Company Quick10K Filing
Healthcare Realty Trust
Price33.35 EPS0
Shares131 P/E366
MCap4,381 P/FCF28
Net Debt1,432 EBIT54
TEV5,813 TEV/EBIT108
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-05
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10-K 2009-12-31 Filed 2010-02-22
8-K 2020-11-04
8-K 2020-11-03
8-K 2020-10-02
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8-K 2020-08-05
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8-K 2020-06-01
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8-K 2020-03-18
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8-K 2019-11-04
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8-K 2018-05-08
8-K 2018-05-03
8-K 2018-05-01
8-K 2018-03-27
8-K 2018-02-14
8-K 2018-02-13

HR 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Real Estate Investments
Note 3. Leases
Note 4. Notes and Bonds Payable
Note 5. Derivative Financial Instruments
Note 6. Commitments and Contingencies
Note 7. Stockholders' Equity
Note 8. Fair Value of Financial Instruments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 hr-2021331xex311.htm
EX-31.2 hr-2021331xex312.htm
EX-32 hr-2021331xex32.htm

Healthcare Realty Trust Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
3.52.82.11.40.70.02012201420172020
Assets, Equity
0.20.10.10.0-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period             to

For the transition period             to

Commission File Number: 001-11852

HEALTHCARE REALTY TRUST INCORPORATED
(Exact name of Registrant as specified in its charter) 
Maryland62-1507028
(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
Common stock, $0.01 par value per shareHRNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
    Large accelerated filer         Accelerated filer         
    Non-accelerated filer         Smaller reporting company
            Emerging growth company

    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
    complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  ☒
As of April 30, 2021, the Registrant had 141,660,077 shares of Common Stock outstanding.




HEALTHCARE REALTY TRUST INCORPORATED
FORM 10-Q
March 31, 2021


    Table of Contents
     
PART I - FINANCIAL INFORMATION
PART II - OTHER INFORMATION
SIGNATURE



Table of Contents

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Healthcare Realty Trust Incorporated
Condensed Consolidated Balance Sheets
Amounts in thousands, except per share data
ASSETS
Unaudited
MARCH 31, 2021
DECEMBER 31, 2020
Real estate properties
Land$369,202 $362,695 
Buildings, improvements and lease intangibles4,201,251 4,220,297 
Personal property11,370 11,195 
Land held for development27,226 27,226 
Total real estate properties4,609,049 4,621,413 
Less accumulated depreciation and amortization(1,238,044)(1,239,224)
Total real estate properties, net3,371,005 3,382,189 
Cash and cash equivalents12,087 15,303 
Assets held for sale, net64,578 20,646 
Operating lease right-of-use assets120,890 125,198 
Financing lease right-of-use assets19,559 19,667 
Investments in unconsolidated joint ventures83,943 73,137 
Other assets, net182,043 176,120 
Total assets$3,854,105 $3,812,260 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes and bonds payable$1,609,251 $1,602,769 
Accounts payable and accrued liabilities66,407 81,174 
Liabilities of assets held for sale1,342 1,216 
Operating lease liabilities91,921 92,273 
Financing lease liabilities18,722 18,837 
Other liabilities68,353 67,615 
Total liabilities1,855,996 1,863,884 
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value per share; 50,000 shares authorized; none issued and outstanding
  
Common stock, $.01 par value per share; 300,000 shares authorized; 141,660 and 139,487 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
1,417 1,395 
Additional paid-in capital3,699,867 3,635,341 
Accumulated other comprehensive loss(13,887)(17,832)
Cumulative net income attributable to common stockholders1,223,521 1,199,499 
Cumulative dividends(2,912,809)(2,870,027)
Total stockholders' equity1,998,109 1,948,376 
Total liabilities and stockholders' equity$3,854,105 $3,812,260 
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, are an integral part of these financial statements.


