10-Q 1 hta201793010-q.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
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 Trust of America, Inc.)
Commission File Number: 333-190916 (Healthcare Trust of America Holdings, LP)
_________________________ 
HEALTHCARE TRUST OF AMERICA, INC.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
(Exact name of registrant as specified in its charter)
Maryland (Healthcare Trust of America, Inc.)
 
20-4738467
Delaware (Healthcare Trust of America Holdings, LP)
 
20-4738347
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
16435 N. Scottsdale Road, Suite 320
Scottsdale, Arizona 85254
(Address of principal executive offices)
(480) 998-3478
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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.    
Healthcare Trust of America, Inc.
x Yes
¨ No
 
Healthcare Trust of America Holdings, LP
x Yes
¨ No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    
Healthcare Trust of America, Inc.
x Yes
¨ No
 
Healthcare Trust of America Holdings, LP
x 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.
Healthcare Trust of America, Inc.
Large-accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
 
 
 
(Do not check if a smaller reporting company)
 
 
Healthcare Trust of America Holdings, LP
Large-accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging growth company ¨
 
 
 
(Do not check if a smaller reporting 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.
Healthcare Trust of America, Inc.
¨
 
 
Healthcare Trust of America Holdings, LP
¨
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Healthcare Trust of America, Inc.
¨ Yes
x No
 
Healthcare Trust of America Holdings, LP
¨ Yes
x No
 
As of October 23, 2017, there were 204,886,019 shares of Class A common stock of Healthcare Trust of America, Inc. outstanding.
 



Explanatory Note
This Quarterly Report combines the Quarterly Reports on Form 10-Q (“Quarterly Report”) for the quarter ended September 30, 2017 of Healthcare Trust of America, Inc. (“HTA”), a Maryland corporation, and Healthcare Trust of America Holdings, LP (“HTALP”), a Delaware limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this Quarterly Report to “we,” “us,” “our,” “the Company” or “our Company” refer to HTA and HTALP, collectively, and all references to “common stock” shall refer to the Class A common stock of HTA.
HTA operates as a real estate investment trust (“REIT”) and is the general partner of HTALP. As of September 30, 2017, HTA owned a 98.0% partnership interest in HTALP, and other limited partners, including some of HTA’s directors, executive officers and their affiliates, owned the remaining partnership interest (including the long-term incentive plan (“LTIP” Units) in HTALP. As the sole general partner of HTALP, HTA has the full, exclusive and complete responsibility for HTALP’s day-to-day management and control, including its compliance with the Securities and Exchange Commission (“SEC”) filing requirements.
We believe it is important to understand the few differences between HTA and HTALP in the context of how we operate as an integrated consolidated company. HTA operates as an umbrella partnership REIT structure in which HTALP and its subsidiaries hold substantially all of the assets. HTA’s only material asset is its ownership of partnership interests of HTALP. As a result, HTA does not conduct business itself, other than acting as the sole general partner of HTALP, issuing public equity from time to time and guaranteeing certain debts of HTALP. HTALP conducts the operations of the business and issues publicly-traded debt, but has no publicly-traded equity. Except for net proceeds from public equity issuances by HTA, which are generally contributed to HTALP in exchange for partnership units of HTALP, HTALP generates the capital required for the business through its operations and by direct or indirect incurrence of indebtedness or through the issuance of its partnership units (“OP Units”).
Noncontrolling interests, stockholders’ equity and partners’ capital are the primary areas of difference between the condensed consolidated financial statements of HTA and HTALP. Limited partnership units in HTALP are accounted for as partners’ capital in HTALP’s condensed consolidated balance sheets and as noncontrolling interest reflected within equity in HTA’s condensed consolidated balance sheets. The differences between HTA’s stockholders’ equity and HTALP’s partners’ capital are due to the differences in the equity issued by HTA and HTALP, respectively.
We believe combining the Quarterly Reports of HTA and HTALP, including the notes to the condensed consolidated financial statements, into this single Quarterly Report results in the following benefits:
enhances stockholders’ understanding of HTA and HTALP by enabling stockholders to view the business as a whole in the same manner that management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this Quarterly Report applies to both HTA and HTALP; and
creates time and cost efficiencies through the preparation of a single combined Quarterly Report instead of two separate Quarterly Reports.
In order to highlight the material differences between HTA and HTALP, this Quarterly Report includes sections that separately present and discuss areas that are materially different between HTA and HTALP, including:
the condensed consolidated financial statements;
certain accompanying notes to the condensed consolidated financial statements, including Note 7 - Debt, Note 10 - Stockholders’ Equity and Partners’ Capital, Note 12 - Per Share Data of HTA and Note 13 - Per Unit Data of HTALP;
the Funds From Operations (“FFO”) and Normalized FFO in Part 1, Item 2 of this Quarterly Report;
the Controls and Procedures in Part 1, Item 4 of this Quarterly Report; and
the Certifications of the Chief Executive Officer and the Chief Financial Officer included as Exhibits 31 and 32 to this Quarterly Report.
In the sections of this Quarterly Report that combine disclosure for HTA and HTALP, this Quarterly Report refers to actions or holdings as being actions or holdings of the Company. Although HTALP (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues or incurs debt, management believes this presentation is appropriate for the reasons set forth above and because the business of the Company is a single integrated enterprise operated through HTALP.

2



HEALTHCARE TRUST OF AMERICA, INC. AND
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
TABLE OF CONTENTS
 
 
 
Page
Healthcare Trust of America, Inc.
 
 
 
 
 
 
Healthcare Trust of America Holdings, LP
 
 
 
 
 
 
Notes for Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP
 
 
 
 
 
 
 
 
 






3



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(Unaudited)
 
 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
480,850

 
$
386,526

Building and improvements
 
5,788,837

 
3,466,516

Lease intangibles
 
648,591

 
467,571

Construction in progress
 
59,573

 

 
 
6,977,851

 
4,320,613

Accumulated depreciation and amortization
 
(973,566
)
 
(817,593
)
Real estate investments, net
 
6,004,285

 
3,503,020

Investment in unconsolidated joint venture
 
68,303

 

Cash and cash equivalents
 
9,410

 
11,231

Restricted cash and escrow deposits
 
17,469

 
13,814

Receivables and other assets, net
 
206,030

 
173,461

Other intangibles, net
 
108,025

 
46,318

Total assets
 
$
6,413,522

 
$
3,747,844

LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Debt
 
$
2,856,758

 
$
1,768,905

Accounts payable and accrued liabilities
 
159,070

 
105,034

Derivative financial instruments - interest rate swaps
 
1,441

 
1,920

Security deposits, prepaid rent and other liabilities
 
61,402

 
49,859

Intangible liabilities, net
 
69,852

 
37,056

Total liabilities
 
3,148,523

 
1,962,774

Commitments and contingencies
 

 

