Toggle SGML Header (+)


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 September 30, 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)
http://www.htareit.com
(Internet address)
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 October 22, 2018, there were 206,940,894 shares of Class A common stock of Healthcare Trust of America, Inc. outstanding.
 



Explanatory Note
This quarterly report combines the Quarterly Reports on Form 10-Q (“Quarterly Report”) for the quarter ended September 30, 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 September 30, 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 11 - Stockholders’ Equity and Partners’ Capital, Note 13 - Per Share Data of HTA, and Note 14 - Per Unit Data of HTALP;
As defined by the National Association of Real Estate Investment Trusts (“NAREIT”), 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)
 
 
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
483,541

 
$
485,319

Building and improvements
 
5,743,439

 
5,830,824

Lease intangibles
 
604,215

 
639,199

Construction in progress
 
27,273

 
14,223

 
 
6,858,468

 
6,969,565

Accumulated depreciation and amortization
 
(1,151,490
)
 
(1,021,691
)
Real estate investments, net
 
5,706,978

 
5,947,874

Investment in unconsolidated joint venture
 
67,592

 
68,577

Cash and cash equivalents
 
225,518

 
100,356

Restricted cash
 
14,639

 
18,204

Receivables and other assets, net
 
213,482

 
207,857

Other intangibles, net
 
100,475

 
106,714

Total assets
 
$
6,328,684

 
$
6,449,582

LIABILITIES AND EQUITY
 
 
 
 
Liabilities:
 
 
 
 
Debt
 
$
2,609,659

 
$
2,781,031

Accounts payable and accrued liabilities
 
160,246

 
167,852

Derivative financial instruments - interest rate swaps
 

 
1,089

Security deposits, prepaid rent and other liabilities
 
55,753

 
61,222

Intangible liabilities, net
 
62,887

 
68,203

Total liabilities
 
2,888,545

 
3,079,397

Commitments and contingencies
 

 

Redeemable noncontrolling interests
 
6,610

 
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; 207,231,171 and 204,892,118 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively
 
2,072

 
2,049

Additional paid-in capital
 
4,574,913

 
4,508,528

Accumulated other comprehensive income
 
648

 
274

Cumulative dividends in excess of earnings
 
(1,224,006
)
 
(1,232,069
)
Total stockholders’ equity
 
3,353,627

 
3,278,782

Noncontrolling interests
 
79,902

 
84,666

Total equity
 
3,433,529

 
3,363,448

Total liabilities and equity
 
$
6,328,684

 
$
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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Rental income
$
175,038

 
$
175,431

 
$
523,826

 
$
438,949

Interest and other operating income
97

 
563

 
302

 
1,271

Total revenues
175,135

 
175,994

 
524,128


440,220

Expenses:
 
 
 
 
 
 
 
Rental
55,789

 
56,331

 
165,364

 
138,874

General and administrative
8,770

 
8,283

 
26,281

 
25,178

Transaction
346

 
261

 
933

 
5,618

Depreciation and amortization
70,568

 
70,491

 
210,064

 
172,900

Impairment
4,281

 

 
8,887

 
5,093

Total expenses
139,754

 
135,366

 
411,529

 
347,663

Income before other income (expense)
35,381

 
40,628

 
112,599

 
92,557

Interest income (expense):
 
 
 
 
 
 
 
Interest related to derivative financial instruments
169

 
(264
)
 
297

 
(827
)
Gain on change in fair value of derivative financial instruments, net

 

 

 
884

Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments
169

 
(264
)
 
297

 
57

Interest related to debt
(25,003
)
 
(25,924
)
 
(77,689
)
 
(59,688
)
Gain on sale of real estate, net
166,372

 

 
166,372

 
3

Loss on extinguishment of debt, net
(1,092
)
 
(774
)
 
(1,092
)
 
(11,192
)
Income from unconsolidated joint venture
432

 
318

 
1,405

 
381

Other income (expense)
89

 
(27
)
 
129

 
(13
)
Net income
$
176,348

 
$
13,957

 
$
202,021

 
$
22,105

Net income attributable to noncontrolling interests (1) 
(3,362
)
 
(194
)
 
(3,887
)
 
(715
)
Net income attributable to common stockholders
$
172,986

 
$
13,763

 
$
198,134

 
$
21,390

Earnings per common share - basic:
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
0.83

 
$
0.07

 
$
0.96

 
$
0.12

Earnings per common share - diluted:
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
0.82

 
$
0.07

 
$
0.94

 
$
0.12

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
207,513

 
200,674

 
205,950

 
173,189

Diluted
211,444

 
204,795

 
209,968

 
177,410

Dividends declared per common share
$
0.310

 
$
0.305

 
$
0.920

 
$
0.905

 
 
 
 
 
 
 
 