1



Table of Contents

Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Income
For the Three Months Ended March 31, 2021 and 2020
Amounts in thousands, except per share data
Unaudited
THREE MONTHS ENDED
March 31,
20212020
Revenues
Rental income$128,389 $122,644 
Other operating1,950 2,163 
130,339 124,807 
Expenses
Property operating52,215 49,552 
General and administrative8,499 8,766 
Acquisition and pursuit costs744 750 
Depreciation and amortization50,079 47,497 
111,537 106,565 
Other Income (Expense)
Gain (loss) on sales of real estate properties18,890 (49)
Interest expense(13,262)(13,960)
Impairment of real estate properties(834)— 
Equity loss from unconsolidated joint ventures(74)(11)
Interest and other income (expense), net500 93 
5,220 (13,927)
Net Income$24,022 $4,315 
Basic earnings per common share $0.17 $0.03 
Diluted earnings per common share $0.17 $0.03 
Weighted average common shares
outstanding - basic
138,774 133,036 
Weighted average common shares
outstanding - diluted
138,871 133,150 
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, are an integral part of these financial statements.


2



Table of Contents

Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Three Months Ended March 31, 2021 and 2020
Amounts in thousands
Unaudited
THREE MONTHS ENDED
 March 31,
20212020
Net income$24,022 $4,315 
Other comprehensive income (loss)
Interest rate swaps
Reclassification adjustments for losses included in net income (interest expense)1,095 328 
Gains (losses) arising during the period on interest rate swaps2,850 (9,663)
Losses on settlement of treasury rate locks arising during the period (4,267)
3,945 (13,602)
Comprehensive income (loss)$27,967 $(9,287)
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, are an integral part of these financial statements.


3



Table of Contents

Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Equity
For the Three Months Ended March 31, 2021 and 2020
Amounts in thousands, except per share data
Unaudited
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Cumulative
Net Income
Cumulative
Dividends
Total
Stockholders’
Equity
Balance at December 31, 2020$1,395 $3,635,341 $(17,832)$1,199,499 $(2,870,027)$1,948,376 
Issuance of common stock, net of issuance costs21 63,064 — — — 63,085 
Common stock redemptions(1)(1,555)— — — (1,556)
Share-based compensation2 3,017 — — — 3,019 
Net income— — — 24,022 — 24,022 
Reclassification adjustments for losses included in net income (interest expense)

— — 1,095 — — 1,095 
Gains arising during the period on
interest rate swaps and treasury rate locks
— — 2,850 — — 2,850 
Dividends to common stockholders
($0.3025 per share)
— — — — (42,782)(42,782)
Balance at March 31, 2021$1,417 $3,699,867 $(13,887)$1,223,521 $(2,912,809)$1,998,109 
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Cumulative
Net Income
Cumulative
Dividends
Total
Stockholders’
Equity
Balance at December 31, 2019$1,347 $3,485,003 $(6,175)$1,127,304 $(2,707,470)$1,900,009 
Issuance of common stock, net of issuance costs2 7,319 — — — 7,321 
Common stock redemptions— (798)— — — (798)
Share-based compensation— 2,599 — — — 2,599 
Net income— — — 4,315 — 4,315 
Reclassification adjustments for losses included in net income (interest expense)

— — 328 — — 328 
Losses arising during the period on interest rate swaps

— — (13,930)— — (13,930)
Dividends to common stockholders ($0.3000 per share)
— — — — (40,416)(40,416)
Balance at March 31, 2020$1,349 $3,494,123 $(19,777)$1,131,619 $(2,747,886)$1,859,428 
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, are an integral part of these financial statements.






