Healthcare Realty Trust Incorporated

02/13/2026 | Press release | Distributed by Public on 02/13/2026 15:18

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Disclosure Regarding Forward-Looking Statements
This report and other materials the Company has filed or may file with the SEC, as well as information included in oral statements or other written statements made, or to be made, by senior management of the Company, contain, or will contain, disclosures that are "forward-looking statements." Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "target," "intend," "plan," "estimate," "project," "continue," "should," "could" and other comparable terms. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of risks and uncertainties that could materially affect the Company's current plans and expectations and future financial condition and results. Such risks and uncertainties as more fully discussed in Item 1A "Risk Factors" of this report and in other reports filed by the Company with the SEC from time to time include, among other things, the following:
Risks relating to our business and operations
•The Company's expected results may not be achieved;
•The Company's revenues depend on the ability of its tenants under its leases to generate sufficient income from their operations to make rental payments to the Company;
•The Company's results of operations have been and will continue to be impacted negatively by the Prospect Medical bankruptcy;
•Owning real estate and indirect interests in real estate is subject to inherent risks;
•The Company may incur impairment charges on its real estate properties or other assets;
•The Company has properties subject to purchase options that expose it to reinvestment risk and reduction in expected investment returns;
•If the Company is unable to promptly re-let its properties, if the rates upon such re-letting are significantly lower than the previous rates or if the Company is required to undertake significant expenditures or make significant leasing concessions to attract new tenants, then the Company's business, consolidated financial condition and results of operations would be adversely affected;
•Certain of the Company's properties are special purpose healthcare facilities and may not be easily adaptable to other uses;
•The Company has, and in the future may have more exposure to fixed rent escalators, which could lag behind inflation and the growth in operating expenses such as real estate taxes, utilities, insurance, and maintenance expense;
•The Company's real estate investments are illiquid and the Company may not be able to sell properties strategically targeted for disposition;
•The Company is subject to risks associated with the development and redevelopment of properties;
•The Company may make material acquisitions and undertake developments and redevelopments that may involve the expenditure of significant funds and may not perform in accordance with management's expectations;
•The Company is exposed to risks associated with geographic concentration;
•Many of the Company's leases are dependent on the viability of associated health systems. Revenue concentrations relating to these leases expose the Company to risks related to the financial condition of the associated health systems;
•Many of the Company's properties are held under ground leases. These ground leases contain provisions that may limit the Company's ability to lease, sell, or finance these properties;
•The Company may experience uninsured or underinsured losses;
•Damage from catastrophic weather and other natural events, whether caused by climate change or otherwise, could result in losses to the Company;
•The Company faces risks associated with security breaches through cyber attacks, cyber intrusions, or otherwise, as well as other significant disruptions of its information technology networks and related systems;
•The Company has structured and may in the future structure acquisitions of property in exchange for limited partnership units of the OP on terms that could limit its liquidity or flexibility;
•Healthcare Realty Trust is a holding company with no direct operations and, as such, it relies on funds received from the OP to pay liabilities, and the interests of its stockholders will be structurally subordinated to all liabilities and obligations of the OP and its subsidiaries
•The Company cannot assure you that it will be able to continue paying dividends at or above the rates previously paid;
•Pandemics and measures intended to prevent their spread or mitigate their severity could have a material adverse effect on the Company's business, results of operations, cash flows and financial condition; and
•The Company's success depends, in part, on its ability to attract and retain talented employees. The loss of any one of the Company's key personnel or the inability to maintain appropriate staffing could adversely impact the Company's business.
Risks relating to our capital structure and financings
•The Company has incurred significant debt obligations and may incur additional debt and increase leverage in the future;
•Covenants in the Company's debt instruments limit its operational flexibility, and a breach of these covenants could materially affect the Company's consolidated financial condition and results of operations;
•If lenders under the Unsecured Credit Facility fail to meet their funding commitments, the Company's operations and consolidated financial position would be negatively impacted;
•The unavailability of equity and debt capital, volatility in the credit markets, increases in interest rates, or changes in the Company's debt ratings could have an adverse effect on the Company's ability to meet its debt payments, make dividend payments to stockholders or engage in acquisition and development activity;
•Increases in interest rates could have a material adverse effect on the Company's cost of capital;
•The Company's swap agreements may not effectively reduce its exposure to changes in interest rates;
•The Company has entered into joint venture agreements that limit its flexibility with respect to jointly owned properties and expects to enter into additional such agreements in the future;
•The U.S. federal income tax treatment of the cash that the Company might receive from cash settlement of a forward equity agreement is unclear and could jeopardize the Company's ability to meet the REIT qualification requirements; and
•In the event of our bankruptcy or insolvency, any forward equity agreements will automatically terminate, and the Company would not receive the expected proceeds from any forward sale of shares of its common stock.
Risks relating to government regulations
•The Company's property taxes could increase due to reassessment or property tax rate changes;
•Trends in the healthcare service industry, including the impact of the One Big Beautiful Bill Act passed during 2025 that is subject of ongoing analysis, may negatively affect the demand for the Company's properties, lease revenues and the values of its investments;
•The costs of complying with governmental laws and regulations may adversely affect the Company's results of operations;
•Qualifying as a REIT involves highly technical and complex provisions of the Internal Revenue Code;
•If the Company fails to remain qualified as a REIT, the Company will be subject to significant adverse consequences, including adversely affecting the value of its common stock;
•The Company's articles of incorporation, as well as provisions of the MGCL, contain limits and restrictions on transferability of the Company's common stock which may have adverse effects on the value of the Company's common stock;
•Complying with the REIT requirements may cause the Company to forego otherwise attractive opportunities;
•The prohibited transactions tax may limit the Company's ability to sell properties;
•New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for the Company to qualify as a REIT; and
•New and increased transfer tax rates may reduce the value of the Company's properties.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company's filings and reports, including, without limitation, estimates and projections regarding the performance of development projects the Company is pursuing.
Overview
The Company owns and operates properties that facilitate the delivery of healthcare services in primarily outpatient settings. To execute its strategy, the Company engages in a broad spectrum of integrated services including leasing, management, acquisition, financing, development and redevelopment of such properties. The Company seeks to generate stable, growing income and lower the long-term risk profile of its portfolio of properties by focusing on facilities primarily located on or near the campuses of acute care hospitals associated with leading health systems. The Company seeks to reduce financial and operational risk by owning properties in high-growth markets with a broad tenant mix that includes over 30 physician specialties, as well as surgery, imaging, cancer, and diagnostic centers.
This section is organized into the following sections:
•Liquidity and Capital Resources;
•Trends and Matters Impacting Operating Results;
•Results of Operations;
•Non-GAAP Financial Measures and Key Performance Indicators; and
•Application of Critical Accounting Policies to Accounting Estimates.
Liquidity and Capital Resources
The Company monitors its liquidity and capital resources and considers several indicators in its assessment of capital markets for financing acquisitions and other operating activities. The Company considers, among other factors, its leverage ratios and lending covenants, dividend payout percentages, interest rates, underlying treasury rates, debt market spreads and cost of equity capital to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.
Sources and Uses of Cash
The Company's revenues are derived from its real estate property portfolio based on contractual arrangements with its tenants. These sources of revenue represent the Company's primary source of liquidity to fund its dividends and its operating expenses, including interest incurred on debt, principal payments on debt, general and administrative costs, capital expenditures and other expenses incurred in connection with managing its existing portfolio and investing in additional properties. To the extent additional investments are not funded by these sources, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets, asset sales and joint venture contributions or through proceeds from the Unsecured Credit Facility.
The Company expects to continue to meet its liquidity needs, including capital for additional investments, tenant improvement allowances, operating and finance lease payments, paying dividends, and funding debt service, through cash on hand, cash flows from operations and the cash flow sources addressed above. See Note 3 to the Consolidated Financial Statements for additional discussion of operating and financing lease payment obligations. See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's sources and uses of cash.
The Company also had unencumbered real estate assets with a gross book value of approximately $10.4 billion at December 31, 2025, of which a portion could serve as collateral for secured mortgage financing. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.