(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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net income
$
176,348

 
$
13,957

 
$
202,021

 
$
22,105

 
 
 
 
 
 
 
 
Other comprehensive (loss) income
 
 
 
 
 
 
 
Change in unrealized (losses) gains on cash flow hedges
(732
)
 
205

 
382

 
(631
)
Total other comprehensive (loss) income
(732
)
 
205

 
382

 
(631
)
 
 
 
 
 
 
 
 
Total comprehensive income
175,616

 
14,162

 
202,403

 
21,474

Comprehensive income attributable to noncontrolling interests
(3,331
)
 
(170
)
 
(3,830
)
 
(619
)
Total comprehensive income attributable to common stockholders
$
172,285

 
$
13,992

 
$
198,573

 
$
20,855

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 Income (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 common stock in HTA
58,623

 
586

 
1,623,636

 

 

 
1,624,222

 

 
1,624,222

Issuance of operating partnership units in HTALP in connection with an acquisition

 

 

 

 

 

 
610

 
610

Share-based award transactions, net
234

 
3

 
5,490

 

 

 
5,493

 

 
5,493

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

 

 
(3,413
)
 

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

 
2

 
5,692

 

 

 
5,694

 
(5,694
)
 

Dividends declared

 

 

 

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

 

 

 

 
21,390

 
21,390

 
635

 
22,025

Other comprehensive loss

 

 

 
(615
)
 

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

 
$
2,007

 
$
4,386,224

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

 
$
84,742

 
$
3,260,307

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

Issuance of common stock in HTA
2,550

 
25

 
72,789

 

 

 
72,814

 

 
72,814

Share-based award transactions, net
323

 
3

 
7,827

 

 

 
7,830

 
411

 
8,241

Repurchase and cancellation of common stock
(729
)
 
(7
)
 
(19,424
)
 

 

 
(19,431
)
 

 
(19,431
)
Redemption of noncontrolling interest and other
195

 
2

 
5,193

 

 

 
5,195

 
(5,195
)
 

Dividends declared

 

 

 

 
(190,071
)
 
(190,071
)
 
(3,810
)
 
(193,881
)
Net income

 

 

 

 
198,134

 
198,134

 
3,822

 
201,956

Other comprehensive income

 

 

 
374

 

 
374

 
8

 
382

Balance as of September 30, 2018
207,231

 
$
2,072

 
$
4,574,913

 
$
648

 
$
(1,224,006
)
 
$
3,353,627

 
$
79,902

 
$
3,433,529

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)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
202,021

 
$
22,105

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and other
203,550

 
169,057

Share-based compensation expense
7,830

 
5,493

Impairment
8,887

 
5,093

Income from unconsolidated joint venture
(1,405
)
 
(381
)
Distributions from unconsolidated joint venture
1,680

 

Gain on sale of real estate, net
(166,372
)
 
(3
)
Loss on extinguishment of debt, net
1,092

 
11,192

Change in fair value of derivative financial instruments

 
(884
)
Changes in operating assets and liabilities:
 
 
 
Receivables and other assets, net
(7,820
)
 
(19,854
)
Accounts payable and accrued liabilities
(5,932
)
 
29,566

Prepaid rent and other liabilities
(2,780
)
 
7,158

Net cash provided by operating activities
240,751

 
228,542

Cash flows from investing activities:
 
 
 
Investments in real estate
(17,389
)
 
(2,357,570
)
Investment in unconsolidated joint venture

 
(68,839
)
Development of real estate
(29,593
)
 
(19,163
)
Proceeds from the sale of real estate
302,440

 
4,746

Capital expenditures
(61,136
)
 
(42,990
)
Collection of real estate notes receivable
524

 

Net cash provided by (used in) investing activities
194,846

 
(2,483,816
)
Cash flows from financing activities:
 
 
 
Borrowings on unsecured revolving credit facility
145,000

 
515,000

Payments on unsecured revolving credit facility
(145,000
)
 
(528,000
)
Proceeds from unsecured senior notes

 
900,000

Payments on secured mortgage loans
(173,212
)
 
(75,444
)
Deferred financing costs
(782
)
 
(16,902
)
Debt extinguishment costs
(1,909
)
 
(10,391
)
Security deposits
499

 
1,932

Proceeds from issuance of common stock
72,814

 
1,624,222

Issuance of operating partnership units
411

 

Repurchase and cancellation of common stock
(19,431
)
 
(3,413
)
Dividends paid
(188,414
)
 
(145,877
)
Distributions paid to noncontrolling interest of limited partners
(3,976
)
 
(4,019
)
Net cash (used in) provided by financing activities
(314,000
)
 
