ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: December 31, 2018 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to |
Maryland | 62-1507028 | |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common stock, $0.01 par value per share | New York Stock Exchange |
Large accelerated filer | ý | Accelerated filer | o | ||||
Non-accelerated filer | Smaller reporting company | o | |||||
Emerging growth company | o | ||||||
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. o |
Page | ||
Gross Investment | Square Feet | Percentage of Square Feet | December 31, 2018 | ||||||||||||
(Dollars and square feet in thousands) | Number of Properties | Occupancy (1) | |||||||||||||
Medical office/outpatient | $ | 3,525,277 | 13,671 | 92.4 | % | 189 | 87.3 | % | |||||||
Inpatient | 250,919 | 570 | 3.8 | % | 5 | 100.0 | % | ||||||||
Office | 134,621 | 558 | 3.8 | % | 5 | 85.9 | % | ||||||||
Sub-Total | 3,910,817 | 14,799 | 100.0 | % | 199 | 87.8 | % | ||||||||
Construction in progress | 33,107 | ||||||||||||||
Land held for development | 24,647 | ||||||||||||||
Corporate property | 5,500 | ||||||||||||||
Total | $ | 3,974,071 |
(1) | The occupancy column represents the percentage of total rentable square feet leased (including month-to-month and holdover leases), excluding one property classified as held for sale as of December 31, 2018. |
Expiration Year | Number of Leases | Leased Square Feet | Percentage of Leased Square Feet | ||||||
2019 (1) | 733 | 2,852,561 | 22.0 | % | |||||
2020 | 485 | 1,899,982 | 14.6 | % | |||||
2021 | 414 | 1,468,849 | 11.3 | % | |||||
2022 | 316 | 1,396,595 | 10.8 | % | |||||
2023 | 306 | 1,335,053 | 10.3 | % | |||||
2024 | 167 | 943,981 | 7.3 | % | |||||
2025 | 95 | 723,638 | 5.5 | % | |||||
2026 | 70 | 226,921 | 1.7 | % | |||||
2027 | 62 | 625,618 | 4.8 | % | |||||
2028 | 93 | 755,676 | 5.8 | % | |||||
Thereafter | 77 | 761,529 | 5.9 | % | |||||
2,818 | 12,990,403 | 100.0 | % |
(1) | Includes 59 leases totaling 160,749 square feet that expired prior to December 31, 2018 and are currently on month-to-month terms. |
• | the Tax Cuts and Jobs Act of 2017, affects healthcare providers and health systems in a variety of ways, positively and negatively, including by limiting their ability to deduct interest on debt, denying deductions for and imposing an excise tax on the compensation in excess of $1 million of the five most highly-compensated employees of health systems, and eliminating, in 2019, the tax penalty for the Affordable Care Act’s individual health insurance mandate; |
• | the expansion of Medicaid benefits and the implementation of health insurance exchanges under the Affordable Care Act, whether run by the state or by the federal government, whereby individuals and small businesses purchase health insurance, including government-funded plans, many assisted by federal subsidies that are subject to ongoing legal and legislative challenges; |
• | quality control, cost containment, and value-based payment system reforms for Medicaid and Medicare, such as expansion of pay-for-performance criteria, bundled provider payments, accountable care organizations, increased patient cost-sharing, geographic payment variations, comparative effectiveness research, and lower payments for hospital readmissions; |
• | implementation of MACRA, which, if not amended in future legislation, will eventually replace the traditional fee-for-service payment model for physicians with a new value-based payment initiative; the CMS exempted approximately two-thirds of physician practices from MACRA compliance in 2018; |
• | equalization of Medicare payment rates across different facility-type settings; Section 603 of the Bipartisan Budget Act of 2015 lowered Medicare payment rates, effective January 1, 2017, for services provided in off-campus, provider-based outpatient departments to the same level of rates for physician office settings; |
• | the continued adoption by providers of federal standards for the meaningful-use of electronic health records; |
• | anti-trust scrutiny of health insurance company mergers; and |
• | consideration of significant cost-saving overhauls of Medicare and Medicaid, including capped federal Medicaid payments to states, premium-support models to provide for a fixed amount of Medicare benefits per enrollee, and an increase in the eligibility age for Medicare. |
• | The construction of properties generally requires various government and other approvals that may not be received when expected, or at all, which could delay or preclude commencement of construction; |
• | Opportunities that the Company pursued but later abandoned could result in the expensing of pursuit costs, which could impact the Company’s consolidated results of operations; |
• | Construction costs could exceed original estimates, which could impact the building’s profitability to the Company; |
• | Operating expenses could be higher than forecasted; |
• | Time required to initiate and complete the construction of a property and to lease up a completed property may be greater than originally anticipated, thereby adversely affecting the Company’s cash flow and liquidity; |
• | Occupancy rates and rents of a completed development property may not be sufficient to make the property profitable to the Company; and |
• | Favorable capital sources to fund the Company’s development and redevelopment activities may not be available when needed. |
• | The Company’s purchase price for acquired facilities may be based upon a series of market or building-specific judgments which may be incorrect; |
• | The costs of any maintenance or improvements for properties might exceed estimated costs; |
• | The Company may incur unexpected costs in the acquisition, construction or maintenance of real estate assets that could impact its expected returns on such assets; and |
• | Leasing may not occur at all, within expected time frames or at expected rental rates. |
• | disrupt the proper functioning of the Company's networks and systems and therefore the Company's operations and/or those of certain tenants; |
• | result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines; |
• | result in the Company's inability to properly monitor its compliance with the rules and regulations regarding the Company's qualification as a REIT; |
• | result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, or otherwise valuable information of the Company or others, which others could use to compete against the Company or which could expose it to damage claims by third-parties for disruption, destructive, or otherwise harmful purposes or outcomes; |
• | result in the Company's inability to maintain the building systems relied upon by the its tenants for the efficient use of their leased space; |
• | require significant management attention and resources to remedy any damages that result; |
• | subject the Company to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements; or |
• | damage the Company's reputation among its tenants and investors generally. |
• | limit the Company’s ability to adjust rapidly to changing market conditions in the event of a downturn in general economic conditions or in the real estate and/or healthcare industries; |
• | impair the Company’s ability to obtain additional debt financing or require potentially dilutive equity to fund obligations and carry out its business strategy; and |
• | result in a downgrade of the rating of the Company’s debt securities by one or more rating agencies, which would increase the costs of borrowing under the Unsecured Credit Facility and the cost of issuance of new debt securities, among other things. |
• | trends in the method of delivery of healthcare services; |
• | competition among healthcare providers; |
• | consolidation among healthcare providers, health insurers, hospitals and health systems; |
• | lower reimbursement rates from government and commercial payors, high uncompensated care expense, investment losses and limited admissions growth pressuring operating profit margins for healthcare providers; |
• | availability of capital; |
• | credit downgrades; |
• | liability insurance expense; |
• | pharmaceutical drug expense; |
• | regulatory and government reimbursement uncertainty resulting from the Affordable Care Act and other healthcare reform laws; |
• | efforts to repeal, replace or modify the Affordable Care Act in whole or in part; |
• | health reform initiatives to address healthcare costs through expanded value-based purchasing programs, bundled provider payments, health insurance exchanges, increased patient cost-sharing, geographic payment variations, comparative effectiveness research, lower payments for hospital readmissions, and shared risk-and-reward payment models such as accountable care organizations; |
• | federal court decisions on cases challenging the legality of the Affordable Care Act, in whole or in part; |
• | federal and state government plans to reduce budget deficits and address debt ceiling limits by lowering healthcare provider Medicare and Medicaid payment rates; |
• | equalizing Medicare payment rates across different settings; |
• | heightened health information technology security standards and the meaningful use of electronic health records by healthcare providers; and |
• | potential tax law changes affecting providers. |
• | Preferred Stock. The Company's charter authorizes the board of directors to issue preferred stock in one or more classes and establish the preferences and rights of any class of preferred stock issued. These actions can be taken without stockholder approval. The issuance of preferred stock could have the effect of delaying or preventing someone from taking control of the Company. |
• | Business combinations. Pursuant to the Maryland law, the Company cannot merge into or consolidate with another corporation or enter into a statutory share exchange transaction in which the Company is not the surviving entity or sell all or substantially all of its assets unless the board of directors adopts a resolution declaring the proposed transaction advisable and two-thirds of the stockholders voting together as a single class approve the transaction. |
• | Control share acquisitions. Maryland general corporation law also provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquirer or by officers or employee directors. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction, or to acquisitions approved or exempted by the corporation's charter or bylaws. |
• | Maryland unsolicited takeover statute. Under Maryland law, the Company's board of directors could adopt various anti-takeover provisions without the consent of stockholders. The adoption of such measures could discourage offers for the Company or make an acquisition of the Company more difficult. On February 12, 2019, the Company opted out of the provision of this statute that permits the board to classify without shareholder vote. As such, the Company's board could not classify into multiple classes without stockholders' approval. |
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (1) | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (1) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) | ||||||
Equity compensation plans approved by security holders | 328,533 | — | 1,788,760 | ||||||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total | 328,533 | — | 1,788,760 |
(1) | The outstanding options relate only to the 2000 Employee Stock Purchase Plan. The Company is unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights under the 2000 Employee Stock Purchase Plan or the weighted average exercise price of outstanding rights under that plan. The 2000 Employee Stock Purchase Plan provides that shares of common stock may be purchased at a per share price equal to 85% of the fair market value of the common stock at the beginning of the offering period or a purchase date applicable to such offering period, whichever is lower. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||
January 1 - January 31 | 20,687 | $ | 32.12 | — | — | ||||
February 1 - February 28 | 509 | 29.36 | — | — | |||||
March 1 - March 31 | — | — | — | — | |||||
April 1 - April 30 | — | — | — | — | |||||
May 1 - May 31 | — | — | — | — | |||||
June 1 - June 30 | — | — | — | — | |||||
July 1 - July 31 | 1,359 | 29.04 | — | — | |||||
August 1 - August 31 | — | — | — | — | |||||
September 1 - September 30 | — | — | — | — | |||||
October 1 - October 31 | — | — | — | — | |||||
November 1 - November 30 | 11,318 | 29.80 | — | — | |||||
December 1 - December 31 | 117,480 | 28.89 | — | — | |||||
Total | 151,353 |
Year Ended December 31, | |||||||||||||||||||
(Amounts in thousands except per share data) | 2018 | 2017 (1) | 2016 (1) | 2015 | 2014 | ||||||||||||||
Statement of Income Data: | |||||||||||||||||||
Total revenues | $ | 450,389 | $ | 424,737 | $ | 411,955 | $ | 388,471 | $ | 370,855 | |||||||||
Total expenses | 370,016 | 335,055 | 310,003 | 283,541 | 267,100 | ||||||||||||||
Other income (expense) | (10,602 | ) | (66,590 | ) | (16,381 | ) | (46,094 | ) | (69,776 | ) | |||||||||
Income from continuing operations | $ | 69,771 | $ | 23,092 | $ | 85,571 | $ | 58,836 | $ | 33,979 | |||||||||
Income (loss) from discontinued operations | — | — | — | 10,600 | (1,799 | ) | |||||||||||||
Net income attributable to common stockholders | $ | 69,771 | $ | 23,092 | $ | 85,571 | $ | 69,436 | $ | 31,887 | |||||||||
Diluted earnings per common share: | |||||||||||||||||||
Income from continuing operations | $ | 0.55 | $ | 0.18 | $ | 0.78 | $ | 0.59 | $ | 0.35 | |||||||||
Income (loss) from discontinued operations | — | — | — | 0.11 | (0.02 | ) | |||||||||||||
Net income attributable to common stockholders | $ | 0.55 | $ | 0.18 | $ | 0.78 | $ | 0.70 | $ | 0.33 | |||||||||
Weighted average common shares outstanding-Diluted | 123,351 | 118,017 | 109,387 | 99,880 | 96,759 | ||||||||||||||
Balance Sheet Data (as of the end of the period): | |||||||||||||||||||
Real estate properties, gross | $ | 3,974,071 | $ | 3,838,638 | $ | 3,628,221 | $ | 3,380,908 | $ | 3,258,279 | |||||||||
Real estate properties, net | $ | 2,958,897 | $ | 2,941,208 | $ | 2,787,382 | $ | 2,618,982 | $ | 2,557,608 | |||||||||
Mortgage notes receivable | $ | — | $ | — | $ | — | $ | — | $ | 1,900 | |||||||||
Assets held for sale, net | $ | 9,272 | $ | 33,147 | $ | 3,092 | $ | 724 | $ | 9,146 | |||||||||
Total assets | $ | 3,191,247 | $ | 3,193,585 | $ | 3,040,647 | $ | 2,810,224 | $ | 2,757,510 | |||||||||
Notes and bonds payable, net | $ | 1,345,984 | $ | 1,283,880 | $ | 1,264,370 | $ | 1,424,992 | $ | 1,403,692 | |||||||||
Total stockholders' equity | $ | 1,716,642 | $ | 1,789,883 | $ | 1,653,414 | $ | 1,242,747 | $ | 1,221,054 | |||||||||
Other Data: | |||||||||||||||||||
Funds from operations (2) | $ | 194,960 | $ | 134,274 | $ | 174,420 | $ | 124,571 | $ | 146,493 | |||||||||
Funds from operations per common share - Diluted (2) | $ | 1.57 | $ | 1.13 | $ | 1.59 | $ | 1.25 | $ | 1.51 | |||||||||
Cash flows from operations | $ | 208,355 | $ | 179,766 | $ | 151,272 | $ | 160,375 | $ | 125,370 | |||||||||
Dividends paid | $ | 150,266 | $ | 142,327 | $ | 131,759 | $ | 120,266 | $ | 116,371 | |||||||||
Dividends declared and paid per common share | $ | 1.20 | $ | 1.20 | $ | 1.20 | $ | 1.20 | $ | 1.20 |
(1) | The Company made certain reclassifications to the Consolidated Statements of Income that are outlined in Note 1, "Summary of Significant Accounting Policies" to the Consolidated Financial Statements. Also, the Company adopted Topic 606 using the full retrospective method on January 1, 2018. The years ended December 31, 2017 and 2016 includes the impact of the adoption. |
(2) | See "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of funds from operations (“FFO”), including why the Company presents FFO and a reconciliation of net income attributable to common stockholders to FFO. |
• | The Company's expected results may not be achieved; |
• | The Company may decide or may be required under purchase options to sell certain properties. The Company may not be able to reinvest the proceeds from sale at rates of return equal to the return received on the properties sold. Uncertain market conditions could result in the Company selling properties at unfavorable rates or at losses in the future; |
• | The Company’s revenues depend on the ability of its tenants under its leases to generate sufficient income from their operations to make rental payments to the Company; |
• | Owning real estate and indirect interests in real estate is subject to inherent risks; |
• | The Company may incur impairment charges on its real estate properties or other assets; |
• | If the Company is unable to promptly re-let its properties, if the rates upon such re-letting are significantly lower than the previous rates or if the Company is required to undertake significant expenditures to attract new tenants, then the Company’s business, consolidated financial condition and results of operations would be adversely affected; |
• | Certain of the Company’s properties are special purpose healthcare facilities and may not be easily adaptable to other uses; |
• | The Company has, and may have more in the future, exposure to fixed rent escalators, which could lag behind inflation and the growth in operating expenses such as real estate taxes, utilities, insurance, and maintenance expenses; |
• | The Company’s real estate investments are illiquid and the Company may not be able to sell properties strategically targeted for disposition; |
• | The Company is subject to risks associated with the development and redevelopment of properties; |
• | The Company may make material acquisitions and undertake developments that may involve the expenditure of significant funds and may not perform in accordance with management’s expectations; |
• | The Company is exposed to risks associated with geographic concentration; |
• | Many of the Company’s leases are dependent on the viability of associated health systems. Revenue concentrations relating to these leases expose the Company to risks related to the financial condition of the associated health systems; |
• | Many of the Company’s properties are held under ground leases. These ground leases contain provisions that may limit the Company’s ability to lease, sell, or finance these properties; |
• | The Company may experience uninsured or underinsured losses; |
• | The Company faces risks associated with security breaches through cyber attacks, cyber intrusions, or otherwise, as well as other significant disruptions of its information technology networks and related systems; |
• | United States government tenants may not receive annual budget appropriations, which could adversely affect their ability to pay the Company; |
• | The Company has incurred significant debt obligations and may incur additional debt and increase leverage in the future; |
• | Covenants in the Company’s debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company’s consolidated financial condition and results of operations; |
• | A change to the Company’s current dividend payment may have an adverse effect on the market price of the Company’s common stock; |
• | If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company’s operations and consolidated financial position would be negatively impacted; |
• | The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company’s debt ratings could have an adverse effect on the Company’s ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and development activity; |
• | The Company is exposed to increases in interest rates, changes to the method that LIBOR rates are determined, and the potential phasing out of LIBOR; and such changes could adversely impact the Company's ability to refinance existing debt, sell assets or engage in acquisition and development activity; |
• | The Company's swap agreements may not effectively reduce its exposure to changes in interest rates; |
• | If a healthcare tenant loses its licensure or certification, becomes unable to provide healthcare services, cannot meet its financial obligations to the Company or otherwise vacates a facility, the Company would have to obtain another tenant for the affected facility; |
• | Adverse trends in the healthcare service industry may negatively affect the Company’s lease revenues and the values of its investments; |
• | The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations; |
• | If the Company fails to remain qualified as a REIT, the Company will be subject to significant adverse consequences, including adversely affecting the value of its common stock; |
• | The Company's Articles of Incorporation, as well as provisions of Maryland general corporation law, contain limits and restrictions on transferability of the Company's common stock which may have adverse effects on the value of the Company's common stock; |
• | Complying with the REIT requirements may cause the Company to forego otherwise attractive opportunities; |
• | The prohibited transactions tax may limit the Company's ability to sell properties; |
• | Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code; and |
• | New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Company to qualify as a REIT. |
• | Overview |
• | Liquidity and Capital Resources |
• | Trends and Matters Impacting Operating Results |
• | Results of Operations |
• | Non-GAAP Financial Measures and Key Performance Indicators |
• | Off-Balance Sheet Arrangements |
• | Contractual Obligations |
• | Application of Critical Accounting Policies to Accounting Estimates |
(Dollars in millions) | Health System Affiliation | Date Acquired | Purchase Price | Mortgage Notes Payable Assumed | Square Footage | Cap Rate (1) | Hospital Campus Location (2) | Type (3) | ||||||||||||||
Seattle, WA | Overlake Health | 5/4/18 | $ | 7.8 | $ | — | 13,314 | 5.0 | % | ADJ | MOB | |||||||||||
Denver, CO (4) | CHI | 5/18/18 | 12.1 | (8.0 | ) | 93,992 | 5.5 | % | ADJ | MOB | ||||||||||||
Denver, CO (4) | CHI | 5/18/18 | 12.9 | — | 93,869 | 7.3 | % | ADJ | OFC | |||||||||||||
Oklahoma City, OK | Integris Health | 5/21/18 | 11.4 | — | 82,647 | 5.9 | % | ADJ | MOB | |||||||||||||
Seattle, WA | MultiCare Health | 6/29/18 | 26.2 | — | 86,942 | 5.7 | % | ON | MOB | |||||||||||||
Denver, CO | CHI | 8/24/18 | 4.1 | — | 17,084 | 6.0 | % | ADJ | MOB | |||||||||||||
Nashville, TN | N/A | 12/4/18 | 31.9 | — | 108,691 | 5.0 | % | N/A | OFC | |||||||||||||
Chicago, IL (5) | Ascension Health | 12/19/18 | 5.1 | — | 14,883 | 5.9 | % | ON | MOB | |||||||||||||
$ | 111.5 | $ | (8.0 | ) | 511,422 | 5.7 | % |
(1) | Cap rate equals the forecasted first year cash net operating income divided by the purchase price plus acquisition costs and expected first year capital expenditures. |
(2) | ON = Located on a hospital campus; ADJ = Adjacent to hospital campus |
(3) | MOB = medical office building; OFC = office building |
(4) | The mortgage note payable assumed at acquisition encumbers both buildings. |
(5) | The Company acquired an additional suite in a previously acquired medical office building. |
• | First generation tenant improvements and planned capital expenditures for acquisitions of approximately $13.1 million; |
• | Second generation tenant improvements of approximately $30.9 million; and |
• | Capital expenditures of approximately $20.3 million. See the Trends and Matters Impacting Operating Results - Capital Expenditures for more detail. |
(Dollars in millions) | Date Disposed | Sales Price | Square Footage | Cap Rate (1) | Type (2) | |||||||||
Roanoke, VA (3) (4) | 4/26/18 | $ | 46.2 | 460,881 | 13.3 | % | MOB, OFC | |||||||
Michigan (5) | 6/27/18 | 9.5 | 121,672 | 25.5 | % | SNF | ||||||||
St. Louis, MO | 8/30/18 | 9.8 | 70,893 | 4.3 | % | MOB | ||||||||
Denver, CO | 12/20/18 | 16.9 | 34,068 | 6.9 | % | IRF | ||||||||
Cleveland, TN | 12/21/18 | 13.3 | 81,382 | 6.5 | % | MOB | ||||||||
Tucson, AZ | 12/27/18 | 3.0 | 37,310 | 8.8 | % | MOB | ||||||||
Total dispositions | $ | 98.7 | 806,206 | 11.4 | % |
(1) | Cap rate equals in-place cash net operating income divided by the sales price. |
(2) | MOB = medical office building; SNF = skilled nursing facility; OFC = office; IRF = inpatient rehabilitation facility |
(3) | Previously classified as held for sale. |
(4) | Includes seven properties and comprised of five single-tenant net lease buildings and two multi-tenant buildings. |
(5) | Includes five skilled nursing facilities. |
• | In January 2018, the Company entered into two interest rate swaps totaling $50.0 million to hedge the 1-month LIBOR portion of the cost of borrowing under the Unsecured Term Loan due 2022 to a fixed rate of interest of 2.46% (plus the applicable margin rate, currently 1.10%) through December 16, 2022. |
• | The following table details the mortgage note payable activity for the year ended December 31, 2018: |
(Dollars in millions) | Transaction Date | Borrowing (Repayment) | Encumbered Square Footage | Contractual Interest Rate | ||||||||
Debt assumptions: | ||||||||||||
Denver, CO (1) | 05/18/18 | $ | 8.0 | 187,861 | 4.5 | % | ||||||
Total borrowings | $ | 8.0 | 187,861 | 4.5 | % | |||||||
Repayments in full: | ||||||||||||
Richmond, VA | 10/1/18 | $ | (5.7 | ) | 59,240 | 6.6 | % | |||||
Seattle, WA | 12/3/18 | (9.1 | ) | 35,558 | 5.8 | % | ||||||
Total repayments | $ | (14.8 | ) | 94,798 | 6.1 | % |
(1) | Assumed upon acquisition and excluding fair value adjustments totaling $0.1 million in aggregate recorded at closing. |
Principal Balance | Carrying Balance (3) | Weighted Years to Maturity | Contractual Rate | Effective Rate | |||||||||
Senior Notes due 2023 | $250,000 | $248,117 | 4.3 | 3.75 | % | 3.95 | % | ||||||
Senior Notes due 2025 | 250,000 | 248,278 | 6.3 | 3.88 | % | 4.08 | % | ||||||
Senior Notes due 2028 | 300,000 | 295,198 | 9.0 | 3.63 | % | 3.84 | % | ||||||
Total Senior Notes Outstanding | $800,000 | $791,593 | 6.7 | 3.74 | % | 3.95 | % | ||||||
Unsecured credit facility due 2020 (1) | 262,000 | 262,000 | 1.6 | LIBOR+1.00% | 3.50 | % | |||||||
Unsecured term loan due 2022 (2) | 150,000 | 149,183 | 4.0 | LIBOR+1.10% | 3.53 | % | |||||||
Mortgage notes payable | 143,115 | 143,208 | 5.1 | 4.96 | % | 4.79 | % | ||||||
Total Outstanding Notes and Bonds Payable | $1,355,115 | $1,345,984 | 5.2 | 3.80 | % | 3.91 | % |
(1) | As of December 31, 2018, the Company had $262.0 million outstanding under the Unsecured Credit Facility with a weighted average interest rate of approximately 3.50% and a remaining borrowing capacity of approximately $438.0 million. |
(2) | The effective interest rate includes the impact of interest rate swaps totaling $25.0 million and $50.0 million to hedge the 1-month LIBOR portion of the cost of borrowing under the Term Loan to a fixed rate of interest of 2.18% and 2.46%, respectively (plus the applicable margin rate, currently 1.10%). |
(3) | Balances are reflected net of discounts and debt issuance costs and include premiums. |
• | The Company continued the redevelopment of a medical office building in Charlotte, North Carolina, which includes a 38,000 square foot vertical expansion. The Company funded approximately $6.1 million during the year ended December 31, 2018. The Company expects initial occupancy to occur in the second quarter of 2019. |
• | The Company continued development of a 151,000 square foot medical office building in Seattle, Washington. The Company funded $21.5 million during the year ended December 31, 2018. The Company expects initial occupancy to occur in the fourth quarter of 2019. |
• | The Company received a certificate of occupancy for a 99,957 square foot medical office building in Denver, Colorado in 2017. The Company spent $1.8 million during the year ended December 31, 2018 including approximately $0.1 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant. The Company anticipates funding tenant improvements throughout 2019. |
