Healthcare Trust of America, Inc. Reports Second Quarter 2018 Earnings

 

Normalized FFO of $0.41 Per Diluted Share
$294 Million of Dispositions Under Contract
Same-Property Cash NOI Growth of 2.6%

SCOTTSDALE, Ariz., Aug. 2, 2018 /PRNewswire/ -- Healthcare Trust of America, Inc. (NYSE: HTA) ("HTA") announced results for the three and six months ended June 30, 2018.

Operating

Second Quarter 2018:

  • Net Income Attributable to Common Stockholders: Increased 359.3% to $15.3 million, compared to Q2 2017. Earnings per diluted share increased 333.3% to $0.07 per diluted share, compared to Q2 2017.
  • Funds From Operations ("FFO"): As defined by the National Association of Real Estate Investment Trusts ("NAREIT"), increased 55.8%, to $84.4 million, compared to Q2 2017. FFO per diluted share increased 33.3%, to $0.40 per diluted share, compared to Q2 2017.
  • Normalized FFO: Increased 22.2%, to $85.1 million, compared to Q2 2017. Normalized FFO per diluted share increased 5.1%, to $0.41 per diluted share, compared to Q2 2017.
  • Normalized Funds Available for Distribution ("FAD"): Increased 19.2%, to $72.2 million, compared to Q2 2017.
  • Same-Property Cash Net Operating Income ("NOI"): Increased $1.9 million, or 2.6%, to $77.9 million, compared to Q2 2017. Excluding the MOBs located on its Forest Park Dallas campus, Same-Property Cash NOI growth would have been 3.1%.

Year-to-Date 2018:

  • Net Income Attributable to Common Stockholders: Increased 229.7%, to $25.1 million, compared to 2017. Earnings per diluted share increased 140.0%, to $0.12 per diluted share, compared to 2017.
  • FFO: As defined by NAREIT, increased 47.7%, to $169.0 million, compared to 2017. FFO per diluted share increased 15.7%, to $0.81 per diluted share, compared to 2017.
  • Normalized FFO: Increased 31.1%, to $170.1 million, compared to 2017. Normalized FFO per diluted share increased 2.5%, to $0.81 per diluted share, compared to 2017.
  • Normalized FAD: Increased 30.6%, to $148.2 million, compared to 2017.
  • Same-Property Cash NOI: Increased $3.7 million, or 2.5%, to $154.1 million, compared to 2017. Excluding the MOBs located on its Forest Park Dallas campus, Same-Property Cash NOI growth would have been 2.8%.

Portfolio

  • Leasing: During the three months ended June 30, 2018, HTA entered into new and renewal leases on approximately 1.0 million square feet of gross leasable area ("GLA"), or 4.2% of its portfolio. Tenant retention for the Same-Property portfolio was 86% by GLA for the quarter, which included approximately 0.7 million square feet of GLA of total expiring leases. Re-leasing spreads for renewal leases on a cash basis were 1.1%. Renewal leases included tenant improvements of $1.66 per square foot of GLA per year of the lease term and approximately one day of free rent per year of the lease term during the three months ended June 30, 2018.
  • Leased Rate: As of June 30, 2018, HTA had a leased rate for its portfolio of 91.9% by GLA and an occupancy rate of 90.9% by GLA.
  • Forest Park Update: During the six months ended June 30, 2018, HTA entered into approximately 41,000 square feet of GLA of new leases on the former Forest Park Dallas campus.
  • Development/Redevelopment: During the three months ended June 30, 2018, HTA announced a new development in its key gateway market of Miami, Florida and commenced two redevelopments, including an agreement to build a new on-campus MOB in the Raleigh, North Carolina market. The projects will have total expected construction costs of approximately $70.6 million and are approximately 78% pre-leased to major health systems. These projects include:
    • Jackson South MOB (Miami, Florida): In April 2018, HTA entered into an agreement to develop a new 51,000 square foot MOB located adjacent to the Jackson South Hospital in Coral Reef, Florida. Total development costs are estimated to be $21.6 million and the building is 70% pre-leased to the hospital. Construction is expected to begin in 2019.
    • Cary MOB (Raleigh, North Carolina): HTA announced it will redevelop the Medical Park of Cary, its existing 90,000 square foot medical park located adjacent to WakeMed Health & Hospital's ("WakeMed"), a leading health system based in Raleigh, North Carolina. As part of the project, HTA will take down four existing buildings totaling 45,000 square feet of GLA and build a new 125,000 square foot Class A MOB. Following this development, Medical Park of Cary will increase to approximately 170,000 square feet of GLA, including buildings that will remain operational through construction. Construction is expected to begin in the spring of 2019, with delivery by 2021 and is expected to cost $43.0 million.
  • Investments: During the six months ended June 30, 2018, HTA invested $8.4 million to acquire an MOB of approximately 24,000 square feet of GLA in Raleigh, North Carolina, that was 100% leased as of the acquisition date to Duke Health System. In addition, HTA invested $3.9 million to consolidate its ownership interests in several other MOBs.
  • Dispositions: Subsequent to June 30, 2018, HTA entered into agreements to sell its Greenville, South Carolina MOB portfolio for a total of $294.3 million in two transactions, including the sale of a single MOB for $9.3 million that has closed subsequent to June 30, 2018 which was classified as held for sale as of June 30, 2018. The remaining properties are expected to close in August 2018. HTA has additional properties under contract to sell which would total up to an additional $60 million of gross proceeds. These properties are subject to customary closing conditions and no closings are assured. HTA intends to use the net proceeds to pay down debt, repurchase shares of its common stock, to invest in acquisitions and developments in markets where it believes it can utilize its property management and leasing platform to drive incremental returns, and for general corporate purposes.