2,257,108

Net change in cash, cash equivalents and restricted cash
121,597

 
1,834

Cash, cash equivalents and restricted cash - beginning of period
118,560

 
25,045

Cash, cash equivalents and restricted cash - end of period
$
240,157

 
$
26,879

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)
 
 
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
 
Real estate investments:
 
 
 
 
Land
 
$
483,541

 
$
485,319

Building and improvements
 
5,743,439

 
5,830,824

Lease intangibles
 
604,215

 
639,199

Construction in progress
 
27,273

 
14,223

 
 
6,858,468

 
6,969,565

Accumulated depreciation and amortization
 
(1,151,490
)
 
(1,021,691
)
Real estate investments, net
 
5,706,978

 
5,947,874

Investment in unconsolidated joint venture
 
67,592

 
68,577

Cash and cash equivalents
 
225,518

 
100,356

Restricted cash
 
14,639

 
18,204

Receivables and other assets, net
 
213,482

 
207,857

Other intangibles, net
 
100,475

 
106,714

Total assets
 
$
6,328,684

 
$
6,449,582

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
Liabilities:
 
 
 
 
Debt
 
$
2,609,659

 
$
2,781,031

Accounts payable and accrued liabilities
 
160,246

 
167,852

Derivative financial instruments - interest rate swaps
 

 
1,089

Security deposits, prepaid rent and other liabilities
 
55,753

 
61,222

Intangible liabilities, net
 
62,887

 
68,203

Total liabilities
 
2,888,545

 
3,079,397

Commitments and contingencies
 


 


Redeemable noncontrolling interests
 
6,610

 
6,737

Partners’ Capital:
 
 
 
 
Limited partners’ capital, 3,929,083 and 4,124,148 units issued and outstanding as of September 30, 2018 and December 31, 2017, respectively
 
79,632

 
84,396

General partners’ capital, 207,231,171 and 204,892,118 units issued and outstanding as of September 30, 2018 and December 31, 2017, respectively
 
3,353,897

 
3,279,052

Total partners’ capital
 
3,433,529

 
3,363,448

Total liabilities and partners’ capital
 
$
6,328,684

 
$
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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Rental income
$
175,038

 
$
175,431

 
$
523,826

 
$
438,949

Interest and other operating income
97

 
563

 
302

 
1,271

Total revenues
175,135

 
175,994

 
524,128

 
440,220

Expenses:
 
 
 
 
 
 
 
Rental
55,789

 
56,331

 
165,364

 
138,874

General and administrative
8,770

 
8,283

 
26,281

 
25,178

Transaction
346

 
261

 
933

 
5,618

Depreciation and amortization
70,568

 
70,491

 
210,064

 
172,900

Impairment
4,281

 

 
8,887

 
5,093

Total expenses
139,754

 
135,366

 
411,529

 
347,663

Income before other income (expense)
35,381

 
40,628

 
112,599

 
92,557

Interest income (expense):
 
 
 
 
 
 
 
Interest related to derivative financial instruments
169

 
(264
)
 
297

 
(827
)
Gain on change in fair value of derivative financial instruments, net

 

 

 
884

Total interest related to derivative financial instruments, including net change in fair value of derivative financial instruments
169

 
(264
)
 
297

 
57

Interest related to debt
(25,003
)
 
(25,924
)
 
(77,689
)
 
(59,688
)
Gain on sale of real estate, net
166,372

 

 
166,372

 
3

Loss on extinguishment of debt, net
(1,092
)
 
(774
)
 
(1,092
)
 
(11,192
)
Income from unconsolidated joint venture
432

 
318

 
1,405

 
381

Other income (expense)
89

 
(27
)
 
129

 
(13
)
Net income
$
176,348

 
$
13,957

 
$
202,021

 
$
22,105

Net income attributable to noncontrolling interests
(18
)
 
(28
)
 
(65
)
 
(80
)
Net income attributable to common unitholders
$
176,330

 
$
13,929

 
$
201,956

 
$
22,025

Earnings per common unit - basic:
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
0.83

 
$
0.07

 
$
0.96

 
$
0.12

Earnings per common unit - diluted:
 
 
 
 
 
 
 
Net income attributable to common unitholders
$
0.83

 
$
0.07

 
$
0.96

 
$
0.12

Weighted average common units outstanding: 
 
 
 
 
 
 
 
Basic
211,444

 
204,795

 
209,968

 
177,410

Diluted
211,444

 
204,795

 
209,968

 
177,410

Dividends declared per common unit
$
0.310

 
$
0.305

 
$
0.920

 
$
0.905

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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Net income
$
176,348

 
$
13,957

 
$
202,021

 
$
22,105

 
 
 
 
 
 
 
 
Other comprehensive (loss) income
 
 
 
 
 
 
 
Change in unrealized (losses) gains on cash flow hedges
(732
)
 
