0000899749false2020FYus-gaap:ServiceMember2024-01102026-01102020-072021-02122023-12102020-08152024-09102027-04202020-08272021-01102022-1172023-0872023-10102024-027P3YP3YP3YP1Y00008997492020-01-012020-12-31iso4217:USD00008997492020-06-30xbrli:shares00008997492021-02-0500008997492020-12-3100008997492019-12-31iso4217:USDxbrli:shares00008997492019-01-012019-12-3100008997492018-01-012018-12-310000899749us-gaap:InterestRateSwapMember2020-01-012020-12-310000899749us-gaap:InterestRateSwapMember2019-01-012019-12-310000899749us-gaap:InterestRateSwapMember2018-01-012018-12-310000899749us-gaap:TreasuryLockMember2020-01-012020-12-310000899749us-gaap:TreasuryLockMember2019-01-012019-12-310000899749us-gaap:TreasuryLockMember2018-01-012018-12-310000899749us-gaap:PreferredStockMember2017-12-310000899749us-gaap:CommonStockMember2017-12-310000899749us-gaap:AdditionalPaidInCapitalMember2017-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-310000899749hr:CumulativeNetIncomeMember2017-12-310000899749hr:CumulativeDividendsMember2017-12-3100008997492017-12-310000899749us-gaap:AdditionalPaidInCapitalMember2018-01-012018-12-310000899749us-gaap:CommonStockMember2018-01-012018-12-310000899749hr:CumulativeNetIncomeMember2018-01-012018-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-310000899749hr:CumulativeDividendsMember2018-01-012018-12-310000899749us-gaap:PreferredStockMember2018-12-310000899749us-gaap:CommonStockMember2018-12-310000899749us-gaap:AdditionalPaidInCapitalMember2018-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000899749hr:CumulativeNetIncomeMember2018-12-310000899749hr:CumulativeDividendsMember2018-12-3100008997492018-12-310000899749us-gaap:CommonStockMember2019-01-012019-12-310000899749us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-310000899749hr:CumulativeNetIncomeMember2019-01-012019-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310000899749hr:CumulativeDividendsMember2019-01-012019-12-310000899749us-gaap:PreferredStockMember2019-12-310000899749us-gaap:CommonStockMember2019-12-310000899749us-gaap:AdditionalPaidInCapitalMember2019-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000899749hr:CumulativeNetIncomeMember2019-12-310000899749hr:CumulativeDividendsMember2019-12-310000899749us-gaap:CommonStockMember2020-01-012020-12-310000899749us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310000899749hr:CumulativeNetIncomeMember2020-01-012020-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310000899749hr:CumulativeDividendsMember2020-01-012020-12-310000899749us-gaap:PreferredStockMember2020-12-310000899749us-gaap:CommonStockMember2020-12-310000899749us-gaap:AdditionalPaidInCapitalMember2020-12-310000899749us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000899749hr:CumulativeNetIncomeMember2020-12-310000899749hr:CumulativeDividendsMember2020-12-31hr:propertyhr:stateutr:sqftxbrli:purehr:reportingUnit0000899749us-gaap:SubsequentEventMember2021-02-102021-02-100000899749us-gaap:SubsequentEventMember2021-02-100000899749us-gaap:LeasesAcquiredInPlaceMember2020-01-012020-12-310000899749us-gaap:LeasesAcquiredInPlaceMember2019-01-012019-12-310000899749us-gaap:LeaseholdsAndLeaseholdImprovementsMember2019-01-012019-12-310000899749srt:MinimumMemberus-gaap:LandImprovementsMember2020-01-012020-12-310000899749srt:MaximumMemberus-gaap:LandImprovementsMember2020-01-012020-12-310000899749us-gaap:BuildingAndBuildingImprovementsMembersrt:MinimumMember2020-01-012020-12-310000899749us-gaap:BuildingAndBuildingImprovementsMembersrt:MaximumMember2020-01-012020-12-310000899749srt:MinimumMemberus-gaap:LeaseAgreementsMember2020-01-012020-12-310000899749srt:MaximumMemberus-gaap:LeaseAgreementsMember2020-01-012020-12-310000899749srt:MinimumMemberhr:PersonalPropertyMember2020-01-012020-12-310000899749srt:MaximumMemberhr:PersonalPropertyMember2020-01-012020-12-310000899749us-gaap:InterestRateSwapMember2020-12-310000899749us-gaap:InterestRateSwapMember2019-12-310000899749hr:ParkingIncomeMember2020-01-012020-12-310000899749hr:ParkingIncomeMember2019-01-012019-12-310000899749hr:ParkingIncomeMember2018-01-012018-12-310000899749hr:RentalLeaseGuarantyMember2020-01-012020-12-310000899749hr:RentalLeaseGuarantyMember2019-01-012019-12-310000899749hr:RentalLeaseGuarantyMember2018-01-012018-12-310000899749hr:ManagementFeeIncomeMember2020-01-012020-12-310000899749hr:ManagementFeeIncomeMember2019-01-012019-12-310000899749hr:ManagementFeeIncomeMember2018-01-012018-12-310000899749hr:MiscellaneousMember2020-01-012020-12-310000899749hr:MiscellaneousMember2019-01-012019-12-310000899749hr:MiscellaneousMember2018-01-012018-12-310000899749srt:ScenarioPreviouslyReportedMember2019-12-310000899749srt:ScenarioPreviouslyReportedMember2019-01-012019-12-310000899749srt:ScenarioPreviouslyReportedMember2018-01-012018-12-310000899749stpr:WAhr:MedicalOfficeMember2020-12-310000899749hr:DallasTexasMemberhr:MedicalOfficeMember2020-12-310000899749hr:LosAngelesCaliforniaMemberhr:MedicalOfficeMember2020-12-310000899749stpr:GAhr:MedicalOfficeMember2020-12-310000899749hr:NashvilleTennesseeMemberhr:MedicalOfficeMember2020-12-310000899749hr:DenverCOMemberhr:MedicalOfficeMember2020-12-310000899749stpr:NChr:MedicalOfficeMember2020-12-310000899749hr:HoustonTexasMemberhr:MedicalOfficeMember2020-12-310000899749stpr:DChr:MedicalOfficeMember2020-12-310000899749stpr:VAhr:MedicalOfficeMember2020-12-310000899749stpr:HIhr:MedicalOfficeMember2020-12-310000899749stpr:IAhr:MedicalOfficeMember2020-12-310000899749hr:MemphisTennesseeMemberhr:MedicalOfficeMember2020-12-310000899749hr:SanFranciscoCaliforniaMemberhr:MedicalOfficeMember2020-12-310000899749stpr:INhr:MedicalOfficeMember2020-12-310000899749hr:AustinTexasMemberhr:MedicalOfficeMember2020-12-310000899749hr:SanAntonioTexasMemberhr:MedicalOfficeMember2020-12-310000899749stpr:ILhr:MedicalOfficeMember2020-12-310000899749hr:GreensboroNCMemberhr:MedicalOfficeMember2020-12-310000899749stpr:COhr:MedicalOfficeMember2020-12-310000899749stpr:MNhr:MedicalOfficeMember2020-12-310000899749hr:OtherStateMemberhr:MedicalOfficeMember2020-12-310000899749hr:MedicalOfficeMember2020-12-310000899749hr:LandHeldForDevelopmentMember2020-12-310000899749hr:MemphisRedevelopmentMember2020-12-310000899749hr:CorporatePropertyMember2020-12-3100008997492020-05-012020-05-3100008997492020-05-31hr:renewalOption0000899749srt:MinimumMember2020-12-310000899749srt:MaximumMember2020-12-31hr:lease0000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-01-032020-01-030000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-01-030000899749hr:MedicalOfficeBuildingMemberstpr:GA2020-02-132020-02-130000899749hr:MedicalOfficeBuildingMemberstpr:GA2020-02-130000899749stpr:NChr:MedicalOfficeBuildingMember2020-02-252020-02-250000899749stpr:NChr:MedicalOfficeBuildingMember2020-02-250000899749hr:MedicalOfficeBuildingMemberstpr:CO2020-03-092020-03-090000899749hr:MedicalOfficeBuildingMemberstpr:CO2020-03-090000899749hr:DenverCOMemberhr:MedicalOfficeBuildingMember2020-03-132020-03-130000899749hr:DenverCOMemberhr:MedicalOfficeBuildingMember2020-03-130000899749hr:SanDiegoCAMemberhr:MedicalOfficeBuildingMember2020-07-012020-07-010000899749hr:SanDiegoCAMemberhr:MedicalOfficeBuildingMember2020-07-010000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-07-172020-07-170000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-07-170000899749stpr:WAhr:MedicalOfficeBuildingMember2020-07-232020-07-230000899749stpr:WAhr:MedicalOfficeBuildingMember2020-07-230000899749hr:MedicalOfficeBuildingMemberstpr:GA2020-07-312020-07-310000899749hr:MedicalOfficeBuildingMemberstpr:GA2020-07-310000899749hr:HoustonTexasMemberhr:MedicalOfficeBuildingMember2020-09-242020-09-240000899749hr:HoustonTexasMemberhr:MedicalOfficeBuildingMember2020-09-240000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-09-282020-09-280000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-09-280000899749hr:MedicalOfficeBuildingMemberstpr:CO2020-10-072020-10-070000899749hr:MedicalOfficeBuildingMemberstpr:CO2020-10-070000899749hr:MedicalOfficeBuildingMemberhr:GreensboroNCMember2020-11-092020-11-090000899749hr:MedicalOfficeBuildingMemberhr:GreensboroNCMember2020-11-090000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2020-11-092020-11-090000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2020-11-090000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2020-11-182020-11-180000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2020-11-180000899749hr:MedicalOfficeBuildingMemberhr:NashvilleTNMember2020-12-012020-12-010000899749hr:MedicalOfficeBuildingMemberhr:NashvilleTNMember2020-12-010000899749hr:MedicalOfficeBuildingMemberhr:GreensboroNCMember2020-12-172020-12-170000899749hr:MedicalOfficeBuildingMemberhr:GreensboroNCMember2020-12-170000899749hr:SanDiegoCAMemberhr:MedicalOfficeBuildingMember2020-12-222020-12-220000899749hr:SanDiegoCAMemberhr:MedicalOfficeBuildingMember2020-12-220000899749hr:MedicalOfficeBuildingMemberstpr:GA2020-12-292020-12-290000899749hr:MedicalOfficeBuildingMemberstpr:GA2020-12-290000899749hr:MedicalOfficeBuildingMemberhr:GreensboroNCMember2020-12-302020-12-300000899749hr:MedicalOfficeBuildingMemberhr:GreensboroNCMember2020-12-300000899749hr:MedicalOfficeBuildingMember2020-01-012020-12-310000899749hr:MedicalOfficeBuildingMember2020-12-310000899749us-gaap:LandMember2020-01-142020-01-140000899749us-gaap:LandMember2020-01-140000899749us-gaap:LandMember2020-09-042020-09-040000899749us-gaap:LandMember2020-09-040000899749us-gaap:LandMember2020-10-222020-10-220000899749us-gaap:LandMember2020-10-220000899749hr:RealEstateAndLandAcquisitionsMember2020-01-012020-12-310000899749hr:RealEstateAndLandAcquisitionsMember2020-12-310000899749srt:MinimumMemberus-gaap:BuildingMember2020-01-012020-12-310000899749srt:MaximumMemberus-gaap:BuildingMember2020-01-012020-12-310000899749us-gaap:LeasesAcquiredInPlaceMember2020-12-310000899749us-gaap:LeasesAcquiredInPlaceMembersrt:MinimumMember2020-01-012020-12-310000899749srt:MaximumMemberus-gaap:LeasesAcquiredInPlaceMember2020-01-012020-12-310000899749hr:AboveMarketLeaseIntangiblesMember2020-12-310000899749hr:AboveMarketLeaseIntangiblesMembersrt:MinimumMember2020-01-012020-12-310000899749hr:AboveMarketLeaseIntangiblesMembersrt:MaximumMember2020-01-012020-12-310000899749hr:BelowMarketLeaseIntangiblesMember2020-12-310000899749hr:BelowMarketLeaseIntangiblesMembersrt:MinimumMember2020-01-012020-12-310000899749srt:MaximumMemberhr:BelowMarketLeaseIntangiblesMember2020-01-012020-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMember2020-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMember2020-01-012020-12-310000899749hr:SanDiegoCAMemberhr:MedicalOfficeBuildingMemberus-gaap:SubsequentEventMember2021-01-070000899749hr:SanDiegoCAMemberhr:MedicalOfficeBuildingMemberus-gaap:SubsequentEventMember2021-01-072021-01-070000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMemberus-gaap:SubsequentEventMember2021-02-012021-02-010000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMemberus-gaap:SubsequentEventMember2021-02-010000899749hr:MedicalOfficeBuildingMemberstpr:MN2020-11-120000899749hr:MedicalOfficeBuildingMemberstpr:MN2020-11-122020-11-120000899749hr:MedicalOfficeBuildingMemberstpr:MN2020-12-070000899749hr:MedicalOfficeBuildingMemberstpr:MN2020-12-072020-12-070000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-12-080000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-12-082020-12-080000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-12-290000899749hr:MedicalOfficeBuildingMemberstpr:CA2020-12-292020-12-290000899749hr:LimitedLiabilityCompanyOneMember2020-01-012020-12-310000899749hr:LimitedLiabilityCompanyTwoMember2020-01-012020-12-31hr:limitedLiabilityCompany0000899749srt:OtherPropertyMember2020-01-012020-12-31hr:garage0000899749srt:OtherPropertyMember2017-10-012017-12-310000899749srt:OtherPropertyMember2019-12-310000899749srt:OtherPropertyMember2018-12-310000899749srt:OtherPropertyMember2019-01-012019-12-310000899749srt:OtherPropertyMember2020-12-310000899749stpr:DChr:MedicalOfficeBuildingMember2019-03-282019-03-280000899749stpr:DChr:MedicalOfficeBuildingMember2019-03-280000899749stpr:INhr:MedicalOfficeBuildingMember2019-03-282019-03-280000899749stpr:INhr:MedicalOfficeBuildingMember2019-03-280000899749hr:MedicalOfficeBuildingMemberstpr:GA2019-04-022019-04-020000899749hr:MedicalOfficeBuildingMemberstpr:GA2019-04-020000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMember2019-06-102019-06-100000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMember2019-06-100000899749stpr:WAhr:MedicalOfficeBuildingMember2019-06-112019-06-110000899749stpr:WAhr:MedicalOfficeBuildingMember2019-06-110000899749stpr:WAhr:MedicalOfficeBuildingMember2019-06-142019-06-140000899749stpr:WAhr:MedicalOfficeBuildingMember2019-06-140000899749stpr:WAhr:MedicalOfficeBuildingMember2019-06-282019-06-280000899749stpr:WAhr:MedicalOfficeBuildingMember2019-06-280000899749hr:HoustonTexasMemberhr:MedicalOfficeBuildingMember2019-08-012019-08-010000899749hr:HoustonTexasMemberhr:MedicalOfficeBuildingMember2019-08-010000899749stpr:OKhr:MedicalOfficeBuildingMember2019-09-262019-09-260000899749stpr:OKhr:MedicalOfficeBuildingMember2019-09-260000899749hr:MedicalOfficeBuildingMemberstpr:CA2019-09-302019-09-300000899749hr:MedicalOfficeBuildingMemberstpr:CA2019-09-300000899749stpr:NChr:MedicalOfficeBuildingMember2019-10-312019-10-310000899749stpr:NChr:MedicalOfficeBuildingMember2019-10-310000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMember2019-10-312019-10-310000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMember2019-10-310000899749stpr:WAhr:MedicalOfficeBuildingMember2019-11-182019-11-180000899749stpr:WAhr:MedicalOfficeBuildingMember2019-11-180000899749stpr:WAhr:MedicalOfficeBuildingMember2019-12-102019-12-100000899749stpr:WAhr:MedicalOfficeBuildingMember2019-12-100000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2019-12-132019-12-130000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2019-12-130000899749stpr:WAhr:MedicalOfficeBuildingMember2019-12-182019-12-180000899749stpr:WAhr:MedicalOfficeBuildingMember2019-12-180000899749srt:MinimumMemberus-gaap:BuildingMember2019-01-012019-12-310000899749srt:MaximumMemberus-gaap:BuildingMember2019-01-012019-12-310000899749srt:MinimumMemberus-gaap:LandImprovementsMember2019-01-012019-12-310000899749srt:MaximumMemberus-gaap:LandImprovementsMember2019-01-012019-12-310000899749us-gaap:LeasesAcquiredInPlaceMember2019-12-310000899749us-gaap:LeasesAcquiredInPlaceMembersrt:MinimumMember2019-01-012019-12-310000899749srt:MaximumMemberus-gaap:LeasesAcquiredInPlaceMember2019-01-012019-12-310000899749hr:AboveMarketLeaseIntangiblesMember2019-12-310000899749hr:AboveMarketLeaseIntangiblesMembersrt:MinimumMember2019-01-012019-12-310000899749hr:AboveMarketLeaseIntangiblesMembersrt:MaximumMember2019-01-012019-12-310000899749hr:BelowMarketLeaseIntangiblesMember2019-12-310000899749hr:BelowMarketLeaseIntangiblesMember2019-01-012019-12-310000899749srt:MaximumMemberhr:BelowMarketLeaseIntangiblesMember2019-01-012019-12-310000899749hr:AboveMarketLeaseIntangiblesLesseeMember2019-12-310000899749hr:AboveMarketLeaseIntangiblesLesseeMembersrt:MinimumMember2019-01-012019-12-310000899749srt:MaximumMemberhr:AboveMarketLeaseIntangiblesLesseeMember2019-01-012019-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMember2019-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMember2019-01-012019-12-310000899749hr:RealEstateDispositionsMemberstpr:MO2020-07-300000899749hr:RealEstateDispositionsMemberstpr:MO2020-07-302020-07-300000899749stpr:OKhr:RealEstateDispositionsMember2020-07-300000899749stpr:OKhr:RealEstateDispositionsMember2020-07-302020-07-300000899749stpr:FLhr:RealEstateDispositionsMember2020-09-300000899749stpr:FLhr:RealEstateDispositionsMember2020-09-302020-09-3000008997492020-04-012020-06-300000899749hr:RealEstateDispositionsMemberstpr:AZ2019-04-090000899749hr:RealEstateDispositionsMemberstpr:AZ2019-04-092019-04-090000899749stpr:VAhr:RealEstateDispositionsMember2019-08-010000899749stpr:VAhr:RealEstateDispositionsMember2019-08-012019-08-010000899749hr:SanAntonioTexasMemberhr:RealEstateDispositionsMember2019-08-280000899749hr:SanAntonioTexasMemberhr:RealEstateDispositionsMember2019-08-282019-08-280000899749hr:EriePennsylvaniaMemberhr:RealEstateDispositionsMember2019-10-250000899749hr:EriePennsylvaniaMemberhr:RealEstateDispositionsMember2019-10-252019-10-250000899749stpr:LAhr:RealEstateDispositionsMember2019-11-250000899749stpr:LAhr:RealEstateDispositionsMember2019-11-252019-11-250000899749stpr:TNhr:RealEstateDispositionsMember2019-11-270000899749stpr:TNhr:RealEstateDispositionsMember2019-11-272019-11-270000899749hr:PittsburghPennsylvaniaMemberhr:RealEstateDispositionsMember2019-12-180000899749hr:PittsburghPennsylvaniaMemberhr:RealEstateDispositionsMember2019-12-182019-12-180000899749hr:DallasTexasMemberhr:RealEstateDispositionsMember2019-12-300000899749hr:DallasTexasMemberhr:RealEstateDispositionsMember2019-12-302019-12-300000899749stpr:VAhr:RealEstateDispositionsMember2019-04-012019-06-300000899749hr:PittsburghPennsylvaniaMemberhr:RealEstateDispositionsMember2019-04-012019-06-300000899749hr:AssetHeldforsaleMember2020-12-310000899749hr:AssetHeldforsaleMember2019-12-310000899749us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2020-12-310000899749us-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2019-12-310000899749us-gaap:SegmentDiscontinuedOperationsMember2020-12-310000899749us-gaap:SegmentDiscontinuedOperationsMember2019-12-310000899749us-gaap:GoodwillMemberus-gaap:OtherAssetsMember2020-12-310000899749us-gaap:GoodwillMemberus-gaap:OtherAssetsMember2019-12-310000899749hr:DeferredFinancingCostsMemberus-gaap:OtherAssetsMember2020-12-310000899749hr:DeferredFinancingCostsMemberus-gaap:OtherAssetsMember2019-12-310000899749hr:DeferredFinancingCostsMemberus-gaap:OtherAssetsMember2020-01-012020-12-310000899749us-gaap:AboveMarketLeasesMemberus-gaap:OtherAssetsMember2020-12-310000899749us-gaap:AboveMarketLeasesMemberus-gaap:OtherAssetsMember2019-12-310000899749us-gaap:AboveMarketLeasesMemberus-gaap:OtherAssetsMember2020-01-012020-12-310000899749us-gaap:CustomerRelationshipsMemberus-gaap:OtherAssetsMember2020-12-310000899749us-gaap:CustomerRelationshipsMemberus-gaap:OtherAssetsMember2019-12-310000899749us-gaap:CustomerRelationshipsMemberus-gaap:OtherAssetsMember2020-01-012020-12-310000899749hr:BelowMarketLeaseIntangiblesMemberus-gaap:OtherLiabilitiesMember2020-12-310000899749hr:BelowMarketLeaseIntangiblesMemberus-gaap:OtherLiabilitiesMember2019-12-310000899749hr:BelowMarketLeaseIntangiblesMemberus-gaap:OtherLiabilitiesMember2020-01-012020-12-310000899749hr:DeferredFinancingCostsMemberhr:NotesandBondsPayableMember2020-12-310000899749hr:DeferredFinancingCostsMemberhr:NotesandBondsPayableMember2019-12-310000899749hr:DeferredFinancingCostsMemberhr:NotesandBondsPayableMember2020-01-012020-12-310000899749us-gaap:LeasesAcquiredInPlaceMemberus-gaap:WhollyOwnedPropertiesMember2020-12-310000899749us-gaap:LeasesAcquiredInPlaceMemberus-gaap:WhollyOwnedPropertiesMember2019-12-310000899749us-gaap:LeasesAcquiredInPlaceMemberus-gaap:WhollyOwnedPropertiesMember2020-01-012020-12-310000899749hr:AboveMarketLeaseIntangiblesLesseeMemberhr:RightofuseAssetsMember2020-12-310000899749hr:AboveMarketLeaseIntangiblesLesseeMemberhr:RightofuseAssetsMember2019-12-310000899749hr:AboveMarketLeaseIntangiblesLesseeMemberhr:RightofuseAssetsMember2020-01-012020-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMemberhr:RightofuseAssetsMember2020-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMemberhr:RightofuseAssetsMember2019-12-310000899749hr:BelowMarketLeaseIntangiblesLesseeMemberhr:RightofuseAssetsMember2020-01-012020-12-310000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMember2020-12-310000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMember2019-12-310000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-01-012020-12-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2020-12-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2019-12-310000899749us-gaap:MediumTermNotesMemberus-gaap:LondonInterbankOfferedRateLIBORMemberhr:TermLoandue2024Member2020-01-012020-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2020-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2019-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-01-012020-12-310000899749us-gaap:SeniorNotesMemberhr:SeniorNotesdue2023Member2020-12-310000899749us-gaap:SeniorNotesMemberhr:SeniorNotesdue2023Member2019-12-310000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2020-12-310000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2019-12-310000899749hr:SeniorNotesdue2028Memberus-gaap:SeniorNotesMember2020-12-310000899749hr:SeniorNotesdue2028Memberus-gaap:SeniorNotesMember2019-12-310000899749us-gaap:SeniorNotesMemberhr:SeniorNotesDue2030Member2020-12-310000899749us-gaap:SeniorNotesMemberhr:SeniorNotesDue2030Member2019-12-310000899749hr:SeniorNotesDue2031Memberus-gaap:SeniorNotesMember2020-12-310000899749hr:SeniorNotesDue2031Memberus-gaap:SeniorNotesMember2019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesPayableNetMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesPayableNetMember2019-12-310000899749us-gaap:MortgagesMembersrt:MinimumMemberhr:MortgageNotesPayableNetMember2020-12-310000899749us-gaap:MortgagesMembersrt:MaximumMemberhr:MortgageNotesPayableNetMember2020-12-310000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMember2011-10-14hr:extensionOption0000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMember2019-05-312019-05-310000899749hr:UnsecuredCreditFacilityMembersrt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-01-012020-12-310000899749srt:MaximumMemberhr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2020-01-012020-12-310000899749hr:UnsecuredCreditFacilityMembersrt:MinimumMemberus-gaap:LineOfCreditMember2020-01-012020-12-310000899749srt:MaximumMemberhr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMember2020-01-012020-12-310000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMember2020-01-012020-12-310000899749hr:UnsecuredCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:UpFrontPaymentArrangementMember2020-12-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2014-02-28hr:Lender0000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2016-07-052016-07-050000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2019-05-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2022Member2019-05-310000899749us-gaap:MediumTermNotesMembersrt:MinimumMemberhr:TermLoandue2024Member2020-01-012020-12-310000899749srt:MaximumMemberus-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2020-01-012020-12-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2020-01-012020-12-310000899749us-gaap:MediumTermNotesMemberus-gaap:InterestRateSwapMemberhr:TermLoandue2024Member2020-12-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2019-04-012019-06-300000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2019-01-012019-12-310000899749us-gaap:MediumTermNotesMemberhr:TermLoandue2024Member2018-01-012018-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2019-05-312019-05-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2019-05-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2020-05-292020-05-290000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMembersrt:MinimumMember2020-01-012020-12-310000899749srt:MaximumMemberhr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