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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 10-K
(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2023

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)
Maryland20-4738467
(State or other jurisdiction of
Incorporation or organization)
(I.R.S. Employer
Identification No.)
3310 West End Avenue
Suite 700
Nashville, Tennessee 37203
(Address of principal executive offices)
(615) 269-8175
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Class A Common Stock, $0.01 par value per shareHRNew York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☒    No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐    No  ☒
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 has filed a report on and attestation to management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15- U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the Registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes     No ☒
The aggregate market value of the shares of common stock of the Registrant (based upon the closing price of these shares on the New York Stock Exchange on June 30, 2023, held by non-affiliates on June 30, 2023, was $7,130,838,614.
As of February 12, 2024, there were 381,180,874 shares of the Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 21, 2024, are incorporated by reference into Part III of this Report.



Explanatory Note
On July 20, 2022, pursuant to that certain Agreement and Plan of Merger dated as of February 28, 2022 (the “Merger Agreement”), by and among Healthcare Realty Trust Incorporated, a Maryland corporation (now known as HRTI, LLC, a Maryland limited liability company) (“Legacy HR”), Healthcare Trust of America, Inc., a Maryland corporation (now known as Healthcare Realty Trust Incorporated) (“Legacy HTA”), Healthcare Trust of America Holdings, LP, a Delaware limited partnership (now known as Healthcare Realty Holdings, L.P.) (the “OP”), and HR Acquisition 2, LLC, a Maryland limited liability company (“Merger Sub”), Merger Sub merged with and into Legacy HR, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA (the “Merger”). Immediately following the Merger, Legacy HR converted to a Maryland limited liability company and changed its name to “HRTI, LLC” and Legacy HTA changed its name to “Healthcare Realty Trust Incorporated.” In addition, the equity interests of Legacy HR were contributed by means of a contribution and assignment agreement to the OP, and Legacy HR became a wholly-owned subsidiary of the OP. As a result, Legacy HR became a part of an umbrella partnership REIT (“UPREIT”) structure, which is intended to align the corporate structure of the combined company after giving effect to the Merger and to provide a platform for the combined company to more efficiently acquire properties in a tax-deferred manner.
For purposes of this Annual Report on Form 10-K, references to "Healthcare Realty Trust" are to Legacy HTA after giving effect to the Merger and references to the "Company," "we," "us," and "our" are to Healthcare Realty Trust and, unless the context requires otherwise, its consolidated subsidiaries, including the OP.
For accounting purposes, the Merger was treated as a “reverse acquisition” in which Legacy HR was considered the accounting acquirer. As a result, the historical financial statements of the accounting acquirer, Legacy HR, became the historical financial statements of the Company. Periodic reports for periods ending following the Merger include financial and other information about the Company. The Merger was accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 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.
In addition, the OP has issued unsecured notes described in Note 10 to the Company's Consolidated Financial Statements included in this report. All unsecured notes are fully and unconditionally guaranteed by the Company, and the OP is 98.8% owned by the Company. Effective January 4, 2021, the Securities and Exchange Commission (the “SEC”) adopted amendments to the financial disclosure requirements which permit subsidiary issuers of obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent. Accordingly, separate consolidated financial statements of the OP have not been presented.
Additionally, 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.









HEALTHCARE REALTY TRUST INCORPORATED
FORM 10-K
December 31, 2023


    Table of Contents
    
[Reserved]
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
SIGNATURES AND SCHEDULES
 









PART I
Item 1. Business
The Company is a self-managed and self-administered 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.
The Company operates so as to qualify as a REIT for federal income tax purposes. As a REIT, the Company is not subject to corporate federal income tax with respect to taxable income distributed to its stockholders. See “Item 1A. Risk Factors” for a discussion of risks associated with qualifying as a REIT.
As described in the Explanatory Note above and elsewhere in this report, on July 20, 2022, Legacy HR and Legacy HTA completed a merger between the companies in which Legacy HR merged with and into a wholly-owned subsidiary of Legacy HTA, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA. Immediately following the Merger, Legacy HTA changed its name to “Healthcare Realty Trust Incorporated.” For accounting purposes, the Merger was treated as a “reverse acquisition” in which Legacy HR was considered the acquirer. The consolidated company operates under the name “Healthcare Realty Trust Incorporated” and its shares of class A common stock, $0.01 par value per share, trade under the ticker symbol “HR”.
Real Estate Properties
The Company had gross investments of approximately $13.4 billion in 655 consolidated real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property as of December 31, 2023. The Company had a weighted average ownership interest of approximately 43% in 33 real estate properties held in unconsolidated joint ventures as of December 31, 2023. The Company provided leasing and property management services to 93% of its portfolio nationwide as of December 31, 2023. The Company’s real estate property investments by geographic area are detailed in Note 3 to the Consolidated Financial Statements. The following table details the Company's owned properties by facility type as of December 31, 2023:
 December 31, 2023
Dollars and square feet in thousandsGROSS INVESTMENTSQUARE FEETNUMBER OF PROPERTIES
OCCUPANCY 1
Medical office/outpatient 2
$12,160,240 35,677 630 87.1 %
Inpatient439,464 934 15 89.9 %
Office467,182 1,631 96.2 %
13,066,886 38,242 653 87.5 %
Construction in progress60,727 
Land held for development59,871 
Investments in financing receivables, net 3,4
122,602 160 100.0 %
Financing lease right-of-use assets 4
82,209 72 83.7 %
Corporate property6,772 
Total real estate investments13,399,067 38,474 655 87.6 %
Unconsolidated joint ventures 5
340,644 1,837 33 87.2 %
Total investments$13,739,711 40,311 688 87.5 %
1The occupancy column represents the percentage of total rentable square feet leased (including month-to-month and holdover leases). There was one property excluded from the table above that was classified as held for sale as of December 31, 2023.
2Includes one real estate property held in a consolidated joint venture.
3Investments in financing receivables, net includes an investment of $115.2 million in a single-tenant net lease property in San Diego, CA related to a sale-leaseback transaction.
4Financing lease right-of-use assets includes a multi-tenant lease property in Columbus, OH related to a sale-leaseback transaction totaling $15.8 million, of which $8.4 million was accounted for as an imputed lease arrangement as required under ASC 842, Leases. The remaining $7.4 million was accounted for as a financing arrangement and is included in investments in financing receivables, net.
5Gross investment includes the Company's pro rata share of unconsolidated joint ventures, net of mortgage notes payable. Square feet have not been adjusted by the Company's ownership percentage.

