Healthcare Realty Trust rporated(HR) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flow statements, reflecting significant changes due to the July 20, 2022 merger with HTA, accounted for as a reverse acquisition Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2022, shows significant increases in total assets, liabilities, real estate properties, notes and bonds payable, and stockholders' equity, primarily driven by the HTA merger Balance Sheet Highlights | Metric | September 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------- | :-------------------------------- | :--------------------------------- | | Total real estate properties, net | $12,716,543 | $3,766,199 | | Cash and cash equivalents | $57,583 | $13,175 | | Total assets | $14,195,443 | $4,258,919 | | Notes and bonds payable | $5,570,139 | $1,801,325 | | Total liabilities | $6,356,417 | $2,073,803 | | Total equity | $7,839,026 | $2,185,116 | Condensed Consolidated Statements of Income The income statement reflects substantial increases in revenues and expenses for both the three and nine months ended September 30, 2022, largely due to the HTA merger, with net income turning positive for the three-month period Income Statement Highlights | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Rental income | $298,931 | $131,746 | $578,052 | $388,620 | | Total revenues | $306,354 | $136,632 | $594,575 | $398,393 | | Property operating expenses | $112,473 | $55,518 | $226,947 | $159,241 | | Merger-related costs | $79,402 | — | $92,603 | — | | Depreciation and amortization | $158,117 | $50,999 | $267,889 | $150,904 | | Total expenses | $367,215 | $115,698 | $628,893 | $337,784 | | Gain on sales of real estate properties | $143,908 | $1,186 | $197,188 | $41,046 | | Interest expense | $(53,044) | $(13,334) | $(82,248) | $(39,857) | | Net income (loss) | $28,616 | $(2,066) | $76,973 | $45,052 | | Basic EPS | $0.08 | $(0.02) | $0.36 | $0.31 | | Diluted EPS | $0.08 | $(0.02) | $0.35 | $0.31 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for the three and nine months ended September 30, 2022, significantly increased compared to the prior year, primarily driven by net income and gains from interest rate swaps Comprehensive Income Highlights | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $28,616 | $(2,066) | $76,973 | $45,052 | | Gains arising during the period on interest rate swaps | $6,083 | $36 | $12,905 | $2,079 | | Comprehensive income (loss) | $35,462 | $(899) | $92,550 | $50,471 | Condensed Consolidated Statements of Equity Total equity saw a substantial increase from December 31, 2021, to September 30, 2022, primarily due to the merger consideration transferred and additional paid-in capital, reflecting the reverse acquisition of HTA Equity Highlights | Metric (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------- | :----------------- | :---------------- | | Common Stock | $3,806 | $1,505 | | Additional Paid-In Capital | $9,586,556 | $3,972,917 | | Total Stockholders' Equity | $7,727,213 | $2,185,116 | | Non-controlling interest | $111,813 | — | | Total Equity | $7,839,026 | $2,185,116 | - Merger consideration transferred contributed $5.58 billion to total stockholders' equity and $110.7 million to non-controlling interest during the nine months ended September 30, 2022[19] Condensed Consolidated Statements of Cash Flows Cash flows from operating activities decreased, while investing activities generated a significant cash inflow, and financing activities resulted in a substantial outflow, largely influenced by the HTA merger and related debt and dividend payments Cash Flow Highlights | Metric (in thousands) | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $126,659 | $170,255 | | Net cash provided by (used in) investing activities | $1,425,834 | $(364,670) | | Net cash (used in) provided by financing activities | $(1,508,085) | $195,112 | | Cash and cash equivalents at end of period | $57,583 | $16,000 | - Investing activities included $1.15 billion cash assumed in the Merger and $870.8 million from sales of real estate properties in 2022[21] - Financing activities included a special dividend payment of $1.12 billion related to the Merger and net repayments on unsecured credit facility of $154.4 million[21] Notes to the Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's accounting policies, the significant impact of the HTA merger, real estate investment activities, lease accounting, other assets and liabilities, debt structure changes, derivative instruments, commitments, contingencies, and stockholders' equity Note 1. Summary of Significant Accounting Policies This note outlines the company's healthcare REIT business, basis of presentation, consolidation principles, use of estimates, and accounting for various revenue streams and financial