10-Q 1 hr-20220630.htm 10-Q hr-20220630
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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: June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission File Number: 001-35568 (Healthcare Realty Trust Incorporated)

HEALTHCARE REALTY TRUST INCORPORATED

(Exact name of Registrant as specified in its charter) 
Maryland(Healthcare Realty Trust Incorporated)20-4738467
(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)
www.healthcarerealty.com
(Internet address)
Healthcare Trust of America, Inc.
16435 N. Scottsdale Road, Suite 320
Scottsdale, Arizona 85254
(Former name, former address and former fiscal year, if changed since last report)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each 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 Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

YesNo

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).    

YesNo

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).

YesNo


As of August 5, 2022, the Registrant had 380,549,204 shares of Common Stock outstanding.



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 Legacy HTA by means of a contribution and assignment agreement to the OP such that 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 the UPREIT reorganization (the “Combined Company”) and to provide a platform for the Combined Company to more efficiently acquire properties in a tax-deferred manner. The Combined Company operates under the name “Healthcare Realty Trust Incorporated” and its shares of class A common stock, $0.01 par value per share, trades on the New York Stock Exchange (the “NYSE”) under the ticker symbol “HR”.

For accounting purposes, the Merger is treated as a “reverse acquisition” in which Legacy HTA is considered the legal acquirer and Legacy HR is considered the accounting acquirer. As a result, the historical financial statements of the accounting acquiror, Legacy HR, become the historical financial statements of Legacy HTA. Because this Quarterly Report on Form 10-Q is being filed by the Combined Company with respect to periods ended prior to the Merger, this report contains the financial statements and other information of Legacy HR as of June 30, 2022. The financial statements and other information of Legacy HTA and the OP as of June 30, 2022 are contained in a Current Report on Form 8-K filed by the Combined Company concurrently with this Quarterly Report on Form 10-Q. Future periodic reports for periods ending following the Merger will reflect financial and other information of the Combined Company.

For purposes of this Quarterly Report on Form 10-Q, references to the “Company” are to Legacy HR and reference to the “Combined Company” are to Legacy HR, Legacy HTA and the OP after giving effect to the Merger.



HEALTHCARE REALTY TRUST INCORPORATED
FORM 10-Q
June 30, 2022


    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
JUNE 30, 2022
DECEMBER 31, 2021
Real estate properties
Land$456,306 $387,918 
Buildings, improvements and lease intangibles4,673,026 4,458,119 
Personal property11,799 11,761 
Investment in financing receivable, net118,446 186,745 
Financing lease right-of-use assets71,632 31,576 
Construction in progress16,728 3,974 
Land held for development22,952 24,849 
Total real estate properties5,370,889 5,104,942 
Less accumulated depreciation and amortization(1,402,509)(1,338,743)
Total real estate properties, net3,968,380 3,766,199 
Cash and cash equivalents34,312 13,175 
Assets held for sale, net 57 
Operating lease right-of-use assets126,204 128,386 
Investments in unconsolidated joint ventures210,781 161,942 
Other assets, net209,200 189,160 
Total assets$4,548,877 $4,258,919 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Notes and bonds payable$2,063,755 $1,801,325 
Accounts payable and accrued liabilities84,210 86,108 
Liabilities of assets held for sale 294 
Operating lease liabilities94,748 96,138 
Financing lease liabilities62,195 22,551 
Other liabilities66,102 67,387 
Total liabilities2,371,010 2,073,803 
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; 151,637 and 150,457 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
1,516 1,505 
Additional paid-in capital4,002,526 3,972,917 
Accumulated other comprehensive loss(1,250)(9,981)
Cumulative net income attributable to common stockholders1,314,515 1,266,158 
Cumulative dividends(3,139,440)(3,045,483)
Total stockholders' equity2,177,867 2,185,116 
Total liabilities and stockholders' equity$4,548,877 $4,258,919 
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, 2021, are an integral part of these financial statements.