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Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2021 and 2020
Amounts in thousands
Unaudited
OPERATING ACTIVITIES
THREE MONTHS ENDED
 March 31,
20212020
Net income$24,022 $4,315 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization50,079 47,497 
Other amortization822 1,491 
Share-based compensation3,019 2,599 
Amortization of straight-line rent receivable (lessor)(1,461)(1,043)
Amortization of straight-line rent on operating leases (lessee)367 375 
(Gain) loss on sales of real estate properties(18,890)49 
Impairment of real estate properties834  
Equity loss from unconsolidated joint ventures 74 11 
Distributions from unconsolidated joint ventures 118 
Changes in operating assets and liabilities:
Other assets, including right-of-use-assets(3,467)(4,032)
Accounts payable and accrued liabilities(17,181)(10,005)
Other liabilities4,278 (2,931)
Net cash provided by operating activities42,496 38,444 
INVESTING ACTIVITIES
Acquisitions of real estate(64,275)(83,580)
Development of real estate(184)(2,451)
Additional long-lived assets(19,937)(22,164)
Investments in unconsolidated joint ventures(10,880) 
Proceeds from sales of real estate properties25,445  
Net cash used in investing activities(69,831)(108,195)
FINANCING ACTIVITIES
Net borrowings (repayments) on unsecured credit facility7,000 (78,000)
Borrowings on term loan 298,995 
Repayments of notes and bonds payable(946)(7,202)
Dividends paid(42,782)(40,416)
Net proceeds from issuance of common stock63,195 7,213 
Common stock redemptions(1,959)(892)
Settlement of treasury rate locks (4,267)
Debt issuance and assumption costs(27)(2,646)
Payments made on finance leases(362)(321)
Net cash provided by financing activities24,119 172,464 
Decrease (increase) in cash and cash equivalents(3,216)102,713 
Cash and cash equivalents at beginning of period15,303 657 
Cash and cash equivalents at end of period$12,087 $103,370 
Supplemental Cash Flow Information
Interest paid$15,779 $11,428 
Invoices accrued for construction, tenant improvements and other capitalized costs$17,805 $12,830 
Mortgage notes payable assumed upon acquisition (adjusted to fair value)$ $19,269 
Capitalized interest$118 $421 
The accompanying notes, together with the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, are an integral part of these financial statements.


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies
Business Overview
Healthcare Realty Trust Incorporated (the "Company") is a real estate investment trust ("REIT") that owns, leases, manages, acquires, finances, develops and redevelops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States. As of March 31, 2021, the Company had gross investments of approximately $4.6 billion in 223 real estate properties located in 24 states totaling approximately 16.1 million square feet. The Company provided leasing and property management services to approximately 13.1 million square feet nationwide. The Company owns 50% of an unconsolidated joint venture with Teachers Insurance and Annuity Association ("TIAA Joint Venture") and earns certain fees as the managing member. As of March 31, 2021, the TIAA Joint Venture owned five buildings. See Note 2 for more details regarding the Company's unconsolidated joint ventures.

Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, management believes there has been no material change in the information disclosed in the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2020. All material intercompany transactions and balances have been eliminated in consolidation.
This interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. In addition, the interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2021 for many reasons including, but not limited to, acquisitions, dispositions, capital financing transactions, changes in interest rates and the effects of other trends, risks and uncertainties.

Principles of Consolidation
The Company’s Condensed Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, and joint ventures and partnerships where the Company controls the operating activities. GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). Accounting Standards Codification 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.
For property holding entities not determined to be VIEs, the Company consolidates such entities in which it owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the entity if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements.
As of March 31, 2021, the Company's unconsolidated joint venture arrangements were accounted for using the equity method of accounting as the Company exercised significant influence over but did not control these entities. See Note 2 for more details regarding the Company's unconsolidated joint ventures.


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Use of Estimates in the Condensed Consolidated Financial Statements
Preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates.
The Company considered the impact of COVID-19 on these assumptions and estimates used and determined that there were no material adverse impacts on the Company's results of operations and financial position at March 31, 2021. There can be no assurance that COVID-19 will not have a future material adverse impact on the financial results and business operations of the Company.
Revenue from Contracts with Customers (Topic 606)
The Company recognizes certain revenue under the core principle of Topic 606. This topic requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease revenue is not within the scope of Topic 606. To achieve the core principle, the Company applies the five step model specified in the guidance.
Revenue that is accounted for under Topic 606 is segregated on the Company’s Condensed Consolidated Statements of Income in the Other operating line item. This line item includes parking income, management fee income and other miscellaneous income. Below is a detail of the amounts by category:
THREE MONTHS ENDED
March 31,
in thousands20212020
Type of Revenue
Parking income$1,658 $2,051 
Management fee income239 78 
Miscellaneous53 34 
$1,950 $2,163 
The Company’s major types of revenue that are accounted for under Topic 606 that are listed above are all accounted for as the performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time, and the Company recognizes revenue monthly based on this principle.

