The use of the words "we," "us," or "our" refers to HTA and HTALP, collectively.
The following discussion should be read in conjunction with our condensed
consolidated financial statements and notes appearing elsewhere in this
Quarterly Report, as well as with the audited consolidated financial statements,
accompanying notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in our 2020 Annual Report on Form
10-K.
The information set forth below is intended to provide readers with an
understanding of our financial condition, changes in financial condition and
results of operations.
•Forward-Looking Statements;
•Executive Summary;
•Company Highlights;
•Critical Accounting Policies;
•Recently Issued or Adopted Accounting Pronouncements;
•Factors Which May Influence Results of Operations;
•Results of Operations;
•Non-GAAP Financial Measures;
•Liquidity and Capital Resources;
•Commitments and Contingencies;
•Debt Service Requirements;
•Off-Balance Sheet Arrangements; and
•Inflation.
Forward-Looking Statements
Certain statements contained in this Quarterly Report constitute forward-looking
statements within the meaning of the safe harbor from civil liability provided
for such statements by the Private Securities Litigation Reform Act of 1995 (set
forth in Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended ("Exchange Act")). Such statements include, in
particular, statements about our plans, strategies, prospects and estimates
regarding future MOB market performance. Additionally, such statements are
subject to certain risks and uncertainties, as well as known and unknown risks,
which could cause actual results to differ materially and in adverse ways from
those projected or anticipated. Therefore, such statements are not intended to
be a guarantee of our performance in future periods. Forward-looking statements
are generally identifiable by the use of such terms as "expect," "project,"
"may," "should," "could," "would," "intend," "plan," "anticipate," "estimate,"
"believe," "continue," "opinion," "predict," "potential," "pro forma" or the
negative of such terms and other comparable terminology. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date this Quarterly Report is filed with the SEC. We cannot
guarantee the accuracy of any such forward-looking statements contained in this
Quarterly Report, and we do not intend to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise, except as required by law.
Any such forward-looking statements reflect our current views about future
events, are subject to unknown risks, uncertainties, and other factors, and are
based on a number of assumptions involving judgments with respect to, among
other things, future economic, competitive and market conditions, all of which
are difficult or impossible to predict accurately. To the extent that our
assumptions differ from actual results, our ability to meet such forward-looking
statements, including our ability to generate positive cash flow from
operations, provide dividends to stockholders and maintain the value of our real
estate properties, may be significantly hindered. Factors that might impair our
ability to meet such forward-looking statements include, without limitation,
those discussed in Part I, Item 1A - Risk Factors in our 2020 Annual Report on
Form 10-K, which is incorporated herein and those discussed in Part II, Item 1A.
Risk Factors in this Quarterly Report on Form 10-Q.
Forward-looking statements express expectations of future events. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties that could cause actual
events or results to differ materially from those projected. Due to these
inherent uncertainties, our stockholders are urged not to place undue reliance
on forward-looking statements. Forward-looking statements speak only as of the
date made. In addition, we undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to projections over time, except as required by
law.
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These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
Additional information concerning us and our business, including additional
factors that could materially affect our financial results, is included herein
and in our other filings with the SEC.
Executive Summary
We are the largest publicly-traded REIT focused on MOBs in the U.S. as measured
by the gross leasable area ("GLA") of our MOBs. We conduct substantially all of
our operations through HTALP. We invest in MOBs that we believe will serve the
future of healthcare delivery and MOBs that are primarily located on health
system campuses, near university medical centers, or in core community
outpatient locations. We also focus on key markets that have certain demographic
and macro-economic trends and where we can utilize our institutional
full-service operating platform to generate strong tenant and health system
relationships and operating cost efficiencies. Our primary objective is to
maximize stockholder value with disciplined growth through strategic investments
that provide an attractive risk-adjusted return for our stockholders by
consistently increasing our cash flow. In pursuing this objective, we: (i) seek
internal growth through proactive asset management, leasing, building services
and property management oversight; (ii) target accretive acquisitions and
developments of MOBs in markets with attractive demographics that complement our
existing portfolio; and (iii) actively manage our balance sheet to maintain
flexibility with conservative leverage.  Additionally, from time to time we
consider, on an opportunistic basis, significant portfolio acquisitions that we
believe fit our core business and could enhance our existing portfolio.
Since 2006, we have invested $7.5 billion primarily in MOBs, development
projects, land and other healthcare real estate assets consisting of
approximately 25.6 million square feet of GLA throughout the U.S. Approximately
67% of our portfolio is located on the campuses of, or adjacent to, nationally
and regionally recognized healthcare systems. Our portfolio is diversified
geographically across 32 states, with no state having more than 20% of our total
GLA as of March 31, 2021. We are concentrated in 20 to 25 key markets that are
experiencing higher economic and demographic trends than other markets, on
average, that we expect will drive demand for MOBs. As of March 31, 2021, we had
approximately 1 million square feet of GLA in ten of our top 20 markets and
approximately 93% of our portfolio, based on GLA, is located in the top 75
Metropolitan Statistical Area ("MSAs"), with Dallas, Boston, Houston, Miami and
Indianapolis being our largest markets by annualized base rent.
Company Highlights
Portfolio Operating Performance
•For the three months ended March 31, 2021, our total revenue was $191.5
million, compared to $185.8 million for the three months ended March 31, 2020.
•For the three months ended March 31, 2021, our net income was $22.4 million,
compared to $18.2 million, for the three months ended March 31, 2020.
•For the three months ended March 31, 2021, our net income attributable to
common stockholders was $0.10 per diluted share, or $22.0 million, compared to
$0.08 per diluted share, or $17.9 million for the three months ended March 31,
2020.
•For the three months ended March 31, 2021, HTA's FFO, as defined by NAREIT, was
$97.8 million, or $0.44 per diluted share, compared to $0.42 per diluted share,
or $93.1 million, for the three months ended March 31, 2020.
•For the three months ended March 31, 2021, HTALP's FFO was $98.2 million, or
$0.44 per diluted OP Unit, compared to $0.42 per diluted OP unit, or $93.4
million, for the three months ended March 31, 2020.
•For the three months ended March 31, 2021, HTA's and HTALP's Normalized FFO was
$0.44 per diluted share and OP Unit, or $98.3 million, compared to $0.42 per
diluted share and OP Unit, or $93.6 million for the three months ended March 31,
2020.
•For additional information on FFO and Normalized FFO, see "FFO and Normalized
FFO" below, which includes a reconciliation to net income attributable to common
stockholders/unitholders and an explanation of why we present this non-GAAP
financial measure.
•For the three months ended March 31, 2021, our NOI was $131.9 million, compared
to $128.9 million for the three months ended March 31, 2020.
•For the three months ended March 31, 2021, our Same-Property Cash NOI increased
1.6%, or $1.9 million, to $123.0 million, compared to $121.1 million for the
three months ended March 31, 2020.
•For additional information on our NOI and Same-Property Cash NOI, see "NOI,
Cash NOI and Same-Property Cash NOI" below, which includes a reconciliation from