• | The Company completed the redevelopment and expansion of one of its medical office buildings in Nashville, Tennessee in 2017. The Company spent approximately $6.1 million during the year ended December 31, 2018, including approximately $1.9 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant. |
Number of Properties | Gross Real Estate Investment as of December 31, 2018 | |||||||||||||||||
Year Exercisable | MOB | Inpatient | Fair Market Value Method (1) | Non Fair Market Value Method (2) | Total | |||||||||||||
Current (3) | 3 | 1 | $ | 95,709 | $ | — | $ | 95,709 | ||||||||||
2019 | — | 1 | 21,355 | — | 21,355 | |||||||||||||
2020 | — | — | — | — | — | |||||||||||||
2021 | 1 | — | — | 14,984 | 14,984 | |||||||||||||
2022 | — | — | — | — | — | |||||||||||||
2023 | — | — | — | — | — | |||||||||||||
2024 | — | — | — | — | — | |||||||||||||
2025 | 5 | 1 | 47,615 | 221,929 | 269,544 | |||||||||||||
2026 | — | — | — | — | — | |||||||||||||
2027 | — | — | — | — | — | |||||||||||||
2028 | 1 | — | 43,858 | — | 43,858 | |||||||||||||
2029 and thereafter | 3 | — | 75,733 | — | 75,733 | |||||||||||||
Total | 13 | 3 | $ | 284,270 | $ | 236,913 | $ | 521,183 |
(1) | The purchase option price includes a fair market value component that is determined by an appraisal process. |
(2) | Includes properties with stated purchase prices or prices based on fixed capitalization rates. These properties have purchase prices that are on average 17% greater than the Company's current gross investment. |
(3) | These purchase options have been exercisable for an average of 10.4 years. |
% Increase | % of Base Rent | |||
Annual increase | ||||
CPI | 2.1 | % | 10.0 | % |
Fixed | 2.9 | % | 81.1 | % |
Non-annual increase | ||||
CPI | 0.9 | % | 1.5 | % |
Fixed | 1.9 | % | 5.9 | % |
No increase | ||||
Term > 1 year | — | % | 1.5 | % |
Change | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | $ | % | ||||||||||
Property operating | $ | 390,256 | $ | 358,009 | $ | 32,247 | 9.0 | % | ||||||
Single-tenant net lease | 47,860 | 52,897 | (5,037 | ) | (9.5 | )% | ||||||||
Straight-line rent | 4,281 | 6,072 | (1,791 | ) | (29.5 | )% | ||||||||
Total Rental income | $ | 442,397 | $ | 416,978 | $ | 25,419 | 6.1 | % |
• | Acquisitions and developments in 2017 and 2018 contributed $26.8 million. |
• | Leasing activity, including contractual rent increases, contributed $8.3 million. |
• | The conversion of one property to single-tenant net lease resulted in a decrease of $0.6 million. |
• | Dispositions in 2017 and 2018 resulted in a decrease of $2.3 million. |
• | Dispositions in 2017 and 2018 resulted in a decrease of $7.2 million. |
• | Acquisitions in 2017 contributed $0.5 million. |
• | The conversion of one property from multi-tenant resulted in an increase of $0.4 million. |
• | Leasing activity, including contractual rent increases, contributed $1.3 million. |
• | Acquisitions and developments in 2017 and 2018 resulted in an increase of $0.8 million. |
• | Dispositions in 2017 and 2018 resulted in a decrease of $0.4 million. |
• | Net leasing activity and contractual rent increases resulted in a decrease of $2.2 million. |
• | Acquisitions and developments in 2017 and 2018 resulted in an increase of $11.4 million. |
• | Increases in portfolio operating expenses as follows: |
◦ | property tax expense of $1.6 million; |
◦ | compensation-related expense of $1.1 million; |
◦ | janitorial expense of $0.3 million; and |
◦ | maintenance and repair expense of $0.2 million. |
• | Dispositions in 2017 and 2018 resulted in a decrease of $1.3 million. |
• | Increase in non-cash performance-based compensation expense totaling $0.6 million. |
• | Increase in payroll compensation of $0.9 million. |
• | Decrease in cash performance-based compensation expense totaling $0.4 million. |
• | Other net increases, including professional fees and other administrative costs, of $0.4 million. |
• | Acquisitions and developments in 2017 and 2018 resulted in increases of $18.6 million. |
• | Various building and tenant improvement expenditures caused increases of $11.7 million. |
• | Dispositions in 2017 and 2018 resulted in decreases of $3.2 million. |
• | Assets that became fully depreciated resulted in decreases of $5.4 million. |
(Dollars in thousands) | 2018 | 2017 | Change | Percentage Change | ||||||||||
Contractual interest | $ | 51,147 | $ | 54,435 | $ | (3,288 | ) | (6.0 | )% | |||||
Net discount/premium accretion | 5 | 187 | (182 | ) | (97.3 | )% | ||||||||
Debt issuance costs amortization | 2,435 | 2,476 | (41 | ) | (1.7 | )% | ||||||||
Amortization of interest rate swap settlement | 168 | 175 | (7 | ) | (4.0 | )% | ||||||||
Interest cost capitalization | (951 | ) | (871 | ) | (80 | ) | 9.2 | % | ||||||
Total interest expense | $ | 52,804 | $ | 56,402 | $ | (3,598 | ) | (6.4 | )% |
• | The Senior Notes due 2028 in an aggregate amount of $300.0 million were issued in the fourth quarter of 2017 and accounted for an increase of $10.3 million. |
• | The Senior Notes due 2021 were repaid in the fourth quarter of 2017 and accounted for a decrease of $21.9 million. |
• | The Unsecured Credit Facility due 2020 and Unsecured Term Loan due 2022 accounted for a net increase of $7.1 |
• | Mortgage notes assumed upon acquisition of real properties accounted for an increase of $1.7 million, and mortgage notes repayments accounted for a decrease of $0.2 million. |
• | Scheduled monthly interest payments related to the Company's mortgage notes payable decreased $0.3 million. |
Change | ||||||||||||||
(Dollars in thousands) | 2017 | 2016 | $ | % | ||||||||||
Property operating | $ | 358,009 | $ | 331,109 | $ | 26,900 | 8.1 | % | ||||||
Single-tenant net lease | 52,897 | 63,895 | (10,998 | ) | (17.2 | )% | ||||||||
Straight-line rent | 6,072 | 7,201 | (1,129 | ) | (15.7 | )% | ||||||||
Total Rental income | $ | 416,978 | $ | 402,205 | $ | 14,773 | 3.7 | % |
• | Acquisitions and developments in 2016 and 2017 resulted in an increase of $18.2 million. |
• | Net leasing activity including contractual rent increases and renewals contributed $13.1 million. |
• | Dispositions in 2016 and 2017 resulted in a decrease of $4.4 million. |
• | Dispositions in 2016 and 2017 resulted in a decrease of $10.1 million. |
• | Reduction in lease revenue of $2.1 million upon tenant vacate and reclassification to held for sale. |
• | Acquisitions in 2016 and 2017 resulted in an increase of $0.7 million. |
• | Contractual rent increases resulted in an increase of $0.5 million. |
• | Acquisitions in 2016 and 2017 resulted in an increase of $0.8 million. |
• | Dispositions in 2016 and 2017 resulted in a decrease of $0.5 million. |
• | The effect of prior year rent abatements that expired and net leasing activity resulted in a decrease of $1.4 million. |
• | Acquisitions and developments in 2016 and 2017 resulted in an increase of $7.7 million. |
• | Increases in portfolio operating expenses as follows: |
◦ | property tax expense of $2.0 million; |
◦ | maintenance and repair expense of $0.3 million; |
◦ | ground lease straight-line rent expense of $0.8 million; |
◦ | janitorial expense of $0.7 million; |
◦ | utilities expense of $0.3 million; |
◦ | compensation-related expense of $0.4 million; and |
◦ | security expense of $0.1 million. |
• | Dispositions in 2016 and 2017 resulted in a decrease of $1.6 million. |
• | Increase in non-cash performance-based compensation expense totaling $2.6 million. |
• | Increase in payroll compensation of $0.4 million. |
• | Decrease in cash performance-based compensation expense totaling $0.8 million. |
• | Other net decreases, including professional fees and other administrative costs, of $0.5 million. |
• | Acquisitions and developments in 2016 and 2017 resulted in increases of $11.1 million. |
• | Various building and tenant improvement expenditures caused increases of $11.9 million. |
• | Dispositions in 2016 and 2017 resulted in decreases of $5.2 million. |
• | Assets that became fully depreciated resulted in decreases of $3.0 million. |
(Dollars in thousands) | 2017 | 2016 | Change | Percentage Change | ||||||||||
Contractual interest | $ | 54,435 | $ | 55,666 | $ | (1,231 | ) | (2.2 | )% | |||||
Net discount/premium accretion | 187 | (45 | ) | 232 | (515.6 | )% | ||||||||
Debt issuance costs amortization | 2,476 | 2,820 | (344 | ) | (12.2 | )% | ||||||||
Amortization of interest rate swap settlement | 175 | 168 | 7 | 4.2 | % | |||||||||
Interest cost capitalization | (871 | ) | (1,258 | ) | 387 | (30.8 | )% | |||||||
Total interest expense | $ | 56,402 | $ | 57,351 | $ | (949 | ) | (1.7 | )% |
• | The Senior Notes due 2028 in an aggregate amount of $300.0 million were issued in the fourth quarter of 2017 and accounted for an increase of $0.6 million. |
• | The Senior Notes due 2021 were repaid in the fourth quarter of 2017 and accounted for a decrease of $1.1 million. |
• | The Unsecured Credit Facility and Unsecured Term Loan due 2022 accounted for a net decrease of $0.2 million. |
• | Mortgage notes assumed upon acquisition of real properties accounted for an increase of $0.3 million, and mortgage notes repayments accounted for a decrease of $0.9 million. |
• | Scheduled monthly interest payments related to the Company's mortgage notes payable increased $0.1 million. |
Year Ended December 31, | |||||||||||
(Amounts in thousands, except per share data) | 2018 | 2017 | 2016 | ||||||||
Net income | $ | 69,771 | $ | 23,092 | $ | 85,571 | |||||
Gain on sales of real estate properties | (41,665 | ) | (39,524 | ) | (41,044 | ) | |||||
Impairments | — | 5,385 | 121 | ||||||||
Real estate depreciation and amortization | 166,854 | 145,321 | 129,772 | ||||||||
Total adjustments | 125,189 | 111,182 | 88,849 | ||||||||
Funds from Operations | $ | 194,960 | $ | 134,274 | $ | 174,420 | |||||
Acquisition and pursuit costs | 738 | 2,180 | 3,414 | ||||||||
Write-off of debt issuance costs upon amendment of credit facilities | — | — | 81 | ||||||||
Pension termination | — | — | 4 | ||||||||
Forfeited earnest money received | (466 | ) | — | — | |||||||
Revaluation of awards upon retirement | 70 | — | 89 | ||||||||
Debt financing costs | — | 45,773 | — | ||||||||
Normalized Funds from Operations | $ | 195,302 | $ | 182,227 | $ | 178,008 | |||||
Non-real estate depreciation and amortization | 5,892 | 5,551 | 5,475 | ||||||||
Provision for bad debt, net | 60 | 159 | (21 | ) | |||||||
Straight-line rent income, net | (2,728 | ) | (4,575 | ) | (7,134 | ) | |||||
Stock-based compensation | 10,621 | 10,027 | 7,509 | ||||||||
Non-cash items included in cash flows from operating activities | 13,845 | 11,162 | 5,829 | ||||||||
2nd Generation tenant improvements | (30,939 | ) | (20,367 | ) | (23,692 | ) | |||||
Leasing commissions paid | (7,119 | ) | (7,099 | ) | (5,210 | ) | |||||
Capital expenditures | (20,347 | ) | (18,790 | ) | (17,122 | ) | |||||
Funds Available for Distribution | $ | 150,742 | $ | 147,133 | $ | 137,813 | |||||
Funds from Operations per Common Share - Diluted | $ | 1.57 | $ | 1.13 | $ | 1.59 | |||||
Normalized Funds from Operations per Common Share - Diluted | $ | 1.57 | $ | 1.53 | $ | 1.63 | |||||
Weighted average common shares outstanding - Diluted | 124,104 | 118,877 | 109,387 |
Same Store Cash NOI for the | ||||||||||||||
Year Ended December 31, | ||||||||||||||
(Dollars in thousands) | Number of Properties (1) | Gross Investment at December 31, 2018 | 2018 | 2017 | ||||||||||
Multi-tenant Properties | 151 | $ | 2,897,873 | $ | 208,348 | $ | 202,556 | |||||||
Single-tenant Net Lease Properties | 14 | 471,319 | 42,476 | 41,101 | ||||||||||
Total | 165 | $ | 3,369,192 | $ | 250,824 | $ | 243,657 |
(1) | Properties are based on the same store definition included below and exclude assets classified as held for sale. |
• | Properties having less than 60% occupancy that is expected to last at least two quarters; |
• | Properties that experience a loss of occupancy over 30% in a single quarter; or |
• | Properties with negative net operating income that is expected to last at least two quarters. |
Reconciliation of Same Store Cash NOI: | |||||||
Year Ended December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Net income | $ | 69,771 | $ | 23,092 | |||
Other income (expense) | 10,602 | 66,590 | |||||
General and administrative expense | 34,511 | 32,992 | |||||
Depreciation and amortization expense | 164,201 | 142,472 | |||||
Other expenses (1) | 7,849 | 8,626 | |||||
Straight-line rent revenue | (4,281 | ) | (6,072 | ) | |||
Other revenue (2) | (5,287 | ) | (4,566 | ) | |||
Cash NOI | 277,366 | 263,134 | |||||
Cash NOI not included in same store | (26,542 | ) | (19,477 | ) | |||
Same store Cash NOI | $ | 250,824 | $ | 243,657 | |||
(1) | Includes acquisition and pursuit costs, bad debt, above and below market ground lease intangible amortization, leasing commission amortization and ground lease straight-line rent. |
(2) | Includes management fee income, storage income, interest, mortgage interest income, above and below market lease intangible amortization, lease inducement amortization, lease terminations and tenant improvement overage amortization. |
Reconciliation of Same Store Property Count: | ||
Property Count as of December 31, 2018 | ||
Same store properties | 165 | |
Acquisitions | 22 | |
Development Completions | 1 | |
Reposition | 11 | |
Total owned real estate properties | 199 |
Payments Due by Period | |||||||||||||||||||
(Dollars in thousands) | Total | Less than 1 Year | 1 -3 Years | 3 - 5 Years | More than 5 Years | ||||||||||||||
Long-term debt obligations, including interest (1) | $ | 1,602,728 | $ | 52,365 | $ | 376,206 | $ | 507,276 | $ | 666,881 | |||||||||
Operating lease commitments (2) | 349,750 | 5,288 | 10,498 | 10,431 | 323,533 | ||||||||||||||
Construction in progress (3) | 46,133 | 39,352 | 6,781 | — | — | ||||||||||||||
Tenant improvements (4) | 29,176 | 29,176 | — | — | — | ||||||||||||||
Total contractual obligations | $ | 2,027,787 | $ | 126,181 | $ | 393,485 | $ | 517,707 | $ | 990,414 |
(1) | The amounts shown include estimated interest on total debt other than the Unsecured Credit Facility and a portion of the Unsecured Term Loan due 2022, whose balance and interest rate may fluctuate from day to day. The fixed rate interest resulting from the Company's outstanding swaps on $75.0 million of the Unsecured Term Loan due 2022 are reflected in the table above. Excluded from the table above are the discounts on the Company's outstanding senior notes of approximately $3.4 million, net premiums totaling approximately $0.8 million on 17 mortgage notes payable, and debt issuance costs totaling approximately $6.5 million which are included in notes and bonds payable on the Company’s Consolidated Balance Sheet as of December 31, 2018. The Company’s long-term debt principal obligations are presented in more detail in the table below. |
(In millions) | Principal Balance at Dec. 31, 2018 | Principal Balance at Dec. 31, 2017 | Maturity Date | Contractual Interest Rates at December 31, 2018 | Principal Payments | Interest Payments | ||||||||||
Unsecured Credit Facility | $ | 262.0 | $ | 189.0 | 7/20 | LIBOR + 1.00% | At maturity | Monthly | ||||||||
Unsecured Term Loan due 2022 | 150.0 | 150.0 | 12/22 | LIBOR + 1.10% | At maturity | Monthly | ||||||||||
Senior Notes due 2023 | 250.0 | 250.0 | 4/23 | 3.75 | % | At maturity | Semi-Annual | |||||||||
Senior Notes due 2025 | 250.0 | 250.0 | 5/25 | 3.88 | % | At maturity | Semi-Annual | |||||||||
Senior Notes due 2028 | 300.0 | 300.0 | 1/28 | 3.63 | % | At maturity | Semi-Annual | |||||||||
Mortgage notes payable | 143.1 | 154.9 | 7/19-5/40 | 3.31%-6.88% | Monthly | Monthly | ||||||||||
$ | 1,355.1 | $ | 1,293.9 |
(2) | Includes primarily ground leases, with expiration dates through 2117, related to various real estate investments for which the Company is currently making payments. |
(3) | Includes cash flow projections related to the construction of one building in Seattle, Washington and the redevelopment of a building in Charlotte, North Carolina. This amount includes $3.4 million of invoices that were accrued and included in construction in progress on the Company's Consolidated Balance Sheet as of December 31, 2018. |
(4) | The Company has remaining tenant improvement allowances, excluding construction in progress, of approximately $29.2 million. |
• | Management, having the authority to approve the action, commits to a plan to sell the property or disposal group; |
• | The property or disposal group is available for immediate sale (i.e., a seller currently has the intent and ability to transfer the property or disposal group to a buyer) in its present condition, subject only to conditions that are usual and customary for sales of such properties or disposal groups; |
• | An active program to locate a buyer and other actions required to complete the plan to sell have been initiated; |
• | The sale of the property or disposal group is probable (i.e., likely to occur) and the transfer is expected to qualify for recognition as a completed sale within one year, with certain exceptions; |
• | The property or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and |
• | Actions necessary to complete the plan indicate that it is unlikely significant changes to the plan will be made or that the plan will be withdrawn. |
• | type of contractual arrangement under which the receivable was recorded, e.g., a mortgage note, a triple net lease, a gross lease, a property operating agreement or some other type of agreement; |
• | tenant’s or debtor’s reason for slow payment; |
• | industry influences and healthcare segment under which the tenant or debtor operates; |
• | evidence of willingness and ability of the tenant or debtor to pay the receivable; |
• | credit-worthiness of the tenant or debtor; |
• | collateral, security deposit, letters of credit or other monies held as security; |
• | tenant’s or debtor’s historical payment pattern; |
• | other contractual agreements between the tenant or debtor and the Company; |
• | relationship between the tenant or debtor and the Company; |
• | state in which the tenant or debtor operates; and |
• | existence of a guarantor and the willingness and ability of the guarantor to pay the receivable. |
Impact on Earnings and Cash Flows | |||||||||||||||
(Dollars in thousands) | Outstanding Principal Balance as of December 31, 2018 | Calculated Annual Interest | Assuming 10% Increase in Market Interest Rates | Assuming 10% Decrease in Market Interest Rates | |||||||||||
Variable Rate Debt: | |||||||||||||||
Unsecured Credit Facility | $ | 262,000 | $ | 9,177 | $ | (656 | ) | $ | 656 | ||||||
Unsecured Term Loan due 2022 (1) | 150,000 | 5,295 | (530 | ) | 530 | ||||||||||
$ | 412,000 | $ | 14,472 | $ | (1,186 | ) | $ | 1,186 |
(1) | As of December 31, 2018 the Company had interest rate swaps that fix the interest rate of $75.0 million of the Unsecured Term Loan due 2022. |
Fair Value | |||||||||||||||||||
(Dollars in thousands) | Carrying Value as of December 31, 2018 | December 31, 2018 | Assuming 10% Increase in Market Interest Rates | Assuming 10% Decrease in Market Interest Rates | December 31, 2017 (1) | ||||||||||||||
Fixed Rate Debt: | |||||||||||||||||||
Senior Notes due 2023 (2) | 248,117 | 239,377 | 235,028 | 243,842 | 240,281 | ||||||||||||||
Senior Notes due 2025 (2) | 248,278 | 238,811 | 232,836 | 245,147 | 241,324 | ||||||||||||||
Senior Notes due 2028 (2) | 295,198 | 294,662 | 286,180 | 303,545 | 294,848 | ||||||||||||||
Mortgage Notes Payable (2) | 143,208 | 142,474 | 140,649 | 144,349 | 155,301 | ||||||||||||||
$ | 934,801 | $ | 915,324 | $ | 894,693 | $ | 936,883 | $ | 931,754 |
(1) | Fair values as of December 31, 2017 represent fair values of obligations that were outstanding as of that date, and do not reflect the effect of any subsequent changes in principal balances and/or additions or extinguishments of instruments. |
(2) | Balances are presented net of discounts and debt issuance costs and including premiums. The fair value presented is based on Level 2 inputs defined as model-derived valuations in which significant inputs and significant value drivers are observable in active markets. |
December 31, | |||||||
2018 | 2017 | ||||||
ASSETS | |||||||
Real estate properties: | |||||||
Land | $ | $ | |||||
Buildings, improvements and lease intangibles | |||||||
Personal property | |||||||
Construction in progress | |||||||
Land held for development | |||||||
Less accumulated depreciation | ( | ) | ( | ) | |||
Total real estate properties, net | |||||||
Cash and cash equivalents | |||||||
Assets held for sale, net | |||||||
Other assets, net | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Liabilities: | |||||||
Notes and bonds payable | $ | $ | |||||
Accounts payable and accrued liabilities | |||||||
Liabilities of properties held for sale | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies | |||||||
Stockholders' Equity: | |||||||
Preferred stock, $.01 par value; 50,000 shares authorized; none issued and outstanding | |||||||
Common stock, $.01 par value; 300,000 shares authorized; 125,279 and 125,132 shares issued and outstanding at December 31, 2018 and 2017, respectively. | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Cumulative net income attributable to common stockholders | |||||||
Cumulative dividends | ( | ) | ( | ) | |||
Total stockholders’ equity | |||||||
Total liabilities and stockholders' equity | $ | $ |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
REVENUES | |||||||||||
Rental income | $ | $ | $ | ||||||||
Other operating | |||||||||||
EXPENSES | |||||||||||
Property operating | |||||||||||
General and administrative | |||||||||||
Acquisition and pursuit costs | |||||||||||
Depreciation and amortization | |||||||||||
Bad debt, net of recoveries | ( | ) | |||||||||
OTHER INCOME (EXPENSE) | |||||||||||
Gain on sales of real estate assets | |||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | |||||
Loss on extinguishment of debt | — | ( | ) | — | |||||||
Pension termination | — | — | ( | ) | |||||||
Impairment of real estate assets | — | ( | ) | ( | ) | ||||||
Interest and other income, net | |||||||||||
( | ) | ( | ) | ( | ) | ||||||
NET INCOME | $ | $ | $ | ||||||||
Basic earnings per common share | $ | $ | $ | ||||||||
Diluted earnings per common share | $ | $ | $ | ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC | |||||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
NET INCOME | $ | $ | $ | ||||||||
Other comprehensive income (loss): | |||||||||||
Interest rate swaps: | |||||||||||
Reclassification adjustment for losses included in net income (Interest expense) | |||||||||||
Losses arising during the period | ( | ) | ( | ) | — | ||||||
Other comprehensive income | |||||||||||
COMPREHENSIVE INCOME | $ | $ | $ |
Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Cumulative Net Income | Cumulative Dividends | Total Stockholders’ Equity | |||||||||||||||||||||
Balance at December 31, 2015 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||
Issuance of stock, net of costs | — | — | — | — | |||||||||||||||||||||||
Common stock redemption | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Loss on forward starting interest rate swaps | — | — | — | — | — | ||||||||||||||||||||||
Dividends to common stockholders ($1.20 per share) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Balance at December 31, 2016 | ( | ) | ( | ) | |||||||||||||||||||||||
Issuance of stock, net of costs | — | — | — | — | |||||||||||||||||||||||
Common stock redemption | — | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Loss on forward starting interest rate swaps | — | — | — | — | — | ||||||||||||||||||||||
Dividends to common stockholders ($1.20 per share) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Balance at December 31, 2017 | ( | ) | ( | ) | |||||||||||||||||||||||
Issuance of stock, net of costs | — | — | — | — | — | ||||||||||||||||||||||
Common stock redemption | — | ( | ) | ( | ) | — | — | — | ( | ) | |||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | — | — | ||||||||||||||||||||||
Loss on interest rate swaps | — | — | — | — | — | ||||||||||||||||||||||
Dividends to common stockholders ($1.20 per share) | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
OPERATING ACTIVITIES | |||||||||||
Net income | $ | $ | $ | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Other amortization | |||||||||||
Share-based compensation | |||||||||||
Amortization of straight-line rent receivable | ( | ) | ( | ) | ( | ) | |||||
Amortization of straight-line rent liability | |||||||||||
Gain on sales of real estate assets | ( | ) | ( | ) | ( | ) | |||||
Loss on extinguishment of debt | — | — | |||||||||
Impairment of real estate assets | — | ||||||||||
Equity from unconsolidated joint ventures (income) | ( | ) | ( | ) | — | ||||||
Distributions from unconsolidated joint ventures | — | — | |||||||||
Provision for bad debts, net | ( | ) | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Other assets | ( | ) | ( | ) | ( | ) | |||||
Accounts payable and accrued liabilities | ( | ) | |||||||||
Other liabilities | ( | ) | |||||||||
Net cash provided by operating activities | |||||||||||
INVESTING ACTIVITIES | |||||||||||
Acquisitions of real estate | ( | ) | ( | ) | ( | ) | |||||
Development of real estate | ( | ) | ( | ) | ( | ) | |||||
Additional long-lived assets | ( | ) | ( | ) | ( | ) | |||||
Investment in unconsolidated joint ventures | — | ( | ) | — | |||||||
Proceeds from sales of real estate | |||||||||||
Proceeds from notes receivable repayments | |||||||||||
Net cash used in investing activities | ( | ) | ( | ) | ( | ) | |||||
FINANCING ACTIVITIES | |||||||||||
Net borrowings (repayments) on unsecured credit facility | ( | ) | |||||||||
Repayment on term loan | — | — | ( | ) | |||||||
Borrowings of notes and bonds payable | — | ||||||||||
Repayments of notes and bonds payable | ( | ) | ( | ) | ( | ) | |||||
Redemption of notes and bonds payable | — | ( | ) | — | |||||||
Dividends paid | ( | ) | ( | ) | ( | ) | |||||
Net proceeds from issuance of common stock | |||||||||||
Common stock redemptions | ( | ) | ( | ) | ( | ) | |||||
Debt issuance and assumption costs | ( | ) | ( | ) | ( | ) | |||||
Net cash (used in) provided by financing activities | ( | ) | |||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | |||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | $ | ||||||||
Supplemental Cash Flow Information: | |||||||||||
Interest paid | $ | $ | $ | ||||||||
Mortgage notes payable assumed upon acquisition (adjusted to fair value) | $ | $ | $ | ||||||||
Invoices accrued for construction, tenant improvements and other capitalized costs | $ | $ | $ | ||||||||
Capitalized interest | $ | $ | $ |
Land improvements | 5.0 to 39.0 years |
Buildings and improvements | 3.3 to 39.0 years |
Lease intangibles (including ground lease intangibles) | 2.1 to 99.0 years |
Personal property | 2.8 to 20.0 years |
• | Level 1 – quoted prices for identical instruments in active markets; |
• | Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
• | Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
(in thousands) | Year Ended December 31, | ||||||||||
Type of Revenue | 2018 | 2017 | 2016 | ||||||||
Parking income | $ | $ | $ | ||||||||
Property lease guaranty income | |||||||||||
Management fee income | |||||||||||
Miscellaneous | |||||||||||
$ | $ | $ |
Year Ended December 31, | |||||||||||
(Dollars in thousands) | 2018 | 2017 | 2016 | ||||||||
Property operating income | $ | $ | $ | ||||||||
Single-tenant net lease | |||||||||||
Straight-line rent | |||||||||||
Rental income | $ | $ | $ |
Year Ended December 31, | |||||||||||||||
2017 | 2016 | ||||||||||||||
(in thousands) | As Previously Reported | As Reclassified | As Previously Reported | As Reclassified | |||||||||||
EXPENSES | |||||||||||||||