2020-01-012020-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2020-01-012020-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMemberus-gaap:InterestRateSwapMember2020-12-310000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2019-04-012019-06-300000899749hr:TermLoandue2026Memberus-gaap:MediumTermNotesMember2019-10-012019-12-310000899749us-gaap:SeniorNotesMemberhr:SeniorNotesdue2023Member2020-10-192020-10-190000899749us-gaap:SeniorNotesMemberhr:SeniorNotesdue2023Member2020-01-012020-12-310000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2015-04-240000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2020-01-012020-12-310000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2019-01-012019-12-310000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2018-01-012018-12-31hr:swapAgreement0000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMember2015-04-242015-04-240000899749hr:SeniorNotesdue2025Memberus-gaap:SeniorNotesMemberus-gaap:InterestRateSwapMember2015-04-242015-04-240000899749hr:SeniorNotesdue2028Memberus-gaap:SeniorNotesMember2017-12-110000899749hr:SeniorNotesdue2028Memberus-gaap:SeniorNotesMember2020-01-012020-12-310000899749us-gaap:SeniorNotesMemberhr:SeniorNotesDue2030Member2020-03-180000899749us-gaap:SeniorNotesMemberhr:SeniorNotesDue2030Member2020-03-130000899749us-gaap:InterestRateSwapMember2020-03-182020-03-180000899749us-gaap:SeniorNotesMemberhr:SeniorNotesDue2030Member2020-01-012020-12-310000899749hr:SeniorNotesDue2031Memberus-gaap:SeniorNotesMember2020-10-020000899749hr:SeniorNotesDue2031Memberus-gaap:SeniorNotesMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesPayableNetMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesPayableNetMember2019-01-012019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesPayableNetMember2018-01-012018-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesSevenPointSixFiveZeroPercentMemberhr:CommercialBankMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesSevenPointSixFiveZeroPercentMemberhr:CommercialBankMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesSevenPointSixFiveZeroPercentMemberhr:CommercialBankMember2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotesFourPercentMember2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotesFourPercentMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotesFourPercentMember2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotesFivePointTwoFourNinePercentMember2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotesFivePointTwoFourNinePercentMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotesFivePointTwoFourNinePercentMember2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes4.301Member2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes4.301Member2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes4.301Member2019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesSixPointFourThreeZeroPercentMemberhr:CommercialBankMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesSixPointFourThreeZeroPercentMemberhr:CommercialBankMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesSixPointFourThreeZeroPercentMemberhr:CommercialBankMember2019-12-310000899749us-gaap:MortgagesMemberus-gaap:SovereignDebtLocalGovernmentUnspecifiedMemberhr:MortgageNotesFourPointSevenNineZeroPercentMember2020-12-310000899749us-gaap:MortgagesMemberus-gaap:SovereignDebtLocalGovernmentUnspecifiedMemberhr:MortgageNotesFourPointSevenNineZeroPercentMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberus-gaap:SovereignDebtLocalGovernmentUnspecifiedMemberhr:MortgageNotesFourPointSevenNineZeroPercentMember2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes3.866Member2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes3.866Member2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes3.866Member2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes3.862Member2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes3.862Member2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes3.862Member2019-12-310000899749us-gaap:MortgagesMemberus-gaap:FinancialServicesSectorMemberhr:MortgageNotes4.266Member2020-12-310000899749us-gaap:MortgagesMemberus-gaap:FinancialServicesSectorMemberhr:MortgageNotes4.266Member2020-01-012020-12-310000899749us-gaap:MortgagesMemberus-gaap:FinancialServicesSectorMemberhr:MortgageNotes4.266Member2019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes4.839Memberhr:LifeInsuranceCompanyMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes4.839Memberhr:LifeInsuranceCompanyMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes4.839Memberhr:LifeInsuranceCompanyMember2019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesFourPointOneThreeOnePercentMemberhr:LifeInsuranceCompanyMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesFourPointOneThreeOnePercentMemberhr:LifeInsuranceCompanyMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotesFourPointOneThreeOnePercentMemberhr:LifeInsuranceCompanyMember2019-12-310000899749hr:MortgageNotes3.958Memberus-gaap:MortgagesMemberhr:LifeInsuranceCompanyMember2020-12-310000899749hr:MortgageNotes3.958Memberus-gaap:MortgagesMemberhr:LifeInsuranceCompanyMember2020-01-012020-12-310000899749hr:MortgageNotes3.958Memberus-gaap:MortgagesMemberhr:LifeInsuranceCompanyMember2019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes4.319Memberus-gaap:FinancialServicesSectorMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes4.319Memberus-gaap:FinancialServicesSectorMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes4.319Memberus-gaap:FinancialServicesSectorMember2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes343Member2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes343Member2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes343Member2019-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes3.707Memberhr:CommercialBankMember2020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes3.707Memberhr:CommercialBankMember2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:MortgageNotes3.707Memberhr:CommercialBankMember2019-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes408Member2020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes408Member2020-01-012020-12-310000899749us-gaap:MortgagesMemberhr:LifeInsuranceCompanyMemberhr:MortgageNotes408Member2019-12-310000899749hr:FivePointTwoFivePercentMortgageNotes20YearMemberus-gaap:MortgagesMemberhr:CommercialBankMember2020-12-310000899749hr:FivePointTwoFivePercentMortgageNotes20YearMemberus-gaap:MortgagesMemberhr:CommercialBankMember2020-01-012020-12-310000899749hr:FivePointTwoFivePercentMortgageNotes20YearMemberus-gaap:MortgagesMemberhr:CommercialBankMember2019-12-310000899749us-gaap:MortgagesMember2020-12-310000899749us-gaap:MortgagesMember2019-12-31hr:mortageNotePayable0000899749us-gaap:MortgagesMemberhr:MortgageNotesMaturingFromMay2022ToMay2040Memberus-gaap:SovereignDebtLocalGovernmentUnspecifiedMember2020-06-300000899749us-gaap:MortgagesMemberus-gaap:SovereignDebtLocalGovernmentUnspecifiedMemberhr:MortgageNotesFourPointSevenNineZeroPercentMember2017-05-310000899749us-gaap:MortgagesMemberus-gaap:SovereignDebtLocalGovernmentUnspecifiedMemberhr:MortgageNotesFourPointSevenNineZeroPercentMember2020-06-300000899749us-gaap:MortgagesMemberhr:MortgageNotesSevenPointSixFiveZeroPercentMemberhr:CommercialBankMember2020-06-012020-06-300000899749us-gaap:MortgagesMembersrt:MinimumMember2020-12-310000899749us-gaap:MortgagesMembersrt:MaximumMember2020-12-310000899749hr:LongTermDebtMaturitiesYearOneMember2020-12-310000899749hr:LongTermDebtMaturitiesYearTwoMember2020-12-310000899749hr:LongTermDebtMaturitiesYearThreeMember2020-12-310000899749hr:LongTermDebtMaturitiesYearFourMember2020-12-310000899749hr:LongTermDebtMaturitiesYearFiveMember2020-12-310000899749hr:LongTermDebtMaturitiesYearFiveAndThereafterMember2020-12-31hr:derivative0000899749us-gaap:TreasuryLockMember2020-12-310000899749hr:TreasuryLock1Member2020-12-310000899749hr:TreasuryLock2Member2020-12-310000899749hr:InterestRateSwap2017Memberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CashFlowHedgingMember2020-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberhr:InterestRateSwap2018Memberus-gaap:CashFlowHedgingMember2020-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CashFlowHedgingMemberhr:InterestRateSwap2019Member2020-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMemberus-gaap:CashFlowHedgingMember2020-12-310000899749hr:InterestRateSwap2017Memberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherLiabilitiesMember2020-12-310000899749hr:InterestRateSwap2017Memberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:OtherLiabilitiesMember2019-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberhr:InterestRateSwap2018Memberus-gaap:OtherLiabilitiesMember2020-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberhr:InterestRateSwap2018Memberus-gaap:OtherLiabilitiesMember2019-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberhr:InterestRateSwap2019Memberus-gaap:OtherLiabilitiesMember2020-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberhr:InterestRateSwap2019Memberus-gaap:OtherLiabilitiesMember2019-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2020-12-310000899749us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2019-12-310000899749hr:InterestRateSwap2017Member2020-01-012020-12-310000899749hr:InterestRateSwap2017Memberus-gaap:InterestExpenseMember2020-01-012020-12-310000899749hr:InterestRateSwap2017Memberus-gaap:InterestExpenseMember2019-01-012019-12-310000899749hr:InterestRateSwap2018Member2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberhr:InterestRateSwap2018Member2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberhr:InterestRateSwap2018Member2019-01-012019-12-310000899749hr:InterestRateSwap2019Member2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberhr:InterestRateSwap2019Member2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberhr:InterestRateSwap2019Member2019-01-012019-12-310000899749us-gaap:InterestExpenseMemberus-gaap:TreasuryLockMember2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberus-gaap:TreasuryLockMember2019-01-012019-12-310000899749hr:SettledInterestRateSwapsMember2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberhr:SettledInterestRateSwapsMember2020-01-012020-12-310000899749us-gaap:InterestExpenseMemberhr:SettledInterestRateSwapsMember2019-01-012019-12-310000899749us-gaap:InterestExpenseMember2020-01-012020-12-310000899749us-gaap:InterestExpenseMember2019-01-012019-12-31hr:investmentBank0000899749hr:AtTheMarketEquityOfferingProgramMember2020-02-140000899749hr:AtTheMarketEquityOfferingProgramMember2019-01-012019-12-310000899749hr:AtTheMarketEquityOfferingProgramMember2019-12-310000899749hr:AtTheMarketEquityOfferingProgramMember2020-01-012020-12-310000899749hr:AtTheMarketEquityOfferingProgramMember2020-12-310000899749hr:AtTheMarketEquityOfferingProgramMemberus-gaap:SubsequentEventMember2021-01-012021-01-310000899749hr:AtTheMarketEquityOfferingProgramMemberus-gaap:SubsequentEventMember2021-01-310000899749srt:MinimumMembersrt:ScenarioForecastMember2021-02-100000899749srt:MaximumMembersrt:ScenarioForecastMember2021-02-100000899749us-gaap:DividendDeclaredMember2020-01-012020-12-310000899749us-gaap:SubsequentEventMember2021-02-092021-02-0900008997492020-05-052020-05-050000899749us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-12-310000899749us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2018-12-310000899749us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310000899749us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310000899749us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:TreasuryLockMember2020-01-012020-12-310000899749us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-12-310000899749us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2020-01-012020-12-310000899749us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310000899749us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310000899749hr:A2015EmployeesStockIncentivePlanMember2020-12-310000899749hr:A2015EmployeesStockIncentivePlanMember2020-01-012020-12-310000899749hr:A2015EmployeesStockIncentivePlanMember2019-01-012019-12-310000899749hr:A2015EmployeesStockIncentivePlanMember2019-12-310000899749hr:StockIncentivePlanMember2015-01-012015-12-310000899749hr:A2015EmployeesStockIncentivePlanMembersrt:MinimumMemberus-gaap:RestrictedStockMember2020-01-012020-12-310000899749srt:MaximumMemberhr:A2015EmployeesStockIncentivePlanMemberus-gaap:RestrictedStockMember2020-01-012020-12-310000899749hr:StockIncentivePlanMemberus-gaap:RestrictedStockMember2020-01-012020-12-310000899749hr:StockIncentivePlanMemberus-gaap:RestrictedStockMember2019-01-012019-12-310000899749hr:StockIncentivePlanMemberus-gaap:RestrictedStockMember2018-01-012018-12-310000899749hr:FormerExecutiveChairmanMember2019-09-302019-09-300000899749us-gaap:PerformanceSharesMemberhr:ExecutiveIncentiveProgramMember2020-01-012020-12-310000899749us-gaap:PerformanceSharesMemberhr:ExecutiveIncentiveProgramMember2019-01-012019-12-310000899749us-gaap:PerformanceSharesMemberhr:ExecutiveIncentiveProgramMember2018-01-012018-12-31hr:executiveOfficer0000899749hr:A2020PerformanceSharesMembersrt:ExecutiveOfficerMemberhr:ExecutiveIncentiveProgramMember2020-12-140000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMembersrt:VicePresidentMember2020-12-140000899749hr:FirstVicePresidentMemberhr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMember2020-12-140000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMember2020-12-142020-12-140000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMember2025-01-012025-12-310000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMember2023-01-012023-12-310000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMember2021-01-012021-12-310000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMember2022-01-012022-12-310000899749hr:A2020PerformanceSharesMemberhr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMember2024-01-012024-12-310000899749hr:ExecutiveIncentiveProgramMemberhr:A2019PerformanceSharesMember2019-12-122019-12-120000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2019PerformanceSharesMember2023-01-012023-12-310000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2019PerformanceSharesMember2021-01-012021-12-310000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2019PerformanceSharesMember2022-01-012022-12-310000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2019PerformanceSharesMember2024-01-012024-12-310000899749hr:FirstVicePresidentMemberhr:ExecutiveIncentiveProgramMemberhr:A2018PerformanceSharesMember2019-12-120000899749hr:ExecutiveIncentiveProgramMemberhr:A2018PerformanceSharesMember2018-12-122018-12-120000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2018PerformanceSharesMember2022-01-012022-12-310000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2018PerformanceSharesMember2021-01-012021-12-310000899749hr:ExecutiveIncentiveProgramMembersrt:ScenarioForecastMemberhr:A2018PerformanceSharesMember2023-01-012023-12-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMember2019-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:ExecutiveOfficerMember2020-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:VicePresidentMember2019-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:VicePresidentMember2020-03-310000899749hr:StockIncentivePlanMemberhr:FirstVicePresidentMemberus-gaap:PerformanceSharesMember2020-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMember2020-01-012020-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMember2019-01-012019-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:MinimumMember2020-01-012020-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:MinimumMember2019-01-012019-03-310000899749hr:StockIncentivePlanMembersrt:MaximumMemberus-gaap:PerformanceSharesMember2020-01-012020-03-310000899749hr:StockIncentivePlanMembersrt:MaximumMemberus-gaap:PerformanceSharesMember2019-01-012019-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:WeightedAverageMember2019-01-012019-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:WeightedAverageMember2020-01-012020-03-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:OfficerMember2020-01-012020-12-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:OfficerMember2019-01-012019-12-310000899749hr:StockIncentivePlanMemberus-gaap:PerformanceSharesMembersrt:OfficerMember2018-01-012018-12-310000899749hr:SalaryDeferralPlanMember2020-12-310000899749hr:SalaryDeferralPlanMemberhr:DeferralOptionOneMember2020-01-012020-12-310000899749hr:DeferralOptionOneMember2020-01-012020-12-310000899749hr:SalaryDeferralPlanMemberhr:DeferralOptionTwoMember2020-01-012020-12-310000899749hr:DeferralOptionTwoMember2020-01-012020-12-310000899749hr:SalaryDeferralPlanMemberhr:DeferralOptionThreeMember2020-01-012020-12-310000899749hr:DeferralOptionThreeMember2020-01-012020-12-310000899749hr:SalaryDeferralPlanMember2020-01-012020-12-310000899749hr:SalaryDeferralPlanMember2019-01-012019-12-310000899749hr:SalaryDeferralPlanMember2018-01-012018-12-310000899749hr:StockIncentivePlanMembersrt:DirectorMember2020-01-012020-12-310000899749hr:StockIncentivePlanMembersrt:DirectorMember2019-01-012019-12-310000899749hr:StockIncentivePlanMembersrt:DirectorMember2018-01-012018-12-31hr:award0000899749hr:StockIncentivePlanMembersrt:ExecutiveOfficerMember2016-01-012016-12-310000899749hr:StockIncentivePlanMembersrt:ExecutiveOfficerMember2020-01-012020-12-310000899749hr:StockIncentivePlanMembersrt:ExecutiveOfficerMember2019-01-012019-12-310000899749hr:StockIncentivePlanMembersrt:ExecutiveOfficerMember2018-01-012018-12-310000899749hr:StockIncentivePlanMember2019-12-310000899749hr:StockIncentivePlanMember2018-12-310000899749hr:StockIncentivePlanMember2017-12-310000899749hr:StockIncentivePlanMember2020-01-012020-12-310000899749hr:StockIncentivePlanMember2019-01-012019-12-310000899749hr:StockIncentivePlanMember2018-01-012018-12-310000899749hr:StockIncentivePlanMember2020-12-310000899749hr:StockIncentivePlanMembersrt:MinimumMemberhr:RestrictedStockAndPerformanceBasedAwardsMember2020-01-012020-12-310000899749hr:StockIncentivePlanMembersrt:MaximumMemberhr:RestrictedStockAndPerformanceBasedAwardsMember2020-01-012020-12-310000899749hr:StockIncentivePlanMemberhr:RestrictedStockAndPerformanceBasedAwardsMember2020-01-012020-12-310000899749hr:DividendReinvestmentPlanMember2020-12-310000899749hr:DividendReinvestmentPlanMember2020-01-012020-12-310000899749hr:DividendReinvestmentPlanMember2019-01-012019-12-310000899749hr:DividendReinvestmentPlanMember2018-01-012018-12-310000899749us-gaap:EmployeeStockMember2020-01-012020-12-310000899749us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeStockMember2020-01-012020-12-310000899749us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeStockMember2019-01-012019-12-310000899749us-gaap:GeneralAndAdministrativeExpenseMemberus-gaap:EmployeeStockMember2018-01-012018-12-310000899749us-gaap:EmployeeStockMember2019-01-012019-12-310000899749us-gaap:EmployeeStockMember2018-01-012018-12-310000899749us-gaap:EmployeeStockMember2019-12-310000899749us-gaap:EmployeeStockMember2018-12-310000899749us-gaap:EmployeeStockMember2017-12-310000899749us-gaap:EmployeeStockMember2020-12-310000899749hr:MedicalOfficeBuildingExpansionMemberhr:MemphisTennesseeMember2019-12-310000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2020-01-012020-12-310000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingExpansionMember2020-12-310000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMember2020-01-012020-12-310000899749hr:NashvilleTennesseeMemberhr:TenantImprovementAllowancesMemberhr:MedicalOfficeBuildingMember2020-01-012020-12-310000899749stpr:NChr:TenantImprovementAllowancesMemberhr:MedicalOfficeBuildingMember2020-01-012020-12-310000899749stpr:WAhr:MedicalOfficeBuildingMember2020-12-310000899749stpr:WAhr:MedicalOfficeBuildingMember2020-01-012020-12-310000899749hr:TenantImprovementAllowancesMemberhr:MedicalOfficeBuildingMemberstpr:CO2020-01-012020-12-310000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2020-12-310000899749hr:DallasTexasMemberhr:MedicalOfficeBuildingMember2020-12-310000899749hr:MedicalOfficeBuildingMemberhr:MemphisTennesseeMember2019-12-310000899749hr:TenantImprovementAllowancesMemberhr:FirstandSecondGenerationLeasesMember2020-12-310000899749us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310000899749us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310000899749us-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310000899749us-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000899749us-gaap:AllowanceForCreditLossMember2019-12-310000899749us-gaap:AllowanceForCreditLossMember2020-01-012020-12-310000899749us-gaap:AllowanceForCreditLossMember2020-12-310000899749us-gaap:AllowanceForCreditLossMember2018-12-310000899749us-gaap:AllowanceForCreditLossMember2019-01-012019-12-310000899749us-gaap:AllowanceForCreditLossMember2017-12-310000899749us-gaap:AllowanceForCreditLossMember2018-01-012018-06-30hr:Property0000899749stpr:WAus-gaap:RealEstateMember2020-12-310000899749hr:DallasTexasMemberus-gaap:RealEstateMember2020-12-310000899749hr:LosAngelesCaliforniaMemberus-gaap:RealEstateMember2020-12-310000899749stpr:GAus-gaap:RealEstateMember2020-12-310000899749hr:NashvilleTennesseeMemberus-gaap:RealEstateMember2020-12-310000899749stpr:COus-gaap:RealEstateMember2020-12-310000899749stpr:NCus-gaap:RealEstateMember2020-12-310000899749hr:HoustonTexasMemberus-gaap:RealEstateMember2020-12-310000899749stpr:DCus-gaap:RealEstateMember2020-12-310000899749stpr:VAus-gaap:RealEstateMember2020-12-310000899749stpr:HIus-gaap:RealEstateMember2020-12-310000899749stpr:IAus-gaap:RealEstateMember2020-12-310000899749hr:MemphisTennesseeMemberus-gaap:RealEstateMember2020-12-310000899749hr:SanFranciscoCaliforniaMemberus-gaap:RealEstateMember2020-12-310000899749stpr:INus-gaap:RealEstateMember2020-12-310000899749hr:AustinTexasMemberus-gaap:RealEstateMember2020-12-310000899749hr:SanAntonioTexasMemberus-gaap:RealEstateMember2020-12-310000899749stpr:ILus-gaap:RealEstateMember2020-12-310000899749hr:GreensboroNCMemberus-gaap:RealEstateMember2020-12-310000899749hr:ColoradoSpringsCOMemberus-gaap:RealEstateMember2020-12-310000899749stpr:MNus-gaap:RealEstateMember2020-12-310000899749hr:OtherStateMemberus-gaap:RealEstateMember2020-12-310000899749us-gaap:RealEstateMember2020-12-310000899749us-gaap:LandAndLandImprovementsMember2020-12-310000899749hr:MemphisRedevelopmentMember2020-12-310000899749hr:CorporatePropertyMember2020-12-310000899749us-gaap:WhollyOwnedPropertiesMember2020-12-310000899749us-gaap:RealEstateMember2020-01-012020-12-310000899749us-gaap:RealEstateMember2019-01-012019-12-310000899749us-gaap:RealEstateMember2018-01-012018-06-300000899749us-gaap:BuildingImprovementsMember2020-01-012020-12-310000899749us-gaap:BuildingImprovementsMember2019-01-012019-12-310000899749us-gaap:BuildingImprovementsMember2018-01-012018-06-300000899749hr:LandHeldForDevelopmentMember2020-01-012020-12-310000899749hr:LandHeldForDevelopmentMember2019-01-012019-12-310000899749hr:LandHeldForDevelopmentMember2018-01-012018-12-310000899749hr:LandHeldForDevelopmentMember2018-01-012018-06-300000899749us-gaap:ConstructionInProgressMember2020-01-012020-12-310000899749us-gaap:ConstructionInProgressMember2019-01-012019-12-310000899749us-gaap:ConstructionInProgressMember2018-01-012018-06-30

