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Section 1: 10-Q (10-Q)

Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-35568 (Healthcare Trust of America, Inc.)
Commission File Number: 333-190916 (Healthcare Trust of America Holdings, LP)
_________________________ 
HEALTHCARE TRUST OF AMERICA, INC.
HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
(Exact name of registrant as specified in its charter)
Maryland (Healthcare Trust of America, Inc.)
 
20-4738467
Delaware (Healthcare Trust of America Holdings, LP)
 
20-4738347
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
16435 N. Scottsdale Road, Suite 320
Scottsdale, Arizona 85254
(Address of principal executive offices)
(480) 998-3478
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Healthcare Trust of America, Inc.
x Yes
¨ No
 
Healthcare Trust of America Holdings, LP
x Yes
¨ No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    
Healthcare Trust of America, Inc.
x Yes
¨ No
 
Healthcare Trust of America Holdings, LP
x Yes
¨ No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Healthcare Trust of America, Inc.
Large-accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Emerging growth company ¨
 
 
 
(Do not check if a smaller reporting company)
 
 
Healthcare Trust of America Holdings, LP
Large-accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company ¨
Emerging growth company ¨
 
 
 
(Do not check if a smaller reporting company)
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Healthcare Trust of America, Inc.
¨
 
 
Healthcare Trust of America Holdings, LP
¨
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Healthcare Trust of America, Inc.
¨ Yes
x No
 
Healthcare Trust of America Holdings, LP
¨ Yes
x No
 
As of April 25, 2018, there were 205,184,578 shares of Class A common stock of Healthcare Trust of America, Inc. outstanding.
 



Explanatory Note
This quarterly report combines the Quarterly Reports on Form 10-Q (“Quarterly Report”) for the quarter ended March 31, 2018, of Healthcare Trust of America, Inc. (“HTA”), a Maryland corporation, and Healthcare Trust of America Holdings, LP (“HTALP”), a Delaware limited partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this Quarterly Report to “we,” “us,” “our,” “the Company” or “our Company” refer to HTA and HTALP, collectively, and all references to “common stock” shall refer to the Class A common stock of HTA.
HTA operates as a real estate investment trust (“REIT”) and is the general partner of HTALP. As of March 31, 2018, HTA owned a 98.1% partnership interest in HTALP, and other limited partners, including some of HTA’s directors, executive officers and their affiliates, owned the remaining partnership interest (including the long-term incentive plan (“LTIP” Units) in HTALP. As the sole general partner of HTALP, HTA has the full, exclusive and complete responsibility for HTALP’s day-to-day management and control, including its compliance with the Securities and Exchange Commission (“SEC”) filing requirements.
We believe it is important to understand the few differences between HTA and HTALP in the context of how we operate as an integrated consolidated company. HTA operates as an umbrella partnership REIT structure in which HTALP and its subsidiaries hold substantially all of the assets. HTA’s only material asset is its ownership of partnership interests of HTALP. As a result, HTA does not conduct business itself, other than acting as the sole general partner of HTALP, issuing public equity from time to time and guaranteeing certain debts of HTALP. HTALP conducts the operations of the business and issues publicly-traded debt, but has no publicly-traded equity. Except for net proceeds from public equity issuances by HTA, which are generally contributed to HTALP in exchange for partnership units of HTALP, HTALP generates the capital required for the business through its operations and by direct or indirect incurrence of indebtedness or through the issuance of its partnership units (“OP Units”).
Noncontrolling interests, stockholders’ equity and partners’ capital are the primary areas of difference between the condensed consolidated financial statements of HTA and HTALP. Limited partnership units in HTALP are accounted for as partners’ capital in HTALP’s condensed consolidated balance sheets and as a noncontrolling interest reflected within equity in HTA’s condensed consolidated balance sheets. The differences between HTA’s stockholders’ equity and HTALP’s partners’ capital are due to the differences in the equity issued by HTA and HTALP, respectively.
We believe combining the Quarterly Reports of HTA and HTALP, including the notes to the condensed consolidated financial statements, into this single Quarterly Report results in the following benefits:
enhances stockholders’ understanding of HTA and HTALP by enabling stockholders to view the business as a whole in the same manner that management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this Quarterly Report applies to both HTA and HTALP; and
creates time and cost efficiencies through the preparation of a single combined Quarterly Report instead of two separate Quarterly Reports.
In order to highlight the material differences between HTA and HTALP, this Quarterly Report includes sections that separately present and discuss areas that are materially different between HTA and HTALP, including:
the condensed consolidated financial statements;
certain accompanying notes to the condensed consolidated financial statements, including Note 7 - Debt, Note 10 - Stockholders’ Equity and Partners’ Capital, Note 12 - Per Share Data of HTA, Note 13 - Per Unit Data of HTALP;
the Funds From Operations (“FFO”) and Normalized FFO in Part 1, Item 2 of this Quarterly Report;
the Controls and Procedures in Part 1, Item 4 of this Quarterly Report; and
the Certifications of the Chief Executive Officer and the Chief Financial Officer included as Exhibits 31 and 32 to this Quarterly Report.
In the sections of this Quarterly Report that combine disclosure for HTA and HTALP, this Quarterly Report refers to actions or holdings as being actions or holdings of the Company. Although HTALP (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues or incurs debt, management believes this presentation is appropriate for the reasons set forth above and because the business of the Company is a single integrated enterprise operated through HTALP.

2



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






3


Table of Contents

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)
(Unaudited)
 
 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
486,403

 
$
485,319

Building and improvements
 
5,851,437

 
5,830,824

Lease intangibles
 
638,103

 
639,199

Construction in progress
 
24,559

 
14,223

 
 
7,000,502

 
6,969,565

Accumulated depreciation and amortization
 
(1,087,262
)
 
(1,021,691
)
Real estate investments, net
 
5,913,240

 
5,947,874

Investment in unconsolidated joint venture
 
69,147

 
68,577

Cash and cash equivalents
 
56,243

 
100,356

Restricted cash
 
12,695

 
18,204

Receivables and other assets, net
 
203,686

 
207,857

Other intangibles, net
 
104,824

 
106,714

Total assets
 
$
6,359,835

 
$
6,449,582

LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Debt
 
$
2,780,291

 
$
2,781,031

Accounts payable and accrued liabilities
 
134,574

 
167,852

Derivative financial instruments - interest rate swaps
 
742

 
1,089

Security deposits, prepaid rent and other liabilities
 
59,530

 
61,222

Intangible liabilities, net
 
66,665

 
68,203

Total liabilities
 
3,041,802

 
3,079,397

Commitments and contingencies
 

 

Redeemable noncontrolling interests
 
6,770

 
6,737

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

 

Class A common stock, $0.01 par value; 1,000,000,000 shares authorized; 205,179,776 and 204,892,118 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
 
2,052

 
2,049

Additional paid-in capital
 
4,511,736

 
4,508,528

Accumulated other comprehensive loss
 
1,157

 
274

Cumulative dividends in excess of earnings
 
(1,284,826
)
 
(1,232,069
)
Total stockholders’ equity
 
3,230,119

 
3,278,782

Noncontrolling interests
 
81,144

 
84,666

Total equity
 
3,311,263

 
3,363,448

Total liabilities and equity
 
$
6,359,835

 
$
6,449,582

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

4


Table of Contents

HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Revenues:
 
 
 
Rental income
$
175,567

 
$
123,993

Interest and other operating income
94

 
354

Total revenues
175,661

 
124,347

Expenses:
 
 
 
Rental
56,022

 
39,020

General and administrative
8,786

 
8,423

Transaction
191

 
284

Depreciation and amortization
70,392

 
47,056

Impairment
4,606

 

Total expenses
139,997

 
94,783

Income before other income (expense)
35,664

 
29,564

Interest expense:
 
 
 
