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EX-2.1 - EX-2.1 - HEALTHCARE TRUST OF AMERICA, INC.d390529dex21.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 1, 2017 (April 25, 2017)

 

 

HEALTHCARE TRUST OF AMERICA, INC.

HEALTHCARE TRUST OF AMERICA HOLDINGS, LP

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   001-35568   20-4738467
Delaware   333-190916   20-4738347

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

16435 N. Scottsdale Road, Suite 320

Scottsdale, Arizona

  85254
(Address of principal executive offices)   (Zip Code)

(480) 998-3478

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 1.01 Entry into a Material Definitive Agreement.

Unless otherwise stated, or the context otherwise requires, references in this Current Report to “HTA,” “Company,” “we,” “us,” “our” and similar terms refer to Healthcare Trust of America, Inc., a Maryland corporation, and its subsidiaries, and references in this Current Report to the “Partnership” refer to Healthcare Trust of America Holdings, LP, a Delaware limited partnership.

The Duke Portfolio Acquisition

On April 29, 2017, we entered into sixteen agreements of purchase and sale (each, a “Purchase Agreement” and collectively, the “Purchase Agreements”), with Duke Realty Limited Partnership, Duke Construction Limited Partnership and certain of their subsidiaries and affiliated entities named therein (collectively, “Duke”), pursuant to which we will acquire Duke’s medical office building (“MOB”) business (the “Duke Acquisition”) consisting of (i) 71 properties currently in service with an aggregate GLA of approximately 6.6 million square feet which are approximately 95% leased, on a gross basis, (ii) five properties in development and two expansion properties with an aggregate gross leasable area (“GLA”) of approximately 470,000 square feet which are 86% pre-leased, (iii) interests in two buildings owned by joint ventures and (iv) two parcels of land, totaling approximately 16.5 acres (collectively, the “Duke Assets”). We will also acquire Duke’s existing development, construction and asset management platform (the “Platform”). Pursuant to the Purchase Agreements, we will also assume certain of the liabilities associated with the assets to be acquired from Duke in the Duke Acquisition (the “Assumed Liabilities”).

Pursuant to the Purchase Agreements, the consideration to be paid for the acquisition of the Duke Assets is approximately $2.75 billion, after giving effect to a credit of approximately $50 million to complete the development projects (the “Acquisition Price”). As described below, 31 properties are subject to rights of first offer (“ROFOs”) or rights of first refusal (“ROFRs”), which, if exercised, could remove such properties from the portfolio to be acquired pursuant to the Purchase Agreements.

Pursuant to the terms of the Purchase Agreements, we are obligated to place an earnest money deposit of $150.0 million in escrow with an independent escrow holder (the “Earnest Money”).

The Purchase Agreements provide that we are obligated to purchase the Duke Assets under the Purchase Agreements, subject to certain exceptions, including the satisfaction of the conditions precedent to our obligations to close under the Purchase Agreements. In addition, the Partnership has guaranteed our obligations under the Purchase Agreements. The Purchase Agreements provide that the closing of the Duke Acquisition thereunder may occur in up to four closings, subject to exceptions related to certain Duke Assets, which closings will occur no later than April 29, 2018, but which are expected to close in the second and third quarter of 2017. The Purchase Agreements require that we consummate the acquisition of at least $1.4 billion of the value of the Duke Assets at the initial closing (the “Initial Closing”). Thereafter, we may elect to consummate the acquisition of the remaining Duke Assets in up to three additional closings (each, a “Serial Closing” and together with the Initial Closing, the “Closings”), subject to certain exceptions, and provided that we are required to purchase at least $250 million of the value of the Duke Assets at each Serial Closing (other than in respect of the final Serial Closing). At each Closing, in general, a pro rata portion of the Earnest Money, as well as any interest earned thereon, will be applied toward the amount of cash consideration to be paid at the applicable Closing, subject to certain exceptions.

One Duke Asset, the Baylor Scott & White Rock Prairie MOB located in College Station, Texas (the “College Station MOB”), is undergoing repairs at Duke’s expense. We are not obligated to acquire the College Station MOB until such repairs are complete; provided, however, that if the repairs are not complete within 18 months from the date of the Purchase Agreements, our obligation to consummate the acquisition of the College Station MOB will terminate.