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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period             to
Commission File Number: 001-11852
HEALTHCARE REALTY TRUST INCORPORATED
(Exact name of Registrant as specified in its charter)
Maryland62-1507028
(State or other jurisdiction of
Incorporation or organization)
(I.R.S. Employer
Identification No.)
3310 West End Avenue
Suite 700
Nashville, Tennessee 37203
(Address of principal executive offices)
(615) 269-8175
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common stock, $0.01 par value per shareHRNew York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☒    No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐    No  ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b -2 of the Exchange Act.:
    Large accelerated filer ☒        Accelerated filer ☐        
    Non-accelerated filer ☐        Smaller reporting company
            Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes      No  ☒
Indicate by check mark whether the registrant has filed a report on and attestation to management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15- U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes      No  ☐
The aggregate market value of the shares of common stock of the Registrant (based upon the closing price of these shares on the New York Stock Exchange on June 30, 2020) held by non-affiliates on June 30, 2020 was $3,924,386,705.
As of February 5, 2021, there were 139,746,677 shares of the Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 11, 2021 are incorporated by reference into Part III of this Report.



Table of Contents
HEALTHCARE REALTY TRUST INCORPORATED
FORM 10-K
December 31, 2020


    Table of Contents
    
SIGNATURES AND SCHEDULES
 



Table of Contents
PART I
Item 1. Business
Healthcare Realty Trust Incorporated (“Healthcare Realty,” the “Company,” "we," "us," and "our") is a self-managed and self-administered 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. The Company was incorporated in Maryland in 1992 and listed on the New York Stock Exchange in 1993.
The Company operates so as to qualify as a REIT for federal income tax purposes. As a REIT, the Company is not subject to corporate federal income tax with respect to taxable income distributed to its stockholders. See “Risk Factors” in Item 1A for a discussion of risks associated with qualifying as a REIT.

Real Estate Properties
The Company had gross investments of approximately $4.6 billion in 223 real estate properties, construction in progress, redevelopments, land held for development and corporate property as of December 31, 2020. In addition, the Company formed an unconsolidated joint venture in 2020 with Teachers Insurance and Annuity Association ("TIAA"), described in more detail below (the "TIAA Joint Venture"). The Company is the managing member of the unconsolidated joint venture that owns four buildings. The Company provided property management services for 172 properties nationwide, totaling approximately 12.6 million square feet as of December 31, 2020. The Company’s real estate property investments by geographic area are detailed in Note 2 to the Consolidated Financial Statements. The following table details the Company's owned properties by facility type as of December 31, 2020:
 December 31, 2020
Dollars and square feet in thousandsGROSS INVESTMENTSQUARE FEETNUMBER OF PROPERTIES
OCCUPANCY 1
Medical office/outpatient$4,312,866 15,330 216 86.8 %
Inpatient111,148 219 100.0 %
Office143,019 558 82.6 %
4,567,033 16,107 223 86.8 %
Land held for development27,226 
Redevelopment properties21,650 
Corporate property5,504 
Total real estate properties4,621,413 
Unconsolidated joint ventures 2
73,137 325 72.4 %
Total investments$4,694,550 16,432 227 86.6 %
1The occupancy column represents the percentage of total rentable square feet leased (including month-to-month and holdover leases), excluding four properties classified as held for sale as of December 31, 2020.
2Gross investment includes the Company's pro rata share of unconsolidated joint ventures. Square feet has not been adjusted by the Company's ownership percentage.
Financial Concentrations
The Company’s real estate portfolio is leased to a diverse tenant base. For the year ended December 31, 2020, the Company did not have any tenants that accounted for 10% or more of the Company’s consolidated revenues. See Note 2 to the Consolidated Financial Statements for additional information regarding the Company's gross investments by geographic market.



1



Table of Contents
Expiring Leases
As of December 31, 2020, the weighted average remaining years to expiration pursuant to the Company’s leases was approximately 3.8 years, with expirations through 2040. The table below details the Company’s lease expirations as of December 31, 2020, excluding four properties classified as held for sale and unconsolidated joint ventures.
EXPIRATION YEARNUMBER OF LEASESLEASED
SQUARE FEET
PERCENTAGE
OF LEASED
SQUARE FEET
2021 (1)
739 2,566,752 18.3 %
2022542 1,896,000 13.6 %
2023470 1,850,456 13.2 %
2024436 2,109,274 15.1 %
2025378 1,820,640 13.0 %
2026143 552,861 4.0 %
2027120 731,521 5.2 %
2028118 729,123 5.2 %
2029112 938,850 6.7 %
2030105 429,243 3.1 %
Thereafter77 363,894 2.6 %
3,240 13,988,614 100.0 %
1Includes 64 leases totaling 225,054 square feet that expired prior to December 31, 2020 and were on month-to-month terms.

See "Trends and Matters Impacting Operating Results" as part of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this report for additional information regarding the Company's leases and leasing efforts.

Liquidity
The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company expects to meet its liquidity needs through cash on hand, cash flows from operations, property dispositions, equity and debt issuances in the public or private markets and borrowings under commercial credit facilities.

Business Strategy
The Company owns and operates properties that facilitate the delivery of healthcare services in primarily outpatient settings. To execute its strategy, the Company engages in a broad spectrum of integrated services including leasing, management, acquisition, development and redevelopment of such properties. The Company seeks to generate stable, growing income and lower the long-term risk profile of its portfolio of properties by focusing on facilities primarily located on or near the campuses of acute care hospitals associated with leading health systems. The Company seeks to reduce financial and operational risk by owning properties in high-growth markets with a broad tenant mix that includes over 30 physician specialties, as well as surgery, imaging, cancer, and diagnostic centers.

2020 Investment Activity
During 2020, the Company acquired 25 medical office buildings for purchase prices totaling $421.0 million. The weighted average capitalization rate for these investments was 5.6%. The Company calculates the capitalization rate for an acquisition as the forecasted first year cash net operating income divided by the purchase price. The Company also acquired three land parcels for purchase prices totaling $5.1 million.
During 2020, the Company entered into the TIAA Joint Venture to invest in a broad range of medical office buildings. The Company has a 50% ownership in the TIAA Joint Venture and is the managing member. The TIAA Joint Venture is not consolidated for purposes of the Company's Consolidated Financial Statements. As of December 31, 2020, the TIAA Joint Venture had acquired four medical office buildings for purchase prices totaling $125.9 million. The weighted average capitalization rate for these investments was 5.3%.


2



Table of Contents
The Company disposed of three properties during 2020 for sales prices totaling $249.5 million. The weighted average capitalization rate for these properties was 7.4%. The Company calculates the capitalization rate for dispositions as the in-place cash net operating income divided by the sales price.
In 2020, the Company funded $26.5 million toward development and redevelopment of six properties.
See the Company's discussion regarding the 2020 acquisitions, joint venture and dispositions activity in Note 4 to the Consolidated Financial Statements and development activity in Note 14 to the Consolidated Financial Statements. Also, please refer to the Company's discussion in "Trends and Matters Impacting Operating Results" as part of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this report.

Competition
The Company competes for the acquisition and development of real estate properties with private investors, healthcare providers, other REITs, real estate partnerships and financial institutions, among others. The business of acquiring and developing new healthcare facilities is highly competitive and is subject to price, construction and operating costs, and other competitive pressures. Some of the Company's competitors may have lower costs of capital.
The financial performance of all of the Company’s properties is subject to competition from similar properties. The extent to which the Company’s properties are utilized depends upon several factors, including the number of physicians using or referring patients to an associated healthcare facility, healthcare employment, competitive systems of healthcare delivery, and the area’s population, size and composition. Private, federal and state health insurance programs and other laws and regulations may also have an effect on the utilization of the properties. The Company’s properties operate in a competitive environment, and patients and referral sources, including physicians, may change their preferences for a healthcare facility from time to time.