instruments, including the impact of the HTA reverse acquisition - As of September 30, 2022, the Company had gross investments of approximately $14.2 billion in 695 real estate properties, construction in progress, redevelopments, financing receivables, financing lease right-of-use assets, land held for development and corporate property[24] - The Merger was treated as a 'reverse acquisition' where Legacy HR was the accounting acquirer, and its historical financial statements became the Company's historical financial statements[25] Other Revenue Streams | Type of Revenue (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Parking income | $2,428 | $2,187 | $6,100 | $5,725 | | Management fee income | $1,426 | $723 | $2,864 | $1,381 | | Miscellaneous | $203 | $59 | $306 | $241 | | Total | $4,057 | $2,969 | $9,270 | $7,347 | Note 2. Merger with HTA This note details the July 20, 2022 merger with HTA, accounted for as a reverse acquisition with Legacy HR as the accounting acquirer, leading to an UPREIT structure, significant asset and liability increases, and goodwill recognition - The Merger was completed on July 20, 2022, with Legacy HTA changing its name to Healthcare Realty Trust Incorporated and Legacy HR becoming HRTI, LLC, a wholly-owned subsidiary of the OP, forming an UPREIT structure[45][47] - The Merger was treated as a 'reverse acquisition' for accounting purposes, with Legacy HR as the accounting acquirer, and its historical financial statements becoming those of the Combined Company[49] Merger Financial Impact | Metric (in thousands) | Amount | | :-------------------- | :----- | | Consideration transferred | $5,576,463 | | Total assets acquired | $11,177,186 | | Total liabilities assumed | $5,635,425 | | Net identifiable assets acquired | $5,541,761 | | Goodwill | $145,404 | - Merger-related costs totaled $79.4 million for the three months and $92.6 million for the nine months ended September 30, 2022, primarily for legal, consulting, and banking services[58] Note 3. Real Estate Investments The company engaged in significant real estate acquisition and disposition activities during the nine months ended September 30, 2022, including properties acquired in the merger and subsequently classified as held for sale Real Estate Acquisitions | Acquisition Type | Purchase Price (in thousands) | Square Footage | | :--------------- | :---------------------------- | :------------- | | Company Acquisitions | $377,190 | 786,704 | | Joint Venture Acquisitions | $100,975 | 214,124 | Real Estate Dispositions | Disposition Type | Sale Price (in thousands) | Square Footage | | :--------------- | :------------------------ | :------------- | | Total Dispositions | $892,447 | 1,991,669 | - Six properties were classified as assets held for sale as of September 30, 2022, with a net value of $185.1 million, compared to none at December 31, 2021[74] Note 4. Leases The company operates as both a lessor and lessee, with significant increases in operating lease income and substantial future lease payment obligations for both properties and ground leases Lease Income and Expense | Metric (in thousands) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease income | $298,931 | $131,746 | $578,052 | $388,620 | | Total lease expense | $6,507 | $2,557 | $12,533 | $7,453 | Future Lease Payment Obligations | Future Lease Payments (in thousands) | Operating (Lessor) | Operating (Lessee) | Financing (Lessee) | | :----------------------------------- | :----------------- | :----------------- | :----------------- | | 2022 (remaining) | $243,946 | $3,665 | $503 | | 2023 | $937,733 | $15,606 | $2,139 | | 2027 and thereafter | $2,242,792 | $894,018 | $398,092 | - As of September 30, 2022, the Company had 243 properties totaling 17.8 million square feet under ground leases, with initial terms of 40 to 99 years[79] Note 5. Other Assets and Liabilities This note details the composition of 'Other assets, net' and 'Accounts payable and accrued liabilities' and 'Other liabilities' on the balance sheet, showing significant increases in most categories from December 31, 2021, to September 30, 2022, largely due to the merger Other Assets, Net | Other Assets (in thousands) | September 30, 2022 | December 31, 2021 | | :-------------------------- | :----------------- | :---------------- | | Above-market intangible assets, net | $86,410 | $4,966 | | Real estate notes receivable, net | $79,036 | — | | Interest rate swap assets | $16,136 | — | | Total Other assets, net | $438,235 | $185,673 | Accounts Payable and Accrued Liabilities | Accounts Payable & Accrued Liabilities (in thousands) | September 30, 2022 | December 31, 2021 | | :------------------------------------ | :----------------- | :---------------- | | Accrued property taxes | $86,192 | $35,295 | | Accounts payable and