Interest related to derivative financial instruments
(58
)
 
(324
)
Gain on change in fair value of derivative financial instruments, net

 
839

Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments
(58
)
 
515

Interest related to debt
(26,195
)
 
(16,058
)
Gain on sale of real estate, net

 
3

Loss on extinguishment of debt, net

 
(32
)
Income from unconsolidated joint venture
570

 

Other income
35

 
8

Net income
$
10,016

 
$
14,000

Net income attributable to noncontrolling interests (1) 
(214
)
 
(455
)
Net income attributable to common stockholders
$
9,802

 
$
13,545

Earnings per common share - basic:
 
 
 
Net income attributable to common stockholders
$
0.05

 
$
0.10

Earnings per common share - diluted:
 
 
 
Net income attributable to common stockholders
$
0.05

 
$
0.09

Weighted average common shares outstanding:
 
 
 
Basic
205,069

 
141,780

Diluted
209,177

 
146,117

Dividends declared per common share
$
0.305

 
$
0.300

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

5


Table of Contents

HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
 
Net income
$
10,016

 
$
14,000

 
 
 
 
Other comprehensive gain (loss)
 
 
 
Change in unrealized gains (losses) on cash flow hedges
900

 
(88
)
Total other comprehensive gain (loss)
900

 
(88
)
 
 
 
 
Total comprehensive income
10,916

 
13,912

Comprehensive income attributable to noncontrolling interests
(198
)
 
(422
)
Total comprehensive income attributable to common stockholders
$
10,718

 
$
13,490

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


6


Table of Contents

HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
 
Class A Common Stock
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Gain (Loss)
 
Cumulative Dividends in Excess of Earnings
 
Total Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
 
Shares
 
Amount
Balance as of December 31, 2016
141,719

 
$
1,417

 
$
2,754,818

 
$

 
$
(1,068,961
)
 
$
1,687,274

 
$
93,143

 
$
1,780,417

Issuance of operating partnership units in connection with an acquisition

 

 

 

 

 

 
610

 
610

Share-based award transactions, net
213

 
2

 
2,528

 

 

 
2,530

 

 
2,530

Repurchase and cancellation of common stock
(107
)
 
(1
)
 
(3,117
)
 

 

 
(3,118
)
 

 
(3,118
)
Dividends declared

 

 

 

 
(43,145
)
 
(43,145
)
 
(1,321
)
 
(44,466
)
Net income

 

 

 

 
13,545

 
13,545

 
425

 
13,970

Other comprehensive loss

 

 

 
(85
)
 

 
(85
)
 
(3
)
 
(88
)
Balance as of March 31, 2017
141,825

 
$
1,418

 
$
2,754,229

 
$
(85
)
 
$
(1,098,561
)
 
$
1,657,001

 
$
92,854

 
$
1,749,855

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
204,892

 
$
2,049

 
$
4,508,528

 
$
274

 
$
(1,232,069
)
 
$
3,278,782

 
$
84,666

 
$
3,363,448

Share-based award transactions, net
289

 
3

 
3,504

 

 

 
3,507

 

 
3,507

Repurchase and cancellation of common stock
(92
)
 
(1
)
 
(2,708
)
 

 

 
(2,709
)
 

 
(2,709
)
Redemption of noncontrolling interest and other
91

 
1

 
2,412

 

 

 
2,413

 
(2,413
)
 

Dividends declared

 

 

 

 
(62,559
)
 
(62,559
)
 
(1,307
)
 
(63,866
)
Net income

 

 

 

 
9,802

 
9,802

 
181

 
9,983

Other comprehensive gain

 

 

 
883

 

 
883

 
17

 
900

Balance as of March 31, 2018
205,180

 
$
2,052

 
$
4,511,736

 
$
1,157

 
$
(1,284,826
)
 
$
3,230,119

 
$
81,144

 
$
3,311,263

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

7


Table of Contents

HEALTHCARE TRUST OF AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
10,016

 
$
14,000

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and other
68,303

 
46,213

Share-based compensation expense
3,507

 
2,530

Bad debt expense
3

 
103

Impairment
4,606

 

Income from unconsolidated joint venture
(570
)
 

Gain on sale of real estate, net

 
(3
)
Loss on extinguishment of debt, net

 
32

Change in fair value of derivative financial instruments

 
(839
)
Changes in operating assets and liabilities:
 
 
 
Receivables and other assets, net
9,274

 
(7,771
)
Accounts payable and accrued liabilities
(30,780
)
 
(7,934
)
Prepaid rent and other liabilities
(3,479
)
 
682

Net cash provided by operating activities
60,880

 
47,013

Cash flows from investing activities:
 
 
 
Investments in real estate
(11,887
)
 
(34,706
)
Development of real estate
(13,235
)
 

Proceeds from the sale of real estate

 
4,746

Capital expenditures
(17,417
)
 
(12,894
)
Collection of real estate notes receivable
172

 

Net cash used in investing activities
(42,367
)
 
(42,854
)
Cash flows from financing activities:
 
 
 
Borrowings on unsecured revolving credit facility

 
92,000

Payments on unsecured revolving credit facility

 
(10,000
)
Payments on secured mortgage loans
(1,598
)
 
(40,155
)
Security deposits
52

 
14

Repurchase and cancellation of common stock
(2,709
)
 
(3,118
)
Dividends paid
(62,546
)
 
(42,536
)
Distributions paid to noncontrolling interest of limited partners
(1,334
)
 
(1,332
)
Net cash used in financing activities
(68,135
)
 
(5,127
)
Net change in cash, cash equivalents and restricted cash
(49,622
)
 
(968
)
Cash, cash equivalents and restricted cash - beginning of period
118,560

 
25,045

Cash, cash equivalents and restricted cash - end of period
$
68,938

 
$
24,077

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

8


Table of Contents

HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data)
(Unaudited)
 
 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
486,403

 
$
485,319

Building and improvements
 
5,851,437

 
5,830,824

Lease intangibles
 
638,103

 
639,199

Construction in progress
 
24,559

 
14,223

 
 
7,000,502

 
6,969,565

Accumulated depreciation and amortization
 
(1,087,262
)
 
(1,021,691
)
Real estate investments, net
 
5,913,240

 
5,947,874

Investment in unconsolidated joint venture
 
69,147

 
68,577

Cash and cash equivalents
 
56,243

 
100,356

Restricted cash
 
12,695

 
18,204

Receivables and other assets, net
 
203,686

 
207,857

Other intangibles, net
 
104,824

 
106,714

Total assets
 
$
6,359,835

 
$
6,449,582

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
Liabilities:
 
 
 
 
Debt
 
$
2,780,291

 
$
2,781,031

Accounts payable and accrued liabilities
 
134,574

 
167,852

Derivative financial instruments - interest rate swaps
 
742

 
1,089

Security deposits, prepaid rent and other liabilities
 
59,530

 
61,222

Intangible liabilities, net
 
66,665

 
68,203

Total liabilities
 
3,041,802

 
3,079,397

Commitments and contingencies
 


 


Redeemable noncontrolling interests
 
6,770

 
6,737

Partners’ Capital:
 
 
 
 
Limited partners’ capital, 4,032,835 and 4,124,148 units issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
 
80,874

 
84,396

General partners’ capital, 205,179,776 and 204,892,118 units issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
 
3,230,389

 
3,279,052

Total partners’ capital
 
3,311,263

 
3,363,448

Total liabilities and partners’ capital
 
$
6,359,835

 
$
6,449,582

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


9


Table of Contents

HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Revenues:
 
 
 
Rental income
$
175,567

 
$
123,993

Interest and other operating income
94

 
354

Total revenues
175,661

 
124,347

Expenses:
 
 
 
Rental
56,022

 
39,020

General and administrative
8,786

 
8,423

Transaction
191

 
284

Depreciation and amortization
70,392

 
47,056

Impairment
4,606

 