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Financial Concentrations
The Company’s real estate portfolio is leased to a diverse tenant base. For the year ended December 31, 2023, the Company did not have any tenants that accounted for 10% or more of the Company’s consolidated revenues. See Note 3 to the Consolidated Financial Statements for additional information regarding the Company's gross investments by geographic market.
Expiring Leases
As of December 31, 2023, the weighted average remaining years to expiration pursuant to the Company’s leases was approximately 4.2 years, with expirations through 2052. The table below details the Company’s lease expirations as of December 31, 2023, excluding the Company's unconsolidated joint ventures, financing receivables, assets held for sale and right-of-use assets.
EXPIRATION YEARNUMBER OF LEASESLEASED
SQUARE FEET
PERCENTAGE
OF LEASED
SQUARE FEET
2024 (1)
1,610 6,081,500 18.2 %
20251,096 4,567,388 13.6 %
20261,061 4,086,806 12.2 %
2027856 4,216,127 12.6 %
2028835 3,732,888 11.1 %
2029402 2,051,552 6.1 %
2030367 2,531,991 7.6 %
2031252 1,198,077 3.6 %
2032295 2,139,548 6.4 %
2033203 1,123,683 3.4 %
Thereafter203 1,750,005 5.2 %
7,180 33,479,565 100.0 %
1Includes 189 leases totaling 397,188 square feet that expired prior to December 31, 2023, and were on month-to-month terms.
See "Trends and Matters Impacting Operating Results" as part of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this report for additional information regarding the Company's leases and leasing efforts.
Liquidity
The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company expects to meet its liquidity needs through cash on hand, cash flows from operations, property dispositions, equity and debt issuances in the public or private markets and borrowings under commercial credit facilities.
Business Strategy
The Company owns and operates properties that facilitate the delivery of healthcare services in primarily outpatient settings. To execute its strategy, the Company engages in a broad spectrum of integrated services including leasing, management, acquisition, financing, development and redevelopment of such properties. The Company seeks to generate stable, growing income and lower the long-term risk profile of its portfolio of properties by focusing on facilities primarily located on or near the campuses of acute care hospitals associated with leading health systems. The Company seeks to reduce financial and operational risk by owning properties in high-growth markets with a broad tenant mix that includes over 30 physician specialties, as well as surgery, imaging, cancer, and diagnostic centers.
2023 Investment Activity
In 2023, the Company acquired two medical office buildings. The total purchase price of the acquisitions was $43.0 million and the weighted average capitalization rate for these investments was 6.5%.
The Company disposed of 39 properties in 2023 for sales prices totaling $787.0 million, including a regional corporate office and one property contributed into a joint venture in which the Company maintains a non-controlling interest. These transactions yielded net cash proceeds of $687.6 million, net of $36.9 million of closing costs and related adjustments, $58.7 million in Company financed notes and $3.8 million of retained joint venture interests. The
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weighted average capitalization rate for these sales was 6.5%. The Company calculates the capitalization rate for dispositions as the in-place cash net operating income divided by the sales price.
In 2023, the Company funded $112.2 million toward development and redevelopment of properties.
See the Company's discussion regarding the 2023 acquisition, joint venture and disposition activity in Note 5 to the Consolidated Financial Statements and development activity in Note 15 to the Consolidated Financial Statements. Also, please refer to the Company's discussion in "Trends and Matters Impacting Operating Results" as part of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II of this report.
Competition
The Company competes for the acquisition and development of real estate properties with private investors, healthcare providers, other REITs, real estate partnerships and financial institutions, among others. The business of acquiring and developing new healthcare facilities is highly competitive and is subject to price, construction and operating costs, and other competitive pressures. Some of the Company's competitors may have lower costs of capital.
The financial performance of all of the Company’s properties is subject to competition from similar properties. The extent to which the Company’s properties are utilized depends upon several factors, including the number of physicians using or referring patients to an associated healthcare facility, healthcare employment, competitive systems of healthcare delivery, and the area’s population, size and composition. Private, federal and state health insurance programs and other laws and regulations may also have an effect on the utilization of the properties.
Government Regulation
The facilities owned by the Company are utilized by medical tenants which are required to comply with extensive regulation and legislation at the federal, state and local levels, including, but not limited to, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), the Bipartisan Budget Act of 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and laws intended to combat fraud, waste and abuse such as the Anti-Kickback Statute, Stark Law and False Claims Act, and laws intended to protect the privacy and security of patient information, such as the Health Insurance Portability and Accountability Act of 1996. These laws and regulations establish, among other things, requirements for state licensure and criteria for medical tenants to participate in government-sponsored reimbursement programs, including the Medicare and Medicaid programs. The Company's leases generally require the tenant to comply with all applicable laws relating to the tenant's use and occupation of the leased premises. Although lease payments to the Company are not directly affected by these laws and regulations, changes in these programs or the loss by a tenant of its license or ability to participate in government-sponsored reimbursement programs could have a material adverse effect on the tenant's ability to make lease payments to the Company.
Government healthcare programs have increased over time as a significant percentage of the U.S. population’s health insurance coverage. The Medicare and Medicaid programs are highly regulated and subject to frequent evaluation and change. Changes from year to year in reimbursement methodology, rates and other regulatory requirements may cause the profitability of providing care to Medicare and Medicaid patients to decline, which could adversely affect tenants' ability to make lease payments to the Company.
The Centers for Medicare and Medicaid Services continued to adjust Medicare payment rates in 2023 to implement site-neutral payment policies. These changes have lowered Medicare payments for services delivered in off-campus hospital outpatient departments in an effort to lessen reimbursement disparity in off-campus medical office and outpatient facilities. The Company’s medical office buildings that are located on hospital campuses could become more valuable as hospital tenants will keep their higher Medicare rates for on-campus outpatient services. However, the Company has not seen a material impact from site-neutral Medicare payment policy, positively or negatively. The Company cannot predict the amount of benefit from these measures or if other federal health policy will ultimately require cuts to reimbursement rates for services provided in other settings. The Company cannot predict the degree to which these changes, or changes to federal healthcare programs in general, may affect the economic performance of some or all of the Company's tenants, positively or negatively.
Since 2018, physicians have been required to report patient data on quality and performance measures that began to affect their Medicare payments in 2020. Implementation of MACRA, and the ongoing debate over the most effective payment system to use to promote value-based reimbursement, along with its budget-neutrality rule that requires
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any increases in payments to be offset by decreases, present the industry and its individual participants with uncertainty and financial risk. The Company cannot predict the degree to which any such changes may affect the economic performance of the Company's tenants or, indirectly, the Company.
Legislative Developments
Taxation of Dividends
The Tax Cuts and Jobs Act of 2017 (“TCJA”) generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income). In addition, the deduction for ordinary REIT dividends is not subject to the wage and tax basis limitations applicable to the deduction for other qualifying pass-through income. The TCJA was a far-reaching and complex revision to the existing U.S. federal income tax laws. Many of the provisions of this act, such as the 20% deduction mentioned above, will expire at the end of 2025, unless extended by legislative action.
Healthcare
Each year, legislative proposals for health policy are introduced in Congress and state legislatures, and regulatory changes are proposed and enacted by government agencies. These proposals, individually or in the aggregate, could significantly change the delivery of healthcare services, either nationally or at the state level, if implemented. Examples of significant legislation or regulatory action recently proposed, enacted, or in the process of implementation include:
the expansion of Medicaid benefits and health insurance exchanges established by the Affordable Care Act, whereby individuals and small businesses purchase health insurance with assistance from federal subsidies;
various state legislature proposals for state-funded single-payer health insurance and a limit on allowable rates of reimbursement to healthcare providers;
the implementation of quality control, cost containment, and value-based payment system reforms for Medicaid and Medicare, such as expansion of pay-for-performance criteria, bundled provider payments, accountable care organizations, comparative effectiveness research, and lower payments for hospital readmissions;
ongoing evaluation of and transition toward value-based reimbursement models for Medicare payments to physicians as designated under MACRA;
annual regulatory updates to Medicare policy for healthcare providers that can broadly change reimbursement methodology under budget-neutral guidelines, with the effect of lowering payments for some services and increasing payments for others, having a varying impact, positively or negatively, on providers;
ongoing efforts to equalize Medicare payment rates across different facility-type settings, according to Section 603 of the Bipartisan Budget Act of 2015, which lowered Medicare payment rates, effective January 1, 2017, for services provided in off-campus, provider-based outpatient departments to the same level of rates for physician office settings;
the continued adoption by providers of federal standards for the Medicare Promoting Interoperability Program;
reforms to the physician self-referral laws, commonly referred to as the Stark Law, as adjusted in 2020 in order to promote the transition toward value-based, coordinated care among providers, although clear intent to boost referrals could still yield provider penalties;
consideration of broad reforms to Medicare and Medicaid, including a significant expansion of Medicare coverage to the greater U.S. population;
more stringent regulatory criteria by which federal antitrust agencies evaluate the potential for anti-competitive practices as a result of mergers and acquisitions of health systems and physicians;
regulations requiring the publication of hospital prices for certain services, as well as hospitals’ negotiated rates with insurers for these services;
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limits on price increases in pharmaceutical drugs and the cost to Medicare beneficiaries, including the potential for setting prices according to an international standard; and
the prohibition of “surprise billing,” or high payment rates charged to consumers for out-of-network physician services.
The Company cannot predict whether any proposals, rulings, or legislation will be fully implemented, adopted, repealed, or amended, or what effect, whether positive or negative, such developments might have on the Company's business.
Environmental Matters
Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property (such as the Company) may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, under, or disposed of in connection with such property, as well as certain other potential costs (including government fines and injuries to persons and adjacent property) relating to hazardous or toxic substances. Most, if not all, of these laws, ordinances and regulations contain stringent enforcement provisions including, but not limited to, the authority to impose substantial administrative, civil, and criminal fines and penalties upon violators. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances, and liability may be imposed on the owner in connection with the activities of a tenant or operator of the property. The cost of any required remediation, removal, fines or personal or property damages and the owner’s liability therefore could exceed the value of the property and/or the aggregate assets of the owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or lease such property or to borrow using such property as collateral. A property can also be negatively impacted either through physical contamination, or by virtue of an adverse effect on value, from contamination that has or may have emanated from other properties.
Operations of the properties owned, developed or managed by the Company are and will continue to be subject to numerous federal, state, and local environmental laws, ordinances and regulations, including those relating to the following: the generation, segregation, handling, packaging and disposal of medical wastes; air quality requirements related to operations of generators, incineration devices, or sterilization equipment; facility siting and construction; disposal of non-medical wastes and ash from incinerators; and underground storage tanks. Certain properties owned, developed or managed by the Company contain, and others may contain or at one time may have contained, underground storage tanks that are or were used to store waste oils, petroleum products or other hazardous substances. Such underground storage tanks can be the source of releases of hazardous or toxic materials. Operations of nuclear medicine departments at some properties also involve the use and handling, and subsequent disposal of, radioactive isotopes and similar materials, activities which are closely regulated by the Nuclear Regulatory Commission and state regulatory agencies. In addition, several of the Company's properties were built during the period that asbestos was commonly used in building construction and other such facilities may be acquired by the Company in the future. The presence of such materials could result in significant costs in the event that any asbestos-containing materials requiring immediate removal and/or encapsulation are located in or on any facilities or in the event of any future renovation activities.
The Company has had environmental site assessments conducted on substantially all of the properties that it currently owns. These site assessments are limited in scope and provide only an evaluation of potential environmental conditions associated with the property, not compliance assessments of ongoing operations. While it is the Company’s policy to seek indemnification from tenants relating to environmental liabilities or conditions, even where leases do contain such provisions, there can be no assurance that the tenant will be able to fulfill its indemnification obligations. In addition, the terms of the Company’s leases do not give the Company control over the operational activities of its tenants or healthcare operators, nor will the Company monitor the tenants or healthcare operators with respect to environmental matters.
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Human Capital Resources
We believe our employees are a critical component to the achievement of our business objectives and recognition as a trusted owner and operator of medical office properties. As of December 31, 2023, the Company employed 584 people. Our employees are comprised of accountants, maintenance engineers, property managers, leasing personnel, architects, administrative staff, an investments team, and the corporate management team. By supporting, recognizing, and investing in our employees, we believe that we are able to attract and retain the highest quality talent. We are committed to fostering, cultivating, and preserving a culture of diversity and inclusion. We embrace employee differences in race, color, religion, sex, sexual orientation, national origin, age, disability, veteran status, and other characteristics that make our employees unique.
To retain talented employees who contribute to the Company’s strategic objectives, we offer an attractive set of employee benefits, including:
Health benefits and 401(k) starting on the first day of employment;
Dollar-for-dollar match on 401(k) contributions up to $2,800, encouraging higher employee savings;
100% of long-term disability and life insurance premiums paid; and
Tuition reimbursement up to $3,000 annually for any employee pursuing higher education.
In addition, we are committed to supporting the performance and career development of all employees, from encouraging staff accountants to sit for the CPA exam to supporting our maintenance engineers in earning various certifications. As owners and operators of medical real estate, we recognize the value of health and wellbeing among our own employees. As we have for many years, Healthcare Realty provides corporate employees with gym membership discounts to encourage fitness. In addition, we offer monthly wellness challenges and resources that provide our employees with tools to enhance their wellbeing. Additional information regarding employee and community engagement is available in the 2023 Corporate Responsibility Report, which is posted on the Company's website (www.healthcarerealty.com).
Environment, Social, and Governance (“ESG”)
Our goal is to create long-term value for all stakeholders, including our employees and investors who expect responsible financial and environmental stewardship, and for our healthcare system partners who rely on the Company to provide well-operated facilities that allow them to effectively serve and care for their local communities.
We seek to help healthcare professionals deliver the best care by providing the highest level of service in the most desirable outpatient settings. Our ESG objectives include full integration of our sustainability strategy, improved transparency and reporting, enhanced operational frameworks, and continued stakeholder engagement.
As we implement our strategy and pursue our objectives, the Company’s actions are guided by our Sustainability Principles and Policies, to ensure continuous improvement and long-term success. Our Sustainability Principles and Policies include:
a.Integration: Embed and integrate leading environmental, social and governance practices designed to enhance portfolio performance into the Company’s daily operations.
b.Impact: Drive positive impact across the Company while mitigating risk and creating long-term value for stakeholders, including our tenants, investors, employees, and the communities in which we live, work and invest.
c.Integrity: Conduct business with integrity, respect and excellence, earning the right to be a preferred provider of outpatient medical properties.
The Company’s Board of Directors is committed to overseeing the integration of our ESG principles throughout the Company. In addition, the Company's incentive program for named executive officers includes ESG performance measures.
The Company's unsecured credit facility (described in more detail herein) contains a sustainability-linked provision that can reduce borrowing costs if the Company meets certain metrics relating to green building certifications. The
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Company met the metrics in 2023 and, as a result, will save one basis point on the cost of its borrowings under the unsecured credit facility in 2024.
To more effectively track and communicate the Company’s ESG performance, we have adopted various frameworks and methodologies, including participation in the annual GRESB Assessment; reporting disclosures in alignment with the Sustainability Accounting Standards Board; establishing goals and key performance indicators under the Sustainable Development Goals, and we are working toward expanding our climate risk and resiliency strategies in alignment with the Task Force on Climate-Related Disclosure.
More information regarding the Company’s Sustainability Principles and Policies and ESG performance can be found in the Company’s 2023 Corporate Responsibility Report on its website (www.healthcarerealty.com).
Available Information
The Company makes available to the public free of charge through its website the Company’s Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the SEC. The Company’s website address is www.healthcarerealty.com.

Corporate Governance Principles
The Company has adopted Corporate Governance Principles relating to the conduct and operations of the Board of Directors. The Corporate Governance Principles are posted on the Company’s website (www.healthcarerealty.com) and are available in print to any stockholder who requests a copy.

Committee Charters
The Board of Directors has an Audit Committee, Compensation and Human Capital Committee, and Nominating and Corporate Governance Committee. The Board of Directors has adopted written charters for each committee, which are posted on the Company’s website (www.healthcarerealty.com) and are available in print to any stockholder who requests a copy.
Executive Officers
Information regarding the executive officers of the Company is set forth in Part III, Item 10 of this report and is incorporated herein by reference.
Item 1A. Risk Factors
The following are some of the risks and uncertainties that could negatively affect the Company’s consolidated financial condition, results of operations, business and prospects. These risk factors are grouped into three categories: risks relating to the Company’s business and operations; risks relating to the Company’s capital structure and financings; and risks relating to government regulations.
These risks, as well as the risks described in Item 1 under the headings “Competition,” “Government Regulation,” “Legislative Developments,” and “Environmental Matters,” and in Item 7 under the heading “Disclosure Regarding Forward-Looking Statements,” should be carefully considered before making an investment decision regarding the Company. The risks and uncertainties described below are not the only ones facing the Company, and there may be additional risks that the Company does not presently know of or that the Company currently considers not likely to have a material impact. If any of the events underlying the following risks actually occurred, the Company’s business, consolidated financial condition, operating results and cash flows, including distributions to the Company's stockholders, could suffer, and the trading price of its common stock could decline.

Risks relating to our business and operations

The Company's expected results may not be achieved.
The Company's expected results may not be achieved, and actual results may differ materially from expectations. This may be the result of various factors, including, but not limited to: changes in the economy; the availability and
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cost of capital at favorable rates; increases in property taxes, utilities and other operating expenses; changes to facility-related healthcare regulations; changes in interest rates; competition for quality assets; negative developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to re-lease space at similar rates as vacancies occur; the Company's ability to timely reinvest proceeds from the sale of assets at similar yields; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; and other legal and operational matters.
The Company may from time to time decide to sell properties and may be required under purchase options to sell certain properties. The Company may not be able to reinvest the proceeds from sales at rates of return equal to the return received on the properties sold. Uncertain market conditions could result in the Company selling properties at unfavorable prices or at losses in the future.
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 revenues are subject to the financial strength of its tenants and associated health systems. The Company has no operational control over the business of these tenants and associated health systems who face a wide range of economic, competitive, government reimbursement and regulatory pressures and constraints, including the loss of licensure or certification. Any slowdown in the economy, decline in the availability of financing from the capital markets, and changes in healthcare regulations may adversely affect the businesses of the Company’s tenants to varying degrees. Such conditions may further impact such tenants’ abilities to meet their obligations to the Company and, in certain cases, could lead to restructurings, disruptions, or bankruptcies of such tenants. The Company leases to government tenants from time to time that may be subject to annual budget appropriations. If a government tenant fails to receive its annual budget appropriation, it might not be able to make its lease payments to the Company. In addition, defaults under leases with federal government tenants are governed by federal statute and not by state eviction or rent deficiency laws. These conditions could adversely affect the Company’s revenues and could increase allowances for losses and result in impairment charges, which could decrease net income attributable to common stockholders and equity and reduce cash flows from operations.
Owning real estate and indirect interests in real estate is subject to inherent risks.
The Company’s operating performance and the value of its real estate assets are subject to the risk that if its properties do not generate revenues sufficient to meet its operating expenses, including debt service, the Company’s cash flow and ability to pay dividends to stockholders will be adversely affected.
The Company may incur impairment charges on its real estate properties or other assets.
The Company performs an impairment review on its real estate properties every year. In addition, the Company assesses the potential for impairment of identifiable intangible assets and long-lived assets, including real estate properties and goodwill, whenever events occur or a change in circumstances indicates that the recorded value might not be fully recoverable. The decision to sell a property also requires the Company to assess the potential for impairment. The Company incurred impairment charges of $149.7 million in 2023, associated with completed or planned disposition activity. The Company may determine in future periods that an impairment has occurred in the value of one or more of its real estate properties or other assets. In such an event, the Company may be required to recognize an impairment which could have a material adverse effect on the Company’s consolidated financial condition and results of operations.