Government Regulation
The facilities owned by the Company are utilized by medical tenants which are required to comply with extensive regulation and legislation at the federal, state and local levels, including, but not limited to, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), the Bipartisan Budget Act of 2015, the Medicare Access and CHIP Modernization Act of 2015, and laws intended to combat fraud and waste such as the Anti-Kickback Statute, Stark Law, False Claims Act and Health Insurance Portability and Accountability Act of 1996. These laws and regulations establish, among other things, requirements for state licensure and criteria for medical tenants to participate in government-sponsored reimbursement programs, including the Medicare and Medicaid programs. The Company's leases generally require the tenant to comply with all applicable laws relating to the tenant's use and occupation of the leased premises. Although lease payments to the Company are not directly affected by these laws and regulations, changes in these programs or the loss by a tenant of its license or ability to participate in government-sponsored reimbursement programs could have a material adverse effect on the tenant's ability to make lease payments to the Company.
The negative financial impact on healthcare providers from COVID-19 in 2020 was substantial, offset, in part, by government relief funding, which included provider payroll and rent subsidies, higher Medicare reimbursement rates, and Medicare payment advancement loans under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) of 2020. Elective procedures for the Company’s tenants were limited at various times during 2020, especially in March and April. While the majority of the Company’s tenants are returning to normal business operations, the ongoing impact from COVID-19 could adversely affect tenants’ ability to make lease payments to the Company.
Government healthcare programs have increased over time as a significant percentage of the U.S. population’s health insurance coverage. The Medicare and Medicaid programs are highly regulated and subject to frequent evaluation and change. Changes from year to year in reimbursement methodology, rates and other regulatory requirements may cause the profitability of providing care to Medicare and Medicaid patients to decline, which could adversely affect tenants' ability to make lease payments to the Company.


3



Table of Contents
The Centers for Medicare and Medicaid Services ("CMS") continued to adjust Medicare payment rates in 2020 to implement site-neutral payment policies. These changes have lowered Medicare payments for services delivered in off-campus hospital outpatient departments in an effort to lessen reimbursement disparity in off-campus medical office and outpatient facilities. The Company’s medical office buildings that are located on hospital campuses could become more valuable as hospital tenants will keep their higher Medicare rates for on-campus outpatient services. However, the Company has not seen a measurable impact from site-neutral Medicare payment policy, positively or negatively. The Company cannot predict the amount of benefit from these measures or if other federal health policy will ultimately require cuts to reimbursement rates for services provided in other settings. The Company cannot predict the degree to which these changes, or changes to federal healthcare programs in general, may affect the economic performance of some or all of the Company's tenants, positively or negatively.
Since 2018, physicians have been required to report patient data on quality and performance measures that began to affect their Medicare payments in 2020. Implementation of the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and the ongoing debate over the most effective payment system to use to promote value-based reimbursement, present the industry and its individual participants with uncertainty and financial risk. The Company cannot predict the degree to which any such changes may affect the economic performance of the Company's tenants or, indirectly, the Company.
Legislative Developments
Taxation of Dividends
The Tax Cuts and Jobs Act of 2017 generally allows a deduction for individuals equal to 20% of certain income from pass-through entities, including ordinary dividends distributed by a REIT (excluding capital gain dividends and qualified dividend income). In addition, the deduction for ordinary REIT dividends is not subject to the wage and tax basis limitations applicable to the deduction for other qualifying pass-through income. The Tax Cuts and Jobs Act of 2017 was a far-reaching and complex revision to the existing U.S. federal income tax laws and will require subsequent rulemaking and interpretation in a number of areas. As a result, the long-term impact of the Tax Reform Legislation cannot be reliably predicted. Further, many of the provisions of this act will expire in 2025, unless extended by legislative action.

Healthcare
Each year, legislative proposals for health policy are introduced in Congress and state legislatures, and regulatory changes are proposed and enacted by government agencies. These proposals, individually or in the aggregate, could significantly change the delivery of healthcare services, either nationally or at the state level, if implemented. Examples of significant legislation or regulatory action recently proposed, enacted, or in the process of implementation include:
the CARES Act, along with subsequent stimulus and COVID-19 relief bills, provided federal relief funding and financial aid to businesses, individuals, and healthcare providers impacted by COVID-19, including higher Medicare reimbursement rates, forgiveness of small business loans to providers for payroll and rent, and additional resources for testing, vaccine development and distribution;
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 the tax penalty for the Affordable Care Act’s individual health insurance mandate;
the expansion of Medicaid benefits and health insurance exchanges established by the Affordable Care Act, whether run by the state or by the federal government, whereby individuals and small businesses purchase health insurance, many assisted by federal subsidies that are subject to ongoing legal challenges and consideration for legislative action;
various state legislature proposals for state-funded single-payer health insurance and a limit on allowable rates of reimbursement to healthcare providers;


4



Table of Contents
the implementation of 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, comparative effectiveness research, and lower payments for hospital readmissions;
MACRA, which requires quality reporting and a transition toward value-based reimbursement models for Medicare payments to physicians;
annual regulatory updates to Medicare policy for healthcare providers that can broadly change reimbursement methodology under budget-neutral guidelines, with the effect of lowering payments for some services and increasing payments for others, having a varying impact, positively or negatively, on providers;
equalization of Medicare payment rates across different facility-type settings, according to Section 603 of the Bipartisan Budget Act of 2015, which 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 CMS rule for hospital outpatient department Medicare payments in 2020 expanded site-neutral payments to clinic visits in previously-grandfathered off-campus facilities;
the continued adoption by providers of federal standards for the meaningful-use of electronic health records;
reforms to the physician self-referral laws, commonly referred to as the Stark Law, were adjusted in 2020 in order to promote the transition toward value-based, coordinated care among providers, although clear intent to boost referrals could still yield provider penalties;
consideration of broad reforms to Medicare and Medicaid, including a significant expansion of Medicare coverage to the greater U.S. population;
regulations requiring the publication of hospital prices for certain services, as well as hospitals’ negotiated rates with insurers for these services;
limits on price increases in pharmaceutical drugs and the cost to Medicare beneficiaries, including the potential for setting prices according to an international standard; and
the prohibition of “surprise billing,” or high payment rates charged to consumers for out-of-network physician services.

The Company cannot predict whether any proposals, rulings, or legislation will be fully implemented, adopted, repealed, or amended, or what effect, whether positive or negative, such developments might have on the Company's business.

Environmental Matters
Under various federal, state and local environmental laws, ordinances and regulations, an owner of real property (such as the Company) may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, under, or disposed of in connection with such property, as well as certain other potential costs (including government fines and injuries to persons and adjacent property) relating to hazardous or toxic substances. Most, if not all, of these laws, ordinances and regulations contain stringent enforcement provisions including, but not limited to, the authority to impose substantial administrative, civil, and criminal fines and penalties upon violators. Such laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances, and liability may be imposed on the owner in connection with the activities of a tenant or operator of the property. The cost of any required remediation, removal, fines or personal or property damages and the owner’s liability therefore could exceed the value of the property and/or the aggregate assets of the owner. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the owner’s ability to sell or lease such property or to borrow using such property as collateral. A property can also be negatively impacted either through physical contamination, or by virtue of an adverse effect on value, from contamination that has or may have emanated from other properties.
Operations of the properties owned, developed or managed by the Company are and will continue to be subject to numerous federal, state, and local environmental laws, ordinances and regulations, including those relating to the


5



Table of Contents
following: the generation, segregation, handling, packaging and disposal of medical wastes; air quality requirements related to operations of generators, incineration devices, or sterilization equipment; facility siting and construction; disposal of non-medical wastes and ash from incinerators; and underground storage tanks. Certain properties owned, developed or managed by the Company contain, and others may contain or at one time may have contained, underground storage tanks that are or were used to store waste oils, petroleum products or other hazardous substances. Such underground storage tanks can be the source of releases of hazardous or toxic materials. Operations of nuclear medicine departments at some properties also involve the use and handling, and subsequent disposal of, radioactive isotopes and similar materials, activities which are closely regulated by the Nuclear Regulatory Commission and state regulatory agencies. In addition, several of the Company's properties were built during the period that asbestos was commonly used in building construction and other such facilities may be acquired by the Company in the future. The presence of such materials could result in significant costs in the event that any asbestos-containing materials requiring immediate removal and/or encapsulation are located in or on any facilities or in the event of any future renovation activities.
The Company has had environmental site assessments conducted on substantially all of the properties that it currently owns. These site assessments are limited in scope and provide only an evaluation of potential environmental conditions associated with the property, not compliance assessments of ongoing operations. While it is the Company’s policy to seek indemnification from tenants relating to environmental liabilities or conditions, even where leases do contain such provisions, there can be no assurance that the tenant will be able to fulfill its indemnification obligations. In addition, the terms of the Company’s leases do not give the Company control over the operational activities of its tenants or healthcare operators, nor will the Company monitor the tenants or healthcare operators with respect to environmental matters.
Human Capital Resources
We believe our employees are a critical component to achievement of our business objectives and recognition as a trusted owner and operator of medical office properties. At December 31, 2020, the Company employed 308 people. Our employees are comprised of accountants, maintenance engineers, property managers, leasing personnel, architects, administrative staff, an investments team, and the corporate management team. By supporting, recognizing, and investing in our employees, we believe that we are able to attract and retain the highest quality talent. To measure employee retention, the Company set voluntary turnover goals of less than 5% for officers and less than 11% for employees, based on a three year average, and the Company is achieving these goals. We are committed to fostering, cultivating, and preserving a culture of diversity and inclusion. We embrace employee differences in race, color, religion, sex, sexual orientation, national origin, age, disability, veteran status, and other characteristics that make our employees unique.
To retain talented employees that contribute to the Company’s strategic objectives, we offer an attractive set of employee benefits, including:
Health benefits and 401(k) starting on the first day of employment;
Auto-enrollment of new employees in our 401(k) plan at 3%;
Dollar-for-dollar match on 401(k) contributions up to $2,800, encouraging higher employee savings;
100% of long-term disability and life insurance premiums paid;
Employee stock purchase plan providing a 15% discount for all employees; and
Tuition reimbursement up to $3,000 annually for any employee pursuing higher education.
In addition, we are committed to supporting the performance and career development of all employees, from encouraging staff accountants to sit for the CPA exam to supporting our maintenance engineers in earning various certifications. As owners and operators of medical real estate, we recognize the value of health and wellbeing among our own employees by providing opportunities for engagement and balance. As we have for many years, Healthcare Realty provides corporate employees with gym membership discounts to encourage fitness. In addition, we offer resources and informational sessions that provide our employees with tools to enhance their wellbeing. Additional


6



Table of Contents
information regarding employee and community engagement is available in the 2020 Corporate Responsibility Report, which is posted on the Company's website (www.healthcarerealty.com).

Available Information
The Company makes available to the public free of charge through its website the Company’s Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company electronically files such reports with, or furnishes such reports to, the Securities and Exchange Commission ("SEC"). The Company’s website address is www.healthcarerealty.com.

Corporate Governance Principles
The Company has adopted Corporate Governance Principles relating to the conduct and operations of the Board of Directors. The Corporate Governance Principles are posted on the Company’s website (www.healthcarerealty.com) and are available in print to any stockholder who requests a copy.

Committee Charters
The Board of Directors has an Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Executive Committee. The Board of Directors has adopted written charters for each committee, except for the Executive Committee, which are posted on the Company’s website (www.healthcarerealty.com) and are available in print to any stockholder who requests a copy.

Executive Officers
Information regarding the executive officers of the Company is set forth in Part III, Item 10 of this report and is incorporated herein by reference.

Sustainability Reporting
Information regarding the Company's sustainability principles and policies and the 2020 Corporate Responsibility Report are posted on the Company's website (www.healthcarerealty.com).

Item 1A. Risk Factors
The following are some of the risks and uncertainties that could negatively affect the Company’s consolidated financial condition, results of operations, business and prospects. These risk factors are grouped into three categories: risks relating to the Company’s business and operations; risks relating to the Company’s capital structure and financings; and risks relating to government regulations.
These risks, as well as the risks described in Item 1 under the headings “Competition,” “Government Regulation,” “Legislative Developments,” and “Environmental Matters,” and in Item 7 under the heading “Disclosure Regarding Forward-Looking Statements,” should be carefully considered before making an investment decision regarding the Company. The risks and uncertainties described below are not the only ones facing the Company, and there may be additional risks that the Company does not presently know of or that the Company currently considers not likely to have a material impact. If any of the events underlying the following risks actually occurred, the Company’s business, consolidated financial condition, operating results and cash flows, including distributions to the Company's stockholders, could suffer, and the trading price of its common stock could decline.

Risk relating to our business and operations
The Company's expected results may not be achieved.
The Company's expected results may not be achieved, and actual results may differ materially from expectations. This may be the result of various factors, including, but not limited to: changes in the economy; the availability and cost of capital at favorable rates; increases in property taxes, utilities and other operating expenses; changes to facility-related healthcare regulations; changes in interest rates; competition for quality assets; negative


7



Table of Contents
developments in the operating results or financial condition of the Company's tenants, including, but not limited to, their ability to pay rent; the Company's ability to reposition or sell facilities with profitable results; the Company's ability to re-lease space at similar rates as vacancies occur; the Company's ability to timely reinvest proceeds from the sale of assets at similar yields; government regulations affecting tenants' Medicare and Medicaid reimbursement rates and operational requirements; unanticipated difficulties and/or expenditures relating to future acquisitions and developments; changes in rules or practices governing the Company's financial reporting; and other legal and operational matters.
The Company may from time to time decide to sell properties and may be required under purchase options to sell certain properties. The Company may not be able to reinvest the proceeds from sales 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 prices or at losses in the future.
The Company had approximately $96.9 million, or 2.1% of the Company’s real estate property investments, that were subject to purchase options held by lessees that were exercisable as of December 31, 2020. Other properties have purchase options that will become exercisable after 2020. Properties with purchase options exercisable in 2020 produced aggregate net operating income of approximately $7.9 million in 2020. The exercise of these purchase options exposes the Company to reinvestment risk and a reduction in investment return. Certain properties subject to purchase options may be purchased at rates of return above the rates of return the Company expects to achieve with new investments. If the Company is unable to reinvest the sale proceeds at rates of return equal to the return received on the properties that are sold, it may experience a decline in lease revenues and profitability and a corresponding material adverse effect on the Company’s consolidated financial condition and results of operations.
For more specific information concerning the Company’s purchase options, see “Purchase Options” in the “Trends and Matters Impacting Operating Results” as a part of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this report.

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.
The Company’s revenues are subject to the financial strength of its tenants and associated health systems. The Company has no operational control over the business of these tenants and associated health systems who face a wide range of economic, competitive, government reimbursement and regulatory pressures and constraints. Any slowdown in the economy, decline in the availability of financing from the capital markets, and changes in healthcare regulations may adversely affect the businesses of the Company’s tenants to varying degrees. Such conditions may further impact such tenants’ abilities to meet their obligations to the Company and, in certain cases, could lead to restructurings, disruptions, or bankruptcies of such tenants. In turn, these conditions could adversely affect the Company’s revenues and could increase allowances for losses and result in impairment charges, which could decrease net income attributable to common stockholders and equity, and reduce cash flows from operations.

The ongoing COVID-19 pandemic and other pandemics that may occur in the future and any measures intended to prevent their spread or mitigate their severity could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition.
The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. The outbreak of COVID-19 has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures, and restricting travel.
During 2020, all of the states and cities in which the Company owns properties, manages properties, and/or has development or redevelopment projects instituted quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue. As a result, a number of the Company's tenants temporarily closed their offices or clinical space or operated on a reduced basis in response to government requirements or recommendations. Many of these


8



Table of Contents
restrictions were lifted during 2020, but some restrictions are continuing into 2021 and more expansive restrictions could be reimposed at any time.
The COVID-19 pandemic has also caused, and is likely to continue to cause, severe economic, market and other disruptions worldwide. There can be no assurance that the Company's access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. In addition, the deterioration of economic conditions as a result of the pandemic may ultimately decrease occupancy levels and average rent per square foot across the Company's portfolio as tenants reduce or defer their spending.
The extent of the COVID-19 pandemic’s effect on the Company's operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, and the availability and effectiveness of vaccines, all of which are uncertain and difficult to predict.
Owning real estate and indirect interests in real estate is subject to inherent risks.
The Company’s operating performance and the value of its real estate assets are subject to the risk that if its properties do not generate revenues sufficient to meet its operating expenses, including debt service, the Company’s cash flow and ability to pay dividends to stockholders will be adversely affected.

The Company may incur impairment charges on its real estate properties or other assets.
The Company performs an impairment review on its real estate properties every year. In addition, the Company assesses the potential for impairment of identifiable intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the recorded value might not be fully recoverable. The decision to sell a property also requires the Company to assess the potential for impairment. At some future date, the Company may determine that an impairment has occurred in the value of one or more of its real estate properties or other assets. In such an event, the Company may be required to recognize an impairment which could have a material adverse effect on the Company’s consolidated financial condition and results of operations.
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 or make significant leasing concessions to attract new tenants, then the Company’s business, consolidated financial condition and results of operations would be adversely affected.
A portion of the Company’s leases will expire over the course of any year. For more specific information concerning the Company’s expiring leases, see "Multi-Tenant Leases" and "Single-Tenant Leases" in the "Trends and Matters Impacting Operating Results" as part of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this report. The Company may not be able to re-let space on terms that are favorable to the Company or at all. Further, the Company may be required to make significant capital expenditures to renovate or reconfigure space or make significant leasing concessions to attract new tenants.

Certain of the Company’s properties are special purpose healthcare facilities and may not be easily adaptable to other uses.
Some of the Company’s properties are specialized medical facilities. If the Company or the Company’s tenants terminate the leases for these properties or the Company’s tenants lose their regulatory authority to operate such properties, the Company may not be able to locate suitable replacement tenants to lease the properties for their specialized uses. Alternatively, the Company may be required to spend substantial amounts to adapt the properties to other uses. Any loss of revenues and/or additional capital expenditures occurring as a result may have a material adverse effect on the Company’s consolidated financial condition and results of operations.


9



Table of Contents

The Company has, and in the future may have more, 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 expense.
The Company receives a significant portion of its revenues by leasing assets subject to fixed rent escalations. Ninety-six percent of leases have increases that are based upon fixed percentages, three percent of leases have increases based on the Consumer Price Index and one percent have no increase. If the fixed percentage increases begin to lag behind inflation and operating expense growth, the Company's performance, growth, and profitability would be negatively impacted.

The Company’s real estate investments are illiquid and the Company may not be able to sell properties strategically targeted for disposition.
Because real estate investments are relatively illiquid, the Company’s ability to adjust its portfolio promptly in response to economic or other conditions is limited. Certain significant expenditures generally do not change in response to economic or other conditions, including debt service (if any), real estate taxes, and operating and maintenance costs. This combination of variable revenue and relatively fixed expenditures may result in reduced earnings and could have an adverse effect on the Company’s financial condition. In addition, the Company may not be able to sell properties targeted for disposition, including properties held for sale, due to adverse market conditions. This may negatively affect, among other things, the Company’s ability to sell properties on favorable terms, execute its operating strategy, repay debt, or pay dividends.