2017 Investment Performance

  • Cash NOI: During the three months ended June 30, 2018, HTA generated $34.8 million of Cash NOI on its 2017 investments, including its investment in its unconsolidated joint venture. This Cash NOI includes over $2.2 million of income from property management and building engineering services provided to its tenants. As of June 30, 2018, HTA's run rate yield on its 2017 investments was approximately 5.3%, which included the full year impact of new leases which have been executed, but which have not yet commenced.
  • Development: As of part the 2017 investments, HTA acquired seven development projects that were under construction and not stabilized at the date of acquisition. Prior to this quarter, HTA had completed five of the seven development projects. During the period ended June 30, 2018, HTA completed the development MOB of Memorial Hermann in Houston, Texas. This MOB was 100,000 square feet of GLA and 100% pre-leased to the hospital. The remaining development has been completed in July 2018.
    As of June 30, 2018, the six completed development properties were 87% leased and generated $1.9 million of Cash NOI. HTA believes it is currently in the late stages of lease negotiations for an additional 33,000 square feet of GLA that would bring the leased rate on these development properties to 88%, if completed. In total, the seven development properties are projected to generate between approximately $2.5 million and $2.8 million in quarterly Cash NOI upon completion and stabilization.

Balance Sheet and Capital Markets

  • Balance Sheet: As of June 30, 2018, HTA had total leverage of 31.8% measured as debt less cash and cash equivalents to total capitalization, and 5.8x measured as debt less cash and cash equivalents to Adjusted Earnings before Interest, Taxes, Depreciation and Amortization for real estate ("Adjusted EBITDAre"). Total liquidity at the end of the quarter was $1.0 billion, including $994.5 million of availability under HTA's unsecured revolving credit facility and $26.2 million of cash and cash equivalents.
  • Debt: During the three months ended June 30, 2018, HTA paid down $96.0 million on its $286.0 million promissory note to the seller, as lender, in the Duke acquisition. The interest rate on the promissory note is 4% per annum.
  • Equity: In June 2018, HTA settled its forward sale arrangement pursuant to its forward equity agreement, which included approximately 2.6 million shares of its common stock for net proceeds of approximately $73.8 million, adjusted for costs to borrow equating to a net price to HTA of $28.94 per share of common stock.
  • Share Repurchase Plan: On June 8, 2018, HTA's Board of Directors approved a stock repurchase plan authorizing HTA to purchase up to $100 million of its common stock from time to time prior to the expiration thereof on June 7, 2020. During June 2018, pursuant to this plan, HTA repurchased 333,002 shares of its common stock, at an average price of $26.26 per share, for an aggregate amount of $8.7 million. In August 2018, HTA's Board of Directors terminated the foregoing plan and adopted a new plan with an increased share repurchase authorization of up to $300 million.

Subsequent Events

  • Debt: Subsequent to June 30, 2018, HTA's operating partnership, HTALP, entered into a modification of its $200.0 million unsecured term loan due in 2023. This modification decreased pricing at HTA's current credit rating by 65 bps from LIBOR plus 165 bps to LIBOR plus 100 bps. 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.
  • Dividends: On August 2, 2018, HTA's Board of Directors announced an increased quarterly dividend of $0.310 per share of common stock and per OP Unit. The quarterly dividend is to be paid on October 5, 2018 to stockholders of record of its common stock and holders of its OP Units on October 2, 2018.

Financial Results - Second Quarter 2018

Rental Income

Rental income increased 24.2% to $173.2 million for the three months ended June 30, 2018, compared to $139.5 million for the three months ended June 30, 2017.

Net Income

Net income increased 367.5% to $15.7 million for the three months ended June 30, 2018, compared to a net loss of $(5.9) million for the three months ended June 30, 2017.