The Company has properties subject to purchase options that expose it to reinvestment risk and reduction in expected investment returns.
The Company had approximately $111.1 million, or 0.83%, of real estate property investments that were subject to purchase options held by lessees that were exercisable as of December 31, 2023. Other properties have purchase options that will become exercisable after 2023. Properties with purchase options exercisable in 2023 produced aggregate net operating income of approximately $10.6 million in 2023. The exercise of these purchase options
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exposes the Company to reinvestment risk and a reduction in investment return. Certain properties subject to purchase options may be purchased at rates of return above the rates of return the Company expects to achieve with new investments. If the Company is unable to reinvest the sale proceeds at rates of return equal to the return received on the properties that are sold, it may experience a decline in lease revenues and profitability and a corresponding material adverse effect on the Company’s consolidated financial condition and results of operations.
For more specific information concerning the Company’s purchase options, see “Purchase Options” in the “Trends and Matters Impacting Operating Results” as a part of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II of this report.
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.
A portion of the Company’s leases will expire over the course of any year. For more specific information concerning the Company’s expiring leases, see "Expiring Leases" in the "Trends and Matters Impacting Operating Results" as part of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II of this report. The Company may not be able to re-let space on terms that are favorable to the Company or at all. Further, the Company may be required to make significant capital expenditures to renovate or reconfigure space or make significant leasing concessions to attract new tenants.
Certain of the Company’s properties are special purpose healthcare facilities and may not be easily adaptable to other uses.
Some of the Company’s properties are specialized medical facilities. If the Company or the Company’s tenants terminate the leases for these properties or the Company’s tenants lose their regulatory authority to operate such properties, the Company may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, the Company may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or additional capital expenditures occurring as a result may have a material adverse effect on the Company’s consolidated financial condition and results of operations.
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 receives a significant portion of its revenues by leasing assets subject to fixed rent escalations. Approximately 95% of leases have increases that are based upon fixed percentages and approximately 5% of leases have increases based on the Consumer Price Index. To the extent fixed percentage increases lag behind inflation and operating expense growth, the Company's performance, growth, and profitability would be negatively impacted. As of December 31, 2023, the Company had weighted average annual fixed rent escalators of 2.82% with its wholly-owned and consolidated properties.
The Company’s real estate investments are illiquid and the Company may not be able to sell properties strategically targeted for disposition.
Because real estate investments are relatively illiquid, the Company’s ability to adjust its portfolio promptly in response to economic or other conditions is limited. Certain significant expenditures generally do not change in response to economic or other conditions, including debt service (if any), real estate taxes, and operating and maintenance costs. This combination of variable revenue and relatively fixed expenditures may result in reduced earnings and could have an adverse effect on the Company’s financial condition. In addition, the Company may not be able to sell properties targeted for disposition, including properties held for sale, due to adverse market conditions. This may negatively affect, among other things, the Company’s ability to sell properties on favorable terms, execute its operating strategy, repay debt, or pay dividends.
The Company is subject to risks associated with the development and redevelopment of properties.
The Company expects development and redevelopment of properties will continue to be a key component of its growth plans. The Company is subject to certain risks associated with the development and redevelopment of properties including the following:
The construction of properties generally requires various government and other approvals that may not be received when expected, or at all, which could delay or preclude commencement of construction;
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Opportunities that the Company pursued but later abandoned could result in the expensing of pursuit costs, which could impact the Company’s consolidated results of operations;
Construction costs could exceed original estimates, which could impact the building’s profitability to the Company;
Operating expenses could be higher than forecasted;
Time required to initiate and complete the construction of a property and to lease up a completed property may be greater than originally anticipated, thereby adversely affecting the Company’s cash flow and liquidity;
Occupancy rates and rents of a completed development property may not be sufficient to make the property profitable to the Company; and
Favorable capital sources to fund the Company’s development and redevelopment activities may not be available when needed.
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 regularly pursues potential transactions to acquire, develop or redevelop real estate assets. Future acquisitions could require the Company to issue equity securities, incur debt or other contingent liabilities or amortize expenses related to other intangible assets, any of which could adversely impact the Company’s consolidated financial condition or results of operations. In addition, equity or debt financing required for such acquisitions may not be available at favorable times or rates.
The Company’s acquired, developed, redeveloped and existing real estate properties may not perform in accordance with management’s expectations because of many factors including the following:
The Company’s purchase price for acquired facilities may be based upon a series of market or building-specific judgments which may be incorrect;
The costs of any maintenance or improvements for properties might exceed estimated costs;
The Company may incur unexpected costs in the acquisition, construction or maintenance of real estate assets that could impact its expected returns on such assets; and
Leasing may not occur at all, within expected time frames or at expected rental rates.
Further, the Company can give no assurance that acquisition, development and redevelopment opportunities that meet management’s investment criteria will be available when needed or anticipated.
The Company is exposed to risks associated with geographic concentration.
As of December 31, 2023, the Company had investment concentrations of greater than 5% of its total investments in the Dallas, TX (8.7%), Houston, TX (5.6%), and Seattle, WA (5.3%) markets. These concentrations increase the exposure to adverse conditions that might affect these markets, including natural disasters, local economic conditions, local real estate market conditions, increased competition, state and local regulation (including property taxes) and other localized events or conditions.
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.
Most of the Company’s properties on or adjacent to hospital campuses are largely dependent on the viability of the health system’s campus where they are located, whether or not the hospital or health system is a tenant in such properties. The viability of these health systems depends on factors such as the quality and mix of healthcare services provided, competition, payor mix, demographic trends in the surrounding community, market position and growth potential. If one of these hospitals is unable to meet its financial obligations, is unable to compete successfully, or is forced to close or relocate, the Company’s properties on or near such hospital campus could be adversely impacted.
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.
As of December 31, 2023, the Company had 232 properties that were held under ground leases, representing an aggregate gross investment of approximately $5.4 billion. The weighted average remaining term of the Company's ground leases is approximately 64.9 years, including renewal options. The Company’s ground lease agreements with
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hospitals and health systems typically contain restrictions that limit building occupancy to physicians on the medical staff of an affiliated hospital and prohibit tenants from providing services that compete with the services provided by the affiliated hospital. Ground leases may also contain consent requirements or other restrictions on sale or assignment of the Company’s leasehold interest, including rights of first offer and first refusal in favor of the lessor. These ground lease provisions may limit the Company’s ability to lease, sell, or obtain mortgage financing secured by such properties which, in turn, could adversely affect the income from operations or the proceeds received from a sale. As a ground lessee, the Company is also exposed to the risk of reversion of the property upon expiration of the ground lease term, or an earlier breach by the Company of the ground lease, which may have a material adverse effect on the Company’s consolidated financial condition and results of operations.
The Company may experience uninsured or underinsured losses.
The Company carries comprehensive liability insurance and property insurance covering its owned and managed properties. A portion of the property insurance is provided by a wholly-owned captive insurance company. In addition, tenants under single-tenant leases are required to carry property insurance covering the Company’s interest in the buildings. Some types of losses may be uninsurable or too expensive to insure against. Insurance companies, including the captive insurance company, limit or exclude coverage against certain types of losses, such as losses due to named windstorms, terrorist acts, earthquakes, toxic mold, and losses without direct physical loss, such as business interruptions occurring from pandemics. Accordingly, the Company may not have sufficient insurance coverage against certain types of losses and may experience decreases in the insurance coverage available. Should an uninsured loss or a loss in excess of insured limits occur, the Company could lose all or a portion of the capital it has invested in a property, as well as the anticipated future revenue from the property. In such an event, the Company might remain obligated for any mortgage debt or other financial obligation related to the property. Further, if any of the Company's insurance carriers were to become insolvent, the Company would be forced to replace the existing coverage with another suitable carrier, and any outstanding claims would be at risk for collection. In such an event, the Company cannot be certain that the Company would be able to replace the coverage at similar or otherwise favorable terms.
The Company has obtained title insurance policies for each of its properties, typically in an amount equal to its original price. However, these policies may be for amounts less than the current or future values of our properties. In such an event, if there is a title defect relating to any of the Company's properties, it could lose some of the capital invested in and anticipated profits from such property. The Company cannot give assurance that material losses in excess of insurance proceeds will not occur in the future.
Damage from catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in losses to the Company.
Many of our properties are located in areas susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as wildfires, hurricanes, earthquakes, tornadoes and floods. The Company could experience losses to the extent that such damages exceed insurance coverage, cause an increase in insurance premiums, and/or a decrease in demand for properties located in such areas. In the event that climate change causes such catastrophic weather or other natural events to increase broadly or in localized areas, such costs and damages could increase above historic expectations. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve energy efficiency of our existing properties and could require the Company to spend more on development and redevelopment properties without a corresponding increase in revenue.
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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 faces risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, persons inside the Company, or persons with access to systems inside the Company, and other significant disruptions of the Company's information technology ("IT") networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. The Company's IT networks and related systems are essential to the operation of its business and its ability to perform day-to-day operations (including managing building systems) and, in some cases, may be critical to the operations of certain of our tenants. Although the Company makes efforts to maintain the security and integrity of these types of IT networks and related systems, it has experienced breaches. While breaches to date have not had a material impact, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that these security measures will be effective or that future attempted security breaches or disruptions would not be successful or damaging.
A security breach or other significant disruption involving the Company's IT network and related systems could:
disrupt the proper functioning of the Company's networks and systems and therefore the Company's operations and/or those of certain tenants;
result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines;
result in the Company's inability to properly monitor its compliance with the rules and regulations regarding the Company's qualification as a REIT;
result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, or otherwise valuable information of the Company or others, which others could use to compete against the Company or which could expose it to damage claims by third parties for disruption, destructive, or otherwise harmful purposes or outcomes;
result in the Company's inability to maintain the building systems relied upon by its tenants for the efficient use of their leased space;
require significant management attention and resources to remedy any damages that result;
subject the Company to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements; or
damage the Company's reputation among its tenants and investors generally.
Although the Company carries cyber risk insurance, losses could exceed insurance coverage available and any or all of the foregoing could have a material adverse effect on the Company's consolidated financial condition and results of operations.
The Company may structure acquisitions of property in exchange for limited partnership units of the OP on terms that could limit its liquidity or flexibility.
The Company may acquire properties by issuing limited partnership units of the OP in exchange for a property owner contributing property to the Company. If the Company continues to enter into such transactions in order to induce the contributors of such properties to accept units of the OP rather than cash in exchange for their properties, it may be necessary for the Company to provide additional incentives. For instance, the OP's limited partnership agreement provides that any holder of units may exchange limited partnership units on a one-for-one basis for shares of common stock or, at the Company's option, cash equal to the value of an equivalent number of shares of the Company's common stock. The Company may, however, enter into additional contractual arrangements with contributors of property under which it would agree to repurchase a contributor’s units for shares of the Company's common stock or cash, at the option of the contributor, at set times. If the contributor required the Company to repurchase units for cash pursuant to such a provision, it would limit the Company's liquidity and, thus, its ability to use cash to make other investments, satisfy other obligations or make distributions to stockholders. Moreover, if the Company were
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required to repurchase units for cash at a time when it did not have sufficient cash to fund the repurchase, the Company might be required to sell one or more of its properties to raise funds to satisfy this obligation. Furthermore, the Company might agree that if distributions the contributor received as a limited partner in the OP did not provide the contributor with an established return level, then upon redemption of the contributor’s units the Company would pay the contributor an additional amount necessary to achieve that return. Such a provision could further negatively impact our liquidity and flexibility. Finally, in order to allow a contributor of a property to defer taxable gain on the contribution of property to the OP, the Company might agree not to sell a contributed property for a defined period of time or until the contributor exchanged the contributor’s units for cash or shares. Such an agreement would prevent the Company from selling those properties, even if market conditions would allow such a sale to be favorable to the Company.
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.
Substantially all of Healthcare Realty Trust's assets are held through the OP, which holds substantially all of its assets through subsidiaries. Healthcare Realty Trust does not have, apart from its interest in the OP, any independent operations. Substantially all of Healthcare Realty Trust's cash flow is dependent upon cash distributions from the OP. As a result, Healthcare Realty Trust relies on distributions from the OP to pay any dividends that may be declared on its shares of Class A common stock. Healthcare Realty Trust also relies on distributions from the OP to meet its other obligations, including any tax liability on taxable income allocated to it from the OP. In addition, because Healthcare Realty Trust is a holding company, stockholder claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of the OP and its subsidiaries. In the event of a bankruptcy, liquidation, or reorganization of Healthcare Realty Trust, its assets and those of the OP and its subsidiaries will be available to satisfy the claims of stockholders only after all of Healthcare Realty Trust's and the OP’s and its subsidiaries’ liabilities and obligations have been paid in full.
The Company cannot assure you that it will be able to continue paying dividends at or above the rates previously paid.
The stockholders of the Company may not receive dividends at the same rate they received previously for various reasons, including the following: (i) the Company may not have enough cash to pay such dividends due to changes in the Company's cash requirements, capital spending plans, cash flow or financial position; (ii) decisions on whether, when and in what amounts to make any future distributions will remain at all times entirely at the discretion of the Board of Directors, which reserves the right to change the Company's current dividend practices at any time and for any reason; (iii) the Company may desire to retain cash to maintain or improve its credit ratings; and (iv) the amount of dividends that the Company's subsidiaries may distribute to the Company may be subject to restrictions imposed by state law, restrictions that may be imposed by state regulators, and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.
Stockholders of the Company do not have a contractual or other legal right to dividends that have not been authorized by the Board of Directors.
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The Company previously incurred and may continue to incur substantial expenses related to the Merger.
The Company incurred substantial expenses in connection with completing the Merger and integrating the business, operations, networks, systems, technologies, policies and procedures of the two companies, including severance costs. While the integration of the two companies is largely complete, the Company could still incur significant expenses as it operates and refines the combined portfolios of the companies.
Pandemics, such as COVID-19, 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.
The COVID-19 pandemic had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. During 2020, all of the states and cities in which the Company owns properties, manages properties, and/or has development or redevelopment projects instituted quarantines, restrictions on travel, “shelter in place” rules, restrictions on the types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue. As a result, a number of the Company's tenants temporarily closed their offices or clinical space or operated on a reduced basis in response to government requirements or recommendations.
The COVID-19 pandemic also caused severe economic, market and other disruptions worldwide. There can be no assurance that the Company's access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. In addition, the deterioration of economic conditions, including supply chain constraints, as a result of the pandemic may ultimately decrease occupancy levels and average rent per square foot across the Company's portfolio as tenants reduce or defer their spending.
The extent of the COVID-19 pandemic’s effect, or the effect of new virus variants or of another pandemic in the future, on the Company's operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the availability and effectiveness of vaccines, and the effect of government requirements or recommendations, all of which are uncertain and difficult to predict.
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.
As of December 31, 2023, the Company had approximately $5.3 billion of outstanding indebtedness excluding discounts, premiums and debt issuance costs. Covenants under the Fourth Amended and Restated Revolving Credit and Term Loan Agreement dated as of July 20, 2022, among Healthcare Realty Trust, the OP, and Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders that are party thereto, as amended ("Unsecured Credit Facility"), and the indentures governing the OP's senior notes permit the Company to incur substantial, additional debt, and the Company may borrow additional funds, which may include secured borrowings or additional instances of notes by the OP that are fully guaranteed by Healthcare Realty Trust. A high level of indebtedness would require the Company to dedicate a substantial portion of its cash flows from operations to service debt, thereby reducing the funds available to implement the Company's business strategy and to make distributions to stockholders. A high level of indebtedness could also:
limit the Company’s ability to adjust rapidly to changing market conditions in the event of a downturn in general economic conditions or in the real estate and/or healthcare industries;
impair the Company’s ability to obtain additional debt financing or require potentially dilutive equity to fund obligations and carry out its business strategy; and
result in a downgrade of the rating of the Company’s debt securities by one or more rating agencies, which would increase the costs of borrowing under the Unsecured Credit Facility and the cost of issuance of new debt securities, among other things.
In addition, from time to time, the Company secures mortgage financing or assumes mortgages to partially fund its investments. If the Company is unable to meet its mortgage payments, then the encumbered properties could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset value. A foreclosure on one or more of the Company's properties could have a material adverse effect on the Company’s consolidated financial condition and results of operations.
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The Company generally does not intend to reserve funds to retire existing debt upon maturity. The Company may not be able to repay, refinance, or extend any or all of our debt at maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense could adversely affect the Company's financial condition and results of operations. Any such refinancing could also impose tighter financial ratios and other covenants that restrict the Company's ability to take actions that could otherwise be in its best interest, such as funding new development activity, making opportunistic acquisitions, or paying dividends.
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.
The terms of the Unsecured Credit Facility, the indentures governing the OP’s outstanding senior notes (which are fully and unconditionally guaranteed by Healthcare Realty Trust) and other debt instruments that the Company may enter into in the future are subject to customary financial and operational covenants. These provisions include, among other things: a limitation on the incurrence of additional indebtedness; limitations on mergers, investments, acquisitions, redemptions of capital stock, and transactions with affiliates; and maintenance of specified financial ratios. The Company’s continued ability to incur debt and operate its business is subject to compliance with these covenants, which limit operational flexibility. Breaches of these covenants could result in defaults under applicable debt instruments, even if payment obligations are satisfied. Financial and other covenants that limit the Company’s operational flexibility, as well as defaults resulting from a breach of any of these covenants in its debt instruments, could have a material adverse effect on 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.
Access to external capital on favorable terms is critical to the Company’s success in growing and maintaining its portfolio. If financial institutions within the Unsecured Credit Facility were unwilling or unable to meet their respective funding commitments to the Company, any such failure would have a negative impact on the Company’s operations, consolidated financial condition and ability to meet its obligations, including the payment of dividends to stockholders.
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.
A REIT is required by the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), to make dividend distributions, thereby retaining less of its capital for growth. As a result, a REIT typically requires new capital to invest in real estate assets. However, there may be times when the Company will have limited access to capital from the equity and/or debt markets. Changes in the Company’s debt ratings could have a material adverse effect on its interest costs and financing sources. The Company’s debt rating can be materially influenced by a number of factors including, but not limited to, acquisitions, investment decisions, and capital management activities. In recent years, the capital and credit markets have experienced volatility and at times have limited the availability of funds. The Company’s ability to access the capital and credit markets may be limited by these or other factors, which could have an impact on its ability to refinance maturing debt, fund dividend payments and operations, acquire healthcare properties and complete development and redevelopment projects. If the Company is unable to refinance or extend principal payments due at maturity of its various debt instruments, its cash flow may not be sufficient to repay maturing debt or make dividend payments to stockholders. If the Company defaults in paying any of its debts or satisfying its debt covenants, it could experience cross-defaults among debt instruments, the debts could be accelerated, and the Company could be forced to liquidate assets for less than the values it would otherwise receive.
Further, the Company obtains credit ratings from various credit-rating agencies based on their evaluation of the Company's credit. These agencies' ratings are based on a number of factors, some of which are not within the Company's control. In addition to factors specific to the Company's financial strength and performance, the rating agencies also consider conditions affecting REITs generally. The Company's credit ratings could be downgraded. If the Company's credit ratings are downgraded or other negative action is taken, the Company could be required, among other things, to pay additional interest and fees on borrowings under the Unsecured Credit Facility.