net income and an explanation of why we present these non-GAAP financial
measures.
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Key Market Focused Strategy and Investments
We believe we have been one of the most active investors in the medical office
sector over the last decade. This has enabled us to create a high quality
portfolio focused on MOBs serving the future of healthcare with scale and
significance in 20 to 25 key markets.
•Our investment strategy includes alignment with key healthcare systems,
hospitals, and leading academic medical universities. We are the largest owner
of on-campus or adjacent MOBs in the country, with approximately 17.2 million
square feet of GLA, or 67%, of our portfolio located in these locations. The
remaining 33% of our portfolio is located in core community outpatient locations
where healthcare is increasingly being delivered.
•Over the past decade, our investments have been focused in our 20 to 25 key
markets which we believe will outperform the broader U.S. markets from an
economic and demographic perspective. As of March 31, 2021, approximately 93% of
our portfolio's GLA is located in the top 75 MSAs. Our key markets represent top
MSAs with strong growth metrics in jobs, household income and population, as
well as low unemployment and mature healthcare infrastructures. Many of our key
markets are also supported by strong university systems.
•Our key market focus has enabled us to establish scale across 20 to 25 key
markets and effectively utilize our asset management and leasing platform to
deliver consistent same store growth and additional yield on investments, as
well as cost effective service to tenants. As of March 31, 2021, we had
approximately 1 million square feet of GLA in ten of our top 20 markets and
approximately 0.5 million square feet of GLA in 17 of our top 20 markets.
•During the three months ended March 31, 2021, we closed on $32.5 million worth
of investments, primarily located in our existing key markets, totaling
approximately 117,000 square feet of GLA.
Internal Growth through Proactive In-House Property Management and Leasing
We believe we have the largest full-service operating platform in the medical
office sector that consists of our in-house asset management and leasing
platform which allows us to better manage and service our existing portfolio. In
each of these markets, we have established a strong in-house asset management
and leasing platform that has allowed us to develop valuable relationships with
health systems, physician practices, universities, and regional development
firms that have led to investment and leasing opportunities for us. Our
full-service operating platform has also enabled us to focus on generating cost
efficiencies as we gain scale across individual markets and regions.
•As of March 31, 2021, our in-house asset management and leasing platform
operated approximately 24.7 million square feet of GLA, or 97% of our total
portfolio.
•As of March 31, 2021, our leased rate (which includes leases which have been
executed, but which have not yet commenced) was 89.2% by GLA and our occupancy
rate was 87.9% by GLA.
•We entered into new and renewal leases on approximately 0.7 million square feet
of GLA, or approximately 2.8% of the GLA of our total portfolio, during the
three months ended March 31, 2021.
•During the three months ended March 31, 2021, tenant retention for the
Same-Property portfolio was 66%. Tenant retention is defined as the sum of the
total leased GLA of tenants that renewed a lease during the period over the
total GLA of leases that renewed or expired during the period.
Financial Strategy and Balance Sheet Flexibility
•As of March 31, 2021, we had total leverage, measured by debt less cash and
cash equivalents to total capitalization, of 32.8%. Total liquidity was
approximately $1.3 billion, inclusive of $1.0 billion available on our unsecured
revolving credit facility, $277.5 million of forward equity agreements, and cash
and cash equivalents of $30.0 million as of March 31, 2021.
•As of March 31, 2021, the weighted average remaining term of our debt portfolio
was 6.9 years.
Critical Accounting Policies
The complete list of our critical accounting policies was disclosed in our 2020
Annual Report on Form 10-K. Additionally, in light of the COVID-19 pandemic, we
believe we have included all relevant information when determining our
management estimates and that these estimates are in line with our established
policies. For further information on other significant accounting policies that
impact us, see Note 2 - Summary of Significant Accounting Policies in the
accompanying condensed consolidated financial statements.
Recently Issued or Adopted Accounting Pronouncements
For detail on recently issued accounting pronouncements see Note 2 - Summary of
Significant Accounting Policies in the accompanying condensed consolidated
financial statements.
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Factors Which May Influence Results of Operations
The novel coronavirus, or COVID-19 pandemic, continues to impact economies and
markets worldwide. All our buildings have remained in operation throughout the
course of the pandemic. However, we addressed periodic requests from a number of
our tenants about their ability to defer payment of a portion of their rents for
a limited duration. We evaluated each such request on a case by case basis. In
2020, which is the period that we believe constituted the majority of our
COVID-related deferral requests, we approved deferral plans totaling
approximately $11.1 million, of which approximately $9.2 million of these
deferrals have been repaid through March 31, 2021. There are no substantial
outstanding requests for assistance from tenants. Payments of rent deferrals are
generally expected to be repaid within the next 3 to 6 months. As of March 31,
2021, we have not granted unilateral rent forgiveness in connection with our
deferral program, however, we may do so in the future if conditions and the
specific economics warrant the use of such measures.
In addition, in 2020 we entered into certain lease modifications in the form of
early renewals where we provide concessions in the form of free rent, which
averaged three months at the inception of the lease, in exchange for additional
term, which, averaged approximately three years. During the three months ended
March 31, 2021, we have not entered into any material deferral arrangements or
early renewal leases with substantive amounts of free rent or other forms of
concession at the onset of the lease as a result of COVID-19. Although we did
not experience significant disruptions from the COVID-19 pandemic during the
three months ended March 31, 2021, should current and planned measures,
including further development and delivery of vaccines and other measures
intended to reduce or eliminate the spread of COVID-19, past and/or proposed
economic stimulus, and other laws, acts and orders proposed or enacted by
federal, state and local agencies or foreign governments, ultimately not be
successful or limited in their efficacy, our business and the broader real
estate industry may experience significant adverse consequences. These
consequences include loss of revenues, increased expenses, increased costs of
materials, difficulty in maintaining an active workforce, and constraints on our
ability to secure capital or financing, among other factors.
Other than the above, we are not aware of any material trends or uncertainties,
other than national economic conditions affecting real estate generally and the
risk factors previously discussed in Part I, Item 1A - Risk Factors, in our 2020
Annual Report on Form 10-K, that may reasonably be expected to have a material
impact, favorable or unfavorable, on revenues or income from the investment,
management and operation of our properties.
Rental Income
The amount of rental income generated by our properties depends principally on
our ability to maintain the occupancy rates of currently leased space and to
lease currently available space and space that will become available from
unscheduled lease terminations at the then applicable rental rates. Negative
trends in one or more of these factors, including the ultimate collections of
such rents, could adversely affect our rental income in future periods.
Investment Activity
During the three months ended March 31, 2021, we had investments with an
aggregate gross purchase price of $32.9 million. During the three months ended
March 31, 2020, we had investments with an aggregate gross purchase price of
$41.7 million. The amount of any future acquisitions or dispositions could have
a significant impact on our results of operations in future periods.