New Accounting Pronouncements
Accounting Standards Update No. 2020-04
On March 12, 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Note 2. Real Estate Investments
2021 Company Acquisitions
The following table details the Company's acquisitions for the three months ended March 31, 2021:
Dollars in thousands
TYPE 1
DATE ACQUIREDPURCHASE PRICE
CASH
CONSIDERATION
2
REAL
ESTATE
OTHER 3
SQUARE FOOTAGE
San Diego, CA
MOB1/7/21$17,150 $17,182 $17,182 $ 22,461 
Dallas, TX 4
MOB2/1/2122,515 22,299 22,641 (342)121,709 
Atlanta, GA 4
MOB2/17/219,800 10,027 10,073 (46)44,567 
Washington, D.C.MOB3/3/2112,750 12,709 12,658 51 26,496 
Total real estate acquisitions$62,215 $62,217 $62,554 $(337)215,233 
1MOB = medical office building.
2Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.
3Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.
4Includes two properties.

Unconsolidated Joint Venture Acquisitions
The TIAA Joint Venture is not consolidated for purposes of the Company's Condensed Consolidated Financial Statements. The following table details the TIAA Joint Venture acquisition for the three months ended March 31, 2021:
Dollars in thousands
TYPE 1
DATE ACQUIREDPURCHASE PRICE
CASH
CONSIDERATION
2
REAL
ESTATE
OTHER 3
SQUARE FOOTAGEOWNERSHIP %
Denver, COMOB3/30/21$14,375 $14,056 $14,550 $(494)59,35950 %
1MOB = medical office building.
2Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.
3Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.

Subsequent to March 31, 2021, the TIAA Joint Venture acquired the following properties:
Dollars in thousands
TYPE 1
DATE ACQUIREDPURCHASE PRICESQUARE FOOTAGEOWNERSHIP %
Colorado Springs, COMOB4/1/21$7,200 27,510 50 %
Los Angeles, CAMOB4/8/2131,335 57,57350 %
San Antonio, TXMOB4/30/2113,600 45,00050 %
$52,135 130,083 
1MOB = medical office building.
Unconsolidated Joint Ventures
The Company's investment in and loss recognized for the three months ended March 31, 2021 and 2020 related to its joint ventures accounted for under the equity method are shown in the table below:
THREE MONTHS ENDED
March 31,
Dollars in thousands20212020
Investments in unconsolidated joint ventures, beginning of period 1
$73,137 $8,130 
New investments during the period10,880  
Equity loss recognized during the period 1
(74)(11)
Owner distributions (119)
Investments in unconsolidated joint ventures, end of period 1
$83,943 $8,000 
1In addition to the TIAA Joint Venture, the Company also has a 55% and 27% ownership interest in two limited liability companies that each own a parking garage in Atlanta, Georgia.




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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
2021 Real Estate Asset Dispositions
The following table details the Company's dispositions for the three months ended March 31, 2021:
Dollars in millions
TYPE 1
Date
Disposed
Sale
Price
Closing AdjustmentsNet ProceedsNet Real Estate Investment
Other (including receivables)2
Gain/(Impairment)Square Footage (Unaudited)
Los Angeles, CA 3
MOB3/11/21$26,000 $(555)$25,445 $6,046 $509 $18,890 73,906
1MOB = medical office building
2Includes straight-line rent receivables, leasing commissions and lease inducements.
3Includes two properties sold to a single purchaser in two transactions which occurred on March 5 and March 11, 2021.