The Company has exposure to variable interest rates and its common stock price is impacted by the volatility in the stock markets. However, the Company's leases, which provide its main source of income and cash flow, have terms of approximately one to 20 years and have lease rates that generally increase on an annual basis at fixed rates or based on consumer price indices.
Operating Activities
Cash flows provided by operating activities for the two years ended December 31, 2025 and 2024 were $457.1 million and $501.6 million, respectively. Several items impact cash flows from operating activities including, but not limited to, cash generated from property operations, interest payments and the timing related to the payment of invoices and other expenses and receipt of tenant rent.
The Company may, from time to time, sell properties and redeploy cash from property sales into new investments. To the extent revenues related to the properties being sold exceed income from these new investments, the Company's consolidated results of operations and cash flows could be adversely affected.
See "Trends and Matters Impacting Operating Results" for additional information regarding the Company's operating activities.
Investing Activities
A summary of the significant transactions impacting investing activities for the year ended December 31, 2025 is listed below. See Note 4 to the Consolidated Financial Statements for more detail on these activities.
Capital Funding
In 2025, the Company incurred capital expenditures totaling $308.8 million for the following:
•$136.6 million toward development and redevelopment of properties;
•$90.2 million toward first generation tenant improvements;
•$46.9 million toward second generation tenant improvements; and
•$35.1 million toward capital expenditures.
See "Trends and Matters Impacting Operating Results" below for more detail.
Real Estate Notes Receivable
In 2025, the Company had the following activity on its real estate notes receivables:
•In January 2025, the Company received $14.9 million as payment towards the principal balance of its mortgage loan that matured on December 2, 2024.
•In March 2025, the Company provided seller financing of $5.4 million in connection with the sale of a real estate property in Houston, Texas.
•In March 2025, the Company executed a mezzanine loan receivable agreement with a maximum loan commitment of $8.5 million. As of December 31, 2025, the Company had funded the full $8.5 million under this agreement.
•In April 2025, a mortgage loan receivable of $37.7 million maturing in February 2026 was repaid in full.
•In December 2025, the Company received $5.8 million as payment towards the principal balance of its mortgage loan that matured on December 22, 2024,
•In December 2025, the Company provided seller financing of $6.4 million in connection with the sale of a real estate property in Houston, Texas.
See Note 1 to the Consolidated Financial Statements accompanying this report for more information about real estate notes receivable and allowance for credit losses.
Dispositions
The following table details the Company's asset sales for the year ended December 31, 2025:
Dollars in thousands DATE DISPOSED SALE PRICE CLOSING ADJUSTMENTS COMPANY-FINANCED MORTGAGE NOTES NET PROCEEDS NET REAL ESTATE INVESTMENT OTHER GAIN/(IMPAIR-MENT) SQUARE FOOTAGE
Boston, MA 2/7/2025 $ 4,500 $ (135) $ - $ 4,365 $ 4,325 $ 15 $ 25 30,304
Denver, CO 1
2/14/2025 8,600 (2,144) - 6,456 7,948 113 (1,605) 69,715
Houston, TX 2
3/20/2025 15,000 (4,087) (5,400) 5,513 14,343 347 (3,777) 127,933
Boston, MA 4/30/2025 486 (47) - 439 60 2 377 -
Boston, MA 5/23/2025 3,000 (36) - 2,964 2,631 27 306 33,176
Jacksonville, FL 6/26/2025 8,100 (11) - 8,089 23,064 (529) (14,446) 53,169
Yakima, WA 1
6/26/2025 31,000 (2,256) - 28,744 8,689 343 19,712 91,561
Houston, TX 6/27/2025 10,500 (15) - 10,485 10,250 42 193 -
South Bend, IN 7/15/2025 43,100 (283) - 42,817 29,481 (7) 13,343 205,573
Milwaukee, WI 1
7/29/2025 42,000 (913) - 41,087 40,644 270 173 147,406
Naples, FL 7/29/2025 19,250 (2,692) - 16,558 15,586 559 413 61,359
New York, NY 7/30/2025 25,000 (1,290) - 23,710 15,531 364 7,815 89,893
Boston, MA 8/25/2025 450 (45) - 405 413 32 (40) 9,010
Lakeland, FL 3
8/27/2025 7,325 (772) - 6,553 6,899 234 (580) 31,158
Salem, OR 8/29/2025 4,000 (427) - 3,573 3,482 159 (68) 21,026
Milwaukee, WI 1
9/29/2025 60,000 (2,203) - 57,797 61,485 (2,884) (804) 220,747
Tampa, FL 9/30/2025 22,000 (778) - 21,222 6,218 646 14,358 47,962
Dallas, TX 3
9/30/2025 58,800 (1,885) - 56,915 26,822 5,379 24,714 448,879
Chicago, IL 9/30/2025 18,700 (477) - 18,223 18,417 (181) (13) 56,531
Columbus, OH 4
9/30/2025 33,750 (2,470) - 31,280 27,884 410 2,986 117,060
Miami, FL 9/30/2025 62,000 (1,867) - 60,133 45,152 2,580 12,401 152,976
New Haven, CT 10/16/2025 725 (4) - 721 612 3 106 -
Des Moines, IA 10/29/2025 7,225 (841) - 6,384 9,275 (2,346) (545) 152,655
Jacksonville, FL 1
11/17/2025 18,600 (1,065) - 17,535 17,590 463 (518) 40,333
Richmond, VA 5
11/18/2025 171,000 (8,772) - 162,228 57,224 13,263 91,741 405,945
Boston, MA 12/8/2025 278 (44) - 234 283 1 (49) 10,380
Atlanta, GA 12/19/2025 3,000 (981) - 2,019 3,331 (1,209) (103) -
Multiple 6
12/19/2025 348,900 (35,341) - 313,559 287,121 1,413 25,025 1,522,500
Memphis, TN 12/29/2025 23,021 (79) - 22,942 8,876 (2,070) 16,136 116,473
Phoenix, AZ 12/29/2025 22,275 (756) - 21,519 17,367 1,217 2,935 89,980
Phoenix, AZ 12/29/2025 5,225 (335) - 4,890 4,927 21 (58) 89,983
Houston, TX 7
12/30/2025 12,500 (4,559) (6,400) 1,541 7,631 4,811 (4,501) 49,319
Total Dispositions $ 1,090,310 $ (77,610) $ (11,800) $ 1,000,900 $ 783,561 $ 23,488 $ 205,652 4,493,006
1Includes two medical outpatient properties.
2The Company provided seller financing of approximately $5.4 million in connection with this sale.
3Includes four medical outpatient properties.
4Includes three medical outpatient properties.
5Includes six medical outpatient properties.
6The Company sold six MOBs in El Paso, TX, four MOBs in Indianapolis, IN, two MOBs in each of Chicago, IL, Cincinnati, OH, Des Moines, IA, Fort Wayne, IN, Minneapolis, MN and Pittsburgh, PA; and one MOB in each of Detroit, MI, Las Vegas, NV and Salt Lake City, UT to a single buyer in a single transaction.
7The Company provided seller financing of approximately $6.4 million in connection with this sale.
Subsequent Dispositions
On January 14, 2026, the Company disposed of a 60,039 square foot medical outpatient building in Atlanta, Georgia for $21.9 million.
Financing Activities
Common Stock Repurchases
During 2025, the Company did not repurchase any shares of its common stock. As of December 31, 2025, the Company had $500.0 million remaining under its current share repurchase authorization.
Subsequent Repurchase Activity
In January 2026, the Company repurchased 2.9 millionshares of its common stock at an average price of $17.27 per share for a total of $50.0 million resulting in $450.0 million of authorized share repurchases remaining.
At-The-Market Equity Offering Program
On December 17, 2025, the Company renewed its ATM equity offering program to sell shares of the Company's common stock from time to time in at-the-market sales transactions. The Company entered into equity distribution agreements with various sales agents having an aggregate offering price of up to $1.0 billion. As of December 31, 2025, there has been no activity under the program.
Debt Activity
Below is a summary of the significant debt financing activity for the year ended December 31, 2025. See Note 9 to the Consolidated Financial Statements for additional information on financing activities.