The Company is subject to risks associated with the development and redevelopment of properties.
The Company expects development and redevelopment of properties will continue to be a key component of its growth plans. The Company is subject to certain risks associated with the development and redevelopment of properties including the following:
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 may make material acquisitions and undertake developments and redevelopments that may involve the expenditure of significant funds and may not perform in accordance with management’s expectations.
The Company regularly pursues potential transactions to acquire, develop or redevelop real estate assets. Future acquisitions could require the Company to issue equity securities, incur debt or other contingent liabilities or amortize expenses related to other intangible assets, any of which could adversely impact the Company’s consolidated financial condition or results of operations. In addition, equity or debt financing required for such acquisitions may not be available at favorable times or rates.
The Company’s acquired, developed, redeveloped and existing real estate properties may not perform in accordance with management’s expectations because of many factors including the following:
The Company’s purchase price for acquired facilities may be based upon a series of market or building-specific judgments which may be incorrect;


10



Table of Contents
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.
Further, the Company can give no assurance that acquisition, development and redevelopment opportunities that meet management’s investment criteria will be available when needed or anticipated.

The Company is exposed to risks associated with geographic concentration.
As of December 31, 2020, the Company had investment concentrations of greater than 5% of its total investments in the Seattle, Washington (14.3%), Dallas, Texas (10.7%), Los Angeles, California (7.5%), and Atlanta, Georgia (6.5%) markets. These concentrations increase the exposure to adverse conditions that might affect these markets, including natural disasters, local economic conditions, local real estate market conditions, increased competition, state and local regulation (including property taxes) and other localized events or conditions.
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.
The Company’s revenue concentrations with tenants are diversified, with the largest revenue concentration relating to Baylor Scott & White Health and its affiliates, which accounted for 8.1% of the Company's consolidated revenues in 2020.
Most of the Company’s properties on or adjacent to hospital campuses are largely dependent on the viability of the health system’s campus where they are located, whether or not the hospital or health system is a tenant in such properties. The viability of these health systems depends on factors such as the quality and mix of healthcare services provided, competition, demographic trends in the surrounding community, market position and growth potential. If one of these hospitals is unable to meet its financial obligations, is unable to compete successfully, or is forced to close or relocate, the Company’s properties on or near such hospital campus could be adversely impacted.

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.
As of December 31, 2020, the Company had 105 properties that were held under ground leases, representing an aggregate gross investment of approximately $2.2 billion. The weighted average remaining term of the Company's ground leases is approximately 70.3 years, including renewal options. The Company’s ground lease agreements with hospitals and health systems typically contain restrictions that limit building occupancy to physicians on the medical staff of an affiliated hospital and prohibit tenants from providing services that compete with the services provided by the affiliated hospital. Ground leases may also contain consent requirements or other restrictions on sale or assignment of the Company’s leasehold interest, including rights of first offer and first refusal in favor of the lessor. These ground lease provisions may limit the Company’s ability to lease, sell, or obtain mortgage financing secured by such properties which, in turn, could adversely affect the income from operations or the proceeds received from a sale. As a ground lessee, the Company is also exposed to the risk of reversion of the property upon expiration of the ground lease term, or an earlier breach by the Company of the ground lease, which may have a material adverse effect on the Company’s consolidated financial condition and results of operations.

The Company may experience uninsured or underinsured losses.
The Company carries comprehensive liability insurance and property insurance covering its owned and managed properties. In addition, tenants under single-tenant leases are required to carry property insurance covering the Company’s interest in the buildings. Some types of losses may be uninsurable or too expensive to insure against. Insurance companies limit or exclude coverage against certain types of losses, such as losses due to named windstorms, terrorist acts, earthquakes, and toxic mold. Accordingly, the Company may not have sufficient insurance coverage against certain types of losses and may experience decreases in the insurance coverage available. Should an uninsured loss or a loss in excess of insured limits occur, the Company could lose all or a portion of the capital it has invested in a property, as well as the anticipated future revenue from the property. In such an event, the Company


11



Table of Contents
might remain obligated for any mortgage debt or other financial obligation related to the property. Further, if any of the Company's insurance carriers were to become insolvent, the Company would be forced to replace the existing coverage with another suitable carrier, and any outstanding claims would be at risk for collection. In such an event, the Company cannot be certain that the Company would be able to replace the coverage at similar or otherwise favorable terms.
The Company has obtained title insurance policies for each of its properties, typically in an amount equal to its original price. However, these policies may be for amounts less than the current or future values of our properties. In such an event, if there is a title defect relating to any of the Company's properties, it could lose some of the capital invested in and anticipated profits from such property. The Company cannot give assurance that material losses in excess of insurance proceeds will not occur in the future.

Damage from catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in losses to the Company.
Many of our properties are located in areas susceptible to revenue loss, cost increase, or damage caused by severe weather conditions or natural disasters such as wildfires, hurricanes, earthquakes, tornadoes and floods. The Company could experience losses to the extent that such damages exceed insurance coverage, cause an increase in insurance premiums, and/or a decrease in demand for properties located in such areas. In the event that climate change causes such catastrophic weather or other natural events to increase broadly or in localized areas, such costs and damages could increase above historic expectations. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve energy efficiency of our existing properties and could require the Company to spend more on development and redevelopment properties without a corresponding increase in revenue.

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.
The Company faces risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, persons inside the Company, or persons with access to systems inside the Company, and other significant disruptions of the Company's information technology ("IT") networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. The Company's IT networks and related systems are essential to the operation of its business and its ability to perform day-to-day operations (including managing building systems) and, in some cases, may be critical to the operations of certain of our tenants. Although the Company makes efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that these security measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventive measures, and it is therefore impossible to entirely mitigate the risk.
A security breach or other significant disruption involving the Company's IT network and related systems could:
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,


12



Table of Contents
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.
Although the Company carries cyber risk insurance, losses could exceed insurance coverage available and any or all of the foregoing could have a material adverse effect on the Company's consolidated financial condition and results of operations.
Government tenants may not receive annual budget appropriations, which could adversely affect their ability to pay the Company. 
The Company may lease to federal, state, and/or local government tenants from time to time. Such tenants may be subject to annual budget appropriations. If a government tenant fails to receive its annual budget appropriation, it might not be able to make its lease payments to the Company. In addition, defaults under leases with federal government tenants are governed by federal statute and not by state eviction or rent deficiency laws. Leases with government tenants typically provide that the government tenant may terminate the lease under certain circumstances.

Risks relating to our capital structure and financings
The Company has incurred significant debt obligations and may incur additional debt and increase leverage in the future.
As of December 31, 2020, the Company had approximately $1.6 billion of outstanding indebtedness excluding discounts, premiums and debt issuance costs. Covenants under the Amended and Restated Credit Agreement dated as of May 31, 2019, among the Company and Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders that are party thereto, as amended ("Unsecured Credit Facility"), the Amended and Restated Term Loan Agreement, dated as of May 31, 2019, among the Company, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders that are party thereto, as amended (the "Unsecured Term Loan due 2024" and "Unsecured Term Loan due 2026") and the indentures governing the Company's senior notes permit the Company to incur substantial, additional debt, and the Company may borrow additional funds, which may include secured borrowings. A high level of indebtedness would require the Company to dedicate a substantial portion of its cash flows from operations to service debt, thereby reducing the funds available to implement the Company's business strategy and to make distributions to stockholders. A high level of indebtedness could also:
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;
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.
In addition, from time to time, the Company secures mortgage financing or assumes mortgages to partially fund its investments. If the Company is unable to meet its mortgage payments, then the encumbered properties could be foreclosed upon or transferred to the mortgagee with a consequent loss of income and asset value. A foreclosure on


13



Table of Contents
one or more of the Company's properties could have a material adverse effect on the Company’s consolidated financial condition and results of operations.
The Company generally does not intend to reserve funds to retire existing debt upon maturity. The Company may not be able to repay, refinance, or extend any or all of our debt at maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense could adversely affect the Company's financial condition and results of operations. Any such refinancing could also impose tighter financial ratios and other covenants that restrict the Company's ability to take actions that could otherwise be in its best interest, such as funding new development activity, making opportunistic acquisitions, or paying dividends.

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.
The terms of the Unsecured Credit Facility, the Unsecured Term Loan due 2024 and the Unsecured Term Loan due 2026, the indentures governing the Company’s outstanding senior notes and other debt instruments that the Company may enter into in the future are subject to customary financial and operational covenants. These provisions include, among other things: a limitation on the incurrence of additional indebtedness; limitations on mergers, investments, acquisitions, redemptions of capital stock, and transactions with affiliates; and maintenance of specified financial ratios. The Company’s continued ability to incur debt and operate its business is subject to compliance with these covenants, which limit operational flexibility. Breaches of these covenants could result in defaults under applicable debt instruments, even if payment obligations are satisfied. Financial and other covenants that limit the Company’s operational flexibility, as well as defaults resulting from a breach of any of these covenants in its debt instruments, could have a material adverse effect on the Company’s consolidated financial condition and results of operations.
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.
Access to external capital on favorable terms is critical to the Company’s success in growing and maintaining its portfolio. If financial institutions within the Unsecured Credit Facility were unwilling or unable to meet their respective funding commitments to the Company, any such failure would have a negative impact on the Company’s operations, consolidated financial condition and ability to meet its obligations, including the payment of dividends to stockholders.

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.
A REIT is required by the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), to make dividend distributions, thereby retaining less of its capital for growth. As a result, a REIT typically requires new capital to invest in real estate assets. However, there may be times when the Company will have limited access to capital from the equity and/or debt markets. Changes in the Company’s debt ratings could have a material adverse effect on its interest costs and financing sources. The Company’s debt rating can be materially influenced by a number of factors including, but not limited to, acquisitions, investment decisions, and capital management activities. In recent years, the capital and credit markets have experienced volatility and at times have limited the availability of funds. The Company’s ability to access the capital and credit markets may be limited by these or other factors, which could have an impact on its ability to refinance maturing debt, fund dividend payments and operations, acquire healthcare properties and complete development and redevelopment projects. If the Company is unable to refinance or extend principal payments due at maturity of its various debt instruments, its cash flow may not be sufficient to repay maturing debt or make dividend payments to stockholders. If the Company defaults in paying any of its debts or satisfying its debt covenants, it could experience cross-defaults among debt instruments, the debts could be accelerated and the Company could be forced to liquidate assets for less than the values it would otherwise receive.
Further, the Company obtains credit ratings from various credit-rating agencies based on their evaluation of the Company's credit. These agencies' ratings are based on a number of factors, some of which are not within the Company's control. In addition to factors specific to the Company's financial strength and performance, the rating agencies also consider conditions affecting REITs generally. The Company's credit ratings could be downgraded. If


14



Table of Contents
the Company's credit ratings are downgraded or other negative action is taken, the Company could be required, among other things, to pay additional interest and fees on borrowings under the Unsecured Credit Facility, Unsecured Term Loan due 2024 and the Unsecured Term Loan due 2026.

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. Such changes could adversely impact the Company's ability to refinance existing debt, sell assets or engage in acquisition and development activity.
A significant portion of the Company’s debt is subject to floating rates, based on LIBOR or other indices. LIBOR and other interest benchmarks may be subject to regulatory reform that could cause fluctuations in interest rates under the Company's debt agreements that are unanticipated. The United Kingdom's Financial Conduct Authority, which regulates LIBOR, has announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR rates after 2021. Recently, the administrator of LIBOR announced extensions of certain USD LIBOR rates to June 2023. It is unclear whether LIBOR will cease to exist or if new methods of calculating it will develop. The Company's existing and future debt agreements that are based on LIBOR could be adversely affected by such changes. The Unsecured Credit Facility, the Unsecured Term Loan due 2024, and the Unsecured Term Loan due 2026 contain provisions addressing the transition away from LIBOR that are intended to provide a mechanism for determining an alternate benchmark rate in the event that LIBOR becomes unavailable during the term of these loans. However, as there is yet to be a widely accepted alternate benchmark, these transitional provisions provide that the alternate benchmark will be selected by the parties in the future, subject to a determinative framework. There can be no certainty as of the date of this report as to the specific alternate benchmark that would be used.
In addition, the generally fixed nature of revenues and the variable rate of certain debt obligations create interest rate risk for the Company. Increases in interest rates could make the financing of any acquisition or investment activity more costly. Rising interest rates would increase the cost of borrowing under the Unsecured Credit Facility, the Unsecured Term Loan due 2024, and the Unsecured Term Loan due 2026, could limit the Company’s ability to refinance existing debt when it matures or cause the Company to pay higher rates upon refinancing. An increase in interest rates also could have the effect of reducing the amounts that third parties might be willing to pay for real estate assets, which could limit the Company’s ability to sell assets at times when it might be advantageous to do so.
The Company's swap agreements may not effectively reduce its exposure to changes in interest rates. 
The Company enters into swap agreements from time to time to manage some of its exposure to interest rate volatility. These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. In addition, these arrangements may not be effective in reducing the Company’s exposure to changes in interest rates. When the Company uses forward-starting interest rate swaps, there is a risk that it will not complete the long-term borrowing against which the swap is intended to hedge. If such events occur, the Company’s consolidated financial condition and results of operations may be adversely affected. See Note 10 to the Consolidated Financial Statements for additional information on the Company's interest rate swaps.
The Company has entered into joint venture agreements that limit its flexibility with respect to jointly owned properties and expects to enter into additional such agreements in the future.
As of December 31, 2020, the Company had investments of $73.1 million in unconsolidated joint ventures with unrelated third parties comprised of four properties and two parking garages. The Company may acquire, develop, or redevelop additional properties in joint ventures with unrelated third parties. In such investments, the Company is subject to risks that may not be present in its other forms of ownership, including:
joint venture partners could have financing and investment goals or strategies that are different than those of the Company, including terms and strategies for such investment and what levels of debt place on the venture;
the parties to a joint venture could reach an impasse on certain decisions, which could result in unexpected costs, including costs associated with litigation or arbitration;
joint venture partners could have investments that are competitive with the Company's properties in certain markets;
interests in joint ventures are often illiquid and the Company may have difficulty exiting such an investment, or may have to exit at less than fair market value;


15



Table of Contents
joint venture partners may be structured differently than the Company for tax purposes and there could be conflicts relating to the Company's REIT status; and
joint venture partners could become insolvent, fail to fund capital contributions, or otherwise fail to fulfill their obligations as a partner, which could require the Company to invest more capital into such ventures than anticipated.
Settlement provisions contained in a forward equity agreement could result in substantial dilution to the Company's earnings per share and return on equity or result in substantial cash payment obligations.
The Company has outstanding forward equity agreements and may enter into additional forward equity agreements in the future. Forward equity agreements typically provide that the relevant forward purchaser will have the right to accelerate that particular forward equity agreement (with respect to all or any portion of the transaction under that particular forward equity agreement that the relevant forward purchaser determines is affected by such event) and require us to settle on a date specified by the relevant forward purchaser if:
• the relevant forward purchaser is unable to establish, maintain or unwind its hedge position with respect to that particular forward equity agreement;
• a termination event occurs as a result of us declaring a dividend or distribution on our common stock with a cash value in excess of a specified amount per calendar quarter, or with an ex-dividend date prior to the anticipated ex-dividend date for such cash dividend;
• an extraordinary event (as such term is defined in that particular forward equity agreement and which includes certain mergers and tender offers and the delisting of our common stock) occurs or our board of directors votes to approve or there is a public announcement of, in either case, any action that, if consummated, would constitute such an extraordinary event; or
• certain other events of default, termination events, or other specified events occur, including, among other things, any material misrepresentation made by us in connection with entering into that particular forward equity agreement, or a nationalization, a bankruptcy termination event or a change in law (as such terms are defined in that particular forward equity agreement).
A forward purchaser’s decision to exercise its right to accelerate the settlement of a particular forward equity agreement will be made irrespective of the Company's need for capital. In such cases, we could be required to issue and deliver shares of common stock under the physical settlement provisions of that particular forward equity agreement or, if we so elect and the forward purchaser so permits our election, net share settlement provisions of that particular forward equity agreement irrespective of our capital needs, which would result in dilution to our earnings per share and return on equity.
We expect that settlement of any forward equity agreement will generally occur no later than the date specified in the particular forward equity agreement, which will generally be no later than twelve months following the trade date of that forward equity agreement. However, any forward equity agreement may be settled earlier than that specified date in whole or in part at our option. We expect that each forward equity agreement will be physically settled by delivery of shares of common stock unless we elect to cash settle or net share settle a particular forward equity agreement. Upon physical settlement or, if we so elect, net share settlement of a particular forward equity agreement, delivery of shares of common stock in connection with such physical settlement or net share settlement will result in dilution to our earnings per share and return on equity. If we elect cash settlement or net share settlement with respect to all or a portion of the shares of common stock underlying a particular forward equity agreement, we expect that the relevant forward purchaser (or an affiliate thereof) will purchase a number of shares of common stock necessary to satisfy its or its affiliate’s obligation to return the shares of common stock borrowed from third parties in connection with sales of shares of common stock under that forward equity agreement, adjusted in the case of net share settlement by any shares deliverable by or to us under the forward equity agreement. In addition, the purchase of shares of common stock in connection with the relevant forward purchaser or its affiliate unwinding its hedge positions could cause the price of shares of common stock to increase over such time (or prevent a decrease over such time), thereby increasing the amount of cash we would owe to the relevant forward purchaser (or decreasing the amount of cash that the relevant forward purchaser would owe us) upon a cash settlement of the relevant forward equity agreement or, in the event of net share settlement, increasing the number of shares of common stock we would