One of the Purchase Agreements provides that Duke has a put right with respect to certain ground leases related to properties acquired as part of the Duke Assets. If Duke exercises such right within 18 months of the date of the Purchase Agreements, we will be obligated to enter into a separate purchase agreement in substantially the same form as the applicable Purchase Agreement to acquire such Duke Assets. In the event we fail to enter into such separate agreement promptly following Duke’s exercise of its put right, we will be obligated to pay Duke $30 million as liquidated damages.


Pursuant to the Purchase Agreements, the Duke Acquisition is subject to various closing conditions, including, among other things, the accuracy of the parties’ representations and warranties and compliance with the parties’ respective covenants. There can be no assurance that any closing condition of the Duke Acquisition will be satisfied or waived, if permitted, or that there will not be events, developments or changes that can cause the closing or closings not to occur. Therefore, there can be no assurance with respect to whether the Duke Acquisition will be completed on the currently contemplated terms, other terms or at all. There is no closing condition relating to our ability to obtain the necessary financing or lender consents for the Duke Acquisition.

In general, as more particularly set forth in the Purchase Agreements, the Purchase Agreements provide that we may terminate the Purchase Agreements if Duke is in breach of any of its representations and warranties, or has failed to comply with any of its obligations or covenants such that any of the conditions precedent to our obligations under the Purchase Agreements cannot be fulfilled. In the case of such termination due to Duke’s default under the Purchase Agreements, we would receive a refund of the Earnest Money, and would be entitled to reimbursement for our actual out-of-pocket costs incurred in preparation for the Duke Acquisition up to $7.5 million. The Purchase Agreements also provide that Duke may terminate the Purchase Agreements if we are in breach of any of our representations and warranties, or have failed to comply with any of our obligations or covenants such that any of the conditions precedent to Duke’s obligations under the Purchase Agreements cannot be fulfilled. In the case of such termination due to our default under the Purchase Agreements, the Earnest Money will be released to Duke as liquidated damages.

The foregoing description of the Purchase Agreements and the Duke Acquisition does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreements, which are each substantially in the form of the Purchase Agreement attached hereto as Exhibit 2.1 and the terms of which are incorporated herein by reference.

The Southwest Health System Portfolio Acquisition

On April 25, 2017, we entered into an agreement of purchase and sale (the “Southwest Health System Purchase Agreement”) pursuant to which we will acquire an MOB portfolio consisting of 11 MOBs (the “Southwest Health System Assets” and, collectively with the Duke Assets, the “Acquisition Assets”) totaling approximately 592,000 square feet of GLA (the “Southwest Health System Acquisition” and, collectively with the Duke Acquisition, the “Acquisitions”) for a purchase price of $150.0 million. Eight of the Southwest Health System Assets are subject to ROFOs or ROFRs exercisable by tenants, which, if exercised, could remove such assets from the portfolio to be acquired. The Southwest Health System Assets are 86% leased and consist of (i) four MOBs located in Phoenix, Arizona, which is one of our key markets, and (ii) seven MOBs located in Southern California. The Southwest Health System Acquisition is subject to customary closing conditions and, accordingly, there can be no assurance that we will complete the Southwest Health System Acquisition.

Stabilized NOI Forecast

We estimate that our stabilized annual net operating income (“NOI”), accounting for the Acquisitions, will be approximately $150 million to $155 million, including gains from increased rental income, same-store growth, pre-leased development assets, lease-ups and operating synergies. We caution you not to place undue reliance on this estimate because it is based on audited and unaudited information provided to us by the sellers of these properties in the diligence process, as well as certain assumptions applied by us, including anticipated occupancy rates, rental rates and expenses, and that there will be no exercise of the outstanding ROFOs or ROFRs with respect to the Acquisition Assets. This estimate is calculated on a non-GAAP basis. Our experience operating these properties may change our expectations with respect to the NOI for these properties. In addition, the actual stabilized NOI may differ from the estimated NOI described above based on numerous factors, including any difficulties which may arise in retaining or achieving assumed occupancy and rental rates, unanticipated expenses, property tax reassessments and the exercise of any of the tenant purchase options applicable to the properties we have under contract. We can provide no assurance that the actual stabilized NOI for these properties will be consistent with the estimated NOI set forth above, and may be materially less.