capital expenditures | $61,461 | $17,036 | | Total Accounts payable and accrued liabilities | $231,018 | $86,108 | Other Liabilities | Other Liabilities (in thousands) | September 30, 2022 | December 31, 2021 | | :------------------------------- | :----------------- | :---------------- | | Below-market intangible liabilities, net | $113,118 | $4,931 | | Deferred revenue | $60,675 | $45,130 | | Total Other liabilities | $203,398 | $67,387 | Note 6. Notes and Bonds Payable The company's notes and bonds payable significantly increased due to debt instruments assumed in the HTA merger and new credit facilities, alongside an exchange offer for Legacy HR notes and mortgage note repayments Notes and Bonds Payable Details | Debt Instrument (in thousands) | Maturity Dates | Balance as of Sep 30, 2022 | Balance as of Dec 31, 2021 | Effective Interest Rate (Sep 30, 2022) | | :----------------------------- | :------------- | :------------------------- | :------------------------- | :------------------------------------- | | $1.5 billion Unsecured Credit Facility | 10/27 | $190,600 | — | 3.99 % | | $1.125 billion Asset Sale Term Loan | 7/24 | $421,919 | — | 4.07 % | | Senior Notes due 2026 | 8/26 | $569,786 | — | 4.94 % | | Total Notes and bonds payable | | $5,570,139 | $1,801,325 | | - The Company assumed $2.55 billion in Senior Notes as part of the Merger with Legacy HTA, including notes due 2026, 2027, 2030, and 2031[93] - Legacy HR's $700.0 million revolving credit facility was replaced by a $1.5 billion revolving credit facility, and existing term loans were restructured and assumed by the Borrower under the new Credit Facility[94][96] Note 7. Derivative Financial Instruments The company uses interest rate swaps as cash flow hedges to manage interest rate risk, with 15 outstanding derivatives having a net asset fair value of $16.1 million as of September 30, 2022 - The Company uses interest rate swaps to hedge variable cash flows associated with existing variable-rate debt, with gains or losses recorded in Accumulated Other Comprehensive Income (Loss) (AOCI)[97][98] Interest Rate Swap Details | Expiration Date | Amount (in thousands) | Weighted Average Rate | | :-------------- | :-------------------- | :-------------------- | | December 16, 2022 | $75,000 | 2.37 % | | January 31, 2023 | $300,000 | 1.42 % | | January 15, 2024 | $200,000 | 1.21 % | | May 1, 2026 | $100,000 | 2.15 % | | Total | $675,000 | 1.57 % | - As of September 30, 2022, the fair value of interest rate swaps designated as hedging instruments was $16.1 million (asset position)[102] Note 8. Commitments and Contingencies The company is engaged in various medical office building development and redevelopment projects with significant funded costs, and is not aware of any material adverse legal proceedings - The Company is undertaking several development and redevelopment projects, including a 217,114 sq ft medical office building in Dallas, TX ($11.1 million funded), a medical office building in Tacoma, WA ($10.3 million funded), and a new 106,194 sq ft medical office building in Nashville, TN ($15.3 million funded)[109][110][111] - A joint venture partnership is developing a 120,694 sq ft medical office building in Raleigh, NC, with approximately $15.3 million funded by the joint venture[113] - The Company is not aware of any pending or threatened litigation that would have a material adverse effect on its financial position, results of operations, or cash flows[108] Note 9. Stockholders' Equity This note details changes in common stock, the ATM equity offering program, common stock dividends, EPS computation, and an overview of incentive plans including restricted shares and RSUs Common Stock Activity | Metric | Nine Months Ended Sep 30, 2022 | Twelve Months Ended Dec 31, 2021 | | :----------------------------- | :----------------------------- | :------------------------------- | | Balance, beginning of period | 150,457,433 | 139,487,375 | | Issuance of common stock | 229,615,152 | 10,899,301 | | Balance, end of period | 380,572,290 | 150,457,433 | - The Company declared and paid common stock dividends totaling $0.93 per share during the nine months ended September 30, 2022[118] Earnings Per Share | EPS Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic EPS | $0.08 | $(0.02) | $0.36 | $0.31 | | Diluted EPS | $0.08 | $(0.02) | $0.35 | $0.31 | Note 10. Fair Value of Financial Instruments This note describes the methods and assumptions for estimating the fair value of financial instruments, including a comparison of carrying and fair values for notes, bonds payable, and real estate notes receivable - Fair value for real estate notes receivable, senior notes, and mortgage notes payable is estimated using cash flow analyses based on current interest rates for similar arrangements[133] Fair