16



Table of Contents
deliver to the relevant forward purchaser (or decreasing the number of shares of common stock that the relevant forward purchaser would deliver to us).
The forward equity price that we expect to receive upon physical settlement of a particular forward equity agreement will be subject to adjustment on a daily basis based on a floating interest rate factor equal to a specified daily rate less a spread and will be decreased based on amounts related to expected dividends on shares of common stock during the term of the particular forward equity agreement. If the specified daily rate is less than the spread on any day, the interest factor will result in a daily reduction of the applicable forward equity price. If the market value of shares of common stock, determined in accordance with the terms of the relevant forward equity agreement, during the relevant valuation period under the particular forward equity agreement is above the applicable forward equity price, in the case of cash settlement, we would pay the relevant forward purchaser under that particular forward equity agreement an amount in cash equal to the difference or, in the case of net share settlement, we would deliver to the relevant forward purchaser a number of shares of common stock having a value, determined in accordance with the terms of the relevant forward equity agreement, equal to the difference. Thus, we could be responsible for a potentially substantial cash payment in the case of cash settlement of a particular forward equity agreement. If the market value of the Company’s common stock, determined in accordance with the terms of the relevant forward equity agreement, during the relevant valuation period under that particular forward equity agreement is below the applicable forward equity price, in the case of cash settlement, we would be paid the difference in cash by the relevant forward purchaser under that particular forward equity agreement or, in the case of net share settlement, we would receive from the relevant forward purchaser a number of shares of common stock having a value equal to the difference.
The U.S. federal income tax treatment of the cash that we might receive from cash settlement of a forward equity agreement is unclear and could jeopardize the Company's ability to meet the REIT qualification requirements.
In the event that we elect to settle any forward equity agreement for cash and the settlement price is below the applicable forward equity price, we would be entitled to receive a cash payment from the relevant forward purchaser. Under Section 1032 of the Internal Revenue Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a "securities futures contract" (as defined in the Internal Revenue Code, by reference to the Securities Exchange Act of 1934, as amended). Although we believe that any amount received by us in exchange for our stock would qualify for the exemption under Section 1032 of the Internal Revenue Code, because it is not entirely clear whether a forward equity agreement qualifies as a "securities futures contract," the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event that we recognize a significant gain from the cash settlement of a forward equity agreement, we might be unable to satisfy the gross income requirements applicable to REITs under the Internal Revenue Code. In that case, we may be able to rely upon the relief provisions under the Internal Revenue Code in order to avoid the loss of our REIT status. Even if the relief provisions apply, we will be subject to a 100% tax on the greater of (i) the excess of 75% of our gross income (excluding gross income from prohibited transactions) over the amount of such income attributable to sources that qualify under the 75% test or (ii) the excess of 95% of our gross income (excluding gross income from prohibited transactions) over the amount of such gross income attributable to sources that qualify under the 95% test, multiplied in either case by a fraction intended to reflect our profitability. In the event that these relief provisions were not available, we could lose our REIT status under the Internal Revenue Code.
In case of our bankruptcy or insolvency, any forward equity agreements will automatically terminate, and we would not receive the expected proceeds from any forward sale of shares of the Company’s common stock.
If we file for or consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or we or a regulatory authority with jurisdiction over us presents a petition for our winding-up or liquidation, and we consent to such a petition, any forward equity agreements that are then in effect will automatically terminate. If any such forward equity agreement so terminates under these circumstances, we would not be obligated to deliver to the relevant forward purchaser any shares of common stock not previously delivered, and the relevant forward purchaser would be discharged from its obligation to pay the applicable forward equity price per share in respect of any shares of common stock not previously settled under the applicable forward equity agreement. Therefore, to the extent that there are any shares of common stock with respect to which any forward equity agreement has not been settled at the time of the


17



Table of Contents
commencement of any such bankruptcy or insolvency proceedings, we would not receive the relevant forward equity price per share in respect of those shares of common stock.
Risks relating to government regulations

The Company's property taxes could increase due to reassessment or property tax rate changes.
Real property taxes on the Company's properties may increase as its properties are reassessed by taxing authorities or as property tax rates change. For example, a current California law commonly referred to as Proposition 13 generally limits annual real estate tax increases on California properties to 2% of assessed value. Accordingly, the assessed value and resulting property tax the Company pays is less than it would be if the properties were assessed at current values. The Company owns 22 properties in California, representing 9.6% of its total revenue. From time to time, proposals have been made to reduce the beneficial impact of Proposition 13, particularly with respect to commercial property, which would include medical office buildings. Most recently, an initiative qualified for California’s November 2020 statewide ballot that would generally limit Proposition 13’s protections to residential real estate. If this initiative had passed, it would have ended the beneficial effect of Proposition 13 for the Company's properties, and property tax expense could have increase substantially, adversely affecting the Company's cash flow from operations and net income. While this initiative did not pass, the Company cannot predict whether other changes to Proposition 13 may be proposed or adopted in the future.
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.
If a tenant loses its license or certification, becomes unable to provide healthcare services, cannot meet its financial obligations to the Company or otherwise vacates a facility, and the Company is unable to attract another healthcare provider on a timely basis and on acceptable terms, the Company’s cash flows and results of operations could suffer. Transfers of operations of healthcare facilities are often subject to regulatory approvals not required for transfers of other types of commercial operations and real estate.

Trends in the healthcare service industry may negatively affect the demand for the Company’s properties, lease revenues and the values of its investments.
The healthcare service industry may be affected by the following:
disruption in patient volume and revenue from the impact of COVID-19;
trends in the method of delivery of healthcare services, such as telehealth;
transition to value-based care and reimbursement of providers;
competition among healthcare providers;
consolidation among healthcare providers, health insurers, hospitals and health systems;
a rise in government-funded health insurance coverage;
pressure on providers' operating profit margins from lower reimbursement rates, lower admissions growth, and higher expense growth;
availability of capital;
credit downgrades;
liability insurance expense;
rising pharmaceutical drug expense;
regulatory and government reimbursement uncertainty related to the Medicare and Medicaid programs;
a trend toward government regulation of pharmaceutical pricing;
government regulation of hospitals' and health insurers' pricing transparency;
federal court decisions on cases challenging the legality of the Affordable Care Act, in whole or in part;
site-neutral rate-setting for Medicare services across different care settings;


18



Table of Contents
heightened health information technology security standards and the meaningful use of electronic health records by healthcare providers; and
potential tax law changes affecting providers.
These trends, among others, can adversely affect the economic performance of some or all of the tenants and, in turn, negatively affect the lease revenues and the value of the Company’s property investments.
The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations.
All real property and the operations conducted on real property are subject to federal, state, and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on tenants, owners, or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may hinder the Company's ability to sell, rent, or pledge such property as collateral for future borrowings.
Compliance with new laws or regulations or stricter interpretation of existing laws may require the Company to incur significant expenditures. For example, proposed legislation to address climate change could increase utility and other costs of operating the Company's properties. Future laws or regulations may impose significant environmental liability. Additionally, tenant or other operations in the vicinity of the Company's properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect the Company's properties. There are various local, state, and federal fire, health, life-safety, and similar regulations with which the Company may be required to comply and that may subject us to liability in the form of fines or damages for noncompliance. Any expenditures, fines, or damages that the Company must pay would adversely affect its results of operations.
Discovery of previously undetected environmentally hazardous conditions may adversely affect the Company's financial condition and results of operations. Under various federal, state, and local environmental laws and regulations, a current or previous property owner or operator may be liable for the cost to remove or remediate hazardous or toxic substances on such property. These costs could be significant. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require significant expenditures or prevent the Company from entering into leases with prospective tenants that may be impacted by such laws. Environmental laws provide for sanctions for noncompliance and may be enforced by governmental agencies or private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials. Third parties may seek recovery from real property owners or operators for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of complying with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could adversely affect the Company's financial condition and 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 intends to operate in a manner that will allow it to continue to qualify as a REIT for federal income tax purposes. Although the Company believes that it qualifies as a REIT, it cannot provide any assurance that it will continue to qualify as a REIT for federal income tax purposes. The Company’s continued qualification as a REIT will depend on the satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. The Company’s ability to satisfy the asset tests depends upon the characterization and fair market values of its assets. The Company’s compliance with the REIT income and quarterly asset requirements also depends upon the Company’s ability to successfully manage the composition of the Company’s income and assets on an ongoing basis. Accordingly, there can be no assurance that the Internal Revenue Service (“IRS”) will not contend that the Company has operated in a manner that violates any of the REIT requirements.
If the Company were to fail to qualify as a REIT in any taxable year, the Company would be subject to federal income tax on its taxable income at regular corporate rates and possibly increased state and local taxes (and the Company


19



Table of Contents
might need to borrow money or sell assets in order to pay any such tax). Further, dividends paid to the Company’s stockholders would not be deductible by the Company in computing its taxable income. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to the Company’s stockholders, which in turn could have an adverse impact on the value of, and trading prices for, the Company’s common stock. In addition, in such event the Company would no longer be required to pay dividends to maintain REIT status, which could adversely affect the value of the Company’s common stock. Unless the Company were entitled to relief under certain provisions of the Internal Revenue Code, the Company also would continue to be disqualified from taxation as a REIT for the four taxable years following the year in which the Company failed to qualify as a REIT.
Even if the Company remains qualified for taxation as a REIT, the Company is subject to certain federal, state and local taxes on its income and assets, including taxes on any undistributed taxable income, and state or local income, franchise, property and transfer taxes. These tax liabilities would reduce the Company’s cash flow and could adversely affect the value of the Company’s common stock. For more specific information on state income taxes paid, see Note 15 to the Consolidated Financial Statements.

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.
In order to qualify as a REIT, no more than 50% of the value of the Company’s outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. To assist in complying with this REIT requirement, the Company’s Articles of Incorporation contain provisions restricting share transfers where the transferee would, after such transfer, own more than 9.9% either in number or value of the outstanding stock of the Company. If, despite this prohibition, stock is acquired increasing a transferee’s ownership to over 9.9% in value of the outstanding stock, the stock in excess of this 9.9% in value is deemed to be held in trust for transfer at a price that does not exceed what the purported transferee paid for the stock, and, while held in trust, the stock is not entitled to receive dividends or to vote. In addition, under these circumstances, the Company has the right to redeem such stock.
In addition, provisions of Maryland's general corporation law may have anti-takeover effects that delay, defer or prevent a takeover attempt. These provisions include the following:
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 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. Maryland law prohibits stockholders from taking action by written consent unless all stockholders consent in writing. The practical effect of this limitation is that any action required or permitted to be taken by the Company's stockholders may only be taken if it is properly brought before an annual or special meeting of stockholders. The Company's bylaws further provide that in order for a stockholder to properly bring any matter before a meeting, the stockholder must comply with requirements regarding advance notice. The foregoing provisions could have the effect of delaying until the next annual meeting stockholder actions that the holders of a majority of the Company's outstanding voting securities favor. These provisions may also discourage another person from making a tender offer for the Company's common stock, because such person or entity, even if it acquired a majority of the Company's outstanding voting securities, would likely be able to take action as a stockholder, such as electing new directors or approving a merger, only at a duly called stockholders meeting. Maryland law also establishes special requirements with respect to business combinations between Maryland corporations and interested stockholders unless exemptions apply. Among other things, the law prohibits for five years following the most recent date on which the interested stockholder became an interested stockholder, a


20



Table of Contents
merger and other similar transactions between a corporation and an interested stockholder and requires a supermajority vote for such transactions after the end of the five-year period.
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.
These restrictions on transfer of the Company’s shares could 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.
To qualify as a REIT for federal income tax purposes, the Company must continually satisfy tests concerning, among other things, the sources of its income, the nature of its assets, the amounts it distributes to its stockholders and the ownership of its stock. The Company may be unable to pursue investments that would be otherwise advantageous to the Company in order to satisfy the source-of-income or distribution requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder the Company’s ability to make certain attractive investments.
The prohibited transactions tax may limit the Company's ability to sell properties.
A REIT's net gain from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The Company may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, there can be no assurance that the Company can comply in all cases with the safe harbor or that it will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, the Company may choose not to engage in certain sales of its properties or may conduct such sales through a taxable REIT subsidiary, which would be subject to federal and state income taxation.
Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code.
Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize the Company’s REIT qualification. The Company’s continued qualification as a REIT will depend on the Company’s satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, the Company’s ability to satisfy the requirements to qualify as a REIT depends in part on the actions of third parties over which the Company has no control or only limited influence, including in cases where the Company owns an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.


21



Table of Contents
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.
The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in the Company. The federal income tax rules that affect REITs are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could cause the Company to change its investments and commitments and affect the tax considerations of an investment in the Company. There can be no assurance that new legislation, regulations, administrative interpretations or court decisions will not change the tax laws significantly with respect to the Company’s qualification as a REIT or with respect to the federal income tax consequences of qualification.
Changes to the Hawaii tax code could result in increased state-level taxation of REITs doing business in Hawaii or mandated state-level withholding of taxes on REIT dividends.
The Company owns three properties in Hawaii, representing 3.1% of its total revenue. The Hawaii State legislature has repeatedly considered, and could consider in the future, legislation that would repeal the REIT dividends paid deduction for Hawaii State income tax purposes related to income generated in Hawaii for a number of years or permanently. Such a repeal could result in double taxation of REIT income in Hawaii under the Hawaii tax code, reduce returns to shareholders and make the Company's stock less attractive to investors. The Hawaii State legislature also has considered, and could consider in the future, mandating withholding of Hawaii State income tax on dividends paid to out-of-state shareholders. Such shareholders may not be able to receive a credit of these taxes from their home state, thereby resulting in double taxation of such dividends. This could reduce returns to shareholders and make the Company's stock less attractive to investors.

Item 1B. Unresolved Staff Comments
None. 

Item 2. Properties
In addition to the properties described in Item 1. “Business,” in Note 2 to the Consolidated Financial Statements, and in Schedule III of Item 15 of this Annual Report on Form 10-K, the Company leases office space from unrelated third parties from time to time. The Company owns its corporate headquarters located at 3310 West End Avenue in Nashville, Tennessee.

Item 3. Legal Proceedings
The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.

Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Shares of the Company’s common stock are traded on the New York Stock Exchange under the symbol “HR.” At December 31, 2020, there were 938 stockholders of record.


22



Table of Contents
Future dividends will be declared and paid at the discretion of the Board of Directors. The Company’s ability to pay dividends is dependent upon its ability to generate funds from operations and cash flows, and to make accretive new investments.
Equity Compensation Plan Information
The following table provides information as of December 31, 2020 about the Company’s common stock that may be issued as restricted stock and upon the exercise of options, warrants and rights under all of the Company’s existing compensation plans, including the 2015 Stock Incentive Plan and the 2000 Employee Stock Purchase Plan.
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 holders341,647 — 1,313,922 
Equity compensation plans not approved by security holders— — — 
Total341,647 — 1,313,922 
1The 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.

Issuer Purchases of Equity Securities
During the year ended December 31, 2020, the Company withheld and canceled shares of Company common stock to satisfy employee tax withholding obligations payable upon the vesting of non-vested shares, as follows:
PERIODTOTAL NUMBER OF SHARES PURCHASEDAVERAGE PRICE PAID
per share
TOTAL NUMBER OF SHARES purchased as part of publicly announced plans or programsMAXIMUM NUMBER OF SHARES
that may yet be purchased
under the plans or programs
January 1 - January 3118,753 $33.20 — — 
February 1 - February 294,810 36.46 — — 
March 1 - March 31— — — — 
April 1 - April 30— — — — 
May 1 - May 31— — — — 
June 1 - June 30— — — — 
July 1 - July 31— — — — 
August 1 - August 31— — — — 
September 1 - September 30— — — — 
October 1 - October 31— — — — 
November 1 - November 30— — — — 
December 1 - December 3130,660 29.58 — — 
Total54,223 

Authorization to Repurchase Common Stock
On May 5, 2020, the Company’s Board of Directors authorized the repurchase of up to $50 million of outstanding shares of the Company’s common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints, and other customary conditions. The Company is not obligated under this authorization to repurchase any specific number of shares. This authorization supersedes all previous stock repurchase authorizations. As of the date of this report, the Company has not repurchased any shares of its common stock under this authorization.


23



Table of Contents
Item 7. Management's Discussions and Analysis of Financial Condition and Results of Operations
Disclosure Regarding Forward-Looking Statements
This report and other materials Healthcare Realty has filed or may file with the SEC, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures that are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “target,” “intend,” “plan,” “estimate,” “project,” “continue,” “should,” “could” and other comparable terms. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could materially affect the Company’s current plans and expectations and future financial condition and results.
Such risks and uncertainties as more fully discussed in Item 1A “Risk Factors” of this report and in other reports filed by the Company with the SEC from time to time include, among other things, the following:
Risk relating to our business and operations
The Company's expected results may not be achieved;
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;
The ongoing COVID-19 pandemic and other pandemics that may occur in the future and any measures intended to prevent their spread or mitigate their severity could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition;
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 or make significant leasing concessions 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 in the future may have more, 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 expense;
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 and redevelopments 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;
Damage from catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in losses to the Company;
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; and
Government tenants may not receive annual budget appropriations, which could adversely affect their ability to pay the Company.



24



Table of Contents
Risks relating to our capital structure and financings
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;
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. 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;
The Company has entered into joint venture agreements that limit its flexibility with respect to jointly owned properties and expects to enter into additional such agreements in the future;
Settlement provisions contained in a forward equity agreement could result in substantial dilution to the Company's earnings per share and return on equity or result in substantial cash payment obligations;
The U.S. federal income tax treatment of the cash that we might receive from cash settlement of a forward equity agreement is unclear and could jeopardize the Company's ability to meet the REIT qualification requirements; and
In case of our bankruptcy or insolvency, any forward equity agreements will automatically terminate, and we would not receive the expected proceeds from any forward sale of shares of the Company’s common stock.

Risks relating to government regulations
The Company's property taxes could increase due to reassessment or property tax rate changes;
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;
Trends in the healthcare service industry may negatively affect the demand for the Company’s properties, 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;
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; and
Changes to the Hawaii tax code could result in increased state-level taxation of REITs doing business in Hawaii or mandated state-level withholding of taxes on REIT dividends.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.


25



Table of Contents

Overview
The Company owns and operates properties that facilitate the delivery of healthcare services in primarily outpatient settings. To execute its strategy, the Company engages in a broad spectrum of integrated services including leasing, management, acquisition, financing, development and redevelopment of such properties. The Company seeks to generate stable, growing income and lower the long-term risk profile of its portfolio of properties by focusing on facilities located on or near the campuses of acute care hospitals associated with leading health systems. The Company seeks to reduce financial and operational risk by owning properties in high-growth markets with a broad tenant mix that includes over 30 physician specialties, as well as surgery, imaging, cancer, and diagnostic centers.
This section is provided as a supplement to, and should be read in conjunction with, the Company's Consolidated Financial Statements and accompanying notes. This section is organized in the following sections:
Liquidity and Capital Resources
Trends and Matters Impacting Operating Results
Results of Operations
Non-GAAP Financial Measures and Key Performance Indicators
Application of Critical Accounting Policies to Accounting Estimates
COVID-19 Rent Deferral
In response to COVID-19, the Company provided some of its tenants with deferred rent arrangements in the second and third quarters of 2020. Through February 10, 2021, the Company collected more than 99.5% of 2020 aggregate tenant billings. Also, through February 10, 2021, the Company has collected 99% of total scheduled deferral payments, leaving approximately $0.1 million to be collected.
Liquidity and Capital Resources
The Company monitors its liquidity and capital resources and considers several indicators in its assessment of capital markets for financing acquisitions and other operating activities. The Company considers, among other factors, its leverage ratios and lending covenants, dividend payout percentages, interest rates, underlying treasury rate, debt market spreads and cost of equity capital to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.
Sources and Uses of Cash
The Company's revenues are derived from its real estate property portfolio based on contractual arrangements with its tenants. These sources of revenue represent the Company's primary source of liquidity to fund its dividends and its operating expenses, including interest incurred on debt, general and administrative costs, capital expenditures and other expenses incurred in connection with managing its existing portfolio and investing in additional properties. To the extent additional investments are not funded by these sources, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets, property dispositions or through proceeds from the Unsecured Credit Facility.
The Company expects to continue to meet its liquidity needs, including capital for additional investments, tenant improvement allowances, operating and finance lease payments, paying dividends, and funding debt service, through cash flows from operations and the cash flow sources addressed above. See Note 3 to the Consolidated Financial Statements for additional discussion of operating and financing lease payment obligations. See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's sources and uses of cash.
The Company also had unencumbered real estate assets with a gross book value of approximately $4.3 billion at December 31, 2020, of which a portion could serve as collateral for secured mortgage financing. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.
The Company has exposure to variable interest rates and its common stock price is impacted by the volatility in the stock markets. However, the Company’s leases, which provide its main source of income and cash flow, have terms of


26



Table of Contents
approximately one to 20 years and have lease rates that generally increase on an annual basis at fixed rates or based on consumer price indices.