Rationale for the Acquisitions

We believe the Acquisitions will create strategic portfolio-related and financial benefits for us, including the following:

 

    Dominant Medical Office Platform in Growing Sector: The combination of HTA’s and Duke’s medical office platform creates the largest dedicated owner and operator of medical office buildings in the United States. With the combination, HTA’s portfolio will increase to 25 million square feet of GLA. The outpatient medical office sector is undergoing significant growth and changes. HTA’s best in class property management and leasing platform and Duke’s development platform creates an unparalleled, full service platform in the outpatient healthcare space that HTA believes will create significant growth opportunities.

 

    Scale in Key Gateway Markets: With the combination, HTA will have approximately 500,000 square feet of GLA or more in each of 17 of the key gateway markets that HTA believes exhibits superior growth characteristics for the next 10 years. Further, the significant overlap between the two portfolios, in which 85% of Duke’s portfolio is within an HTA market, creates significant scale that allows for significant potential operating and leasing synergies with limited additional corporate infrastructure.

 

    High Quality Portfolio that Serves Future of Healthcare: The combined portfolio is uniquely positioned to serve the future of healthcare delivery. Approximately 71% of the combined portfolio is located on-campus with leading health systems, with the remainder in community core outpatient locations that increasingly meet patient and healthcare provider needs.

 

    Established Track Record of Performance and Returns: Both HTA and Duke have established track records for consistent, same store growth, superior operating metrics, and sourcing and executing accretive acquisition and development opportunities. The combination creates an experienced platform with a strong track record of performance for stockholders.

 

    Accretive Transaction with Strong Balance Sheet: The transaction is expected to be accretive to HTA’s normalized funds from operations (“FFO”) in 2018 following capital activities that are expected to leave HTA with a strong and conservative balance sheet in the near term and positioned for future growth.

Portfolios to be Acquired

The Duke Assets consist of 78 properties, consisting of (i) 71 properties currently in service with an aggregate GLA of approximately 6.6 million square feet which are approximately 95% leased on a gross basis, (ii) five properties in development and two expansion projects with an aggregate GLA of approximately 470,000 square feet which are 86% pre-leased, (iii) interests in two buildings owned by joint ventures and (iv) two parcels of land, totaling approximately 16.5 acres. These properties will be internally managed (other than those managed by tenants).

The Southwest Health System Assets consist of 11 properties, comprising 592,000 square feet of GLA and are approximately 86% leased, with 44% leased by Dignity Health Medical Group and 42% leased to related physicians and health providers. These MOBs will be internally managed (other than those managed by tenants) and are located in Phoenix, Arizona (one of our key markets) and in Southern California.


The weighted average lease term of the Duke Assets is 9.6 years.

The table below provides details of the Acquisition Assets as of March 31, 2017 by healthcare group:

 

Healthcare System

  

State(s)

   Number of
Properties
     GLA      Number of
Properties
to be
Acquired

Subject to
Ground
Lease
 

Duke Active Portfolio

           

Baylor Scott & White Health

   Texas      17        1,526,385        11  

Ascension Health

   Indiana, Tennessee, Texas, Wisconsin      7        728,677        6  

Trihealth

   Ohio      6        277,808        2  

Northside Hospital

   Georgia      2        466,171        1  

Community Health Systems

   New Mexico, Texas      5        417,992        5  

Advanced Health Systems

   Florida      5        355,125        5  

Harbin Clinic

   Georgia      7        333,581        1  

Health and Hospital Corporation of Marion
County(2)

   Indiana      1        273,479        1  

Kindred Healthcare

   Indiana, Missouri, Ohio, Tennessee      4        229,341        3  

Veterans Administration

   Florida      2        224,037        —    

Tenet Healthcare

   Texas      1        199,800        —    

Carolinas HealthCare System

   North Carolina      1        190,773        1  

Houston Methodist

   Texas      3        168,850        3  

SCL Health

   Colorado      4        166,433        —    

WakeMed Health and Hospital

   North Carolina      2        135,692        2  

Trinity Health

   Illinois      1        104,912        —    

Inova Health System

   Virginia      1        100,952        1  

Mercy Health

   Ohio      1        80,074        1  

UNC Rex Healthcare

   North Carolina      1        30,370        1  

Hackensack UMC

   New Jersey      1        57,411        1  

Edward-Elmhurst Healthcare

   Illinois      1        56,531        1  

WellStar Health

   Georgia      1        52,175        1  

HCA Healthcare

   Georgia      1        39,759        1  

Duke Development Portfolio

           

Baylor Scott & White

   Texas      1        27,149        —    

Main Line Health

   Pennsylvania      1        101,228        1  

Centegra Health System

   Illinois      1        80,973        1  

Baptist Memorial Healthcare

   Mississippi      1        79,585        1  

Providence Health and Services

   California, North Carolina      2        82,000        1  

Duke Land

           

Facey (Retail Parcel)

   California      1        198,677        —    

Miami Jackson

   Florida      1        530,996        —    

Southwest Health System Portfolio

           

Southwest Health System

   Arizona, California      11        591,551        11  

 

(1) Purchase of 16% interest.
(2) Purchase of 50% interest.