FFO

FFO, as defined by NAREIT, was $0.40 per diluted share, or $84.4 million, for the three months ended June 30, 2018, compared to $0.30 per diluted share, or $54.2 million, for the three months ended June 30, 2017.

Normalized FFO

Normalized FFO was $0.41 per diluted share, or $85.1 million, for the three months ended June 30, 2018, compared to $0.39 per diluted share, or $69.6 million, for the three months ended June 30, 2017.

Normalized FAD

Normalized FAD increased 19.2% to $72.2 million, for the three months ended June 30, 2018, compared to $60.6 million for the three months ended June 30, 2017.

NOI

NOI increased 24.2% to $119.8 million for the three months ended June 30, 2018, compared to $96.4 million for the three months ended June 30, 2017.

Same-Property Cash NOI

Same-Property Cash NOI increased $1.9 million, or 2.6%, to $77.9 million, for the three months ended June 30, 2018, compared to $75.9 million for the three months ended June 30, 2017. Excluding the MOBs located on its Forest Park Dallas campus, Same-Property Cash NOI growth would have been 3.1%.

General and Administrative Expenses

General and administrative expenses were $8.7 million for the three months ended June 30, 2018, compared to $8.5 million for the three months ended June 30, 2017.

Interest Expense

Total interest expense was $26.3 million for the three months ended June 30, 2018, compared to $17.9 million for the three months ended June 30, 2017.

Tenant Retention

Tenant retention for the Same-Property portfolio was 86% by GLA for the quarter, which included approximately 0.7 million square feet of GLA of expiring leases.

Financial Results - Year-to-Date 2018

Rental Income

Rental income increased 32.4% to $348.8 million for the six months ended June 30, 2018, compared to $263.5 million for the six months ended June 30, 2017.

Net Income

Net income increased 215.1% to $25.7 million for the six months ended June 30, 2018, compared to $8.1 million for the six months ended June 30, 2017.

FFO

FFO, as defined by NAREIT, was $0.81 per diluted share, or $169.0 million, for the six months ended June 30, 2018, compared to $0.70 per diluted share, or $114.4 million, for the six months ended June 30, 2017.

Normalized FFO

Normalized FFO was $0.81 per diluted share, or $170.1 million, for the six months ended June 30, 2018, compared to $0.79 per diluted share, or $129.8 million, for the six months ended June 30, 2017.

Normalized FAD

Normalized FAD increased 30.6% to $148.2 million, for the six months ended June 30, 2018, compared to $113.5 million for the six months ended June 30, 2017.

NOI

NOI increased 31.7% to $239.4 million for the six months ended June 30, 2018, compared to $181.7 million for the six months ended June 30, 2017.

Same-Property Cash NOI

Same-Property Cash NOI increased $3.7 million, or 2.5%, to $154.1 million, for the six months ended June 30, 2018, compared to $150.4 million for the six months ended June 30, 2017. Excluding the MOBs located on its Forest Park Dallas campus, Same-Property Cash NOI growth would have been 2.8%.

General and Administrative Expenses

General and administrative expenses were $17.5 million for the six months ended June 30, 2018, compared to $16.9 million for the six months ended June 30, 2017.

Interest Expense

Total interest expense was $52.6 million for the six months ended June 30, 2018, compared to $33.4 million for the six months ended June 30, 2017.

Investment Activity

During the six months ended June 30, 2018, HTA invested $8.4 million to acquire an MOB of approximately 24,000 square feet of GLA in Raleigh, North Carolina, that was 100% leased as of the acquisition date to Duke Health System. In addition, HTA invested $3.9 million to consolidate its ownership interests in several other MOBs.

Leased Rate, Occupancy Rate and Tenant Retention

The leased rate (includes leases which have been executed, but which have not yet commenced) was 91.9% by GLA as of June 30, 2018. The occupancy rate of HTA's portfolio was 90.9% by GLA as of June 30, 2018. Tenant retention for the Same-Property portfolio was 84% by GLA year-to-date, which included approximately 1.3 million square feet of expiring leases.

Credit Rated Tenants

Investment grade rated tenants as a percent of annualized base rent was 48% as of June 30, 2018. Additionally, 61% of HTA's annualized base rent as of June 30, 2018 was derived from tenants that have (or whose parent companies have) a credit rating from a nationally recognized rating agency.

In-House Property Management and Leasing Platform

As of June 30, 2018, HTA's in-house property management and leasing platform operated approximately 22.7 million square feet of GLA, or 94%, of HTA's total portfolio.

About Healthcare Trust of America, Inc.