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Results of Operations
Comparison of the Three Months Ended March 31, 2021 and 2020
As of March 31, 2021 and 2020, we owned and operated approximately 25.6 million
and 24.9 million square feet of GLA, respectively, with a leased rate of 89.2%
and 90.8%, respectively (including leases which have been executed, but which
have not yet commenced), and an occupancy rate of 87.9% and 89.9%, respectively.
All explanations are applicable to both HTA and HTALP unless otherwise noted.
Comparison of the three months ended March 31, 2021 and 2020, respectively, is
set forth below (in thousands):
                                                           Three Months Ended March 31,
                                                  2021            2020         Change       % Change
  Revenues:
  Rental income                               $   191,350      $ 185,531      $ 5,819          3.1  %
  Interest and other operating income                 143            245         (102)       (41.6)
  Total revenues                                  191,493        185,776        5,717          3.1
  Expenses:
  Rental                                           59,579         56,862        2,717          4.8
  General and administrative                       10,560         11,518         (958)        (8.3)
  Transaction                                          96            140          (44)       (31.4)
  Depreciation and amortization                    76,274         77,665       (1,391)        (1.8)

  Interest expense                                 22,986         23,872         (886)        (3.7)
  Total expenses                                  169,495        170,057         (562)        (0.3)
  Gain on sale of real estate, net                      -          1,991       (1,991)      (100.0)