Subsequent Disposition
On April 12, 2021, the Company disposed of a 19,732 square foot single-tenant net leased medical office building located in Atlanta, GA. The sales price was $8.1 million and the Company's net investment in the building as of March 31, 2021 was approximately $5.7 million.
Assets Held for Sale
As of March 31, 2021 and December 31, 2020, the Company had nine and four properties, respectively, classified as assets held for sale. The following properties were reclassified to held for sale during the first quarter of 2021:
a medical office building in Atlanta, GA with a contractual sales price of $8.1 million. The sales price is greater than the current net investment of approximately $5.7 million. The Company disposed of this property on April 12, 2021.
three medical office buildings in Gadsden, AL with a contractual sales price of $5.5 million. An impairment charge of $0.8 million was recorded based on the contractual sales price less estimated costs to sell.
a medical office building in Richmond, VA with a contractual sales price of $52.0 million. The contractual sales price is greater than the current net investment of approximately $29.4 million.
The table below reflects the assets and liabilities of the properties classified as held for sale as of March 31, 2021 and December 31, 2020:
(Dollars in thousands)March 31, 2021December 31, 2020
Balance Sheet data:
Land$3,148 $1,664 
Building, improvements and lease intangibles96,013 27,443 
Personal property56 39 
99,217 29,146 
Accumulated depreciation(40,381)(10,455)
Real estate assets held for sale, net58,836 18,691 
Operating lease right-of-use assets3,241  
Other assets, net2,501 1,955 
Assets held for sale, net$64,578 $20,646 
Accounts payable and accrued liabilities$588 $533 
Other liabilities754 683 
Liabilities of assets held for sale$1,342 $1,216 
Note 3. Leases
Lessor Accounting
The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2040. Some leases provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as consumer price index ("CPI"). In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the three months ended March 31, 2021 was $128.4 million.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements, as of March 31, 2021 were as follows:
In thousandsOperating
2021$286,175 
2022345,229 
2023298,828 
2024233,601 
2025183,405 
2026 and thereafter459,569 
$1,806,807 
Lessee Accounting
As of March 31, 2021, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of March 31, 2021, the Company had 104 properties, excluding one property classified as held for sale, totaling 8.6 million square feet that were held under ground leases. Some of the ground lease renewal terms are based on fixed rent renewal terms and others have market rent renewal terms. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on CPI. The Company had 42 prepaid ground leases, excluding one property classified as held for sale, as of March 31, 2021. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.1 million and $0.2 million of the Company’s rental expense for the three months ended March 31, 2021 and 2020, respectively.
The Company’s future lease payments (primarily for its 62 non-prepaid ground leases) as of March 31, 2021 were as follows:
In thousandsOPERATINGFINANCING
2021$3,164 $611 
20224,932 783 
20234,971 793 
20245,027 815 
20255,068 826 
2026 and thereafter303,574 87,983 
Total undiscounted lease payments326,736 91,811 
Discount(234,815)(73,089)
Lease liabilities$91,921 $18,722 



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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
The following table provides details of the Company's total lease expense for the three months ended March 31, 2021 and 2020:
THREE MONTHS ENDED
March 31,
In thousands20212020
Operating lease cost
Operating lease expense$1,178 $1,174 
Variable lease expense896 800 
Finance lease cost
Amortization of right-of-use assets88 70 
Interest on lease liabilities247 237 
Total lease expense$2,409 $2,281 
Other information
Operating cash flows outflows related to operating leases$1,844 $2,550 
Financing cash flows outflows related to financing leases$362 $321 
Weighted-average remaining lease term (excluding renewal options) - operating leases48.449.4
Weighted-average remaining lease term (excluding renewal options) -finance leases64.264.9
Weighted-average discount rate - operating leases5.7 %5.7 %
Weighted-average discount rate - finance leases5.4 %5.4 %

Note 4. Notes and Bonds Payable
The table below details the Company’s notes and bonds payable. 
 MATURITY DATESBALANCE AS OFEFFECTIVE INTEREST RATE
as of 3/31/2021
Dollars in thousands3/31/202112/31/2020
$700 million Unsecured Credit Facility
5/23$7,000 $ 1.01 %
$200 million Unsecured Term Loan Facility, net of issuance costs 1
5/24199,292 199,236 1.96 %
$150 million Unsecured Term Loan due 2026 2
6/26149,503 149,479 3.13 %
Senior Notes due 2025, net of discount and issuance costs 3
5/25248,841 248,776 4.08 %
Senior Notes due 2028, net of discount and issuance costs1/28296,243 296,123 3.84 %
Senior Notes due 2030, net of discount and issuance costs 4
3/30296,554 296,468 2.71 %
Senior Notes due 2031, net of discount and issuance costs 3/31295,037 294,924 2.24 %
Mortgage notes payable, net of discounts and issuance costs and including premiums11/22-4/27116,781 117,763 4.07 %
$1,609,251 $1,602,769 
1The effective interest rate includes the impact of interest rate swaps on $75.0 million at a weighted average rate of 2.37% (plus the applicable margin rate, currently 100 basis points).
2The effective interest rate includes the impact of interest rate swaps on $100.0 million at a weighted average rate of 2.23% (plus the applicable margin rate, currently 160 basis points).
3The effective interest rate includes the impact of the $1.7 million settlement of forward-starting interest rate swaps that is included in Accumulated other comprehensive loss on the Company's Condensed Consolidated Balance Sheets.
4The effective interest rate includes the impact of the $4.3 million settlement of forward interest rate hedges that is included in Accumulated other comprehensive loss on the Company's Condensed Consolidated Balance Sheets.