Operating Activities
Cash flows provided by operating activities for the two years ended December 31, 2020 and 2019 were $470.1 million and $213.1 million, respectively. Several items impact cash flows from operating activities including, but not limited to, cash generated from property operations, interest payments and the timing related to the payment of invoices and other expenses and receipt of tenant rent.
The Company may, from time to time, sell properties and redeploy cash from property sales into new investments. To the extent revenues related to the properties being sold exceed income from these new investments, the Company's consolidated results of operations and cash flows could be adversely affected.
See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's operating activities.
Investing Activities
A summary of the significant transactions impacting investing activities for the year ended December 31, 2020 is listed below. See Note 4 to the Consolidated Financial Statements for more detail on these activities.
Outflows
The following table details the acquisitions for the year ended December 31, 2020:
Dollars in millionsASSOCIATED HEALTH SYSTEM/TENANCYDATE ACQUIREDPURCHASE PRICESQUARE FOOTAGE
CAP
RATE 1
MILES TO CAMPUS
Los Angeles, CAMemorialCare Health1/3/20$42.0 86,9865.3 %0.14
Atlanta, GAWellstar Health System2/13/2012.0 64,624 5.6 %0.10 
Raleigh, NCWakeMed Health2/25/206.3 15,964 6.7 %0.04 
Colorado Springs, COCommonSpirit Health3/9/208.2 34,210 6.5 %1.60 
Denver, CO 2
UCHealth3/13/2033.5 136,994 6.1 %0.24 
San Diego, CAPalomar Health7/1/2016.7 46,083 5.9 %0.04 
Los Angeles, CACedars-Sinai-Huntington7/17/2035.0 49,785 5.4 %0.11 
Seattle, WA 3
MultiCare Health System7/23/2011.0 21,309 5.6 %0.06 
Atlanta, GAWellstar Health System7/31/2020.5 48,145 6.2 %0.13 
Houston, TXMemorial Hermann9/24/2011.0 40,235 5.6 %0.03 
Los Angeles, CAProvidence St. Joseph Health9/28/2014.0 24,252 5.6 %0.03 
Colorado Springs, COCommonSpirit Health10/7/20208.9 36,720 6.5 %1.60 
Greensboro, NC 2
Cone Health-Sentara11/9/202045.1 149,400 5.5 %0.02 
Memphis, TNUT Health/Methodist/BMG11/9/202026.3 135,270 5.7 %0.90 
Memphis, TNBaptist Memorial (BMG)11/18/20207.0 40,192 6.5 %0.00 
Nashville, TNAscension Health12/1/202014.0 38,736 5.2 %0.10 
Greensboro, NCCone Health-Sentara12/17/202010.5 27,599 5.4 %0.25 
San Diego, CANone12/22/202037.4 45,157 5.2 %4.40 
Atlanta, GA 4
NGHS/Northside12/29/202050.0 125,404 5.2 %0.22 
Greensboro, NCCone Health-Sentara12/30/202011.6 35,373 6.0 %0.00 
Total acquisitions421.0 1,202,438 5.6 %
Land acquisition 5
1/14/201.6 — 
Land acquisition 6
9/4/201.0 — 
Land acquisition 7
10/22/202.5 — 
$426.1 1,202,438 
1The cap rate represents the forecasted annual net operating income ("NOI") derived from in-place leases divided by purchase price.
2Includes three properties.
3Represents a single-tenant property.
4Includes two properties.


27



Table of Contents
5The Company acquired land parcels under four existing buildings (previously ground leased with the hospital system).
6The Company acquired a land parcel under an existing building (previously ground leased). The building and land were disposed on September 30, 2020.
7The Company acquired a land parcel adjacent to an existing building, and the land parcel will be held for development.

During 2020, the Company entered into the TIAA Joint Venture to invest in a broad range of medical office buildings. The Company accounted for its 50% ownership in the TIAA Joint Venture as an equity method investment. As of December 31, 2020, the Company's investments totaled $65.7 million, inclusive of capital acquisition funding. The Company serves as the managing member of this joint venture. The following table provides details of the joint venture transactions.
Dollars in millionsASSOCIATED HEALTH SYSTEM/TENANCYDATE ACQUIREDPURCHASE PRICESQUARE FOOTAGE
CAP
RATE 1
MILES TO CAMPUS
Minneapolis, MNAllina Health11/12/20$16.6 92,1395.1 %0.00
Minneapolis, MNSummit Orthopedics12/7/202015.5 48,594 6.8 %2.50 
Los Angeles, CAMemorialCare Health12/8/202080.6 135,904 4.9 %0.00 
Los Angeles, CAMemorialCare Health12/29/202013.2 48,759 6.0 %1.60 
Total acquisitions$125.9 325,396 5.3 %
1The cap rate represents the forecasted annual net operating income ("NOI") derived from in-place leases divided by purchase price.

In 2020, the Company funded the following tenant improvements and capital expenditures:
$26.5 million toward development and redevelopment of properties;
$20.5 million toward first generation tenant improvements and planned capital expenditures for acquisitions;
$26.2 million toward second generation tenant improvements; and
$21.8 million toward capital expenditures. See the "Trends and Matters Impacting Operating Results - Capital Expenditures" for more detail.

Subsequent Acquisitions
On January 7, 2021, the Company acquired a 22,461 square foot medical office building in San Diego, California for a purchase price of $17.2 million.
On February 1, 2021, the Company acquired two medical office buildings totaling 121,709 square feet in Dallas, Texas for a total purchase price of $22.5 million.
Inflows
The following table details the dispositions for the year ended December 31, 2020:
Dollars in millionsDATE
DISPOSED
SALES PRICESQUARE FOOTAGE
DISPOSITION CAP RATE 1
PROPERTY TYPE 2
Springfield, MO 7/30/20$138.0 186,0007.5 %SF
Oklahoma City, OK7/30/20106.5 200,000 7.5 %MOB
Miami, FL9/30/205.0 26,000 3.9 %MOB
Total dispositions$249.5 412,000 7.4 %
1Cap rate represents the in-place cash NOI divided by sales price.
2MOB = medical office building; SF = surgical facility

Financing Activities
Common Stock Issuances
On February 14, 2020, the Company entered into sales agreements with six investment banks to allow sales under its at-the-market equity offering program of up to an aggregate of $500.0 million of common stock. The following table details the Company's at-the-market activity, including forward transactions that occurred during the year and subsequent to year-end.


28



Table of Contents
WEIGHTED AVERAGE SALE PRICE
per share
SHARES PRICEDSHARES SETTLEDSHARES REMAINING TO BE SETTLEDNET PROCEEDS
in millions
2020$31.50 6,430,572 4,607,313 1,823,259 $141.5 
January 2021$30.53 215,532 239,896 1,798,895 $7.2 
Of the 1.8 million shares remaining to be settled, all of which are expected to be settled by January 2022, the Company expects net proceeds ranging from $53.9 million to $55.8 million depending on the timing of settlement. After accounting for these settlements, the Company has approximately $291.0 million remaining available to be sold under the current sales agreements at the date of this filing.
Debt Activity
Below is a summary of the significant debt financing activity for the year ended December 31, 2020. See Note 9 to the Consolidated Financial Statements for additional information on financing activities.
The following table details the mortgage note payable activity for the year ended December 31, 2020:
(in millions)TRANSACTION DATEBORROWING
(REPAYMENT)
ENCUMBERED SQUARE FEETCONTRACTUAL INTEREST RATE
Debt assumptions:
Los Angeles, CA1/3/2020$19.3 86,986 3.90 %
San Diego, CA12/22/202016.545,157 4.25 %
$35.8 132,143 4.06 %
Repayments in full:
Oklahoma City, OK2/3/2020$(5.9)68,860 6.10 %
Des Moines, IA5/4/2020(0.3)83,318 5.74 %
Seattle, WA6/2/2020(12.6)67,510 6.44 %
Minneapolis, MN (1)
6/25/2020(10.3)60,476 6.75 %
Atlanta, GA10/1/2020(4.2)40,171 5.47 %
Seattle, WA11/10/2020(10.0)87,462 5.91 %
$(43.3)407,797 6.25 %
1.Consisting of three series municipal bonds encumbering one property.

On March 18, 2020, the Company issued $300.0 million of unsecured senior notes due 2030 (the "Senior Notes due 2030") in a registered public offering. The Senior Notes due 2030 bear interest at 2.40%, payable semi-annually on March 15 and September 15, beginning September 15, 2020, and are due on March 15, 2030, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $1.0 million and the Company incurred approximately $2.8 million in debt issuance costs. Concurrent with this transaction, the Company settled two treasury rate locks for $4.3 million. Inclusive of the discount, debt issuance costs and settlement of the treasury rate locks, the effective interest rate was 2.71%. The Senior Notes due 2030 have various financial covenants that are required to be met on a quarterly and annual basis.
On May 29, 2020, the Company borrowed $150.0 million from its Unsecured Term Loan due 2026.
On October 2, 2020, the Company issued $300.0 million of unsecured senior notes due 2031 (the "Senior Notes due 2031") in a registered public offering. The Senior Notes due 2031 bear interest at 2.05%, payable semi-annually on March 15 and September 15, beginning March 15, 2021, and are due on March 15, 2031, unless redeemed earlier by the Company. The notes were issued at a discount of approximately $2.4 million and the Company incurred approximately $2.8 million in debt issuance costs. Inclusive of the discount and debt issuance costs, the effective interest rate was 2.24%. The Senior Notes due 2031 have various financial covenants that are required to be met on a quarterly and annual basis.


29



Table of Contents
On October 19, 2020, the Company redeemed its unsecured senior notes due 2023 (the "Senior Notes due 2023") bearing interest at 3.75%. The aggregate redemption price of $270.5 million consisted of outstanding principal of $250.0 million, accrued interest of $0.1 million, and a "make-whole" amount of approximately $20.4 million for the early extinguishment of debt. The unaccreted discount and unamortized costs on these notes of $1.1 million was written off upon redemption. In October 2020, the Company recognized a loss on early extinguishment of debt of approximately $21.5 million related to this redemption.
The Company has outstanding interest rate derivatives totaling $175.0 million to hedge one-month LIBOR. The following details the amount and rate of each swap (dollars in thousands):
EFFECTIVE DATEAMOUNTWEIGHTED
AVERAGE RATE
EXPIRATION DATE
December 18, 2017$25,000 2.18 %December 16, 2022
February 1, 201850,000 2.46 %December 16, 2022
May 1, 201950,000 2.33 %May 1, 2026
June 3, 201950,000 2.13 %May 1, 2026
$175,000 2.29 %
The following table details the Company's debt balances as of December 31, 2020:
PRINCIPAL BALANCE
CARRYING BALANCE 1
WEIGHTED YEARS TO MATURITYCONTRACTUAL RATEEFFECTIVE RATE
Senior Notes due 2025 2
$250,000 $248,776 4.3 3.88 %4.08 %
Senior Notes due 2028300,000 296,123 7.0 3.63 %3.84 %
Senior Notes due 2030 3
300,000 296,468 9.3 2.40 %2.71 %
Senior Notes due 2031300,000 294,924 10.3 2.05 %2.24 %
Total Senior Notes Outstanding1,150,000 1,136,291 7.8 2.95 %3.18 %
$700 million unsecured credit facility due 2023 4
— — 2.4 LIBOR+0.90%1.04 %
$200 million unsecured term loan due 2024 5
200,000 199,236 3.4 LIBOR+1.00%1.99 %
$150 million unsecured term loan due 2026 6
150,000 149,479 5.4 LIBOR+1.60%3.14 %
Mortgage notes payable117,221 117,763 3.7 4.20 %4.07 %
Total Outstanding Notes and Bonds Payable$1,617,221 $1,602,769 6.8 2.94 %3.09 %
1Balances are reflected net of discounts and debt issuance costs and include premiums.
2The effective interest rate includes the impact of the $1.7 million settlement of four forward-starting interest rate swaps that is included in accumulated other comprehensive income on the Company's Consolidated Balance Sheets.
3The effective interest rate includes the impact of the $4.3 million settlement of two forward-stating treasury locks that is included in accumulated other comprehensive income on the Company's Consolidated Balance Sheets.
4As of December 31, 2020, the Company had no loans outstanding under the Unsecured Credit Facility with a remaining borrowing capacity of a $700.0 million.
5The effective interest rate includes the impact of interest rate swaps totaling $75.0 million to hedge the 1-month LIBOR portion of the cost of borrowing under the Unsecured Term Loan due 2024 at a weighted average interest rate of 2.37% (plus the applicable margin rate, currently 1.00%).
6The effective interest rate includes the impact of interest rate swaps totaling $100.0 million to hedge the 1-month LIBOR portion of the cost of borrowing under the Unsecured Term Loan due 2026 at a weighted average interest rate of 2.23% (plus the applicable margin rate, currently 1.60%).

Debt Covenant Information
The Company’s various debt agreements contain certain representations, warranties, and financial and other covenants customary in such debt 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, 2020, the Company was in compliance with the financial covenant provisions under all of its various debt instruments.
As of December 31, 2020, 99.8% of the Company’s principal balances were due after 2021. Also, as of December 31, 2020, the Company's incurrence of total debt as defined in the senior notes due 2025 and 2028 [debt divided by (total assets less intangibles and accounts receivable)] was approximately 35.1% (cannot be greater than 60%) and debt service coverage [interest expense divided by (net income plus interest expense, taxes, depreciation and amortization,


30



Table of Contents
gains and impairments)] was approximately 5.0 times (cannot be less than 1.5x). The covenants for the Senior Notes due 2030 and 2031 are less restrictive.
The Company plans to manage its capital structure to maintain compliance with its debt covenants consistent with its current profile. Downgrades in ratings by the rating agencies could have a material adverse impact on the Company’s cost and availability of capital, which could in turn have a material adverse impact on consolidated results of operations, liquidity and/or financial condition.

Trends and Matters Impacting Operating Results
Management monitors factors and trends important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Discussed below are some of the factors and trends that management believes may impact future operations of the Company.
Acquisitions and Dispositions
During 2020, the Company acquired 25 medical office buildings for purchase prices totaling $421.0 million, resulting in cash consideration paid of $390.1 million. The weighted average capitalization rate for these investments was 5.6%. The Company also acquired three land parcels for purchase prices totaling $5.1 million, resulting in cash consideration paid of $5.4 million.
In addition to the acquisitions described in the prior paragraph, during 2020, the Company entered into a joint venture agreement with TIAA to invest in a broad range of medical office buildings. The TIAA Joint Venture acquired four medical office buildings for purchase prices totaling $125.9 million, resulting in cash consideration paid of $123.3 million. The weighted average capitalization rate for these investments was 5.3%.
The Company disposed of three properties in 2020 for sales prices totaling $249.5 million, yielding net cash proceeds of $249.3 million net of $0.2 million of closing costs and related adjustments. The weighted average capitalization rate for these investments was 7.4%.
A component of the Company's strategy is to continually monitor its portfolio for opportunities to improve the overall quality. Properties that no longer meet the Company's investment criteria may be sold for higher capitalization rates than properties acquired to replace them. Properties that meet the Company's investment criteria may be purchased for lower capitalization rates because of their lower-risk profile and higher internal growth potential. In addition, the volume and timing of such acquisitions and dispositions could have a material impact on operating results.
See the Company's discussion of the 2020 acquisitions and dispositions activity in Note 4 to the Consolidated Financial Statements.
Development and Redevelopment Activity
In 2020, the Company funded $26.5 million toward development and redevelopment of properties, including the following:
The Company completed the core and shell of a 151,031 square foot medical office building in Seattle, Washington. The Company funded $10.5 million during the year ended December 31, 2020. The first tenant took occupancy during the first quarter of 2020.
The Company continued the redevelopment of a 110,883 square foot medical office building in Memphis, Tennessee. The Company funded approximately $12.6 million during the year ended December 31, 2020.
The Company funded an additional $1.1 million on a previously completed redevelopment in Nashville, Tennessee, $1.1 million on a previously completed development project in Denver, Colorado, and $0.7 million on a previously completed redevelopment in Charlotte, North Carolina.
The Company began the redevelopment of a 217,000 square foot medical office building in Dallas, Texas. The Company funded approximately $0.4 million during the year ended December 31, 2020. The building continues to operate with in-place leases during construction. The redevelopment is expected to take approximately a year to complete.


31



Table of Contents
The table below details the Company’s development activity as of December 31, 2020. The information included in the table below represents management’s estimates and expectations at December 31, 2020, which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates may not reflect actual results.
December 31, 2020ESTIMATED REMAINING FUNDINGS unauditedESTIMATED TOTAL INVESTMENT unauditedAPPROXIMATE SQUARE FEET unaudited
Dollars in thousandsNUMBER OF PROPERTIESINITIAL OCCUPANCYCONSTRUCTION IN PROGRESS BALANCETOTAL FUNDED during the yearTOTAL AMOUNT FUNDED
Recently Completed
Seattle, WAQ1 2020$— $10,520 $59,552 $4,568 $64,120 151,031 
Redevelopment Activity
Memphis, TN 1
Q1 2021— 12,618 21,650 8,550 30,200 110,883 
Dallas, TXQ4 2020— 423 423 16,477 16,900 217,000 
Total$— $23,561 $81,625 $29,595 $111,220 478,914 
1The project includes the acquisition of a 110,883 square foot medical office building for $8.7 million and redevelopment costs related to the property. Initial occupancy represents the quarter in which the redevelopment is expected to be completed. The building will continue to operate with in-place leases during construction.

The Company is in the planning stages with several health systems and developers regarding new development and redevelopment opportunities and expects one or more to begin in 2021. Total costs to develop or redevelop a typical medical office building can vary depending on the scope of the project, market rental terms, parking configuration, building amenities, asset type and geographic location.
The Company’s disclosures regarding projections or estimates of completion dates and leasing may not be indicative of actual results. See Note 14 to the Consolidated Financial Statements for more information on the Company’s development and redevelopment activities.