Total expenses
139,997

 
94,783

Income before other income (expense)
35,664

 
29,564

Interest expense:
 
 
 
Interest related to derivative financial instruments
(58
)
 
(324
)
Gain on change in fair value of derivative financial instruments, net

 
839

Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments
(58
)
 
515

Interest related to debt
(26,195
)
 
(16,058
)
Gain on sale of real estate, net

 
3

Loss on extinguishment of debt, net

 
(32
)
Income from unconsolidated joint venture
570

 

Other income
35

 
8

Net income
$
10,016

 
$
14,000

Net income attributable to noncontrolling interests
(33
)
 
(30
)
Net income attributable to common unitholders
$
9,983

 
$
13,970

Earnings per common unit - basic:
 
 
 
Net income attributable to common unitholders
$
0.05

 
$
0.10

Earnings per common unit - diluted:
 
 
 
Net income attributable to common unitholders
$
0.05

 
$
0.10

Weighted average common units outstanding: 
 
 
 
Basic
209,177

 
146,117

Diluted
209,177

 
146,117

Dividends declared per common unit
$
0.305

 
$
0.300

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

10


Table of Contents

HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
 
Net income
$
10,016

 
$
14,000

 
 
 
 
Other comprehensive gain (loss)
 
 
 
Change in unrealized gains (losses) on cash flow hedges
900

 
(88
)
Total other comprehensive gain (loss)
900

 
(88
)
 
 
 
 
Total comprehensive income
10,916

 
13,912

Comprehensive income attributable to noncontrolling interests
(33
)
 
(30
)
Total comprehensive income attributable to common unitholders
$
10,883

 
$
13,882

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


11


Table of Contents

HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL
(In thousands)
(Unaudited)
 
General Partners’ Capital
 
Limited Partners’ Capital
 
Total Partners’ Capital
 
Units
 
Amount
 
Units
 
Amount
 
Balance as of December 31, 2016
141,719

 
$
1,687,544

 
4,323

 
$
92,873

 
$
1,780,417

Issuance of limited partner units in connection with an acquisition

 

 
21

 
610

 
610

Share-based award transactions, net
213

 
2,530

 

 

 
2,530

Redemption and cancellation of general partner units
(107
)
 
(3,118
)
 

 

 
(3,118
)
Distributions declared

 
(43,145
)
 

 
(1,321
)
 
(44,466
)
Net income

 
13,545

 

 
425

 
13,970

Other comprehensive loss

 
(85
)
 

 
(3
)
 
(88
)
Balance as of March 31, 2017
141,825

 
$
1,657,271

 
4,344

 
$
92,584

 
$
1,749,855

 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
204,892

 
$
3,279,052

 
4,124

 
$
84,396

 
$
3,363,448

Share-based award transactions, net
289

 
3,507

 

 

 
3,507

Redemption and cancellation of general partner units
(92
)
 
(2,709
)
 

 

 
(2,709
)
Redemption of limited partner units and other
91

 
2,413

 
(91
)
 
(2,413
)
 

Distributions declared

 
(62,559
)
 

 
(1,307
)
 
(63,866
)
Net income

 
9,802

 

 
181

 
9,983

Other comprehensive gain

 
883

 

 
17

 
900

Balance as of March 31, 2018
205,180

 
$
3,230,389

 
4,033

 
$
80,874

 
$
3,311,263

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


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HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
10,016

 
$
14,000

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and other
68,303

 
46,213

Share-based compensation expense
3,507

 
2,530

Bad debt expense
3

 
103

Impairment
4,606

 

Income from unconsolidated joint venture
(570
)
 

Gain on sale of real estate, net

 
(3
)
Loss on extinguishment of debt, net

 
32

Change in fair value of derivative financial instruments

 
(839
)
Changes in operating assets and liabilities:
 
 
 
Receivables and other assets, net
9,274

 
(7,771
)
Accounts payable and accrued liabilities
(30,780
)
 
(7,934
)
Prepaid rent and other liabilities
(3,479
)
 
682

Net cash provided by operating activities
60,880

 
47,013

Cash flows from investing activities:
 
 
 
Investments in real estate
(11,887
)
 
(34,706
)
Development of real estate
(13,235
)
 

Proceeds from the sale of real estate

 
4,746

Capital expenditures
(17,417
)
 
(12,894
)
Collection of real estate notes receivable
172

 

Net cash used in investing activities
(42,367
)
 
(42,854
)
Cash flows from financing activities:
 
 
 
Borrowings on unsecured revolving credit facility

 
92,000

Payments on unsecured revolving credit facility

 
(10,000
)
Payments on secured mortgage loans
(1,598
)
 
(40,155
)
Security deposits
52

 
14

Repurchase and cancellation of general partner units
(2,709
)
 
(3,118
)
Distributions paid to general partner
(62,546
)
 
(42,536
)
Distributions paid to limited partners and redeemable noncontrolling interests
(1,334
)
 
(1,332
)
Net cash used in financing activities
(68,135
)
 
(5,127
)
Net change in cash, cash equivalents and restricted cash
(49,622
)
 
(968
)
Cash, cash equivalents and restricted cash - beginning of period
118,560

 
25,045

Cash, cash equivalents and restricted cash - end of period
$
68,938

 
$
24,077

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

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HEALTHCARE TRUST OF AMERICA, INC. AND HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us” or “our” refers to Healthcare Trust of America, Inc. and Healthcare Trust of America Holdings, LP, collectively.
1. Organization and Description of Business
HTA, a Maryland corporation, and HTALP, a Delaware limited partnership, were incorporated or formed, as applicable, on April 20, 2006. HTA operates as a REIT and is the general partner of HTALP, which is the operating partnership, in an umbrella partnership, or “UPREIT” structure. HTA has qualified and intends to continue to be taxed as a REIT for federal income tax purposes under the applicable sections of the Internal Revenue Code.
We own real estate primarily consisting of medical office buildings (“MOBs”) located on or adjacent to hospital campuses or in off-campus, community core outpatient locations across 33 states within the United States, and we lease space to tenants primarily consisting of health systems, research and academic institutions, and various sized physician practices.  We generate substantially all of our revenues from rents and rental-related activities, such as property and facilities management and other incidental revenues related to the operation of real estate. 
Our primary objective is to maximize stockholder value with growth through strategic investments that provide an attractive risk-adjusted return for our stockholders by consistently increasing our cash flow. In pursuing this objective, we: (i) seek internal growth through proactive asset management, leasing, building services and property management oversight; (ii) target accretive acquisitions and developments of MOBs in markets with attractive demographics that complement our existing portfolio; and (iii) actively manage our balance sheet to maintain flexibility with conservative leverage. Additionally, from time to time we consider, on an opportunistic basis, significant portfolio acquisitions that we believe fit our core business and we expect to enhance our existing portfolio.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the U.S. (“GAAP”) in all material respects and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Our accompanying condensed consolidated financial statements include our accounts and those of our subsidiaries and any consolidated variable interest entities (“VIEs”). All inter-company balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable for the full year. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2017 Annual Report on Form 10-K.