1


Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Income
For the Three and Six Months Ended June 30, 2022 and 2021
Amounts in thousands, except per share data
Unaudited
THREE MONTHS ENDED
June 30,
SIX MONTHS ENDED
June 30,
2022202120222021
Revenues
Rental income$140,632 $128,486 $279,121 $256,874 
Interest from financing receivable, net1,957 510 3,887 510 
Other operating2,738 2,427 5,213 4,378 
145,327 131,423 288,221 261,762 
Expenses
Property operating57,010 51,509 114,474 103,724 
General and administrative10,540 8,545 21,576 17,044 
Acquisition and pursuit costs1,352 670 2,655 1,414 
Merger-related costs7,085  13,201  
Depreciation and amortization55,731 49,826 109,772 99,905 
131,718 110,550 261,678 222,087 
Other income (expense)
Gain on sales of real estate properties8,496 20,970 53,280 39,860 
Interest expense(15,543)(13,261)(29,204)(26,523)
Loss on extinguishment of debt  (1,429) 
Impairment of real estate properties (5,078)25 (5,912)
Equity loss from unconsolidated joint ventures(307)(146)(652)(220)
Interest and other (expense) income, net(125)(262)(206)238 
(7,479)2,223 21,814 7,443 
Net income $6,130 $23,096 $48,357 $47,118 
Basic earnings per common share $0.04 $0.16 $0.32 $0.33 
Diluted earnings per common share $0.04 $0.16 $0.32 $0.33 
Weighted average common shares
outstanding - basic
149,676 141,917 149,321 140,354 
Weighted average common shares
outstanding - diluted
149,739 142,049 149,397 140,468 

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, 2021, are an integral part of these financial statements.


2


Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Comprehensive Income
For the Three and Six Months Ended June 30, 2022 and 2021
Amounts in thousands
Unaudited
THREE MONTHS ENDED
 June 30,
SIX MONTHS ENDED
June 30,
2022202120222021
Net income $6,130 $23,096 $48,357 $47,118 
Other comprehensive income
Interest rate swaps
Reclassification adjustments for losses included in net income (interest expense)823 1,114 1,909 2,209 
Gains (losses) arising during the period on interest rate swaps1,663 (807)6,822 2,043 
2,486 307 8,731 4,252 
Comprehensive income $8,616 $23,403 $57,088 $51,370 
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, 2021, are an integral part of these financial statements.


3


Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Equity
For the Three Months Ended June 30, 2022 and 2021
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 March 31, 2022$1,516 $3,999,060 $(3,736)$1,308,385 $(3,092,343)$2,212,882 
Issuance of common stock, net of issuance costs— 110 — — — 110 
Share-based compensation— 3,356 — — — 3,356 
Net income— — — 6,130 — 6,130 
Reclassification adjustments for losses included in net income (interest expense)

— — 823 — — 823 
Gains arising during the period on
interest rate swaps
— — 1,663 — — 1,663 
Dividends to common stockholders
($0.31 per share)
— — — — (47,097)(47,097)
Balance at June 30, 2022$1,516 $4,002,526 $(1,250)$1,314,515 $(3,139,440)$2,177,867 
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Cumulative
Net Income
Cumulative
Dividends
Total
Stockholders’
Equity
Balance at March 31, 2021$1,417 $3,699,867 $(13,887)$1,223,521 $(2,912,809)$1,998,109 
Issuance of common stock, net of issuance costs38 116,153 — — — 116,191 
Common stock redemptions— (55)— — — (55)
Share-based compensation— 2,627 — — — 2,627 
Net income— — — 23,096 — 23,096 
Reclassification adjustments for losses included in net income (interest expense)
— — 1,114 — — 1,114 
Losses arising during the period on interest rate swaps
— — (807)— — (807)
Dividends to common stockholders ($0.3025 per share)
— — — — (44,021)(44,021)
Balance at June 30, 2021$1,455 $3,818,592 $(13,580)$1,246,617 $(2,956,830)$2,096,254 

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, 2021, are an integral part of these financial statements.