Redeemable noncontrolling interests
 
4,692

 
4,653

Equity:
 
 
 
 
Preferred stock, $0.01 par value; 200,000,000 shares authorized; none issued and outstanding
 

 

Class A common stock, $0.01 par value; 1,000,000,000 shares authorized; 200,686,673 and 141,719,134 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
 
2,007

 
1,417

Additional paid-in capital
 
4,386,224

 
2,754,818

Accumulated other comprehensive loss
 
(615
)
 

Cumulative dividends in excess of earnings
 
(1,212,051
)
 
(1,068,961
)
Total stockholders’ equity
 
3,175,565

 
1,687,274

Noncontrolling interests
 
84,742

 
93,143

Total equity
 
3,260,307

 
1,780,417

Total liabilities and equity
 
$
6,413,522

 
$
3,747,844

 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4



HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Rental income
$
175,431

 
$
118,252

 
$
438,949

 
$
338,646

Interest and other operating income
563

 
88

 
1,271

 
243

Total revenues
175,994

 
118,340

 
440,220


338,889

Expenses:
 
 
 
 
 
 
 
Rental
56,331

 
36,885

 
138,874

 
105,299

General and administrative
8,283

 
7,293

 
25,178

 
20,879

Transaction
261

 
1,122

 
5,618

 
4,997

Depreciation and amortization
70,491

 
47,864

 
172,900

 
130,430

Impairment

 

 
5,093

 

Total expenses
135,366

 
93,164

 
347,663

 
261,605

Income before other income (expense)
40,628

 
25,176

 
92,557

 
77,284

Interest expense:
 
 
 
 
 
 

Interest related to derivative financial instruments
(264
)
 
(552
)
 
(827
)
 
(1,856
)
Gain (loss) on change in fair value of derivative financial instruments, net

 
1,306

 
884

 
(2,144
)
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments
(264
)
 
754

 
57

 
(4,000
)
Interest related to debt
(25,924
)
 
(16,386
)
 
(59,688
)
 
(44,503
)
Gain on sale of real estate, net

 

 
3

 
4,212

Loss on extinguishment of debt, net
(774
)
 
(3,000
)
 
(11,192
)
 
(3,022
)
Income from unconsolidated joint venture
318

 

 
381

 

Other (expense) income
(27
)
 
95

 
(13
)
 
220

Net income
$
13,957

 
$
6,639

 
$
22,105

 
$
30,191

Net income attributable to noncontrolling interests (1) 
(194
)
 
(212
)
 
(715
)
 
(830
)
Net income attributable to common stockholders
$
13,763

 
$
6,427

 
$
21,390

 
$
29,361

Earnings per common share - basic:
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
0.07

 
$
0.05

 
$
0.12

 
$
0.22

Earnings per common share - diluted:
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
0.07

 
$
0.04

 
$
0.12

 
$
0.21

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
200,674

 
138,807

 
173,189

 
134,905

Diluted
204,795

 
143,138

 
177,410

 
138,314

Dividends declared per common share
$
0.305

 
$
0.300

 
$
0.905

 
$
0.890

 
 
 
 
 
 
 
 
(1) Includes amounts attributable to redeemable noncontrolling interests.
The accompanying notes are an integral part of these condensed consolidated financial statements.

5



HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income
$
13,957

 
$
6,639

 
$
22,105

 
$
30,191

 
 
 
 
 
 
 
 
Other comprehensive gain (loss)
 
 
 
 
 
 
 
Change in unrealized gains (losses) on cash flow hedges
205

 

 
(631
)
 

Total other comprehensive gain (loss)
205

 

 
(631
)
 

 
 
 
 
 
 
 
 
Total comprehensive income
14,162

 
6,639

 
21,474

 
30,191

Comprehensive income attributable to noncontrolling interests
(170
)
 
(211
)
 
(619
)
 
(802
)
Total comprehensive income attributable to common stockholders
$
13,992

 
$
6,428

 
$
20,855

 
$
29,389

The accompanying notes are an integral part of these condensed consolidated financial statements.


6



HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
Class A Common Stock
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Loss
 
Cumulative Dividends in Excess of Earnings
 
Total Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
 
Shares
 
Amount
Balance as of December 31, 2015
127,027

 
$
1,270

 
$
2,328,806

 
$

 
$
(950,652
)
 
$
1,379,424

 
$
27,534

 
$
1,406,958

Issuance of common stock, net
14,138

 
141

 
417,022

 

 

 
417,163

 

 
417,163

Issuance of operating partnership units in connection with an acquisition

 

 

 

 

 

 
71,754

 
71,754

Share-based award transactions, net
393

 
4

 
5,132

 

 

 
5,136

 

 
5,136

Repurchase and cancellation of common stock
(87
)
 
(1
)
 
(2,424
)
 

 

 
(2,425
)
 

 
(2,425
)
Redemption of noncontrolling interest and other
257

 
3

 
5,030

 

 

 
5,033

 
(5,709
)
 
(676
)
Dividends declared

 

 

 

 
(121,686
)
 
(121,686
)
 
(3,134
)
 
(124,820
)
Net income

 

 

 

 
29,361

 
29,361

 
802

 
30,163

Balance as of September 30, 2016
141,728

 
$
1,417

 
$
2,753,566

 
$

 
$
(1,042,977
)
 
$
1,712,006

 
$
91,247

 
$
1,803,253

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2016
141,719

 
$
1,417

 
$
2,754,818

 
$

 
$
(1,068,961
)
 
$
1,687,274

 
$
93,143

 
$
1,780,417

Issuance of common stock, net
58,623

 
586

 
1,623,636

 

 

 
1,624,222

 

 
1,624,222

Issuance of operating partnership units in connection with an acquisition

 

 

 

 

 

 
610

 
610

Share-based award transactions, net
234

 
3

 
5,490

 

 

 
5,493

 

 
5,493

Repurchase and cancellation of common stock
(116
)
 
(1
)
 
(3,412
)
 

 

 
(3,413
)
 

 
(3,413
)
Redemption of noncontrolling interest and other
227

 
2

 
5,692

 

 

 
5,694

 
(5,694
)
 

Dividends declared

 

 

 

 
(164,480
)
 
(164,480
)
 
(3,936
)
 
(168,416
)
Net income

 

 

 

 
21,390

 
21,390

 
635

 
22,025

Other comprehensive loss

 

 

 
(615
)
 

 
(615
)
 
(16
)
 
(631
)
Balance as of September 30, 2017
200,687

 
$
2,007

 
$
4,386,224

 
$
(615
)
 
$
(1,212,051
)
 
$
3,175,565

 
$
84,742

 
$
3,260,307

The accompanying notes are an integral part of these condensed consolidated financial statements.