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

Principles of Consolidation
The condensed consolidated financial statements include the accounts of our subsidiaries and consolidated joint venture arrangements. The portions of the HTALP operating partnership not owned by us are presented as non-controlling interests in our consolidated balance sheets and statements of operations, consolidated statements of comprehensive income or loss, consolidated statements of equity, and consolidated statements of changes in partners’ capital. The portions of other joint venture arrangements not owned by us are presented as redeemable non-controlling interests on the accompanying condensed consolidated balance sheets. In addition, as described in Note 1 - Organization and Description of Business, certain third parties have been issued OP Units in HTALP. Holders of OP Units are considered to be noncontrolling interest holders in HTALP and their ownership interests are reflected as equity on the accompanying condensed consolidated balance sheets. Further, a portion of the earnings and losses of HTALP are allocated to noncontrolling interest holders based on their respective ownership percentages. Upon conversion of OP Units to common stock, any difference between the fair value of the common stock issued and the carrying value of the OP Units converted to common stock is recorded as a component of equity. As of March 31, 2018 and December 31, 2017, there were approximately 4.0 million, and 4.1 million, respectively, of OP Units issued and outstanding.
VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one of the following: (i) the power to direct the activities that most significantly impact the entity’s economic performance; (ii) the obligation to absorb the expected losses of the entity; and (iii) the right to receive the expected returns of the entity. We consolidate our investment in VIEs when we determine that we are the primary beneficiary. A primary beneficiary is one that has both: (i) the power to direct the activities of the VIE that most significantly impacts the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. The HTALP operating partnership and our other joint venture arrangements are VIEs because the limited partners in those partnerships, although entitled to vote on certain matters, do not possess kick-out rights or substantive participating rights. Additionally, we determined that we are the primary beneficiary of our VIEs. Accordingly, we consolidate our interests in the HTALP operating partnership and in our other joint venture arrangements. However, because we hold what is deemed a majority voting interest in the HTALP operating partnership and our other joint venture arrangements, it qualifies for the exemption from providing certain disclosure requirements associated with investments in VIEs. We will evaluate on an ongoing basis the need to consolidate entities based on the standards set forth in GAAP as described above.
Reclassification
In November 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-18 Statement of Cash Flows: Restricted Cash. ASU 2016-18 requires that a statement of cash flows explain the change during the period in cash, cash equivalents and restricted cash or restricted cash equivalents. Therefore, restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period amounts shown on the accompanying condensed consolidated statements of cash flows. We adopted ASU 2016-18 as set forth in our 2017 Annual Report on Form 10-K as of January1, 2017, and as a result of the adoption, the guidance requires retrospective adoption for all periods presented. The following table represents the previously reported balances and the reclassified balances for the impacted items for the three months ended March 31, 2017 in the accompanying condensed consolidated statements of cash flows (in thousands):
 
Three Months Ended March 31, 2017
 
As Previously Reported
 
As Reclassified
Cash flows from investing activities:
 
 
 
        Other assets (1)
$
5,771

 
$

               Net cash used in investing activities
(37,083
)
 
(42,854
)
 
 
 
 
Net change in cash, cash equivalents and restricted cash (2)
$
4,803

 
$
(968
)
Cash, cash equivalents and restricted cash - beginning of period (2)
11,231

 
25,045

Cash, cash equivalents and restricted cash - end of period (2)
$
16,034

 
$
24,077

 
 
 
 
(1) Prior to adoption of ASU 2016-18, the line item description was “Restricted cash, escrow deposits and other assets”.
(2) With the adoption of ASU 2016-18, the line item description now includes restricted cash.

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

Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of all highly liquid investments with a maturity of three months or less when purchased. Restricted cash is comprised of reserve accounts for property taxes, insurance, capital improvements and tenant improvements as well as collateral accounts for debt and interest rate swaps and deposits for future investments.
With our adoption of ASU 2016-18 as set forth in our 2017 Annual Report on Form 10-K as of January 1, 2017, the following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed consolidated balance sheets to the combined amounts shown on the accompanying condensed consolidated statements of cash flows (in thousands):
 
March 31,
 
2018
 
2017
Cash and cash equivalents
$
56,243

 
$
16,034

Restricted cash
12,695

 
8,043

Total cash, cash equivalents and restricted cash
$
68,938

 
$
24,077

Revenue Recognition
Minimum annual rental revenue is recognized on a straight-line basis over the term of the related lease (including rent holidays). Differences between rental income recognized and amounts contractually due under the lease agreements are recorded as straight-line rent receivables. Tenant reimbursement revenue, which is comprised of additional amounts recoverable from tenants for common area maintenance expenses and certain other recoverable expenses, is recognized as revenue in the period in which the related expenses are incurred. Tenant reimbursements are recorded on a gross basis, as we are generally the primary obligor with respect to purchasing goods and services from third-party suppliers, have discretion in selecting the supplier, and have credit risk. We recognize lease termination fees when there is a signed termination letter agreement, all of the conditions of the agreement have been met, and the tenant is no longer occupying the property. Rental income is reported net of amortization of inducements. Effective January 1, 2018, with the adoption of Topic 606 and corresponding amendments, the revenue recognition process will be based on a five-step model to account for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. Topic 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We have identified all of our revenue streams and we have concluded that rental income from leasing arrangements represents a substantial portion of our revenue and, therefore, is specifically excluded from Topic 606 and will be governed and evaluated with the anticipated adoption of Topic 842. The other revenue stream identified as impacting Topic 606 is concentrated in the recognition of real estate sales and this component does not have a material impact on our financial statements. For more detailed information on Topic 606 see “Recently Issued or Adopted Accounting Pronouncements” below.
Investments in Real Estate
Depreciation expense of buildings and improvements for the three months ended March 31, 2018 and 2017, was $50.7 million and $32.7 million, respectively.

Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures using the equity method of accounting because we have the ability to exercise significant influence, but not control, over the financial and operational policy decisions of the investments. Using the equity method of accounting, the initial investment is recognized at cost and subsequently adjusted for our share of the net income or loss and any distributions from the joint venture. As of March 31, 2018, we had a 50% interest in one such investment with a carrying value and maximum exposure to risk of $69.1 million, which is recorded in investment in unconsolidated joint venture in the accompanying condensed consolidated balance sheets. We record our share of net income (loss) in income (loss) from unconsolidated joint venture in the accompanying condensed consolidated statements of operations. For the three months ended March 31, 2018, we recognized income of $0.6 million. Our unconsolidated joint venture was acquired during the second quarter of 2017 and, as such, there was no income (loss) or distributions for the three months ended March 31, 2017.

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

Recently Issued or Adopted Accounting Pronouncements
The following table provides a brief description of recently adopted accounting pronouncements:
Accounting Pronouncement
 
Description
 
Effective Date
 
Effect on financial statements
Topic 606; collectively, ASU 2014-09, 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, ASU 2017-05, ASU 2017-10, ASU 2017-13 and ASU 2017-14
Revenue from Contracts with Customers
(Issued May 2014, August 2015, March 2016, April 2016, May 2016, December 2016, February 2017, May 2017, September 2017 and November 2017)
 
In May 2014, the FASB issued Topic 606. The objective of Topic 606 is to establish a comprehensive new five-step model requiring a company to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (i.e., payment) to which the company expects to be entitled in exchange for those goods or services. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to Topic 606. Topic 606 does not apply to revenue from lease contracts until the adoption of the new leases standard in ASU 2016-02, in January 2019.

ASU 2017-05 applies to all nonfinancial assets (including real estate) for which the counterparty is not a customer and requires an entity to derecognize a nonfinancial asset in a partial sale transaction when it ceases to have a controlling financial interest in the asset and has transferred control of the asset. Once an entity transfers control of the nonfinancial asset, the entity is required to measure any nonconrolling interest it receives or retains at fair value. Under the current guidance, a partial sale is recognized and carryover basis is used for the retained interest resulting in only partial gain recognition by the entity, however, the new guidance eliminates the use of carryover basis and generally requires the full gain to be recognized.

In adopting Topic 606, companies may use either a full retrospective or a modified retrospective approach.

 
Topic 606 is effective for fiscal years beginning after December 15, 2017 along with the right of early adoption as of the original effective date.