Security Deposits and Letters of Credit
As of December 31, 2020, the Company held approximately $11.4 million in letters of credit and security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon these instruments if there are any defaults under the leases.
Multi-Tenant Leases
The Company expects that approximately 20% of the leases in its multi-tenant portfolio will expire each year. In-place multi-tenant leases have a weighted average lease term of 7.0 years and a weighted average remaining lease term of 3.6 years. Demand for well-located real estate with complementary practice types and services remains consistent, and the Company's 2020 quarterly tenant retention statistics ranged from 81% to 85%. In 2021, the Company has 738 leases totaling 2.5 million square feet in its multi-tenant portfolio that are scheduled to expire. Of those leases, 89% are in on-campus buildings, which, in our experience, tend to have high tenant retention rates between 75% to 90%.
Included in the 2021 lease expirations is a 111,000 square foot fitness center leased by Baylor Scott & White Health. The fitness center is located in a 217,000 square foot on-campus medical office building. A new operator, Cowboys Fit, executed an approximately 14-year lease for a reconfigured 52,000 square foot fitness center, and the existing tenant will remain in place until the new lease commences. The Company expects to convert the remaining space for clinical use. 
The Company continues to emphasize its multi-tenant contractual rent increases for in-place leases. As of December 31, 2020 and 2019, the Company's contractual rental rate growth averaged 2.88% and 2.89%, respectively, for in-place leases. In addition, the Company continued to see strong quarterly weighted average rental rate growth for renewing leases ("cash leasing spread") and expects the majority of its renewals to increase between 3.0% and 4.0%. In 2020, cash leasing spreads averaged 4.1%.


32



Table of Contents
In a further effort to maximize revenue growth and reduce its exposure to key expenses such as taxes and utilities, the Company carefully manages its balance of lease types. Gross leases, wherein the Company has full exposure to all operating expenses, comprise 11% of its lease portfolio. Modified gross or base year leases, in which the Company and tenant both pay a share of operating expenses, comprise 32% of the Company's leased portfolio. Net leases, in which tenants pay all allowable operating expenses, total 57% of the leased portfolio.
Capital Expenditures
Capital expenditures are long-term investments made to maintain and improve the physical and aesthetic attributes of the Company's owned properties. Examples of such improvements include, but are not limited to, material changes to, or the full replacement of, major building systems (exterior facade, building structure, roofs, elevators, mechanical systems, electrical systems, energy management systems, upgrades to existing systems for improved efficiency) and common area improvements (furniture, signage and artwork, bathroom fixtures and finishes, exterior landscaping, parking lots or garages). These additions are capitalized into the gross investment of a property and then depreciated over their estimated useful lives, typically ranging from 7 to 20 years. Capital expenditures specifically do not include recurring maintenance expenses, whether direct or indirect, related to the upkeep and maintenance of major building systems or common area improvements.  Capital expenditures also do not include improvements related to a specific tenant suite, unless the improvement is part of a major building system or common area improvement.
The Company invested $21.8 million, or $1.33 per square foot, in capital expenditures in 2020 and $17.2 million, or $1.12 per square foot, in capital expenditures in 2019. As a percentage of cash net operating income, 2020 and 2019 capital expenditures were 7.3% and 5.9%, respectively. For a reconciliation of cash net operating income, see "Same Store Cash NOI" in the "Non-GAAP Financial Measures and Key Performance Indicators" section as part of Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II, Item 7 of this report.

Tenant Improvements
The Company may invest in tenant improvements for the purpose of refurbishing or renovating tenant space. The Company categorizes these expenditures into first and second generation tenant improvements. As of December 31, 2020, the Company had commitments of approximately $53.8 million that are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction.
First Generation Tenant Improvements & Planned Capital Expenditures for Acquisitions
First generation tenant improvements and planned capital expenditures for acquisition spending totaled $20.5 million and $19.8 million for the years ended December 31, 2020 and 2019, respectively. First generation tenant improvements include build out costs related to suite space in shell condition. Planned capital expenditures for acquisitions include expected near-term fundings that were contemplated as part of the acquisition.
Second Generation Tenant Improvements
Second generation tenant improvements spending totaled $26.2 million in 2020, or 8.8% of total cash net operating income. In 2019, this spending totaled $28.7 million, or 9.9% of total cash net operating income.
If the cost of a tenant improvement project exceeds a tenant improvement allowance, the Company generally offers the tenant the option to finance the excess over the lease term with interest or to reimburse the overage to the Company in a lump sum. In either case, such overages are amortized by the Company as rental income over the term of the lease. Interest earned on tenant overages is included in other operating income in the Company's Consolidated Statements of Income and totaled approximately $0.3 million in 2020, $0.2 million in 2019, and $0.3 million in 2018. The first and second generation tenant overage amount amortized to rent totaled approximately $6.3 million in 2020, $5.7 million in 2019, and $4.8 million in 2018.
Second generation, multi-tenant tenant improvement commitments in 2020 for renewals averaged $1.58 per square foot per lease year, ranging quarterly from $1.48 to $1.78. In 2019, these commitments averaged $2.26 per square foot per lease year, ranging quarterly from $1.75 to $3.15. In 2018, these commitments averaged $1.94 per square foot per lease year, ranging quarterly from $1.50 to $2.48.


33



Table of Contents
Second generation, multi-tenant tenant improvement commitments in 2020 for new leases averaged $5.52 per square foot per lease year, ranging quarterly from $4.07 to $6.40. In 2019, these commitments averaged $5.02 per square foot per lease year, ranging quarterly from $4.79 to $5.18. In 2018, these commitments averaged $4.82 per square foot per lease year, ranging quarterly from $4.04 to $5.42.

Leasing Commissions
In certain markets, the Company may pay leasing commissions to real estate brokers who represent either the Company or prospective tenants, with commissions generally equating to 4% to 6% of the gross lease value for new leases and 2% to 4% of the gross lease value for renewal leases. In addition, the Company may pay internal employees commissions when leases are executed and meet certain leasing thresholds. External leasing commissions are amortized to property operating expense, and internal leasing costs are amortized to general and administrative expense in the Company's Consolidated Statements of Income. In 2020, the Company paid leasing commissions of approximately $10.4 million, or $0.64 per square foot. In 2019, the Company paid leasing commissions of approximately $11.3 million, or $0.74 per square foot. As a percentage of total cash net operating income, leasing commissions paid for 2020 and 2019 were 2.9% and 3.9%, respectively. The amount of leasing commissions amortized over the term of the applicable leases totaled $7.4 million, $6.1 million and $5.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Rent Abatements
Rent abatements, which generally take the form of deferred rent, are sometimes used to help induce a potential tenant to lease space in the Company's properties. Such abatements, when made, are amortized by the Company on a straight-line basis against rental income over the lease term. Rent abatements for 2020 totaled approximately $2.8 million, or $0.18 per square foot. Rent abatements for 2019 totaled approximately $2.1 million, or $0.13 per square foot. Rent abatements for 2018 totaled approximately $3.1 million, or $0.21 per square foot.

Single-Tenant Leases
As of December 31, 2020, the Company had a total of 13 single-tenant leases, with a weighted average lease term of 11.9 years and a weighted average remaining lease term of 6.1 years.
Included in the 2021 lease expirations is one single-tenant leased, on-campus medical office building with a lease expiration of December 31, 2020. The Company and the tenant have agreed in principle on renewal terms, and the Company expects to complete the renewal agreement in the first quarter of 2021.
Operating Leases
As of December 31, 2020, the Company was obligated to make rental payments under operating lease agreements consisting primarily of ground leases related to 62 real estate investments, excluding those ground leases the Company has prepaid. At December 31, 2020, the Company had 105 properties totaling 8.8 million square feet that were held under ground leases with a remaining weighted average term of 70.3 years, including 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 2119.


34



Table of Contents

Purchase Options
The Company had approximately $96.9 million in real estate properties as of December 31, 2020 that were subject to exercisable purchase options. The Company has approximately $254.8 million in real estate properties that are subject to purchase options that will become exercisable after 2020. Additional information about the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):
NUMBER OF PROPERTIESGROSS REAL ESTATE INVESTMENT AS OF DECEMBER 31, 2020
YEAR EXERCISABLEMOBINPATIENT
FAIR MARKET
VALUE METHOD 1
NON FAIR MARKET
VALUE METHOD 2
TOTAL
Current 3, 4
$96,934 $— $96,934 
2021— — — — — 
2022— — 14,984 14,984 
2023— — — — — 
2024— — — — — 
2025— 48,171 19,459 67,630 
2026— — — — — 
2027— — — — — 
2028— 43,961 — 43,961 
2029— 26,494 — 26,494 
2030— — — — — 
2031 and thereafter— 101,647 — 101,647 
Total14 $317,207 $34,443 $351,650 
1The purchase option price includes a fair market value component that is determined by an appraisal process.
2Includes properties with stated purchase prices or prices based on fixed capitalization rates.
3These purchase options have been exercisable for an average of 12.4 years.
4The Company has received notice from a hospital system ground lessor to begin the process to explore the valuation of one medical office building.

Debt Management
The Company maintains a conservative and flexible capital structure that allows it to fund new investments and operate its existing portfolio. The Company has approximately $117.2 million of mortgage notes payable, most of which were assumed when the Company acquired properties. In 2021, the Company has approximately $21.1 million of mortgage notes payable that will mature or are able to be repaid without penalty. The Company will repay mortgage notes with cash on hand or borrowings under the Unsecured Credit Facility.

Impact of Inflation
The Company is subject to the risk of inflation as most of its revenues are derived from long-term leases. Most of the Company's leases provide for fixed increases in base rents or increases based on the Consumer Price Index, and require the tenant to pay all or some portion of increases in operating expenses. The Company believes that these provisions mitigate the impact of inflation. However, there can be no assurance that the Company's ability to increase rents or recover operating expenses will always keep pace with inflation. The Company's leases have a weighted average lease term remaining of approximately 3.8 years. The following table shows the percentage of the Company's leases that provide for fixed or CPI-based rent increases by type as of December 31, 2020:
% INCREASE% OF BASE RENT
Annual increase
CPI 2.0 %2.5 %
Fixed3.0 %91.3 %
Non-annual increase
CPI 0.8 %0.5 %
Fixed2.1 %4.5 %
No increase
Term > 1 year— %1.2 %


35



Table of Contents

New Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for information on new accounting standards including both standards that the Company adopted during the year and those that have not yet been adopted. The Company continues to evaluate the impact of the new standards that have not yet been adopted.
Other Items Impacting Operations
General and administrative expenses will fluctuate quarter-to-quarter. In the first quarter of each year, general and administrative expense includes increases for certain expenses such as payroll taxes, non-cash Employee Stock Purchase Plan expense and healthcare savings account fundings. The Company expects these customary expenses to increase by approximately $0.8 million in the first quarter of 2021. Approximately $0.6 million is not expected to recur in subsequent quarters in 2021.

Results of Operations
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
The Company’s consolidated results of operations for 2020 compared to 2019 were significantly impacted by acquisitions, dispositions, gain on sales and impairment charges recorded on real estate properties.

Revenues
Rental income increased $30.0 million, or 6.5%, to approximately $492.3 million compared to $462.2 million in the prior year and is comprised of the following:
CHANGE
Dollars in thousands2020 2019 $%
Property operating$453,699 $415,142 $38,557 9.3 %
Single-tenant 34,828 44,083 (9,255)(21.0)%
Straight-line rent3,735 3,000 735 24.5 %
Total rental income$492,262 $462,225 $30,037 6.5 %
Property operating rental income increased $38.6 million, or 9.3%, from the prior year primarily as a result of the following activity:
Acquisitions in 2019 and 2020 contributed $31.9 million.
A development completed in 2020 contributed $2.5 million.
Leasing activity, including contractual rent increases, contributed $6.9 million.
Dispositions in 2019 and 2020 resulted in a decrease of $2.7 million.
Single-tenant lease income decreased $9.3 million, or 21.0%, from the prior year primarily as a result of the following activity:
Dispositions in 2019 and 2020 resulted in a decrease of $10.0 million.
An acquisition in 2020 contributed $0.3 million.
Leasing activity, including contractual rent increases, contributed $0.4 million.
Straight-line rent income increased $0.7 million, or 24.5%, from the prior year primarily as a result of the following activity:
Acquisitions in 2019 and 2020 resulted in an increase of $1.4 million.
A development completed in 2020 contributed $0.1 million.
Dispositions in 2019 and 2020 resulted in a decrease of $0.4 million.
Reduced rent abatements along with net leasing activity and contractual rent increases resulted in a decrease of $0.4 million.


36



Table of Contents

Other operating income decreased $0.7 million or 8.7% from the prior year primarily due to a reduction in variable parking revenue.

Expenses
Property operating expenses increased $16.5 million, or 9.2%, from the prior year primarily as a result of the following activity:
Acquisitions in 2019 and 2020 resulted in an increase of $14.8 million.
A development completed in 2020 resulted in an increase of $0.6 million.
Increases in portfolio operating expenses as follows:
Property tax expense of $2.7 million;
Leasing commission amortization of $1.2 million;
Intangible amortization write-off due the acquisition of previously ground leased land totaling $0.7 million;
Insurance expense of $0.6 million;
Security expense of $0.2 million;
Compensation increase of $0.2 million; and
Janitorial expense of $0.2 million.
Decreases in portfolio operating expenses as follows:
Utilities expense of $1.0 million;
Maintenance and repair expense of $1.0 million; and
Legal fees and other administration costs of $0.7 million.
Dispositions in 2019 and 2020 resulted in a decrease of $2.0 million.
General and administrative expenses decreased approximately $4.1 million, or 11.8%, from the prior year primarily as a result of the following activity:
The Company's former Executive Chairman, David R. Emery, died on September 30, 2019 resulting in a $2.9 million charge for the nine months ended September 30, 2019 because of the acceleration of his outstanding nonvested share-based awards and associated taxes.
Decrease in incentive-based awards of approximately $0.7 million.
Decrease in travel expense of $0.9 million.
Compensation expense increased $1.0 million, including $0.5 million of non-cash expense.
Other net decreases, including professional fees and other administrative costs, of $0.6 million.
Depreciation and amortization expense increased $12.6 million, or 7.1%, from the prior year primarily as a result of the following activity:
Acquisitions in 2019 and 2020 and a development in 2020 resulted in increases of $20.1 million.
Various building and tenant improvement expenditures caused increases of $9.9 million.
Dispositions in 2019 and 2020 resulted in decreases of $5.6 million.
Assets that became fully depreciated resulted in decreases of $11.8 million.


37



Table of Contents

Other Income (Expense)
Other income (expense), a net expense, decreased $29.4 million, or 80.2%, from the prior year mainly due to the following activity:
Gain on Sales of Real Estate Properties
Gain on sales of real estate properties totaling approximately $70.4 million and $25.1 million are associated with the sales of three and eleven real estate properties during 2020 and 2019, respectively.
Interest Expense
Interest expense increased $0.7 million for the year ended December 31, 2020 compared to the prior year. The components of interest expense are as follows:
CHANGE
Dollars in thousands20202019$%
Contractual interest$52,656 $53,364 $(708)(1.3)%
Net discount/premium accretion483 250 233 93.2 %
Debt issuance costs amortization2,704 2,448 256 10.5 %
Amortization of interest rate swap settlement168 168 — — %
Amortization of treasury hedge settlement336 — 336 — %
Interest cost capitalization(1,142)(1,411)269 (19.1)%
Interest on lease liabilities969 616 353 — %
Total interest expense$56,174 $55,435 $739 1.3 %
Contractual interest decreased $0.7 million, or 1.3%, primarily as a result of the following activity:
The Unsecured Credit Facility accounted for a net decrease of $6.6 million.
The Unsecured Term Loan due 2024 accounted for a net decrease of $0.7 million.
The Unsecured Term Loan due 2026 accounted for an increase of $2.2 million.
The issuance of Senior Notes due 2030 and the Senior Notes due 2031 accounted for an increase of $7.2 million.
The redemption of Senior Notes due 2023 accounted for a decrease of $1.9 million.
Mortgage notes repayments accounted for a decrease of $0.9 million.
Loss on extinguishment of debt
The Company recognized a loss on early extinguishment of debt of approximately $21.5 million related to the redemption of the Senior Notes due 2023.
Impairment of Real Estate Assets
Impairment of real estate assets totaling approximately $5.6 million is associated with the sales of two real estate properties during 2019.
Equity income (loss) from unconsolidated joint ventures
During 2020, the TIAA Joint Venture acquired four medical office buildings and the Company recognized its pro-rata share of the loss.
Interest and other income (expense), net
The Company expensed approximately $0.8 million of debt issuance costs as a result of the Term Loan modification in 2019.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
The Company's discussion regarding the comparison of the year ended December 31, 2019 compared to the year ended December 31, 2018 was previously disclosed beginning on page 33 in the Company's 2019 Form 10-K filed on February 12, 2020.

Non-GAAP Financial Measures and Key Performance Indicators
Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined


38



Table of Contents
as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of these measures to the most directly comparable GAAP financial measures.
The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.

Funds from Operations ("FFO"), Normalized FFO and Funds Available for Distribution ("FAD")
FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, impairment, and after adjustments for unconsolidated partnerships and joint ventures.”
In addition to FFO, the Company presents Normalized FFO and FAD. Normalized FFO is presented by adding to FFO acquisition-related costs, acceleration of debt issuance costs, debt extinguishment costs and other Company-defined normalizing items to evaluate operating performance. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense and provision for bad debts, net; and subtracting straight-line rent income, net of expense, and maintenance capital expenditures, including second generation tenant improvements, capital expenditures and leasing commissions paid. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO, and FAD should not be considered as an alternative to net income as an indicator of the Company's financial performance or to cash flow from operating activities as an indicator of the Company's liquidity. FFO, Normalized FFO, and FAD should be reviewed in connection with GAAP financial measures.
Management believes FFO, Normalized FFO, FFO per share, Normalized FFO per share and FAD ("Non-GAAP Measures") provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, Non-GAAP Measures can facilitate comparisons of operating performance between periods. The Company reports Non-GAAP Measures because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these Non-GAAP Measures. However, none of these measures represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. Further, these measures should not be considered as an alternative to net income as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.


39



Table of Contents
The table below reconciles net income attributable to common stockholders to FFO, Normalized FFO and FAD for the years ended December 31, 2020, 2019, and 2018.
 YEAR ENDED DECEMBER 31,
Amounts in thousands, except per share data2020 2019 2018 
Net income$72,195 $39,185 $69,771 
Gain on sales of real estate assets(70,361)(25,101)(41,665)
Impairments— 5,617 — 
Real estate depreciation and amortization194,574 180,715 166,534 
Proportionate share of unconsolidated joint ventures564 321 320 
FFO196,972 200,737 194,960 
Acquisition and pursuit costs 1
2,561 1,742 738 
Lease intangible amortization 2
690 147 — 
Accelerated stock awards 3
— 2,854 70 
Forfeited earnest money received — — (466)
Debt financing costs 4
21,920 760 — 
Proportionate share of unconsolidated joint ventures16 — — 
Normalized FFO222,159 206,240 195,302 
Non-real estate depreciation and amortization3,154 3,269 3,284 
Non-cash interest expense amortization 5
3,691 2,866 2,608 
Provision for bad debt, net207 167 60 
Straight-line rent income, net(2,245)(1,463)(2,762)
Stock-based compensation9,922 9,519 10,621 
Proportionate share of unconsolidated joint ventures27 32 34 
Normalized FFO adjusted for non-cash items236,915 220,630 209,147 
2nd Generation tenant improvements