4


Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Equity
For the Six Months Ended June 30, 2022 and 2021
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, 2021$1,505 $3,972,917 $(9,981)$1,266,158 $(3,045,483)$2,185,116 
Issuance of common stock, net of issuance costs7 22,764 — — — 22,771 
Common stock redemptions— (206)— — — (206)
Share-based compensation4 7,051 — — — 7,055 
Net Income— — — 48,357 — 48,357 
Reclassification adjustments for losses included in net income (interest expense)

— — 1,909 — — 1,909 
Gains arising during the period on
interest rate swaps
— — 6,822 — — 6,822 
Dividends to common stockholders
($0.62 per share)
— — — — (93,957)(93,957)
Balance at June 30, 2022$1,516 $4,002,526 $(1,250)$1,314,515 $(3,139,440)$2,177,867 
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 costs59 179,216 — — — 179,275 
Common stock redemptions(1)(1,610)— — — (1,611)
Share-based compensation2 5,645 — — — 5,647 
Net income— — — 47,118 — 47,118 
Reclassification adjustments for losses included in net income (interest expense)
— — 2,209 — — 2,209 
Gains arising during the period on interest rate swaps
— — 2,043 — — 2,043 
Dividends to common stockholders ($0.6050 per share)
— — — — (86,803)(86,803)
Balance at June 30, 2021$1,455 $3,818,592 $(13,580)$1,246,617 $(2,956,830)$2,096,254 
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, 2021, are an integral part of these financial statements.


5


Healthcare Realty Trust Incorporated
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2022 and 2021
Amounts in thousands
Unaudited
OPERATING ACTIVITIES
SIX MONTHS ENDED
June 30,
20222021
Net income$48,357 $47,118 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization109,772 99,905 
Other amortization2,680 1,728 
Share-based compensation7,055 5,647 
Amortization of straight-line rent receivable (lessor)(3,292)(3,024)
Amortization of straight-line rent on operating leases (lessee)756 735 
Gain on sales of real estate properties(53,280)(39,860)
Loss on extinguishment of debt1,429  
Impairment of real estate properties(25)5,912 
Equity loss from unconsolidated joint ventures 652 220 
Distributions from unconsolidated joint ventures108  
Non-cash interest from financing receivable(388) 
Changes in operating assets and liabilities:
Other assets, including right-of-use-assets540 (4,746)
Accounts payable and accrued liabilities(3,166)(10,418)
Other liabilities2,923 2,412 
Net cash provided by operating activities114,121 105,629 
INVESTING ACTIVITIES
Acquisitions of real estate(287,004)(100,121)
Development of real estate(7,475)(1,415)
Additional long-lived assets(45,631)(41,839)
Investments in unconsolidated joint ventures(49,599)(45,018)
Investment in financing receivable498 (104,648)
Proceeds from sales of real estate properties108,044 90,144 
Net cash used in investing activities(281,167)(202,897)
FINANCING ACTIVITIES
Net borrowings on unsecured credit facility280,500 13,000 
Repayments of notes and bonds payable(18,224)(1,925)
Redemption of notes and bonds payable(2,184) 
Dividends paid(93,774)(86,803)
Net proceeds from issuance of common stock22,768 179,381 
Common stock redemptions(852)(2,014)
Debt issuance and assumption costs (252)
Payments made on finance leases(51)(683)
Net cash provided by financing activities188,183 100,704 
Increase in cash and cash equivalents21,137 3,436 
Cash and cash equivalents at beginning of period13,175 15,303 
Cash and cash equivalents at end of period$34,312 $18,739 
Supplemental Cash Flow Information
Interest paid$26,641 $24,659 
Invoices accrued for construction, tenant improvements and other capitalized costs$18,874 $19,506 
Capitalized interest$145 $154 

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, 2021, are an integral part of these financial statements.