Property operating expense | $ | $ | $ | $ | |||||||||||
Bad debt, net | ( | ) | ( | ) | |||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||
Gain on sales of properties | $ | $ | $ | $ | |||||||||||
Impairments | ( | ) | ( | ) | ( | ) | |||||||||
INCOME FROM CONTINUING OPERATIONS | $ | $ | $ | $ | |||||||||||
DISCONTINUED OPERATIONS | |||||||||||||||
Loss from discontinued operations | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Impairments of real estate assets | ( | ) | |||||||||||||
Gain on sales of properties | |||||||||||||||
LOSS FROM DISCONTINUED OPERATIONS | $ | ( | ) | $ | $ | ( | ) | $ |
Year Ended December 31, | |||||||||||||||
2017 | 2016 | ||||||||||||||
(in thousands) | As Previously Reported | As Reclassified | As Previously Reported | As Reclassified | |||||||||||
REVENUES | |||||||||||||||
Rental income | $ | $ | $ | $ | |||||||||||
Other operating | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
OTHER INCOME (EXPENSE) | |||||||||||||||
Interest and other income, net | $ | $ | $ | $ | |||||||||||
NET INCOME | $ | $ | $ | $ | |||||||||||
(Dollars in thousands) | Number of Facilities | Land | Buildings, Improvements,and Lease Intangibles | Personal Property | Total | Accumulated Depreciation | ||||||||||||||||
Dallas, TX | $ | $ | $ | $ | $ | ( | ) | |||||||||||||||
Seattle, WA | ( | ) | ||||||||||||||||||||
Nashville, TN | ( | ) | ||||||||||||||||||||
Atlanta, GA | ( | ) | ||||||||||||||||||||
Los Angeles, CA | ( | ) | ||||||||||||||||||||
Charlotte, NC | ( | ) | ||||||||||||||||||||
Denver, CO | ( | ) | ||||||||||||||||||||
Richmond, VA | ( | ) | ||||||||||||||||||||
Honolulu, HI | ( | ) | ||||||||||||||||||||
Des Moines, IA | ( | ) | ||||||||||||||||||||
Houston, TX | ( | ) | ||||||||||||||||||||
Oklahoma City, OK | ( | ) | ||||||||||||||||||||
San Francisco, CA | ( | ) | ||||||||||||||||||||
Springfield, MO | ( | ) | ||||||||||||||||||||
Austin, TX | ( | ) | ||||||||||||||||||||
Washington, DC | ( | ) | ||||||||||||||||||||
Memphis, TN | ( | ) | ||||||||||||||||||||
San Antonio, TX | ( | ) | ||||||||||||||||||||
Chicago, IL | ( | ) | ||||||||||||||||||||
Indianapolis, IN | ( | ) | ||||||||||||||||||||
Minneapolis, MN | ( | ) | ||||||||||||||||||||
Other (20 markets) | ( | ) | ||||||||||||||||||||
( | ) | |||||||||||||||||||||
Land held for development | ( | ) | ||||||||||||||||||||
Construction in progress | ||||||||||||||||||||||
Corporate property | ( | ) | ||||||||||||||||||||
Total real estate investments | $ | $ | $ | $ | $ | ( | ) |
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 and thereafter | |||
$ |
(Dollars in millions) | Type (1) | Date Acquired | Purchase Price | Mortgage Notes Payable Assumed (2) | Cash Consideration(3) | Real Estate | Other (4) | Square Footage (Unaudited) | ||||||||||||||||||
Seattle, WA | MOB | $ | $ | $ | $ | $ | ||||||||||||||||||||
Denver, CO (5) | MOB | ( | ) | ( | ) | |||||||||||||||||||||
Denver, CO (5) | OFC | ( | ) | |||||||||||||||||||||||
Oklahoma City, OK | MOB | ( | ) | |||||||||||||||||||||||
Seattle, WA | MOB | ( | ) | |||||||||||||||||||||||
Denver, CO | MOB | |||||||||||||||||||||||||
Nashville, TN | OFC | |||||||||||||||||||||||||
Chicago, IL (5) | MOB | ( | ) | |||||||||||||||||||||||
$ | $ | ( | ) | $ | $ | $ | ( | ) |
(1) | MOB = medical office building; OFC = office |
(2) | The mortgage note payable assumed in the acquisition does not reflect the fair value premium totaling $ |
(3) | Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition. |
(4) | Includes other assets acquired, liabilities assumed, intangibles recognized at acquisition and fair value adjustments on debt assumed. |
(5) | The mortgage note payable assumed at acquisition encumbers both buildings. |
(6) | The Company acquired an additional suite in a previously acquired medical office building. |
Estimated Fair Value | Estimated Useful Life | |||||
(In millions) | (In years) | |||||
Building | $ | 20.0 - 30.0 | ||||
Land | — | |||||
Land Improvements | 5.0 - 13.5 | |||||
Intangibles: | ||||||
At-market lease intangibles | 1.3 - 4.2 | |||||
Below-market lease intangibles | ( | ) | 3.8 | |||
Total intangibles | ||||||
Mortgage notes payable assumed, including fair value adjustments | ( | ) | ||||
Other assets acquired | ||||||
Accounts payable, accrued liabilities and other liabilities assumed | ( | ) | ||||
Total cash paid | $ |
(Dollars in millions) | Type (1) | Date Acquired | Purchase Price | Mortgage Notes Payable Assumed (2) | Cash Consideration(3) | Real Estate | Other (4) | Square Footage (Unaudited) | ||||||||||||||||||
Real estate acquisitions | ||||||||||||||||||||||||||
St. Paul, MN | MOB | $ | $ | $ | $ | $ | ||||||||||||||||||||
San Francisco, CA | MOB | |||||||||||||||||||||||||
Washington, D.C. | MOB | ( | ) | ( | ) | |||||||||||||||||||||
Los Angeles, CA | MOB | ( | ) | |||||||||||||||||||||||
Atlanta, GA | MOB | ( | ) | |||||||||||||||||||||||
Atlanta, GA | MOB | |||||||||||||||||||||||||
Atlanta, GA (5) | MOB | |||||||||||||||||||||||||
Atlanta, GA | MOB | |||||||||||||||||||||||||
Seattle, WA | MOB | ( | ) | |||||||||||||||||||||||
Atlanta, GA (5) | MOB | ( | ) | |||||||||||||||||||||||
Atlanta, GA | MOB | ( | ) | ( | ) | |||||||||||||||||||||
Atlanta, GA (5) | MOB | ( | ) | |||||||||||||||||||||||
Atlanta, GA | MOB | ( | ) | ( | ) | |||||||||||||||||||||
Chicago, IL | MOB | ( | ) | |||||||||||||||||||||||
Seattle, WA | MOB | ( | ) | |||||||||||||||||||||||
Austin, TX (6) | MOB | |||||||||||||||||||||||||
$ | $ | ( | ) | $ | $ | $ |
(1) | MOB = medical office building |
(2) | The mortgage notes payable assumed in the acquisitions do not reflect the fair value adjustments totaling $ |
(3) | Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition. |
(4) | Includes other assets acquired, liabilities assumed, intangibles recognized at acquisition and fair value adjustments on debt assumed. |
(5) | The "Other" column includes the equity investment in limited liability companies that own |
(6) |
Estimated Fair Value | Estimated Useful Life | |||||
(In millions) | (In years) | |||||
Building | $ | 15.0 - 37.0 | ||||
Land | — | |||||
Land Improvements | 5.0 - 12.0 | |||||
Intangibles: | ||||||
At-market lease intangibles | 2.1 - 12.6 | |||||
Below-market lease intangibles | ( | ) | 8.5 - 15.0 | |||
Below-market ground lease intangibles | 36.8 - 99.0 | |||||
Total intangibles | ||||||
Mortgage notes payable assumed, including fair value adjustments | ( | ) | ||||
Other assets acquired | ||||||
Equity investment in joint ventures | ||||||
Accounts payable, accrued liabilities and other liabilities assumed | ( | ) | ||||
Total cash paid | $ |
(Dollars in millions) | Type (1) | Date Disposed | Sales Price | Closing Adjustments | Net Proceeds | Net Real Estate Investment | Other (including receivables) (3) | Gain/ (Impairment) | Square Footage (Unaudited) | |||||||||||||||||||||
Real estate dispositions | ||||||||||||||||||||||||||||||
Roanoke, VA (2) (4) | MOB, OFC | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Michigan (5) | SNF | ( | ) | |||||||||||||||||||||||||||
St. Louis, MO | MOB | ( | ) | |||||||||||||||||||||||||||
Denver, CO | IRF | ( | ) | |||||||||||||||||||||||||||
Cleveland, TN | MOB | ( | ) | |||||||||||||||||||||||||||
Tucson, AZ | MOB | ( | ) | |||||||||||||||||||||||||||
Total dispositions | $ | $ | ( | ) | $ | $ | $ | $ |
(1) | MOB = medical office building; IRF = inpatient rehabilitation facility; OFC = office; SNF = skilled nursing facility |
(2) | Previously classified as held for sale. |
(3) | Includes straight-line rent receivables, leasing commissions and lease inducements. |
(4) | Includes |
(5) | Includes |
(Dollars in millions) | Type (1) | Date Disposed | Sales Price | Closing Adjustments | Net Proceeds | Net Real Estate Investment | Other (including receivables) (3) | Gain/ (Impairment) | Square Footage (Unaudited) | |||||||||||||||||||||
Real estate dispositions | ||||||||||||||||||||||||||||||
Evansville, IN | OTH | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Columbus, GA (2) | MOB | |||||||||||||||||||||||||||||
Las Vegas, NV (2) | MOB | ( | ) | |||||||||||||||||||||||||||
Texas (3 properties) | IRF | ( | ) | |||||||||||||||||||||||||||
Chicago, IL (4) | MOB | ( | ) | |||||||||||||||||||||||||||
San Antonio, TX | IRF | ( | ) | |||||||||||||||||||||||||||
Roseburg, OR | MOB | ( | ) | |||||||||||||||||||||||||||
St. Louis, MO | MOB | ( | ) | ( | ) | |||||||||||||||||||||||||
Total dispositions | $ | $ | ( | ) | $ | $ | $ | $ |
(1) | MOB = medical office building; IRF = inpatient rehabilitation facility; OTH = other |
(2) | Previously classified as held for sale. |
(3) | Includes straight-line rent receivables, leasing commissions and lease inducements. |
(4) |
December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Balance Sheet data | |||||||
Land | $ | $ | |||||
Buildings, improvements and lease intangibles | |||||||
Personal property | |||||||
Accumulated depreciation | ( | ) | ( | ) | |||
Real estate assets held for sale, net | |||||||
Other assets, net | |||||||
Assets held for sale, net | $ | $ | |||||
Accounts payable and accrued liabilities | $ | $ | |||||
Other liabilities | |||||||
Liabilities of properties held for sale | $ | $ |
December 31, | |||||||
(Dollars in millions) | 2018 | 2017 | |||||
Straight-line rent receivables | $ | $ | |||||
Prepaid assets | |||||||
Additional long-lived assets, net | |||||||
Above-market intangible assets, net | |||||||
Accounts receivable | |||||||
Allowance for uncollectible accounts | ( | ) | ( | ) | |||
Ground lease modification, net | |||||||
Equity investments in joint ventures | |||||||
Goodwill | |||||||
Project costs | |||||||
Debt issuance costs, net (1) | |||||||
Customer relationship intangible assets, net | |||||||
Interest rate swap assets | — | ||||||
Other | |||||||
$ | $ |
(1) | Includes debt issuance costs related to the Company's Unsecured credit facility due 2020. |
December 31, | |||||||
(Dollars in millions) | 2018 | 2017 | |||||
Net LLC investments, beginning of period | $ | $ | |||||
New investments during the period | |||||||
Equity income (loss) recognized during the period | |||||||
Owner distributions | ( | ) | |||||
Net LLC investments, end of period | $ | $ |
Gross Balance at December 31, | Accumulated Amortization at December 31, | Weighted Avg. Remaining Life (Years) | Balance Sheet Classification | ||||||||||||||||
(Dollars in millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
Goodwill | $ | $ | $ | $ | N/A | Other assets, net | |||||||||||||
Credit facility debt issuance costs | Other assets, net | ||||||||||||||||||
Above-market lease intangibles | Other assets, net | ||||||||||||||||||
Customer relationship intangibles | Other assets, net | ||||||||||||||||||
Below-market lease intangibles | ( | ) | ( | ) | ( | ) | ( | ) | Other liabilities | ||||||||||
Debt issuance costs (1) | Notes and bonds payable | ||||||||||||||||||
At-market lease intangibles | Real estate properties | ||||||||||||||||||
$ | $ | $ | $ |
(1) |
(Dollars in millions) | Future Amortization of Intangibles, net | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 |
December 31, | Maturity Dates | Contractual Interest Rates | Principal Payments | Interest Payments | ||||||||||||
(Dollars in thousands) | 2018 | 2017 | ||||||||||||||
Unsecured Credit Facility | $ | $ | 7/20 | LIBOR + 1.00% | At maturity | Monthly | ||||||||||
Unsecured Term Loan due 2022 (1) | 12/22 | LIBOR + 1.10% | At maturity | Monthly | ||||||||||||
Senior Notes due 2023 (1) | 4/23 | % | At maturity | Semi-Annual | ||||||||||||
Senior Notes due 2025 (1) | 5/25 | % | At maturity | Semi-Annual | ||||||||||||
Senior Notes due 2028 (1) | 1/28 | % | At maturity | Semi-Annual | ||||||||||||
Mortgage notes payable (2) | 7/19-5/40 | 3.31%-6.88% | Monthly | Monthly | ||||||||||||
$ | $ |
(1) | Balances are shown net of discounts and unamortized issuance costs. |
(2) |
December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Unsecured Term Loan due 2022 principal balance | $ | $ | |||||
Debt issuance costs | ( | ) | ( | ) | |||
Unsecured Term Loan due 2022 carrying amount | $ | $ |
December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Senior Notes due 2023 face value | $ | $ | |||||
Unaccreted discount | ( | ) | ( | ) | |||
Debt issuance costs | ( | ) | ( | ) | |||
Senior Notes due 2023 carrying amount | $ | $ |
December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Senior Notes due 2025 face value | $ | $ | |||||
Unaccreted discount | ( | ) | ( | ) | |||
Debt issuance costs | ( | ) | ( | ) | |||
Senior Notes due 2028 carrying amount | $ | $ |
December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Senior Notes due 2028 face value | $ | $ | |||||
Unaccreted discount | ( | ) | ( | ) | |||
Debt issuance costs | $ | ( | ) | $ | ( | ) | |
Senior Notes due 2028 carrying amount | $ | $ |
December 31, | |||||||
(Dollars in thousands) | 2018 | 2017 | |||||
Mortgage notes payable principal balance | $ | $ | |||||
Unamortized premium | |||||||
Unaccreted discount | ( | ) | ( | ) | |||
Debt issuance costs | ( | ) | ( | ) | |||
Mortgage notes payable carrying amount | $ | $ |
Original Balance | Effective Interest Rate (22) | Maturity Date | Collateral (23) | Principal and Interest Payments (21) | Investment in Collateral at December 31, | Balance at December 31, | |||||||||||||||||
(Dollars in millions) | 2018 | 2018 | 2017 | ||||||||||||||||||||
Insurance Co. (1) | % | 12/18 | |||||||||||||||||||||
Commercial Bank (2) | % | 3/19 | |||||||||||||||||||||
Commercial Bank (3) | % | 7/19 | |||||||||||||||||||||
Commercial Bank (4) | % | 7/20 | (20) | ||||||||||||||||||||
Life Insurance Co. (5) | % | 8/20 | |||||||||||||||||||||
Life Insurance Co. (6) | % | 8/20 | |||||||||||||||||||||
Life Insurance Co. (7) | % | 1/21 | |||||||||||||||||||||
Commercial Bank (8) | % | 2/21 | |||||||||||||||||||||
Life Insurance Co. (9) | % | 11/22 | |||||||||||||||||||||
Life Insurance Co. (10) | % | 8/23 | |||||||||||||||||||||
Financial Services (11) | % | 10/23 | |||||||||||||||||||||
Life Insurance Co. (12) | % | 12/23 | |||||||||||||||||||||
Life Insurance Co. (13) | % | 1/24 | |||||||||||||||||||||
Life Insurance Co. (14) | % | 2/24 | |||||||||||||||||||||
Financial Services (15) | % | 9/24 | |||||||||||||||||||||
Commercial Bank | % | 1/26 | |||||||||||||||||||||
Commercial Bank (16) | % | 4/27 | |||||||||||||||||||||
Municipal Government (17) (18) | % | (19) | |||||||||||||||||||||
$ | $ | $ |
(1) | The Company repaid this mortgage note in October 2018. The Company's unencumbered gross investment was $ |
(2) | The Company repaid this mortgage note in December 2018. The Company's unencumbered gross investment was $ |
(3) | The unamortized portion of the $ |
(4) | The unaccreted portion of the $ |
(5) | The unamortized portion of the $ |
(6) | The unamortized portion of the $ |
(7) | The unamortized portion of the $ |
(8) | The unaccreted portion of the $ |
(9) | The unaccreted portion of the $ |
(10) | The unaccreted portion of the $ |
(11) | The unamortized portion of the $ |
(12) | The unamortized portion of the $ |
(13) | The unamortized portion of the $ |
(14) | The unamortized portion of the $ |
(15) | The unamortized portion of the $ |
(16) | The unamortized portion of the $ |
(17) | Balance consists of |
(18) | The unamortized portion of the $ |
(19) | These |
(20) | Payable in monthly installments of interest only for |
(21) | Payable in monthly installments of principal and interest with the final payment due at maturity (unless otherwise noted). |
(22) | The contractual interest rates for the |
(23) |
(Dollars in thousands) | Principal Maturities | Net Accretion/ Amortization (1) | Debt Issuance Costs (2) | Notes and Bonds Payable | % | ||||||||||||
2019 | $ | $ | ( | ) | $ | ( | ) | $ | % | ||||||||
2020 | ( | ) | ( | ) | % | ||||||||||||
2021 | ( | ) | ( | ) | % | ||||||||||||
2022 | ( | ) | ( | ) | % | ||||||||||||
2023 | ( | ) | ( | ) | % | ||||||||||||
2024 and thereafter | ( | ) | ( | ) | % | ||||||||||||
$ | $ | ( | ) | $ | ( | ) | $ | % |
(1) | Includes discount accretion and premium amortization related to the Company’s Senior Notes due 2023, Senior Notes due 2025, Senior Notes due 2028 and |
(2) |
Interest Rate Derivative | Number of Instruments | Notional (in millions) | ||||
Interest rate swaps - 2017 | $ | |||||
Interest rate swaps - 2018 | ||||||
Total interest rate swaps | $ |
As of December 31, 2018 | As of December 31, 2017 | ||||||||||
(Dollars in thousands) | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||
Derivatives designated as hedging instruments | |||||||||||
Interest rate swaps 2017 | Other assets, net | $ | Other liabilities | $ | ( | ) | |||||
Interest rate swaps 2018 | Other liabilities | ( | ) | — | |||||||
Total derivatives designated as hedging instruments | $ | $ | ( | ) |
Amount of Gain/(Loss) Recognized in OCI on Derivatives | Amount of Loss Reclassified from OCI into Income for the Twelve Months Ended December 31, | ||||||||||
(Dollars in thousands) | 2018 | 2018 | 2017 | ||||||||
Interest rate swaps 2017 | $ | Interest expense | $ | $ | |||||||
Interest rate swaps 2018 | ( | ) | Interest expense | ||||||||
Settled interest rate swaps | Interest expense | ||||||||||
$ | ( | ) | Total interest expense | $ | $ |
Offsetting of Derivative Assets | |||||||||||||||||||||||
As of December 31, 2018 | |||||||||||||||||||||||
Gross Amounts Not Offset in the Consolidated Balance Sheets | |||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets presented in the Consolidated Balance Sheets | Financial Instruments | Cash Collateral | Net Amount | ||||||||||||||||||
Derivatives | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||
Offsetting of Derivative Liabilities | |||||||||||||||||||||||
Gross Amounts Not Offset in the Consolidated Balance Sheets | |||||||||||||||||||||||
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets presented in the Consolidated Balance Sheets | Financial Instruments | Cash Collateral | Net Amount | ||||||||||||||||||
Derivatives | $ | ( | ) | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Year Ended December 31, | ||||||||
2018 | 2017 | 2016 | ||||||
Balance, beginning of year | ||||||||
Issuance of common stock | ||||||||
Non-vested stock-based awards, net of withheld shares and forfeitures | ||||||||
Balance, end of year |
Shares Sold | Sales Price Per Share | Net Proceeds (in millions) | |||||||
2018 | NA | $ | |||||||
2017 | NA | $ | |||||||
2016 | $28.31 - $33.66 | $ |
Interest Rate Swaps | ||||||||
December 31, | ||||||||
(Dollars in thousands) | 2018 | 2017 | ||||||
Beginning balance | $ | ( | ) | $ | ( | ) | ||
Other comprehensive loss before reclassifications | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | ) | ( | ) | ||||
Net current-period other comprehensive income | ||||||||
Ending balance | $ | ( | ) | $ | ( | ) |
Details about accumulated other comprehensive income (loss) components | Amount reclassified from accumulated other comprehensive income (loss) | Affected line item in the statement where net income is presented | ||||
(Dollars in thousands) | ||||||
Amounts reclassified from accumulated other comprehensive income (loss) related to settled interest rate swaps | $ | Interest Expense | ||||
Amounts reclassified from accumulated other comprehensive income (loss) related to current interest rate swaps | Interest Expense | |||||
$ |
(Dollars in millions) | Future Amortization of Non-Vested Shares | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 and thereafter | |||
Total | $ |
• | On December 12, 2018, the Company granted non-vested stock awards for TSR performance to its |
• | On December 11, 2017, the Company granted non-vested stock awards for TSR performance to its |
• | On December 16, 2016, the Company granted non-vested stock awards for TSR performance to its |
• | On February 16, 2016, the Company granted cash incentive and non-vested performance-based awards totaling $ |
• | On March 1, 2016, the Company issued |
• | On December 30, 2016, the Company issued |
• | On December 30, 2016, the Company issued |
Year Ended December 31, | |||||||||||
(Dollars in thousands, except per share data) | 2018 | 2017 | 2016 | ||||||||
Stock-based awards, beginning of year | |||||||||||
Granted | |||||||||||
Vested | ( | ) | ( | ) | ( | ) | |||||
Stock-based awards, end of year | |||||||||||
Weighted-average grant date fair value of: | |||||||||||
Stock-based awards, beginning of year | $ | $ | $ | ||||||||
Stock-based awards granted during the year | $ | $ | $ | ||||||||
Stock-based awards vested during the year | $ | $ | $ | ||||||||
Stock-based awards, end of year | $ | $ | $ | ||||||||
Grant date fair value of shares granted during the year | $ | $ | $ |
Year Ended December 31, | |||||||||||
(Dollars in thousands, except per share data) | 2018 | 2017 | 2016 | ||||||||
Options outstanding, beginning of year | |||||||||||
Granted | |||||||||||
Exercised | ( | ) | ( | ) | ( | ) | |||||
Forfeited | ( | ) | ( | ) | ( | ) | |||||
Expired | ( | ) | ( | ) | ( | ) | |||||
Options outstanding and exercisable, end of year | |||||||||||
Weighted-average exercise price of: | |||||||||||
Options outstanding, beginning of year | $ | $ | $ | ||||||||
Options granted during the year | $ | $ | $ | ||||||||
Options exercised during the year | $ | $ | $ | ||||||||
Options forfeited during the year | $ | $ | $ | ||||||||
Options expired during the year | $ | $ | $ | ||||||||
Options outstanding, end of year | $ | $ | $ | ||||||||
Weighted-average fair value of options granted during the year (calculated as of the grant date) | $ | $ | $ | ||||||||
Intrinsic value of options exercised during the year | $ | $ | $ | ||||||||
Intrinsic value of options outstanding and exercisable (calculated as of December 31) | $ | $ | $ | ||||||||
Exercise prices of options outstanding (calculated as of December 31) | $ | $ | $ | ||||||||
Weighted-average contractual life of outstanding options (calculated as of December 31, in years) |
2018 | 2017 | 2016 | ||||||
Risk-free interest rates | % | % | % | |||||
Expected dividend yields | % | % | % | |||||
Expected life (in years) | ||||||||
Expected volatility | % | % | % | |||||
Expected forfeiture rates | % | % | % |
Year Ended December 31, | |||||||||||
(Dollars in thousands, except per share data) | 2018 | 2017 | 2016 | ||||||||
Weighted Average Common Shares | |||||||||||
Weighted average Common Shares outstanding | |||||||||||
Non-vested shares | ( | ) | ( | ) | ( | ) | |||||
Weighted average Common Shares - Basic | |||||||||||
Weighted average Common Shares - Basic | |||||||||||
Dilutive effect of non-vested shares | — | — | |||||||||
Dilutive effect of employee stock purchase plan | |||||||||||
Weighted average Common Shares - Diluted | |||||||||||
Net Income | $ | $ | $ | ||||||||
Dividends paid on nonvested share-based awards | ( | ) | ( | ) | — | ||||||
Net income applicable to common stockholders | $ | $ | $ | ||||||||
Basic Earnings Per Common Share | $ | $ | $ | ||||||||
Diluted Earnings Per Common Share | $ | $ | $ |
December 31, 2018 | |||||||||||||||||||||||||||
(Dollars in thousands) | Number of Properties | Initial Occupancy | Construction in Progress Balance | Total Funded During the Year | Total Amount Funded | Estimated Remaining Fundings (unaudited) | Estimated Total Investment (unaudited) | Approximate Square Feet (unaudited) | |||||||||||||||||||
Construction Activity | |||||||||||||||||||||||||||
Charlotte, NC | Q2 2019 | $ | $ | $ | $ | ||||||||||||||||||||||
Seattle, WA | Q4 2019 | ||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ |
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
2024 and thereafter | |||
$ |
Year Ended December 31, | |||||||||||
(Dollars in thousands) | 2018 | 2017 | 2016 | ||||||||
Net income | $ | $ | $ | ||||||||
Reconciling items to taxable income: | |||||||||||
Depreciation and amortization | |||||||||||
Gain or loss on disposition of depreciable assets | ( | ) | ( | ) | |||||||
Impairments | |||||||||||
Straight-line rent | ( | ) | ( | ) | ( | ) | |||||
Receivable allowances | |||||||||||
Stock-based compensation | ( | ) | |||||||||
Other | |||||||||||
Taxable income (1) | $ | $ | $ | ||||||||
Dividends paid | $ | $ | $ |
2018 | 2017 | 2016 | ||||||||||||||||||
Per Share | % | Per Share | % | Per Share | % | |||||||||||||||
Common stock: | ||||||||||||||||||||
Ordinary income (1) | $ | % | $ | % | $ | % | ||||||||||||||
Return of capital | % | % | % | |||||||||||||||||
Unrecaptured section 1250 gain | % | % | % | |||||||||||||||||
Common stock distributions | $ | % | $ | % | $ | % |
Year Ended December 31, | |||||||||||
(Dollars in thousands) | 2018 | 2017 | 2016 | ||||||||
State income tax expense: | |||||||||||
Texas gross margins tax | $ | $ | $ | ||||||||
Other | |||||||||||
Total state income tax expense | $ | $ | $ | ||||||||
State income tax payments, net of refunds and collections | $ | $ | $ |
December 31, 2018 | December 31, 2017 | ||||||||||||||
(Dollars in millions) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
Notes and bonds payable (1) | $ | $ | $ | $ |
Quarter Ended | |||||||||||||||
(Dollars in thousands, except per share data) | March 31 | June 30 (1) | September 30 | December 31 (2) | |||||||||||
2018 | |||||||||||||||
Revenues from continuing operations | $ | $ | $ | $ | |||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | |||||||||||
Net income attributable to common stockholders per share: | |||||||||||||||
Basic earnings per common share | $ | $ | $ | $ | |||||||||||
Diluted earnings per common share | $ | $ | $ | $ |
(1) | The increases in net income and amounts per share for the second quarter of 2018 are primarily attributable to gains of $ |
(2) | The increases in net income and amounts per share for the fourth quarter of 2018 are primarily attributable to gains of $ |
Quarter Ended | |||||||||||||||
(Dollars in thousands, except per share data) | March 31 (1) | June 30 (2) | September 30 (3) | December 31 (4) | |||||||||||
2017 | |||||||||||||||
Revenues from continuing operations | $ | $ | $ | $ | |||||||||||
Net income attributable to common stockholders | $ | $ | $ | $ | ( | ) | |||||||||
Net income attributable to common stockholders per share: | |||||||||||||||
Basic earnings per common share | $ | $ | $ | $ | ( | ) | |||||||||
Diluted earnings per common share | $ | $ | $ | $ | ( | ) |
(1) | The increases in net income and amounts per share for the first quarter of 2017 are primarily attributable to gains of $ |
(2) | The increases in net income and amounts per share for the second quarter of 2017 are primarily attributable to gains of $ |
(3) | The decreases in net income and amounts per share for the third quarter of 2017 are primarily attributable to impairment charges of $ |
(4) |
Name | Age | Position | |||
David R. Emery | 74 | Executive Chairman of the Board | |||
Todd J. Meredith | 44 | President & Chief Executive Officer | |||
J. Christopher Douglas | 43 | Executive Vice President & Chief Financial Officer | |||
John M. Bryant, Jr. | 52 | Executive Vice President & General Counsel | |||
Robert E. Hull | 46 | Executive Vice President - Investments |
(a) | Index to Historical Financial Statements, Financial Statement Schedules and Exhibits |
(1) | Financial Statements: |
(3) | Exhibits: |
Exhibit Number | Description of Exhibits | ||||
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4.1 | — | Specimen stock certificate. (3) | |||
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101.INS | — | This instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |||
101.SCH | — | XBRL Taxonomy Extension Schema Document. (filed herewith) | |||
101.CAL | — | XBRL Taxonomy Extension Calculation Linkbase Document. (filed herewith) | |||
101.LAB | — | XBRL Taxonomy Extension Labels Linkbase Document. (filed herewith) | |||