  Income from unconsolidated joint venture            392            422          (30)        (7.1)
  Other income                                          3             76          (73)       (96.1)
  Net income                                  $    22,393      $  18,208      $ 4,185         23.0  %

  NOI                                         $   131,914      $ 128,914      $ 3,000          2.3  %
  Same-Property Cash NOI                      $   122,990      $ 121,086      $ 1,904          1.6  %



Rental Income
For the three months ended March 31, 2021 and 2020, respectively, rental income
was comprised of the following (in thousands):
                                                                         Three Months Ended March 31,
                                                      2021                2020              Change               % Change
Contractual rental income                        $   182,512          $ 175,839          $   6,673                      3.8  %
Straight-line rent and amortization of above and
(below) market leases                                  5,247              6,094               (847)                   (13.9)
Other rental revenue                                   3,591              3,598                 (7)                    (0.2)
Total rental income                              $   191,350          $ 185,531          $   5,819                      3.1  %



Contractual rental income, which includes expense reimbursements, increased $6.7
million for the three months ended March 31, 2021, compared to the three months
ended March 31, 2020. The increase was primarily due to additional contractual
rental income of $4.3 million from our 2020 and 2021 acquisitions, and
contractual rent increases for the three months ended March 31, 2021.
Average starting and expiring base rents for new and renewal leases consisted of
the following for the three months ended March 31, 2021 and 2020, respectively
(in thousands, except in average base rents per square foot of GLA):
                                     Three Months Ended March 31,
                                           2021                   2020
New and renewal leases:
Average starting base rents   $        24.75                    $ 25.37
Average expiring base rents            22.99                      24.99

Square feet of GLA                       705                        885


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Lease rates can vary across markets, and lease rates that are considered above
or below current market rent may change over time. Leases that expired in 2021
had rents that we believed were at market rates. In general, leasing concessions
vary depending on lease type, term, geography, and supply/demand dynamics.
Tenant improvements, leasing commissions and tenant concessions for new and
renewal leases consisted of the following for the three months ended March 31,
2021 and 2020, respectively (in per square foot of GLA):
                             Three Months Ended March 31,
                                   2021                   2020
New leases:
Tenant improvements   $        22.34                    $ 36.09
Leasing commissions             3.63                       2.51
Tenant concessions              7.14                       5.11
Renewal leases:
Tenant improvements   $         5.03                    $  6.26
Leasing commissions             2.21                       3.70
Tenant concessions              0.16                       0.60


The average term for new and renewal leases executed consisted of the following
for the three months ended March 31, 2021 and 2020, respectively (in years):
                     Three Months Ended March 31,
                      2021                      2020
New leases            4.4                       9.9
Renewal leases        4.2                       4.5