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Increases in interest rates could have a material adverse effect on the Company's cost of capital.
During 2023, the Federal Reserve continued to raise interest rates in an effort to curb inflation. Further increases in interest rates will increase interest costs on any new debt and existing variable rate debt. Such increases in the cost of capital could adversely impact our ability to finance operations, acquire and develop properties, and refinance existing debt. Additionally, increased interest rates may also result in less liquid property markets, limiting our ability to sell existing assets.
The Company's swap agreements may not effectively reduce its exposure to changes in interest rates. 
The Company enters into swap agreements from time to time to manage some of its exposure to interest rate volatility. These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing the Company’s exposure to changes in interest rates. When the Company uses forward-starting interest rate swaps, there is a risk that it will not complete the long-term borrowing against which the swap is intended to hedge. If such events occur, the Company’s consolidated financial condition and results of operations may be adversely affected. See Note 11 to the Consolidated Financial Statements for additional information on the Company's interest rate swaps.
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.
As of December 31, 2023, the Company had investments of $311.5 million in unconsolidated joint ventures with unrelated third parties comprised of 33 properties and two parking garages. In addition, the Company had an investment of $30.1 million in one operating consolidated joint venture, as well as investments of $58.1 million in three consolidated joint ventures with developments in various stages of construction. The Company may acquire, develop, or redevelop additional properties in joint ventures with unrelated third parties. In such investments, the Company is subject to risks that may not be present in its other forms of ownership, including:
joint venture partners could have financing and investment goals or strategies that are different than those of the Company, including terms and strategies for such investment and what levels of debt place on the venture;
the parties to a joint venture could reach an impasse on certain decisions, which could result in unexpected costs, including costs associated with litigation or arbitration;
a joint venture partner's actions might have the result of subjecting the property or the Company to liabilities in excess of those contemplated;
joint venture partners could have investments that are competitive with the Company's properties in certain markets;
interests in joint ventures are often illiquid and the Company may have difficulty exiting such an investment, or may have to exit at less than fair market value;
joint venture partners may be structured differently than the Company for tax purposes and there could be conflicts relating to the Company's REIT status; and
joint venture partners could become insolvent, fail to fund capital contributions, or otherwise fail to fulfill their obligations as a partner, which could require the Company to invest more capital into such ventures than anticipated.