7



HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net income
 
$
22,105

 
$
30,191

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, amortization and other
 
169,057

 
128,728

Share-based compensation expense
 
5,493

 
5,136

Bad debt expense
 
635

 
508

Impairment
 
5,093

 

Income from unconsolidated joint venture
 
(381
)
 

Gain on sale of real estate, net
 
(3
)
 
(4,212
)
Loss on extinguishment of debt, net
 
11,192

 
3,022

Change in fair value of derivative financial instruments
 
(884
)
 
2,144

Changes in operating assets and liabilities:
 
 
 
 
Receivables and other assets, net
 
(20,489
)
 
(14,051
)
Accounts payable and accrued liabilities
 
29,566

 
3,598

Prepaid rent and other liabilities
 
7,158

 
(6,807
)
Net cash provided by operating activities
 
228,542

 
148,257

Cash flows from investing activities:
 
 
 
 
Investments in real estate
 
(2,357,570
)
 
(532,527
)
Investment in unconsolidated joint venture
 
(68,839
)
 

Development of real estate
 
(19,163
)
 

Proceeds from the sale of real estate
 
4,746

 
23,368

Capital expenditures
 
(42,990
)
 
(34,064
)
Restricted cash, escrow deposits and other assets
 
(3,655
)
 
2,143

Net cash used in investing activities
 
(2,487,471
)
 
(541,080
)
Cash flows from financing activities:
 
 
 
 
Borrowings on unsecured revolving credit facility
 
515,000

 
513,000

Payments on unsecured revolving credit facility
 
(528,000
)
 
(704,000
)
Proceeds from unsecured senior notes
 
900,000

 
347,725

Borrowings on unsecured term loans
 

 
200,000

Payments on unsecured term loans
 

 
(155,000
)
Payments on secured mortgage loans
 
(75,444
)
 
(98,453
)
Deferred financing costs
 
(16,902
)
 
(3,039
)
Debt extinguishment costs
 
(10,391
)
 

Security deposits
 
1,932

 
862

Proceeds from issuance of common stock
 
1,624,222

 
418,891

Repurchase and cancellation of common stock
 
(3,413
)
 
(2,425
)
Dividends paid
 
(145,877
)
 
(116,655
)
Distributions paid to noncontrolling interest of limited partners
 
(4,019
)
 
(2,724
)
Redemption of redeemable noncontrolling interest
 

 
(491
)
Net cash provided by financing activities
 
2,257,108

 
397,691

Net change in cash and cash equivalents
 
(1,821
)
 
4,868

Cash and cash equivalents - beginning of period
 
11,231

 
13,070

Cash and cash equivalents - end of period
 
$
9,410

 
$
17,938

The accompanying notes are an integral part of these condensed consolidated financial statements.

8



HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
(Unaudited)
 
 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
480,850

 
$
386,526

Building and improvements
 
5,788,837

 
3,466,516

Lease intangibles
 
648,591

 
467,571

Construction in progress
 
59,573

 

 
 
6,977,851

 
4,320,613

Accumulated depreciation and amortization
 
(973,566
)
 
(817,593
)
Real estate investments, net
 
6,004,285

 
3,503,020

Investment in unconsolidated joint venture
 
68,303

 

Cash and cash equivalents
 
9,410

 
11,231

Restricted cash and escrow deposits
 
17,469

 
13,814

Receivables and other assets, net
 
206,030

 
173,461

Other intangibles, net
 
108,025

 
46,318

Total assets
 
$
6,413,522

 
$
3,747,844

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
Liabilities:
 
 
 
 
Debt
 
$
2,856,758

 
$
1,768,905

Accounts payable and accrued liabilities
 
159,070

 
105,034

Derivative financial instruments - interest rate swaps
 
1,441

 
1,920

Security deposits, prepaid rent and other liabilities
 
61,402

 
49,859

Intangible liabilities, net
 
69,852

 
37,056

Total liabilities
 
3,148,523

 
1,962,774

Commitments and contingencies
 


 


Redeemable noncontrolling interests
 
4,692

 
4,653

Partners’ Capital:
 
 
 
 
Limited partners’ capital, 4,116,546 and 4,323,095 units issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
 
84,472

 
92,873

General partners’ capital, 200,686,673 and 141,719,134 units issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
 
3,175,835

 
1,687,544

Total partners’ capital
 
3,260,307

 
1,780,417

Total liabilities and partners’ capital
 
$
6,413,522

 
$
3,747,844

The accompanying notes are an integral part of these condensed consolidated financial statements.


9



HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Rental income
$
175,431

 
$
118,252

 
$
438,949

 
$
338,646

Interest and other operating income
563

 
88

 
1,271

 
243

Total revenues
175,994

 
118,340

 
440,220

 
338,889

Expenses:
 
 
 
 
 
 
 
Rental
56,331

 
36,885

 
138,874

 
105,299

General and administrative
8,283

 
7,293

 
25,178

 
20,879

Transaction
261

 
1,122

 
5,618

 
4,997

Depreciation and amortization
70,491

 
47,864

 
172,900

 
130,430

Impairment

 

 
5,093

 

Total expenses
135,366

 
93,164

 
347,663

 
261,605

Income before other income (expense)
40,628

 
25,176

 
92,557

 
77,284

Interest expense:
 
 
 
 
 
 
 
Interest related to derivative financial instruments
(264
)
 
(552
)
 
(827
)
 
(1,856
)
Gain (loss) on change in fair value of derivative financial instruments, net

 
1,306

 
884

 
(2,144
)
Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments
(264
)
 
754

 
57

 
(4,000
)
Interest related to debt
(25,924
)
 
(16,386
)
 
(59,688
)
 
(44,503
)
Gain on sale of real estate, net

 

 
3

 
4,212

Loss on extinguishment of debt, net
(774
)
 
(3,000
)
 
(11,192
)
 
(3,022
)
Income from unconsolidated joint venture
318

 

 
381

 

Other (expense) income
(27
)
 
95

 
(13
)
 
220

Net income
$
13,957

 
$
6,639

 
$
22,105

 
$
30,191

Net income attributable to noncontrolling interests
(28
)
 
(1
)
 
(80
)
 
(28
)
Net income attributable to common unitholders
$
13,929

 
$
6,638

 
$
22,025

 
$
30,163

Earnings per common unit - basic:
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
0.07

 
$
0.05

 
$
0.12

 
$
0.22

Earnings per common unit - diluted:
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
0.07

 
$
0.05

 
$
0.12

 
$
0.22

Weighted average common units outstanding: 
 
 
 
 
 
 
 
Basic
204,795

 
143,137

 
177,410

 
138,314

Diluted
204,795

 
143,137

 
177,410

 
138,314

Dividends declared per common unit
$
0.305

 
$
0.300

 
$
0.905

 
$
0.890

The accompanying notes are an integral part of these condensed consolidated financial statements.