6



Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies
Business Overview
Healthcare Realty Trust Incorporated 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. References to the Company in these Notes to the Condensed Consolidated Financial Statements are to Legacy HR as the "accounting acquiror" in the Merger defined and described in more detail in Note 9 to these Condensed Consolidated Financial Statements. As of June 30, 2022, the Company had gross investments of approximately $5.4 billion in 255 real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property. The Company's 255 real estate properties are located in 23 states and total approximately 17.2 million square feet. The Company provided leasing and property management services to approximately 15.4 million square feet nationwide. The Company owns 50% of an unconsolidated joint venture with Teachers Insurance and Annuity Association (the "TIAA Joint Venture") and earns certain fees as the managing member. As of June 30, 2022, the TIAA Joint Venture owned 21 real estate properties. See Note 2 for more details regarding the Company's unconsolidated joint ventures. Any references to square footage or occupancy percentage, and any amounts derived from these values in these notes to the Company's Condensed Consolidated Financial Statements, are outside the scope of our independent registered public accounting firm’s review.
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 Company's Annual Report on Form 10-K for the year ended December 31, 2021. All material intercompany transactions and balances have been eliminated in consolidation.
This interim financial information should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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, 2022 for many reasons including, but not limited to, the Merger (as discussed in more detail in Note 9 below), 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, as of June 30, 2022, 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 any entity in which the Company owns


7



Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
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 June 30, 2022, 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.
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.
Investments in Leases - Financing Receivables, Net
In accordance with Accounting Standards Codification ("ASC") 842, for transactions in which the Company enters into a contract to acquire an asset and leases it back to the seller (i.e., a sale leaseback transaction), control of the asset is not considered to have transferred when the seller-lessee has a purchase option. As a result, the Company does not recognize the underlying real estate asset but instead recognizes a financial asset in accordance with ASC 310 “Receivables”.
During the first quarter of 2022, the Company reclassified the two medical office buildings in Nashville, Tennessee that were acquired in separate sale-leaseback transactions in the fourth quarter of 2021. The leases with the sellers commenced in the first quarter, which resulted in the allocation of the financing receivable totaling $73.9 million to land and building and improvements.
Income from Lease Financing Receivables
The Company recognizes the related income from the financing receivable based on an imputed interest rate over the terms of the applicable lease. As a result, the interest recognized from the financing receivable will not equal the cash payments from the lease agreement.
Acquisition costs incurred in connection with entering into the financing receivable are treated as loan origination fees. These costs are classified with the financing receivable and are included in the balance of the net investment. Amortization of these amounts will be recognized as a reduction to Income from financing receivable, net over the life of the lease.
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
June 30,
SIX MONTHS ENDED
June 30,
in thousands2022202120222021
Type of Revenue
Parking income$1,919 $1,880 $3,672 $3,538 
Management fee income 1
783 419 1,438 658 
Miscellaneous36 128 103 182 
$2,738 $2,427 $5,213 $4,378 
1 Includes the recovery of certain expenses under the financing receivable as outlined in the management agreement.

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.