205

 
382

 
(631
)
Total other comprehensive (loss) income
(732
)
 
205

 
382

 
(631
)
 
 
 
 
 
 
 
 
Total comprehensive income
175,616

 
14,162

 
202,403

 
21,474

Comprehensive income attributable to noncontrolling interests
(18
)
 
(28
)
 
(65
)
 
(80
)
Total comprehensive income attributable to common unitholders
$
175,598

 
$
14,134

 
$
202,338

 
$
21,394

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 general partner units
58,623

 
1,624,222

 

 

 
1,624,222

Issuance of limited partner units in connection with an acquisition

 

 
21

 
610

 
610

Share-based award transactions, net
234

 
5,493

 

 

 
5,493

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

 

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

 
5,694

 
(227
)
 
(5,694
)
 

Distributions declared

 
(164,480
)
 

 
(3,936
)
 
(168,416
)
Net income

 
21,390

 

 
635

 
22,025

Other comprehensive loss

 
(615
)
 

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

 
$
3,175,835

 
4,117

 
$
84,472

 
$
3,260,307

 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
204,892

 
$
3,279,052

 
4,124

 
$
84,396

 
$
3,363,448

Issuance of general partner units
2,550

 
72,814

 

 

 
72,814

Share-based award transactions, net
323

 
7,830

 

 
411

 
8,241

Redemption and cancellation of general partner units
(729
)
 
(19,431
)
 

 

 
(19,431
)
Redemption of limited partner units and other
195

 
5,195

 
(195
)
 
(5,195
)
 

Distributions declared

 
(190,071
)
 

 
(3,810
)
 
(193,881
)
Net income

 
198,134

 

 
3,822

 
201,956

Other comprehensive income

 
374

 

 
8

 
382

Balance as of September 30, 2018
207,231

 
$
3,353,897

 
3,929

 
$
79,632

 
$
3,433,529

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


12


Table of Contents

HEALTHCARE TRUST OF AMERICA HOLDINGS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
202,021

 
$
22,105

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and other
203,550

 
169,057

Share-based compensation expense
7,830

 
5,493

Impairment
8,887

 
5,093

Income from unconsolidated joint venture
(1,405
)
 
(381
)
Distributions from unconsolidated joint venture
1,680

 

Gain on sale of real estate, net
(166,372
)
 
(3
)
Loss on extinguishment of debt, net
1,092

 
11,192

Change in fair value of derivative financial instruments

 
(884
)
Changes in operating assets and liabilities:
 
 
 
Receivables and other assets, net
(7,820
)
 
(19,854
)
Accounts payable and accrued liabilities
(5,932
)
 
29,566

Prepaid rent and other liabilities
(2,780
)
 
7,158

Net cash provided by operating activities
240,751

 
228,542

Cash flows from investing activities:
 
 
 
Investments in real estate
(17,389
)
 
(2,357,570
)
Investment in unconsolidated joint venture

 
(68,839
)
Development of real estate
(29,593
)
 
(19,163
)
Proceeds from the sale of real estate
302,440

 
4,746

Capital expenditures
(61,136
)
 
(42,990
)
Collection of real estate notes receivable
524

 

Net cash provided by (used in) investing activities
194,846

 
(2,483,816
)
Cash flows from financing activities:
 
 
 
Borrowings on unsecured revolving credit facility
145,000

 
515,000

Payments on unsecured revolving credit facility
(145,000
)
 
(528,000
)
Proceeds from unsecured senior notes

 
900,000

Payments on secured mortgage loans
(173,212
)
 
(75,444
)
Deferred financing costs
(782
)
 
(16,902
)
Debt extinguishment costs
(1,909
)
 
(10,391
)
Security deposits
499

 
1,932

Proceeds from issuance of general partner units
72,814

 
1,624,222

Issuance of limited partner units
411

 

Repurchase and cancellation of general partner units
(19,431
)
 
(3,413
)
Distributions paid to general partner
(188,414
)
 
(145,877
)
Distributions paid to limited partners and redeemable noncontrolling interests
(3,976
)
 
(4,019
)
Net cash (used in) provided by financing activities
(314,000
)
 
2,257,108

Net change in cash, cash equivalents and restricted cash
121,597

 
1,834

Cash, cash equivalents and restricted cash - beginning of period
118,560

 
25,045

Cash, cash equivalents and restricted cash - end of period
$
240,157

 
$
26,879

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

13


Table of Contents

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 32 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.