10



HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income
$
13,957

 
$
6,639

 
$
22,105

 
$
30,191

 
 
 
 
 
 
 
 
Other comprehensive gain (loss)
 
 
 
 
 
 
 
Change in unrealized gains (losses) on cash flow hedges
205

 

 
(631
)
 

Total other comprehensive gain (loss)
205

 

 
(631
)
 

 
 
 
 
 
 
 
 
Total comprehensive income
14,162

 
6,639

 
21,474

 
30,191

Comprehensive income attributable to noncontrolling interests
(28
)
 
(1
)
 
(80
)
 
(28
)
Total comprehensive income attributable to common unitholders
$
14,134

 
$
6,638

 
$
21,394

 
$
30,163

The accompanying notes are an integral part of these condensed consolidated financial statements.


11



HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL
(In thousands)
(Unaudited)
 
General Partners’ Capital
 
Limited Partners’ Capital
 
Total Partners’ Capital
 
Units
 
Amount
 
Units
 
Amount
 
Balance as of December 31, 2015
127,027

 
$
1,379,694

 
1,930

 
$
27,264

 
$
1,406,958

Issuance of general partner units, net
14,138

 
417,163

 

 

 
417,163

Issuance of limited partner units in connection with an acquisition

 

 
2,650

 
71,754

 
71,754

Share-based award transactions, net
393

 
5,136

 

 

 
5,136

Redemption and cancellation of general partner units
(87
)
 
(2,425
)
 

 

 
(2,425
)
Redemption of limited partner units and other
257

 
5,033

 
(257
)
 
(5,709
)
 
(676
)
Distributions declared

 
(121,686
)
 

 
(3,134
)
 
(124,820
)
Net income

 
29,361

 

 
802

 
30,163

Balance as of September 30, 2016
141,728

 
$
1,712,276

 
4,323

 
$
90,977

 
$
1,803,253

 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2016
141,719

 
$
1,687,544

 
4,323

 
$
92,873

 
$
1,780,417

Issuance of general partner units, net
58,623

 
1,624,222

 

 

 
1,624,222

Issuance of limited partner units in connection with an acquisition

 

 
21

 
610

 
610

Share-based award transactions, net
234

 
5,493

 

 

 
5,493

Redemption and cancellation of general partner units
(116
)
 
(3,413
)
 

 

 
(3,413
)
Redemption of limited partner units and other
227

 
5,694

 
(227
)
 
(5,694
)
 

Distributions declared

 
(164,480
)
 

 
(3,936
)
 
(168,416
)
Net income

 
21,390

 

 
635

 
22,025

Other comprehensive loss

 
(615
)
 

 
(16
)
 
(631
)
Balance as of September 30, 2017
200,687

 
$
3,175,835

 
4,117

 
$
84,472

 
$
3,260,307

The accompanying notes are an integral part of these condensed consolidated financial statements.


12



HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net income
 
$
22,105

 
$
30,191

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, amortization and other
 
169,057

 
128,728

Share-based compensation expense
 
5,493

 
5,136

Bad debt expense
 
635

 
508

Impairment
 
5,093

 

Income from unconsolidated joint venture
 
(381
)
 

Gain on sale of real estate, net
 
(3
)
 
(4,212
)
Loss on extinguishment of debt, net
 
11,192

 
3,022

Change in fair value of derivative financial instruments
 
(884
)
 
2,144

Changes in operating assets and liabilities:
 
 
 
 
Receivables and other assets, net
 
(20,489
)
 
(14,051
)
Accounts payable and accrued liabilities
 
29,566

 
3,598

Prepaid rent and other liabilities
 
7,158

 
(6,807
)
Net cash provided by operating activities
 
228,542

 
148,257

Cash flows from investing activities:
 
 
 
 
Investments in real estate
 
(2,357,570
)
 
(532,527
)
Investment in unconsolidated joint venture
 
(68,839
)
 

Development of real estate
 
(19,163
)
 

Proceeds from the sale of real estate
 
4,746

 
23,368

Capital expenditures
 
(42,990
)
 
(34,064
)
Restricted cash, escrow deposits and other assets
 
(3,655
)
 
2,143

Net cash used in investing activities
 
(2,487,471
)
 
(541,080
)
Cash flows from financing activities:
 
 
 
 
Borrowings on unsecured revolving credit facility
 
515,000

 
513,000

Payments on unsecured revolving credit facility
 
(528,000
)
 
(704,000
)
Proceeds from unsecured senior notes
 
900,000

 
347,725

Borrowings on unsecured term loans
 

 
200,000

Payments on unsecured term loans
 

 
(155,000
)
Payments on secured mortgage loans
 
(75,444
)
 
(98,453
)
Deferred financing costs
 
(16,902
)
 
(3,039
)
Debt extinguishment costs
 
(10,391
)
 

Security deposits
 
1,932

 
862

Proceeds from issuance of general partner units
 
1,624,222

 
418,891

Repurchase and cancellation of general partner units
 
(3,413
)
 
(2,425
)
Distributions paid to general partner
 
(145,877
)
 
(116,655
)
Distributions paid to limited partners and redeemable noncontrolling interests
 
(4,019
)
 
(2,724
)
Redemption of redeemable noncontrolling interest
 

 
(491
)
Net cash provided by financing activities
 
2,257,108

 
397,691

Net change in cash and cash equivalents
 
(1,821
)
 
4,868

Cash and cash equivalents - beginning of period
 
11,231

 
13,070

Cash and cash equivalents - end of period
 
$
9,410

 
$
17,938

The accompanying notes are an integral part of these condensed consolidated financial statements.