101.DEF | — | XBRL Taxonomy Extension Definition Linkbase Document. (filed herewith) | |||
101.PRE | — | XBRL Taxonomy Extension Presentation Linkbase Document. (filed herewith) |
(1) | Filed as an exhibit to the Company’s Form 8-K filed February 19, 2016 and hereby incorporated by reference. |
(2) | Filed as an exhibit to the Company's Form 8-K filed May 5, 2017 and hereby incorporated by reference. |
(3) | Filed as an exhibit to the Company's Registration Statement on Form S-11 (Registration No. 33-60506) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. |
(4) | Filed as an exhibit to the Company's Form 8-K filed May 17, 2001 and hereby incorporated by reference. |
(5) | Filed as an exhibit to the Company’s Form 8-K filed December 4, 2009 and hereby incorporated by reference. |
(6) | Filed as an exhibit to the Company’s Form 8-K filed December 13, 2010 and hereby incorporated by reference. |
(7) | Filed as an exhibit to the Company's Form 8-K filed March 26, 2013 and hereby incorporated by reference. |
(8) | Filed as an exhibit to the Company’s Form 8-K filed April 24, 2015 and hereby incorporated by reference. |
(9) | Filed as an exhibit to the Company’s Form 8-K filed December 11, 2017 and hereby incorporated by reference. |
(10) | Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 1999 and hereby incorporated by reference. |
(11) | Filed as an exhibit to the Company's Form 10-Q for the quarter ended March 31, 2018 and hereby incorporated by reference. |
(12) | Filed as an exhibit to the Company’s Registration Statement on Form S-3 (Registration No. 33-79452) previously filed on September 26, 2003 pursuant to the Securities Act of 1933 and hereby incorporated by reference. |
(13) | Filed as an exhibit to the Company's Form 10-K for the year ended December 31, 2015 and hereby incorporated by reference. |
(14) | Filed as an exhibit to the Company's Form 10-K for the year ended December 31, 2016 and hereby incorporated by reference. |
(15) | Filed as an exhibit to the Company's Form 8-K filed February 3, 2016 and hereby incorporated by reference. |
(16) | Filed as an exhibit to the Company's Form 10-Q for the quarter ended March 31, 2010 and hereby incorporated by reference. |
(17) | Filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2013 and hereby incorporated by reference. |
(18) | Filed as an exhibit to the Company’s Form 10-Q for the quarter ended June 30, 2015 and hereby incorporated by reference. |
(19) | Filed as an exhibit to the Company's Form 10-Q for the quarter ended June 30, 2012 and hereby incorporated by reference. |
(20) | Filed as an exhibit to the Company's proxy statement filed March 30, 2015 and hereby incorporated by reference. |
(21) | Filed as an exhibit to the Company's Form 8-K filed October 19, 2011 and hereby incorporated by reference. |
(22) | Filed as an exhibit to the Company's Form 10-K for the year ended December 31, 2012 and hereby incorporated by reference. |
(23) | Filed as an exhibit to the Company's Form 8-K filed February 28, 2014 and hereby incorporated by reference. |
(24) | Filed as an exhibit to the Company's Form 10-Q for the quarter ended June 30, 2016 and hereby incorporated by reference. |
(25) | Filed as an exhibit to the Company's Form 8-K filed December 22, 2017 and hereby incorporated by reference. |
1. | 2000 Employee Stock Purchase Plan (filed as Exhibit 10.1) |
2. | Amendment No. 1 to 2000 Employee Stock Purchase Plan (filed as Exhibit 10.2) |
3. | Third Amended and Restated Employment Agreement, dated February 16, 2016, between David R. Emery and the Company (filed as Exhibit 10.4) |
4. | Third Amended and Restated Employment Agreement, dated February 16, 2016, between Todd J. Meredith and the Company (filed as Exhibit 10.5) |
5. | Third Amended and Restated Employment Agreement, dated February 15, 2017, between John M. Bryant, Jr. and the Company (filed as Exhibit 10.6) |
6. | Amended and Restated Employment Agreement, dated January 1, 2017, between Robert E. Hull and the Company (filed as Exhibit 10.7) |
7. | Third Amended and Restated Employment Agreement, dated February 15, 2017, between B. Douglas Whitman, II and the Company (filed as Exhibit 10.8) |
8. | Amended and Restated Employment Agreement, dated February 2, 2016, between J. Christopher Douglas and the Company (filed as Exhibit 10.9) |
9. | Healthcare Realty Trust Incorporated Amended and Restated Executive Incentive Plan (filed as Exhibit 10.10) |
10. | 2010 Restricted Stock Implementation for Non-Employee Directors, dated May 4, 2010 (filed as Exhibit 10.11) |
11. | Amendment No. 1 to Restricted Stock Implementation for Non-Employee Directors (filed as Exhibit 10.12) |
12. | Amendment No. 2 to Restricted Stock Implementation for Non-Employee Directors (filed as Exhibit 10.13) |
13. | Healthcare Realty Trust Incorporated Form of Restricted Stock Agreement for Non-Employee Directors (filed as Exhibit 10.14) |
14. | Healthcare Realty Trust Incorporated Form of Restricted Stock Agreement for Officers (filed as Exhibit 10.15) |
15. | Healthcare Realty Trust Incorporated 2015 Stock Incentive Plan (filed as Exhibit 10.16) |
16. | Amendment No. 1 to Healthcare Realty Trust Incorporated 2015 Stock Incentive Plan (filed as Exhibit 10.17) |
HEALTHCARE REALTY TRUST INCORPORATED | |||||
By: | /s/ TODD J. MEREDITH | ||||
Todd J. Meredith | |||||
President and Chief Executive Officer |
Signature | Title | Date | ||
/s/ Todd J. Meredith | President and Chief Executive Officer | February 13, 2019 | ||
Todd J. Meredith | (Principal Executive Officer) | |||
/s/ J. Christopher Douglas | Executive Vice President and Chief Financial | February 13, 2019 | ||
J. Christopher Douglas | Officer (Principal Financial Officer) | |||
/s/ Amanda L. Callaway | Senior Vice President and Chief Accounting | February 13, 2019 | ||
Amanda L. Callaway | Officer (Principal Accounting Officer) | |||
/s/ David R. Emery | Executive Chairman of the Board | February 13, 2019 | ||
David R. Emery | ||||
/s/ Nancy H. Agee | Director | February 13, 2019 | ||
Nancy H. Agee | ||||
/s/ Edward H. Braman | Director | February 13, 2019 | ||
Edward H. Braman | ||||
/s/ Peter F. Lyle | Director | February 13, 2019 | ||
Peter F. Lyle | ||||
/s/ Edwin B. Morris, III | Director | February 13, 2019 | ||
Edwin B. Morris, III | ||||
/s/ John Knox Singleton | Director | February 13, 2019 | ||
John Knox Singleton | ||||
/s/ Bruce D. Sullivan | Director | February 13, 2019 | ||
Bruce D. Sullivan | ||||
/s/ Christann M. Vasquez | Director | February 13, 2019 | ||
Christann M. Vasquez |
Balance at Beginning of Period | Additions and Deductions | Uncollectible Accounts Written-off | Balance at End of Period | |||||||||||||||||||
Description | Charged /(Credited) to Costs and Expenses | Charged to Other Accounts | ||||||||||||||||||||
2018 | Accounts and notes receivable allowance | $ | $ | $ | $ | $ | ||||||||||||||||
2017 | Accounts and notes receivable allowance | $ | $ | $ | $ | $ | ||||||||||||||||
2016 | Accounts and notes receivable allowance | $ | $ | ( | ) | $ | $ | $ |
Land (1) | Buildings, Improvements, Lease Intangibles and CIP (1) | ||||||||||||||||||||||||||||||||||||||||||||
Market | Number of Properties | Initial Investment | Cost Capitalized Subsequent to Acquisition | Total | Initial Investment | Cost Capitalized Subsequent to Acquisition | Total | Personal Property | (2) (3) (5) Total Property | (1) (3) Accumulated Depreciation | (4) Encumbrances | Date Acquired | Date Constructed | ||||||||||||||||||||||||||||||||
Dallas, TX | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | 2003-2010 | 1974-2008 | |||||||||||||||||||||||||||||||||
Seattle, WA | 2008-2018 | 1957-2009 | |||||||||||||||||||||||||||||||||||||||||||
Nashville, TN | 2004-2018 | 1960-2015 | |||||||||||||||||||||||||||||||||||||||||||
Atlanta, GA | 2017 | 1999-2014 | |||||||||||||||||||||||||||||||||||||||||||
Los Angela, CA | 1993-2017 | 1973-1998 | |||||||||||||||||||||||||||||||||||||||||||
Charlotte, NC | 2008-2013 | 1961-2008 | |||||||||||||||||||||||||||||||||||||||||||
Denver, CO | 2010-2018 | 1977-2015 | |||||||||||||||||||||||||||||||||||||||||||
Richmond, VA | 2011 | 1992-2005 | |||||||||||||||||||||||||||||||||||||||||||
Honolulu, HI | 2003-2004 | 1975-2010 | |||||||||||||||||||||||||||||||||||||||||||
Des Moines, IA | 2008-2014 | 2002-2009 | |||||||||||||||||||||||||||||||||||||||||||
Houston, TX | 1993-2014 | 1984-2012 | |||||||||||||||||||||||||||||||||||||||||||
Oklahoma City, OK | 2010-2018 | 1981-2014 | |||||||||||||||||||||||||||||||||||||||||||
San Francisco, CA | 2015-2017 | 1975-2014 | |||||||||||||||||||||||||||||||||||||||||||
Springfield, MO | 2013 | 2013 | |||||||||||||||||||||||||||||||||||||||||||
Austin, TX | 2007-2015 | 1972-2015 | |||||||||||||||||||||||||||||||||||||||||||
Washington, D.C. | 2004-2017 | 1967-2005 | |||||||||||||||||||||||||||||||||||||||||||
Memphis, TN | 1999-2013 | 1993-2007 | |||||||||||||||||||||||||||||||||||||||||||
San Antonio, TX | 1996-2010 | 1978-2011 | |||||||||||||||||||||||||||||||||||||||||||
Chicago, IL | 2004-2018 | 1993-2009 | |||||||||||||||||||||||||||||||||||||||||||
Indianapolis, IN | 2008-2010 | 2005-2008 | |||||||||||||||||||||||||||||||||||||||||||
Minneapolis, MN | 2014-2017 | 1974-2010 | |||||||||||||||||||||||||||||||||||||||||||
Other (21 markets) | 1993-2016 | 1906-2009 | |||||||||||||||||||||||||||||||||||||||||||
Total Real Estate | |||||||||||||||||||||||||||||||||||||||||||||
Land Held for Develop. | |||||||||||||||||||||||||||||||||||||||||||||
Construction in Progress | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Corporate Property | |||||||||||||||||||||||||||||||||||||||||||||
Total Properties | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
(1) | Includes |
(2) | Total properties as of December 31, 2018 have an estimated aggregate total cost of $ |
(3) | Depreciation is provided for on a straight-line basis on buildings and improvements over |
(4) | Includes unamortized premium of $ |
(5) | Rollforward of Total Property and Accumulated Depreciation, including assets held for sale, for the year ended December 31, 2018, 2017 and 2016 follows: |
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||||||||||||||||
(Dollars in thousands) | Total Property | Accumulated Depreciation | Total Property | Accumulated Depreciation | Total Property | Accumulated Depreciation | |||||||||||||||||
Beginning Balance | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Additions during the period: | |||||||||||||||||||||||
Real Estate acquired | |||||||||||||||||||||||
Other improvements | |||||||||||||||||||||||
Land held for development | |||||||||||||||||||||||
Construction in Progress | |||||||||||||||||||||||
Retirement/dispositions: | |||||||||||||||||||||||
Real Estate | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Land held for development | |||||||||||||||||||||||
Ending Balance | $ | $ | $ | $ | $ | $ |
ATTEST: |
(A) | Certain Definitions: |
(B) | Rank. The Series A Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to all classes or series of Common Stock of the Corporation, and to all equity securities ranking junior to such Series A Preferred Stock; (b) on a parity with all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank on a parity with the Series A Preferred Stock; and (c) junior to all equity securities issued by the Corporation the terms of which specifically provide that such equity securities rank senior to the Series A Preferred Stock. The term "equity securities" shall not include convertible debt securities. |
(C) | Dividends. |
(D) | Liquidation Preference. |
(E) | Redemption by the Corporation. |
(F) | Voting Rights. |
1. | The undersigned parties agree to merge to form a new corporation. |
2. | Healthcare Realty of Tennessee, L.P., a Tennessee limited partnership organized on March 20, 1997 (the “Merging Partnership”), shall merge with and into Healthcare Realty Trust Incorporated, a Maryland corporation with its principal office located in Baltimore (the “Merger”). Healthcare Realty Trust Incorporated shall be the successor corporation (“Successor Corporation”). |
3. | The terms and conditions of the Merger were advised, authorized and approved by the undersigned parties in the manner and by the vote required by, in the case of the Merging Partnership, its certificate of limited partnership and the laws of the state of Tennessee, and in the case of the Successor Corporation, its charter and the laws of the state of Maryland. The Merger was approved by the general partner and the limited partners of the Merging Partnership by unanimous consent. The Merger was approved by the board of directors of the Successor Corporation by unanimous consent, in accordance with Section 3-105(a)(5) of the MGCL. |
4. | There are no amendments to the Successor Corporation’s charter or to the Merging Partnership’s certificate of limited partnership to be effected as part of the Merger. |
5. | The Surviving Corporation has authority to issue Two Hundred Million (200,000,000) shares of capital stock, of which One Hundred and Fifty Million (150,000,000) are Common Stock having a par value of $.01 per share and Fifty Million (50,000,000) are Preferred Stock having a par value of $.01 per share. The aggregate par value of all shares is Two Million Dollars ($2,000,000). |
6. | There is only one class of limited partnership interests. The sole limited partner of the Merging partnership owns ninety-nine percent (99%) of the overall partnership interests. The general partner of the Merging Partnership owns one percent (1%) of the overall partnership interests. |
7. | Manner and basis of conversion: Each unit of limited partnership interest in Healthcare Realty of Tennessee shall be converted into the right to receive Twelve Thousand Six Hundred Nineteen and 71/100 Dollars ($12,619.71). |
8. | The effective date of the Merger, for accounting purposes only, is June 30, 1999. |
1. | Article III, Section 3.2 is hereby amended and restated to read as follows: |
2. | Article III, Section 3.3 is hereby amended and restated to read as follows: |
3. | Article III, Section 3.8 is hereby amended and restated to read as follows: |
1. | Article VII, Section 7.1 is hereby amended and restated in its entirety to read as follows: |
2. | Article VII, Section 7.4 is hereby amended and restated in its entirety to read as follows: |
Amended by the Board of Directors of Healthcare Realty Trust Incorporated as of October 23, 2007 | ||||
/s/ Rita H. Todd Rita H. Todd, Secretary | ||||
Subsidiary | State of Incorporation |
3310 West End, LLC | TN |
5901 Westown Parkway MOB, LLC | DE |
593HR, LLC | TN |
Allenmore C, LLC | DE |
Ankeny North MOB, LLC | DE |
Clive Wellness Campus Building Five, LLC | DE |
Clive Wellness Campus Building One, LLC | DE |
Clive Wellness Campus Building Two, LLC | DE |
DOB III, LLC | TN |
DPCI 6002 Professional, LLC | GA |
DPCII 6001 Professional, LLC | GA |
Healthcare Acquisition of Texas, Inc. | AL |
Healthcare Realty Services Incorporated | TN |
Healthcare Realty Trust Incorporated | MD |
HR 3705 Medical Parkway, LLC | DE |
HR 601 Broadway Unit A, LLC | TN |
HR 9191 Pinecroft SPE, LLC | DE |
HR Acquisition I Corporation | MD |
HR Acquisition of Alabama, Inc. | AL |
HR Acquisition of Pennsylvania, Inc. | PA |
HR Acquisition of San Antonio, Ltd. | AL |
HR Assets, LLC | DE |
HR Bell Air, LLC | MD |
HR Briargate, LLC | DE |
HR Carolinas Holdings, LLC | DE |
HR Dakota, LLC | DE |
HR First Hill Medical Building SPE, LLC | DE |
HR Forest Glen, LLC | TN |
HR Fridley, LLC | MN |
HR HMP Unit 1 Manager, LLC | DE |
HR HMP Unit 1 SPE, LLC | DE |
HR Interests, Inc. | TX |
HR Lowry Medical Center SPE, LLC | DE |
HR MAC II, LLC | DE |
HR McNaughten SPE, LLC | DE |
HR MRMC MOB II SPE, LLC | DE |
HR MRMC MOB III SPE, LLC | DE |
HR North Carolina, LLC | DE |
HR of California, Inc. | AL |
HR of Carolinas, LLC | DE |
HR of Indiana, LLC | DE |
HR of Iowa, LLC | DE |
HR of Kingsport, LLC | AL |
HR of Los Angeles, Inc. | AL |
HR of Los Angeles, Ltd. | AL |
HR of Sarasota, Ltd. | AL |
HR Richmond Community SPE, LLC | DE |
HR Richmond Manager, LLC | DE |
HR Santa Rosa, LLC | TN |
HR Springfield MO, LLC | DE |
HR St. Francis MOB I SPE, LLC | DE |
HR St. Mary’s MOB NW SPE, LLC | DE |
HR St. Mary’s MOB South SPE, LLC | DE |
HR St. Mary’s MOB West SPE, LLC | DE |
HR Summit Crossing SPE, LLC | DE |
HR Three Tree, LLC | DE |
HR Unity, LLC | TN |
HR Valley North, LLC | DE |
HR West Des Moines SPE, LLC | DE |
HR West Hills Manager SPE, LLC | TN |
HR West Hills MOB SPE, LLC | TN |
HRP MAC III, LLC | DE |
HRP MAC IV, LLC | DE |
HR-Pima, LLC | DE |
HRT Holdings, Inc. | DE |
HRT of Alabama, Inc. | AL |
HRT of Delaware, Inc. | DE |
HRT of Illinois, Inc. | DE |
HRT of Louisiana, Inc. | LA |
HRT of Mississippi, Inc. | DE |
HRT of Roanoke, Inc. | VA |
HRT of Tennessee, LLC | TN |
HRT of Virginia, Inc. | VA |
HRT Properties of Texas, Ltd. | TX |
KCC 340 Kennestone, LLC | GA |
KPCI 55 Whitcher, LLC | GA |
KPCII 61 Whitcher, LLC | GA |
Lakewood MOB, LLC | DE |
Maplewood MOB, LLC | DE |
Oat Properties, LLC | TN |
Pasadena Medical Plaza SSJ Ltd. | FL |
Pennsylvania HRT, Inc. | PA |
POP 144 Bill Carruth, LLC | GA |
PPC 148 Bill Carruth, LLC | GA |
Southwest General Medical Building (TX) SPE, LLC | DE |
Stevens Pavilion LLC | DE |
Union Plaza Holdings, LLC | DE |
West Norman SPE, LLC | TN |
Yakima Valley Subsidiary LLC | DE |
1. | I have reviewed this annual report on Form 10-K of Healthcare Realty Trust Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 13, 2019 | |
/s/ TODD J. MEREDITH | ||
Todd J. Meredith | ||
President and Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Healthcare Realty Trust Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | February 13, 2019 | |
/s/ J. CHRISTOPHER DOUGLAS | ||
J. Christopher Douglas | ||
Executive Vice President and Chief Financial Officer |
1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | February 13, 2019 | |
/s/ TODD J. MEREDITH | ||
Todd J. Meredith | ||
President and Chief Executive Officer | ||
/s/ J. CHRISTOPHER DOUGLAS | ||
J. Christopher Douglas | ||
Executive Vice President and Chief Financial Officer |
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Feb. 08, 2019 |
Jun. 30, 2018 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | HEALTHCARE REALTY TRUST INCORPORATED | ||
Entity Central Index Key | 0000899749 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 125,294,458 | ||
Entity Public Float | $ 3,548,286,261 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized shares | 50,000,000 | 50,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares (shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares (shares) | 300,000,000 | 300,000,000 |
Common stock, issued shares | 125,279,000 | 125,132,000 |
Common stock, outstanding shares (shares) | 125,279,000 | 125,132,000 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
NET INCOME | $ 69,771 | $ 23,092 | $ 85,571 |
Other comprehensive income (loss): | |||
Reclassification adjustment for losses included in net income (Interest expense) | 424 | 176 | 168 |
Losses arising during the period | (27) | (74) | |
Other comprehensive income | 397 | 102 | 168 |
COMPREHENSIVE INCOME | $ 70,168 | $ 23,194 | $ 85,739 |
Consolidated Statements of Equity (Parenthetical) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Dividend per share to common stockholders (in dollars per share) | $ 1.20 | $ 1.20 | $ 1.20 |
Cumulative Dividends | |||
Dividend per share to common stockholders (in dollars per share) | 1.20 | 1.20 | 1.20 |
Total Stockholders' Equity | |||
Dividend per share to common stockholders (in dollars per share) | $ 1.20 | $ 1.20 | $ 1.20 |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Business Overview Healthcare Realty Trust Incorporated (the “Company”) is a real estate investment trust ("REIT") that owns, leases, manages, acquires, finances, develops and redevelops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States of America. The Company had gross investments of approximately $4.0 billion in 199 real estate properties, construction in progress, land held for development and corporate property as of December 31, 2018. The Company’s 199 owned real estate properties are located in 27 states and total approximately 14.8 million square feet. The Company provided property management services to approximately 11.2 million square feet nationwide. Square footage and property count disclosures in this Annual Report on Form 10-K are unaudited. Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, joint ventures, partnerships and consolidated variable interest entities (“VIE”) where the Company controls the operating activities of the VIE. In accordance with the consolidation accounting standards, the Company must evaluate each contractual relationship it has with its lessees, borrowers, or others to determine whether or not the contractual arrangement creates a variable interest in those entities. If the Company determines that it has a variable interest and the entity is a VIE, then management must determine whether or not the Company is the primary beneficiary of the VIE, resulting in consolidation of the VIE if the Company is the primary beneficiary. A primary beneficiary has the power to direct those activities of the VIE that most significantly impact its economic performance and has the obligation to absorb the losses of, or receive the benefits from, the VIE. The Company had no interests in VIEs as of December 31, 2018 and 2017. The Company's investments in its unconsolidated joint ventures are included in other assets and the related equity income is recognized within interest and other income, net in other income (expense) on the Company's Consolidated Financial Statements. See Note 7 for additional information. All significant intercompany accounts, transactions and balances have been eliminated upon consolidation in the Consolidated Financial Statements. Use of Estimates in the Consolidated Financial Statements Preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates. Segment Reporting The Company owns, leases, acquires, manages, finances, develops and redevelops outpatient and other healthcare-related properties. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore, the Company discloses its operating results in a single reportable segment. Real Estate Properties Real estate properties are recorded at cost or at fair value if acquired in a transaction that is a business combination under Accounting Standards Codification Topic 805, Business Combinations. Cost or fair value at the time of acquisition is allocated among land, buildings, tenant improvements, lease and other intangibles, and personal property as applicable. The Company’s gross real estate assets, on a financial reporting basis, totaled approximately $4.0 billion as of December 31, 2018 and $3.8 billion as of December 31, 2017. During 2018 and 2017, the Company eliminated against accumulated depreciation approximately $9.9 million and $10.2 million, respectively, of fully amortized real estate intangibles that were initially recorded as a component of certain real estate acquisitions. Also during 2018 and 2017, approximately $0.5 million and $2.6 million of fully depreciated tenant and capital improvements that were no longer in service were eliminated against accumulated depreciation. Depreciation expense of real estate properties for the three years ended December 31, 2018, 2017 and 2016 was $143.8 million, $129.4 million and $116.5 million, respectively. Depreciation and amortization of real estate assets and liabilities in place as of December 31, 2018, is provided for on a straight-line basis over the asset’s estimated useful life:
The Company capitalizes direct costs, including costs such as construction costs and professional services, and indirect costs, including capitalized interest and overhead costs, associated with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their intended use. Capitalized interest cost is calculated using the weighted average interest rate of the Company's unsecured debt or the interest rate on project specific debt, if applicable. The Company continues to capitalize interest on the unoccupied portion of the properties in stabilization for up to one year after the buildings have been placed into service, at which time the capitalization of interest must cease. Land Held for Development Land held for development includes parcels of land owned by the Company, upon which the Company intends to develop and own outpatient healthcare facilities. The Company’s investment in seven parcels of land held for development located adjacent to certain of the Company's existing medical office buildings in Texas, Iowa, Tennessee and Colorado totaled approximately $24.6 million as of December 31, 2018. The Company’s investment in six parcels of land held in Texas, Iowa, and Tennessee totaled approximately $20.1 million as of December 31, 2017. Asset Impairment The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable. Indicators of impairment may include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company reviews for possible impairment, those assets subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes. If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property. Acquisitions of Real Estate Properties with In-Place Leases The Company's acquisitions of real estate properties typically do not meet the definition of a business and are accounted for as asset acquisitions. Acquisitions of real estate properties with in-place leases are accounted for at relative fair value. When a building with in-place leases is acquired, the cost of the acquisition must be allocated between the tangible real estate assets "as-if-vacant" and the intangible real estate assets related to in-place leases based on their estimated fair values. The values related to above- or below-market in-place lease intangibles are amortized over the remaining term of the leases upon acquisition to rental income where the Company is the lessor and to property operating expense where the Company is the lessee, and are amortized over the remaining term of the leases upon acquisition. The Company considers whether any of the in-place lease rental rates are above- or below-market. An asset (if the actual rental rate is above-market) or a liability (if the actual rental rate is below-market) is calculated and recorded in an amount equal to the present value of the future cash flows that represent the difference between the actual lease rate and the average market rate. If an in-place lease is identified as a below-market rental rate, the Company would also evaluate any renewal options associated with that lease to determine if the intangible should include those periods. The Company also estimates an absorption period, which can vary by property, assuming the building is vacant and must be leased up to the actual level of occupancy when acquired. During that absorption period, the owner would incur direct costs, such as tenant improvements, and would suffer lost rental income. Likewise, the owner would have acquired a measurable asset in that, assuming the building was vacant, certain fixed costs would be avoided because the actual in-place lessees would reimburse a certain portion of fixed costs through expense reimbursements during the absorption period. All of these intangible assets (above- or below-market lease, tenant improvement costs avoided, leasing costs avoided, rental income lost, and expenses recovered through in-place lessee reimbursements) are estimated and recorded in amounts equal to the present value of estimated future cash flows. The actual purchase price is allocated based on the various asset fair values described above. The building and tenant improvement components of the purchase price are depreciated over the estimated useful life of the building or the weighted average remaining term of the in-places leases. The at-market, in-place lease intangibles are amortized to amortization expense over the weighted average remaining term of the leases, customer relationship assets are amortized to amortization expense over terms applicable to each acquisition. Any goodwill recorded through a business combination would be reviewed for impairment at least annually and is not amortized. See Note 8 for more details on the Company’s intangible assets. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