14


Table of Contents
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 noncontrolling 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 noncontrolling 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 September 30, 2018 and December 31, 2017, there were approximately 3.9 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 and restricted cash equivalents. Therefore, restricted cash and 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 in the fourth quarter of 2017, as set forth in our 2017 Annual Report on Form 10-K as of January 1, 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 nine months ended September 30, 2017 in the accompanying condensed consolidated statements of cash flows (in thousands):
 
Nine Months Ended September 30, 2017
 
As Previously Reported
 
As Reclassified
Cash flows from investing activities:
 
 
 
        Other assets (1)
$
(3,655
)
 
$

               Net cash used in investing activities
(2,487,471
)
 
(2,483,816
)
 
 
 
 
Net change in cash, cash equivalents and restricted cash (2)
$
(1,821
)
 
$
1,834

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

 
25,045

Cash, cash equivalents and restricted cash - end of period (2)
$
9,410

 
$
26,879

 
 
 
 
(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.

15


Table of Contents
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 (i) reserve accounts for property taxes, insurance, capital improvements and tenant improvements; (ii) collateral accounts for debt and interest rate swaps; and (iii) deposits for future investments.
With our adoption of ASU 2016-18 in the fourth quarter of 2017, 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 as of September 30, 2018 and 2017, respectively (in thousands):
 
September 30,
 
2018
 
2017
Cash and cash equivalents
$
225,518

 
$
9,410

Restricted cash
14,639

 
17,469

Total cash, cash equivalents and restricted cash
$
240,157

 
$
26,879

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 real estate taxes, common area maintenance and other certain operating expenses are recognized as revenue on a gross basis in the period in which the related recoverable expenses are incurred.  We accrue revenue corresponding to these expenses on a quarterly basis to adjust recorded amounts to our best estimate of the final annual amounts to be billed. Subsequent to year-end, on a calendar year basis, we perform reconciliations on a lease-by-lease basis and bill or credit each tenant for any differences between the estimated expenses we billed and the actual expenses that were incurred. 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 the adoption of Topic 606 did 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 September 30, 2018 and 2017 was $50.2 million and $49.8 million, respectively. Depreciation expense of buildings and improvements for the nine months ended September 30, 2018 and 2017 was $151.5 million and $121.5 million, respectively.

Redeemable Noncontrolling Interests
We account for redeemable equity securities in accordance with ASU 2009-04 Liabilities (Topic 480): Accounting for Redeemable Equity Instruments, which requires that equity securities redeemable at the option of the holder be classified outside permanent stockholders’ equity. We classify redeemable equity securities as redeemable noncontrolling interests in the accompanying condensed consolidated balances sheets. We measure the redemption value and record an adjustment to the carrying value of the equity securities as a component of redeemable noncontrolling interest. As of September 30, 2018 and December 31, 2017, we had redeemable noncontrolling interests of $6.6 million and $6.7 million, respectively. Refer to Note 10 - Redeemable Noncontrolling Interests in the accompanying notes to the condensed consolidated financial statements for more detail relating to our redeemable noncontrolling interests.


16


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

Unconsolidated Joint Ventures
We account for our investments in unconsolidated joint ventures using the equity method of accounting because we have the ability to exercise significant influence, but not control, over the financial and operational policy decisions of the investments. Using the equity method of accounting, the initial investment is recognized at cost and subsequently adjusted for our share of the net income or loss and any distributions from the joint venture. As of September 30, 2018, we had a 50% interest in one such investment with a carrying value and maximum exposure to risk of $67.6 million, which is recorded in investment in unconsolidated joint venture in the accompanying condensed consolidated balance sheets. We record our share of net income (loss) in income (loss) from unconsolidated joint venture in the accompanying condensed consolidated statements of operations. For the three and nine months ended September 30, 2018, we recognized income of $0.4 million and $1.4 million, respectively. For the three and nine months ended September 30, 2017, we recognized income of $0.3 million and $0.4 million, respectively.
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 noncontrolling 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.

17


Table of Contents
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, 2018-01 and 2018-11 Leases (Issued February 2016, January 2018 and July 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 with the adoption of ASU 2018-11, an optional transition method whereby an entity initially applies the new lease standard at the adoption date and recognizes 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 as of January 1, 2019. 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) as part of ASU 2018-11, 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.

As part of the adoption, all leases for which we are the lessee, including ground leases and certain other corporate leases, will be recorded in our consolidated financial statements as either financing or operating leases with corresponding right of use assets and lease liability obligations. Management has commenced the reevaluation of all leases where we are the lessee to determine (a) the total future lease payments, including an assessment of the availability and likelihood of our exercising extension options available to us under the terms of the respective leases, (b) an appropriate incremental borrowing rate in light of the extended term of our ground leases, and (c) an abstract of all applicable lease provisions that may cause the treatment of these leases to be classified differently under ASC 842 than what they are currently being classified as under current accounting guidance. We anticipate that our assessment will be concluded by December 31, 2018 and that we will have evaluated all leases sufficiently to provide a range of potential impact to our financial statements.