Mortgage Activity
During the year ended December 31, 2025, the Company repaid in full a mortgage note payable bearing interest at a rate of 4.25% that encumbered a 45,157 square foot property in California.
Senior Notes
During the year ended December 31, 2025, the Company repaid its Senior Notes due 2025 at maturity including $250 million of principal and $4.8 million of accrued interest.
Term Loans
During the year ended December 31, 2025, the Company repaid the $300 million Unsecured Term Loan due January 2026, the $200 million Unsecured Term Loan due January 2026, and the $150 million Unsecured Term Loan due June 2026 and recorded approximately $0.5 million of accelerated amortization expense included in the loss on extinguishment of debt.
Interest Rate Swaps
As of December 31, 2025, the Company had seven outstanding interest rate derivatives totaling $500 million to hedge one-month Secured Overnight Financing Rate ("SOFR"). The following details the amount and rate of each swap as of such date (dollars in thousands):
EXPIRATION DATE NOTIONAL AMOUNT WEIGHTED
AVERAGE RATE
May 2026 $ 100,000 2.15 %
December 2026 150,000 3.84 %
June 2027 150,000 4.13 %
December 2027 100,000 4.13 %
Total $ 500,000 3.65 %
The following table details the Company's debt balances as of December 31, 2025:
PRINCIPAL BALANCE
CARRYING BALANCE 1
WEIGHTED YEARS TO MATURITY2
CONTRACTUAL RATE EFFECTIVE RATE
Senior Notes due 2026
$ 600,000 $ 595,026 0.6 3.50 % 4.94 %
Senior Notes due 2027
500,000 492,693 1.5 3.75 % 4.76 %
Senior Notes due 2028 300,000 298,652 2.0 3.63 % 3.85 %
Senior Notes due 2030 650,000 597,188 4.1 3.10 % 5.30 %
Senior Notes due 2030
299,500 297,610 4.2 2.40 % 2.72 %
Senior Notes due 2031
299,785 296,866 5.2 2.05 % 2.25 %
Senior Notes due 2031 800,000 685,874 5.2 2.00 % 5.13 %
Total Senior Notes Outstanding 3,449,285 3,263,909 2.90 % 4.47 %
$1.5 billion unsecured credit facility 120,000 120,000 4.5 SOFR + 0.84% 4.61 %
$200 million unsecured term loan 200,000 199,635 3.5 SOFR + 0.94% 4.81 %
$300 million unsecured term loan 300,000 299,055 3.0 SOFR + 0.94% 4.81 %
Mortgage notes payable 28,904 28,824 0.6 3.94 % 4.50 %
Total Outstanding Notes and Bonds Payable $ 4,098,189 $ 3,911,423 3.19 % 4.52 %
1Balances are reflected net of discounts and debt issuance costs and include premiums.
2Includes extension options.
Subsequent Debt Activity
In February 2026, the Company entered into a commercial paper dealer agreement to issue short-term commercial paper notes up to $600.0 million, with maturities up to 364 days. The program is back-stopped by the Unsecured Credit Facility. The notes will be issued at par less a discount representing an interest factor, or if interest bearing, at par.
Debt Covenant Information
The Company's various debt agreements contain certain representations, warranties, and financial and other covenants customary in such debt agreements. Among other things, these provisions require the Company to maintain certain financial ratios and impose certain limits on the Company's ability to incur indebtedness and create liens or encumbrances. As of December 31, 2025, the Company was in compliance with the financial covenant provisions under all of its various debt instruments.
As of December 31, 2025,72.5%of the Company's principal balances were due after 2027, including extension options. Also, as of December 31, 2025, the Company's incurrence of total debt as defined in the senior notes [debt divided by (total assets less intangibles and accounts receivable)] was approximately 35.8%(cannot be greater than 60%) and debt service coverage [interest expense divided by (net income plus interest expense, taxes, depreciation and amortization, gains and impairments)] was approximately 3.5 times (cannot be less than 1.5 times).
The Company plans to manage its capital structure to maintain compliance with its debt covenants consistent with its current profile. Downgrades in ratings by the rating agencies could have a material adverse impact on the Company's cost and availability of capital, which could in turn have a material adverse impact on consolidated results of operations, liquidity and/or financial condition.
Supplemental Guarantor Information
The OP has issued unsecured notes described in Note 9 to the Company's Consolidated Financial Statements included in this report. All unsecured notes are fully and unconditionally guaranteed by the Company, and the OP is 98.6% owned by the Company. Effective January 4, 2021, the Securities and Exchange Commission (the "SEC") adopted amendments to the financial disclosure requirements which permit subsidiary issuers of obligations guaranteed by the parent to omit separate financial statements if the consolidated financial statements of the parent company have been filed, the subsidiary obligor is a consolidated subsidiary of the parent company, the guaranteed security is debt or debt-like, and the security is guaranteed fully and unconditionally by the parent.
Accordingly, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, the Company has excluded the summarized financial information for the OP because the assets, liabilities, and results of operations of the OP are not materially
different than the corresponding amounts in the Company's Consolidated Financial Statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
Trends and Matters Impacting Operating Results
Management monitors factors and trends important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Discussed below are some of the factors and trends that management believes may impact the future operations of the Company.
Economic and Market Conditions
Rising interest rates and increased volatility in the capital markets have increased the Company's cost and availability of debt and equity capital. Limited availability and increases in the cost of capital could adversely impact the Company's ability to finance operations and acquire and develop properties. To the extent the Company's tenants experience increased costs or financing difficulties due to the economic and market conditions, they may be unable or unwilling to make payments or perform their obligations when due. Additionally, increased interest rates may also result in less liquid property markets, limiting the Company's ability to sell existing assets or obtain joint venture capital.
Acquisitions and Dispositions
The Company had no real estate acquisition activity for the year ended December 31, 2025.
The Company disposed of 70 properties in 2025 for sales prices totaling approximately $1.1 billion. These transactions yielded net cash proceeds of approximately $1.0 billion, net of approximately $77.6 million of closing costs and related adjustments, and $11.8 million in Company financed notes. The weighted average capitalization rate for these sales was 6.7%. The Company calculates the capitalization rate for dispositions as the in-place cash net operating income divided by the sales price.
See the Company's discussion of its 2025 disposition activity in Note 4 to the Consolidated Financial Statements.
Development and Redevelopment Activity
The table below details the Company's activity related to its active development and redevelopment projects as of December 31, 2025. The information included in the table below represents management's estimates and expectations at December 31, 2025, which are subject to change. The Company's disclosures regarding certain projections or estimates may not reflect actual results.
ESTIMATED REMAINING FUNDINGS ESTIMATED TOTAL INVESTMENT APPROXIMATE SQUARE FEET
Dollars in thousands NUMBER OF PROPERTIES TOTAL FUNDED DURING THE YEAR TOTAL AMOUNT FUNDED
Development Activity
Raleigh, NC 1 $ 5,500 $ 48,474 $ 9,526 $ 58,000 122,991
Fort Worth, TX 1 15,028 44,360 3,840 48,200 101,279
Total $ 20,528 $ 92,834 $ 13,366 $ 106,200 224,270
Redevelopment Activity
Charlotte, NC 2 $ 13,849 $ 30,934 $ 4,116 $ 35,050 169,135
Houston, TX 2 14,598 $ 27,265 2,735 30,000 314,861
White Plains, NY 1 19,105 $ 23,534 1,366 24,900 65,851
Charlotte, NC 1 188 $ 188 19,012 19,200 122,388
Washington, DC 1 5,105 $ 14,185 1,015 15,200 57,323
Seattle, WA 1 58 $ 58 13,542 13,600 78,288
Raleigh, NC 1 4,479 $ 5,028 5,772 10,800 40,400
Houston, TX 1 - $ - 10,400 10,400 40,214
Denver, CO 2 11 $ 11 10,189 10,200 78,691
Port St. Lucie, FL 1 156 $ 458 8,942 9,400 31,466
Dallas, TX 1 469 $ 469 8,131 8,600 126,121
Denver, CO 1 675 $ 675 6,625 7,300 55,978
Other 8 18,660 $ 19,251 77,549 96,800 849,087
Total 23 $ 77,353 $ 122,056 $ 169,394 $ 291,450 2,029,803
For previously completed development and redevelopment projects, during 2025, the Company funded an additional $38.7 million related to ongoing tenant improvements.