The table below provides the percentage of annualized base rent for leases in place as of December 31, 2016, by key market for our consolidated MOBs, as well as MOBs that were under construction, or for which substantial redevelopment is planned or that occurred during 2016, combined for the Acquisitions:

 

     HTA      Duke and Southwest Healthcare System Portfolios      Combined  

Key Market

   Annualized
Base Rent(1)
     Percent of
Annualized
Base Rent(1)
     Annualized Base Rent(1)      Percent of Annualized
Base Rent(1)
     Annualized
Base Rent(1)
     Percent of
Annualized
Base Rent(1)
 
     ($ thousands)      (%)      ($ thousands)      (%)      ($ thousands)      (%)  

Dallas, TX

     17,366        4.6        26,525        20.7        43,891        8.7  

Boston, MA

     32,154        8.5        —          —          32,154        6.4  

Atlanta, GA

     13,145        3.5        17,350        13.5        30,495        6.0  

Indianapolis, IN

     15,414        4.1        9,498        7.4        24,912        4.9  

Phoenix, AZ

     19,389        5.1        4,432        3.5        23,821        4.7  

Houston, TX

     20,398        5.4        2,344        1.8        22,743        4.5  

Miami, FL

     18,320        4.8        1,970        1.5        20,289        4.0  

Pittsburgh, PA

     20,154        5.3        —          —          20,154        4.0  

Hartford/New Haven, CT

     19,992        5.3        —          —          19,992        4.0  

Greenville, SC

     18,091        4.8        —          —          18,091        3.6  

Denver, CO

     8,808        2.3        8,071        6.3        16,879        3.3  

Albany, NY

     16,274        4.3        —          —          16,274        3.2  

Raleigh, NC

     12,843        3.4        3,368        2.6        16,211        3.2  

Orange County/Los Angeles, CA

     12,066        3.2        4,028        3.1        16,094        3.2  

Tampa, FL

     10,799        2.9        5,366        4.2        16,165        3.2  

Austin, TX

     2,186        0.6        9,017        7.0        11,203        2.2  

Milwaukee, WI

     6,385        1.7        3,993        3.1        10,379        2.1  

Orlando, FL

     6,205        1.6        3,968        3.1        10,173        2.0  

Chicago, IL

     5,001        1.3        5,055        3.9        10,056        2.0  

White Plains, NY

     6,991        1.8        1,151        0.9        8,143        1.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Top 20 MSAs

     281,981        74.5        106,136        82.6        388,119        76.8  

Additional Top 75 MSAs

     65,186        17.3        19,334        15.4        84,518        16.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Key Markets & Top 75 MSAs

     347,167        91.8        125,470        98.0        472,637        93.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Annualized base rent is calculated by multiplying contractual base rent as of December 31, 2016 by 12 (excluding the impact of abatements, concessions, and straight-line rent).


The table below provides the percentage of GLA by key market for leases in place as of December 31, 2016, for our consolidated MOBs, as well as MOBs that were under construction or for which substantial redevelopment is planned or that occurred during 2016, combined for the Acquisitions:

 

Key Market

   HTA      Duke and Southwest
Healthcare System
Portfolios
     Combined  
   GLA      Percent of
Total GLA
     GLA      Percent of
Total GLA
     GLA      Percent of
Total GLA
 
     (Square feet,
thousands)
     (%)      (Square feet,
thousands)
     (%)      (Square feet,
thousands)
     (%)  