Healthcare Trust of America, Inc. (NYSE: HTA) is the largest dedicated owner and operator of medical office buildings in the United States, comprising over 24.2 million square feet of GLA, with over $7.0 billion invested primarily in medical office buildings. HTA provides real estate infrastructure for the integrated delivery of healthcare services in highly-desirable locations. Investments are targeted to build critical mass in 20 to 25 leading gateway markets that generally have leading university and medical institutions which translates to superior demographics, high-quality graduates, intellectual talent and job growth. The strategic markets HTA invests in support a strong, long-term demand for quality medical office space. HTA utilizes an integrated asset management platform consisting of on-site leasing, property management, engineering and building services, and development capabilities to create complete, state of the art facilities in each market. This drives efficiencies, strong tenant and health system relationships, and strategic partnerships that result in high levels of tenant retention, rental growth and long-term value creation. Headquartered in Scottsdale, Arizona, HTA has developed a national brand with dedicated relationships at the local level.

Founded in 2006 and listed on the New York Stock Exchange in 2012, HTA has produced attractive returns for its stockholders that have significantly outperformed the S&P 500 and US REIT indices. More information about HTA can be found on the Company's Website, Facebook, LinkedIn and Twitter.

Forward-Looking Language

This press release contains certain forward-looking statements with respect to HTA. Forward-looking statements are statements that are not descriptions of historical facts and include statements regarding management's intentions, beliefs, expectations, plans or predictions of the future, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Because such statements include risks, uncertainties and contingencies, actual results may differ materially and in adverse ways from those expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, without limitation, the following: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of REITs and changes to laws governing the healthcare industry; the availability of capital; changes in interest rates; competition in the real estate industry; the supply and demand for operating properties in our proposed market areas; changes in accounting principles generally accepted in the United States of America; policies and guidelines applicable to REITs; the availability of properties to acquire; and the availability of financing. Additional information concerning us and our business, including additional factors that could materially and adversely affect our financial results, include, without limitation, the risks described under Part I, Item 1A - Risk Factors, in our 2017 Annual Report on Form 10-K and in our filings with the SEC.

Conference Call

HTA will host a conference call and webcast on Friday, August 3, 2018 at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time) to review its financial performance and operating results for the three and six months ended June 30, 2018.

Conference Call and Webcast Details:
Domestic Dial-In Number: (877) 507-6265
International Dial-In Number: (412) 902-6633
Canada Dial-In Number: (855) 669-9657
Webcast: www.htareit.com under the Investor Relations tab

Replay Conference Call Details:
Domestic Dial-In Number: (877) 344-7529
International Dial-In Number: (412) 317-0088
Canada Dial-In Number: (855) 669-9658
Conference ID: 10122321
Available August 3, 2018 (one hour after the end of the conference call) to September 3, 2018 at 12:00 p.m. Eastern Time (9:00 a.m. Pacific Time)

Supplemental Information

Supplemental financial data are available on the HTA's website at www.htareit.com.

Financial Contact:
Robert A. Milligan
Chief Financial Officer
480.998.3478

                                                   HEALTHCARE TRUST OF AMERICA, INC.

                                                 CONDENSED CONSOLIDATED BALANCE SHEETS

                                          (In thousands, except for share and per share data)

                                                              (Unaudited)


                                                             June 30, 2018                    December 31, 2017
                                                             -------------                   -----------------

                            ASSETS

    Real estate investments:

    Land                                                                        $486,403                              $485,319

    Building and improvements                                    5,873,927                                5,830,824

    Lease intangibles                                              633,938                                  639,199

    Construction in progress                                        21,397                                   14,223
                                                                    ------                                   ------

                                                                 7,015,665                                6,969,565

    Accumulated depreciation and
     amortization                                              (1,146,260)                             (1,021,691)

    Real estate investments, net                                 5,869,405                                5,947,874

    Assets held for sale, net                                        6,916                                        -

    Investment in unconsolidated joint
     venture                                                        67,870                                   68,577

    Cash and cash equivalents                                       26,191                                  100,356

    Restricted cash                                                 13,414                                   18,204

    Receivables and other assets, net                              215,250                                  207,857

    Other intangibles, net                                         103,084                                  106,714
                                                                   -------                                  -------

    Total assets                                                              $6,302,130                            $6,449,582
                                                                              ==========                            ==========

                    LIABILITIES AND EQUITY

    Liabilities:

    Debt                                                                      $2,683,531                            $2,781,031

    Accounts payable and accrued
     liabilities                                                   152,516                                  167,852

    Liabilities of assets held for sale                                161                                        -

    Derivative financial instruments -
     interest rate swaps                                               548                                    1,089

    Security deposits, prepaid rent and
     other liabilities                                              65,012                                   61,222

    Intangible liabilities, net                                     64,964                                   68,203
                                                                    ------                                   ------

    Total liabilities                                            2,966,732                                3,079,397