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.
The Company has utilized and, in the future, may utilize forward equity agreements to secure pricing for equity capital needed at a later time. The Company currently has no forward equity agreements outstanding. In the event that we enter into forward equity agreements in the future and elect to settle any such forward equity agreement for cash and the settlement price is below the applicable forward equity price, we would be entitled to receive a cash payment from the relevant forward purchaser. Under Section 1032 of the Internal Revenue Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a "securities futures contract" (as defined in the Internal Revenue Code, by reference to the Exchange Act). Although we believe that any amount received by us in exchange for our stock would qualify for the exemption under Section 1032 of the Internal Revenue Code, because it is not entirely clear whether a forward equity agreement qualifies as a "securities futures contract," the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event
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that we recognize a significant gain from the cash settlement of a forward equity agreement, we might be unable to satisfy the gross income requirements applicable to REITs under the Internal Revenue Code. In that case, we may be able to rely upon the relief provisions under the Internal Revenue Code in order to avoid the loss of our REIT status. Even if the relief provisions apply, we will be subject to a 100% tax on the greater of (i) the excess of 75% of our gross income (excluding gross income from prohibited transactions) over the amount of such income attributable to sources that qualify under the 75% test or (ii) the excess of 95% of our gross income (excluding gross income from prohibited transactions) over the amount of such gross income attributable to sources that qualify under the 95% test, multiplied in either case by a fraction intended to reflect our profitability. In the event that these relief provisions were not available, we could lose our REIT status under the Internal Revenue Code.
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.
If we file for or consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or we or a regulatory authority with jurisdiction over us presents a petition for our winding-up or liquidation, and we consent to such a petition, any forward equity agreements that are then in effect will automatically terminate. If any such forward equity agreement so terminates under these circumstances, we would not be obligated to deliver to the relevant forward purchaser any shares of common stock not previously delivered, and the relevant forward purchaser would be discharged from its obligation to pay the applicable forward equity price per share in respect of any shares of common stock not previously settled under the applicable forward equity agreement. Therefore, to the extent that there are any shares of common stock with respect to which any forward equity agreement has not been settled at the time of the commencement of any such bankruptcy or insolvency proceedings, we would not receive the relevant forward equity price per share in respect of those shares of common stock.
Risks relating to government regulations
The Company's property taxes could increase due to reassessment or property tax rate changes.
Real property taxes on the Company's properties may increase as its properties are reassessed by taxing authorities or as property tax rates change. For example, a current California law commonly referred to as Proposition 13 generally limits annual real estate tax increases on California properties to 2% of assessed value at the date of acquisition. Accordingly, the assessed value and resulting property tax the Company pays is less than it would be if the properties were assessed at current values. The Company owns 36 properties in California, representing 7.1% of its total revenue. From time to time, proposals have been made to reduce the beneficial impact of Proposition 13, particularly with respect to commercial property, which would include medical office buildings. Most recently, an initiative qualified for California’s November 2020 statewide ballot that would generally limit Proposition 13’s protections to residential real estate. If this initiative had passed, it would have ended the beneficial effect of Proposition 13 for the Company's properties, and property tax expense could have increase substantially, adversely affecting the Company's cash flow from operations and net income. While this initiative did not pass, the Company cannot predict whether other changes to Proposition 13 may be proposed or adopted in the future.
Trends in the healthcare service industry may negatively affect the demand for the Company’s properties, lease revenues and the values of its investments.
The healthcare service industry may be affected by the following:
transition to value-based care and reimbursement of providers;
competition among healthcare providers;
consolidation among healthcare providers, health insurers, hospitals and health systems;
a rise in government-funded health insurance coverage;
pressure on providers' operating profit margins from lower reimbursement rates, lower admissions growth, and higher expense growth;
availability of capital;
credit downgrades;
liability insurance expense;
rising pharmaceutical drug expense;
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regulatory and government reimbursement uncertainty related to the Medicare and Medicaid programs;
a trend toward government regulation of pharmaceutical pricing;
government regulation of hospitals' and health insurers' pricing transparency;
federal court decisions on cases challenging the legality of the Affordable Care Act, in whole or in part;
site-neutral rate-setting for Medicare services across different care settings;
disruption in patient volume and revenue from pandemics, such as COVID-19;
trends in the method of delivery of healthcare services, such as telehealth;
heightened health information technology security standards and the meaningful use of electronic health records by healthcare providers; and
potential tax law changes affecting providers.
These trends, among others, can adversely affect the economic performance of some or all of the tenants and, in turn, negatively affect the lease revenues and the value of the Company’s property investments.
The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations.
All real property and the operations conducted on real property are subject to federal, state, and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on tenants, owners, or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may hinder the Company's ability to sell, rent, or pledge such property as collateral for future borrowings.
Compliance with new laws or regulations or stricter interpretation of existing laws may require the Company to incur significant expenditures. For example, proposed legislation to address climate change could increase utility and other costs of operating the Company's properties. Future laws or regulations may impose significant environmental liability. Additionally, tenant or other operations in the vicinity of the Company's properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect the Company's properties. There are various local, state, and federal fire, health, life-safety, and similar regulations with which the Company may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance. Any expenditures, fines, or damages that the Company must pay would adversely affect its results of operations.
Discovery of previously undetected environmentally hazardous conditions may adversely affect the Company's financial condition and results of operations. Under various federal, state, and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on such property. These costs could be significant. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require significant expenditures or prevent the Company from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or private parties. Certain environmental laws and common law principles could be used to impose liability for the release of and exposure to hazardous substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could adversely affect the Company's financial condition and results of operations.
Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.
Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize the Company’s REIT qualification. The Company’s continued qualification as a REIT will depend on the Company’s satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other
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requirements on a continuing basis. In addition, the Company’s ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which the Company has no control or only limited influence, including in cases where the Company owns an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
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 intends to operate in a manner that will allow it to continue to qualify as a REIT for federal income tax purposes. Although the Company believes that it qualifies as a REIT, it cannot provide any assurance that it will continue to qualify as a REIT for federal income tax purposes. The Company’s continued qualification as a REIT will depend on the satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. The Company’s ability to satisfy the asset tests depends upon the characterization and fair market values of its assets. The Company’s compliance with the REIT income and quarterly asset requirements also depends upon the Company’s ability to successfully manage the composition of the Company’s income and assets on an ongoing basis. Accordingly, there can be no assurance that the Internal Revenue Service (“IRS”) will not contend that the Company has operated in a manner that violates any of the REIT requirements.
If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to federal income tax on its taxable income at regular corporate rates and possibly increased state and local taxes (and the Company might need to borrow money or sell assets in order to pay any such tax). Further, dividends paid to the Company’s stockholders would not be deductible by the Company in computing its taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to the Company’s stockholders, which in turn could have an adverse impact on the value of the Company’s common stock. In addition, in such an event the Company would no longer be required to pay dividends to maintain REIT status, which could adversely affect the value of the Company’s common stock. Unless the Company were entitled to relief under certain provisions of the Internal Revenue Code, the Company also would continue to be disqualified from taxation as a REIT for the four taxable years following the year in which the Company failed to qualify as a REIT.
Even if the Company remains qualified for taxation as a REIT, the Company is subject to certain federal, state and local taxes on its income and assets, including taxes on any undistributed taxable income, and state or local income, franchise, property and transfer taxes. These tax liabilities would reduce the Company’s cash flow and could adversely affect the value of the Company’s common stock. For more specific information on state income taxes paid, see Note 16 to the Consolidated Financial Statements.
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.
In order to qualify as a REIT, no more than 50% of the value of the Company’s outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. To assist in complying with this REIT requirement, the Company’s articles of incorporation contain provisions restricting share transfers where the transferee would, after such transfer, own more than 9.8% either in number or value of the outstanding stock of the Company. If, despite this prohibition, stock is acquired increasing a transferee’s ownership to over 9.8% in value of the outstanding stock, the stock in excess of this 9.8% in value is deemed to be held in trust for transfer at a price that does not exceed what the purported transferee paid for the stock, and, while held in trust, the stock is not entitled to receive dividends or to vote. In addition, under these circumstances, the Company has the right to redeem such stock.
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In addition, certain provisions of the MGCL applicable to the Company may have the effect of inhibiting or deterring a third party from making a proposal to acquire the Company or of delaying or preventing a change of control under circumstances that otherwise could provide Company stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
provisions under Subtitle 8 of Title 3 of the MGCL that permit the Board of Directors, without stockholders’ approval and regardless of what is currently provided in the Company's Articles of Incorporation or bylaws, to implement certain takeover defenses;
“business combination” provisions that, subject to limitations, prohibit certain business combinations, asset transfers and equity security issuances or reclassifications between the Company and an “interested stockholder” (defined generally as any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the Company's outstanding voting stock or an affiliate or associate of the Company who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the Company's then outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose supermajority voting requirements unless certain minimum price conditions are satisfied; and
“control share” provisions that provide that holders of “control shares” of the Company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by Company stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
Pursuant to a resolution adopted by the Board of Directors, the Company is prohibited from classifying the Board of Directors under Subtitle 8 unless stockholders entitled to vote generally in the election of directors approve a proposal to repeal such resolution by the affirmative of a majority of the votes cast on the matter. In the case of the business combination provisions of the MGCL, the Board of Directors has adopted a resolution providing that any business combination between the Company and any other person is exempted from this statute, provided that such business combination is first approved by the Board of Directors. This resolution, however, may be altered or repealed in whole or in part at any time. In the case of the control share provisions of the MGCL, the Company has opted out of these provisions pursuant to a provision in its bylaws. The Company may, however, by amendment to its bylaws, opt into the control share provisions of the MGCL. The Company may also choose to adopt other takeover defenses in the future. Any such actions could deter a transaction that may otherwise be in the interest of Company stockholders.
These restrictions on the transfer of the Company’s shares could 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.
To qualify as a REIT for federal income tax purposes, the Company must continually satisfy tests concerning, among other things, the sources of its income, the nature of its assets, the amounts it distributes to its stockholders and the ownership of its stock. The Company may be unable to pursue investments that would be otherwise advantageous to the Company in order to satisfy the source-of-income or distribution requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder the Company’s ability to make certain attractive investments.
The prohibited transactions tax may limit the Company's ability to sell properties.
A REIT's net gain from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The Company may be subject to the prohibited transaction tax equal to 100% of net gain upon the disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, there can be no assurance that the Company can comply in all cases with the safe harbor or that it will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of
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business. Consequently, the Company may choose not to engage in certain sales of its properties or may conduct such sales through a taxable REIT subsidiary, which would be subject to federal and state income taxation.
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.
The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in the Company. The federal income tax rules that affect REITs are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could cause the Company to change its investments and commitments and affect the tax considerations of an investment in the Company. There can be no assurance that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to the Company’s qualification as a REIT or with respect to the federal income tax consequences of qualification.
New and increased transfer tax rates may reduce the value of the Company’s properties.
In recent years, several cities in which the Company owns assets have increased transfer tax rates. These include Boston, Los Angeles, San Francisco, Seattle, and Washington, D.C. In 2022, Los Angeles increased its transfer tax rate from 0.45% to 5.5% on sales of real properties greater than $10 million in value, effective April 1, 2023. In 2020, San Francisco increased it transfer tax rate to 6% for sales in excess of $25 million in value. Also in 2020, the State of Washington increased its transfer tax rate from 1.28% to 3% on sales in excess of $3 million in value; the combined state and local transfer tax rate in Seattle/King County, Washington is 3.5% on sales above $3 million. As state and municipal governments seek new ways to raise revenue, other jurisdictions may implement new real estate transfer taxes or increase existing transfer tax rates. Increases in such tax rates can impose significant additional transaction costs on sales of commercial real estate and may reduce the value of the Company’s properties for sale by the amount of the new or increased tax.
Item 1B. Unresolved Staff Comments
None.

Item 1C. Cybersecurity
The Company annually reviews its overall risk profile with the Audit Committee and full Board of Directors. Assessing, identifying and managing material risks from cybersecurity threats are integrated into the Company’s overall risk management processes.
The Audit Committee of the Company’s Board of Directors has oversight in the management of risks associated with cybersecurity. The Audit Committee is briefed regularly on cybersecurity matters, including meeting with the Company’s Chief Technology Officer at least annually and receiving a memorandum quarterly regarding cybersecurity. In addition, the Audit Committee discusses cybersecurity with other members of management and the internal audit staff at each quarterly meeting. The Audit Committee reports to the full Board of Directors quarterly regarding cybersecurity.
Management of the Company plays an integral role in assessing and managing risks from cybersecurity threats. The Company has a dedicated technology services department, led by the Company’s Chief Technology Officer. The Company also has an in-house internal audit staff that is involved in risk management of cybersecurity threats. The Company solicits input from key employees regarding the overall risk environment, including cybersecurity threats. The Company requires all employees to complete cybersecurity training semi-annually and periodically facilitates penetration tests on the Company's systems.
The Company’s Chief Technology Officer reports to the Executive Vice President – Operations. In addition, as discussed in more detail below, any cybersecurity incident is reported to the Company’s legal department. While the
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Company’s Executive Vice President – Operations and the members of its legal department do not have a technology services background, we believe that the Company’s Chief Technology Officer and technology services team possess the requisite background and experience to effectively manage the Company’s cybersecurity needs.
The Company also engages with third parties on an as-needed basis to advise and assist in managing cybersecurity risks. When the Company utilizes third-party services that include web-based platforms or data collection stored on third-party servers, it reviews the service provider’s SOC1 attestation reports on internal controls and inquires regarding controls and procedures utilized by such third parties with respect to cybersecurity of the Company’s data.
The Company has in place a cybersecurity incident response plan. Procedures for addressing cybersecurity incidents include reporting incidents up to senior management, including the Company’s legal department for analysis. If a cybersecurity incident were determined to be material, the Company’s disclosure committee would address appropriate public disclosures. As noted above, management regularly reports to the Audit Committee regarding the current cyber threat environment and the controls and procedures meant to address such risks. If a cybersecurity incident were determined to be material, the Audit Committee would be informed promptly.
The Company carries cyber risk insurance, but there can be no assurance that losses from a cybersecurity incident would not exceed the insurance coverage.
The Company is subject to risks associated with cybersecurity threats. Although the Company has not experienced a cybersecurity incident that materially affected or, to the Company’s knowledge, is reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition, the Company has, from time to time, experienced threats to and breaches of its data and systems. 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. These risks are described in more detail under Item 1A. Risk Factors.


Item 2. Properties
In addition to the properties described in Item 1. “Business,” in Note 3 to the Consolidated Financial Statements, and in Schedule III of Item 15 of this Annual Report on Form 10-K, the Company leases office space from unrelated third parties from time to time. The Company owns its corporate headquarters located at 3310 West End Avenue in Nashville, Tennessee.

Item 3. Legal Proceedings
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 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Shares of the Company’s common stock are traded under the symbol “HR.” As of December 31, 2023, there were 2,167 stockholders of record.
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Future dividends will be declared and paid at the discretion of the Board of Directors. The Company’s ability to pay dividends is dependent upon its ability to generate funds from operations and cash flows, and to make accretive new investments.
Equity Compensation Plan Information
The following table provides information as of December 31, 2023, about the Company’s common stock that may be issued as restricted stock and upon the exercise of options, warrants and rights under the Company’s existing compensation plans, including the Amended and Restated 2006 Incentive Plan.
PLAN CATEGORY
NUMBER OF SECURITIES
TO BE ISSUED
upon exercise of outstanding options, warrants, and rights 1
WEIGHTED AVERAGE EXERCISE PRICE
of outstanding options, warrants, and rights 1
NUMBER OF SECURITIES REMAINING AVAILABLE 
for future issuance under equity 
compensation plans (excluding
securities reflected in the first column)
Equity compensation plans approved by security holders155,613 — 8,102,861 
Equity compensation plans not approved by security holders— — — 
Total155,613 — 8,102,861 
1The outstanding options relate only to Legacy HR's 2000 Employee Stock Purchase Plan (the "Legacy HR Employee Stock Purchase Plan"), which was terminated in November 2022. No new options will be issued under the Legacy HR Employee Stock Purchase Plan and existing options will expire in March 2024. The Company is unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights under the Legacy HR Employee Stock Purchase Plan or the weighted average exercise price of outstanding rights under that plan. The Legacy HR Employee Stock Purchase Plan provides that shares of common stock may be purchased at a per share price equal to 85% of the fair market value of the common stock at the beginning of the offering period or a purchase date applicable to such offering period, whichever is lower.