The Company regularly consults with health systems and developers regarding long-term future new development opportunities. In addition, the Company continually evaluates its portfolio for accretive redevelopment opportunities.
Security Deposits and Letters of Credit
As of December 31, 2025, the Company held approximately $36.7 million in letters of credit and security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon these instruments if there are any defaults under the leases.
Expiring Leases
The Company expects that approximately 15% of the leases in its portfolio will expire each year. In-place leases have a weighted average lease term of 8.3 years and a weighted average remaining lease term of 4.4 years. Demand for well-located real estate with complementary practice types and services remains consistent, and the Company's 2025 quarterly tenant retention statistics ranged from 77% to 80%. In 2026, the Company has 1,130 leases totaling 3.6 million square feet in its multi-tenant portfolio that are scheduled to expire. See additional information regarding expiring single-tenant leases under the heading "Single-Tenant Leases" below.
The Company seeks contractual rent increases for in-place leases. As of December 31, 2025 and 2024, the Company's contractual rental rate growth averaged 2.90% and 2.83%, respectively, for in-place leases. In addition, the Company continued to see strong quarterly weighted average rental rate growth for renewing leases ("cash leasing spread"). In 2025, cash leasing spreads averaged 2.7%.
In a further effort to maximize revenue growth and reduce its exposure to key expenses such as taxes and utilities, the Company carefully manages its balance of lease types. Gross leases, wherein the Company has full exposure to all operating expenses, comprise 8% of its lease portfolio. Modified gross or base year leases, in which the Company and tenant both pay a share of operating expenses, comprise 30% of the Company's leased portfolio. Net leases, in which tenants pay substantially all operating expenses, total 58% of the leased portfolio. Absolute net leases, in which tenants pay substantially all of the building's operating and capital expenses, comprise 4%.
Prospect Medical
As previously disclosed, Prospect filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in January of 2025. Prospect leased approximately 80,912 square feet of space from the Company. In October of 2025, a subsidiary of Hartford Health was selected as the successful bidder for the Prospect assets associated with the Company's Prospect leases. The Company signed direct leases with Hartford Heath totaling 65,477 square feet effective January 1, 2026 and retained certain sublet in additional spaces. There is no assurance that the Company will be able to timely relet the remaining Prospect leased space that was not assumed by Hartford Health.
Capital Expenditures
Capital expenditures are long-term investments made to maintain and improve the physical and aesthetic attributes of the Company's owned properties. Examples of such improvements include, but are not limited to, material changes to, or the full replacement of, major building systems (exterior facade, building structure, roofs, elevators, mechanical systems, electrical systems, energy management systems, upgrades to existing systems for improved efficiency) and common area improvements (furniture, signage and artwork, bathroom fixtures and finishes, exterior landscaping, parking lots or garages). These additions are capitalized into the gross investment of a property and then depreciated over their estimated useful lives, typically ranging from 7 to 20 years. Capital expenditures specifically do not include recurring maintenance expenses, whether direct or indirect, related to the upkeep and maintenance of major building systems or common area improvements. Capital expenditures also do not include improvements related to a specific tenant suite, unless the improvement is part of a major building system or common area improvement.
The Company invested $35.1 million, or $1.07 per square foot, in capital expenditures in 2025 and $32.5 million, or $0.94 per square foot, in capital expenditures in 2024. As a percentage of cash net operating income, 2025 and 2024 capital expenditures were 4.8% and 4.1%, respectively. For a reconciliation of cash net operating income, see "Same Store Cash NOI" in the "Non-GAAP Financial Measures and Key Performance Indicators" section as part of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in Part II of this report.
Tenant Improvements
The Company may invest in tenant improvements for the purpose of refurbishing or renovating tenant space. The Company categorizes these expenditures into first and second generation tenant improvements. As of December 31, 2025, the Company had commitments of approximately $161.8 million that are expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction.
First Generation Tenant Improvements
First generation tenant improvements totaled $90.2 million and $52.4 million for the years ended December 31, 2025 and 2024, respectively. First generation tenant improvements include build out costs related to suite space in shell condition.
Second Generation Tenant Improvements
Second generation tenant improvements spending totaled $46.9 million in 2025, or 6.4% of total cash net operating income. In 2024, this spending totaled $68.4 million, or 8.7% of total cash net operating income.
If the cost of a tenant improvement project exceeds a tenant improvement allowance, the Company generally offers the tenant the option to finance the excess over the lease term with interest or to reimburse the overage to the Company in a lump sum. In either case, such overages are amortized by the Company as rental income over the term of the lease. Interest earned on tenant overages is included in other operating income in the Company's Consolidated Statements of Operations. The first and second generation tenant overage amount amortized to rent, including interest, totaled approximately $10.0 million in 2025, $7.8 million in 2024, and $8.4 million in 2023.
Second generation tenant improvement commitments in 2025 for renewals averaged $2.22 per square foot per lease year, ranging quarterly from $1.66 to $3.13. In 2024, these commitments averaged $2.14 per square foot per lease year, ranging quarterly from $1.80 to $2.39. In 2023, these commitments averaged $1.78 per square foot per lease year, ranging quarterly from $1.64 to $1.89.
Second generation tenant improvement commitments in 2025 for new leases averaged $6.91 per square foot per lease year, ranging quarterly from $6.08 to $7.60. In 2024, these commitments averaged $7.22 per square foot per lease year, ranging quarterly from $6.93 to $7.34. In 2023, these commitments averaged $5.69 per square foot per lease year, ranging quarterly from $4.44 to $7.11.
Leasing Commissions
In certain markets, the Company may pay leasing commissions to real estate brokers who represent either the Company or prospective tenants, with commissions generally equating to 4% to 6% of the gross lease value for new leases and 2% to 4% of the gross lease value for renewal leases. In addition, the Company pays its leasing employees incentive compensation when leases are executed that meet certain leasing thresholds. External leasing commissions are amortized to property operating expense, and internal leasing costs are amortized to general and administrative expense in the Company's Consolidated Statements of Operations.
In 2025, the Company paid leasing commissions of approximately $54.8 million, or $1.67 per square foot. In 2024, the Company paid leasing commissions of approximately $47.1 million, or $1.37 per square foot. In 2023, the Company paid leasing commissions of approximately $35.9 million, or $0.93 per square foot. As a percentage of total cash net operating income, leasing commissions paid for 2025, 2024 and 2023 were 7.5%, 6.0% and 4.3%, respectively. The amount of leasing commissions amortized over the term of the applicable leases totaled $25.9 million, $21.2 million and $13.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Rent Abatements
Rent abatements, which generally take the form of deferred rent, are sometimes used to help induce a potential tenant to lease space in the Company's properties. Such abatements, when made, are amortized by the Company on a straight-line basis against rental income over the lease term. Rent abatements for 2025 totaled approximately $20.9 million, or $0.72 per square foot. Rent abatements for 2024 totaled approximately $16.0 million, or $0.46 per square foot. Rent abatements for 2023 totaled approximately $14.3 million, or $0.37 per square foot.
Single-Tenant Leases
As of December 31, 2025, the Company had a total of 102 single-tenant buildings, with a weighted average lease term of 11.6 years and a weighted average remaining lease term of 5.7 years.
Ten single-tenant buildings have leases that expire in 2026. Four of the buildings have been renewed. The Company is in negotiations with tenants in six of these buildings and expects the leases to be renewed or the building to be backfilled.
Operating Leases
As of December 31, 2025, the Company was obligated to make rental payments under operating lease agreements consisting primarily of ground leases related to 108 real estate investments, excluding those ground leases the Company has prepaid. As of December 31, 2025, the Company had 168 properties totaling 12.4 million square feet that were held under ground leases with a remaining weighted average term of 60.6 years, including renewal options. These ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119.