Executed purchase and sale agreements, that are binding agreements, are categorized as level one inputs. Brokerage estimates, letters of intent, or unexecuted purchase and sale agreements are considered to be level three as they are nonbinding in nature. Fair Value of Derivative Financial Instruments Derivative financial instruments are recorded at fair value on the Company's Consolidated Balance Sheets as other assets or other liabilities. The valuation of derivative instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. Fair values of derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of the Company's forward starting interest rate swap contracts are estimated by pricing models that consider foreign trade rates and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. For derivatives designated in qualifying cash flow hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss). Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the underlying hedged transaction is recognized in earnings. As of December 31, 2018 and 2017, the Company had $0.9 million and $1.3 million, respectively recorded in accumulated other comprehensive loss related to forward starting interest rate swaps entered into and settled during 2015 and a hedge of the Company's variable rate debt. See Note 10 for additional information. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash includes cash held in escrow in connection with proceeds from the sales of certain real estate properties. The Company had restricted cash during the years ended December 31, 2018 and 2017. However, the Company reinvested the restricted cash for real estate acquisitions prior to the ending balance sheet date. Allowance for Doubtful Accounts and Credit Losses Accounts Receivable Management monitors the aging and collectibility of its accounts receivable balances on an ongoing basis. Whenever deterioration in the timeliness of payment from a tenant or sponsoring health system is noted, management investigates and determines the reason or reasons for the delay. Considering all information gathered, management’s judgment is exercised in determining whether a receivable is potentially uncollectible and, if so, how much or what percentage may be uncollectible. Among the factors management considers in determining collectibility are: the type of contractual arrangement under which the receivable was recorded (e.g., a triple net lease, a gross lease, a property operating agreement, or some other type of agreement); the tenant’s reason for slow payment; industry influences under which the tenant operates; evidence of willingness and ability of the tenant to pay the receivable; credit-worthiness of the tenant; collateral, security deposit, letters of credit or other monies held as security; tenant’s historical payment pattern; other contractual agreements between the tenant and the Company; relationship between the tenant and the Company; the state in which the tenant operates; and the existence of a guarantor and the willingness and ability of the guarantor to pay the receivable. Considering these factors and others, management concludes whether all or some of the aged receivable balance is likely uncollectible. Upon determining that some portion of the receivable is likely uncollectible, the Company records a provision for bad debts for the amount it expects will be uncollectible. When efforts to collect a receivable are exhausted, the receivable amount is charged off against the allowance. The Company does not hold any accounts receivable for sale. Goodwill and Other Intangible Assets Goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present. Identifiable intangible assets of the Company are comprised of enterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and debt issuance costs. In-place lease and customer relationship intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Debt issuance costs are amortized over the term of the debt instrument on the effective interest method or the straight-line method when the effective interest method is not applicable. Goodwill is not amortized but is evaluated annually as of December 31 for impairment. Both the 2018 and 2017 impairment evaluations indicated that no impairment had occurred with respect to the $3.5 million goodwill asset. See Note 8 for more detail on the Company’s intangible assets. Contingent Liabilities From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages. The Company continually monitors any matters that may present a contingent liability, and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are first recorded when a loss is determined to be both probable and can be reasonably estimated. Changes in estimates regarding the exposure to a contingent loss are reflected as adjustments to the related liability in the periods when they occur. Because of uncertainties inherent in the estimation of contingent liabilities, it is possible that the Company’s provision for contingent losses could change materially in the near term. To the extent that any significant losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements. Stock-Based Compensation The Company has various employee and director stock-based awards outstanding. These awards include non-vested common stock and options to purchase common stock granted to employees pursuant to the 2015 Stock Incentive Plan and its predecessor plans (the “2015 Incentive Plan”) and the 2000 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). The Company recognizes share-based payments to employees and directors in the Consolidated Statements of Income on a straight-line basis over the requisite service period based on the fair value of the award on the measurement date. The Employee Stock Purchase Plan features a “look-back” provision which enables the employee to purchase a fixed number of common shares at the lesser of 85% of the market price on the date of grant or 85% of the market price on the date of exercise, with optional purchase dates occurring once each quarter for 27 months. The Company accounts for awards to its employees under the Employee Stock Purchase Plan based on fair value, using the Black-Scholes model, and generally recognizes expense over the award’s vesting period, net of estimated forfeitures. Since the options granted under the Employee Stock Purchase Plan immediately vest, the Company records compensation expense for those options when they are granted in the first quarter of each year and then may record additional compensation expense in subsequent quarters as warranted. During the years ended December 31, 2018, 2017 and 2016, the Company recognized in general and administrative expenses approximately $0.3 million, $0.2 million, and $0.2 million, respectively, of compensation expense related to the annual grant of options to its employees to purchase shares under the Employee Stock Purchase Plan. See Note 12 for details on the Company’s stock-based awards. Accumulated Other Comprehensive Income (Loss) Certain items must be included in comprehensive income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, derivative instruments and unrealized gains or losses on available-for-sale securities. As of December 31, 2018, the Company’s accumulated other comprehensive income (loss) consists of the loss for changes in the fair value of active derivatives designated as cash flow hedges and the loss on the unamortized settlement of four forward starting swaps. See Note 10 for more details on the Company's derivative financial instruments. Revenue from Contracts with Customers (Topic 606) The Company recognizes certain revenue under the core principle of Topic 606. This requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease revenue is not within the scope of Topic 606. To achieve the core principle, the Company applies the five step model specified in the guidance. See the New Accounting Pronouncements section below for additional information. Revenue that is accounted for under Topic 606 is segregated on the Company’s Consolidated Statements of Income in the Other operating line item. This line item includes parking income, property lease guaranty income, management fee income and other miscellaneous income. Below is a detail of the amounts by category:
The Company’s three major types of revenue that are accounted for under Topic 606 that are listed above are all accounted for as the performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time and the Company recognizes revenue monthly based on this principle. One, one and two of the Company’s owned real estate properties as of December 31, 2018, 2017 and 2016, respectively, were covered under property operating agreements between the Company and a sponsoring health system, which contractually obligate the sponsoring health system to provide to the Company a minimum return on the Company’s investment in the property in exchange for the right to be involved in the operating decisions of the property, including tenancy. If the minimum return is not achieved through normal operations of the property, the Company calculates and accrues to property lease guaranty revenue, each quarter, any shortfalls due from the sponsoring health systems under the terms of the property operating agreement. Management fee income for property management services provided to third parties are generally calculated, accrued and billed monthly based on a percentage of cash collections of tenant receivables for the month or a stated amount per square foot. Internal management fee income, where the Company manages its owned properties, is eliminated in consolidation. Rental Income Rental income related to non-cancelable operating leases is recognized as earned over the life of the lease agreements on a straight-line basis. The Company's lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index ("CPI"). Rental income from properties under multi-tenant office lease arrangements and rental income from properties with single-tenant lease arrangements are included in rental income on the Company's Consolidated Statements of Income. The components of rental income are as follows:
Operating expense recoveries, included in property operating income, were approximately $81.1 million, $73.4 million and $66.0 million, respectively, for the years ended December 31, 2018, 2017 and 2016. Federal Income Taxes No provision has been made for federal income taxes. The Company intends at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code. The Company must distribute at least 90% per annum of its real estate investment trust taxable income to its stockholders and meet other requirements to continue to qualify as a real estate investment trust. See Note 15 for further discussion. The Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and administrative expenses. No such amounts were recognized during the three years ended December 31, 2018. Federal tax returns for the years 2015, 2016, 2017 and 2018 are currently subject to examination by taxing authorities. State Income Taxes The Company must pay certain state income taxes and the provisions for such taxes are generally included in general and administrative expense on the Company’s Consolidated Statements of Income. See Note 15 for further discussion. Sales and Use Taxes The Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in revenues in the Company’s Consolidated Statements of Income. Discontinued Operations The Company sells properties from time to time due to a variety of factors, including among other things, market conditions or the exercise of purchase options by tenants. The Company does not expect these dispositions to meet the amended definition of a discontinued operation as defined in Accounting Standards Update ("ASU") No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." The Company adopted ASU No. 2014-08 on a prospective basis beginning January 1, 2015 which excluded properties previously in discontinued operations prior to adoption. However, if a sale were to meet the amended definition representing a strategic shift that has or will have a major effect on the Company's operations and financial results, the operating results of the properties that have been sold or are held for sale will be reported as discontinued operations in the Company’s Consolidated Statements of Income for all periods presented. Assets Held for Sale Long-lived assets held for sale are reported at the lower of their carrying amount or their fair value less estimated cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as held for sale. Losses resulting from the sale of such properties are characterized as impairment losses in the Consolidated Statements of Income. See Note 5 for more detail on assets held for sale. Earnings per Share The Company uses the two-class method of computing net earnings per common share. Earnings per common share is calculated by considering share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities. Undistributed earnings (excess net income over dividend payments) are allocated on a prorata basis to common shareholders and restricted shareholders. Undistributed losses (dividends in excess of net income) do not get allocated to restricted stockholders as they do not have the contractual obligation to share in losses. The amount of undistributed losses that applies to the restricted stockholders is allocated to the common stockholder. Basic earnings per common share is calculated using weighted average shares outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is calculated using weighted average shares outstanding plus the dilutive effect of the outstanding stock options from the Employee Stock Purchase Plan using the treasury stock method and the average stock price during the period. See Note 13 for the calculations of earnings per share. Reclassifications Consolidated Statements of Income Certain reclassifications have been made on the Company's Consolidated Statements of Income. After the adoption of ASU 2014-08, the Company's dispositions have not met the updated definition to be reported as discontinued operations. The Company had some residual impact from properties that were identified as discontinued operations prior to the adoption of ASU 2014-08. These amounts are considered immaterial and have been reclassified for the prior year presentations on the Company's Consolidated Statements of Income.
New Accounting Pronouncements Accounting Standards Update No. 2014-09 and No. 2015-14 In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers," a comprehensive new revenue recognition standard that supersedes most existing revenue recognition guidance, including sales of real estate. This standard's core principle is that a company will recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. However, leasing contracts, representing the major source of the Company's revenues, are not within the scope of the new standard and will continue to be accounted for under other standards. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606); Deferral of the Effective Date." This standard is effective for the Company for annual and interim periods beginning after December 15, 2017. The Company adopted this standard by using the full retrospective adoption method beginning on January 1, 2018. The Company's revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, the adoption of this standard did not have a material impact on the timing and measurement of the Company's leasing revenues. The Company has identified that parking income, property lease guaranty income and management fee income are within the scope of Topic 606. However, these items were determined to have the same pattern of revenue recognition that the Company had historically recognized. The Company reclassified these amounts along with all other items that are accounted for within the scope of Topic 606 into the Other operating line item on the Company's Consolidated Statements of Income. This line item historically contained the revenue associated with property lease guaranty income, management fee income and other non-lease revenue. The Company reclassified parking income from rental income to other operating. The following table represents the impact of the adoption of this standard on the Company's Consolidated Statements of Income for the years ended December 31, 2017 and 2016:
Accounting Standards Update No. 2016-02, No. 2018-01 and No. 2018-11 In February 2016, the FASB issued ASU 2016-02, "Leases." In January 2018, the FASB issued ASU 2018-01, "Leases - Land Easement Practical Expedient for Transition to Topic 842," in July 2018, the FASB issued ASU 2018-10, "Codification Improvements to Topic 842, Leases" and ASU 2018-11, "Leases - Targeted Improvements," and in December 2018, the FASB issued ASU 2018-20, “Narrow-Scope Improvements for Lessors.” These accounting standard updates are collectively referred to as "Topic 842." Topic 842 provides several practical expedients that the Company expects to elect. These are (a) the package of practical expedients offered that allows an entity not to reassess upon adoption (i) whether an expired or existing contract contains a lease, (ii) lease classification related to expired or existing lease arrangements, and (iii) whether costs incurred on expired or existing leases qualify as initial direct costs, and (b) the practical expedient not to separate certain non-lease components, such as common area maintenance, from the lease component if (i) the timing and pattern of transfer are the same for the non-lease component and associated lease component, and (ii) the lease component would be classified as an operating lease if accounted for separately. For lessees, the new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the income statement. The Company expects that most of the leases where the Company is the lessee will be recorded on the Company's balance sheet as operating leases. These leases are primarily ground leases, but also include management office leases in third party buildings and certain copier and postage machine leases. The Company utilized a third party to assist in determining the discount rate for its ground leases. The terms of the ground leases generally range from 40 to 99 years with a weighted average remaining lease term remaining of 53.9 years, excluding renewal options. The Company's discount rates ranged from 2.9% for leases expiring in 2019 to 6.2% for leases expiring in 2115. The Company expects to recognize as of January 1, 2019 the present value of its lease payments of $90.0 million to $100.0 million with a corresponding lease liability of $90.0 million to $100.0 million. For lessors, the new standard requires a lessor to classify leases as either sales-type, direct-financing or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease. Lessor accounting remains largely unchanged with some exceptions including the concept of separating lease and nonlease components. Nonlease components, such as common area maintenance, will be accounted for under Topic 606 and separated from the lease payments. However, the Company will elect the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. The Company does not expect a material impact from the adoption of Topic 842 related to leases where the Company is the lessor. The new standard is effective for the Company on January 1, 2019. Topic 842 provides two transition alternatives. The Company elected to choose the prospective optional transition method available to apply the guidance in Accounting Standards Codification Topic 840 in the comparative periods presented in the year Topic 842 is adopted. Topic 842 includes extensive quantitative and qualitative disclosures as compared to Topic 840, Leases, for both lessees and lessors. Accounting Standards Update No. 2016-13 In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." This update is intended to improve financial reporting by requiring timelier 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. This update requires that financial statement assets measured at an amortized cost and certain other financial instruments be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. This standard is effective for annual and interim periods beginning after December 15, 2019 with early adoption permitted. The Company is in the initial stages of evaluating the impact from the adoption of this new standard on the Consolidated Financial Statements and related notes. However, operating lease receivables, representing the majority of the Company's receivables, are not within the scope of the new standard. Accounting Standards Update No. 2016-15 In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments." This update clarifies whether the following items should be classified as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance and bank-owned life insurance policies, (vi) distributions from equity method investees, (vii) beneficial interest in securitization transactions and (viii) receipts and payments with aspects of more than one class of cash flows. This standard was effective for the Company for annual and interim periods beginning on January 1, 2018 with early adoption permitted on a retrospective transition method to each period presented. The Company adopted this standard effective January 1, 2017. In connection with the adoption of this update, the Company elected to use the cumulative earnings approach to classify distributions when received related to the Company's equity method investments. There was not a material impact on the Company's Consolidated Financial Statements and related notes resulting from the adoption of this standard. Accounting Standards Update No. 2017-01 In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations: Clarifying the Definition of a Business." This update modifies the requirements to meet the definition of a business under Topic 805, "Business Combinations." The amendments provide a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. The Company believes that this amendment will result in most of its real estate acquisitions being accounted for as asset acquisitions rather than business combinations. This standard was effective for the Company for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard effective January 1, 2017 and has accounted for acquisitions that occurred during the year as asset acquisitions. The impact to the Consolidated Financial Statements and related notes as a result of the adoption of this standard is primarily related to the difference in the accounting of acquisition costs. When accounting for these costs as a part of an asset acquisition, the Company is permitted to capitalize the costs. The adoption of this standard did not have a material impact on the Consolidated Financial Statements and related notes. Accounting Standards Update No. 2017-04 In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." This update eliminates Step 2 of the goodwill impairment test. As such, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value. This standard is effective for the Company for annual and interim periods beginning after December 15, 2019. The Company does not expect a material impact on the Consolidated Financial Statements and related notes from the adoption of this standard. Accounting Standards Update No. 2017-05 In February 2017, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets." This update 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. This standard is effective for the Company for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard as of January 1, 2018 using the full retrospective adoption method. However, there was no impact to the Company's Consolidated Financial Statements from the adoption of this standard. Accounting Standards Update No. 2017-09 In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation - Scope of Modification Accounting." This update provides guidance about which changes to the terms and conditions of share-based awards require an entity to apply modification accounting in Topic 718. This standard is effective for the Company for the annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard on January 1, 2018. There was not a material impact to the Consolidated Financial Statements from the adoption of this standard. Accounting Standards Update No. 2018-07 In June 2018, the FASB issued ASU 2018-07, "Compensation - Stock Compensation - Improvements to Nonemployee Share-Based Payment Accounting." This update supersedes most of the prior accounting guidance on nonemployee share-based payments, and instead aligns it with existing guidance on employee share-based payments in Topic 718. As a result, nonemployee share-based payment transactions will be measured by estimating the fair value of the equity instrument that an entity is obligated to issue and the measurement date will be consistent with the measurement date for employee share-based payment awards. Probability is to be considered on nonemployee awards with performance conditions. The classification will continue to be subject to the requirements of Topic 718, although cost recognition of nonemployee awards will remain unchanged. The amendments become effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this standard as of January 1, 2019. The adoption of this standard did not have a material impact to the Company's Consolidated Financial Statements.
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Property Investments |
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Real Estate Investment Property, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Investments | Property Investments The Company invests in healthcare-related properties located throughout the United States. The Company provides management, leasing, development and redevelopment services, and capital for the construction of new facilities as well as for the acquisition of existing properties. The Company had gross investments of approximately $4.0 billion in 199 real estate properties, construction in progress, land held for development and corporate property as of December 31, 2018. The following table summarizes the Company’s investments at December 31, 2018.
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Real Estate Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Real Estate Leases | Real Estate Leases Real Estate Leases The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2036. Some leases and financial arrangements provide for fixed rent renewal terms in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease and for a short period thereafter, with an option or a right of first refusal to purchase the leased property. The Company’s portfolio of single-tenant net leases generally requires the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property. Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2018 are as follows (in thousands):
Revenue Concentrations The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2018, 2017 and 2016. Purchase Option Provisions Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had approximately $117.1 million in five real estate properties as of December 31, 2018 that were subject to purchase options that were exercisable or become exercisable during 2019.