    Commitments and contingencies

    Redeemable noncontrolling interests                              6,644                                    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;
     207,493,355 and 204,892,118 shares
     issued and outstanding as of June 30,
     2018 and December 31, 2017,
     respectively                                                    2,075                                    2,049

    Additional paid-in capital                                   4,580,373                                4,508,528

    Accumulated other comprehensive loss                             1,367                                      274

    Cumulative dividends in excess of
     earnings                                                  (1,332,759)                             (1,232,069)
                                                                ----------                               ----------

    Total stockholders' equity                                   3,251,056                                3,278,782

    Noncontrolling interests                                        77,698                                   84,666
                                                                    ------                                   ------

    Total equity                                                 3,328,754                                3,363,448

    Total liabilities and equity                                              $6,302,130                            $6,449,582
                                                                              ==========                            ==========

 

                                                                                   HEALTHCARE TRUST OF AMERICA, INC.

                                                                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                 (In thousands, except per share data)

                                                                                              (Unaudited)


                                                       Three Months Ended June 30,                                   Six Months Ended June 30,

                                                    2018                     2017                      2018                     2017
                                                    ----                     ----                      ----                     ----

    Revenues:

    Rental income                                           $173,221                                          $139,525                           $348,788  $263,518

    Interest and other operating
     income                                          111                                  354                                   205                    708
                                                     ---                                  ---                                   ---                    ---

    Total revenues                               173,332                              139,879                               348,993                264,226

    Expenses:

    Rental                                        53,553                               43,523                               109,575                 82,543

    General and administrative                     8,725                                8,472                                17,511                 16,895

    Transaction                                      396                                5,073                                   587                  5,357

    Depreciation and amortization                 69,104                               55,353                               139,496                102,409

    Impairment                                         -                               5,093                                 4,606                  5,093

    Total expenses                               131,778                              117,514                               271,775                212,297
                                                 -------                              -------                               -------                -------

    Income before other income
     (expense)                                    41,554                               22,365                                77,218                 51,929

    Interest income (expense):

    Interest related to derivative
     financial instruments                           186                                (239)                                  128                  (563)

    Gain on change in fair value of
     derivative financial
     instruments, net                                  -                                  45                                     -                   884
                                                     ---                                 ---                                   ---                   ---

    Total interest related to
     derivative financial
     instruments, including net
     change in fair value of
     derivative financial
     instruments                                     186                                (194)                                  128                    321

    Interest related to debt                    (26,491)                            (17,706)                             (52,686)              (33,764)

    Gain on sale of real estate,
     net                                               -                                   -                                    -                     3

    Loss on extinguishment of debt,
     net                                               -                            (10,386)                                    -              (10,418)

    Income from unconsolidated
     joint venture                                   403                                   63                                   973                     63

    Other income                                       5                                    6                                    40                     14
                                                     ---                                  ---                                   ---                    ---

    Net income (loss)                                        $15,657                                          $(5,852)                           $25,673    $8,148

    Net income attributable to
     noncontrolling interests                      (311)                                (66)                                (525)                 (521)
                                                    ----                                  ---                                  ----                   ----

    Net income (loss) attributable
     to common stockholders                                  $15,346                                          $(5,918)                           $25,148    $7,627
                                                             =======                                           =======                            =======    ======

    Earnings per common share - basic:

    Net income (loss) attributable
     to common stockholders                                    $0.07                                           $(0.03)                             $0.12     $0.05
                                                               =====                                            ======                              =====     =====

    Earnings per common share - diluted:

    Net income (loss) attributable
     to common stockholders                                    $0.07                                           $(0.03)                             $0.12     $0.05
                                                               =====                                            ======                              =====     =====

    Weighted average common shares outstanding:

    Basic                                        205,241                              176,464                               205,155                159,218
                                                 =======                              =======                               =======                =======

    Diluted                                      209,259                              176,464                               209,218                163,490
                                                 =======                              =======                               =======                =======

    Dividends declared per common
     share                                                    $0.305                                            $0.300                             $0.610    $0.600
                                                              ======                                            ======                             ======    ======

 

                                               HEALTHCARE TRUST OF AMERICA, INC.