Dallas, TX

     728        4.1        1,669        23.3        2,397        9.6  

Boston, MA

     1,037        5.9        —          —          1,037        4.2  

Atlanta, GA

     663        3.7        892        12.4        1,554        6.2  

Indianapolis, IN

     977        5.5        625        8.7        1,602        6.4  

Phoenix, AZ

     1,018        5.7        297        4.1        1,315        5.3  

Houston, TX

     874        4.9        339        4.7        1,213        4.9  

Miami, FL

     888        5.0        107        1.5        995        4.0  

Pittsburgh, PA

     1,095        6.2        —          —          1,095        4.4  

Hartford/New Haven, CT

     936        5.3        —          —          936        3.8  

Greenville, SC

     965        5.4        —          —          965        3.9  

Denver, CO

     371        2.1        167        2.3        538        2.2  

Albany, NY

     880        5.0        —          —          880        3.5  

Raleigh, NC

     532        3.0        211        2.9        743        3.0  

Orange County/Los Angeles, CA

     432        2.4        262        3.7        694        2.8  

Tampa, FL

     439        2.5        252        3.5        691        2.8  

Austin, TX

     84        0.5        443        6.2        527        2.1  

Milwaukee, WI

     277        1.6        221        3.1        498        2.0  

Orlando, FL

     289        1.6        220        3.1        509        2.0  

Chicago, IL

     139        0.8        242        3.4        382        1.5  

White Plains, NY

     276        1.6        57        0.8        333        1.3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Top 20 MSAs

     12,900        72.8        6,004        83.7        18,904        75.9  

Additional Top 75 MSAs

     3,376        19        967        13.5        4,342        17.5  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Key Markets & Top 75 MSAs

     16,276        91.9        6,971        97.2        23,246        93.4  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Rights of First Refusal and Rights of First Offer

Certain of the Acquisition Assets are subject to ROFOs or ROFRs. ROFOs or ROFRs as to 39 of the Acquisition Assets have been triggered as a result of the Acquisitions, which could reduce the number of assets acquired pursuant to the Acquisitions if the tenants exercise their respective rights to acquire the properties. The value of such assets is approximately $1.4 billion.


Bridge Loan Facility

In connection with the Duke Acquisition, on April 29, 2017, we received a commitment letter from Wells Fargo Bank, National Association and Wells Fargo Securities, LLC for a senior unsecured bridge loan facility (the “Bridge Loan Facility”) consisting of an aggregate principal amount of up to $2.32 billion, less the aggregate amount of proceeds from debt or equity capital raises or a senior term loan facility(the “Duke Acquisition Bridge Loan”). The Bridge Loan Facility will be made available to us on the Closings as interim financing for the Duke Acquisition, and any loan amount will be advanced in a single draw. The Bridge Loan Facility would mature 364 days from the applicable Closing. The net proceeds of the Duke Acquisition Bridge Loan are to be used to finance a portion of the consideration for the Duke Acquisition and pay fees, commissions and expenses in connection with the Duke Acquisition and any of the aforementioned capital raising transactions.

The funding of the Bridge Loan Facility will be subject to the satisfaction of certain customary conditions precedent to funding for this type of facility, including conditions related to the aforementioned issuances and sales of senior unsecured notes, other debt securities and/or equity securities.

Loans under the Bridge Loan Facility will bear interest at a rate per annum equal to either (i) a base rate, plus an applicable interest margin in effect at such time for base rate loans, or (ii) the applicable LIBOR plus the applicable interest margin in effect at such time for LIBOR loans. The Bridge Loan Facility will also require us to pay Wells Fargo Bank, National Association and Wells Fargo Securities, LLC certain customary fees.

The above summary of the Bridge Loan Facility is based on the commitment letter we received from Wells Fargo Bank, National Association and Wells Fargo Securities, LLC, the terms of which are subject to the final documentation between us, on the one hand, and Wells Fargo Bank, National Association and Wells Fargo Securities, LLC, on the other hand.

Seller Financing

Pursuant to the Purchase Agreements, Duke is requiring that we accept from it a non-recourse, senior secured first lien loan, subject to customary non-recourse carve-outs, in an amount equal to $330 million (the “Seller Financing”), which we must use to fund a portion of the Acquisition Price. The Seller Financing will be secured by a first priority mortgage lien (or the equivalent in the relevant jurisdiction) on certain of the Duke Assets and will be jointly and severally guaranteed by the borrower and the Partnership. Pursuant to the Seller Financing, we will pay monthly interest only in arrears at an annual rate of 4%. We will pay the principal under the Seller Financing in three (3) equal payments, with the first payment due on the first anniversary of the applicable closing date under the Purchase Agreements, the second payment due on the second anniversary thereof and the final payment due on January 10, 2020. The Seller Financing provides for release provisions on asset sales and acceleration provisions in the event of a change of control of the borrower, and is not otherwise subject to pre-payment.


