted average lease term of existing leases from July 2027 to December 2035, amends the contractual rents to current market rates, and increases the annual contractual lease escalations from 2.5% to 3.0%. In connection with this extension, CommonSpirit is provided the right to reduce the amount of space leased by up to approximately 200,000 square feet at any time after the original lease maturity dates.

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NOTE 7. Loans Receivable

The following table summarizes the Company’s loans receivable (in thousands):


	June 30, 2024		December 31, 2023
Secured loans(1)(2)	$	200,583	$	178,678
CCRC resident loans	53,346		42,733
Mezzanine loans(2)	35,820		—
Unamortized discounts and fees(3)	(5,128)		(131)
Reserve for loan losses	(9,143)		(2,830)
Loans receivable, net	$	275,478	$	218,450

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(1)At June 30, 2024, the Company had $69 million of remaining commitments to fund additional loans for outpatient medical capital expenditure projects. At December 31, 2023, the Company had $29 million of remaining commitments to fund additional loans for senior housing redevelopment and capital expenditure projects. This $29 million commitment was reduced to zero in February 2024 in conjunction with the refinance of the Sunrise Senior Housing Portfolio Seller Financing as discussed below.

(2)Includes secured loans and mezzanine loans acquired as part of the Merger (see Note 3).

(3)As of June 30, 2024, includes net unamortized discounts of $5 million related to the loans receivable acquired as part of the Merger (see Note 3).

The Merger

On March 1, 2024, upon the consummation of the Merger, the Company acquired 9 secured loans with an aggregate outstanding principal balance of $89 million and 10 mezzanine loans with an aggregate outstanding principal balance of $36 million, for a total of $124 million. Typically, each secured loan is secured by a mortgage on a related outpatient medical building, each construction loan (included in secured loans above) is secured by a mortgage on the land and improvements as constructed, generally with guarantees from the borrowers, and each mezzanine loan is collateralized by an ownership interest in the respective borrower. As of the Closing Date, the secured loans had maturities ranging from June 2024 to July 2027 and stated fixed interest rates ranging from 7.00% to 10.00%. The mezzanine loans had maturities ranging from June 2024 to June 2027 and stated fixed interest rates ranging from 8.00% to 10.00%.

As of June 30, 2024, unamortized net discounts on the secured loans and mezzanine loans acquired were $1 million and $3 million, respectively. These discounts are recognized in interest income and other on the Consolidated Statements of Operations using the effective interest rate method over the remaining term of the loans. As of June 30, 2024, six of the secured loans acquired had $69 million of remaining commitments to fund outpatient medical capital expenditure projects.

Sunrise Senior Housing Portfolio Seller Financing

In conjunction with the sale of 32 senior housing operating properties (“SHOP”) facilities for $664 million in January 2021, the Company provided the buyer with initial financing of $410 million. The remainder of the sales price was received in cash at the time of sale. Additionally, the Company agreed to provide up to $92 million of additional financing for capital expenditures (up to 65% of the estimated cost of capital expenditures). The initial and additional financing is secured by the buyer’s equity ownership in each property. In June 2023, the interest rate on this secured loan was converted from a variable rate based on LIBOR to a variable rate based on Term SOFR (plus a 10 basis point adjustment related to SOFR transition).

In June 2021, February 2022, July 2022, and December 2022, the Company received partial principal repayments of $246 million, $8 million, $27 million, and $10 million, respectively, in conjunction with the disposition of the underlying collateral. In connection with these principal repayments, the additional financing available was reduced to $40 million, of which $11 million had been funded as of December 31, 2023.

In February 2024, this loan reached its maturity and was refinanced with the Company. In connection with the refinance, the Company received a partial principal repayment of $69 million and the maturity date was extended to August 2027. The interest rate on the loan remained as Term SOFR (plus a 10 basis point adjustment related to SOFR transition) plus 4.0% for the first two years of the extended term, but increases to 5.0% for the last 18 months of the extended term and is now subject to a fixed floor of 9%. In connection with the refinance, the additional financing was reduced to $1 million, all of which was funded in February 2024. Therefore, at June 30, 2024, the Company no longer has a commitment to provide the borrower with additional financing for capital expenditures. In May 2024, the Company received a partial principal repayment of $5 million in conjunction with the disposition of the underlying collateral. At June 30, 2024 and December 31, 2023, this secured loan had an outstanding principal balance of $58 million and $131 million, respectively.

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Other SHOP Seller Financing

In conjunction with the sale of 16 additional SHOP facilities for $230 million in January 2021, the Company provided the buyer with financing of $150 million. The remainder of the sales price was received in cash at the time of sale. The financing is secured by the buyer’s equity ownership in each property. Upon maturity in January 2023, the borrower did not make the required principal repayment. In February 2023, the borrower made a partial principal repayment of $102 million and the remaining balance owed was refinanced with the Company. In connection with the refinance, the maturity date of the loan was extended to January 2024 and the interest rate on the loan was increased to a variable rate based on Term SOFR (plus an 11 basis point adjustment related to SOFR transition) plus 6.0% for the first six months of the extended term, increasing to 7.0% for the last six months of the extended term. The Company also received a $1 million extension fee in connection with the refinance, which was recognized in interest income through the maturity date of January 2024.

In January 2024, the loan was refinanced with the Company. In connection with the refinance, the maturity date of the loan was extended to January 2025. The interest rate on the loan remained as Term SOFR (plus an