 
We adopted Topic 606 effective January 1, 2018 to all open contracts using the modified retrospective approach.
As part of the adoption, we identified all revenue streams and concluded that revenues from leasing arrangements represented substantially all of our revenue and is generally excluded from the scope of Topic 606. Rather, rental revenue, including any executory type costs, will be governed and evaluated with the adoption of Topic 842 as described below. In addition, under Topic 606, revenue recognition for real estate sales will be substantially based on a principles-based approach to determine whether there has been transfer of control versus continuing involvement under the current guidance. There have not been, nor do we anticipate, any reclassifications or material impacts on our consolidated financial statements as a result of this adoption.

ASU 2017-09
Compensation - Stock Compensation (Topic 718): Clarifying the Scope of Modification (Issued May 2017)
 
ASU 2017-09 amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms and conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718.
 
ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted.
 
We adopted ASU 2017-09 as of January 1, 2018. There have not been, nor do we anticipate, any reclassifications or material impacts on our consolidated financial statements as a result of this adoption.

ASU 2017-12
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (Issued August 2017)
 
ASU 2017-12 expands and refines hedge accounting for both financial (e.g., interest rate) and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness.
 
ASU 2017-12 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted.
 
We adopted ASU 2017-12 as of January 1, 2018. Using the modified retrospective approach, the cumulative effect of the ineffectiveness for the year ended December 31, 2017 was immaterial; therefore, no adjustment was made to beginning retained earnings.  Additionally, as a result of the adoption, we no longer disclose the ineffective portion of the change in fair value of our derivative financial instruments. The entire change in the fair value of the hedging instruments included in the assessment of hedge effectiveness will now be recorded in other comprehensive income and subsequently reclassified to interest expense in the period the hedging instrument affects earnings.



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

The following table provides a brief description of recently issued accounting pronouncements:
Accounting Pronouncement
 
Description
 
Effective Date
 
Effect on financial statements
Topic 842; collectively ASU 2016-02 and 2018-01 Leases (Issued February 2016 and January 2018)
 
In February 2016, The FASB issued Topic 842. Topic 842 will supersede the existing guidance for lease accounting and states that companies will be required to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Topic 842 requires qualitative and quantitative disclosures to supplement the amounts recorded in the financial statements so that users can understand the nature of the entity’s leasing activities, including significant judgments and changes in judgments. ASU 2018-01 provides an optional transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted for as leases under the current lease guidance in Topic 840.  An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date the entity adopts Topic 842; otherwise, an entity should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease.   Within Topic 842, lessor accounting remained fairly unchanged. In adopting Topic 842, companies will be required to either use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements or an optional transition method by recognizing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.
 
Topic 842 is effective for the fiscal years beginning after December 15, 2018 with early adoption permitted.
 
We will adopt the provisions of Topic 842 no later than January 1, 2019. As part of our adoption, we have started our evaluation process to determine the amount of the impact to our consolidated results from operations, consolidated statements of financial position and related disclosures.
We anticipate that we will elect (a) the practical expedient offered that allows an entity to not reassess upon adoption (i) whether an expired or existing contract contains a lease arrangement; (ii) lease classification related to expired or existing lease arrangements; or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs; and (b) the practical expedient to not separate certain non-lease components, such as common area maintenance from lease revenue if (i) the timing and pattern of revenue recognition are the same for the non-lease component; and (ii) the related lease component and the combined single lease component would be classified as an operating lease.
Further, we anticipate as a result of the adoption, all leases for which we are the lessee, including ground leases and certain corporate leases, will be recorded on our consolidated financial statements as either financing leases or operating leases with a related right of use asset and lease liability. We are assessing the related cash flows of such leases and the appropriate discount rates that correspond to the terms of these leases. With respect to initial direct costs, we are assessing the projected impact the change in guidance will have on our accounting of such costs, however, we have capitalized approximately $1.3 million of internal initial direct costs during the three months ended March 31, 2018 (as defined by the current lease standard, ASC 840 - Leases). Upon the adoption of Topic 842, these initial direct costs would have been either in part or in their entirety classified as selling or general and administrative costs on our consolidated results of operations.
ASU 2016-13
Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments
(Issued June 2016)
 
ASU 2016-13 is intended to improve financial reporting by requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial statement assets measured at an amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis.
 
ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted.
 
We do not anticipate early adoption or there to be a material impact, however, we are evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements.

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

3. Investments in Real Estate
For the three months ended March 31, 2018, our investments had an aggregate purchase price of $12.3 million. As part of these investments, we incurred $65,000 of capitalized costs. The allocations for these investments, in which we own a controlling financial interest, are set forth below in the aggregate for the three months ended March 31, 2018 and 2017, respectively (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Land
$
1,084

 
$
4,934

Building and improvements
10,280

 
29,762

In place leases
662

 
3,185

Below market leases
(139
)
 
(65
)
Net assets acquired
11,887

 
37,816

Other, net
447

 
1,230

Aggregate purchase price
$
12,334

 
$
39,046

The acquired intangible assets and liabilities referenced above had weighted average lives of the following terms for the three months ended March 31, 2018 and 2017, respectively (in years):
 
Three Months Ended March 31,
 
2018
 
2017
Acquired intangible assets
8.4
 
11.3
Acquired intangible liabilities
8.4
 
10.2
4. Impairment
During the three months ended March 31, 2018, we recorded an impairment charge of $4.6 million on two MOBs located in Texas and South Carolina with an aggregate value of $13.0 million. During the three months ended March 31, 2017, no impairment charges were recorded.
5. Intangible Assets and Liabilities
Intangible assets and liabilities consisted of the following as of March 31, 2018 and December 31, 2017, respectively (in thousands, except weighted average remaining amortization terms):
 
March 31, 2018
 
December 31, 2017
 
Balance
 
Weighted Average Remaining
Amortization in Years
 
Balance
 
Weighted Average Remaining
Amortization in Years
Assets:
 
 
 
 
 
 
 
In place leases
$
473,514

 
9.7
 
$
474,252

 
9.8
Tenant relationships
164,589

 
10.3
 
164,947

 
10.2
Above market leases
39,919

 
6.2
 
40,082

 
6.3
Below market leasehold interests
92,362

 
60.2
 
92,362

 
63.4
 
770,384

 
 
 
771,643

 
 
Accumulated amortization
(330,274
)
 
 
 
(312,655
)
 
 
Total
$
440,110

 
19.6
 
$
458,988

 
19.5
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Below market leases
$
61,952

 
14.1
 
$
61,820

 
14.7
Above market leasehold interests
20,610

 
49.9
 
20,610

 
50.1
 
82,562

 
 
 
82,430

 
 
Accumulated amortization
(15,897
)
 
 
 
(14,227
)
 
 
Total
$
66,665

 
24.4
 
$
68,203

 
25.0

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

The following is a summary of the net intangible amortization for the three months ended March 31, 2018 and 2017, respectively (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Amortization recorded against rental income related to above and (below) market leases
$
(62
)
 
$
(223
)
Rental expense related to above and (below) market leasehold interests
277

 
129

Amortization expense related to in place leases and tenant relationships
17,648

 
12,730

6. Receivables and Other Assets
Receivables and other assets consisted of the following as of March 31, 2018 and December 31, 2017, respectively (in thousands):
 
March 31, 2018
 
December 31, 2017
Tenant receivables, net
$
12,471

 
$
20,269

Other receivables, net
8,548

 
9,305

Deferred financing costs, net
7,328

 
7,759

Deferred leasing costs, net
26,383

 
25,494

Straight-line rent receivables, net
89,674

 
85,143

Prepaid expenses, deposits, equipment and other, net
57,291

 
58,358

Derivative financial instruments - interest rate swaps
1,991

 
1,529

Total
$
203,686

 
$
207,857

The following is a summary of the amortization of deferred leasing costs and financing costs for the three months ended March 31, 2018, and 2017, respectively (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Amortization expense related to deferred leasing costs
$
1,506