Value of Financial Instruments | Financial Instrument (in millions) | September 30, 2022 Carrying Value | September 30, 2022 Fair Value | December 31, 2021 Carrying Value | December 31, 2021 Fair Value | | :------------------------------- | :-------------------------------- | :---------------------------- | :------------------------------- | :--------------------------- | | Notes and bonds payable | $5,570.1 | $5,321.0 | $1,801.3 | $1,797.4 | | Real estate notes receivable | $79.0 | $79.0 | — | — | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and operating results, emphasizing the HTA merger's impact, discussing liquidity, capital resources, investing, financing, operating activities, key trends, and non-GAAP financial measures Merger with Healthcare Trust of America The July 20, 2022 merger with HTA established an UPREIT structure, rebranded the entity, and resulted in Legacy HR's historical financial statements becoming the Company's due to reverse acquisition accounting - The Merger was completed on July 20, 2022, resulting in Legacy HTA changing its name to Healthcare Realty Trust Incorporated and Legacy HR becoming a wholly-owned subsidiary of the OP, operating under an UPREIT structure[139] - Legacy HR was the accounting acquirer in the reverse acquisition, meaning its historical financial statements became the historical financial statements of the Company[140] Liquidity and Capital Resources The company's liquidity, supported by rent receipts and property sales, includes $1.3 billion available on its Credit Facility and $57.6 million in cash as of September 30, 2022, deemed adequate by management - As of September 30, 2022, the Company had $1.3 billion available to be drawn on its Credit Facility and $57.6 million in cash[142] - Primary sources of cash include rent receipts, proceeds from property sales, joint ventures, and public/private debt or equity offerings[142] - The Credit Facility was restructured in connection with the Merger, adding additional borrowing capacities[144] Investing Activities Investing activities generated approximately $1.4 billion in cash flow for the nine months ended September 30, 2022, driven by significant real estate acquisitions and dispositions, including properties acquired and sold as part of the merger - Cash flows provided by investing activities for the nine months ended September 30, 2022, were approximately $1.4 billion[145] Real Estate Acquisitions | Acquisition Type | Purchase Price (in thousands) | Square Footage | | :--------------- | :---------------------------- | :------------- | | Company Acquisitions | $377,190 | 786,704 | | Joint Venture Acquisitions | $100,975 | 214,124 | Real Estate Dispositions | Disposition Type | Sales Price (in thousands) | Square Footage | | :--------------- | :------------------------- | :------------- | | Total Dispositions | $892,447 | 1,991,669 | Capital Funding During the nine months ended September 30, 2022, capital funding included $48.6 million for development and redevelopment projects, $26.0 million for first-generation tenant improvements and capital expenditures for acquisitions, $20.1 million for second-generation tenant improvements, and $23.2 million for capital expenditures - Capital funding for the nine months ended September 30, 2022, included $48.6 million for development/redevelopment, $26.0 million for first-generation tenant improvements and planned capital expenditures for acquisitions, $20.1 million for second-generation tenant improvements, and $23.2 million for capital expenditures[154] Financing Activities Cash flows used in financing activities totaled approximately $1.5 billion for the nine months ended September 30, 2022, primarily due to a special merger-related dividend and debt repayments, alongside an active ATM equity offering program - Cash flows used in financing activities for the nine months ended September 30, 2022, were approximately $1.5 billion[154] - The Company repaid mortgage notes totaling $12.6 million and $6.4 million in February 2022[156][157] Interest Rate Swap Details | Interest Rate Swap (in thousands) | Expiration Date | Amount | Weighted Average Rate | | :-------------------------------- | :-------------- | :----- | :-------------------- | | Outstanding interest rate derivatives | January 31, 2023 | $300,000 | 1.42 % | | | December 16, 2022 | $75,000 | 2.37 % | | | January 15, 2024 | $200,000 | 1.21 % | | | May 1, 2026 | $100,000 | 2.15 % | | Total | | $675,000 | 1.57 % | Operating Activities Cash flows provided by operating activities decreased to $126.7 million for the nine months ended September 30, 2022, from $170.3 million in the prior year, influenced by property operations, interest payments, and expense timing - Cash flows provided by operating activities decreased from $170.3 