Rental Expenses
For the three months ended March 31, 2021 and 2020, rental expenses attributable
to our properties were $59.6 million and $56.9 million, respectively. The
increase in rental expenses was primarily due to $1.3 million of additional
rental expenses associated with our 2020 and 2021 acquisitions for the three
months ended March 31, 2021, with the remainder of the increase primarily due to
increased expenses from weather-related events experienced during the quarter.
General and Administrative Expenses
For the three months ended March 31, 2021 and 2020, general and administrative
expenses were $10.6 million and $11.5 million, respectively. The decrease was
primarily due to a reduction in corporate overhead expenses.
Depreciation and Amortization Expense
For the three months ended March 31, 2021 and 2020, depreciation and
amortization expense was $76.3 million and $77.7 million, respectively. This
increase was associated with our 2020 and 2021 acquisitions, partially offset by
buildings we disposed of during 2020.
Interest Expense
For the three months ended March 31, 2021 and 2020, interest expense was $23.0
million and $23.9 million, respectively. The decrease in interest expense is
primarily due to lower average interest rates as compared to the same period in
2020.
To achieve our objectives, we borrow at both fixed and variable rates. From time
to time, we also enter into derivative financial instruments, such as interest
rate swaps, in order to mitigate our interest rate risk on a related financial
instrument. We do not enter into derivative or interest rate transactions for
speculative purposes.
Gain on Sale of Real Estate, net
We had no sales of real estate assets during the three months ended March 31,
2021. For the three months ended March 31, 2020, we realized a net gain of
approximately $2.0 million on the sale of part of our interest in undeveloped
land in Miami, Florida.
Net Income
For the three months ended March 31, 2021 and 2020, net income was $22.4 million
and $18.2 million, respectively. The increase is primarily the result of
continued growth in our operations due to accretive acquisitions and improved
operating efficiencies.
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NOI and Same-Property Cash NOI
For the three months ended March 31, 2021 and 2020, NOI was $131.9 million and
$128.9 million, respectively. The increase in NOI was primarily due to
additional NOI from our 2020 and 2021 acquisitions of $3.2 million for the three
months ended March 31, 2021, partially offset by $0.2 million of reduced NOI as
a result of the buildings we sold during 2020 for the three months ended March
31, 2021, and a reduction in straight-line rent from properties we owned for
more than a year.
Same-Property Cash NOI increased 1.6% to $123.0 million for the three months
ended March 31, 2021 compared to the three months ended March 31, 2020. The
increases were primarily the result of rent escalations, improved operating
efficiencies, and offset by a slight decrease in average occupancy.
Non-GAAP Financial Measures
FFO and Normalized FFO
We compute FFO in accordance with the current standards established by NAREIT.
NAREIT defines FFO as net income or loss attributable to common
stockholders/unitholders (computed in accordance with GAAP), excluding gains or
losses from sales of real estate property and impairment write-downs of
depreciable assets, plus depreciation and amortization related to investments in
real estate, and after adjustments for unconsolidated partnerships and joint
ventures. Since FFO excludes depreciation and amortization unique to real
estate, among other items, it provides a perspective not immediately apparent
from net income or loss attributable to common stockholders/unitholders.
We also compute Normalized FFO, which excludes from FFO: (i) transaction
expenses; (ii) gain or loss on extinguishment of debt; (iii) noncontrolling
income or loss from OP Units included in diluted shares (only applicable to the
Company); and (iv) other normalizing adjustments, which include items that are
unusual and infrequent in nature. Our methodology for calculating Normalized FFO
may be different from the methods utilized by other REITs and, accordingly, may
not be comparable to other REITs.
We present FFO and Normalized FFO because we consider them important
supplemental measures of our operating performance and believe they are
frequently used by securities analysts, investors and other interested parties
in the evaluation of REITs. Historical cost accounting assumes that the value of
real estate assets diminishes ratably over time. Since real estate values have
historically risen or fallen based on market conditions, many industry investors
have considered the presentation of operating results for real estate companies
that use historical cost accounting to be insufficient by themselves. FFO and
Normalized FFO should not be considered as alternatives to net income or loss
attributable to common stockholders/unitholders (computed in accordance with
GAAP) as indicators of our financial performance, nor are they indicative of
cash available to fund cash needs. FFO and Normalized FFO should be reviewed in
connection with other GAAP measurements.
In addition, the amounts included in the calculation of FFO and Normalized FFO
are generally the same for HTALP and HTA, except for net income or loss
attributable to common stockholders/unitholders, noncontrolling income or loss
from OP Units included in diluted shares (only applicable to the Company) and
the weighted average shares of our common stock or HTALP OP Units outstanding.
The following is the reconciliation of HTA's FFO and Normalized FFO to net
income attributable to common stockholders for the three months ended March 31,
2021 and 2020, respectively (in thousands, except per share data):
                                                                            

Three Months Ended March 31,

                                                                                 2021                   2020
Net income attributable to common stockholders                            $ 

22,030 $ 17,901 Depreciation and amortization expense related to investments in real estate

                                                                             75,331               76,737
Gain on sale of real estate, net                                                        -               (1,991)

Proportionate share of joint venture depreciation and amortization

           488                  467
FFO attributable to common stockholders                                   $        97,849          $    93,114
Transaction expenses                                                                   96                  140

Noncontrolling income from OP Units included in diluted shares                        363                  307

Normalized FFO attributable to common stockholders                        $ 

98,308 $ 93,561

Net income attributable to common stockholders per diluted share $

          0.10          $      0.08
FFO adjustments per diluted share, net                                               0.34                 0.34
FFO attributable to common stockholders per diluted share                 $          0.44          $      0.42
Normalized FFO adjustments per diluted share, net                                    0.00                 0.00