13



HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us” or “our” refers to Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP, collectively.
1. Organization and Description of Business
HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006. HTA operates as a REIT and is the general partner of HTALP, which is the operating partnership. As of September 30, 2017, HTA owned a 98.0% partnership interest and other limited partners, including some of our directors, executive officers and their affiliates, owned the remaining partnership interest (including the LTIP Units) in HTALP. As the sole general partner of HTALP, HTA has the full, exclusive and complete responsibility for HTALP’s day-to-day management and control. HTA operates in an umbrella partnership REIT structure in which HTALP and its subsidiaries hold substantially all of the assets. HTA’s only material asset is its ownership of partnership interests of HTALP. As a result, HTA does not conduct business itself, other than acting as the sole general partner of HTALP, issuing public equity from time to time and guaranteeing certain debts of HTALP. HTALP conducts the operations of the business and issues publicly-traded debt, but has no publicly-traded equity.
HTA is the largest publicly-traded REIT focused on medical office buildings (“MOBs”) in the U.S. as measured by the gross leasable area (“GLA”) of our MOBs. HTA conducts substantially all of its 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 our key markets that have certain demographic and macro-economic trends and where we can utilize our institutional property management and leasing platform to generate strong tenant 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 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. HTA has qualified to be taxed as a REIT for federal income tax purposes and intends to continue to be taxed as a REIT.
Since 2006, we have invested $7.0 billion to create a portfolio of MOBs and other healthcare assets consisting of approximately 24.2 million square feet of GLA throughout the U.S. As of September 30, 2017, our portfolio included $2.24 billion of investments, net of development credits received at closing, in connection with our acquisition of the Duke MOB business (the “Duke Acquisition”), which includes a 50% ownership interest in an unconsolidated joint venture for $68.8 million as of the date of acquisition. Our only remaining obligations related to the Duke Acquisition are the potential acquisition of a land parcel in Miami, FL and a single property in Texas that are each currently excluded from our purchase obligations due to current outstanding physical condition issues.
As of September 30, 2017, approximately 96% of our portfolio, based on GLA, was located on the campuses of, or aligned with, nationally or regionally recognized healthcare systems. Our portfolio is diversified geographically across 33 states, with no state having more than 19% of our total GLA as of September 30, 2017. 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. Approximately 92% of our portfolio, based on GLA, is located in the top 75 metropolitan statistical areas (“MSAs”) with Atlanta, Boston, Dallas, Houston and Tampa being our largest markets by investment.
Our principal executive office is located at 16435 North Scottsdale Road, Suite 320, Scottsdale, Arizona, 85254.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles (“GAAP”) in all material respects and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Our accompanying condensed consolidated financial statements include our accounts and those of our subsidiaries and any consolidated variable interest entities (“VIEs”). All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

14


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable for the full year. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2016 Annual Report on Form 10-K.
Principles of Consolidation
The consolidated financial statements include the accounts of our subsidiaries and consolidated joint venture arrangements. The portions of the HTALP operating partnership not owned by us are presented as non-controlling interests in our consolidated balance sheets and statements of operations, consolidated statements of comprehensive income or loss, consolidated statements of equity, and consolidated statements of changes in partners’ capital. The portions of other joint venture arrangements not owned by us are presented as redeemable non-controlling interests in our consolidated balance sheets. In addition, as described in Note 1 - Organization and Description of Business, certain third parties have been issued OP Units in HTALP. Holders of OP Units are considered to be noncontrolling interest holders in HTALP and their ownership interests are reflected as equity in the consolidated balance sheets. Further, a portion of the earnings and losses of HTALP are allocated to noncontrolling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of the common stock issued and the carrying value of the OP Units converted to common stock is recorded as a component of equity. As of September 30, 2017 and December 31, 2016, there were approximately 4.1 million and 4.3 million, respectively, of OP Units issued and outstanding.
VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following: (i) the power to direct the activities that most significantly impact the entity’s economic performance; (ii) the obligation to absorb the expected losses of the entity; and (iii) the right to receive the expected returns of the entity. We consolidate our investment in VIEs when we determine that we are the primary beneficiary. A primary beneficiary is one that has both: (i) the power to direct the activities of the VIE that most significantly impacts the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The HTALP operating partnership and our other joint venture arrangements are VIEs because the limited partners in those partnerships, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights. Additionally, we determined that we are the primary beneficiary of our VIEs. Accordingly, we consolidate our interests in the HTALP operating partnership and in our other joint venture arrangements. However, because we hold what is deemed a majority voting interest in the HTALP operating partnership and our other joint venture arrangements, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs. We will evaluate on an ongoing basis the need to consolidate entities based on the standards set forth in GAAP as described above.
Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures using the equity method of accounting because we have the ability to exercise significant influence, but not control, over the financial and operational policy decisions of the investments. Using the equity method of accounting, the initial investment is recognized at cost and subsequently adjusted for our share of the net income or loss and any distributions from the joint venture. As of September 30, 2017, we had a 50% interest in one such investment with a carrying value, maximum exposure to risk, of $68.3 million, which is recorded in investment in unconsolidated joint venture in the accompanying condensed consolidated balance sheets. We record our share of net income (loss) in income (loss) from unconsolidated joint venture in the accompanying condensed consolidated statements of operations. For the three and nine months ended September 30, 2017, we recognized income of $318,000 and $381,000, respectively, from our unconsolidated joint venture.
Investments in Real Estate
Depreciation expense of buildings and improvements for the three months ended September 30, 2017 and 2016 was $49.8 million and $31.1 million, respectively. Depreciation expense of buildings and improvements for the nine months ended September 30, 2017 and 2016 was $121.5 million and $86.6 million, respectively.

15


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Recently Issued or Adopted Accounting Pronouncements
The following table provides a brief description of recently adopted accounting pronouncements:    
Accounting Pronouncement
 
Description
 
Effective Date
 
Effect on financial statements
ASU 2017-01
Business Combinations:
Clarifying the Definition of a Business
(Issued January 2017)
 
ASU 2017-01 clarifies the definition of a business by adding guidance to assist entities evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including, but not limited to, acquisitions, disposals, goodwill and consolidation.
 
ASU 2017-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
 
We adopted ASU 2017-01 as of January 1, 2017 on a prospective basis. We expect that the majority of our future investments in real estate will be accounted for as asset acquisitions under ASU 2017-01. The adoption of ASU 2017-01 will impact how we account for acquisition-related expenses and contingent consideration, which may result in lower acquisition-related expenses and eliminate fair value adjustments related to future contingent consideration arrangements.
The following table provides a brief description of recently issued accounting pronouncements:
Accounting Pronouncement
 
Description
 
Effective Date
 
Effect on financial statements
ASU 2014-09
Revenue from Contracts with Customers
(Issued May 2014)
 
ASU 2014-09 is a comprehensive new five-step model requiring a company to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (i.e., payment) to which the company expects to be entitled in exchange for those goods or services. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to ASU 2014-09. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach.

 
In August 2015, the FASB deferred the effective date of ASU 2014-09 to the first interim period within annual reporting periods beginning after December 15, 2017 along with the right of early adoption as of the original effective date.