 
$
1,262

Interest expense related to deferred financing costs
431

 
331

7. Debt
Debt consisted of the following as of March 31, 2018 and December 31, 2017, respectively (in thousands):
 
March 31, 2018
 
December 31, 2017
Unsecured revolving credit facility
$

 
$

Unsecured term loans
500,000

 
500,000

Unsecured senior notes
1,850,000

 
1,850,000

Fixed rate mortgages loans
413,180

 
414,524

Variable rate mortgages loans
37,664

 
37,918

 
2,800,844

 
2,802,442

Deferred financing costs, net
(15,145
)
 
(15,850
)
Discount, net
(5,408
)
 
(5,561
)
Total
$
2,780,291

 
$
2,781,031


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

Unsecured Credit Agreement
Unsecured Revolving Credit Facility due 2022
In 2017, HTALP entered into an amended and restated $1.3 billion unsecured credit agreement (the “Unsecured Credit Agreement”) which increased the amount available under the unsecured revolving credit facility to $1.0 billion and extended the maturities of the unsecured revolving credit facility to June 30, 2022 and for the $300.0 million unsecured term loan referenced below until February 1, 2023. The maximum principal amount of the Unsecured Credit Agreement may be increased by up to $750.0 million, subject to certain conditions, for a total principal amount of $2.05 billion.
Borrowings under the unsecured revolving credit facility accrue interest at a rate equal to adjusted LIBOR, plus a margin ranging from 0.83% to 1.55% per annum based on our credit rating. We also pay a facility fee ranging from 0.13% to 0.30% per annum on the aggregate commitments under the unsecured revolving credit facility. As of March 31, 2018, the margin associated with our borrowings was 1.00% per annum and the facility fee was 0.20% per annum.
Unsecured Term Loan due 2023
In 2017, we entered into an amended and restated Unsecured Credit Agreement as noted above. As part of this agreement, we obtained a $300.0 million unsecured term loan that was guaranteed by us with a maturity date of February 1, 2023. Borrowings under this unsecured term loan accrue interest equal to adjusted LIBOR, plus a margin ranging from 0.90% to 1.75% per annum based on our credit rating. The margin associated with our borrowings as of March 31, 2018 was 1.10% per annum. Including the impact of the interest rate swaps associated with our unsecured term loan, the interest rate was 2.98% per annum, based on our current credit rating. As of March 31, 2018, HTALP had $300.0 million under this unsecured term loan outstanding.
$200.0 Million Unsecured Term Loan due 2023
As of March 31, 2018, HTALP had a $200.0 million unsecured term loan outstanding, which matures on September 26, 2023. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 1.50% to 2.45% per annum based on our credit rating. The margin associated with our borrowings as of March 31, 2018 was 1.65% per annum. HTALP had interest rate swaps in place that fixed the interest rate at 3.22% per annum, based on our current credit rating.
$300.0 Million Unsecured Senior Notes due 2021
As of March 31, 2018, HTALP had $300.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act of 1933, as amended (the “Securities Act”), bear interest at 3.38% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.21% of the principal amount thereof, with an effective yield to maturity of 3.50% per annum. As of March 31, 2018, HTALP had $300.0 million of these unsecured senior notes outstanding that mature on July 15, 2021.
$400.0 Million Unsecured Senior Notes due 2022
In 2017, in connection with the $500.0 million unsecured senior notes due 2027 referenced below, HTALP issued $400.0 million of unsecured senior notes that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 2.95% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.94% of the principal amount thereof, with an effective yield to maturity of 2.96% per annum. As of March 31, 2018, HTALP had $400.0 million of these unsecured senior notes outstanding that mature on July 1, 2022.
$300.0 Million Unsecured Senior Notes due 2023
As of March 31, 2018, HTALP had $300.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.70% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.19% of the principal amount thereof, with an effective yield to maturity of 3.80% per annum. As of March 31, 2018, HTALP had $300.0 million of these unsecured senior notes outstanding that mature on April 15, 2023.

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

$350.0 Million Unsecured Senior Notes due 2026
As of March 31, 2018, HTALP had $350.0 million of unsecured senior notes outstanding that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.50% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.72% of the principal amount thereof, with an effective yield to maturity of 3.53% per annum. As of March 31, 2018, HTALP had $350.0 million of these unsecured senior notes outstanding that mature on August 1, 2026.
$500.0 Million Unsecured Senior Notes due 2027
In 2017, in connection with the $400.0 million unsecured senior notes due 2022 referenced above, HTALP issued $500.0 million of unsecured senior notes that are guaranteed by us. These unsecured senior notes are registered under the Securities Act, bear interest at 3.75% per annum and are payable semi-annually. Additionally, these unsecured senior notes were offered at 99.49% of the principal amount thereof, with an effective yield to maturity of 3.81% per annum. As of March 31, 2018, HTALP had $500.0 million of these unsecured senior notes outstanding that mature on July 1, 2027.
Fixed and Variable Rate Mortgages
In 2017, we were required by the seller under the Duke acquisition to execute, as the borrower, for a part of the purchase price a senior secured first lien loan, subject to customary non-recourse carve-outs, a promissory note (the “Promissory Note”) in the amount of $286.0 million. The Promissory Note bears interest at 4.0% per annum and is payable in three equal payments maturing on January 10, 2020 and is guaranteed by us.
As of March 31, 2018, HTALP and its subsidiaries had fixed and variable rate mortgage loans with interest rates ranging from 2.85% to 6.39% per annum and a weighted average interest rate of 4.30% per annum. Including the impact of the interest rate swap associated with our variable rate mortgages, the weighted average interest rate was 4.39% per annum.
Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of March 31, 2018 (in thousands):
Year
 
Amount
2018
 
$
100,915

2019
 
107,676

2020
 
146,678

2021
 
305,772

2022
 
463,063

Thereafter
 
1,676,740

Total
 
$
2,800,844

Deferred Financing Costs
As of March 31, 2018, the future amortization of our deferred financing costs is as follows (in thousands):
Year
 
Amount
2018
 
$
2,117

2019
 
2,826

2020
 
2,804

2021
 
2,610

2022
 
1,987

Thereafter
 
2,801

Total
 
$
15,145


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

We are required by the terms of our applicable loan agreements to meet various affirmative and negative covenants that we believe are customary for these types of facilities, such as limitations on the incurrence of debt by us and our subsidiaries that own unencumbered assets, limitations on the nature of HTALP’s business, and limitations on distributions by HTALP and its subsidiaries that own unencumbered assets. Our loan agreements also impose various financial covenants on us, such as a maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a minimum tangible net worth covenant, a maximum ratio of unsecured indebtedness to unencumbered asset value, rent coverage ratios and a minimum ratio of unencumbered NOI to unsecured interest expense. As of March 31, 2018, we believe that we were in compliance with all such financial covenants and reporting requirements. In addition, certain of our loan agreements include events of default provisions that we believe are customary for these types of facilities, including restricting us from making dividend distributions to our stockholders in the event we are in default thereunder, except to the extent necessary for us to maintain our REIT status.
8. Derivative Financial Instruments and Hedging Activities
Risk Management Objective of Using Derivative Financial Instruments
We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations. We record counterparty credit risk valuation adjustments on interest rate swap derivative assets in order to properly reflect the credit quality of the counterparty. In addition, our fair value of interest rate swap derivative liabilities is adjusted to reflect the impact of our credit quality.
Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and treasury locks as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without exchange of the underlying notional amount. A treasury lock is a synthetic forward sale of a U.S. treasury note, which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance.
As a result of our adoption of ASU 2017-12 as of January 1, 2018, the entire change in the fair value of derivatives designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets and are subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings. During the three months ended March 31, 2018, such derivatives were used to hedge the variable cash flows associated with variable rate debt. Additionally, we will no longer disclose the ineffective portion of the change in fair value of our derivatives.
Amounts reported in accumulated other comprehensive income in the accompanying condensed consolidated balance sheets related to derivatives will be reclassified to interest expense as interest payments are made on our variable rate debt. During the next twelve months, we estimate that an additional $0.9 million will be reclassified from other comprehensive income in the accompanying condensed consolidated balance sheets as an increase to interest related to derivative financial instruments in the accompanying condensed consolidated statements of operations.
As of March 31, 2018, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk (in thousands, except number of instruments):
Interest Rate Swaps
 
March 31, 2018
Number of instruments
 
5

Notional amount
 
$
189,095


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

The table below presents the fair value of our derivative financial instruments designated as a hedge as well as our classification in the accompanying condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017, respectively (in thousands).
 