Normalized FFO attributable to common stockholders per diluted share $

0.44 $ 0.42

Weighted average diluted common shares outstanding                                222,268              220,623



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The following is the reconciliation of HTALP's FFO and Normalized FFO to net
income attributable to common unitholders for the three months ended March 31,
2021 and 2020, respectively (in thousands, except per unit data):
                                                                        

Three Months Ended March 31,

                                                                          2021                   2020
Net income attributable to common unitholders                      $        

22,393 $ 18,208 Depreciation and amortization expense related to investments in real estate

                                                                 75,331               76,737
Gain on sale of real estate, net                                                 -               (1,991)

Proportionate share of joint venture depreciation and amortization

    488                  467
FFO attributable to common unitholders                             $        98,212          $    93,421
Transaction expenses                                                            96                  140

Normalized FFO attributable to common unitholders                  $        

98,308 $ 93,561

Net income attributable to common unitholders per diluted share $

   0.10          $      0.08
FFO adjustments per diluted OP Unit, net                                      0.34                 0.34

FFO attributable to common unitholders per diluted OP Unit $

   0.44          $      0.42
Normalized FFO adjustments per diluted OP Unit, net                           0.00                 0.00

Normalized FFO attributable to common unitholders per diluted OP Unit

                                                               $        

0.44 $ 0.42

Weighted average diluted common OP Units outstanding                       222,268              220,623



NOI, Cash NOI and Same-Property Cash NOI
NOI is a non-GAAP financial measure that is defined as net income or loss
(computed in accordance with GAAP) before: (i) general and administrative
expenses; (ii) transaction expenses; (iii) depreciation and amortization
expense; (iv) impairment; (v) interest expense; (vi) gain or loss on sales of
real estate; (vii) gain or loss on extinguishment of debt; (viii) income or loss
from unconsolidated joint venture; and (ix) other income or expense. We believe
that NOI provides an accurate measure of the operating performance of our
operating assets because NOI excludes certain items that are not associated with
the management of our properties. Additionally, we believe that NOI is a widely
accepted measure of comparative operating performance of REITs. However, our use
of the term NOI may not be comparable to that of other REITs as they may have
different methodologies for computing this amount. NOI should not be considered
as an alternative to net income or loss (computed in accordance with GAAP) as an
indicator of our financial performance. NOI should be reviewed in connection
with other GAAP measurements.
Cash NOI is a non-GAAP financial measure which excludes from NOI: (i)
straight-line rent adjustments; (ii) amortization of below and above market
leases/leasehold interests and other GAAP adjustments; (iii) notes receivable
interest income; and (iv) other normalizing adjustments. Contractual base rent,
contractual rent increases, contractual rent concessions and changes in
occupancy or lease rates upon commencement and expiration of leases are a
primary driver of our revenue performance. We believe that Cash NOI, which
removes the impact of straight-line rent adjustments, provides another
measurement of the operating performance of our operating assets. Additionally,
we believe that Cash NOI is a widely accepted measure of comparative operating
performance of REITs. However, our use of the term Cash NOI may not be
comparable to that of other REITs as they may have different methodologies for
computing this amount. Cash NOI should not be considered as an alternative to
net income or loss (computed in accordance with GAAP) as an indicator of our
financial performance. Cash NOI should be reviewed in connection with other GAAP
measurements.
To facilitate the comparison of Cash NOI between periods, we calculate
comparable amounts for a subset of our owned and operational properties referred
to as "Same-Property". Same-Property Cash NOI excludes (i) properties which have
not been owned and operated by us during the entire span of all periods
presented and disposed properties, (ii) our share of unconsolidated joint
ventures, (iii) development, redevelopment and land parcels, (iv) properties
intended for disposition in the near term which have (a) been approved by the
Board of Directors, (b) is actively marketed for sale, and (c) an offer has been
received at prices we would transact and the sales process is ongoing, and (v)
certain non-routine items. Same-Property Cash NOI should not be considered as an
alternative to net income or loss (computed in accordance with GAAP) as an
indicator of our financial performance. Same-Property Cash NOI should be
reviewed in connection with other GAAP measurements.
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The following is the reconciliation of HTA's and HTALP's NOI, Cash NOI and
Same-Property Cash NOI to net income for the three months ended March 31, 2021
and 2020, respectively (in thousands):
                                                                           Three Months Ended March 31,
                                                                             2021                   2020
Net income                                                            $        22,393          $    18,208
General and administrative expenses                                            10,560               11,518
Transaction expenses                                                               96                  140
Depreciation and amortization expense                                          76,274               77,665

Interest expense                                                               22,986               23,872
Gain on sale of real estate, net                                                    -               (1,991)

Income from unconsolidated joint venture                                         (392)                (422)
Other income                                                                       (3)                 (76)
NOI                                                                   $       131,914          $   128,914
Straight-line rent adjustments, net                                            (3,774)              (3,245)