Purchase Options
The Company had approximately $55.7 millionin real estate properties as of December 31, 2025, that were subject to exercisable purchase options. The Company has approximately $1.0 billion in real estate properties that are subject to purchase options that will become exercisable after 2025. Additional information about the amount and basis for determination of the purchase price is detailed in the table below (dollars in thousands):
YEAR EXERCISABLE NUMBER OF PROPERTIES
GROSS REAL ESTATE INVESTMENT AS OF DECEMBER 31, 20251
Current 2
3 $ 55,723
2026 4 132,946
2027 5 142,340
2028 5 135,641
2029 3 82,272
2030 - -
2031 4 111,905
2032 2 24,789
2033 - -
2034 - -
2035 2 43,660
2036 and thereafter 3
9 348,870
Total 37 $ 1,078,146
1Purchase option prices are based on fair market value components that are determined by an appraisal process, except for two properties totaling $62.9 million with stated prices or prices based on fixed capitalization rates.
2These purchase options have been exercisable for an average of 21.5 years.
3Includes two medical outpatient properties that are recorded in the line item Investment in financing receivable, net on the Company's Consolidated Balance Sheet.
Debt Management
The Company maintains a flexible capital structure that allows it to fund new investments and operate its existing portfolio. The Company has approximately $28.9 million of mortgage notes payable, maturing in 2026, mostof which were assumed when the Company acquired properties. The Company will repay mortgages with cash on hand or borrowings under the Unsecured Credit Facility. The Company had $1.3 billion of outstanding debt that matures in 2026 and 2027. See additional information in "Liquidity and Capital Resources - Financing Activities" above.
Impact of Inflation
The Company is subject to the risk of inflation as most of its revenues are derived from long-term leases. Most of the Company's leases provide for fixed increases in base rents or increases based on the Consumer Price Index and require the tenant to pay all or some portion of increases in operating expenses. The Company believes that these provisions mitigate the impact of inflation. However, there can be no assurance that the Company's ability to increase rents or recover operating expenses will keep pace with inflation. The Company's leases have a weighted average lease term remaining of approximately 4.4 years. As of December 31, 2025, 96% of the Company's leases provide for fixed base rent increases and 4% provide for Consumer Price Index-based rent increases.
New Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for information on new accounting standards including both standards that the Company adopted during the year and those that have not yet been adopted. The Company continues to evaluate the impact of the new standards that have not yet been adopted.
Results of Operations
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The Company's consolidated results of operations for 2025 compared to 2024 were impacted by developments, dispositions, gain on sales and impairment charges recorded on real estate properties, and capital markets transactions.
Revenues
Rental income decreased $94.7 million, or 7.7%, as a result of the following:
•Dispositions in 2024 and 2025 resulted in a decrease of $130.8 million.
•Leasing activity, including contractual rent increases, resulted in an increase of $28.3 million.
•Developments completed in 2024 and 2025 resulted in an increase of $7.8 million.
Interest income decreased $2.1 million, or 12.9%, for the year ended December 31, 2025, compared to the prior year primarily as a result of the repayment and maturity of note receivables, partially offset by the addition of new mortgages receivables.
Other operating income increased $9.1 million, or 47.3%, for the year ended December 31, 2025, compared to the prior year primarily as a result of income from management fees related to unconsolidated joint ventures and managed properties.
Expenses
Property operating expenses decreased $24.4 million, or 5.1%, from the prior year primarily as a result of the following activity:
•Dispositions in 2024 and 2025 resulted in a decrease of $45.5 million.
•Developments completed in 2024 and 2025 resulted in an increase of $2.0 million.
•Increases in portfolio operating expenses as follows:
◦Administrative, leasing commissions, and other legal expenses of $7.3 million;
◦Compensation expense of $4.8 million;
◦Utilities expense of $3.6 million;
◦Maintenance and repair expense of $2.1 million; and
◦Janitorial expense of $1.3 million.
General and administrative expenses decreased approximately $10.6 million, or 12.7%, from the prior year primarily as a result of the following activity:
•Decrease in payroll and payroll related expenses of approximately $4.1 million.
•Decrease in restructuring and severance-related charges of $3.5 million.
•Decrease in Director fees and non-cash incentive compensation of $1.3 million.
•Other decreases include legal and other administrative costs of $3.0 million.
•Increase in cash incentive compensation expense of $0.9 million.
•Increase in non-cash incentive compensation of $0.4 million.
Depreciation and amortization expense decreased $111.2 million, or 16.5%, from the prior year primarily as a result of the following activity:
•Dispositions in 2024 and 2025 resulted in a decrease of $81.1 million.
•Assets that became fully depreciated resulted in a decrease of $60.1 million.
•Developments completed in 2024 and 2025 resulted in an increase of $2.2 million.
•Various building and tenant improvement expenditures resulted in an increase of $27.8 million.
Other Income (Expense)
Other income (expense), as an expense decreased $355.0 million, or 50.9%, from the prior year mainly due to the following activity:
Gain on Sales of Real Estate Properties
Gains on the sale of real estate properties and other assets for the years ended December 31, 2025and 2024 totaled $235.4 million and $109.8 million, respectively.
Interest Expense
Interest expense decreased $33.4 million for the year ended December 31, 2025 compared to the prior year. The components of interest expense are as follows:
CHANGE
Dollars in thousands 2025 2024 $ %
Contractual interest $ 169,014 $ 196,392 $ (27,378) (13.9) %
Net discount/premium accretion 43,163 41,050 2,113 5.1 %
Debt issuance costs amortization 4,760 4,769 (9) (0.2) %
Amortization of interest rate swap settlement 53 168 (115) (68.5) %
Amortization of treasury hedge settlement 427 427 - - %
Fair value derivative - 187 (187) (100.0) %
Interest cost capitalization (12,123) (4,295) (7,828) 182.3 %
Interest on lease liabilities 3,695 3,727 (32) (0.9) %
Total interest expense $ 208,989 $ 242,425 $ (33,436) (13.8) %
Contractual interest decreased$27.4 million, or 13.9%, primarily as a result of the following activity:
•The unsecured term loans accounted for a decrease of approximately $18.5 million.
•The unsecured term loan repayments accounted for a decrease of approximately $15.1 million.
•The Unsecured Credit Facility accounted for an increase of approximately $3.0 million as a result of an increased weighted average balance outstanding.
•Active interest rate swaps accounted for an increase of $9.7 million, while expired interest rate swaps accounted for an increase of $0.3 million.
•Mortgage note repayments, net of assumptions, accounted for a decrease of approximately $0.3 million.
•The repayment of the Senior Note due 2025 accounted for a decrease of $6.5 million.
Debt extinguishment costs
During the year ended December 31, 2025, the Company recorded approximately $0.5 million in debt extinguishment costs related to the Unsecured Credit Facility, which replaced the Company's prior credit facility.
Impairment of Real Estate Assets and Credit Loss Reserves
During the year ended December 31, 2025, the Company recognized impairments totaling $361.1 million related to completed or planned dispositions, changes in holding periods or changes in property use. In addition, the Company recorded $1.6 million in credit loss reserves relating to a mortgage notes receivable and a $1.9 million fair value adjustment for an equity investment in other assets.
Impairment of real estate assets in 2024 totaling approximately $249.9 million related to completed or planned dispositions, changes in holding periods or changes in property use. Additionally, the Company recorded $59.5 million of credit loss reserves on its mortgage note receivables and a $4.1 million fair value adjustment for an equity investment in other assets.
Impairment of Goodwill
There was no goodwill impairment in 2025. During the first quarter of 2024, the Company determined that the carrying value of its single reporting unit exceeded estimated fair value and therefore recorded a $250.5 million full impairment of its goodwill, which is recorded as a non-cash charge in "Impairment of goodwill" in the consolidated
statements of operations. See Note 1 to the Consolidated Financial Statements accompanying this report for more details.
Equity income (loss) from unconsolidated joint ventures
The Company recognized its proportionate share of losses from its unconsolidated joint ventures. The losses are primarily attributable to non-cash depreciation expense. See Note 4 for more details regarding the Company's unconsolidated joint ventures.