 
We have identified all of our revenue streams and concluded rental income from leasing arrangements represents a substantial portion of our revenue and is specifically excluded from ASU 2014-09 and will be governed and evaluated with the anticipated adoption of ASU 2016-02 as described below. Upon adoption of ASU 2016-02, ASU 2014-09 may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and other reimbursement revenue), even when the revenue for such activities is not separately stipulated in the lease. In that case, the revenue from these items previously recognized on a straight-line basis under the current lease guidance would be recognized under the new revenue guidance as the related services are delivered. As a result, while total revenue recognized over time would not differ under the new guidance, the recognition pattern would be different. Under ASU 2014-09, revenue recognition for real estate sales is largely based on the transfer of control versus continuing involvement under the current guidance. Upon adoption, there will not be a material impact on our consolidated financial statements since we have historically disposed of the majority of our properties with no future controls or contingencies. We will adopt ASU 2014-09 effective January 1, 2018 using the modified retrospective approach.
ASU 2016-02
Leases
(Issued February 2016)
 
ASU 2016-02 will supersede the existing guidance for lease accounting and states that companies will be required to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand the nature of the entity’s leasing activities, including significant judgments and changes in judgments. Within ASU 2016-02 lessor accounting remained fairly unchanged. In adopting ASU 2016-02, companies will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.
 
ASU 2016-02 is effective for the fiscal years beginning after December 15, 2018 with early adoption permitted.
 
We are still evaluating the full impact of ASU 2016-02 on our consolidated financial statements, however, we will adopt ASU 2016-02 as of January 1, 2019 and anticipate that we will elect a practical expedient offered in ASU 2016-02 that allows an entity to not reassess the following upon adoption (elected as a group): (i) whether an expired or existing contract contains a lease arrangement; (ii) lease classification related to expired or existing lease arrangements; or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. As a result of the adoption, all new or amended leases for which we are the lessee, including corporate and ground leases, that are entered into on or after January 1, 2019, will be recorded on our consolidated financial statements as either financing leases or operating leases with a related right of use asset and lease liability. In addition, we expect that certain executory and non-lease components, such as common area maintenance, will need to be accounted for separately from the lease component of the lease. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components will be accounted for under the new revenue recognition guidance in ASU 2014-09 as mentioned above.

16


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Accounting Pronouncement
 
Description
 
Effective Date
 
Effect on financial statements
ASU 2016-13
Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments
(Issued June 2016)
 
ASU 2016-13 is intended to improve financial reporting by requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial statement assets measured at an amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis.
 
ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted.
 
We do not anticipate early adoption or there to be a material impact, however, we are evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements.
ASU 2016-15
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
(Issued August 2016)
 
ASU 2016-15 clarifies the guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle.
 
ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
 
We will adopt ASU 2016-15 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. We will reclass cash payments related to debt prepayment and extinguishment costs from operating activities to financing activities. Based on our initial assessment the other listed provisions will not have a material impact on our consolidated financial statements and related notes resulting from the adoption of this standard.
ASU 2016-18
Statement of Cash Flows: Restricted Cash
(Issued November 2016)
 
ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.
 
ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
 
We will adopt ASU 2016-18 during the fourth quarter of 2017 and apply the standard retrospectively for all periods presented. Restricted cash and escrow deposits consist primarily of cash escrowed for real estate acquisitions, real estate taxes, property insurance and capital improvements. We will provide a reconciliation of the changes in cash and cash equivalents and restricted cash and escrow deposits within our consolidated balance sheets to the consolidated statement of cash flows.
ASU 2017-05
Other Income: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
(Issued February 2017)
 
ASU 2017-05 defines an in-substance nonfinancial asset, unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing the sales of real estate, removes exception to the financial asset derecognition model and clarifies the accounting for contributions of nonfinancial assets to joint ventures.
 
ASU 2017-05 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
 
We will adopt ASU 2017-05 as of January 1, 2018. We do not anticipate there to be a material impact on our consolidated financial statements, as we currently do not have this type of income. However, going forward we will continue to monitor any future impact.
ASU 2017-09
Compensation - Stock Compensation (Topic 718): Clarifying the Scope of Modification (Issued May 2017)
 
ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms and conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718.
 
ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
 
We will adopt ASU 2017-09 as of January 1, 2018. We do not anticipate there to be a material impact on our consolidated financial statements.
ASU 2017-12
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Issued August 2017)
 
ASU 2017-12 expands and refines hedge accounting for both financial (e.g., interest rate) and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness.
 
ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted.
 
We do not anticipate early adoption, however, we are evaluating the impact of adopting ASU 2017-12 on our consolidated financial statements.

17


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

3. Investments in Real Estate
Our investments, including the Duke Acquisition, brings our total investments for the nine months ended September 30, 2017, to an aggregate purchase price of $2.7 billion. As part of these investments, we incurred $17.2 million of costs attributable to these investments, which were capitalized in accordance with the adoption of ASU 2017-01 during the nine months ended September 30, 2017. In addition, as part of an acquisition, we issued 20,687 OP Units with a market value at the time of issuance of $0.6 million.
The allocations for these investments, in which we own a controlling financial interest, are set forth below in the aggregate for the nine months ended September 30, 2017 and 2016, respectively (in thousands):
 
Nine Months Ended September 30,
 
2017
 
2016
Land
$
93,064

 
$
77,949

Building and improvements
2,336,544

 
505,138

In place leases
187,890

 
50,997

Below market leases
(27,817
)
 
(12,790
)
Above market leases
11,718

 
4,413

Below market leasehold interests
54,252

 
4,188

Above market leasehold interests
(8,978
)
 
(50
)
Below market debt

 
360

Interest rate swaps

 
(779
)
Net assets acquired
2,646,673

 
629,426

Other, net (1)
60,781

 
3,540

Aggregate purchase price
$
2,707,454

 
$
632,966

 
 
 
 
(1) For the nine months ended September 30, 2017, other, net, consisted primarily of capital expenditures and tenant improvements received as credits at the time of acquisition.
Subsequent to September 30, 2017, we completed an investment with a purchase price of $8.3 million. As part of the acquisition, we issued to the seller as a part of the acquisition consideration a total of 16,972 OP Units with a market value at the time of issuance of $0.5 million. The purchase price of this investment was subject to certain post-closing adjustments. Due to the recent timing of this investment, we have not yet completed our purchase price allocation with respect to this investment and, therefore, we cannot provide disclosures at this time similar to those set forth above in Note 3 - Investments in Real Estate to our condensed consolidated financial statements.
The acquired intangible assets and liabilities referenced above had weighted average lives of the following for the nine months ended September 30, 2017 and 2016, respectively (in years):
 
Nine Months Ended September 30,
 
2017
 
2016
Acquired intangible assets
20.6
 
9.1
Acquired intangible liabilities
19.9
 
8.3
4. Impairment and Dispositions
During the nine months ended September 30, 2017, we completed the disposition of an MOB located in Texas for a gross sales price of $5.0 million, representing approximately 48,000 square feet of GLA. In addition, during the nine months ended September 30, 2017, we recorded impairment charges of $5.1 million related to one MOB located in Massachusetts. During the nine months ended September 30, 2016, we completed a disposition of four senior care facilities for an aggregate gross sales price of $26.5 million. During the nine months ended September 30, 2016, we recorded no impairment charges.