Amortization of (below) and above market leases/leasehold interests, net and other GAAP adjustments

                                                   (475)              (1,699)
Notes receivable interest income                                                   (6)                (138)

Cash NOI                                                              $     

127,659 $ 123,832 Acquisitions not owned/operated for all periods presented and disposed properties Cash NOI

                                                   (3,378)                (565)
Redevelopment Cash NOI                                                           (410)                (914)
Intended for sale Cash NOI                                                       (881)              (1,267)
Same-Property Cash NOI (1)                                            $     

122,990 $ 121,086

(1) Same-Property includes 429 buildings for the three months ended March 31,
2021 and 2020, respectively.
Liquidity and Capital Resources
Our primary sources of cash include: (i) cash flow from operations; (ii)
borrowings under our unsecured revolving credit facility; (iii) net proceeds
from the issuances of debt and equity securities; and (iv) proceeds from our
dispositions. During the next 12 months our primary uses of cash are expected to
include: (a) the funding of acquisitions of MOBs, development properties and
other facilities that serve the healthcare industry; (b) capital expenditures;
(c) the payment of operating expenses; (d) debt service payments, including
principal payments; and (e) the payment of dividends to our stockholders. We
anticipate cash flow from operations, restricted cash and reserve accounts and
our unsecured revolving credit facility, if needed, will be sufficient to fund
our operating expenses, capital expenditures and dividends to stockholders.
Investments and maturing indebtedness may require funds from borrowings under
our unsecured revolving credit facility, the issuance of debt and/or equity
securities or proceeds from sales of real estate.
As of March 31, 2021, we had total liquidity of $1.3 billion, inclusive of $1.0
billion available on our unsecured revolving credit facility, $277.5 million of
unsettled forward equity agreements, and cash and cash equivalents of $30.0
million. We believe that we have sufficient liquidity and opportunities to
obtain additional liquidity at our disposal to sustain operations for the
foreseeable future.
As of March 31, 2021, we had unencumbered assets with a gross book value of $8.0
billion. The unencumbered properties may be used as collateral to secure
additional financings in future periods or refinance our current debt as it
becomes due. Our ability to raise funds from future debt and equity issuances is
dependent on our investment grade credit ratings, general economic and market
conditions, and our operating performance.
When we acquire a property, we prepare a capital plan that contemplates the
estimated capital needs of that investment. In addition to operating expenses,
capital needs may also include costs of refurbishment, tenant improvements or
other major capital expenditures. The capital plan for each investment will be
adjusted through ongoing, regular reviews of our portfolio or as necessary to
respond to unanticipated additional capital needs. Capital expenditures for the
remainder of the year will be primarily targeted towards planned maintenance
activities and other capital improvements that are either of an immediate need
to preserve liquidity, or strategically necessary for revenue generation
purposes. Currently these expenditures are estimated at approximately $15
million to $20 million per quarter. Although we cannot provide assurance that we
will not exceed these estimated expenditure levels, we believe our liquidity of
$1.3 billion allows us the flexibility to fund such capital expenditures as may
be necessary or advisable.
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If we experience lower occupancy levels, reduced rental rates, reduced revenues
as a result of asset sales, or increased capital expenditures and leasing costs
compared to historical levels due to competitive market conditions for new and
renewal leases, the effect would be a reduction of net cash provided by
operating activities. If such a reduction of net cash provided by operating
activities is realized, we may have a cash flow deficit in subsequent periods.
Our estimate of net cash available is based on various assumptions which are
difficult to predict, including the levels of our leasing activity and related
leasing costs. Any changes in these assumptions could impact our financial
results and our ability to fund working capital and unanticipated cash needs.
Cash Flows
The following is a summary of our cash flows for the three months ended March
31, 2021 and 2020, respectively (in thousands):
                                                               Three Months 

Ended March 31,

                                                       2021                2020               Change
Cash, cash equivalents and restricted cash -
beginning of period                                $  118,765          $   37,616          $   81,149
Net cash provided by operating activities              65,353              75,421             (10,068)
Net cash used in investing activities                 (76,299)            (76,623)                324
Net cash (used in) provided by financing
activities                                            (74,733)            185,058            (259,791)
Cash, cash equivalents and restricted cash - end
of period                                          $   33,086          $  

221,472 $ (188,386)