                                        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        (In thousands)

                                                          (Unaudited)


                                                                   Six Months Ended June 30,

                                                               2018                    2017
                                                               ----                    ----

    Cash flows from operating activities:

    Net income                                                         $25,673                              $8,148

    Adjustments to reconcile net income to net cash
     provided by operating activities:

    Depreciation, amortization and
     other                                                  135,177                               100,536

    Share-based compensation expense                          5,703                                 3,839

    Impairment                                                4,606                                 5,093

    Income from unconsolidated joint
     venture                                                  (973)                                 (63)

    Distributions from unconsolidated
     joint venture                                              975                                     -

    Gain on sale of real estate, net                              -                                  (3)

    Loss on extinguishment of debt,
     net                                                          -                               10,418

    Change in fair value of derivative
     financial instruments                                        -                                (884)

    Changes in operating assets and liabilities:

    Receivables and other assets, net                       (2,956)                              (2,742)

    Accounts payable and accrued
     liabilities                                           (13,254)                               14,272

    Prepaid rent and other liabilities                        1,157                                 1,907
                                                              -----                                 -----

    Net cash provided by operating
     activities                                             156,108                               140,521
                                                            -------                               -------

    Cash flows from investing activities:

    Investments in real estate                             (11,887)                          (2,202,815)

    Investment in unconsolidated joint
     venture                                                      -                             (68,839)

    Development of real estate                             (23,861)                                (348)

    Proceeds from the sale of real
     estate                                                       -                                4,746

    Capital expenditures                                   (34,110)                             (26,022)

    Collection of real estate notes
     receivable                                                 347                                     -

    Net cash used in investing
     activities                                            (69,511)                          (2,293,278)
                                                            -------                            ----------

    Cash flows from financing activities:

    Borrowings on unsecured revolving
     credit facility                                         85,000                               305,000

    Payments on unsecured revolving
     credit facility                                       (85,000)                            (393,000)

    Proceeds from unsecured senior
     notes                                                        -                              900,000

    Payments on secured mortgage loans                     (99,218)                             (74,319)

    Deferred financing costs                                      -                              (9,400)

    Debt extinguishment costs                                     -                             (10,391)

    Security deposits                                           222                                 1,964

    Proceeds from issuance of common
     stock                                                   72,814                             1,624,222

    Repurchase and cancellation of
     common stock                                          (11,553)                              (3,339)

    Dividends paid                                        (125,128)                             (85,683)

    Distributions paid to
     noncontrolling interest of
     limited partners                                       (2,689)                              (2,722)

    Net cash (used in) provided by
     financing activities                                 (165,552)                            2,252,332
                                                           --------                             ---------

    Net change in cash, cash
     equivalents and restricted cash                       (78,955)                               99,575

    Cash, cash equivalents and
     restricted cash -beginning of
     period                                                 118,560                                25,045
                                                            -------                                ------

    Cash, cash equivalents and
     restricted cash -end of period                                    $39,605                            $124,620
                                                                       =======                            ========

 

                                                                      HEALTHCARE TRUST OF AMERICA, INC.

                                                                  NOI, CASH NOI AND SAME-PROPERTY CASH NOI

                                                                               (In thousands)

                                                                                 (Unaudited)


                                    Three Months Ended June 30,                             Six Months Ended June 30,

                                      2018                      2017                      2018                    2017
                                      ----                      ----

    Net income (loss)                          $15,657                                          $(5,852)                 $25,673    $8,148

    General and administrative
     expenses                        8,725                                 8,472                               17,511       16,895

    Transaction expenses (1)           396                                 5,073                                  587        5,357

    Depreciation and amortization
     expense                        69,104                                55,353                              139,496      102,409

    Impairment                           -                                5,093                                4,606        5,093

    Interest expense and net
     change in fair value of
     derivative financial
     instruments                    26,305                                17,900                               52,558       33,443

    Gain on sale of real estate,
     net                                 -                                    -                                   -         (3)

    Loss on extinguishment of
     debt, net                           -                               10,386                                    -      10,418

    Income from unconsolidated
     joint venture                   (403)                                    -                               (973)           -

    Other income                       (5)                                  (6)                                (40)        (14)


    NOI                                       $119,779                                           $96,419                 $239,418  $181,746
                                              ========                                           =======                 ========  ========

    NOI percentage growth            24.2%                                                        31.7%
                                      ====                                                          ====


    NOI                                       $119,779                                           $96,419                 $239,418  $181,746

    Straight-line rent
     adjustments, net              (2,377)                              (1,616)                             (5,543)     (2,825)

    Amortization of (below) and
     above market leases/
     leasehold interests, net           40                                   126                                  255           32

    Notes receivable interest
     income and other GAAP
     adjustments                      (19)                                (240)                               (149)       (495)

    Cash NOI                                  $117,423                                           $94,689                 $233,981  $178,458

    Acquisitions not owned/
     operated for all periods
     presented and disposed
     properties Cash NOI          (33,664)                             (11,973)                            (68,340)    (14,535)

    Redevelopment Cash NOI           (365)                              (1,149)                               (622)     (2,364)

    Intended for sale Cash NOI     (5,507)                              (5,628)                            (10,889)    (11,122)
                                    ------                                ------                              -------      -------

    Same-Property Cash NOI (2)                 $77,887                                           $75,939                 $154,130  $150,437
                                               =======                                           =======                 ========  ========

    Same-Property Cash NOI
     percentage growth                2.6%                                                         2.5%
                                       ===                                                           ===

             (1)    For the
                     three and
                     six months
                     ended June
                     30, 2017,
                     transaction
                     costs
                     include
                     $4.6
                     million of
                     non-
                     incremental
                     costs
                     related to
                     the Duke
                     acquisition.