18


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

5. Intangible Assets and Liabilities
Intangible assets and liabilities consisted of the following as of September 30, 2017 and December 31, 2016, respectively (in thousands, except weighted average remaining amortization):
 
September 30, 2017
 
December 31, 2016
 
Balance
 
Weighted Average Remaining
Amortization in Years
 
Balance
 
Weighted Average Remaining
Amortization in Years
Assets:
 
 
 
 
 
 
 
In place leases
$
478,052

 
9.7
 
$
294,597

 
9.7
Tenant relationships
170,539

 
10.7
 
172,974

 
10.6
Above market leases
39,724

 
6.3
 
28,401

 
6.3
Below market leasehold interests
92,362

 
63.4
 
38,136

 
60.4
 
780,677

 
 
 
534,108

 
 
Accumulated amortization
(299,398
)
 
 
 
(256,305
)
 
 
Total
$
481,279

 
19.2
 
$
277,803

 
16.1
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Below market leases
$
61,788

 
14.7
 
$
34,370

 
18.6
Above market leasehold interests
20,610

 
50.3
 
11,632

 
53.0
 
82,398

 
 
 
46,002

 
 
Accumulated amortization
(12,546
)
 
 
 
(8,946
)
 
 
Total
$
69,852

 
24.9
 
$
37,056

 
28.5
The following is a summary of the net intangible amortization for the three and nine months ended September 30, 2017 and 2016, respectively (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Amortization recorded against rental income related to above and (below) market leases
$
(108
)
 
$
(115
)
 
$
(371
)
 
$
202

Rental expense related to above and (below) market leasehold interests
322

 
118

 
617

 
321

Amortization expense related to in place leases and tenant relationships
18,757

 
15,266

 
45,944

 
39,483

6. Receivables and Other Assets
Receivables and other assets consisted of the following as of September 30, 2017 and December 31, 2016, respectively (in thousands):
 
September 30, 2017
 
December 31, 2016
Tenant receivables, net
$
14,417

 
$
8,722

Other receivables, net
10,161

 
9,233

Deferred financing costs, net
8,190

 
4,198

Deferred leasing costs, net
23,794

 
20,811

Straight-line rent receivables, net
83,133

 
74,052

Prepaid expenses, deposits, equipment and other, net
65,383

 
55,904

Derivative financial instruments - interest rate swaps
952

 
541

Total
$
206,030

 
$
173,461


19


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following is a summary of the amortization of deferred leasing costs and financing costs for the three and nine months ended September 30, 2017 and 2016, respectively (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Amortization expense related to deferred leasing costs
$
1,445

 
$
1,224

 
$
4,179

 
$
3,368

Interest expense related to deferred financing costs
398

 
331

 
1,061

 
994

7. Debt
Debt consisted of the following as of September 30, 2017 and December 31, 2016, respectively (in thousands):
 
September 30, 2017
 
December 31, 2016
Unsecured revolving credit facility
$
75,000

 
$
88,000

Unsecured term loans
500,000

 
500,000

Unsecured senior notes
1,850,000

 
950,000

Fixed rate mortgages loans
415,853

 
204,562

Variable rate mortgages loans
38,169

 
38,904

 
2,879,022

 
1,781,466

Deferred financing costs, net
(16,552
)
 
(9,527
)
Discount, net
(5,712
)
 
(3,034
)
Total
$
2,856,758

 
$
1,768,905

Unsecured Credit Agreement
Unsecured Revolving Credit Facility due 2022
On July 27, 2017, HTALP entered into an amended and restated $1.3 billion unsecured credit agreement (the “Unsecured Credit Agreement”) which increased the amount available under the unsecured revolving credit facility to $1.0 billion and extended the maturities of the unsecured revolving credit facility to June 30, 2022 and for the $300.0 million unsecured term loan referenced below until February 1, 2023. The maximum principal amount of the Unsecured Credit Agreement may be increased by up to $750.0 million, subject to certain conditions, for a total principal amount of $2.05 billion.
Borrowings under the unsecured revolving credit facility accrue interest at a rate equal to adjusted LIBOR, plus a margin ranging from 0.83% to 1.55% per annum based on our credit rating. We also pay a facility fee ranging from 0.13% to 0.30% per annum on the aggregate commitments under the unsecured revolving credit facility. As of September 30, 2017, the margin associated with our borrowings was 1.00% per annum and the facility fee was 0.20% per annum.
Unsecured Term Loan due 2023
On July 27, 2017, we entered into an amended and restated Unsecured Credit Agreement as noted above. As part of this agreement, we obtained a $300.0 million unsecured term loan that was guaranteed by us with a maturity date of February 1, 2023. Borrowings under this unsecured term loan accrue interest equal to adjusted LIBOR, plus a margin ranging from 0.90% to 1.75% per annum based on our credit rating. The margin associated with our borrowings as of September 30, 2017 was 1.10% per annum. Including the impact of the interest rate swaps associated with our unsecured term loan, the interest rate was 2.40% per annum, based on our current credit rating. As of September 30, 2017, HTALP had $300.0 million under this unsecured term loan outstanding.
Bridge Loan Facility
In connection with the Duke Acquisition, in May 2017, we entered into a senior unsecured bridge loan facility (the “Bridge Loan Facility”) which provided to us up to $2.47 billion, less the aggregate amount of net proceeds from debt or equity capital raises or a senior term loan facility. The Bridge Loan Facility was made available to us on the closing of the Duke Acquisition and was scheduled to mature 364 days from the closing. In June 2017, we terminated the Bridge Loan Facility and no proceeds were used because we elected to fund the Duke Acquisition through other equity and debt offerings. In connection with the execution and subsequent termination of the Bridge Loan Facility, we incurred $10.4 million in related fees, which we recorded in income (loss) on extinguishment of debt in the accompanying condensed consolidated statements of operations.