8



Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
New Accounting Pronouncements
Accounting Standards Update No. 2020-04
On March 12, 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. Management continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
Note 2. Real Estate Investments
2022 Company Acquisitions
The following table details the Company's acquisitions for the six months ended June 30, 2022:
Dollars in thousandsDATE ACQUIREDPURCHASE PRICE
CASH
CONSIDERATION
1
REAL
ESTATE 2
OTHER 3
SQUARE FOOTAGE
Dallas, TX 2/11/22$8,175 $8,185 $8,202 $(17)18,000 
San Francisco, CA 4
3/7/22114,000 112,986 108,687 4,299 166,396 
Atlanta, GA4/7/226,912 7,054 7,178 (124)21,535 
Denver, CO4/13/226,320 5,254 5,269 (15)12,207 
Colorado Springs, CO 5
4/13/2213,680 13,686 13,701 (15)25,800 
Seattle, WA4/28/228,350 8,334 8,370 (36)13,256 
Houston, TX4/28/2236,250 36,299 36,816 (517)76,781 
Los Angeles, CA4/29/2235,000 35,242 25,400 9,842 34,282 
Oklahoma City, OK4/29/2211,100 11,259 11,334 (75)34,944 
Raleigh, NC 4
5/31/2227,500 26,710 27,127 (417)85,113 
Tampa, FL 5
6/9/2218,650 18,619 18,212 407 55,788 
Total real estate acquisitions$285,937 $283,628 $270,296 $13,332 544,102 
1Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.
2Excludes financing right of use assets.
3Includes other assets acquired, liabilities assumed, and intangibles recognized at acquisition.
4Includes three properties.
5Includes two properties.

Subsequent to June 30, 2022 and unrelated to the Merger, the Company acquired the following property:
Dollars in thousandsDATE ACQUIREDPURCHASE PRICESQUARE FOOTAGE
Seattle, WA8/1/22$4,850 10,593 





9



Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
2022 TIAA 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 acquisitions for the six months ended June 30, 2022:
Dollars in thousandsDATE ACQUIREDPURCHASE PRICE
CASH
CONSIDERATION
1
REAL
ESTATE
OTHER 2
SQUARE FOOTAGECOMPANY OWNERSHIP %
San Francisco, CA 3
3/7/22$67,175 $66,789 $65,179 $1,610 110,865 50 %
Los Angeles, CA 4
3/7/2233,800 32,384 32,390 (6)103,259 50 %
Total real estate acquisitions$100,975 $99,173 $97,569 $1,604 214,124 

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.
3Includes three properties.
4Includes two properties.


Unconsolidated Joint Ventures
The Company's investment in and loss recognized for the three and six months ended June 30, 2022 and 2021 related to its joint ventures accounted for under the equity method are shown in the table below:
THREE MONTHS ENDED
June 30,
SIX MONTHS ENDED
June 30,
Dollars in thousands2022202120222021
Investments in unconsolidated joint ventures, beginning of period 1
$211,195 $83,943 $161,942 $73,137 
New investments during the period 34,138 49,599 45,018 
Equity loss recognized during the period 1
(307)(146)(652)(220)
Owner Distributions(107) (108) 
Investments in unconsolidated joint ventures, end of period 1
$210,781 $117,935 $210,781 $117,935 
1In addition to the TIAA Joint Venture, the Company also has a 55% and 27% ownership interest, respectively, in two limited liability companies that each own a parking garage in Atlanta, Georgia.

2022 Real Estate Asset Dispositions
The following table details the Company's dispositions for the six months ended June 30, 2022:
Dollars in millionsDATE DISPOSEDSALE PRICECLOSING ADJUSTMENTSNET PROCEEDSNET REAL ESTATE INVESTMENT
OTHER (INCLUDING RECEIVABLES) 1
GAIN/(IMPAIRMENT)SQUARE FOOTAGE
Loveland, CO 2
2/24/22$84,950 $(45)$84,905 $40,095 $4 $44,806 150,291 
San Antonio, TX 2
4/15/2225,500 (2,272)23,228 14,381 284 8,563 201,523 
Total dispositions$110,450 $(2,317)$108,133 $54,476 $288 $53,369 351,814 
1Includes straight-line rent receivables, leasing commissions and lease inducements.
2Includes two properties.