             (2)    Same-
                     Property
                     includes
                     321 and 319
                     buildings
                     for the
                     three and
                     six months
                     ended June
                     30, 2018
                     and 2017,
                     respectively.

NOI is a non-GAAP financial measure that is defined as net income or loss (computed in accordance with GAAP) before: (i) general and administrative expenses; (ii) transaction expenses; (iii) depreciation and amortization expense; (iv) impairment; (v) interest expense and net change in fair value of derivative financial instruments; (vi) gain or loss on sales of real estate; (vii) gain or loss on extinguishment of debt; (viii) income or loss from unconsolidated joint venture; and (ix) other income or expense. HTA believes that NOI provides an accurate measure of the operating performance of its operating assets because NOI excludes certain items that are not associated with the management of its properties. Additionally, HTA believes that NOI is a widely accepted measure of comparative operating performance of real estate investment trusts ("REITs"). However, HTA's use of the term NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of its financial performance. NOI should be reviewed in connection with other GAAP measurements.

Cash NOI is a non-GAAP financial measure which excludes from NOI: (i) straight-line rent adjustments; (ii) amortization of below and above market leases/leasehold interests; (iii) notes receivable interest income; and (iv) other GAAP adjustments. Contractual base rent, contractual rent increases, contractual rent concessions and changes in occupancy or lease rates upon commencement and expiration of leases are a primary driver of HTA's revenue performance. HTA believes that Cash NOI, which removes the impact of straight-line rent adjustments, provides another measurement of the operating performance of its operating assets. Additionally, HTA believes that Cash NOI is a widely accepted measure of comparative operating performance of REITs. However, HTA's use of the term Cash NOI may not be comparable to that of other REITs as they may have different methodologies for computing this amount. Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of its financial performance. Cash NOI should be reviewed in connection with other GAAP measurements.

To facilitate the comparison of Cash NOI between periods, HTA calculates comparable amounts for a subset of its owned and operational properties referred to as "Same-Property". Same-Property Cash NOI excludes (i) properties which have not been owned and operated by HTA during the entire span of all periods presented and disposed properties, (ii) HTA's share of unconsolidated joint ventures, (iii) development, redevelopment and land parcels, (iv) properties intended for disposition in the near term which have (a) been approved by the Board of Directors, (b) is actively marketed for sale, and (c) an offer has been received at prices HTA would transact and the sales process is ongoing, and (v) certain non-routine items. Same-Property Cash NOI should not be considered as an alternative to net income or loss (computed in accordance with GAAP) as an indicator of its financial performance. Same-Property Cash NOI should be reviewed in connection with other GAAP measurements.

                                                                       HEALTHCARE TRUST OF AMERICA, INC.

                                                                    FFO, NORMALIZED FFO AND NORMALIZED FAD

                                                                     (In thousands, except per share data)

                                                                                  (Unaudited)


                                       Three Months Ended June 30,                            Six Months Ended June 30,

                                          2018                    2017                      2018                    2017
                                          ----                    ----                      ----                    ----

    Net income (loss) attributable to
     common stockholders                          $15,346                                         $(5,918)                 $25,148    $7,627

    Depreciation and amortization
     expense related to investments
     in real estate                     68,585                              54,968                              138,441      101,657

    Gain on sale of real estate, net         -                                  -                                   -         (3)

    Impairment                               -                              5,093                                4,606        5,093

    Proportionate share of joint
     venture depreciation and
     amortization                          463                                  42                                  814           42
                                           ---                                 ---                                  ---          ---

    FFO attributable to common
     stockholders                                 $84,394                                          $54,185                 $169,009  $114,416

    Transaction expenses                   252                                 430                                  443          714

    Gain on change in fair value of
     derivative financial
     instruments, net                        -                               (45)                                   -       (884)

    Loss on extinguishment of debt,
     net                                     -                             10,386                                    -      10,418

    Noncontrolling income from
     partnership units included in
     diluted shares                        297                                  44                                  478          469

    Other normalizing items, net (1)       144                               4,643                                  144        4,643
                                           ---                               -----                                  ---        -----

    Normalized FFO attributable to
     common stockholders                          $85,087                                          $69,643                 $170,074  $129,776

    Other income                           (5)                                (6)                                (40)        (14)

    Non-cash compensation expense        2,224                               1,309                                5,703        3,839