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Note 5. Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income (Loss) ("AOCI") and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.
As of March 31, 2021, the Company had eight outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
DERIVATIVE INSTRUMENTNUMBER OF INSTRUMENTSNOTIONAL AMOUNT
in millions
Interest rate swaps8 $175.0

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company's derivative financial instruments, as well as their classification on the Condensed Consolidated Balance Sheet as of March 31, 2021.
BALANCE AT MARCH 31, 2021
In thousandsBALANCE SHEET LOCATIONFAIR VALUE
Derivatives designated as hedging instruments
Interest rate swapsOther liabilities$9,378 
Total derivatives designated as hedging instruments$9,378 


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
The table below presents the effect of cash flow hedge accounting on AOCI during the three months ended March 31, 2021 and 2020 related to the Company's outstanding interest rate swaps.
(GAIN) LOSS RECOGNIZED IN
AOCI ON DERIVATIVE
three months ended March 31,
LOSS RECLASSIFIED FROM
AOCI INTO INCOME
three months ended March 31,
In thousands2021202020212020
Interest rate swaps$(2,850)$9,663 Interest expense$946 $271 
Settled treasury hedges 4,267 Interest expense107 15 
Settled interest rate swaps  Interest expense42 42 
 $(2,850)$13,930 Total interest expense$1,095 $328 

The Company estimates that $4.4 million will be reclassified from AOCI to interest expense over the next 12 months.
Credit-risk-related Contingent Features
The Company's agreements with each of its derivative counterparties contain a cross-default provision under which the Company could be declared in default of its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness.
As of March 31, 2021, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $9.8 million. As of March 31, 2021, the Company has not posted any collateral related to these agreements and was not in breach of any agreement.
Note 6. Commitments and Contingencies
Legal Proceedings
The Company is, from time to time, involved in litigation arising in the ordinary course of business. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
Redevelopment Activity
The Company continued the redevelopment of a 217,114 square foot medical office building in Dallas, Texas. As of March 31, 2021, the Company funded approximately $0.4 million in project costs. The building continues to operate with in-place leases during construction. The first new tenant lease of the redevelopment is expected to commence in the first quarter of 2022.
The Company continued the redevelopment of a 110,883 square foot medical office building in Memphis, Tennessee. As of March 31, 2021, the Company funded approximately $27.1 million in project costs. The core and shell portion of this redevelopment was completed and the first new tenant took occupancy in the first quarter of 2021, with the construction of tenant spaces to be completed throughout the remainder of 2021.
In April 2021, the Company began the redevelopment of a medical office building in Tacoma, Washington. The redevelopment includes interior and exterior improvements to the existing building, plus the addition of 23,000 square feet. The Company expects the tenant lease to commence in the second quarter of 2022.
Note 7. Stockholders' Equity
Common Stock    
The following table provides a reconciliation of the beginning and ending shares of common stock outstanding for the three months ended March 31, 2021 and the year ended December 31, 2020:
MARCH 31, 2021DECEMBER 31, 2020
Balance, beginning of period139,487,375 134,706,154 
Issuance of common stock2,057,157 4,637,445 
Nonvested share-based awards, net of withheld shares 115,483 143,776 
Balance, end of period141,660,015 139,487,375 