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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Assets Held for Sale
The Company did not have any properties classified as assets held for sale as of June 30, 2022 and December 31, 2021. The table below reflects the assets and liabilities of the properties classified as held for sale as of June 30, 2022 and December 31, 2021:
Dollars in thousandsJune 30, 2022December 31, 2021
Other assets, net$ $57 
Assets held for sale, net$ $57 
Accounts payable and accrued liabilities$ $169 
Other liabilities 125 
Liabilities of assets held for sale$ $294 
Note 3. Leases
Lessor Accounting
The Company’s properties generally were 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.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as the consumer price index ("CPI"). In addition, most of the Company's leases include 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 and six months ended June 30, 2022 was $140.6 million and $279.1 million, respectively.
On March 30, 2022, the Company executed a lease as a ground lessor for a 1.9 acre parcel of land in Texas previously recorded in land held for development. The lease is classified as a sales-type lease under Topic 842 as the present value of lease payments equals or exceeds substantially all of the fair value of the underlying asset. The land value of $1.8 million was reclassified from Land held for development to Other assets.
Future lease payments under the non-cancelable operating leases, excluding any reimbursements and the sale-type lease, as of June 30, 2022 were as follows:
Dollars in thousandsOPERATING
2022$214,083 
2023398,689 
2024326,597 
2025269,308 
2026217,068 
2027 and thereafter566,038 
$1,991,783 
Lessee Accounting
As of June 30, 2022, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. As of June 30, 2022, the Company had 108 properties totaling 8.9 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 41 prepaid ground leases as of June 30, 2022. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $0.1


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
million and $0.2 million of the Company’s rental expense for the three months ended June 30, 2022 and 2021, respectively, and $0.3 million for the six months ended June 30, 2022 and 2021, respectively.
The Company’s future lease payments (primarily for its 67 non-prepaid ground leases) as of June 30, 2022 were as follows:
Dollars in thousandsOPERATINGFINANCING
2022$2,118 $735 
20235,071 1,654 
20245,130 1,692 
20255,174 1,723 
20265,201 1,749 
2027 and thereafter306,956 368,730 
Total undiscounted lease payments329,650 376,283 
Discount(234,902)(314,088)
Lease liabilities$94,748 $62,195 
The following table provides details of the Company's total lease expense for the three and six months ended June 30, 2022 and 2021:
THREE MONTHS ENDED
June 30,
SIX MONTHS ENDED
June 30,
Dollars in thousands2022202120222021
Operating lease cost
Operating lease expense$1,194 $1,182 $2,409 $2,360 
Variable lease expense1,038 972 2,062 1,868 
Finance lease cost
Amortization of right-of-use assets331 88 503 176 
Interest on lease liabilities765 247 1,052 493 
Total lease expense$3,328 $2,489 $6,026 $4,897 
Other information
Operating cash flows outflows related to operating leases$1,799$2,587 $4,596 $4,431 
Operating cash flows outflows related to financing leases$509$ $767 $ 
Financing cash flows outflows related to financing leases$$321 $51 $683 
Right-of-use assets obtained in exchange for new finance lease liabilities$$ $40,589 $ 
Weighted-average remaining lease term (excluding renewal options) - operating leases47.448.1
Weighted-average remaining lease term (excluding renewal options) - finance leases61.764.5
Weighted-average discount rate - operating leases5.6 %5.7 %
Weighted-average discount rate - finance leases5.0 %5.4 %



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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, cont.
Note 4. Notes and Bonds Payable
The table below details the Company’s notes and bonds payable as of June 30, 2022 and 2021. 
 MATURITY DATESBALANCE AS OFEFFECTIVE INTEREST RATE
as of 6/30/2022
Dollars in thousands6/30/202212/31/2021
$700 million Unsecured Credit Facility
5/23$490,500 $210,000 2.69 %
$200 million Unsecured Term Loan due 2024, net of issuance costs 1
5/24199,572 199,460 2.55 %
$150 million Unsecured Term Loan due 2026, net of issuance costs 2
6/26149,447 149,376 2.79 %
Senior Notes due 2025, net of discount and issuance costs 3
5/25249,176 249,040 4.08 %
Senior Notes due 2028, net of discount and issuance costs1/28296,864 296,612