Issuer Purchases of Equity Securities
During the year ended December 31, 2023, the Company withheld and canceled shares of Company common stock to satisfy employee tax withholding obligations payable upon the vesting of non-vested shares, as follows:
PERIODTOTAL NUMBER OF SHARES PURCHASEDAVERAGE PRICE PAID
per share
TOTAL NUMBER OF SHARES purchased as part of publicly announced plans or programsMAXIMUM NUMBER OF SHARES
that may yet be purchased
under the plans or programs
February 1 - February 2838,632 $21.71 — — 
December 1 - December 3187,453 15.97 — — 
Total126,085 $18.84 
Authorization to Repurchase Common Stock
On May 31, 2023, the Company’s Board of Directors authorized the repurchase of up to $500 million of outstanding shares of the Company’s common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints, and other customary conditions. The Company is not obligated under this authorization to repurchase any specific number of shares. This authorization supersedes all previous stock repurchase authorizations. As of the date of this report, the Company has not repurchased any shares of its common stock under this authorization.
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Stock Performance Graph
The following graph provides a comparison of the Company's cumulative total shareholder return with the Russell 3000 Index and cumulative total returns of FTSE NAREIT All Equity REITs Index for the period from December 31, 2018, through December 31, 2023. The comparison assumes $100 was invested on December 31, 2018, in the Company's common stock and in each of the indexes and assumes reinvestment of dividends, as applicable. The Company's data for periods prior to the closing of the Merger is the stock performance of Legacy HR.
HR Total Return Graph 2023.jpg


Item 6. [Reserved]

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Disclosure Regarding Forward-Looking Statements
This report and other materials the Company have 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” of this report 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;
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;
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;
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;
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 may structure acquisitions of property in exchange for limited partnership units of the OP on terms that could limit its liquidity or flexibility;
The Company cannot assure you that it will be able to continue paying dividends at or above the rates previously paid;
The Company previously incurred and may continue to incur substantial expenses related to the Merger; and
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Pandemics, such as COVID-19, 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.

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 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;
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.
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Overview
The Company owns and operates properties that facilitate the delivery of healthcare services in primarily outpatient settings. To execute its strategy, the Company engages in a broad spectrum of integrated services including leasing, management, acquisition, financing, development and redevelopment of such properties. The Company seeks to generate stable, growing income and lower the long-term risk profile of its portfolio of properties by focusing on facilities primarily located on or near the campuses of acute care hospitals associated with leading health systems. The Company seeks to reduce financial and operational risk by owning properties in high-growth markets with a broad tenant mix that includes over 30 physician specialties, as well as surgery, imaging, cancer, and diagnostic centers.
As described in the Explanatory Note above and elsewhere in this report, on July 20, 2022, Legacy HR and Legacy HTA completed a merger between the companies in which Legacy HR merged with and into a wholly-owned subsidiary of Legacy HTA, with Legacy HR continuing as the surviving entity and a wholly-owned subsidiary of Legacy HTA. Immediately following the Merger, Legacy HTA changed its name to “Healthcare Realty Trust Incorporated.” For accounting purposes, the Merger was treated as a “reverse acquisition” in which Legacy HR was considered the acquirer. Accordingly, the information discussed in this section reflects, for periods prior to the closing of the Merger, the financial condition and results of operations of Legacy HR, and for periods from the closing of the Merger, that of the Company.
This section is organized into the following sections:
Liquidity and Capital Resources;
Trends and Matters Impacting Operating Results;
Results of Operations;
Non-GAAP Financial Measures and Key Performance Indicators; and
Application of Critical Accounting Policies to Accounting Estimates.

Liquidity and Capital Resources
The Company monitors its liquidity and capital resources and considers several indicators in its assessment of capital markets for financing acquisitions and other operating activities. The Company considers, among other factors, its leverage ratios and lending covenants, dividend payout percentages, interest rates, underlying treasury rates, debt market spreads and cost of equity capital to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.
Sources and Uses of Cash
The Company's revenues are derived from its real estate property portfolio based on contractual arrangements with its tenants. These sources of revenue represent the Company's primary source of liquidity to fund its dividends and its operating expenses, including interest incurred on debt, principal payments on debt, general and administrative costs, capital expenditures and other expenses incurred in connection with managing its existing portfolio and investing in additional properties. To the extent additional investments are not funded by these sources, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets, property dispositions or through proceeds from the Unsecured Credit Facility.
The Company expects to continue to meet its liquidity needs, including capital for additional investments, tenant improvement allowances, operating and finance lease payments, paying dividends, and funding debt service, through cash on hand, cash flows from operations and the cash flow sources addressed above. See Note 4 to the Consolidated Financial Statements for additional discussion of operating and financing lease payment obligations. See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's sources and uses of cash.
The Company also had unencumbered real estate assets with a gross book value of approximately $13.2 billion at December 31, 2023, of which a portion could serve as collateral for secured mortgage financing. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot,
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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.
The Company has exposure to variable interest rates and its common stock price is impacted by the volatility in the stock markets. However, the Company’s leases, which provide its main source of income and cash flow, have terms of approximately one to 20 years and have lease rates that generally increase on an annual basis at fixed rates or based on consumer price indices.
Operating Activities
Cash flows provided by operating activities for the two years ended December 31, 2023 and 2022 were $499.8 million and $272.7 million, respectively. Several items impact cash flows from operating activities including, but not limited to, cash generated from property operations, merger-related costs, interest payments and the timing related to the payment of invoices and other expenses and receipt of tenant rent.
The Company may, from time to time, sell properties and redeploy cash from property sales into new investments. To the extent revenues related to the properties being sold exceed income from these new investments, the Company's consolidated results of operations and cash flows could be adversely affected.
See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's operating activities.
Investing Activities
A summary of the significant transactions impacting investing activities for the year ended December 31, 2023 is listed below. See Note 5 to the Consolidated Financial Statements for more detail on these activities.
The following table details the Company's real estate acquisition activity for the year ended December 31, 2023:
Dollars in thousandsDATE ACQUIREDPURCHASE PRICEMORTGAGE NOTES PAYABLE, NET
CASH
CONSIDERATION
1
REAL
ESTATE
OTHER 2
SQUARE FOOTAGE
Tampa, FL3/10/23$31,500 $— $30,499 $30,596 $(97)115,867 
Colorado Springs, CO7/28/2311,450 (5,284)6,024 11,416 (108)42,770 
Total real estate acquisitions$42,950 $(5,284)$36,523 $42,012 $(205)158,637 
1Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.
2Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.


Capital Funding
In 2023, the Company incurred capital expenditures totaling $262.1 million for the following:
$112.2 million toward development and redevelopment of properties;
$38.7 million toward first generation tenant improvements and planned capital expenditures for acquisitions;
$63.5 million toward second generation tenant improvements; and
$47.7 million toward capital expenditures.
See "Trends and Matters Impacting Operating Results" below for more detail.
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The following table details the dispositions for the year ended December 31, 2023:

Dollars in thousandsDATE DISPOSEDSALE PRICECLOSING ADJUSTMENTSCOMPANY-FINANCED NOTESNET PROCEEDSNET REAL ESTATE INVESTMENT
OTHER (INCLUDING RECEIVABLES) 1
GAIN/(IMPAIRMENT)SQUARE FOOTAGE
Tampa/Miami, FL2
1/12/23$93,250 $(5,875)$— 87,375 $87,302 $(888)$961 224,037 
Dallas, TX 3
1/30/2319,210 (141)— 19,069 18,986 43 40 36,691 
St. Louis, MO2/10/23350 (18)— 332 398 — (66)6,500 
Los Angeles, CA3/23/2321,000 (526)— 20,474 20,610 52 (188)37,165 
Los Angeles, CA 4
3/30/2375,000 (8,079)(45,000)21,921 88,624 (803)(20,900)147,078 
Los Angeles, CA 5
5/12/233,300 (334)— 2,966 3,268 — (302)— 
Albany, NY6/30/2310,000 (1,229)— 8,771 2,613 (1,040)7,198 40,870 
Houston, TX8/2/238,320 (285)— 8,035 4,567 194 3,274 57,170 
Atlanta, GA8/22/2325,140 (66)— 25,074 23,226 (536)2,386 55,195 
Dallas, TX9/15/23115,000 (1,504)— 113,496 64,183 6,094 43,219 161,264 
Houston, TX9/18/23250 (24)— 226 1,998 — (1,772)52,040 
Chicago, IL9/27/2359,950 (870)— 59,080 74,710 (380)(15,250)104,912 
Evansville, IN 6
11/13/2318,500 (63)— 18,437 17,807 (149)779 260,520 
Houston, TX12/1/234,100 (6)— 4,094 3,486 — 608 83,223 
Charleston, SC 7
12/15/236,200 (401)— 5,799 3,415 — 2,384 15,014 
Dallas, TX12/20/2343,295 (764)— 42,531 33,882 (3,782)12,431 77,827 
Los Angeles, CA12/21/2319,000 (1,311)— 17,689 17,787 — (98)104,377 
Tucson, AZ 8,9
12/22/2343,230 (3,770)(6,000)33,460 39,786 (26)(300)215,471 
Miami, FL12/22/2318,250 (756)— 17,494 17,354 643 (503)48,000 
Sebring, FL12/27/239,500 (81)— 9,419 10,438 (512)(507)38,949 
Boston, MA12/28/23117,197 (2,079)— 115,118 107,803 9,828 (2,513)161,254 
Jacksonville/Orlando/Miami, FL 10
12/29/2377,000 (8,678)(7,700)60,622 65,839 (294)2,777 354,500 
Total dispositions$787,042 $(36,860)$(58,700)$691,482 $708,082 $8,444 $33,658 2,282,057 
1Includes straight-line rent receivables, leasing commissions and lease inducements.
2Includes two properties sold in two separate transactions to the same buyer on the same date.
3The Company sold this property to a joint venture in which it retained a 40% interest. Sales price and square footage reflect the total sales price paid by the joint venture and total square footage of the property.
4The Company entered into a mortgage loan agreement with the buyer for $45.0 million.
5The Company sold a land parcel totaling 0.34 acres.
6Includes five properties sold in three separate transactions to the same buyer on the same date.
7The Company sold a corporate office in Charleston, SC that was 100% occupied by the Company.
8Includes 12 properties sold in one transaction to the same buyer.
9The Company entered into a mezzanine loan agreement with the buyer for $6.0 million.
10Includes three properties sold in one transaction to the same buyer. The Company entered into a separate note receivable for $7.7 million related to this sale.


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Financing Activities
Common Stock Issuances
The Company has in place an at-the-market ("ATM") equity offering program to sell shares of the Company’s common stock from time to time in at-the-market sales transactions. The Company has equity distribution agreements with various sales agents with respect to the ATM offering program with an aggregate sales amount of up to $750.0 million. As of December 31, 2023, $750.0 million remained available for issuance under the current ATM offering program.
Debt Activity
Below is a summary of the significant debt financing activity for the year ended December 31, 2023. See Note 10 to the Consolidated Financial Statements for additional information on financing activities.
Mortgage Activity
The following table details the mortgage note repayment activity for the year ended December 31, 2023:
(dollars in millions)TRANSACTION DATEPRINCIPAL BORROWING (REPAYMENT)ENCUMBERED SQUARE FEETCONTRACTUAL INTEREST RATE
Debt assumptions:
Colorado Springs, CO7/28/2023$5.6 42,770 4.50 %
Mortgages repaid at maturity:
Atlanta, GA8/1/2023$(9.8)66,984 3.31 %
Lakewood, CO12/1/2023(6.6)93,992 4.51 %
Total repayments$(16.4)160,976 3.79 %
Subsequent Activity
(dollars in millions)TRANSACTION DATEPRINCIPAL REPAYMENTENCUMBERED SQUARE FEETCONTRACTUAL INTEREST RATE
Mortgages repaid at maturity:
West Hills, CA1/5/2024$(11.3)63,012 4.77 %
Atlanta, GA2/1/2024(5.6)40,324 4.12 %
Total repayments$(16.9)103,336 4.55 %
Term Loans
On April 26, 2023, the Company exercised the first of its two one-year extension options for the $350 million delayed-draw term loan facility, extending the initial maturity date of July 20, 2023 to July 20, 2024. An extension fee of $0.4 million (0.125% of the committed funds) was paid and will be amortized over the extension term.
Interest Rate Swaps
As of December 31, 2023, the Company had outstanding interest rate derivatives totaling approximately $1.3 billion to hedge one-month SOFR. The following details the amount and rate of each swap as of such date (dollars in thousands):
EXPIRATIONAMOUNTWEIGHTED
AVERAGE RATE
January 2024200,000 1.21 %
May 2026275,000 3.74 %
June 2026150,000 3.83 %
December 2026150,000 3.84 %
June 2027200,000 4.27 %
December 2027300,000 3.93 %
$1,275,000 3.49 %