Further, with respect to initial direct costs, we are currently assessing the projected impact to the accounting of such costs, including the impact of potential changes to our use of internal and external leasing and leasing-related personnel, potential changes in compensation structures to such individuals, and other considerations of related costs that could have an impact to our financial statements. For the nine months ended September 30, 2018, we have capitalized approximately $3.7 million of internal initial direct costs (as defined by the current lease standard, ASC 840 - Leases). Utilizing a traditional third party leasing commission structure of 3% of gross lease value, total leasing commissions would have totaled over $9 million during the nine months ended September 30, 2018.

Upon the adoption of Topic 842, these internal initial direct costs will either in part or in their entirety be classified as additional general and administrative expenses on our consolidated statements of operations, depending on the finalization of our assessment of the impact of such adoption. We estimate the range of these expenses to be approximately $6 million to $8 million and effecting Earnings Per Share by approximately $0.03 to $0.04 per share on an annualized basis. In addition, operating expenses and income for real estate taxes and insurance will likely increase by offsetting amounts. This however will not have a material impact on our consolidated financial statements.

18


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


Accounting Pronouncement
 
Description
 
Effective Date
 
Effect on financial statements
ASU 2016-13
Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments
(Issued June 2016)
 
ASU 2016-13 is intended to improve financial reporting by requiring more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU 2016-13 requires that financial statement assets measured at an amortized cost be presented at the net amount expected to be collected through an allowance for credit losses that is deducted from the amortized cost basis.
 
ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted.
 
We do not anticipate early adoption or there to be a material impact to our consolidated financial statements based on our ongoing evaluation.
ASU 2018-07
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
(Issued June 2018)
 
ASU 2018-07 expands the scope of Topic 718 and the amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (i) financing to the issuer or (ii) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606.
 
ASU 2018-07 is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, but not earlier than an entity’s adoption date of Topic 606.
 
We will adopt ASU 2018-07 as of January 1, 2019. We do not expect there to be a material impact to our consolidated financial statements and related notes.
ASU 2018-13
Fair Value Measurement (Topic 820): Changes to the Disclosure Requirements for Fair Value Measurement
(Issued August 2018)
 
ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820 as follows: (A) Disclosure removals: (i) the amount of and reasons for transfers between Level 1 and Level 2; (ii) the policy for timing of transfers between levels; and (iii) the valuation process for Level 3 fair value measurements. (B) Disclosure modifications: (i) no requirement to disclose the timing of liquidation unless the investee has communicated the timing to the reporting entity or announced the timing publicly; and (ii) for Level 3 fair value measurements, a narrative description of measurement uncertainty at the reporting date, not the sensitivity to future changes. (C) Disclosure additions: (i) for recurring Level 3 measurements, disclose the changes in unrealized gains and losses for the period included in OCI and the statement of comprehensive income; and (ii) for Level 3 fair value measurements in the table of significant input, disclose the range and weighted average of the significant unobservable inputs and the way it is calculated.
 
ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 with early adoption permitted.
 
We will adopt ASU 2018-07 as of January 1, 2020. We will consider all level inputs in our ongoing evaluation but do not anticipate there to be a material impact to our consolidated financial statements.

19


Table of Contents
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 nine months ended September 30, 2018, our investments had an aggregate purchase price of $17.8 million. As part of these investments, we incurred approximately $0.1 million 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 nine months ended September 30, 2018 and 2017, respectively (in thousands):
 
Nine Months Ended September 30,
 
2018
 
2017
Land
$
1,895

 
$
93,064

Building and improvements
14,458

 
2,336,544

In place leases
1,237

 
187,890

Below market leases
(201
)
 
(27,817
)
Above market leases

 
11,718

Below market leasehold interests

 
54,252

Above market leasehold interests

 
(8,978
)
Net assets acquired
17,389

 
2,646,673

Other, net (1)
447

 
60,781

Aggregate purchase price
$
17,836

 
$
2,707,454

 
 
 
 
(1) For the nine months ended September 30, 2017, other, net, consisted primarily of capital expenditures and tenant improvements received as credits at the time of acquisition.
The acquired intangible assets and liabilities referenced above had weighted average lives of the following terms for the nine months ended September 30, 2018 and 2017, respectively (in years):
 
Nine Months Ended September 30,
 
2018
 
2017
Acquired intangible assets
5.8
 
20.6
Acquired intangible liabilities
6.5
 
19.9
4. Dispositions and Impairment
Dispositions
During the nine months ended September 30, 2018, we completed the disposition of 17 MOBs totaling approximately 965,000 square feet of gross leasable area (“GLA”) located in Greenville, South Carolina (the “Greenville Disposition”) for an aggregate gross sales price of $294.3 million in two transactions, including the sale of a single MOB which we classified as held for sale as of June 30, 2018. Additionally, we completed the disposition of two MOBs located in Derry, New Hampshire and North Adams, Massachusetts for an aggregate gross sales price of $11.6 million, totaling approximately 120,000 square feet of GLA. During the nine months ended September 30, 2017, we completed the disposition of an MOB located in Texas for a gross sales price of $5.0 million totaling approximately 48,000 square feet of GLA.
Impairment
During the three and nine months ended September 30, 2018, we recorded impairment charges of $4.3 million and $8.9 million, respectively, on six MOBs located in Tennessee, Texas and South Carolina. During the nine months ended September 30, 2017, we recorded impairment charges of $5.1 million related to one MOB located in Massachusetts.