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

At-The-Market Equity Offering Program
The Company has in place an at-the-market equity offering program to sell up to an aggregate of $500.0 million of the Company’s common stock from time to time. The following table details the Company's at-the-market activity, including forward transactions:
WEIGHTED AVERAGE SALE PRICE
per share
SHARES PRICEDSHARES SETTLEDSHARES REMAINING TO BE SETTLEDNET PROCEEDS
in millions
Balance, beginning of period$   1,823,259 $ 
1Q 2021$30.09 215,532 2,038,791  $62.7 
April 2021$30.81 4,133,619  4,133,619 $ 
The 4.1 million shares remaining are expected to be settled by April 2022, and the Company expects net proceeds ranging from $120.9 million to $125.5 million, depending on the timing of settlement. Expected net proceeds are calculated by reducing the initial price by adjustments provided in the forward equity arrangements. After accounting for these settlements, the Company has approximately $163.6 million remaining available to be sold under the current sales agreements at the date of this filing.
Common Stock Dividends
During the three months ended March 31, 2021, the Company declared and paid common stock dividends totaling $0.3025 per share. On May 4, 2021, the Company declared a quarterly common stock dividend in the amount of $0.3025 per share payable on May 28, 2021 to stockholders of record on May 17, 2021.
Earnings Per Common Share
The Company uses the two-class method of computing net earnings per common shares. The Company's nonvested share-based awards are considered participating securities pursuant to the two-class method.
During the three months ended March 31, 2021, the Company did not enter into any forward sale agreements to sell shares of common stock through the Company's at-the-market equity offering program. The Company considered the accounting guidance governing financial instruments and derivatives to account for these agreements and concluded that it was not a liability as it did not embody obligations to repurchase our shares of common stock nor did it embody obligations to issue a variable number of shares for which the monetary value was predominately fixed, varying with something other than the fair value of the shares, or varying inversely in relation to the shares. In addition, the Company evaluated whether the agreements met the derivative and hedging guidance scope exception to be accounted for as an equity instrument and concluded that the agreements can be classified as equity.
The Company used the treasury method to determine the dilution from the forward equity agreements during the period of time prior to settlement. The number of weighted-average shares outstanding used in the computation of earnings per common share for the three months ended March 31, 2021 did not include the effect from any assumed issuance of shares of common stock pursuant to the settlement of the forward equity agreements at the contractual price, less the assumed repurchase of the common stock at the average market price using the proceeds, adjusted for costs to borrow. For the three months ended March 31, 2021, no weighted-average incremental shares of common stock were excluded from the computation of weighted-average common shares outstanding - diluted.


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Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2021 and 2020.
THREE MONTHS ENDED MARCH 31,
Dollars in thousands, except per share data20212020
Weighted average common shares outstanding
Weighted average common shares outstanding140,567,352 134,758,335 
Non-vested shares(1,793,598)(1,722,090)
Weighted average common shares outstanding - basic138,773,754 133,036,245 
Weighted average common shares outstanding - basic138,773,754 133,036,245 
Dilutive effect of forward equity shares  
Dilutive effect of employee stock purchase plan97,064 113,321 
Weighted average common shares outstanding - diluted138,870,818 133,149,566 
Net Income$24,022 $4,315 
Dividends paid on nonvested share-based awards(540)(517)
Net income applicable to common stockholders$23,482 $3,798 
Basic earnings per common share - net income $0.17 $0.03 
Diluted earnings per common share - net income $0.17 $0.03 

Incentive Plans
During the three months ended March 31, 2021, the Company made the following stock awards:
On January 1, 2021, the Company granted non-vested stock awards to certain officers with a grant date fair value of $0.6 million which consisted of an aggregate 21,396 shares through its salary deferral program.
On February 10, 2021, the Company granted non-vested stock awards to its four named executive officers, five senior vice presidents, and five first vice presidents with a grant date fair value totaling $3.8 million, which consisted of an aggregate 124,648 non-vested shares, with a five-year vesting period.
Also, on February 10, 2021, the Company granted a performance-based award to officers, excluding the four named executive officers, five senior vice presidents, and five first vice presidents, under the Long-term Incentive Program totaling $0.6 million, which consisted of an aggregate 19,679 non-vested shares.
A summary of the activity under the Company's share-based incentive plans for the three months ended March 31, 2021 and 2020 is included in the table below.
THREE MONTHS ENDED MARCH 31,
 20212020
Share-based awards, beginning of period1,766,061 1,754,066 
Granted165,723 39,344 
Vested(145,413)(68,649)
Share-based awards, end of period