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2023 Interest Rate Swap Activity
On February 16, 2023, the Company entered into a swap transaction with a notional amount of $50.0 million and a fixed rate of 4.16%. The swap agreement has an effective date of March 1, 2023 and a termination date of June 1, 2026.
On March 28, 2023, the Company entered into a swap transaction with a notional amount of $100.0 million and a fixed rate of 3.67%. The swap agreement has an effective date of April 3, 2023 and a termination date of June 1, 2026.
On October 19, 2023, the Company entered into two swap transactions totaling $100.0 million. The notional amounts were $50.0 million each with fixed rates of 4.71% and 4.67%. The swap agreements have effective dates of November 1, 2023 and termination dates of June 1, 2027 and December 1, 2027, respectively.
On October 23, 2023, the Company entered into two swap transactions totaling $100.0 million with an aggregate fixed rate of 4.73%. The swap agreements have effective dates of November 1, 2023 and termination dates of May 31, 2026.
On November 9, 2023, the Company entered into a swap transaction with a notional amount of $75.0 million and a fixed rate of 4.54%. The swap agreement has an effective date of December 1, 2023 and a termination date of May 31, 2026.
The following table details the Company's debt balances as of December 31, 2023:
PRINCIPAL BALANCE
CARRYING BALANCE 1
WEIGHTED YEARS TO MATURITY 2
CONTRACTUAL RATEEFFECTIVE RATE
Senior Notes due 2025$250,000 $249,484 1.3 3.88 %4.12 %
Senior Notes due 2026 3
600,000 579,017 2.6 3.50 %4.94 %
Senior Notes due 2027 3
500,000 483,727 3.5 3.75 %4.76 %
Senior Notes due 2028300,000 297,429 4.0 3.63 %3.85 %
Senior Notes due 2030 3
650,000 575,443 6.1 3.10 %5.30 %
Senior Notes due 2030
299,500 296,780 6.2 2.40 %2.72 %
Senior Notes due 2031
299,785 295,832 7.2 2.05 %2.25 %
Senior Notes due 2031 3
800,000 649,521 7.2 2.00 %5.13 %
Total Senior Notes Outstanding3,699,285 3,427,233 4.9 2.97 %4.43 %
$1.5 billion unsecured credit facility 4
— — 3.8 SOFR + 0.95%6.31 %
$350 million unsecured term loan 350,000 349,798 1.6 SOFR + 1.05%6.39 %
$200 million unsecured term loan200,000 199,903 2.4 SOFR + 1.05%6.39 %
$150 million unsecured term loan150,000 149,643 2.4 SOFR + 1.05%6.39 %
$300 million unsecured term loan 3
300,000 299,958 2.8 SOFR + 1.05%6.39 %
$200 million unsecured term loan 3
200,000 199,502 3.5 SOFR + 1.05%6.39 %
$300 million unsecured term loan 300,000 298,288 4.0 SOFR + 1.05%6.39 %
Mortgage notes payable70,752 70,534 2.0 4.17 %4.15 %
Total Outstanding Notes and Bonds Payable$5,270,037 $4,994,859 4.0 3.96 %5.02 %
1Balances are reflected net of discounts and debt issuance costs and include premiums.
2Includes extension options.
3Debt instruments assumed as part of the Merger with Legacy HTA on July 20, 2022. The amounts shown represent fair value adjustments.
4As of December 31, 2023, the Company had no outstanding borrowings under the Unsecured Credit Facility with a remaining borrowing capacity of $1.5 billion.


Debt Covenant Information
The Company’s various debt agreements contain certain representations, warranties, and financial and other covenants customary in such debt agreements. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain limits on the Company’s ability to incur indebtedness and create
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liens or encumbrances. As of December 31, 2023, the Company was in compliance with the financial covenant provisions under all of its various debt instruments.
As of December 31, 2023, 99.5% of the Company’s principal balances were due after 2024, including extension options. Also, as of December 31, 2023, the Company's incurrence of total debt as defined in the senior notes [debt divided by (total assets less intangibles and accounts receivable)] was approximately 37.5% (cannot be greater than 60%) and debt service coverage [interest expense divided by (net income plus interest expense, taxes, depreciation and amortization, gains and impairments)] was approximately 3.2 times (cannot be less than 1.5 times).
The Company plans to manage its capital structure to maintain compliance with its debt covenants consistent with its current profile. Downgrades in ratings by the rating agencies could have a material adverse impact on the Company’s cost and availability of capital, which could in turn have a material adverse impact on consolidated results of operations, liquidity and/or financial condition.

Trends and Matters Impacting Operating Results
Management monitors factors and trends important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Discussed below are some of the factors and trends that management believes may impact the future operations of the Company.
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.
The Company reviews goodwill for impairment annually as of December 31 of each year or whenever events or changes in circumstances indicate that an impairment may exist. Given volatility in its stock price, the Company performed a quantitative assessment, and the fair value of the Company’s single reporting unit was estimated using a combination of discounted cash flow models and earnings multiples techniques. 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. The determination of fair value using the earnings multiples technique requires assumptions to be made in relation to maintainable earnings and earnings multipliers. These forecasts and assumptions are highly subjective, and while we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. Although the quantitative assessment indicated goodwill was not impaired as of December 31, 2023, given the results of our quantitative assessment, the Company is at risk for future goodwill impairment because it is reasonably possible that, among other factors, continual stock price volatility and downward pressure on the Company's market capitalization could have a material impact on one or more of the estimates and assumptions used to evaluate goodwill.
Acquisitions and Dispositions
In 2023, the Company acquired two medical office buildings. The total purchase price of the acquisitions was $43.0 million and the weighted average capitalization rate for these investments was 6.5%.
The Company disposed of 39 properties in 2023 for sales prices totaling $787.0 million, including a regional corporate office and one property contributed into a joint venture in which the Company maintains a non-controlling interest. These transactions yielded net cash proceeds of $687.6 million, net of $36.9 million of closing costs and related adjustments, $58.7 million in Company financed notes and $3.8 million of retained joint venture interests. The weighted average capitalization rate for these properties was 6.5%. The Company calculates the capitalization rate for dispositions as the in-place cash net operating income divided by the sales price.
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See the Company's discussion of its 2023 acquisition and disposition activity in Note 5 to the Consolidated Financial Statements.
Development and Redevelopment Activity
The table below details the Company’s activity related to its active development and redevelopment projects as of December 31, 2023. The information included in the table below represents management’s estimates and expectations at December 31, 2023, which are subject to change. The Company’s disclosures regarding certain projections or estimates may not reflect actual results.
ESTIMATED REMAINING FUNDINGS ESTIMATED TOTAL INVESTMENT APPROXIMATE SQUARE FEET
Dollars in thousandsNUMBER OF PROPERTIESTOTAL FUNDED DURING THE YEARTOTAL AMOUNT FUNDED
Development Activity
Nashville, TN$11,971 $37,330 $6,670 $44,000 106,194 
Orlando, FL 1
16,047 32,680 32,320 65,000 156,566 
Raleigh, NC19,766 33,392 19,208 52,600 120,694 
Phoenix, AZ21,341 21,341 32,659 54,000 101,000 
Total$69,125 $124,743 $90,857 $215,600 484,454 
Redevelopment Activity
Washington, DC7,918 10,776 10,424 21,200 259,290 
Houston, TX4,698 5,683 24,317 30,000 314,861 
Charlotte, NC3,627 3,890 14,810 18,700 169,135 
Washington, DC4,270 4,783 5,295 10,078 57,323 
Total$20,513 $25,132 $54,846 $79,978 800,609 
1This project is funded through a construction note receivable.

The Company funded an additional $22.6 million related to ongoing tenant improvements at previously completed projects.
The Company is in the planning stages with several health systems and developers regarding new development and redevelopment opportunities and one or more could begin in 2024. Total costs to develop or redevelop a typical medical office building can vary depending on the scope of the project, market rental terms, parking configuration, building amenities, asset type and geographic location.
The Company’s disclosures regarding certain estimates or projections may not be indicative of actual results.

Security Deposits and Letters of Credit
As of December 31, 2023, the Company held approximately $38.5 million in letters of credit and security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon these instruments if there are any defaults under the leases.
Expiring Leases
The Company expects that approximately 15% to 20% of the leases in its portfolio will expire each year. In-place leases have a weighted average lease term of 8.5 years and a weighted average remaining lease term of 4.2 years. Demand for well-located real estate with complementary practice types and services remains consistent, and the Company's 2023 quarterly tenant retention statistics ranged from 74% to 79%. In 2024, the Company has 1,546 leases totaling 5.0 million square feet in its multi-tenant portfolio that are scheduled to expire. Of those leases, 74% are in on-campus buildings, which, in our experience, tend to have high tenant retention rates between 75% to 90%. See additional information regarding expiring single-tenant leases under the heading "Single-Tenant Leases" below.
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The Company continues to emphasize its contractual rent increases for in-place leases. As of December 31, 2023 and 2022, the Company's contractual rental rate growth averaged 2.82% and 2.77%, respectively, for in-place leases. In addition, the Company continued to see strong quarterly weighted average rental rate growth for renewing leases ("cash leasing spread") and expects the majority of its renewal rates to increase between 3.0% and 4.0%. In 2023, cash leasing spreads averaged 2.6%.
In a further effort to maximize revenue growth and reduce its exposure to key expenses such as taxes and utilities, the Company carefully manages its balance of lease types. Gross leases, wherein the Company has full exposure to all operating expenses, comprise 8% of its lease portfolio. Modified gross or base year leases, in which the Company and tenant both pay a share of operating expenses, comprise 28% of the Company's leased portfolio. Net leases, in which tenants pay substantially all operating expenses, total 59% of the leased portfolio. Absolute net leases, in which tenants pay substantially all the building's operating and capital expenses, comprise 5%.
Capital Expenditures
Capital expenditures are long-term investments made to maintain and improve the physical and aesthetic attributes of the Company's owned properties. Examples of such improvements include, but are not limited to, material changes to, or the full replacement of, major building systems (exterior facade, building structure, roofs, elevators, mechanical systems, electrical systems, energy management systems, upgrades to existing systems for improved efficiency) and common area improvements (furniture, signage and artwork, bathroom fixtures and finishes, exterior landscaping, parking lots or garages). These additions are capitalized into the gross investment of a property and then depreciated over their estimated useful lives, typically ranging from 7 to 20 years. Capital expenditures specifically do not include recurring maintenance expenses, whether direct or indirect, related to the upkeep and maintenance of major building systems or common area improvements.  Capital expenditures also do not include improvements related to a specific tenant suite, unless the improvement is part of a major building system or common area improvement.
The Company invested $47.7 million, or $1.24 per square foot, in capital expenditures in 2023 and $48.9 million, or $1.21 per square foot, in capital expenditures in 2022. As a percentage of cash net operating income, 2023 and 2022 capital expenditures were 5.8% and 8.5%, respectively. For a reconciliation of cash net operating income, see "Same Store Cash NOI" in the "Non-GAAP Financial Measures and Key Performance Indicators" section as part of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II of this report.

Tenant Improvements
The Company may invest in tenant improvements for the purpose of refurbishing or renovating tenant space. The Company categorizes these expenditures into first and second generation tenant improvements. As of December 31, 2023, the Company had commitments of approximately $222.4 million that are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction.
First Generation Tenant Improvements & Planned Capital Expenditures for Acquisitions
First generation tenant improvements and planned capital expenditures for acquisition spending totaled $38.7 million and $46.4 million for the years ended December 31, 2023 and 2022, respectively. First generation tenant improvements include build out costs related to suite space in shell condition. Planned capital expenditures for acquisitions include expected near-term fundings that were contemplated as part of the acquisition.
Second Generation Tenant Improvements
Second generation tenant improvements spending totaled $63.5 million in 2023, or 7.7% of total cash net operating income. In 2022, this spending totaled $33.6 million, or 5.8% of total cash net operating income.
If the cost of a tenant improvement project exceeds a tenant improvement allowance, the Company generally offers the tenant the option to finance the excess over the lease term with interest or to reimburse the overage to the Company in a lump sum. In either case, such overages are amortized by the Company as rental income over the term of the lease. Interest earned on tenant overages is included in other operating income in the Company's Consolidated Statements of Operations. The first and second generation tenant overage amount amortized to rent, including interest, totaled approximately $8.4 million in 2023, $7.5 million in 2022, and $5.9 million in 2021.
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Second generation, multi-tenant tenant improvement commitments in 2023 for renewals averaged $1.78 per square foot per lease year, ranging quarterly from $1.64 to $1.89. In 2022, these commitments averaged $1.76 per square foot per lease year, ranging quarterly from $1.46 to $1.90. In 2021, these commitments averaged $1.53 per square foot per lease year, ranging quarterly from $1.27 to $1.87.
Second generation, multi-tenant tenant improvement commitments in 2023 for new leases averaged $5.69 per square foot per lease year, ranging quarterly from $4.44 to $7.11. In 2022, these commitments averaged $5.74 per square foot per lease year, ranging quarterly from $4.84 to $7.07. In 2021, these commitments averaged $5.39 per square foot per lease year, ranging quarterly from $4.74 to $5.96.