20


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

5. Intangible Assets and Liabilities
Intangible assets and liabilities consisted of the following as of September 30, 2018 and December 31, 2017, respectively (in thousands, except weighted average remaining amortization terms):
 
September 30, 2018
 
December 31, 2017
 
Balance
 
Weighted Average Remaining
Amortization in Years
 
Balance
 
Weighted Average Remaining
Amortization in Years
Assets:
 
 
 
 
 
 
 
In place leases
$
451,990

 
9.8
 
$
474,252

 
9.8
Tenant relationships
152,225

 
9.4
 
164,947

 
10.2
Above market leases
37,537

 
6.1
 
40,082

 
6.3
Below market leasehold interests
91,759

 
64.5
 
92,362

 
63.4
 
733,511

 
 
 
771,643

 
 
Accumulated amortization
(343,251
)
 
 
 
(312,655
)
 
 
Total
$
390,260

 
21.6
 
$
458,988

 
19.5
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Below market leases
$
61,525

 
14.6
 
$
61,820

 
14.7
Above market leasehold interests
20,610

 
49.5
 
20,610

 
50.1
 
82,135

 
 
 
82,430

 
 
Accumulated amortization
(19,248
)
 
 
 
(14,227
)
 
 
Total
$
62,887

 
25.1
 
$
68,203

 
25.0
The following is a summary of the net intangible amortization for the three and nine months ended September 30, 2018 and 2017, respectively (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Amortization recorded against rental income related to above and (below) market leases
$
(352
)
 
$
(108
)
 
$
(660
)
 
$
(371
)
Rental expense related to above and (below) market leasehold interests
287

 
322

 
850

 
617

Amortization expense related to in place leases and tenant relationships
18,475

 
18,757

 
52,800

 
45,944

6. Receivables and Other Assets
Receivables and other assets consisted of the following as of September 30, 2018 and December 31, 2017, respectively (in thousands):
 
September 30, 2018
 
December 31, 2017
Tenant receivables, net
$
13,062

 
$
20,269

Other receivables, net
15,067

 
9,305

Deferred financing costs, net
6,480

 
7,759

Deferred leasing costs, net
28,783

 
25,494

Straight-line rent receivables, net
89,531

 
85,143

Prepaid expenses, deposits, equipment and other, net
58,971

 
58,358

Derivative financial instruments - interest rate swaps
1,588

 
1,529

Total
$
213,482

 
$
207,857


21


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

The following is a summary of the amortization of deferred leasing costs and financing costs for the three and nine months ended September 30, 2018, and 2017, respectively (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Amortization expense related to deferred leasing costs
$
1,357

 
$
1,445

 
$
4,166

 
$
4,179

Interest expense related to deferred financing costs
431

 
398

 
1,293

 
1,061

7. Debt
Debt consisted of the following as of September 30, 2018 and December 31, 2017, respectively (in thousands):
 
September 30, 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
279,230

 
414,524

Variable rate mortgages

 
37,918

 
2,629,230

 
2,802,442

Deferred financing costs, net
(14,448
)
 
(15,850
)
Discount, net
(5,123
)
 
(5,561
)
Total
$
2,609,659

 
$
2,781,031

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 September 30, 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 September 30, 2018 was 1.10% per annum. Including the impact of the interest rate swaps associated with our unsecured term loan, the interest rate was 3.46% per annum, based on our current credit rating. As of September 30, 2018, HTALP had $300.0 million under this unsecured term loan outstanding.
$200.0 Million Unsecured Term Loan due 2024
On August 1, 2018, HTALP entered into a modification of our $200.0 million unsecured term loan previously due in 2023. The modification decreased pricing at our current credit rating by 65 basis points. Borrowings under the unsecured term loan accrue interest at a rate equal to LIBOR, plus a margin ranging from 0.75% to 1.65% per annum based on our credit rating. The margin associated with our borrowings as of September 30, 2018 was 1.00% per annum. HTALP had interest rate swaps on a portion of the balance, which resulted in a fixed interest rate at 2.70% per annum. The maturity date was also extended by five months to January 2024. The other material terms of the unsecured term loan prior to the modification remained substantially unchanged. As of September 30, 2018, HTALP had $200.0 million under this unsecured term loan outstanding.