Forward-Looking Statements

Certain statements contained in this Current Report constitute forward-looking statements within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements include, in particular, statements about our plans, strategies, prospects, the pending acquisitions, the potential impact of such acquisitions on our results of operations, future medical office building market performance and funding of the acquisitions. Additionally, such statements are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially and in adverse ways from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Forward-looking statements are generally identifiable by the use of such terms as “expect,” “project,” “may,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “pro forma” or the negative of such terms and other comparable terminology. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Current Report. We cannot guarantee the accuracy of any such forward-looking statements contained in this Current Report, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Any such forward-looking statements reflect our current views about future events, are subject to unknown risks, uncertainties, and other factors, and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, provide dividends to stockholders, and maintain the value of our real estate properties, may be significantly hindered. The following factors, as well as any cautionary language in this Current Report, provide examples of certain risks, uncertainties and events that could cause actual events or results to differ materially from those presented in our forward-looking statements:

 

    our ability to consummate the Acquisitions (as defined below);

 

    our ability to effectively deploy net proceeds of offerings of securities;

 

    our ability to effectively integrate the Acquisition Assets (as defined below) into our portfolio;

 

    changes in economic conditions affecting the healthcare property sector, the commercial real estate market and the credit market;

 

    competition for acquisition of medical office buildings and other facilities that serve the healthcare industry;

 

    economic fluctuations in certain states in which our property investments are geographically concentrated;

 

    retention of our senior management team;

 

    financial stability and solvency of our tenants;

 

    supply and demand for operating properties in the market areas in which we operate;

 

    our ability to acquire real properties, and to successfully operate those properties once acquired;

 

    changes in property taxes;

 

    legislative and regulatory changes, including changes to laws governing the taxation of REITs and changes to laws governing the healthcare industry;

 

    fluctuations in reimbursements from third-party payors such as Medicare and Medicaid;

 

    changes in interest rates;

 

    the availability of capital and financing;
    restrictive covenants in our existing credit facilities;

 

    changes in our credit ratings;

 

    our ability to remain qualified as a REIT;


    changes in accounting principles generally accepted in the United States of America, policies and guidelines applicable to REITs;

 

    delays in liquidating defaulted mortgage loan investments; and

 

    other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission, including those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Quarterly Report on Form 10-Q for the period ended March 31, 2017, under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, you are urged not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date made. In addition, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.

These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth above in “Item 1.01 — Entry into a Material Definitive Agreement” is incorporated herein by reference.

Item 7.01. Regulation FD Disclosure.

On May 1, 2017, the Company issued a press release announcing the Duke Acquisition. A copy of the Company’s press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

On May 1, 2017, the Company issued a press release announcing the proposed public offering of its Class A common stock. A copy of the Company’s press release is furnished as Exhibit 99.2 and is incorporated herein by reference.

The information disclosed under this Item 7.01, including Exhibit 99.1 and 99.2 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.


Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements. The following is financial information relating to the Duke Assets:

 

Independent Auditors’ Report

     F-1  

Combined Statement of Revenues in Excess of Certain Expenses for the Three Months Ended March 31, 2017 (unaudited) and for the Year Ended December 31, 2016

     F-2  

Notes to Combined Statement of Revenues in Excess of Certain Expenses for the Year Ended December 31, 2016

     F-3  

 

(d) Exhibits.

The Exhibit Index appearing immediately after the signature page of this Form 8-K is incorporated herein by reference.


Independent Auditors’ Report

The Shareholders and Directors of

Duke Realty Corporation:

Report on the Financial Statements

We have audited the accompanying combined statement of revenues in excess of certain expenses of Duke Realty Healthcare Properties (as defined in Note 2) for the year ended December 31, 2016, and related notes (the “combined statement”).

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the statement in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on the combined statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the combined statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the combined statement referred to above presents fairly, in all material respects, the combined revenues and certain expenses of the Duke Healthcare Properties described in Note 2 for the year ended December 31, 2016, in accordance with U.S. generally accepted accounting principles.