Interest and other income (expense)
During 2025, the Company recorded approximately $4.3 million from Accumulated other comprehensive income ("AOCI") to other expense related to ineffectiveness and subsequent termination of eight interest rate swaps. See Note 10 to the Consolidated Financial Statements in this report for more details regarding the Company's derivative accounting.
In addition, the Company recognized income of approximately $0.8 million primarily due to a Federal ERC program (Employee Retention Credit) providing cash payment for employee retention during the COVID-19 pandemic totaling $4.4 million, net of a charge for a merger-related transfer tax charge that was finalized during the fourth quarter of 2025 totaling $3.6 million.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The Company's discussion regarding the comparison of the year ended December 31, 2024 compared to the year ended December 31, 2023 was previously disclosed beginning on page 38 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 19, 2025, and is incorporated herein by reference.
Non-GAAP Financial Measures and Key Performance Indicators
Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of these measures to the most directly comparable GAAP financial measures.
The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.
Funds from Operations ("FFO"), Normalized FFO and Funds Available for Distribution ("FAD")
FFO and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT's operating performance equal to "net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, impairment, and after adjustments for unconsolidated partnerships and joint ventures."
In addition to FFO, the Company presents Normalized FFO and FAD. Normalized FFO is presented by adding to FFO acquisition-related costs, acceleration of debt issuance costs, debt extinguishment costs and other Company-defined normalizing items to evaluate operating performance. FAD is presented by adding to Normalized FFO non-real estate depreciation and amortization, deferred financing fees amortization, share-based compensation expense and provision for bad debts, net; and subtracting straight-line rent income, net of expense, and maintenance capital
expenditures, including second generation tenant improvements, capital expenditures and leasing commissions paid. The Company's definition of these terms may not be comparable to that of other real estate companies as they may have different methodologies for computing these amounts. FFO, Normalized FFO, and FAD should not be considered as an alternative to net income as an indicator of the Company's financial performance or to cash flow from operating activities as an indicator of the Company's liquidity. FFO, Normalized FFO, and FAD should be reviewed in connection with GAAP financial measures.
Management believes FFO, Normalized FFO, FFO per share, Normalized FFO per share and FAD ("Non-GAAP Measures") provide an understanding of the operating performance of the Company's properties without giving effect to certain significant non-cash items, primarily gains on sales of real estate, impairments and depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, all of which are based on historical costs, and which may be of limited relevance in evaluating current performance, Non-GAAP Measures can facilitate comparisons of operating performance between periods. The Company reports Non-GAAP Measures because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these Non-GAAP Measures. However, none of these measures represent cash generated from operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs. Further, these measures should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.
The table below reconciles net income attributable to common stockholders to FFO, Normalized FFO and FAD attributable to common stockholders for the years ended December 31, 2025, 2024, and 2023.
YEAR ENDED DECEMBER 31,
Amounts in thousands, except per share data 2025 2024 2023
Net loss attributable to common stockholders $ (246,071) $ (654,485) $ (278,261)
Net loss attributable to common stockholders per diluted share 1
$ (0.71) $ (1.81) $ (0.74)
Gain on sales of real estate assets (235,389) (104,684) (77,546)
Impairment of real estate properties 361,090 249,909 149,717
Real estate depreciation and amortization 586,146 690,988 738,526
Non-controlling loss from operating partnership units (3,497) (9,149) (3,426)
Unconsolidated JV depreciation, amortization and impairment 27,769 20,678 18,116
FFO adjustments $ 736,119 $ 847,742 $ 825,387
FFO adjustments per common share - diluted $ 2.08 $ 2.29 $ 2.15
FFO attributable to common stockholders $ 490,048 $ 193,257 $ 547,126
FFO attributable to common stockholders per common share - diluted $ 1.38 $ 0.52 $ 1.43
Transaction costs 2,029 3,122 2,026
Merger-related costs - - (1,952)
Lease intangible amortization (1,350) (2,054) 860
Non-routine tax and legal matters (118) 1,077 175
Debt financing costs 2
5,107 237 (62)
Restructuring and severance-related charges 26,318 29,852 1,445
Credit losses and gains (losses) on other assets, net 3
3,508 59,707 8,599
Impairment of goodwill - 250,530 -
Merger-related fair value of debt instruments 42,593 40,667 42,885
Unconsolidated JV normalizing items 4
811 390 389
Normalized FFO adjustments $ 78,898 $ 383,528 $ 54,365
Normalized FFO adjustments per common share - diluted $ 0.22 $ 1.04 $ 0.14
Normalized FFO attributable to common stockholders $ 568,946 $ 576,785 $ 601,491
Normalized FFO attributable to common stockholders per common share - diluted $ 1.61 $ 1.56 $ 1.57
Non-real estate depreciation and other amortization, net 6,114 1,478 2,566
Non-cash interest amortization, net5
5,126 5,101 4,968
Rent reserves, net 952 714 3,163
Straight-line rent, net (29,392) (27,254) (32,592)
Stock-based compensation 13,609 14,036 13,791
Unconsolidated JV non-cash items 6
(1,420) (923) (1,034)
Normalized FFO adjusted for non-cash items $ 563,935 $ 569,937 $ 592,353
2nd generation tenant improvements (47,438) (69,445) (66,081)
Leasing commissions paid (31,664) (47,450) (36,391)
Building capital (36,531) (33,934) (49,343)
FAD $ 448,302 $ 419,108 $ 440,538
FFO weighted average common shares outstanding - diluted7
354,454 369,767 383,381
1Potential common shares are not included in diluted earnings per share when a loss exists as the effect would be antidilutive.
2For the year ended December 31, 2025, includes loss on debt extinguishment, loss on derivatives, and legal fees related to the Unsecured Credit Facility, which replaced the Company's prior credit facility.
3For the year ended December 31, 2025, includes $1.6 million credit loss reserves on two mortgage note receivables and a $1.9 million loss on other assets included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations. For the year ended December 31, 2024, includes $59.6 million in credit loss reserves, net of recoveries on four notes receivable included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations, $5.1 million gain on sale of other assets included in "Gains on sales of real estate and other assets" on the Statement of Operations, $4.1 million loss on other asset included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations, and a $1.1 million straight line rent reversal included in "Rental income" on the Statement of Operations. For the year ended December 31, 2023, includes a $5.2 million credit allowance for a mezzanine loan included in "Impairment of real estate properties and credit loss reserves" on the Statement of Operations and $3.4 million reserve included in "Rental Income" on the Statement of Operations for previously deferred rent and straight line rent for three skilled nursing facilities.
4Includes the Company's proportionate share of normalizing items related to unconsolidated joint ventures such as lease intangibles and transaction costs.
5Includes the amortization of deferred financing costs, discounts and premiums, and non-cash financing receivable amortization.
6Includes the Company's proportionate share of straight-line rent, net related to unconsolidated joint ventures.
7The Company utilizes the treasury stock method which includes the dilutive effect of nonvested share-based awards outstanding of 426,098, 556,201 and 397,168 for the years ended December 31, 2025, 2024, and 2023, respectively.
Cash Net Operating Income ("NOI") and Same Store Cash NOI
Cash NOI and Same Store Cash NOI are key performance indicators. Management considers these to be supplemental measures that allow investors, analysts and Company management to measure unlevered property-level operating results. The Company defines Cash NOI as rental income, interest from financing receivables less property operating expenses. Cash NOI excludes non-cash items such as above and below market lease intangibles, straight-line rent, lease inducements, financing receivable amortization, tenant improvement amortization and leasing commission amortization. The Company also excludes cash lease termination fees. Cash NOI is historical and not necessarily indicative of future results.
Same Store Cash NOI compares Cash NOI for stabilized properties. Stabilized properties are properties that have been included in operations for the duration of the year-over-year comparison period presented. Accordingly, stabilized properties exclude properties that were recently acquired or disposed of, properties classified as held for sale or intended for sale, properties undergoing redevelopment, and newly-redeveloped or developed properties.
The Company utilizes the redevelopment classification for properties where management has approved a change in strategic direction for such properties through the application of additional resources including an amount of capital expenditures significantly above routine maintenance and capital improvement expenditures.