million for the nine months ended September 30, 2021, to $126.7 million for the nine months ended September 30, 2022[159] Trends and Matters Impacting Operating Results Management identifies rising interest rates and capital market volatility as increasing capital costs, expects approximately 15% annual lease expirations with 75-90% retention, anticipates operating expense increases, and projects $33 million to $36 million in annual G&A expense synergies within a year of the merger - Rising interest rates and increased capital market volatility have increased the Company's cost and availability of debt and equity capital, potentially impacting financing and acquisition/development abilities[163] - Approximately 15% of leases are expected to expire annually, with 477 leases (1.3 million sq ft) expiring in Q4 2022, and the Company typically expects to retain 75% to 90% of tenants[164] - The Company expects annual general and administrative expense synergies of $33 million to $36 million to be realized within a year from the closing of the Merger[166] Non-GAAP Financial Measures and Key Performance Indicators Management utilizes non-GAAP financial measures like FFO, Normalized FFO, FAD, Cash NOI, and Same Store Cash NOI to evaluate operating performance and property-level results, acknowledging they are not GAAP substitutes Non-GAAP Performance Metrics | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | FFO attributable to common stockholders | $47,942 | $61,365 | $161,161 | $179,212 | | Normalized FFO attributable to common stockholders | $129,415 | $62,441 | $261,221 | $181,489 | | FAD | $100,450 | $48,605 | $214,526 | $150,353 | | FFO per common share - diluted | $0.14 | $0.42 | $0.76 | $1.26 | | Normalized FFO per common share - diluted | $0.39 | $0.43 | $1.23 | $1.27 | Same Store Cash NOI | Same Store Cash NOI (in thousands) | 2022 | 2021 | | :--------------------------------- | :-------- | :-------- | | Proforma same store cash NOI | $178,828 | $173,951 | - Same Store Cash NOI for the three months ended September 30, 2022, increased to $178.8 million from $174.0 million in the prior year, reflecting a 2.8% growth[181] Results of Operations The company's results of operations for both the three and nine months ended September 30, 2022, were significantly impacted by the HTA merger, acquisitions, and capital market transactions, leading to substantial increases in revenues and expenses Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 For the three months ended September 30, 2022, rental income surged by 126.9%, property operating and G&A expenses more than doubled, and interest expense nearly quadrupled, all primarily due to the merger and associated $79.4 million in merger-related costs - Rental income increased $167.2 million (126.9%) for the three months ended September 30, 2022, with $154.6 million from the Merger[187] - Property operating expenses increased $57.0 million (102.6%), with $51.3 million from the Merger[189] - Merger-related costs totaled $79.4 million, and interest expense increased $39.7 million (297.8%), with $22.8 million from senior notes and unsecured term loans assumed in the Merger[189][192] Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 For the nine months ended September 30, 2022, rental income grew by 48.7%, property operating and G&A expenses increased significantly, and interest expense more than doubled, all primarily driven by the merger and its $92.6 million in related costs - Rental income increased $189.4 million (48.7%) for the nine months ended September 30, 2022, with $154.6 million from the Merger[196][197] - Property operating expenses increased $67.7 million (42.5%), with $51.3 million from the Merger[199] - Merger-related costs totaled $92.6 million, and interest expense increased $42.4 million (106.4%), with $22.8 million from senior notes and unsecured term loans assumed in the Merger[199][202] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risk from changing interest rates on its debt and mortgage notes, which management actively monitors, with no material changes reported for the nine months ended September 30, 2022 - The Company is exposed to market risk from changing interest rates on its debt and mortgage notes[205] - No material changes in quantitative and qualitative disclosures about market risks were reported during the nine months ended September 30, 2022, compared to the Annual Report on Form 10-K for the year ended December 31, 2021[205] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, excluding Legacy HTA's acquired operations from the internal control assessment due to the recent merger - The Company's disclosure controls and procedures were effective as of September 30, 2022[206] - The acquired operations of Legacy HTA were excluded from management's assessment