Leasing Commissions
In certain markets, the Company may pay leasing commissions to real estate brokers who represent either the Company or prospective tenants, with commissions generally equating to 4% to 6% of the gross lease value for new leases and 2% to 4% of the gross lease value for renewal leases. In addition, the Company pays its leasing employees incentive compensation when leases are executed that meet certain leasing thresholds. External leasing commissions are amortized to property operating expense, and internal leasing costs are amortized to general and administrative expense in the Company's Consolidated Statements of Operations. In 2023, the Company paid leasing commissions of approximately $35.9 million, or $0.93 per square foot. In 2022, the Company paid leasing commissions of approximately $22.9 million, or $0.57 per square foot. As a percentage of total cash net operating income, leasing commissions paid for 2023 and 2022 were 4.3% and 4.0%, respectively. The amount of leasing commissions amortized over the term of the applicable leases totaled $13.8 million, $11.0 million and $9.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Rent Abatements
Rent abatements, which generally take the form of deferred rent, are sometimes used to help induce a potential tenant to lease space in the Company's properties. Such abatements, when made, are amortized by the Company on a straight-line basis against rental income over the lease term. Rent abatements for 2023 totaled approximately $14.3 million, or $0.37 per square foot. Rent abatements for 2022 totaled approximately $14.8 million, or $0.37 per square foot. Rent abatements for 2021 totaled approximately $4.6 million, or $0.27 per square foot.

Single-Tenant Leases
As of December 31, 2023, the Company had a total of 125 single-tenant buildings, with a weighted average lease term of 11.4 years and a weighted average remaining lease term of 5.2 years.
Twenty-one single-tenant buildings have leases that expire in 2024. Eleven of these leases have been renewed. The Company is in negotiations with eight of the tenants and expects the leases to be renewed or the building to be immediately backfilled. The Company expects the tenants of two of these single-tenant buildings to vacate the buildings upon lease expiration. One of these buildings is part of a planned redevelopment and the other is expected to be leased or sold. The expected lost revenue from these expirations in 2024 is $3.8 million.
Operating Leases
As of December 31, 2023, the Company was obligated to make rental payments under operating lease agreements consisting primarily of ground leases related to 157 real estate investments, excluding those ground leases the Company has prepaid. As of December 31, 2023, the Company had 232 properties totaling 16.9 million square feet that were held under ground leases with a remaining weighted average term of 64.9 years, including renewal options. These ground leases typically have initial terms of 50 to 75 years with one or more renewal options extending the terms to 75 to 100 years, with expiration dates through 2119.
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Purchase Options
The Company had approximately $111.1 million in real estate properties as of December 31, 2023 that were subject to exercisable purchase options. The Company has approximately $1.1 billion in real estate properties that are subject to purchase options that will become exercisable after 2023. Additional information about the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):
YEAR EXERCISABLENUMBER OF PROPERTIES
GROSS REAL ESTATE INVESTMENT AS OF DECEMBER 31, 2023 1
Current 2
$111,074 
2024— — 
202593,813 
2026181,696 
2027110,537 
2028134,227 
202981,855 
2030— — 
2031108,936 
203224,629 
2033— — 
2034 and thereafter 3
320,771 
Total44 $1,167,538 
1Purchase option prices are based on fair market value components that are determined by an appraisal process, except for three properties totaling $45.3 million with stated prices or prices based on fixed capitalization rates.
2These purchase options have been exercisable for an average of 13.9 years.
3Includes two medical office buildings that are recorded in the line item Investment in financing receivable, net on the Company's Consolidated Balance Sheet.

Debt Management
The Company maintains a conservative and flexible capital structure that allows it to fund new investments and operate its existing portfolio. The Company has approximately $70.8 million of mortgage notes payable, most of which were assumed when the Company acquired properties. The Company has approximately $24.1 million of mortgage notes payable that will mature in 2024. The Company will repay mortgages with cash on hand or borrowings under the Unsecured Credit Facility. See additional information in Liquidity and Capital Resources - Financing Activities.
Impact of Inflation
The Company is subject to the risk of inflation as most of its revenues are derived from long-term leases. Most of the Company's leases provide for fixed increases in base rents or increases based on the Consumer Price Index and require the tenant to pay all or some portion of increases in operating expenses. The Company believes that these provisions mitigate the impact of inflation. However, there can be no assurance that the Company's ability to increase rents or recover operating expenses will keep pace with inflation. The Company's leases have a weighted average lease term remaining of approximately 4.2 years. The Company has 94.9% of leases that provide for fixed base rent increases and 5.1% that provide for Consumer Price Index-based rent increases as of December 31, 2023.
New Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for information on new accounting standards including both standards that the Company adopted during the year and those that have not yet been adopted. The Company continues to evaluate the impact of the new standards that have not yet been adopted.
Other Items Impacting Operations
General and administrative expenses will fluctuate quarter-to-quarter. In the first quarter of each year, general and administrative expense include increases for certain expenses such as payroll taxes and healthcare savings account fundings. The Company expects these customary expenses to increase by approximately $0.9 million in the first quarter of 2024. Approximately $0.6 million is not expected to recur in subsequent quarters in 2024.
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Results of Operations
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
The Company’s consolidated results of operations for 2023 compared to 2022 were significantly impacted by the Merger, acquisitions, dispositions, gain on sales and impairment charges recorded on real estate properties, and capital markets transactions.
Revenues
Rental income increased $401.7 million, or 44.3%, to approximately $1.3 billion compared to $907.5 million in the prior year as a result of the following:
Impact from the Merger contributed $377.0 million.
Acquisitions in 2022 and 2023 contributed $19.4 million.
Leasing activity contributed $21.5 million.
Dispositions in 2022 and 2023 resulted in a decrease of $16.2 million.
Interest income increased $5.7 million, or 49.3%, from the prior year primarily as result of notes receivables assumed in the Merger and notes receivables entered into with a buyer upon disposition of properties during 2023.
Other operating income increased $3.7 million, or 27.3%, from the prior year primarily as a result of income from transient parking and management fees assumed with the Merger.
Expenses
Property operating expenses increased $156.4 million, or 45.5%, from the prior year primarily as a result of the following activity:
Impact from the Merger resulted in an increase of $130.9 million.
Acquisitions in 2022 and 2023 resulted in an increase of $8.9 million.
Increases in portfolio operating expenses as follows:
Utilities expense of $7.0 million;
Administrative, leasing commissions, and other legal expense of $5.7 million;
Maintenance and repair expense of $4.9 million;
Janitorial expense of $1.9 million; and
Security expense of $0.1 million.
Dispositions in 2022 and 2023 resulted in a decrease of $1.7 million.
Property tax expense decreased $1.0 million.
Insurance expense decreased $0.3 million.
General and administrative expenses increased approximately $5.7 million, or 10.8%, from the prior year primarily as a result of the following activity:
Net increases, primarily due to impacts from the Merger, including professional fees, audit services, insurance, travel and other administrative costs, of $5.6 million.
Payroll and related expenses of $1.5 million, of which $1.3 million was related to severance.
Decrease in non-cash compensation incentive expense of $1.4 million.
The Company incurred Merger-related costs of $(2.0) million and $103.4 million, respectively, for the years ended December 31, 2023 and 2022, which were included within Merger-related costs in results of operations. The Merger-related costs primarily consisted of legal, consulting, severance, and banking services, and for the year ended December 31, 2023, included a refund of $17.8 million for transfer taxes paid during the year ended December 31, 2022.
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Depreciation and amortization expense increased $277.6 million, or 61.3%, from the prior year primarily as a result of the following activity:
Impact from the Merger, including purchase accounting fair value adjustments, resulted in an increase of $251.2 million.
Acquisitions in 2022 and 2023 resulted in an increase of 9.8 million.
Various building and tenant improvement expenditures caused an increase of $28.3 million.
Dispositions in 2022 and 2023 resulted in a decrease of $1.1 million.
Assets that became fully depreciated resulted in a decrease of $10.6 million.
Other Income (Expense)
Other income (expense), as an expense increased $400.7 million, or 621.1%, from the prior year mainly due to the following activity:
Gain on Sales of Real Estate Properties
Gain on sales of real estate properties totaling approximately $77.5 million and $270.3 million are associated with the sales of 12 and ten real estate properties during 2023 and 2022, respectively.
Interest Expense
Interest expense increased $111.9 million for the year ended December 31, 2023 compared to the prior year. The components of interest expense are as follows:
CHANGE
Dollars in thousands20232022$%
Contractual interest$208,305 $118,085 $90,220 76.4 %
Net discount/premium accretion38,941 18,227 20,714 113.6 %
Debt issuance costs amortization5,588 4,256 1,332 31.3 %
Amortization of interest rate swap settlement168 168 — — %
Amortization of treasury hedge settlement427 427 — — %
Fair value derivative4,412 4,057 355 8.8 %
Interest cost capitalization(2,961)(1,409)(1,552)110.1 %
Interest on lease liabilities3,704 2,880 824 28.6 %
Total interest expense$258,584 $146,691 $111,893 76.3 %
Contractual interest increased $90.2 million, or 76.4%, primarily as a result of the following activity:
Senior notes and unsecured term loans assumed in the Merger accounted for an increase of approximately $54.7 million.
New unsecured term loans executed with the amended credit facility accounted for an increase of approximately $30.1 million.
The Company's Unsecured Term Loans due 2024 and due 2026, accounted for an increase of approximately $11.9 million.
The Unsecured Credit Facility accounted for an increase of approximately $10.4 million.
Active interest rate derivatives accounted for a decrease of $16.6 million.
Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.3 million.

Impairment of Real Estate Assets and Credit Loss Reserves
Impairment of real estate assets in 2023 totaling approximately $149.7 million is associated with completed or planned disposition activity. Additionally, the Company recorded $5.2 million of credit loss reserves on its mortgage notes receivable.
Impairment of real estate assets in 2022 totaling approximately $54.4 million is associated with completed or planned disposition activity.
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Equity income (loss) from unconsolidated joint ventures
The Company recognizes its proportionate share of losses from its unconsolidated joint ventures. The losses are primarily attributable to non-cash depreciation expense. See Note 5 for more details regarding the Company's unconsolidated joint ventures.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
The Company's discussion regarding the comparison of the year ended December 31, 2022 compared to the year ended December 31, 2021 was previously disclosed beginning on page 39 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023, and is incorporated herein by reference.

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 Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.
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, deferred financing fees amortization, share-based compensation expense and provision for bad debts, net; and subtracting straight-line rent income, net of expense, and maintenance capital expenditures, including second generation tenant improvements, capital expenditures and leasing commissions paid. 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 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 gains on sales of real estate, impairments and 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 instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation,
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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.
The table below reconciles net income attributable to common stockholders to FFO, Normalized FFO and FAD attributable to common stockholders for the years ended December 31, 2023, 2022, and 2021.
 YEAR ENDED DECEMBER 31,
Amounts in thousands, except per share data2023 2022 2021 
Net (loss) income attributable to common stockholders$(278,261)$40,897 $66,659 
Net (loss) income attributable to common stockholders per diluted share 1
$(0.74)$0.15 $0.45 
Gain on sales of real estate assets(77,546)(270,271)(55,940)
Impairments149,717 54,427 17,101 
Real estate depreciation and amortization738,526 459,211 208,155 
Non-controlling income from operating partnership units(3,426)(5)— 
Proportionate share of unconsolidated joint ventures18,116 12,722 5,541 
FFO adjustments$825,387 $256,084 $174,857 
FFO adjustments per common share - diluted 8
$2.15 $1.01 $1.22 
FFO attributable to common stockholders$547,126 $296,981 $241,516 
FFO attributable to common stockholders per common share - diluted 7
$1.43 $1.17 $1.68 
Acquisition and pursuit costs 2
2,026 3,229 3,930 
Merger-related costs 3
(1,952)103,380 — 
Merger-related fair value of debt instruments42,885 21,248 — 
Lease intangible amortization 860 1,028 162 
Allowance for credit losses 4
8,599 — — 
Non-routine legal costs/forfeited earnest money received 175 771 (35)
Debt financing costs (62)3,145 283 
Severance costs1,445 — — 
Unconsolidated JV normalizing items 5
389 330 225 
Normalized FFO adjustments$54,365 $133,131 $4,565 
Normalized FFO adjustments per common share - diluted 8
$0.14 $0.52 $0.03 
Normalized FFO attributable to common stockholders$601,491 $430,112 $246,081 
Normalized FFO attributable to common stockholders per common share - diluted 8
$1.57 $1.69 $1.71 
Non-real estate depreciation and amortization2,566 2,217 2,397 
Non-cash interest expense amortization 6
4,968 5,129 3,182 
Provision for bad debt, net3,163 516 73 
Straight-line rent income, net(32,592)(20,124)(4,303)
Share-based compensation13,791 14,294 10,729 
Unconsolidated JV non-cash items 7
(1,034)(1,206)(1,357)
Normalized FFO adjusted for non-cash items$592,353 $430,938 $256,802 
2nd Generation tenant improvements(66,081)(33,620)(26,363)
Leasing commissions paid(36,391)(22,929)(11,742)
Capital expenditures(49,343)(48,913)(19,582)
Maintenance capital expenditures(151,815)(105,462)(57,687)
FAD$