Any recently acquired property will be included in the same store pool once the Company has owned the property for eight full quarters. Newly-developed or redeveloped properties will be included in the same store pool eight full quarters after substantial completion.
The following table reflects the Company's Same Store Cash NOI for the years ended December 31, 2025 and 2024.
NUMBER OF PROPERTIES GROSS INVESTMENT
at December 31, 2025 		SAME STORE CASH NOI for the year ended December 31
Dollars in thousands 2025 2024
Same store properties 473 $ 9,172,301 $ 601,925 $ 573,072
Joint venture same store properties 28 $ 313,552 $ 16,622 $ 17,117
The following tables reconcile net loss to Same Store NOI and the same store property metrics to the total owned real estate portfolio for the years ended December 31, 2025 and 2024:
Reconciliation of Same Store Cash NOI
YEAR ENDED DECEMBER 31,
Dollars in thousands 2025 2024
Net loss $ (249,485) $ (663,904)
Other expense 342,392 697,381
General and administrative expense 72,569 83,121
Depreciation and amortization expense 563,966 675,152
Other expenses1
32,210 23,446
Straight-line rent, net (23,752) (26,115)
Joint venture properties 33,503 24,219
Other revenue2
(39,792) (31,967)
Cash NOI 731,611 781,333
Cash NOI not included in same store (113,064) (191,144)
Same store cash NOI 618,547 590,189
Same store joint venture properties (16,622) (17,117)
Same store cash NOI (excluding JVs) $ 601,925 $ 573,072
1.Includes transaction costs, rent reserves, above and below market ground lease intangible amortization, leasing commission amortization, non-cash adjustments for financing receivables, and ground lease straight-line rent.
2.Includes management fee income, interest, above and below market lease intangible amortization, lease inducement amortization, lease termination fees, deferred financing cost amortization and principal related to investment in financing receivable, and tenant improvement overage amortization.
Reconciliation of Same Store Properties
AS OF DECEMBER 31, 2025
Dollars and square feet in thousands PROPERTY COUNT
GROSS INVESTMENT 1
SQUARE
FEET 		OCCUPANCY
Same store properties
473 $ 9,172,301 26,303 92.2 %
Joint venture same store properties 28 313,552 1,532 90.1 %
Wholly owned and joint venture acquisitions 30 183,779 2,193 95.3 %
Wholly owned and joint venture re/development completions 4 139,279 332 60.8 %
Wholly owned and joint venture re/developments 27 796,431 2,371 70.0 %
Total 562 $ 10,605,342 32,731 90.4 %
Joint venture properties 63 608,367 4,113 89.7 %
Total wholly-owned real estate properties 499 $ 9,996,975 28,618 90.5 %
1Excludes assets held for sale, construction in progress, land held for development, corporate property and financing lease right-of-use assets unrelated to an imputed lease arrangement as a result of a sale leaseback transaction.
Application of Critical Accounting Policies to Accounting Estimates
The Company's Consolidated Financial Statements are prepared in accordance with GAAP and the rules and regulations of the SEC. In preparing the Consolidated Financial Statements, management is required to exercise judgment and make assumptions that impact the carrying amount of assets and liabilities and the reported amounts of revenues and expenses reflected in the Consolidated Financial Statements.
Management routinely evaluates the estimates and assumptions used in the preparation of its Consolidated Financial Statements. These regular evaluations consider historical experience and other reasonable factors and use the seasoned judgment of management personnel. Management has reviewed the Company's critical accounting policies with the Audit Committee of the Board of Directors.
Management believes the following paragraphs in this section describe the application of critical accounting policies and estimates by management to arrive at the critical accounting estimates reflected in the Consolidated Financial Statements. The Company's accounting policies are more fully discussed in Note 1 to the Consolidated Financial Statements.
Principles of Consolidation
The Company's Consolidated Financial Statements include the accounts of the Company, its wholly owned subsidiaries, joint ventures, and partnerships where the Company controls the operating activities. All material intercompany accounts and transactions have been eliminated.
Capitalization of Costs
GAAP generally allows for the capitalization of various types of costs. The rules and regulations on capitalizing costs and the subsequent depreciation or amortization of those costs versus expensing them in the period incurred vary depending on the type of costs and the reason for capitalizing the costs.
Direct costs of development and redevelopment projects generally include construction costs, professional services such as architectural and legal costs, travel expenses, and land acquisition costs as well as other types of fees and expenses. These costs are capitalized as part of the basis of an asset to which such costs relate. Indirect costs include capitalized interest and overhead costs. Indirect costs are capitalized during construction and on the unoccupied space in a property for up to one year after the space is ready for its intended use. Capitalized interest is calculated using the weighted average interest rate of the Company's unsecured debt or the interest rate on project specific debt, if applicable. The Company's overhead costs are based on overhead load factors that are charged to a project based on direct time incurred. The Company computes the overhead load factors annually for its employees who are involved in the projects. The overhead load factors are computed to absorb that portion of indirect employee costs (payroll and benefits, training, and similar costs) that are attributable to the productive time the employee incurs working directly on projects. The employees who work on these projects maintain and report their hours, by project. Employee costs that are administrative, such as vacation time, sick time, or general and administrative time, are expensed in the period incurred.
Acquisition-related costs include finder's fees, advisory, legal, accounting, valuation, other professional or consulting fees, and certain general and administrative costs. Acquisition-related costs are expensed in the period incurred for acquisitions accounted for as a business combination under Accounting Standards Codification Topic 805, Business Combinations. These costs associated with asset acquisitions are capitalized in accordance with GAAP.
Management's judgment is also exercised in determining whether costs that have been previously capitalized to a project should be reserved for or written off if or when the project is abandoned or circumstances otherwise change that would call the project's viability into question. The Company follows a standard and consistently applied policy of classifying pursuit activity as well as reserving for these types of costs based on their classification.
The Company classifies its pursuit projects into two categories relating to development. The first category includes pursuits of developments that have a remote chance of producing new business. Costs for these projects are expensed in the period incurred. The second category includes those pursuits of developments that are either probable or highly probable to result in a project or contract. Since the Company believes it is probable that these pursuits will result in a project or contract, it capitalizes these costs in full and records no reserve.
Each quarter, all capitalized pursuit costs are again reviewed for viability or a change in classification, and a management decision is made as to whether any additional reserve is deemed necessary. If necessary and considered appropriate, management would record an additional reserve at that time. Capitalized pursuit costs, net of the reserve, are carried in other assets in the Company's Consolidated Balance Sheets, and any reserve recorded is charged to acquisition and pursuit costs on the Consolidated Statements of Operations. All pursuit costs will ultimately be written off to expense or capitalized as part of the constructed real estate asset.
As of December 31, 2025 and 2024, the Company's Consolidated Balance Sheets include capitalized pursuit costs relating to potential developments totaling $5.0 million and $4.9 million, respectively. The Company expensed costs related to the pursuit of acquisitions and dispositions totaling $1.0 million, $1.7 million and $0.8 million for the years ended December 31, 2025, 2024 and 2023, respectively. In addition, the Company expensed costs related to the pursuit of developments totaling $1.0 million, $1.1 million, and $0.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.
Valuation of Long-Lived Assets Held and Used, Unconsolidated Joint Ventures, Intangible Assets and Goodwill
Long-Lived Assets Held and Used
The Company assesses the potential for impairment of identifiable intangible assets and long-lived assets, primarily real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be recoverable. Important factors that could cause management to review for impairment include significant underperformance of an asset relative to historical or expected operating results; significant changes in the Company's use of assets or the strategy for its overall business; plans to sell an asset before its useful life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company reviews for possible impairment of those assets subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes.
In addition, at least annually, the Company assesses whether there were indicators, including property operating performance, changes in anticipated holding period and general market conditions, that the value of the Company's investments, including unconsolidated joint ventures, may have been impaired. The investment's value would have been impaired only if management's estimate of the fair value of the Company's investment was less than its carrying value. To the extent impairment had occurred, a loss would have been recognized for the excess of its carrying amount over its fair value.