of internal control over financial reporting for the nine months ended September 30, 2022, due to the July 20, 2022 merger[207] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is occasionally involved in litigation in the ordinary course of business but is not aware of any pending or threatened litigation that would have a material adverse effect on its financial position, results of operations, or cash flows - The Company is not aware of any pending or threatened litigation that would have a material adverse effect on its consolidated financial position, results of operations, or cash flows[208] Item 1A. Risk Factors This section highlights various risks, including substantial merger integration expenses, business combination difficulties, key employee retention challenges, and the impact of significant indebtedness and rising interest rates on capital access and financial performance Operational Risks Operational risks encompass substantial merger and integration expenses, potential difficulties in combining Legacy HR and Legacy HTA's businesses, and challenges in retaining key employees, all of which could disrupt operations and hinder synergy realization - The Company has incurred and expects to incur substantial expenses for completing and integrating the Merger, which may exceed anticipated savings[210][211] - Potential difficulties in integrating Legacy HR and Legacy HTA include combining businesses, managing personnel from different locations, and integrating different histories, cultures, markets, and tenant bases[212] - The success of the Company after the Merger depends on its ability to retain key employees, who may depart due to integration uncertainties[214] Regulatory and Legal Risks Regulatory and legal risks include counterparties exercising contractual rights due to the merger and inherent challenges in joint venture investments such as shared decision-making and reliance on partners' financial stability - Counterparties to certain agreements may exercise contractual rights (e.g., termination, repurchase, acceleration) in connection with the Merger, potentially impacting the Company adversely[219] - Joint venture investments involve risks such as lack of sole decision-making authority, reliance on partners' financial condition, potential impasses on decisions, and disputes[220] Other Risks Other risks include substantial indebtedness increasing borrowing costs and limiting capital access, the inability to secure additional financing or refinance debt, potential credit rating downgrades, and rising interest rates adversely impacting financial obligations and growth activities - The Company has substantial indebtedness and may incur more, which could reduce credit ratings, hinder adaptability, limit capital access, and increase vulnerability to economic downturns[222] - The unavailability of equity and debt capital, volatility in credit markets, and increases in interest rates could adversely affect the Company's ability to meet debt payments, pay dividends, or engage in acquisition and development activities[226] - Increases in interest rates, as seen with the Federal Reserve's actions in March 2022, will increase interest costs on new and existing variable debt, adversely impacting financing, acquisitions, and refinancing capabilities[228][229] Item 2. Unregistered Sales of Equity and Use of Proceeds The Board authorized a $500.0 million common stock repurchase program on August 2, 2022, with no shares repurchased under this new authorization as of the report date, though 2,018 shares were purchased in September at an average price of $24.14 - On August 2, 2022, the Board authorized the repurchase of up to $500.0 million of common stock, superseding previous authorizations[230] - As of the report date, no shares have been repurchased under the new authorization[230] Common Stock Repurchases | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------- | :------------------------------- | :--------------------------- | | September 1 - 30 | 2,018 | $24.14 | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including the Merger Agreement, organizational documents, indentures for senior notes, credit and term loan agreements, employment agreements, and certifications - Key exhibits include the Agreement and Plan of Merger, various Articles of Amendment and Restatement, Indentures for Senior Notes, the Fourth Amended and Restated Revolving Credit and Term Loan Agreement, and employment agreements[232][235] SIGNATURE The report is duly signed on behalf of Healthcare Realty Trust Incorporated by J. Christopher Douglas, Executive Vice President and Chief Financial Officer, on November 9, 2022 - The report was signed by J. Christopher Douglas, Executive Vice President and Chief Financial Officer, on November 9, 2022[241]