 
Asset Derivatives
 
Liability Derivatives
  
 
 
 
Fair Value at:
 
 
 
Fair Value at:
Derivatives Designated as Hedging Instruments:
 
Balance Sheet
Location
 
March 31, 2018
 
December 31, 2017
 
Balance Sheet
Location
 
March 31, 2018
 
December 31, 2017
Interest rate swaps
 
Receivables and other assets
 
$
1,991

 
$
1,529

 
Derivative financial instruments
 
$
742

 
$
1,089

The table below presents the gain or loss recognized on our derivative financial instruments designated as hedges as well as our classification in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017, respectively (in thousands). As a result of the adoption of ASU 2017-12 as of January 1, 2018, we no longer disclose the ineffective portion of the change in fair value of our derivative financial instruments designated as hedges.
 
 
Gain (Loss) Recognized in OCI on Derivative
 
 
 
Gain (Loss) Reclassified from Accumulated OCI into Income

 
 
Three Months Ended March 31,
 
 
 
Three Months Ended March 31,
Derivatives Cash Flow Hedging Relationships:
 
2018
 
2017
 
Statement of Operations Location
 
2018
 
2017
Interest rate swaps
 
$
970

 
$
(164
)
 
Interest related to derivative financial instruments
 
$
70

 
$
(76
)
Non-Designated Hedges
Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements of ASC 815 - Derivatives and Hedging. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly to gain or loss on change in fair value of derivative financial instruments in the accompanying condensed consolidated statements of operations. For the three months ended March 31, 2017, we recorded a gain on change in fair value of derivative financial instruments of $0.8 million. There were no non-designated hedges as of March 31, 2018.
Tabular Disclosure of Offsetting Derivatives
The table below sets forth the net effects of offsetting and net presentation of our derivatives as of March 31, 2018 and December 31, 2017, respectively (in thousands). The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets or liabilities are presented in the consolidated balance sheets.
 
 
Offsetting of Derivative Assets
 
 
Gross Amounts of Recognized Assets
 
Gross Amounts in the Consolidated Balance Sheets
 
Net Amounts of Assets Presented in the Consolidated Balance Sheets
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
March 31, 2018
 
$
1,991

 
$

 
$
1,991

 
$

 
$

 
$
1,991

December 31, 2017
 
1,529

 

 
1,529

 

 

 
1,529

 
 
Offsetting of Derivative Liabilities
 
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts in the Consolidated Balance Sheets
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
March 31, 2018
 
$
742

 
$

 
$
742

 
$

 
$

 
$
742

December 31, 2017
 
1,089

 

 
1,089

 

 

 
1,089


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

Credit Risk Related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision that if we default on any of our indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations.
We also have agreements with each of our derivative counterparties that incorporate provisions from our indebtedness with a lender affiliate of the derivative counterparty requiring it to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by these agreements.
As of March 31, 2018, the fair value of derivatives in a net liability position, including accrued interest, but excluding any adjustment for nonperformance risk related to these agreements, was $0.7 million. As of March 31, 2018, we have not posted any collateral related to these agreements and we were not in breach of any of the provisions of these agreements. If we had breached any of the provisions of these agreements, we could have been required to settle our obligations under these agreements at an aggregate termination value of $0.7 million at March 31, 2018.
9. Commitments and Contingencies
Litigation
We engage in litigation from time to time with various parties as a routine part of our business, including tenant defaults. However, we are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material effect on our condensed consolidated financial position, results of operations or cash flows. 
Environmental Matters
We follow the policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our condensed consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability at our properties that we believe would require additional disclosure or the recording of a loss contingency.
Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business. In our opinion, these matters are not expected to have a material effect on our condensed consolidated financial position, results of operations or cash flows.
10. Stockholders’ Equity and Partners’ Capital
HTALP’s operating partnership agreement provides that it will distribute cash flow from operations and net sale proceeds to its partners in accordance with their overall ownership interests at such times and in such amounts as the general partner determines. Dividend distributions are made such that a holder of one OP Unit in HTALP will receive distributions from HTALP in an amount equal to the dividend distributions paid to the holder of one share of our common stock. In addition, for each share of common stock issued or redeemed by us, HTALP issues or redeems a corresponding number of OP Units.
During 2017, we entered a forward sale arrangement pursuant to a forward equity agreement, with proceeds of $75.0 million, excluding anticipated costs to borrow. In February 2018, the maturity date was extended to October 2018, subject to adjustments as provided in the forward equity agreement. Refer to Note 12 - Per Share Data of HTA to these condensed consolidated financial statements for a more detailed discussion related to our forward equity agreement.
Common Stock Dividends
See our accompanying condensed consolidated statements of operations for the dividends declared during the three months ended March 31, 2018 and 2017. On April 27, 2018, our Board of Directors announced a quarterly dividend of $0.305 per share/unit of common stock to be paid on July 10, 2018 to stockholders of record of our common stock and OP unitholders on July 5, 2018.

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

Incentive Plan
The Plan permits the grant of incentive awards to our employees, officers, non-employee directors and consultants as selected by our Board of Directors. The Plan authorizes us to grant awards in any of the following forms: options; stock appreciation rights; restricted stock; restricted or deferred stock units; performance awards; dividend equivalents; other stock-based awards, including units in HTALP; and cash-based awards. Subject to adjustment as provided in the Plan, the aggregate number of awards reserved and available for issuance under the Plan is 5,000,000 shares. As of March 31, 2018, there were 1,405,137 awards available for grant under the Plan.
Restricted Common Stock
For the three months ended March 31, 2018 and 2017, we recognized compensation expense of $3.5 million and $2.5 million, respectively. Compensation expense was recorded in general and administrative expenses in the accompanying condensed consolidated statements of operations.
As of March 31, 2018, we had $11.7 million of unrecognized compensation expense, net of estimated forfeitures, which we will recognize over a remaining weighted average period of 1.8 years.
The following is a summary of our restricted common stock activity as of March 31, 2018 and 2017, respectively:
 
March 31, 2018
 
March 31, 2017
 
Restricted Common Stock
 
Weighted
Average Grant
Date Fair Value
 
Restricted Common Stock
 
Weighted
Average Grant
Date Fair Value
Beginning balance
589,606

 
$
29.38

 
640,870

 
$
27.36

Granted
307,534

 
29.05

 
215,333

 
29.31

Vested
(205,270
)
 
29.13

 
(229,621
)
 
24.88

Forfeited
(20,061
)
 
29.66

 
(2,524
)
 
29.96

Ending balance
671,809

 
$
29.29

 
624,058

 
$
28.94

11. Fair Value of Financial Instruments
Financial Instruments Reported at Fair Value - Recurring
The table below presents our assets and liabilities measured at fair value on a recurring basis as of March 31, 2018, aggregated by the applicable level in the fair value hierarchy (in thousands):
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
Derivative financial instruments
 
$

 
$
1,991

 
$

 
$
1,991

Liabilities:
 
 
 
 
 
 
 