The Company may, from time to time, be approached by a third party with an interest in purchasing one or more of the Company's operating real estate properties that were otherwise not for sale. Alternatively, the Company may explore disposing of an operating real estate property but without specific intent to sell the property and without the property meeting the criteria to be classified as held for sale (see discussion below). In such cases, the Company and a potential buyer typically negotiate a letter of intent followed by a purchase and sale agreement that includes a due diligence timeline for completion of customary due diligence procedures. Anytime throughout this period the transaction could be terminated by the parties. The Company views the execution of a purchase and sale agreement as a circumstance that warrants an impairment assessment and must include its best estimates of the impact of a potential sale in the recoverability test discussed in more detail below.
A property value is considered impaired only if management's estimate of current and projected (undiscounted and unleveraged) operating cash flows of the property is less than the net carrying value of the property. These estimates of future cash flows include only those that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the property based on its estimated remaining useful life. These estimates, including the useful life determination which can be affected by any potential sale of the property, are based on management's assumptions about its use of the property. Therefore, significant judgment is involved in estimating the current and projected cash flows.
When the Company executes a purchase and sale agreement for a held and used property, the Company performs the cash flow estimation described above. This assessment gives consideration to all available information, including an assessment of the likelihood the potential transaction will be consummated under the terms and conditions set forth in the purchase and sale agreement. Management will re-evaluate the recoverability of the property if and when significant changes occur as the transaction proceeds toward closing. Normally sale transactions will close within 15 to 30 days after the due diligence period expires. Upon expiration of the due diligence period, management will again re-evaluate the recoverability of the property, updating its assessment based on the status of the potential sale.
Whenever management determines that the carrying value of an asset that has been tested may not be recoverable, then an impairment charge would be recognized to the extent the current carrying value exceeds the current fair value of the asset. Significant judgment is also involved in making a determination of the estimated fair value of the asset.
The Company also performs an annual goodwill impairment review. The Company's reviews are typically performed as of December 31 of each year. In 2025, a review was not necessary as the Company's goodwill asset had a zero balance. During the first quarter of 2024, the Company experienced a sustained decline in the price per share of its common stock, which was identified as an indicator of goodwill impairment. As a result, a goodwill evaluation was performed. As of the measurement date, the Company's current operations are carried out through a single reporting unit that had a carrying value of approximately $12.0 billion. The Company determined that the carrying value
exceeded estimated fair value and therefore an impairment of goodwill was recorded. The Company recorded a $250.5 million full impairment of its goodwill, which is recorded as a non-cash charge in "Impairment of goodwill" in the Consolidated Statement of Operations for the year ended December 31, 2024.
Long-Lived Assets to be Disposed of by Planned Sale
From time-to-time management affirmatively decides to sell certain real estate properties under a plan of sale. The Company reclassifies the property or disposal group as held for sale when all the following criteria for a qualifying plan of sale are met:
•Management, having the authority to approve the action, commits to a plan to sell the property or disposal group;
•The property or disposal group is available for immediate sale (i.e., a seller currently has the intent and ability to transfer the property or disposal group to a buyer) in its present condition, subject only to conditions that are usual and customary for sales of such properties or disposal groups;
•An active program to locate a buyer and other actions required to complete the plan to sell have been initiated;
•The sale of the property or disposal group is probable (i.e., likely to occur) and the transfer is expected to qualify for recognition as a completed sale within one year, with certain exceptions;
•The property or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and
•Actions necessary to complete the plan indicate that it is unlikely significant changes to the plan will be made or that the plan will be withdrawn.
A property or disposal group classified as held for sale is initially measured at the lower of its carrying amount or fair value less estimated costs to sell. An impairment charge is recognized for any initial adjustment of the property's or disposal group's carrying amount to its fair value less estimated costs to sell in the period the held for sale criteria are met. The fair value less estimated costs to sell the property (disposal group) should be assessed each reporting period it remains classified as held for sale. Depreciation ceases as long as a property is classified as held for sale.
If circumstances arise that were previously considered unlikely and a subsequent decision not to sell a property classified as held for sale were to occur, the property is reclassified as held and used. The property is measured at the time of reclassification at the lower of its (a) carrying amount before it was classified as held for sale, adjusted for any depreciation expense or impairment losses that would have been recognized had the property been continuously classified as held and used or (b) fair value at the date of the subsequent decision not to sell. The effect of any required adjustment is reflected in income from continuing operations at the date of the decision not to sell.
The Company recorded impairment charges totaling $361.1 million and $249.9 million, respectively, for the years ended December 31, 2025 and December 31, 2024, related to real estate properties sold and properties with changes in the expected holding periods.
Valuation of Asset Acquisitions
As described in more detail in Note 1 to the Consolidated Financial Statements, when the Company acquires real estate properties with in-place leases, the cost of the acquisition must be allocated between the acquired tangible real estate assets "as if vacant" and any acquired intangible assets. Such intangible assets could include above- (or below-) market in-place leases and at-market in-place leases, which could include the opportunity costs associated with absorption period rentals, direct costs associated with obtaining new leases such as tenant improvements, leasing commissions and customer relationship assets. With regard to the elements of estimating the "as if vacant" values of the property and the intangible assets, including the absorption period, occupancy increases during the absorption period, tenant improvement amounts, and leasing commission percentages, the Company uses the same absorption period and occupancy assumptions for similar property types. Any remaining excess purchase price is then allocated to the tangible and intangible assets based on their relative fair values. The identifiable tangible and intangible assets are then subject to depreciation and amortization.
Depreciation of Real Estate Assets and Amortization of Related Intangible Assets
As of December 31, 2025, the Company had gross investments of approximately $9.1 billion in depreciable real estate assets and related intangible assets. When real estate assets and related intangible assets are acquired or placed in service, they must be depreciated or amortized. Management's judgment involves determining which depreciation method to use, estimating the economic life of the building and improvement components of real estate assets, and estimating the value of intangible assets acquired when real estate assets are purchased that have in-place leases.
With respect to the building components, there are several depreciation methods available under GAAP. Some methods record relatively more depreciation expense on an asset in the early years of the asset's economic life, and relatively less depreciation expense on the asset in the later years of its economic life. The straight-line method of depreciating real estate assets is the method the Company follows because, in the opinion of management, it is the method that most accurately and consistently allocates the cost of the asset over its estimated life. The Company assigns a useful life to its owned properties based on many factors, including the age and condition of the property when acquired.
Revenue Recognition
The Company's primary source of revenue is rental income derived from non-cancelable leases. When a lease is executed, the terms and conditions of the lease are assessed to determine the appropriate accounting classification. As of December 31, 2025, with the exception of one finance lease, all of the Company's leases, where the Company is the lessor, are classified as operating leases. Operating leases are recognized on the straight-line basis over the term of the related lease, including periods where a tenant is provided a rent concession. Operating expense recoveries, which include reimbursements for building specific operating expenses, are recognized as revenue in the period in which the related expenses are incurred. The Company generally expects that collectability is probable at lease commencement. If the assessment of collectability changes after the lease commencement date and Rental income is not considered probable, Rental income is recognized on a cash basis and all previously recognized uncollectible Rental income is reversed in the period in which it is determined not to be probable of collection. In addition to the lease-specific collectability assessment performed under Topic 842, the Company may also apply a general reserve ("provision for bad debt"), as a reduction to Rental income, for its portfolio of operating lease receivables.
The Company also recognizes certain revenue based on the guidance in Topic 606 and is based on the five-step model to account for revenue arising from contracts with customers. The Company's primary source of revenue associated with Topic 606 relates to parking revenue and management fee income.
Derivative Instruments
Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the derivative instrument with the recognition of the changes in the fair-value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transaction in a cash flow hedge. The accounting for a derivative requires that the Company make judgments in determining the nature of the derivatives and their effectiveness, including ones regarding the likelihood that a forecasted transaction will take place. These judgments could materially affect our consolidated financial statements.
The Company may enter into a derivative instrument to manage interest rate risk from time to time. When a derivative instrument is initiated, the Company will assess its intended use of the derivative instrument and may elect a hedging relationship and apply hedge accounting. As required by the accounting literature, the Company will formally document the hedging relationship for all derivative instruments prior to or contemporaneous with entering into the derivative instrument.
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