    Straight-line rent adjustments,
     net                               (2,377)                            (1,616)                             (5,543)     (2,825)

    Amortization of (below) and above
     market leases/leasehold
     interests and corporate assets,
     net                                   559                                 511                                1,310          784

    Deferred revenue -tenant
     improvement related                  (38)                               (11)                                (69)        (11)

    Amortization of deferred
     financing costs and debt
     discount/premium, net               1,291                                 853                                2,580        1,639

    Recurring capital expenditures,
     tenant improvements and leasing
     commissions                      (14,511)                           (10,065)                            (25,861)    (19,705)
                                       -------                             -------                              -------      -------

    Normalized FAD attributable to
     common stockholders                          $72,230                                          $60,618                 $148,154  $113,483
                                                  =======                                          =======                 ========  ========


    Net income (loss) attributable to
     common stockholders per diluted
     share                                          $0.07                                          $(0.03)                   $0.12     $0.05

    FFO adjustments per diluted
     share, net                           0.33                                0.33                                 0.69         0.65
                                          ----                                ----                                 ----         ----

    FFO attributable to common
     stockholders per diluted share                 $0.40                                            $0.30                    $0.81     $0.70

    Normalized FFO adjustments per
     diluted share, net                   0.01                                0.09                                 0.00         0.09


    Normalized FFO attributable to
     common stockholders per diluted
     share                                          $0.41                                            $0.39                    $0.81     $0.79
                                                    =====                                            =====                    =====     =====


    Weighted average diluted common
     shares outstanding (2)            209,259                             180,672                              209,218      163,490
                                       =======                             =======                              =======      =======

             (1)    For the three
                     and six
                     months ended
                     June 30,
                     2017, other
                     normalizing
                     items
                     include $4.6
                     million of
                     non-
                     incremental
                     costs
                     related to
                     the Duke
                     acquisition
                     that were
                     included in
                     transaction
                     expenses on
                     HTA's
                     condensed
                     consolidated
                     statements
                     of
                     operations.

             (2)    For the three
                     months ended
                     June 30,
                     2017, these
                     securities
                     are anti-
                     dilutive on
                     a GAAP basis
                     as a result
                     of HTA's net
                     loss, but
                     are
                     considered
                     dilutive on
                     a non-GAAP
                     basis in
                     periods
                     where we
                     report non-
                     GAAP net
                     income.

HTA computes FFO in accordance with the current standards established by NAREIT. NAREIT defines FFO as net income or loss attributable to common stockholders (computed in accordance with GAAP), excluding gains or losses from sales of real estate property and impairment write-downs of depreciable assets, plus depreciation and amortization related to investments in real estate, and after adjustments for unconsolidated partnerships and joint ventures. HTA presents this non-GAAP financial measure because it considers it an important supplemental measure of its operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. Historical cost accounting assumes that the value of real estate assets diminishes ratably over time. Since real estate values have historically risen or fallen based on market conditions, many industry investors have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Because FFO excludes depreciation and amortization unique to real estate, among other items, it provides a perspective not immediately apparent from net income or loss attributable to common stockholders.

HTA computes Normalized FFO, which excludes from FFO: (i) transaction expenses; (ii) gain or loss on change in fair value of derivative financial instruments; (iii) gain or loss on extinguishment of debt; (iv) noncontrolling income or loss from partnership units included in diluted shares; and (v) other normalizing items, which include items that are unusual and infrequent in nature. HTA presents this non-GAAP financial measure because it allows for the comparison of its operating performance to other REITs and between periods on a consistent basis. HTA's methodology for calculating Normalized FFO may be different from the methods utilized by other REITs and, accordingly, may not be comparable to other REITs. Normalized FFO should not be considered as an alternative to net income or loss attributable to common stockholders (computed in accordance with GAAP) as an indicator of its financial performance, nor is it indicative of cash available to fund cash needs. Normalized FFO should be reviewed in connection with other GAAP measurements.

HTA also computes Normalized FAD, which excludes from Normalized FFO: (i) other income or expense; (ii) non-cash compensation expense; (iii) straight-line rent adjustments; (iv) amortization of below and above market leases/leasehold interests and corporate assets; (v) amortization of deferred financing costs and debt premium/discount; and (vi) recurring capital expenditures, tenant improvements and leasing commissions. HTA believes this non-GAAP financial measure provides a meaningful supplemental measure of its operating performance. Normalized FAD should not be considered as an alternative to net income or loss attributable to common stockholders (computed in accordance with GAAP) as an indicator of its financial performance, nor is it indicative of cash available to fund cash needs. Normalized FAD should be reviewed in connection with other GAAP measurements.

 

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SOURCE Healthcare Trust of America, Inc.

Company Codes: NYSE:HTA

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