 
Derivative financial instruments
 
$

 
$
742

 
$

 
$
742

The table below presents our assets and liabilities measured at fair value on a recurring basis as of December 31, 2017, aggregated by the applicable level in the fair value hierarchy (in thousands):
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
Derivative financial instruments
 
$


$
1,529


$

 
$
1,529

Liabilities:
 
 
 
 
 
 
 
 
Derivative financial instruments
 
$

 
$
1,089

 
$

 
$
1,089


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

Financial Instruments Reported at Fair Value - Non-Recurring
The table below presents our assets measured at fair value on a non-recurring basis as of March 31, 2018, aggregated by the applicable level in the fair value hierarchy (in thousands):
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
MOB (1)
 
$

 
$
12,985

 
$

 
$
12,985

 
 
 
 
 
 
 
 
 
(1) During the three months ended March 31, 2018, we recognized $4.6 million of impairment charges to the carrying value of two MOBs. The estimated fair value as of March 31, 2018 for these MOBs was based upon a pending sales agreement.
The table below presents our assets measured at fair value on a non-recurring basis as of December 31, 2017, aggregated by the applicable level in the fair value hierarchy (in thousands):
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
MOB (1)
 
$

 
$
10,271

 
$

 
$
10,271

 
 
 
 
 
 
 
 
 
(1) During the year ended December 31, 2017, we recognized $13.9 million of impairment charges to the carrying value of two MOBs and a portfolio of MOBs. The estimated fair value as of December 31, 2017 for these MOBs was based upon a pending sales agreement and real estate market comparables.
There have been no transfers of assets or liabilities between levels. We will record any such transfers at the end of the reporting period in which a change of event occurs that results in a transfer. Although we have determined that the majority of the inputs used to value our interest rate swap derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our interest rate swap derivative positions and have determined that the credit valuation adjustments are not significant to their overall valuation. As a result, we have determined that our interest rate swap derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. 
Financial Instruments Disclosed at Fair Value
We consider the carrying values of cash and cash equivalents, tenant and other receivables, restricted cash and accounts payable, and accrued liabilities, to approximate fair value for these financial instruments because of the short period of time between origination of the instruments and their expected realization. All of these financial instruments are considered Level 2.
The fair value of debt is estimated using borrowing rates available to us with similar terms and maturities, which is considered a Level 2 input. As of March 31, 2018, the fair value of the debt was $2,765.8 million compared to the carrying value of $2,780.3 million. As of December 31, 2017, the fair value of the debt was $2,826.3 million compared to the carrying value of $2,781.0 million.

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

12. Per Share Data of HTA
In October 2017, we entered a forward sale arrangement pursuant to a forward equity agreement to sell approximately 2.6 million shares of common stock through our ATM at a price of $29.40 per share, for proceeds of approximately $75.0 million, excluding anticipated costs to borrow. In February 2018, the maturity date was extended to October 2018, subject to adjustments as provided in the forward equity agreement. To account for the forward equity agreement, we considered the accounting guidance governing financial instruments and derivatives and concluded that our forward equity agreement was not a liability as it did not embody obligations to repurchase our shares of common stock nor did it embody obligations to issue a variable number of shares for which the monetary value was predominately fixed, varying with something other than the fair value of the shares, or varying inversely in relation to our shares. We also evaluated whether the agreement met the derivatives and hedging guidance scope exception to be accounted for as an equity instrument and concluded that the agreement can be classified as an equity contract based on the following assessment: (i) none of the agreements’ exercise contingencies were based on observable markets or indices besides those related to the market for our own stock price and operations; and (ii) none of the settlement provisions precluded the agreement from being indexed to our own common stock.
In addition, we considered the potential dilution resulting from the forward equity agreement on our earnings per common share calculations. We used the treasury method to determine the dilution resulting from the forward equity agreement during the period of time prior to settlement. The number of weighted-average shares outstanding - diluted used in the computation of earnings per common share for the three months ended March 31, 2018, included the effect from the assumed issuance of 2.6 million shares of common stock pursuant to the settlement of the forward equity agreement at the contractual price, less the assumed repurchase of common shares at the average market price using the proceeds of approximately $75.0 million, excluding anticipated costs to borrow. For the three months ended March 31, 2018, approximately 266,000 weighted-average incremental shares were excluded from the computation of our weighted-average shares-diluted, as their impact was anti-dilutive.
We include unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents as “participating securities” pursuant to the two-class method. The resulting classes are our common stock and restricted stock. Our forward equity agreement is not considered a participating security and, therefore, is not included in the computation of earnings per share using the two-class method. For the three months ended March 31, 2018, and 2017, all of our earnings were distributed and the calculated earnings per share amount would be the same for all classes.
The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per share of HTA for the three months ended March 31, 2018, and 2017, respectively (in thousands, except per share data):
 
Three Months Ended March 31,
 
2018
 
2017
Numerator:
 
 
 
Net income
$
10,016

 
$
14,000

Net income attributable to noncontrolling interests
(214
)
 
(455
)
Net income attributable to common stockholders
$
9,802

 
$
13,545

Denominator:
 
 
 
Weighted average shares outstanding - basic
205,069

 
141,780

Dilutive shares - partnership units convertible into common stock
4,108

 
4,337

Adjusted weighted average shares outstanding - diluted
209,177

 
146,117

Earnings per common share - basic
 
 
 
Net income attributable to common stockholders
$
0.05

 
$
0.10

Earnings per common share - diluted
 
 
 
Net income attributable to common stockholders
$
0.05

 
$
0.09


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

13. Per Unit Data of HTALP
In October 2017, we entered a forward sale arrangement pursuant to a forward equity agreement to sell 2.6 million shares of common stock through our ATM. Refer to Note 12 - Per Share Data of HTA to these condensed consolidated financial statements for a more detailed discussion related to our forward equity agreement executed in October 2017.
The following is the reconciliation of the numerator and denominator used in basic and diluted earnings per unit of HTALP for the three months ended March 31, 2018, and 2017, respectively (in thousands, except per unit data):
 
Three Months Ended March 31,
 
2018
 
2017
Numerator:
 
 
 
Net income
$
10,016

 
$
14,000

Net income attributable to noncontrolling interests
(33
)
 
(30
)
Net income attributable to common unitholders
$
9,983

 
$
13,970

Denominator: 
 
 
 
Weighted average units outstanding - basic
209,177

 
146,117

Dilutive units - partnership units convertible into common units

 

Adjusted weighted average units outstanding - diluted
209,177

 
146,117

Earnings per common unit - basic:
 
 
 
Net income attributable to common unitholders
$
0.05

 
$
0.10

Earnings per common unit - diluted:
 
 
 
Net income attributable to common unitholders
$
0.05

 
$
0.10

14. Supplemental Cash Flow Information
The following is the supplemental cash flow information for the three months ended March 31, 2018, and 2017, respectively (in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Supplemental Disclosure of Cash Flow Information:
 
 
 
Interest paid
$
37,518

 
$
19,186

Income taxes paid
656

 
60

 
 
 
 
Supplemental Disclosure of Noncash Investing and Financing Activities:
 
 
 
Accrued capital expenditures
$
760

 
$
5,696

Dividend distributions declared, but not paid
63,828

 
44,489

Issuance of operating partnership units in connection with acquisitions

 
610

Note receivable retired in connection with an acquisition

 
2,494

Redemption of noncontrolling interest
2,413

 


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The use of the words “we,” “us” or “our” refers to HTA and HTALP, collectively.
The following discussion should be read in conjunction with our condensed consolidated financial statements and notes appearing elsewhere in this Quarterly Report, as well as with the audited consolidated financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2017 Annual Report on Form 10-K. Such condensed consolidated financial statements and information have been prepared to reflect HTA’s and HTALP’s financial position as of March 31, 2018 and December 31, 2017, together with results of operations and cash flows for three months ended March 31, 2018 and