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Acquisitions, Dispositions and Mortgage Repayments |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Acquisitions and Dispositions and Mortgage Repayments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions, Dispositions and Mortgage Repayments | Acquisitions, Dispositions and Mortgage Repayments 2018 Real Estate Acquisitions The following table details the Company's acquisitions for the year ended December 31, 2018:
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The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the real estate acquisitions for 2018 as of the acquisition date:
Non-monetary Exchange On June 29, 2018, the Company completed the swap of a non-revenue producing garage that was built by the Company in 2012 located in Denver, Colorado for 20.5 acres of land adjacent to the Catholic Health Initiative’s St. Anthony Hospital campus. A portion of this land, approximately 4.6 acres, has been allocated to an existing medical office building that was developed by the Company in 2017. This building is located on land previously ground leased from the hospital. The remaining land has been recorded in land held for development. The land acquired was appraised for $5.8 million. The Company had a net investment of $3.9 million in the parking garage and recognized a gain of $1.9 million in connection with this transaction. 2017 Real Estate Acquisitions The following table details the Company's acquisitions for the year ended December 31, 2017:
The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the real estate acquisitions for 2017 as of the acquisition date:
2018 Real Estate Asset Dispositions The following table details the Company's dispositions for the year ended December 31, 2018:
2017 Real Estate Asset Dispositions The following table details the Company's dispositions for the year ended December 31, 2017:
(4) The Company recorded an impairment of approximately $0.3 million in the first quarter of 2017 upon management's decision to sell.
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Held for Sale |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Held for Sale and Discontinued Operations | Held for Sale Assets and liabilities of properties sold or classified as held for sale are separately identified on the Company’s Consolidated Balance Sheets in the current period. As of December 31, 2018 and 2017, the Company had one and eight properties, respectively, classified as held for sale.
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Impairment Charges |
12 Months Ended |
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Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Impairment Charges | Impairment Charges An asset is impaired when undiscounted cash flows expected to be generated by the asset are less than the carrying value of the asset. The Company must assess the potential for impairment of its long-lived assets, including real estate properties, whenever events occur or there is a change in circumstances, such as the sale of a property or the decision to sell a property, that indicate that the recorded value might not be fully recoverable. The Company did not record any impairment charges in 2018. The Company recorded impairment charges on properties sold or classified as held for sale for the years ended December 31, 2017 and 2016 totaling $5.4 million and $0.1 million, respectively. Both level 1 and level 3 fair value techniques were used to derive these impairment charges.
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Other Assets |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets Other assets consist primarily of straight-line rent receivables, additional long-lived assets, prepaids, intangible assets, debt issuance costs and accounts receivable. Items included in "Other assets, net" on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017 are detailed in the table below:
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Unconsolidated Joint Ventures During the fourth quarter of 2017, the Company purchased a non-managing membership interest in two LLCs that own two parking garages in Atlanta, Georgia for $8.7 million which is included in the equity investments in joint ventures line in the table above. The parking garage interests were purchased in connection with three buildings that were acquired in the fourth quarter of 2017. The Company's investment in and income (loss) recognized for the years ended December 31, 2018 and 2017 related to its LLCs accounted for under the equity method are shown in the table below:
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Intangible Assets and Liabilities |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets and Liabilities | Intangible Assets and Liabilities The Company has several types of intangible assets and liabilities included in its Consolidated Balance Sheets, including goodwill, debt issuance costs, above-, below-, and at-market lease intangibles, and customer relationship intangibles. The Company’s intangible assets and liabilities as of December 31, 2018 and 2017 consisted of the following:
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For the years ended December 31, 2018 and 2017, the Company recognized approximately $23.2 million and $16.6 million of intangible amortization expense, respectively. The following table represents expected amortization over the next five years of the Company’s intangible assets and liabilities in place as of December 31, 2018:
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Notes and Bonds Payable |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes and Bonds Payable | Notes and Bonds Payable
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The Company’s various debt agreements contain certain representations, warranties, and financial and other covenants customary in such loan agreements. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain limits on the Company’s ability to incur indebtedness and create liens or encumbrances. As of December 31, 2018, the Company was in compliance with its financial covenant provisions under its various debt instruments. Unsecured Credit Facility due 2020 On October 14, 2011, the Company entered into a $700.0 million unsecured credit facility with a syndicate of lenders (the "Unsecured Credit Facility"). On July 29, 2016, the Company entered into the third amendment to the Unsecured Credit Facility to extend the maturity date to July 2020. The credit facility agreement provides the Company with two six-month extension options that could extend the maturity date to July 2021. Each option is subject to an extension fee of 0.075% of the aggregate commitments. Amounts outstanding under the Unsecured Credit Facility bear interest at LIBOR plus an applicable margin rate. The margin rate, which depends on the Company's credit ratings, ranges from 0.83% to 1.55% (1.00% as of December 31, 2018). In addition, the Company pays a facility fee per annum on the aggregate amount of commitments ranging from 0.13% to 0.30% (0.20% as of December 31, 2018). As of December 31, 2018, the Company had $262.0 million outstanding under the Unsecured Credit Facility with an effective interest rate of approximately 3.50% and had a remaining borrowing capacity of approximately $438.0 million. Unsecured Term Loan due 2022 In February 2014, the Company entered into a $200.0 million unsecured term loan with a syndicate of nine lenders. On July 5, 2016, the Company repaid $50.0 million of the outstanding principal. On December 18, 2017, the Company entered into an amendment to the unsecured term loan due 2022 (the "Unsecured Term Loan due 2022") with a syndicate of nine lenders to extend the maturity date to December 2022. The Unsecured Term Loan due 2022 bears interest at a rate equal to (x) LIBOR plus (y) a margin ranging from 0.90% to 1.75% (1.10% as of December 31, 2018) based upon the Company's unsecured debt ratings. Payments under the Unsecured Term Loan due 2022 are interest only, with the full amount of the principal due at maturity. The Unsecured Term Loan due 2022 may be prepaid at any time, without penalty. The Unsecured Term Loan due 2022 has various financial covenant provisions that are required to be met on a quarterly and annual basis that are equivalent to those of the Unsecured Credit Facility. On December 20, 2017, the Company entered into two interest rate swaps totaling $25.0 million to hedge the 1-month LIBOR portion of the cost of borrowing under the Unsecured Term Loan due 2022 to a fixed interest rate of 2.18% (plus the applicable margin rate) through December 2022. On January 30, 2018, the Company entered into two additional interest rate swaps totaling $50.0 million to hedge the 1-month LIBOR portion of the cost of borrowing under the Unsecured Term Loan due 2022 to a fixed interest rate of 2.46% (plus the applicable margin rate) through December 2022. The outstanding balance on the Unsecured Term Loan due 2022 was $150.0 million as of December 31, 2018 with an effective interest rate of approximately 3.53% including the impact of the interest rate swaps. For each of the years ended December 31, 2018, 2017, and 2016 the Company amortized approximately $0.2 million of the debt issuance costs which is included in interest expense on the Company's Consolidated Statements of Income. The following table reconciles the balance of the Unsecured Term Loan due 2022 on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017:
Senior Notes due 2023 On March 26, 2013, the Company issued $250.0 million of unsecured senior notes due 2023 (the "Senior Notes due 2023") in a registered public offering. The Senior Notes due 2023 bear interest at 3.75%, payable semi-annually on April 15 and October 15, beginning October 15, 2013, and are due on April 15, 2023, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $2.1 million and the Company incurred debt issuance cost of $2.1 million, which yielded a 3.95% interest rate per annum upon issuance. For each of the years ended December 31, 2018, 2017 and 2016, the Company amortized approximately $0.2 million of the discount and $0.2 million of the debt issuance cost which are included in interest expense on the Company’s Consolidated Statements of Income. The following table reconciles the balance of the Senior Notes due 2023 on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017:
Senior Notes due 2025 On April 24, 2015, the Company issued $250.0 million of unsecured senior notes due 2025 (the "Senior Notes due 2025") in a registered public offering. The Senior Notes due 2025 bear interest at 3.875%, payable semi-annually on May 1 and November 1, beginning November 1, 2015, and are due on May 1, 2025, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $0.2 million and the Company incurred approximately $2.3 million in debt issuance costs which yielded a 4.08% interest rate per annum upon issuance. For each of the years ended December 31, 2018 , 2017, and 2016 the Company amortized approximately $0.2 million of the debt issuance costs which is included in interest expense on the Company's Consolidated Statements of Income. Concurrent with this transaction, the Company settled four forward starting swap agreements for $1.7 million. The Senior Notes due 2025 have various financial covenants that are required to be met on a quarterly and annual basis. The following table reconciles the balance of the Senior Notes due 2025 on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017:
Senior Notes due 2028 On December 11, 2017, the Company issued $300.0 million of unsecured Senior Notes due 2028 (the "Senior Notes due 2028") in a registered public offering. The Senior Notes due 2028 bear interest at 3.625%, payable semi-annually on January 15 and July 15, beginning July 15, 2018, and are due on January 15, 2028, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $2.5 million and the Company incurred approximately $2.7 million in debt issuance costs which yielded a 3.84% interest rate per annum upon issuance. For the year ended December 31, 2018, the Company amortized approximately $0.2 million of the discount and $0.2 million of the debt issuance costs which are included in interest expense on the Company's Consolidated Statements of Income. The Senior Notes due 2028 have various financial covenants that are required to be met on a quarterly and annual basis. The following table reconciles the balance of the Senior Notes due 2028 on the Company’s Consolidated Balance Sheets as of December 31, 2018:
Mortgage Notes Payable The following table reconciles the Company’s aggregate mortgage notes principal balance with the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017. For the years ended December 31, 2018, 2017 and 2016, the Company amortized approximately $0.4 million, $0.3 million and $0.3 million of the discount and $0.8 million, $0.7 million, and $0.9 million of the premium. For the years ended December 31, 2018, 2017 and 2016, the Company also amortized approximately $0.1 million, $0.1 million, and $0.2 million of the debt issuance costs, respectively, on the mortgage notes payable which is included in interest expense on the Company’s Consolidated Statements of Income.
The following table details the Company’s mortgage notes payable, with related collateral.
Other Long-Term Debt Information Future maturities of the Company’s notes and bonds payable as of December 31, 2018 were as follows:
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(2) Excludes approximately $2.2 million in debt issuance costs related to the Company's Unsecured Credit Facility included in other assets, net.
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Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments Risk Management Objective of Using Derivatives The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2018 and 2017, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During each of the years ended December 31, 2018 and 2017 the Company entered into two outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
During the year ended December 31, 2015, the Company entered into four forward starting interest rate swaps with a total notional value of $225.0 million to hedge the risk of changes in the interest-related cash flows associated with the potential issuance of long-term debt. That debt was issued in April 2015, as discussed in Note 9, and the forward starting interest rate swaps were terminated. As a result, the Company realized a loss at the termination date which was deferred and is being amortized over the term of the Senior Notes due 2025. Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet The table below presents the fair value of the Company's derivative financial instruments, as well as, their classification on the Consolidated Balance Sheets as of December 31, 2018 and 2017.
Tabular Disclosure of the Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss) The table below presents the effect of cash flow hedge accounting on Accumulated other comprehensive income (loss) as of December 31, 2018 related to the Company's outstanding interest rate swaps.
Tabular Disclosure Offsetting Derivatives The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of December 31, 2018. The net amounts of derivative assets and liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Company's Consolidated Balance Sheets.
Credit-risk-related Contingent Features The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company's default on the indebtedness. |
Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Common Stock The Company had no preferred shares outstanding and had common shares outstanding for the three years ended December 31, 2018 as follows:
At-The-Market Equity Offering Program The Company has in place an at-the-market equity offering program to sell shares of the Company’s common stock from time to time in at-the-market sales transactions. The following table details the shares sold under this program.
On February 19, 2016, the Company entered into sales agreements with five investment banks to allow sales under its at-the-market equity offering program of up to 10,000,000 shares of common stock. A previous sales agreement with one investment bank was terminated effective February 17, 2016. No shares were sold related to this program during 2017 or 2018. On May 5, 2017, the Company entered into a sales agreement with a sixth investment bank in connection with the same allotment of shares. The Company has 5,868,697 authorized shares remaining available to be sold under the current sales agreements as of February 13, 2019. Dividends Declared During 2018, the Company declared and paid common stock dividends aggregating $1.20 per share ($0.30 per share per quarter). On February 12, 2019, the Company declared a quarterly common stock dividend in the amount of $0.30 per share payable on March 8, 2019 to stockholders of record on February 22, 2019. Common Stock Authorization On May 2, 2017, the Company's shareholders approved an amendment to the Company's Articles of Incorporation to increase the number of authorized shares of common stock from 150,000,000 to 300,000,000. Authorization to Repurchase Common Stock The Company’s Board of Directors has authorized management to repurchase up to 3,000,000 shares of the Company’s common stock. As of December 31, 2018, the Company had not repurchased any shares under this authorization. The Company may elect, from time to time, to repurchase shares either when market conditions are appropriate or as a means to reinvest excess cash flows. Such purchases, if any, may be made either in the open market or through privately negotiated transactions. Accumulated Other Comprehensive Loss During each of the two years ended December 31, 2018 and 2017, the Company entered into two interest rate swaps to hedge the variable cash flows associated with existing variable-rate debt. The Company recorded losses in accumulated other comprehensive loss of approximately $0.4 million as of December 31, 2018. The Company continues to amortize the 2015 settlement of forward-starting interest rate swaps. This amount will be reclassified out of accumulated other comprehensive loss impacting net income over the 10-year term of the associated senior note issuance. See Note 10 for more information regarding the Company's derivative instruments. The following table represents the changes in accumulated other comprehensive loss during the years ended December 31, 2018 and 2017:
The following table represents the details regarding the reclassifications from Accumulated other comprehensive income (loss) during the year ended December 31, 2018:
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Stock and Other Incentive Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock and Other Incentive Plans | Stock and Other Incentive Plans Stock Incentive Plan In May 2015, the Company's stockholders approved the 2015 Stock Incentive Plan (the "2015 Incentive Plan") which authorizes the Company to issue 3,500,000 shares of common stock to its employees and directors. The 2015 Incentive Plan, which superseded the 2007 Employee Stock Incentive Plan (the "Predecessor Plan"), will continue until terminated by the Company’s Board of Directors. As of December 31, 2018 and 2017, the Company had issued a total of 1,711,240 and 1,438,228 restricted shares, respectively, under the 2015 Incentive Plan for compensation-related awards to employees and directors, with a total of 1,788,760 and 2,061,772, respectively, remaining which had not been issued. Under the Predecessor Plan for compensation-related awards to employees and directors, the Company had issued, net of forfeitures, a total of 1,878,637 restricted shares for the year ended December 31, 2015. Non-vested shares issued under the 2015 Incentive Plan are generally subject to fixed vesting periods varying from three to eight years beginning on the date of issue. If a recipient voluntarily terminates his or her relationship with the Company or is terminated for cause before the end of the vesting period, the shares are forfeited, at no cost to the Company. The Company recognizes the impact of forfeitures as they occur. Once the shares have been issued, the recipient has the right to receive dividends and the right to vote the shares. Compensation expense, included in general and administrative expense, recognized during the years ended December 31, 2018, 2017 and 2016 from the amortization of the value of shares over the vesting period issued to employees and directors was $10.4 million, $9.8 million and $7.4 million, respectively. The following table represents expected amortization of the Company's non-vested shares issued:
Executive Incentive Plan On July 31, 2012, the Company adopted an Executive Incentive Plan, which was amended and restated on February 16, 2016 ("Executive Incentive Plan"), to provide specific award criteria with respect to incentive awards made under the 2015 Incentive Plan subject to the discretion of the Compensation Committee. No new shares of common stock were authorized in connection with the Executive Incentive Plan. Under the terms of the Executive Incentive Plan, the Company's named executive officers, and certain other members of senior management, may earn incentive awards in the form of cash and non-vested stock. Cash incentive awards are based on individual and Company performance. Company performance is measured over a four-quarter period against targeted financial and operational metrics set in advance by the Compensation Committee. Non-vested stock awards are based on the Company's relative total shareholder return ("TSR") performance over one-year and three-year periods, measured against the Company's peer group. For 2018, 2017 and 2016, compensation expense, included in general and administrative expense, resulting from the amortization of non-vested share grants to officers was approximately $5.7 million, $5.0 million, and $4.0 million, respectively. Details of the awards that have been earned from this plan are as follows:
in the form of 213,639 non-vested shares, with a five-year vesting period, which will result in annual compensation expense of $1.3 million each of 2019, and 2020, and $1.2 million for 2021, respectively.
Long-Term Incentive Program In the first quarter of 2018 and 2017, the Company granted a performance-based award to officers, excluding the four named executive officers and five senior vice presidents, under the Long-term Incentive Program adopted under the 2015 Incentive Plan (the "LTIP") totaling approximately $1.2 million and $1.3 million, which was granted in the form of 43,414 non-vested shares and 41,368 non-vested shares, respectively. The shares have vesting periods ranging from three to eight years with a weighted average vesting period of approximately six years. For 2018, 2017 and 2016, compensation expense resulting from the amortization of non-vested share grants to officers was approximately $1.2 million, $1.1 million, and $1.1 million, respectively. Salary Deferral Plan The Company's salary deferral plan allows certain of its officers to elect to defer up to 50% of their base salary in the form of non-vested shares issued under the 2015 Incentive Plan subject to long-term vesting. The number of shares will be increased through a Company match depending on the length of the vesting period selected by the officer. The officer's vesting period choices are: three years for a 30% match; five years for a 50% match; and eight years for a 100% match. During 2018, 2017 and 2016, the Company issued 33,348 shares, 39,016 shares and 42,256 shares, respectively, to its officers through the salary deferral plan. For 2018, 2017 and 2016, compensation expense resulting from the amortization of non-vested share grants to officers was approximately $1.0 million, $1.2 million, and $1.2 million, respectively. Non-employee Directors Incentive Plan The Company issues non-vested shares to its non-employee directors under the 2015 Incentive Plan. The directors’ shares issued have a one-year vesting period beginning with the May 2015 grant (previously a three-year vesting period) and are subject to forfeiture prior to such date upon termination of the director’s service, at no cost to the Company. During 2018, 2017 and 2016, the Company issued 30,989 shares, 23,231 shares, and 21,374 shares, respectively, to its non-employee directors through the 2015 Incentive Plan. For 2018, 2017 and 2016, compensation expense resulting from the amortization of non-vested share grants to directors was approximately $0.8 million, $0.8 million, and $1.0 million, respectively. Other Grants The Company issued three one-time non-vested share grants related to executive management transition in 2016. For 2018, 2017 and 2016 compensation expense resulting from the amortization of these non-vested share grants to officers was approximately $1.7 million, $1.7 million, and $0.1 million, respectively. The following information provides information about each grant:
A summary of the activity under the 2015 Incentive Plan and related information for the three years in the period ended December 31, 2018 follows:
The vesting periods for the non-vested shares granted during 2018 ranged from one to eight years with a weighted-average amortization period remaining as of December 31, 2018 of approximately 5.1 years. During 2018, 2017 and 2016, the Company withheld 151,353 shares, 94,403 shares and 48,248 shares, respectively, of common stock from its officers to pay estimated withholding taxes related to the vesting of shares. 401(k) Plan The Company maintains a 401(k) plan that allows eligible employees to defer salary, subject to certain limitations imposed by the Internal Revenue Code. The Company provides a matching contribution of up to 3% of each eligible employee’s salary, subject to certain limitations. The Company’s matching contributions were approximately $0.4 million for each year during 2018, 2017 and 2016. Dividend Reinvestment Plan The Company is authorized to issue 1,000,000 shares of common stock to stockholders under the Dividend Reinvestment Plan. As of December 31, 2018, the Company had issued 591,114 shares under the plan of which 9,487 shares were issued in 2018, 26,031 shares were issued in 2017 and 9,575 shares were issued in 2016. Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan, pursuant to which the Company is authorized to issue shares of common stock. Under the Employee Stock Purchase Plan, each eligible employee in January of each year is able to purchase up to $25,000 of common stock at the lesser of 85% of the market price on the date of grant or 85% of the market price on the date of exercise of such option. The number of shares subject to each year’s option becomes fixed on the date of grant. Options granted under the Employee Stock Purchase Plan expire if not exercised 27 months after each such option’s date of grant. Cash received from employees upon exercising options under the Employee Stock Purchase Plan was approximately $0.4 million for the year ended December 31, 2018, $0.8 million for the year ended December 31, 2017, and $1.2 million for the year ended December 31, 2016. A summary of the Employee Stock Purchase Plan activity and related information for the three years in the period ended December 31, 2018 is as follows:
The fair values for these options were estimated at the date of grant using a Black-Scholes options pricing model with the weighted-average assumptions for the options granted during the period noted in the following table. The risk-free interest rate was based on the U.S. Treasury constant maturity-nominal two-year rate whose maturity is nearest to the date of the expiration of the latest option outstanding and exercisable; the expected dividend yield was based on the expected dividends of the current year as a percentage of the average stock price of the prior year; the expected life of each option was estimated using the historical exercise behavior of employees; expected volatility was based on historical volatility of the Company’s common stock; and expected forfeitures were based on historical forfeiture rates within the look-back period.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per ShareThe Company uses the two-class method of computing net earnings per common share. Non-vested share-based awards containing non-forfeitable rights to dividends are considered participating securities pursuant to the two-class method. The table below sets forth the computation of basic and diluted earnings per common share for the three years in the period ended December 31, 2018.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Redevelopment Activity The Company completed the redevelopment and expansion of one of its medical office buildings in Nashville, Tennessee in 2017. The Company spent approximately $6.1 million during the year ended December 31, 2018, including approximately $1.9 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant. The Company continued the redevelopment of a medical office building in Charlotte, North Carolina, which includes a 38,000 square foot vertical expansion. The Company funded approximately $6.1 million during the year ended December 31, 2018. The Company expects initial occupancy to occur in the second quarter of 2019. Development Activity The Company completed the development of a 99,957 square foot medical office building in Denver, Colorado in 2017. The Company spent approximately $1.8 million during the year ended December 31, 2018, including approximately $0.1 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant. The Company anticipates funding additional tenant improvements throughout 2019. The Company continued the development of a 151,000 square foot medical office building in Seattle, Washington. The Company spent approximately $21.5 million on the development during the year ended December 31, 2018. The Company expects initial occupancy to occur in the fourth quarter of 2019. The table below details the Company’s construction activity as of December 31, 2018. The information included in the table below represents management’s estimates and expectations at December 31, 2018, which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates may not reflect actual results.
Tenant Improvements The Company may provide a tenant improvement allowance in new or renewal leases for the purpose of refurbishing or renovating tenant space. As of December 31, 2018, the Company had commitments of approximately $29.2 million that are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction. Land Held for Development Land held for development includes parcels of land owned by the Company, upon which the Company intends to develop and own outpatient healthcare facilities. The Company’s investment in seven parcels of land held for development located adjacent to certain of the Company's existing medical office buildings in Texas, Iowa, Tennessee and Colorado totaled approximately $24.6 million as of December 31, 2018. The Company’s investment in six parcels of land held in Texas, Iowa, and Tennessee totaled approximately $20.1 million as of 2017. Operating Leases As of December 31, 2018, the Company was obligated under operating lease agreements consisting primarily of the Company’s ground leases. At December 31, 2018, the Company had 107 properties totaling 8.8 million square feet that were held under ground leases with a remaining weighted average term of 53.9 years, excluding renewal options. These ground leases typically have initial terms of 50 to 75 years with one or more renewal options extending the terms to 75 to 100 years, with expiration dates through 2117. Any increases related to the Company’s ground leases are generally either stated or based on the Consumer Price Index. Rental expense relating to the operating leases for the years ended December 31, 2018, 2017 and 2016 was $6.9 million, $6.5 million and $5.8 million, respectively. The Company prepaid 47 ground leases. The amortization of the prepaid rent represented approximately $0.5 million of the Company’s rental expense for the years ended December 31, 2018, 2017, and 2016.
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Other Data |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Data | Other Data Taxable Income (unaudited) The Company has elected to be taxed as a REIT, as defined under the Internal Revenue Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its taxable income to its stockholders. As a REIT, the Company generally will not be subject to federal income tax on taxable income it distributes currently to its stockholders. Accordingly, no provision for federal income taxes has been made in the accompanying Consolidated Financial Statements. If the Company fails to qualify as a REIT for any taxable year, then it will be subject to federal income taxes at regular corporate rates, including any applicable alternative minimum tax, and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies as a REIT, it may be subject to certain state and local taxes on its income and property and to federal income and excise tax on its undistributed taxable income. Earnings and profits (as defined under the Internal Revenue Code), the current and accumulated amounts of which determine the taxability of distributions to stockholders, vary from net income attributable to common stockholders and taxable income because of different depreciation recovery periods, depreciation methods, and other items. On a tax-basis, the Company’s gross real estate assets totaled approximately $4.0 billion, $4.0 billion, and $3.7 billion as of December 31, 2018, 2017 and 2016, respectively. The following table reconciles the Company’s consolidated net income attributable to common stockholders to taxable income for the three years ended December 31, 2018:
______ (1) Before REIT dividend paid deduction. Characterization of Distributions (unaudited) Distributions in excess of earnings and profits generally constitute a return of capital. The following table gives the characterization of the distributions on the Company’s common stock for the three years ended December 31, 2018. For the three years ended December 31, 2018, there were no preferred shares outstanding. As such, no dividends were distributed related to preferred shares for those periods.