20


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

$200.0 Million Unsecured Term Loan due 2023
As of September 30, 2017, HTALP had a $200.0 million unsecured term loan outstanding, which matures on September 26, 2023. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 1.50% to 2.45% per annum based on our credit rating. The margin associated with our borrowings as of September 30, 2017 was 1.65% per annum. HTALP had interest rate swaps in place that fixed the interest rate at 2.93% per annum, based on our current credit rating.
$300.0 Million Unsecured Senior Notes due 2021
As of September 30, 2017, HTALP had $300.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act of 1933, as amended (the “Securities Act”), bear interest at 3.38% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.21% of the principal amount thereof, with an effective yield to maturity of 3.50% per annum. As of September 30, 2017, HTALP had $300.0 million of these unsecured senior notes outstanding that mature on July 15, 2021.
$400.0 Million Unsecured Senior Notes due 2022
In June 2017, in connection with the Duke Acquisition and the $500.0 million unsecured senior notes due 2027 referenced below, HTALP issued $400.0 million of unsecured senior notes that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 2.95% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.94% of the principal amount thereof, with an effective yield to maturity of 2.96% per annum. As of September 30, 2017, HTALP had $400.0 million of these unsecured senior notes outstanding that mature on July 1, 2022.
$300.0 Million Unsecured Senior Notes due 2023
As of September 30, 2017, HTALP had $300.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.70% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.19% of the principal amount thereof, with an effective yield to maturity of 3.80% per annum. As of September 30, 2017, HTALP had $300.0 million of these unsecured senior notes outstanding that mature on April 15, 2023.
$350.0 Million Unsecured Senior Notes due 2026
As of September 30, 2017, HTALP had $350.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.50% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.72% of the principal amount thereof, with an effective yield to maturity of 3.53% per annum. As of September 30, 2017, HTALP had $350.0 million of these unsecured senior notes outstanding that mature on August 1, 2026.
$500.0 Million Unsecured Senior Notes due 2027
In June 2017, in connection with the Duke Acquisition and the $400.0 million unsecured senior notes due 2022 referenced above, HTALP issued $500.0 million of unsecured senior notes that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.75% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.49% of the principal amount thereof, with an effective yield to maturity of 3.81% per annum. As of September 30, 2017, HTALP had $500.0 million of these unsecured senior notes outstanding that mature on July 1, 2027.
Fixed and Variable Rate Mortgages
In June 2017, as part of the Duke Acquisition, we were required by the seller to execute as the borrower for a part of the purchase price a senior secured first lien loan, subject to customary non-recourse carve-outs, in the amount of $286.0 million (the “Promissory Note”). The Promissory Note bears interest at 4.0% per annum and is payable in three equal payments maturing on January 10, 2020 and is guaranteed by us.
As of September 30, 2017, HTALP and its subsidiaries had fixed and variable rate mortgages loans with interest rates ranging from 2.70% to 6.39% per annum and a weighted average interest rate of 4.31% per annum. Including the impact of the interest rate swap associated with our variable rate mortgages, the weighted average interest rate was 4.46% per annum.

21


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of September 30, 2017 (in thousands):
Year
 
Amount
Remainder of 2017
 
$
1,166

2018
 
100,827

2019
 
105,940

2020
 
144,892

2021
 
303,933

Thereafter
 
2,222,264

Total
 
$
2,879,022

Deferred Financing Costs
As of September 30, 2017, the future amortization of our deferred financing costs is as follows (in thousands):
Year
 
Amount
Remainder of 2017
 
$
618

2018
 
2,821

2019
 
2,826

2020
 
2,804

2021
 
2,610

Thereafter
 
4,873

Total
 
$
16,552

We are required by the terms of our applicable loan agreements to meet various affirmative and negative covenants that we believe are customary for these types of facilities, such as limitations on the incurrence of debt by us and our subsidiaries that own unencumbered assets, limitations on the nature of HTALP’s business, and limitations on distributions by HTALP and its subsidiaries that own unencumbered assets. Our loan agreements also impose various financial covenants on us, such as a maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a minimum tangible net worth covenant, a maximum ratio of unsecured indebtedness to unencumbered asset value, rent coverage ratios and a minimum ratio of unencumbered net operating income to unsecured interest expense. As of September 30, 2017, we believe that we were in compliance with all such financial covenants and reporting requirements. In addition, certain of our loan agreements include events of default provisions that we believe are customary for these types of facilities, including restricting us from making dividend distributions to our stockholders in the event we are in default thereunder, except to the extent necessary for us to maintain our REIT status.
8. Derivative Financial Instruments and Hedging Activities
Risk Management Objective of Using Derivative Financial Instruments
We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, our fair value of interest rate swap derivative liabilities is adjusted to reflect the impact of our credit quality.

22


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and treasury locks as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without exchange of the underlying notional amount. A treasury lock is a synthetic forward sale of a U.S. treasury note, which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2017, such derivatives were used to hedge the variable cash flows associated with variable rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and nine months ended September 30, 2017, we recorded approximately $4,000 and $31,000, respectively, of hedge ineffectiveness in earnings. We designated our derivative financial instruments as cash flow hedges in March 2017.
During the nine months ended September 30, 2017, we entered into and settled two treasury locks designated as cash flow hedges with an aggregate notional amount of $250.0 million to hedge future fixed rate debt issuances, which fixed the 10-year swap rates at an average rate of 2.26% per annum. Upon settlement of these contracts during the nine months ended September 30, 2017, we paid and reported a loss of $0.7 million which was recorded in accumulated other comprehensive loss in our accompanying condensed consolidated statements of comprehensive income (loss) and a gain of $25,000 which was recorded in the change in fair value of our derivative financial instruments in our accompanying condensed consolidated statements of operations.
Amounts reported in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. During the next twelve months, we estimate that an additional $0.4 million will be reclassified from other comprehensive income in the accompanying condensed consolidated balance sheets as an increase to interest related to derivative financial instruments in the accompanying condensed consolidated statements of operations.
As of September 30, 2017, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments):
Interest Rate Swaps
 
September 30, 2017
Number of instruments
 
5

Notional amount
 
$
189,751

The table below presents the fair value of our derivative financial instruments designated as a hedge as well as our classification in the accompanying condensed consolidated balance sheets as of September 30, 2017 (in thousands). In March 2017, we designated our derivative financial instruments as cash flow hedges. As such, prior to March 2017 we did not have derivatives designated as hedging instruments.
 
 
Asset Derivatives
 
Liability Derivatives
  
 
 
 
Fair Value at:
 
 
 
Fair Value at:
Derivatives Designated as Hedging Instruments:
 
Balance Sheet
Location
 
September 30, 2017
 
December 31, 2016
 
Balance Sheet
Location
 
September 30, 2017
 
December 31, 2016
Interest rate swaps
 
Receivables and other assets
 
$
952

 
$

 
Derivative financial instruments
 
$
1,441

 
$


23


HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The tables below present the gain or loss recognized on our derivative financial instruments designated as hedges as well as our classification in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016 (in thousands). In March 2017, we designated our derivative financial instruments as cash flow hedges. As such, prior to March 2017 we did not have derivatives designated as hedging instruments.
  
 
Gain (Loss) Recognized in OCI on Derivative
(Effective Portion):
 
 
 
Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion):
 
 
 
Gain (Loss) Recognized in Income on Derivative
(Ineffective Portion and Amount Excluded from
Effectiveness Testing):
 
 
Three Months Ended September 30,
 
 
 
Three Months Ended September 30,
 
 
 
Three Months Ended September 30,
Derivatives Cash Flow Hedging Relationships:
 
2017
 
2016
 
Statement of Operations Location
 
2017
 
2016
 
Statement of Operations Loc