Net cash provided by operating activities decreased in 2021 primarily due to the
impact of our 2020 and 2021 acquisitions and contractual rent increases offset
by our 2020 dispositions. We anticipate cash flows from operating activities to
increase as a result of the growth in our portfolio through new acquisitions and
continued leasing activity in our existing portfolio.
For the three months ended March 31, 2021, net cash used in investing activities
primarily related to investments in real estate of $30.5 million, capital
expenditures of $28.9 million, and development of real estate of $17.1 million.
For the three months ended March 31, 2020, net cash used in investing activities
primarily related to investments in real estate of $41.3 million, capital
expenditures of $23.8 million, development of real estate of $12.1 million, and
funding of a real estate loan of $6.0 million, partially offset by proceeds from
the sale of real estate of $6.4 million.
For the three months ended March 31, 2021, net cash used in financing activities
primarily related to dividends paid to holders of our common stock of $70.0
million and the repurchase and cancellation of common stock of $3.2 million. For
the three months ended March 31, 2020, net cash provided by financing activities
primarily related to net borrowings on our unsecured credit facility of $305.0
million and proceeds from issuance of common stock of $50.0 million, offset by
payments on our secured mortgage loans of $95.6 million, dividends paid to
holders of our common stock of $68.2 million, and the repurchase and
cancellation of common stock of $4.6 million.
Dividends
The amount of dividends we pay to our stockholders is determined by our Board of
Directors, in their sole discretion, and is dependent on a number of factors,
including funds available, our financial condition, capital expenditure
requirements and annual dividend distribution requirements needed to maintain
our status as a REIT under the Internal Revenue Code of 1986, as amended. We
have paid monthly or quarterly dividends since February 2007, and if our
investments produce sufficient cash flow, we expect to continue to pay dividends
to our stockholders. Because our cash available for dividend distributions in
any year may be less than 90% of our taxable income for the year, we may obtain
the necessary funds through borrowings, issuing new securities or selling assets
to pay out enough of our taxable income to satisfy our dividend distribution
requirement. Our organizational documents do not establish a limit on dividends
that may constitute a return of capital for federal income tax purposes. The
dividend we pay to our stockholders is equal to the distributions received from
HTALP in accordance with the terms of the HTALP partnership agreement. It is our
intention to continue to pay dividends. However, our Board of Directors may
reduce our dividend rate and we cannot guarantee the timing and amount of
dividends that we may pay in the future, if any.
For the three months ended March 31, 2021, we paid cash dividends of $70.0
million on our common stock. In April 2021 for the quarter ended March 31, 2021,
we paid cash dividends on our common stock of $70.0 million.
Financing
We have historically maintained a low leveraged balance sheet and intend to
continue to maintain this structure in the long term. However, our total
leverage may fluctuate on a short-term basis as we execute our business
strategy. As of March 31, 2021, our leverage ratio, measured by debt less cash
and cash equivalents to total capitalization, was 32.8%.
As of March 31, 2021, we had debt outstanding of $3.0 billion and the weighted
average interest rate therein was 2.89% per annum, inclusive of the impact of
our cash flow hedges. The following is a summary of our unsecured and secured
debt. See Note 8 - Debt in the accompanying condensed consolidated financial
statements for a further discussion of our debt.
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Unsecured Revolving Credit Facility
As of March 31, 2021, the full $1.0 billion was available on our $1.0 billion
unsecured revolving credit facility. Our unsecured revolving credit facility
matures in June 2022.
Unsecured Term Loans
As of March 31, 2021, we had $500.0 million of unsecured term loans outstanding,
comprised of $300.0 million under our Unsecured Credit Agreement maturing in
2023, and $200.0 million under our unsecured term loan maturing in 2024.
Unsecured Senior Notes
As of March 31, 2021, we had $2.55 billion of unsecured senior notes
outstanding, comprised of $600.0 million of senior notes maturing in 2026,
$500.0 million of senior notes maturing in 2027, $650.0 million of senior notes
maturing in 2030 and $800.0 million of senior notes maturing in 2031.
Commitments and Contingencies
There have been no material changes from the commitments and contingencies
previously disclosed in our 2020 Annual Report on Form 10-K.
Debt Service Requirements
We are required by the terms of our applicable loan agreements to meet certain
financial covenants, such as minimum net worth and liquidity, and reporting
requirements, among others. As of March 31, 2021, we believe that we were in
compliance with all such covenants and we are not aware of any covenants that it
is reasonably likely that we would not be able to meet in accordance with our
loan agreements.
Off-Balance Sheet Arrangements
As of and during the three months ended March 31, 2021, we had no material
off-balance sheet arrangements that have had or are reasonably likely to have a
current or future effect on our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
Inflation
We are exposed to inflation risk as income from future long-term leases is the
primary source of our cash flows from operations. There are provisions in the
majority of our tenant leases that protect us from the impact of normal
inflation. These provisions include rent escalations, reimbursement billings for
operating expense pass-through charges and real estate tax and insurance
reimbursements on a per square foot allowance. However, due to the long-term
nature of our leases, among other factors, the leases may not reset frequently
enough to cover inflation.
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