______ (1) For the 2018 reporting year all ordinary income is also Code Section 199A eligible per the The Tax Cut and Jobs Act of 2017. State Income Taxes The Company must pay certain state income taxes, which are typically included in general and administrative expense on the Company’s Consolidated Statements of Income. The State of Texas gross margins tax on gross receipts from operations is disclosed in the table below as an income tax because it is considered such by the Securities and Exchange Commission. State income tax expense and state income tax payments for the three years ended December 31, 2018 are detailed in the table below:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practical to estimate that value. Cash, cash equivalents and restricted cash - The carrying amount approximates fair value. Mortgage notes receivable - The fair value of mortgage notes receivable is estimated based either on cash flow analyses at an assumed market rate of interest or at a rate consistent with the rates on mortgage notes acquired by the Company recently, if any. Borrowings under the Unsecured Credit Facility due 2020 and Unsecured Term Loan due 2022 - The carrying amount approximates fair value because the borrowings are based on variable market interest rates. Senior unsecured notes payable - The fair value of notes and bonds payable is estimated using cash flow analyses, based on the Company’s current interest rates for similar types of borrowing arrangements. Mortgage notes payable - The fair value is estimated using cash flow analyses, based on the Company’s current interest rates for similar types of borrowing arrangements. Interest rate swap agreements - Interest rate swap agreements are recorded in other liabilities on the Company's Consolidated Balance Sheets at fair value. Fair value is estimated by utilizing pricing models that consider forward yield curves and discount rates. The table below details the fair value and carrying values for notes and bonds payable as of December 31, 2018 and 2017.
______ (1) Level 2 – model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
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Selected Quarterly Financial Data (unaudited) |
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Selected Quarterly Financial Data (unaudited) | Selected Quarterly Financial Data (unaudited) Quarterly financial information for the year ended December 31, 2018 is summarized below.
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Quarterly financial information for the year ended December 31, 2017 is summarized below.
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(4) The decreases in net income and amounts per share for the fourth quarter of 2017 are primarily attributable to a loss on the extinguishment of debt of $45.0 million.
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Schedule II - Valuation and Qualifying Accounts |
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SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation and Qualifying Accounts | Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2018, 2017 and 2016 (Dollars in thousands)
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Schedule III - Real Estate and Accumulated Depreciation |
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SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate and Accumulated Depreciation | Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2018 (Dollars in thousands)
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Schedule IV - Mortgage Loans on Real Estate |
12 Months Ended |
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Dec. 31, 2018 | |
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract] | |
Mortgage Loans on Real Estate | Schedule IV – Mortgage Loans on Real Estate as of December 31, 2018 |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Overview | Business OverviewHealthcare Realty Trust Incorporated (the “Company”) is a real estate investment trust ("REIT") that owns, leases, manages, acquires, finances, develops and redevelops income-producing real estate properties associated primarily with the delivery of outpatient healthcare services throughout the United States of America. The Company had gross investments of approximately $4.0 billion in 199 real estate properties, construction in progress, land held for development and corporate property as of December 31, 2018. The Company’s 199 owned real estate properties are located in 27 states and total approximately 14.8 million square feet. The Company provided property management services to approximately 11.2 million square feet nationwide. Square footage and property count disclosures in this Annual Report on Form 10-K are unaudited. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation The Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, joint ventures, partnerships and consolidated variable interest entities (“VIE”) where the Company controls the operating activities of the VIE. In accordance with the consolidation accounting standards, the Company must evaluate each contractual relationship it has with its lessees, borrowers, or others to determine whether or not the contractual arrangement creates a variable interest in those entities. If the Company determines that it has a variable interest and the entity is a VIE, then management must determine whether or not the Company is the primary beneficiary of the VIE, resulting in consolidation of the VIE if the Company is the primary beneficiary. A primary beneficiary has the power to direct those activities of the VIE that most significantly impact its economic performance and has the obligation to absorb the losses of, or receive the benefits from, the VIE. The Company had no interests in VIEs as of December 31, 2018 and 2017. The Company's investments in its unconsolidated joint ventures are included in other assets and the related equity income is recognized within interest and other income, net in other income (expense) on the Company's Consolidated Financial Statements. See Note 7 for additional information. All significant intercompany accounts, transactions and balances have been eliminated upon consolidation in the Consolidated Financial Statements.
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Use of Estimates in the Consolidated Financial Statements | Use of Estimates in the Consolidated Financial StatementsPreparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment ReportingThe Company owns, leases, acquires, manages, finances, develops and redevelops outpatient and other healthcare-related properties. The Company is managed as one reporting unit, rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore, the Company discloses its operating results in a single reportable segment. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Properties | Real Estate Properties Real estate properties are recorded at cost or at fair value if acquired in a transaction that is a business combination under Accounting Standards Codification Topic 805, Business Combinations. Cost or fair value at the time of acquisition is allocated among land, buildings, tenant improvements, lease and other intangibles, and personal property as applicable. The Company’s gross real estate assets, on a financial reporting basis, totaled approximately $4.0 billion as of December 31, 2018 and $3.8 billion as of December 31, 2017. During 2018 and 2017, the Company eliminated against accumulated depreciation approximately $9.9 million and $10.2 million, respectively, of fully amortized real estate intangibles that were initially recorded as a component of certain real estate acquisitions. Also during 2018 and 2017, approximately $0.5 million and $2.6 million of fully depreciated tenant and capital improvements that were no longer in service were eliminated against accumulated depreciation. Depreciation expense of real estate properties for the three years ended December 31, 2018, 2017 and 2016 was $143.8 million, $129.4 million and $116.5 million, respectively. Depreciation and amortization of real estate assets and liabilities in place as of December 31, 2018, is provided for on a straight-line basis over the asset’s estimated useful life:
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Land Held for Development | Land Held for DevelopmentLand held for development includes parcels of land owned by the Company, upon which the Company intends to develop and own outpatient healthcare facilities. The Company’s investment in seven parcels of land held for development located adjacent to certain of the Company's existing medical office buildings in Texas, Iowa, Tennessee and Colorado totaled approximately $24.6 million as of December 31, 2018. The Company’s investment in six parcels of land held in Texas, Iowa, and Tennessee totaled approximately $20.1 million as of December 31, 2017. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Impairment | Assets Held for SaleLong-lived assets held for sale are reported at the lower of their carrying amount or their fair value less estimated cost to sell. Further, depreciation of these assets ceases at the time the assets are classified as held for sale. Losses resulting from the sale of such properties are characterized as impairment losses in the Consolidated Statements of Income.Asset ImpairmentThe Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable. Indicators of impairment may include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company reviews for possible impairment, those assets subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes. If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions of Real Estate Properties with In-Place Leases | Acquisitions of Real Estate Properties with In-Place Leases The Company's acquisitions of real estate properties typically do not meet the definition of a business and are accounted for as asset acquisitions. Acquisitions of real estate properties with in-place leases are accounted for at relative fair value. When a building with in-place leases is acquired, the cost of the acquisition must be allocated between the tangible real estate assets "as-if-vacant" and the intangible real estate assets related to in-place leases based on their estimated fair values. The values related to above- or below-market in-place lease intangibles are amortized over the remaining term of the leases upon acquisition to rental income where the Company is the lessor and to property operating expense where the Company is the lessee, and are amortized over the remaining term of the leases upon acquisition. The Company considers whether any of the in-place lease rental rates are above- or below-market. An asset (if the actual rental rate is above-market) or a liability (if the actual rental rate is below-market) is calculated and recorded in an amount equal to the present value of the future cash flows that represent the difference between the actual lease rate and the average market rate. If an in-place lease is identified as a below-market rental rate, the Company would also evaluate any renewal options associated with that lease to determine if the intangible should include those periods. The Company also estimates an absorption period, which can vary by property, assuming the building is vacant and must be leased up to the actual level of occupancy when acquired. During that absorption period, the owner would incur direct costs, such as tenant improvements, and would suffer lost rental income. Likewise, the owner would have acquired a measurable asset in that, assuming the building was vacant, certain fixed costs would be avoided because the actual in-place lessees would reimburse a certain portion of fixed costs through expense reimbursements during the absorption period. All of these intangible assets (above- or below-market lease, tenant improvement costs avoided, leasing costs avoided, rental income lost, and expenses recovered through in-place lessee reimbursements) are estimated and recorded in amounts equal to the present value of estimated future cash flows. The actual purchase price is allocated based on the various asset fair values described above. The building and tenant improvement components of the purchase price are depreciated over the estimated useful life of the building or the weighted average remaining term of the in-places leases. The at-market, in-place lease intangibles are amortized to amortization expense over the weighted average remaining term of the leases, customer relationship assets are amortized to amortization expense over terms applicable to each acquisition. Any goodwill recorded through a business combination would be reviewed for impairment at least annually and is not amortized. See Note 8 for more details on the Company’s intangible assets.
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Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. In calculating fair value, a company must maximize the use of observable market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the details of such fair value measurements. A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires the use of observable market data when available. These inputs have created the following fair value hierarchy:
Executed purchase and sale agreements, that are binding agreements, are categorized as level one inputs. Brokerage estimates, letters of intent, or unexecuted purchase and sale agreements are considered to be level three as they are nonbinding in nature. |
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Fair Value of Derivative Financial Instruments | Fair Value of Derivative Financial InstrumentsDerivative financial instruments are recorded at fair value on the Company's Consolidated Balance Sheets as other assets or other liabilities. The valuation of derivative instruments requires the Company to make estimates and judgments that affect the fair value of the instruments. Fair values of derivatives are estimated by pricing models that consider the forward yield curves and discount rates. The fair value of the Company's forward starting interest rate swap contracts are estimated by pricing models that consider foreign trade rates and discount rates. Such amounts and the recognition of such amounts are subject to significant estimates that may change in the future. For derivatives designated in qualifying cash flow hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss). Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the underlying hedged transaction is recognized in earnings. As of December 31, 2018 and 2017, the Company had $0.9 million and $1.3 million, respectively recorded in accumulated other comprehensive loss related to forward starting interest rate swaps entered into and settled during 2015 and a hedge of the Company's variable rate debt. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash includes cash held in escrow in connection with proceeds from the sales of certain real estate properties. The Company had restricted cash during the years ended December 31, 2018 and 2017. However, the Company reinvested the restricted cash for real estate acquisitions prior to the ending balance sheet date. |
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Allowance for Doubtful Accounts and Credit Losses | Allowance for Doubtful Accounts and Credit Losses Accounts Receivable Management monitors the aging and collectibility of its accounts receivable balances on an ongoing basis. Whenever deterioration in the timeliness of payment from a tenant or sponsoring health system is noted, management investigates and determines the reason or reasons for the delay. Considering all information gathered, management’s judgment is exercised in determining whether a receivable is potentially uncollectible and, if so, how much or what percentage may be uncollectible. Among the factors management considers in determining collectibility are: the type of contractual arrangement under which the receivable was recorded (e.g., a triple net lease, a gross lease, a property operating agreement, or some other type of agreement); the tenant’s reason for slow payment; industry influences under which the tenant operates; evidence of willingness and ability of the tenant to pay the receivable; credit-worthiness of the tenant; collateral, security deposit, letters of credit or other monies held as security; tenant’s historical payment pattern; other contractual agreements between the tenant and the Company; relationship between the tenant and the Company; the state in which the tenant operates; and the existence of a guarantor and the willingness and ability of the guarantor to pay the receivable. Considering these factors and others, management concludes whether all or some of the aged receivable balance is likely uncollectible. Upon determining that some portion of the receivable is likely uncollectible, the Company records a provision for bad debts for the amount it expects will be uncollectible. When efforts to collect a receivable are exhausted, the receivable amount is charged off against the allowance. The Company does not hold any accounts receivable for sale.
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Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill and intangible assets with indefinite lives are not amortized, but are tested at least annually for impairment. Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are reviewed for impairment only when impairment indicators are present. Identifiable intangible assets of the Company are comprised of enterprise goodwill, in-place lease intangible assets, customer relationship intangible assets, and debt issuance costs. In-place lease and customer relationship intangible assets are amortized on a straight-line basis over the applicable lives of the assets. Debt issuance costs are amortized over the term of the debt instrument on the effective interest method or the straight-line method when the effective interest method is not applicable. Goodwill is not amortized but is evaluated annually as of December 31 for impairment. Both the 2018 and 2017 impairment evaluations indicated that no impairment had occurred with respect to the $3.5 million goodwill asset.
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Contingent Liabilities | Contingent Liabilities From time to time, the Company may be subject to loss contingencies arising from legal proceedings and similar matters. Additionally, while the Company maintains comprehensive liability and property insurance with respect to each of its properties, the Company may be exposed to unforeseen losses related to uninsured or underinsured damages. The Company continually monitors any matters that may present a contingent liability, and, on a quarterly basis, management reviews the Company’s reserves and accruals in relation to each of them, adjusting provisions as necessary in view of changes in available information. Liabilities for contingencies are first recorded when a loss is determined to be both probable and can be reasonably estimated. Changes in estimates regarding the exposure to a contingent loss are reflected as adjustments to the related liability in the periods when they occur. Because of uncertainties inherent in the estimation of contingent liabilities, it is possible that the Company’s provision for contingent losses could change materially in the near term. To the extent that any significant losses, in addition to amounts recognized, are at least reasonably possible, such amounts will be disclosed in the notes to the Consolidated Financial Statements.
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Stock-based Compensation | Stock-Based Compensation The Company has various employee and director stock-based awards outstanding. These awards include non-vested common stock and options to purchase common stock granted to employees pursuant to the 2015 Stock Incentive Plan and its predecessor plans (the “2015 Incentive Plan”) and the 2000 Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). The Company recognizes share-based payments to employees and directors in the Consolidated Statements of Income on a straight-line basis over the requisite service period based on the fair value of the award on the measurement date. The Employee Stock Purchase Plan features a “look-back” provision which enables the employee to purchase a fixed number of common shares at the lesser of 85% of the market price on the date of grant or 85% of the market price on the date of exercise, with optional purchase dates occurring once each quarter for 27 months. The Company accounts for awards to its employees under the Employee Stock Purchase Plan based on fair value, using the Black-Scholes model, and generally recognizes expense over the award’s vesting period, net of estimated forfeitures. Since the options granted under the Employee Stock Purchase Plan immediately vest, the Company records compensation expense for those options when they are granted in the first quarter of each year and then may record additional compensation expense in subsequent quarters as warranted. During the years ended December 31, 2018, 2017 and 2016, the Company recognized in general and administrative expenses approximately $0.3 million, $0.2 million, and $0.2 million, respectively, of compensation expense related to the annual grant of options to its employees to purchase shares under the Employee Stock Purchase Plan.
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Accumulated Other Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss)Certain items must be included in comprehensive income, including items such as foreign currency translation adjustments, minimum pension liability adjustments, derivative instruments and unrealized gains or losses on available-for-sale securities. As of December 31, 2018, the Company’s accumulated other comprehensive income (loss) consists of the loss for changes in the fair value of active derivatives designated as cash flow hedges and the loss on the unamortized settlement of four forward starting swaps. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue from Contracts with Customers (Topic 606) The Company recognizes certain revenue under the core principle of Topic 606. This requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Lease revenue is not within the scope of Topic 606. To achieve the core principle, the Company applies the five step model specified in the guidance. See the New Accounting Pronouncements section below for additional information. Revenue that is accounted for under Topic 606 is segregated on the Company’s Consolidated Statements of Income in the Other operating line item. This line item includes parking income, property lease guaranty income, management fee income and other miscellaneous income. Below is a detail of the amounts by category:
The Company’s three major types of revenue that are accounted for under Topic 606 that are listed above are all accounted for as the performance obligation is satisfied. The performance obligations that are identified for each of these items are satisfied over time and the Company recognizes revenue monthly based on this principle. One, one and two of the Company’s owned real estate properties as of December 31, 2018, 2017 and 2016, respectively, were covered under property operating agreements between the Company and a sponsoring health system, which contractually obligate the sponsoring health system to provide to the Company a minimum return on the Company’s investment in the property in exchange for the right to be involved in the operating decisions of the property, including tenancy. If the minimum return is not achieved through normal operations of the property, the Company calculates and accrues to property lease guaranty revenue, each quarter, any shortfalls due from the sponsoring health systems under the terms of the property operating agreement. Management fee income for property management services provided to third parties are generally calculated, accrued and billed monthly based on a percentage of cash collections of tenant receivables for the month or a stated amount per square foot. Internal management fee income, where the Company manages its owned properties, is eliminated in consolidation. Rental Income Rental income related to non-cancelable operating leases is recognized as earned over the life of the lease agreements on a straight-line basis. The Company's lease agreements generally include provisions for stated annual increases or increases based on a Consumer Price Index ("CPI"). Rental income from properties under multi-tenant office lease arrangements and rental income from properties with single-tenant lease arrangements are included in rental income on the Company's Consolidated Statements of Income. The components of rental income are as follows:
Operating expense recoveries, included in property operating income, were approximately $81.1 million, $73.4 million and $66.0 million, respectively, for the years ended December 31, 2018, 2017 and 2016.
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Federal Income Taxes | Federal Income Taxes No provision has been made for federal income taxes. The Company intends at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code. The Company must distribute at least 90% per annum of its real estate investment trust taxable income to its stockholders and meet other requirements to continue to qualify as a real estate investment trust. See Note 15 for further discussion. The Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated Financial Statements as a component of general and administrative expenses. No such amounts were recognized during the three years ended December 31, 2018. Federal tax returns for the years 2015, 2016, 2017 and 2018 are currently subject to examination by taxing authorities.
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State Income Taxes | State Income TaxesThe Company must pay certain state income taxes and the provisions for such taxes are generally included in general and administrative expense on the Company’s Consolidated Statements of Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sales and Use Taxes | Sales and Use TaxesThe Company must pay sales and use taxes to certain state tax authorities based on rents collected from tenants in properties located in those states. The Company is generally reimbursed for these taxes by the tenant. The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a net basis in revenues in the Company’s Consolidated Statements of Income. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued OperationsThe Company sells properties from time to time due to a variety of factors, including among other things, market conditions or the exercise of purchase options by tenants. The Company does not expect these dispositions to meet the amended definition of a discontinued operation as defined in Accounting Standards Update ("ASU") No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." The Company adopted ASU No. 2014-08 on a prospective basis beginning January 1, 2015 which excluded properties previously in discontinued operations prior to adoption. However, if a sale were to meet the amended definition representing a strategic shift that has or will have a major effect on the Company's operations and financial results, the operating results of the properties that have been sold or are held for sale will be reported as discontinued operations in the Company’s Consolidated Statements of Income for all periods presented. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earning Per Share | Earnings per Share The Company uses the two-class method of computing net earnings per common share. Earnings per common share is calculated by considering share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents as participating securities. Undistributed earnings (excess net income over dividend payments) are allocated on a prorata basis to common shareholders and restricted shareholders. Undistributed losses (dividends in excess of net income) do not get allocated to restricted stockholders as they do not have the contractual obligation to share in losses. The amount of undistributed losses that applies to the restricted stockholders is allocated to the common stockholder. |
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Reclassifications | Reclassifications Consolidated Statements of Income Certain reclassifications have been made on the Company's Consolidated Statements of Income. After the adoption of ASU 2014-08, the Company's dispositions have not met the updated definition to be reported as discontinued operations. The Company had some residual impact from properties that were identified as discontinued operations prior to the adoption of ASU 2014-08. These amounts are considered immaterial and have been reclassified for the prior year presentations on the Company's Consolidated Statements of Income.
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New Accounting Pronouncements | New Accounting Pronouncements Accounting Standards Update No. 2014-09 and No. 2015-14 In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers," a comprehensive new revenue recognition standard that supersedes most existing revenue recognition guidance, including sales of real estate. This standard's core principle is that a company will recognize revenue when it transfers goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. However, leasing contracts, representing the major source of the Company's revenues, are not within the scope of the new standard and will continue to be accounted for under other standards. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606); Deferral of the Effective Date." This standard is effective for the Company for annual and interim periods beginning after December 15, 2017. The Company adopted this standard by using the full retrospective adoption method beginning on January 1, 2018. The Company's revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, the adoption of this standard did not have a material impact on the timing and measurement of the Company's leasing revenues. The Company has identified that parking income, property lease guaranty income and management fee income are within the scope of Topic 606. However, these items were determined to have the same pattern of revenue recognition that the Company had historically recognized. The Company reclassified these amounts along with all other items that are accounted for within the scope of Topic 606 into the Other operating line item on the Company's Consolidated Statements of Income. This line item historically contained the revenue associated with property lease guaranty income, management fee income and other non-lease revenue. The Company reclassified parking income from rental income to other operating. The following table represents the impact of the adoption of this standard on the Company's Consolidated Statements of Income for the years ended December 31, 2017 and 2016:
Accounting Standards Update No. 2016-02, No. 2018-01 and No. 2018-11 In February 2016, the FASB issued ASU 2016-02, "Leases." In January 2018, the FASB issued ASU 2018-01, "Leases - Land Easement Practical Expedient for Transition to Topic 842," in July 2018, the FASB issued ASU 2018-10, "Codification Improvements to Topic 842, Leases" and ASU 2018-11, "Leases - Targeted Improvements," and in December 2018, the FASB issued ASU 2018-20, “Narrow-Scope Improvements for Lessors.” These accounting standard updates are collectively referred to as "Topic 842." Topic 842 provides several practical expedients that the Company expects to elect. These are (a) the package of practical expedients offered that allows an entity not to reassess upon adoption (i) whether an expired or existing contract contains a lease, (ii) lease classification related to expired or existing lease arrangements, and (iii) whether costs incurred on expired or existing leases qualify as initial direct costs, and (b) the practical expedient not to separate certain non-lease components, such as common area maintenance, from the lease component if (i) the timing and pattern of transfer are the same for the non-lease component and associated lease component, and (ii) the lease component would be classified as an operating lease if accounted for separately. For lessees, the new standard establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the income statement. The Company expects that most of the leases where the Company is the lessee will be recorded on the Company's balance sheet as operating leases. These leases are primarily ground leases, but also include management office leases in third party buildings and certain copier and postage machine leases. The Company utilized a third party to assist in determining the discount rate for its ground leases. The terms of the ground leases generally range from 40 to 99 years with a weighted average remaining lease term remaining of 53.9 years, excluding renewal options. The Company's discount rates ranged from 2.9% for leases expiring in 2019 to 6.2% for leases expiring in 2115. The Company expects to recognize as of January 1, 2019 the present value of its lease payments of $90.0 million to $100.0 million with a corresponding lease liability of $90.0 million to $100.0 million. For lessors, the new standard requires a lessor to classify leases as either sales-type, direct-financing or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease. Lessor accounting remains largely unchanged with some exceptions including the concept of separating lease and nonlease components. Nonlease components, such as common area maintenance, will be accounted for under Topic 606 and separated from the lease payments. However, the Company will elect the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. The Company does not expect a material impact from the adoption of Topic 842 related to leases where the Company is the lessor. The new standard is effective for the Company on January 1, 2019. Topic 842 provides two transition alternatives. The Company elected to choose the prospective optional transition method available to apply the guidance in Accounting Standards Codification Topic 840 in the comparative periods presented in the year Topic 842 is adopted. Topic 842 includes extensive quantitative and qualitative disclosures as compared to Topic 840, Leases, for both lessees and lessors. Accounting Standards Update No. 2016-13 In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." This update is intended to improve financial reporting by requiring timelier 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. This update requires that financial statement assets measured at an amortized cost and certain other financial instruments be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. This standard is effective for annual and interim periods beginning after December 15, 2019 with early adoption permitted. The Company is in the initial stages of evaluating the impact from the adoption of this new standard on the Consolidated Financial Statements and related notes. However, operating lease receivables, representing the majority of the Company's receivables, are not within the scope of the new standard. Accounting Standards Update No. 2016-15 In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments." This update clarifies whether the following items should be classified as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance and bank-owned life insurance policies, (vi) distributions from equity method investees, (vii) beneficial interest in securitization transactions and (viii) receipts and payments with aspects of more than one class of cash flows. This standard was effective for the Company for annual and interim periods beginning on January 1, 2018 with early adoption permitted on a retrospective transition method to each period presented. The Company adopted this standard effective January 1, 2017. In connection with the adoption of this update, the Company elected to use the cumulative earnings approach to classify distributions when received related to the Company's equity method investments. There was not a material impact on the Company's Consolidated Financial Statements and related notes resulting from the adoption of this standard. Accounting Standards Update No. 2017-01 In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations: Clarifying the Definition of a Business." This update modifies the requirements to meet the definition of a business under Topic 805, "Business Combinations." The amendments provide a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. The Company believes that this amendment will result in most of its real estate acquisitions being accounted for as asset acquisitions rather than business combinations. This standard was effective for the Company for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard effective January 1, 2017 and has accounted for acquisitions that occurred during the year as asset acquisitions. The impact to the Consolidated Financial Statements and related notes as a result of the adoption of this standard is primarily related to the difference in the accounting of acquisition costs. When accounting for these costs as a part of an asset acquisition, the Company is permitted to capitalize the costs. The adoption of this standard did not have a material impact on the Consolidated Financial Statements and related notes. Accounting Standards Update No. 2017-04 In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." This update eliminates Step 2 of the goodwill impairment test. As such, an entity will perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting unit's carrying amount exceeds its fair value. This standard is effective for the Company for annual and interim periods beginning after December 15, 2019. The Company does not expect a material impact on the Consolidated Financial Statements and related notes from the adoption of this standard. Accounting Standards Update No. 2017-05 In February 2017, the FASB issued ASU 2017-05, "Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets." This update 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. This standard is effective for the Company for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard as of January 1, 2018 using the full retrospective adoption method. However, there was no impact to the Company's Consolidated Financial Statements from the adoption of this standard. Accounting Standards Update No. 2017-09 In May 2017, the FASB issued ASU 2017-09, "Compensation - Stock Compensation - Scope of Modification Accounting." This update provides guidance about which changes to the terms and conditions of share-based awards require an entity to apply modification accounting in Topic 718. This standard is effective for the Company for the annual and interim periods beginning after December 15, 2017 with early adoption permitted. The Company adopted this standard on January 1, 2018. There was not a material impact to the Consolidated Financial Statements from the adoption of this standard. |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets' estimated useful life | Depreciation expense of real estate properties for the three years ended December 31, 2018, 2017 and 2016 was $143.8 million, $129.4 million and $116.5 million, respectively. Depreciation and amortization of real estate assets and liabilities in place as of December 31, 2018, is provided for on a straight-line basis over the asset’s estimated useful life:
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Disaggregation of revenue | Below is a detail of the amounts by category:
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Schedule of rental income | The components of rental income are as follows:
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Schedule of reclassified expenses | These amounts are considered immaterial and have been reclassified for the prior year presentations on the Company's Consolidated Statements of Income.