22


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

$300.0 Million Unsecured Senior Notes due 2021
As of September 30, 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 September 30, 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 September 30, 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 September 30, 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 September 30, 2018, HTALP had $300.0 million of these unsecured senior notes outstanding that mature on April 15, 2023.
$350.0 Million Unsecured Senior Notes due 2026
As of September 30, 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 September 30, 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 September 30, 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 a promissory note (the “Promissory Note”), as the borrower, for a part of the purchase price, a senior secured first lien loan, subject to customary non-recourse carve-outs, in the amount of $286.0 million. The Promissory Note bears interest at 4.0% per annum and is payable in three equal payments maturing on January 10, 2020 and is guaranteed by us. In June 2018, the first principal installment of $96.0 million was paid and as of September 30, 2018, the outstanding balance was $190.0 million.
In August 2018, we prepaid approximately $72.6 million of our fixed and variable rate mortgages, including the settlement of three cash flow hedges, utilizing net proceeds from the Greenville Disposition to do so, resulting in a loss on extinguishment of debt of $1.1 million, primarily due to prepayment fees we incurred. See Note 4 - Impairment and Dispositions for more detail on the Greenville Disposition. As of September 30, 2018, HTALP and its subsidiaries had only fixed rate mortgages with interest rates ranging from 2.85% to 5.50% per annum and a weighted average interest rate of 4.32% per annum.
Subsequent to September 30, 2018, we prepaid approximately $67.2 million of our fixed rate mortgages. We did not incur any prepayment fees related to this transaction.

23


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

Future Debt Maturities
The following table summarizes the debt maturities and scheduled principal repayments of our indebtedness as of September 30, 2018 (in thousands):
Year
 
Amount
2018
 
$
1,086

2019
 
99,453

2020
 
99,641

2021
 
304,840

2022
 
462,089

Thereafter
 
1,662,121

Total
 
$
2,629,230

Deferred Financing Costs
As of September 30, 2018, the future amortization of our deferred financing costs is as follows (in thousands):
Year
 
Amount
2018
 
$
764

2019
 
2,956

2020
 
2,894

2021
 
2,721

2022
 
2,098

Thereafter
 
3,015

Total
 
$
14,448

Debt Covenants
We are required by the terms of our applicable loan agreements to meet various affirmative and negative covenants that we believe are customary for these types of facilities, such as limitations on the incurrence of debt by us and our subsidiaries that own unencumbered assets, limitations on the nature of HTALP’s business, and limitations on distributions by HTALP and its subsidiaries that own unencumbered assets. Our loan agreements also impose various financial covenants on us, such as a maximum ratio of total indebtedness to total asset value, a minimum ratio of EBITDA to fixed charges, a minimum tangible net worth covenant, a maximum ratio of unsecured indebtedness to unencumbered asset value, rent coverage ratios and a minimum ratio of unencumbered Net Operating Income (“NOI”) to unsecured interest expense. As of September 30, 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.

24


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

Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps and treasury locks as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without exchange of the underlying notional amount. A treasury lock is a synthetic forward sale of a U.S. treasury note, which is settled in cash based upon the difference between an agreed upon treasury rate and the prevailing treasury rate at settlement. Such treasury locks are entered into to effectively fix the treasury component of an upcoming debt issuance.
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 (loss) 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 nine months ended September 30, 2018, such derivatives were used to hedge the variable cash flows associated with variable rate debt. Additionally, as a result of the foregoing adoption of ASU 2017-12, we no longer disclose the ineffective portion of the change in fair value of our derivatives financial instruments designated as hedges.
Amounts reported in accumulated other comprehensive income (loss) 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 $1.2 million will be reclassified from other comprehensive income (loss) 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.
In August 2018, we settled three of our five cash flow hedges utilizing net proceeds from the Greenville Disposition to do so. See Note 4 - Impairment and Dispositions in the accompanying notes to the condensed consolidated financial statements for more detail on the Greenville Disposition. As of September 30, 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):
Cash Flow Hedges
 
September 30, 2018
Number of instruments
 
2

Notional amount
 
$
155,000

The table below presents the fair value of our derivative financial instruments designated as a hedge as well as our classification in the accompanying condensed consolidated balance sheets as of September 30, 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
 
September 30, 2018
 
December 31, 2017
 
Balance Sheet
Location
 
September 30, 2018
 
December 31, 2017
Interest rate swaps
 
Receivables and other assets
 
$
1,588

 
$
1,529

 
Derivative financial instruments
 
$

 
$
1,089


25


Table of Contents
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 gain or loss recognized on our derivative financial instruments designated as hedges as well as our classification in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2018 and