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Schedule of previously reported balances | The following table represents the impact of the adoption of this standard on the Company's Consolidated Statements of Income for the years ended December 31, 2017 and 2016:
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Property Investments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate Investment Property, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Investment | The following table summarizes the Company’s investments at December 31, 2018.
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Real Estate Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Future minimum lease payments due to the Company under property operating agreements | Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2018 are as follows (in thousands):
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Acquisitions, Dispositions and Mortgage Repayments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and Dispositions and Mortgage Repayments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of acquisitions | The following table details the Company's acquisitions for the year ended December 31, 2018:
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The following table details the Company's acquisitions for the year ended December 31, 2017:
(6) The Company acquired additional ownership interests in an existing building bringing the Company's ownership to 69.4%.
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Summary of assets acquired and liabilities assumed | The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the real estate acquisitions for 2017 as of the acquisition date:
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Summary of dispositions | 2018 Real Estate Asset Dispositions The following table details the Company's dispositions for the year ended December 31, 2018:
2017 Real Estate Asset Dispositions The following table details the Company's dispositions for the year ended December 31, 2017:
(4) The Company recorded an impairment of approximately $0.3 million in the first quarter of 2017 upon management's decision to sell.
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Held for Sale (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures | The table below reflects the assets and liabilities of the properties classified as held for sale as of December 31, 2018 and 2017.
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Other Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Items included in other assets | Other assets consist primarily of straight-line rent receivables, additional long-lived assets, prepaids, intangible assets, debt issuance costs and accounts receivable. Items included in "Other assets, net" on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017 are detailed in the table below:
______
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Equity Method Investments | The Company's investment in and income (loss) recognized for the years ended December 31, 2018 and 2017 related to its LLCs accounted for under the equity method are shown in the table below:
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Intangible Assets and Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finite lived intangible assets and liabilities | The Company’s intangible assets and liabilities as of December 31, 2018 and 2017 consisted of the following:
______ (1) Includes debt issuance costs related to the Company's Unsecured credit facility due 2020.
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Schedule of expected net future amortization expense | The following table represents expected amortization over the next five years of the Company’s intangible assets and liabilities in place as of December 31, 2018:
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Notes and Bonds Payable (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt |
______
(2) Balances are shown net of discounts and unamortized issuance costs and include premiums.
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Schedule of Mortgage Notes Payable | The following table details the Company’s mortgage notes payable, with related collateral.
(23) MOB-Medical office building
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Future contractual maturities of the Company's notes and bonds payable | Future maturities of the Company’s notes and bonds payable as of December 31, 2018 were as follows:
______
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Medium-term Notes [Member] | Term Loan due 2022 [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table reconciles the balance of the Unsecured Term Loan due 2022 on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017:
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Senior Notes [Member] | Senior Notes due 2023 [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table reconciles the balance of the Senior Notes due 2023 on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017:
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Senior Notes [Member] | Senior Notes due 2025 [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table reconciles the balance of the Senior Notes due 2025 on the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017:
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Senior Notes [Member] | Senior Notes due 2028 [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table reconciles the balance of the Senior Notes due 2028 on the Company’s Consolidated Balance Sheets as of December 31, 2018:
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Mortgage Notes [Member] | Mortgage notes payable [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following table reconciles the Company’s aggregate mortgage notes principal balance with the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017. For the years ended December 31, 2018, 2017 and 2016, the Company amortized approximately $0.4 million, $0.3 million and $0.3 million of the discount and $0.8 million, $0.7 million, and $0.9 million of the premium. For the years ended December 31, 2018, 2017 and 2016, the Company also amortized approximately $0.1 million, $0.1 million, and $0.2 million of the debt issuance costs, respectively, on the mortgage notes payable which is included in interest expense on the Company’s Consolidated Statements of Income.
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Derivative Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) | The table below presents the effect of cash flow hedge accounting on Accumulated other comprehensive income (loss) as of December 31, 2018 related to the Company's outstanding interest rate swaps.
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The table below presents the fair value of the Company's derivative financial instruments, as well as, their classification on the Consolidated Balance Sheets as of December 31, 2018 and 2017.
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Offsetting Assets | The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of December 31, 2018. The net amounts of derivative assets and liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Company's Consolidated Balance Sheets.
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Offsetting Liabilities | The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of December 31, 2018. The net amounts of derivative assets and liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Company's Consolidated Balance Sheets.
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Stockholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of the beginning and ending common stock outstanding | The Company had no preferred shares outstanding and had common shares outstanding for the three years ended December 31, 2018 as follows:
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Schedule of sale of stock under market equity offering Program | The following table details the shares sold under this program.
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Reconciliation of beginning and ending balances of accumulated other comprehensive income | The following table represents the changes in accumulated other comprehensive loss during the years ended December 31, 2018 and 2017:
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Reclassifications out of accumulated other comprehensive income | The following table represents the details regarding the reclassifications from Accumulated other comprehensive income (loss) during the year ended December 31, 2018:
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Stock and Other Incentive Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Unrecognized Compensation Cost, Nonvested Awards | The following table represents expected amortization of the Company's non-vested shares issued:
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Summary of the activity under the Incentive Plan the previous directors' plan | A summary of the activity under the 2015 Incentive Plan and related information for the three years in the period ended December 31, 2018 follows:
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Summary of the Employee Stock Purchase Plan activity | A summary of the Employee Stock Purchase Plan activity and related information for the three years in the period ended December 31, 2018 is as follows:
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Fair value of options issued based on weighted-average assumptions |
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Earnings Per Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | The table below sets forth the computation of basic and diluted earnings per common share for the three years in the period ended December 31, 2018.
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of construction activity | The table below details the Company’s construction activity as of December 31, 2018. The information included in the table below represents management’s estimates and expectations at December 31, 2018, which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates may not reflect actual results.
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Minimum lease payments for its operating leases | The Company’s future minimum lease payments primarily for its 60 non-prepaid ground leases as of December 31, 2018 were as follows (in thousands):
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Other Data (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxable Income | The following table reconciles the Company’s consolidated net income attributable to common stockholders to taxable income for the three years ended December 31, 2018:
______ (1) Before REIT dividend paid deduction
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Characterization of distributions on common stock | For the three years ended December 31, 2018, there were no preferred shares outstanding. As such, no dividends were distributed related to preferred shares for those periods.
______ (1) For the 2018 reporting year all ordinary income is also Code Section 199A eligible per the The Tax Cut and Jobs Act of 2017.
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State Income Taxes | State income tax expense and state income tax payments for the three years ended December 31, 2018 are detailed in the table below:
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Fair Value of Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value and carrying values for notes and bonds payable, mortgage notes receivable and notes receivable | The table below details the fair value and carrying values for notes and bonds payable as of December 31, 2018 and 2017.
______ (1) Level 2 – model-derived valuations in which significant inputs and significant value drivers are observable in active markets.
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Selected Quarterly Financial Data (unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Quarterly Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of quarterly financial information | Quarterly financial information for the year ended December 31, 2018 is summarized below.
______
Quarterly financial information for the year ended December 31, 2017 is summarized below.
______
(4) The decreases in net income and amounts per share for the fourth quarter of 2017 are primarily attributable to a loss on the extinguishment of debt of $45.0 million.
|
Summary of Significant Accounting Policies - Components of rental income (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Accounting Policies [Abstract] | |||
Property operating income | $ 390,256 | $ 358,009 | $ 331,109 |
Single-tenant net lease | 47,860 | 52,897 | 63,895 |
Straight-line rent | 4,281 | 6,072 | 7,201 |
Rental income | $ 442,397 | $ 416,978 | $ 402,205 |
Summary of Significant Accounting Policies - Components of other operating income (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Other Operating Income [Abstract] | |||
Other operating | $ 7,992 | $ 7,759 | $ 9,750 |
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Disaggregation of Revenue [Line Items] | |||
Other operating | $ 7,992 | $ 7,759 | $ 9,750 |
Parking Income [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Other operating | 6,930 | 6,611 | 6,121 |
Property Lease Guaranty Income [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Other operating | 675 | 726 | 3,058 |
Management Fee Income [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Other operating | 273 | 308 | 402 |
Miscellaneous [Member] | |||
Disaggregation of Revenue [Line Items] | |||
Other operating | $ 114 | $ 114 | $ 169 |
Property Investments (Details Textual) $ in Billions |
Dec. 31, 2018
USD ($)
property
|
---|---|
Real Estate Investment Property, Net [Abstract] | |
Investment in real estate properties and mortgage notes | $ | $ 4.0 |
Number of real estate investments | property | 199 |
Real Estate Leases (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Leases [Abstract] | |
2019 | $ 326,441 |
2020 | 279,211 |
2021 | 235,660 |
2022 | 201,072 |
2023 | 163,978 |
2024 and thereafter | 476,673 |
Total | $ 1,683,035 |
Real Estate Leases - Narrative (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
renewal_option
| |
Leases [Abstract] | |
Approximate Investment in real estate properties subject to outstanding contractual option to purchase | $ | $ 117.1 |
Number of exercisable purchase options | renewal_option | 5 |
Held for Sale (Details Textual) - property |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Discontinued Operations and Disposal Groups [Abstract] | ||
Number of properties held for sale | 1 | 8 |
Impairment Charges (Details Textual) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Abstract] | ||
Impairments | $ 5.4 | $ 0.1 |
Other Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Straight-line rent receivables | $ 69,500 | $ 67,000 |
Prepaid assets | 66,200 | 65,200 |
Additional long-lived assets, net | 23,500 | 24,900 |
Above-market intangible assets, net | 16,800 | 17,900 |
Accounts receivable | 10,000 | 7,400 |
Allowance for uncollectible accounts | (300) | (300) |
Ground lease modification, net | 9,900 | 10,300 |
Equity investments in joint ventures | 8,500 | 8,700 |
Goodwill | 3,500 | 3,487 |
Project costs | 2,200 | 2,000 |
Debt issuance costs, net (1) | 2,200 | 3,500 |
Customer relationship intangible assets, net | 1,700 | 1,700 |
Interest rate swap assets | 229 | |
Other | 800 | 1,200 |
Other Assets | $ 214,697 | $ 213,015 |
Other Assets - Unconsolidated Joint Ventures (Details) |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2017
building
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2017
Garage
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
Equity Method Investments [Roll Forward] | |||||
Net LLC investments, beginning of period | $ 8,700,000 | ||||
Equity income (loss) recognized during the period | 4,000 | $ 7,000 | |||
Owner distributions | (200,000) | 0 | |||
Net LLC investments, end of period | $ 8,700,000 | 8,500,000 | 8,700,000 | ||
Parking Garages [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Number of parking garages | 2 | 2 | |||
Number of buildings acquired | building | 3 | ||||
Equity Method Investments [Roll Forward] | |||||
Net LLC investments, beginning of period | 8,700,000 | 0 | |||
New investments during the period | 8,700,000 | 0 | 8,700,000 | ||
Equity income (loss) recognized during the period | 0 | 0 | |||
Net LLC investments, end of period | $ 8,700,000 | $ 8,500,000 | $ 8,700,000 |
Intangible Assets and Liabilities - Expected future amortization expense (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangible amortization expense | $ 23.2 | $ 16.6 |
Future Amortization of Intangibles, Net [Abstract] | ||
2019 | 22.1 | |
2020 | 15.5 | |
2021 | 9.6 | |
2022 | 7.3 | |
2023 | $ 4.6 |
Notes and Bonds Payable - Mortgage Notes (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
mortgage_note_payable
mortgage_loan
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Debt Instrument [Line Items] | ||
Issuance costs | $ (6,534) | |
Notes and bonds payable | $ 1,345,984 | $ 1,283,880 |
Number of Outstanding Mortgage Notes | mortgage_loan | 17 | |
Mortgage Notes [Member] | ||
Debt Instrument [Line Items] | ||
Issuance costs | $ (700) | |
Number of Outstanding Mortgage Notes | mortgage_loan | 18 | |
Mortgage notes payable [Member] | Mortgage Notes [Member] | ||
Debt Instrument [Line Items] | ||
Mortgage notes | $ 143,115 | 154,916 |
Unamortized premium | 1,805 | 2,651 |
Unaccreted discount | (968) | (1,332) |
Issuance costs | (744) | (853) |
Notes and bonds payable | 143,208 | $ 155,382 |
Municipal Government [Member] | Mortgage Notes 4.79% [Member] | Mortgage Notes [Member] | ||
Debt Instrument [Line Items] | ||
Mortgage notes | 11,000 | |
Unamortized premium | $ 1,000 | |
Number of Outstanding Mortgage Notes | mortgage_note_payable | 3 |
Derivative Financial Instruments (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016
swap_agreement
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
swap_agreement
|
|
Derivative [Line Items] | |||
Number of forward starting swaps | swap_agreement | 4 | ||
Interest rate cash flow hedge gain (loss) to be reclassified to interest expense during the next 12 months | $ | $ (40,000) | ||
Number of interest rate derivatives | swap_agreement | 2 | ||
Cash Flow Hedging [Member] | Forward Starting Interest Rate Swap [Member] | |||
Derivative [Line Items] | |||
Notional value | $ | $ 225,000,000.0 |
Derivative Financial Instruments - Derivative Instruments Designated as Cash Flow Hedges (Details) $ in Millions |
Dec. 31, 2018
USD ($)
swap_agreement
|
Dec. 31, 2017
swap_agreement
|
---|---|---|
Derivative [Line Items] | ||
Number of interest rate swaps | 2 | |
Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap [Member] | ||
Derivative [Line Items] | ||
Number of interest rate swaps | 4 | |
Derivative notional amount | $ | $ 75.0 | |
Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap - 2017 [Member] | ||
Derivative [Line Items] | ||
Number of interest rate swaps | 2 | |
Derivative notional amount | $ | $ 25.0 | |
Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member] | Interest Rate Swap - 2018 [Member] | ||
Derivative [Line Items] | ||
Number of interest rate swaps | 2 | |
Derivative notional amount | $ | $ 50.0 |
Derivative Financial Instruments - Offsetting Derivatives (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Gross Amounts of Recognized Assets | $ 229 |
Gross Amounts Offset in the Consolidated Balance Sheets | 0 |
Net Amounts of Assets presented in the Consolidated Balance Sheets | 229 |
Financial Instruments | (68) |
Cash Collateral | 0 |
Net Amount | 161 |
Gross Amounts of Recognized Assets | (68) |
Gross Amounts Offset in the Consolidated Balance Sheets | 0 |
Net Amounts of Assets presented in the Consolidated Balance Sheets | (68) |
Financial Instruments | 68 |
Cash Collateral | 0 |
Net Amount | $ 0 |
Stockholders' Equity - Common shares (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Reconciliation of the beginning and ending common stock outstanding | |||
Balance, beginning of year (shares) | 125,132,000 | ||
Balance, end of year (shares) | 125,279,000 | 125,132,000 | |
Common Stock [Member] | |||
Reconciliation of the beginning and ending common stock outstanding | |||
Balance, beginning of year (shares) | 125,131,593 | 116,416,900 | 101,517,009 |
Issuance of common stock (shares) | 26,203 | 8,395,607 | 14,063,100 |
Non-vested stock-based awards, net of withheld shares and forfeitures (shares) | 121,659 | 319,086 | 836,791 |
Balance, end of year (shares) | 125,279,455 | 125,131,593 | 116,416,900 |
Stockholders' Equity - Narrative (Details) - $ / shares |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Feb. 12, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
May 02, 2017 |
May 01, 2017 |
|
Class of Stock [Line Items] | ||||||||||
Dividend per share to common stockholders, paid (in dollars per share) | $ 0.3 | $ 0.3 | $ 0.3 | $ 1.20 | $ 1.20 | $ 1.20 | ||||
Dividends per share to common stockholders, declared (in dollars per share) | $ 0.30 | $ 1.20 | ||||||||
Common stock, authorized shares (shares) | 300,000,000 | 300,000,000 | 300,000,000 | 300,000,000 | 150,000,000 | |||||
Number of common shares authorized to be repurchased (shares) | 3,000,000 | 3,000,000 | ||||||||
Dividend Declared [Member] | Subsequent Event [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Dividends per share to common stockholders, declared (in dollars per share) | $ 0.30 | |||||||||
Common Stock [Member] | ||||||||||
Class of Stock [Line Items] | ||||||||||
Issuance of common stock (shares) | 26,203 | 8,395,607 | 14,063,100 |
Stock and Other Incentive Plans - Amortization of Compensation for Nonvested Shares (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
2019 | $ 8.6 |
2020 | 8.1 |
2021 | 7.0 |
2022 | 4.5 |
2023 | 2.3 |
2024 and thereafter | 2.8 |
Total | $ 33.3 |
Stock and Other Incentive Plans (Details) - Stock Incentive Plan [Member] - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Summary of the activity under the incentive plans | |||
Stock-based awards, beginning of year (shares) | 1,907,645 | 1,786,497 | 1,092,262 |
Granted (shares) | 273,012 | 413,489 | 885,219 |
Vested (shares) | (410,794) | (292,341) | (190,984) |
Stock-based awards, end of year (shares) | 1,769,863 | 1,907,645 | 1,786,497 |
Weighted-average grant date fair value of: | |||
Stock-based awards, beginning of year (in USD per share) | $ 28.44 | $ 27.18 | $ 24.72 |
Stock-based awards granted during the year (in USD per share) | 29.72 | 32.05 | 29.60 |
Stock-based awards vested during the year (in USD per share) | 25.32 | 25.88 | 24.34 |
Stock-based awards, end of year (in USD per share) | $ 29.36 | $ 28.44 | $ 27.18 |
Grant date fair value of shares granted during the year | $ 8,114 | $ 13,254 | $ 26,204 |
Stock and Other Incentive Plans (Details 2) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Fair value of options issued based on weighted-average assumptions | |||
Risk-free interest rates | 1.89% | 1.20% | 1.06% |
Expected dividend yields | 3.66% | 3.70% | 4.64% |
Expected life (in years) | 1 year 5 months 12 days | 1 year 5 months 12 days | 1 year 5 months 1 day |
Expected volatility | 28.40% | 20.40% | 17.60% |
Expected forfeiture rates | 85.00% | 85.00% | 85.00% |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Weighted Average Common Shares | |||||||||||
Weighted average Common Shares outstanding (in shares) | 125,219,773 | 119,739,216 | 109,861,580 | ||||||||
Non-vested shares (in shares) | (1,927,648) | (1,813,058) | (1,289,478) | ||||||||
Weighted average Common Shares - Basic (in shares) | 123,292,125 | 117,926,158 | 108,572,102 | ||||||||
Dilutive effect of non-vested shares (in shares) | 709,559 | ||||||||||
Dilutive effect of employee stock purchase plan (in shares) | 58,808 | 91,007 | 105,336 | ||||||||
Weighted average Common Shares - Diluted (in shares) | 123,350,933 | 118,017,165 | 109,386,997 | ||||||||
Net Income | $ 69,771 | $ 23,092 | $ 85,571 | ||||||||
Dividends paid on nonvested share-based awards | (2,320) | (2,149) | |||||||||
Net income applicable to common stockholders | $ 23,092 | $ 67,451 | $ 20,943 | $ 85,571 | |||||||
Basic earnings per common share (dollars per share) | $ 0.13 | $ 0.05 | $ 0.30 | $ 0.07 | $ (0.31) | $ 0.02 | $ 0.22 | $ 0.28 | $ 0.55 | $ 0.18 | $ 0.79 |
Diluted earnings per common share (dollars per share) | $ 0.13 | $ 0.05 | $ 0.30 | $ 0.07 | $ (0.31) | $ 0.02 | $ 0.22 | $ 0.28 | $ 0.55 | $ 0.18 | $ 0.78 |
Commitments and Contingencies - Minimum lease payments (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Future minimum lease payments due to the Company under property operating agreements | |
2019 | $ 5,288 |
2020 | 5,260 |
2021 | 5,238 |
2022 | 5,207 |
2023 | 5,224 |
2024 and thereafter | 323,533 |
Total | $ 349,750 |
Other Data (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Net income | $ 69,771 | $ 23,092 | $ 85,571 |
Reconciling items to taxable income: | |||
Depreciation and amortization | 64,775 | 46,426 | 38,260 |
Gain or loss on disposition of depreciable assets | (27,581) | 1,570 | (32,103) |
Impairments | 0 | 0 | 121 |
Straight-line rent | (3,049) | (4,551) | (7,101) |
Receivable allowances | 2,470 | 1,680 | 2,067 |
Stock-based compensation | (1,699) | 1,855 | 1,301 |
Other | 842 | 6,552 | 2,236 |
Reconciling items to taxable income, total | 35,758 | 53,532 | 4,781 |
Taxable income | 105,529 | 76,624 | 90,352 |
Dividends paid | $ 150,266 | $ 142,327 | $ 131,759 |
Other Data (Details 1) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Characterization of distributions on common stock | |||
Ordinary income per share | $ 0.75 | $ 0.42 | $ 0.78 |
Return of capital per share | 0.33 | 0.50 | 0.35 |
Unrecaptured section 1250 gain per share | 0.12 | 0.28 | 0.07 |
Common stock distributions per share | $ 1.20 | $ 1.20 | $ 1.20 |
Ordinary income in percent of common stock distribution | 62.20% | 34.50% | 65.00% |
Return of capital in percent of common stock distribution | 27.80% | 42.00% | 29.50% |
Unrecaptured section 1250 gain in percent of common stock distribution | 10.00% | 23.50% | 5.50% |
Common stock distribution in percentage | 100.00% | 100.00% | 100.00% |
Other Data (Details 2) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
State income tax expense: | |||
Texas gross margins tax | $ 586 | $ 608 | $ 562 |
Other | 0 | 0 | 2 |
Total state income tax expense | 586 | 608 | 564 |
State income tax payments, net of refunds and collections | $ 637 | $ 555 | $ 544 |
Other Data (Details Textual) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Other Data (Textual) [Abstract] | |||
Condition to qualify as a REIT as defined under the Internal Revenue Code | Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its taxable income to its stockholders. | ||
Estimated aggregate total cost of total assets for federal income tax purposes | $ 4,000,000,000.0 | $ 4,000,000,000.0 | $ 3,700,000,000 |
Number of preferred shares outstanding (shares) | 0 | 0 | 0 |
Dividends distributed to preferred shares | $ 0 |
Fair Value of Financial Instruments (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Carrying Value [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes and bonds payable | $ 1,346.0 | $ 1,283.9 |
Fair Value [Member] | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Notes and bonds payable | $ 1,326.5 | $ 1,269.7 |
Selected Quarterly Financial Data (unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Summary of quarterly financial information | |||||||||||
Revenues from continuing operations | $ 113,168 | $ 113,462 | $ 111,634 | $ 112,124 | $ 107,749 | $ 107,025 | $ 105,318 | $ 104,644 | $ 450,389 | $ 424,737 | $ 411,955 |
NET INCOME | $ 16,314 | $ 6,548 | $ 37,729 | $ 9,180 | $ (37,151) | $ 3,173 | $ 25,224 | $ 31,845 | |||
Net income attributable to common stockholders per share: | |||||||||||
Basic earnings per common share (dollars per share) | $ 0.13 | $ 0.05 | $ 0.30 | $ 0.07 | $ (0.31) | $ 0.02 | $ 0.22 | $ 0.28 | $ 0.55 | $ 0.18 | $ 0.79 |
Diluted earnings per common share (dollars per share) | $ 0.13 | $ 0.05 | $ 0.30 | $ 0.07 | $ (0.31) | $ 0.02 | $ 0.22 | $ 0.28 | $ 0.55 | $ 0.18 | $ 0.78 |
Selected Quarterly Financial Data (unaudited) - Additional information (Details) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018
USD ($)
property
|
Jun. 30, 2018
USD ($)
property
|
Dec. 31, 2017
USD ($)
|
Sep. 30, 2017
USD ($)
|
Jun. 30, 2017
USD ($)
property
|
Mar. 31, 2017
USD ($)
property
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
|
Quarterly Financial Information Disclosure [Abstract] | |||||||||
Gain on sales of real estate assets | $ 10,800 | $ 27,700 | $ 39,524 | $ 16,100 | $ 23,400 | $ 41,665 | $ 39,524 | $ 41,044 | |
Number of properties sold | property | 3 | 12 | 3 | 6 | |||||
Impairment charges | $ 5,100 | ||||||||
Loss on extinguishment of debt | $ 45,000 | $ 44,985 |
Schedule II - Valuation and Qualifying Accounts (Details) - Accounts receivable allowance [Member] - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance at Beginning of Period | $ 256 | $ 148 | $ 179 |
Charged/(Credited) to Costs and Expenses, Additions and Deductions | 60 | 159 | (21) |
Charged to Other Accounts, Additions and Deductions | 0 | 0 | 0 |
Uncollectible Accounts Written-off | 65 | 51 | 10 |
Balance at End of Period | $ 251 | $ 256 | $ 148 |
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