Emphasis of Matter

We draw attention to Note 2 of the combined statement, which describes that the accompanying combined statement of revenues in excess of certain expenses was prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended (for inclusion in the filing of Form 8-K of Healthcare Trust of America, Inc.) and is not intended to be a complete presentation of revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ KPMG LLP

April 28, 2017

 

F-1


DUKE REALTY HEALTHCARE PROPERTIES

COMBINED STATEMENT OF REVENUES IN EXCESS OF CERTAIN EXPENSES

 

     For the Three
Months Ended
March 31, 2017
(Unaudited)
     For the Year
Ended December 31,
2016
 

Revenues:

     

Rental revenues, including recoveries from tenants

   $ 43,298,156      $ 161,838,278  
  

 

 

    

 

 

 

Certain Expenses:

     

Operating Expenses

     7,453,309        29,587,761  

Real Estate Taxes

     5,741,754        19,130,821  
  

 

 

    

 

 

 
     13,195,063        48,718,582  
  

 

 

    

 

 

 

Revenues in Excess of Certain Expenses

   $ 30,103,093      $ 113,119,696  
  

 

 

    

 

 

 

See accompanying notes to the Combined Statement of Revenues in Excess of Certain Expenses

 

F-2


DUKE REALTY HEALTHCARE PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUES IN EXCESS OF CERTAIN

EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2016

 

(1) Operating Properties

The Duke Realty Healthcare Properties are part of a pending portfolio acquisition by a subsidiary of Healthcare Trust of America, Inc. (the “Company”) that is considered probable as of the issuance date of this Combined Statement of Revenues in Excess of Certain Expenses for the year ended December 31, 2016 (“Combined Statement”). The Company will acquire (i) 69 properties that were in service at December 31, 2016, (ii) five properties that were under development at December 31, 2016, (iii) two expansion projects for current properties that were in progress at December 31, 2016, and (iv) 16.5 acres of undeveloped land from Duke Realty Limited Partnership and affiliated entities in the second and third quarters of 2017. Ownership interests in two unconsolidated medical office joint ventures are also included in the pending transaction, but transfers of such ownership interests are subject to the approval of the other owners of these joint ventures and, as such, are not considered probable as of the issuance date of the Combined Statement.

Of the 69 in service properties, seven were placed in service in 2016. Two of the seven properties placed in service during 2016 had less than three months of rental history as of December 31, 2016. Only the revenues and certain expenses of the 67 acquired properties that were in service as of December 31, 2016 (the “Duke Realty Healthcare Properties” or the “Properties”), and that had more than three months of rental history, are included in this Combined Statement.

The following tables list (i) the properties included in the Combined Statement for the year ended December 31, 2016 as well as the properties that are excluded from the Combined Statement due to (ii) having limited rental history, (iii) still being under development or (iv) being owned by the aforementioned unconsolidated joint ventures:

I. Properties Included in Combined Statement

 

Property Name

  

City

   State    Square
Feet
     Month/Year
Placed in
Service/Acquired
 

Baylor Scott & White Plano Pavilion II

   Plano    TX      140,455        June-09  

Baylor Scott & White McKinney POB I

   McKinney    TX      115,278        July-12  

Baylor Scott & White McKinney POB II

   McKinney    TX      77,047        September-16  

Baylor Scott & White Hillcrest MOB 1

   Waco    TX      102,177        October-12  

Baylor Scott & White Hillcrest MOB 2

   Waco    TX      54,744        October-12  

Baylor Scott & White McClinton Cancer Center

   Waco    TX      34,723        November-13  

Baylor Scott & White Administration Building

   Dallas    TX      81,429        June-09  

Baylor Scott & White Rock Prairie MOB

   College Station    TX      119,030        July-13  

Baylor Scott & White Roney Bone & Joint Institute

   Marble Falls    TX      66,500        May-13  

Baylor Scott & White Marble Falls MOB

   Temple    TX      77,679        October-13  

Baylor Scott & White Emergency Medical Center—Burleson

   Burleson    TX      36,718        May-14  

Baylor Scott & White Emergency Medical Center—Rockwall

   Rockwall    TX      36,709        March-14  

Baylor Scott & White Emergency Medical Center—Murphy

   Murphy    TX      36,705        March-14  

Baylor Scott & White Emergency Medical Center—Mansfield

   Mansfield    TX      36,691        July-14  

Baylor Scott & White Emergency Medical Center—Keller

   Keller    TX      36,013        December-13  

Baylor Scott & White Emergency Medical Center—Colleyville

   Colleyville    TX      16,091        August-14  

Columbia St. Mary’s—Water Tower

   Milwaukee    WI      153,820        October-12  

St. Thomas DePaul Medical Center

   Murfreesboro    TN      120,660        April-08  

St. Vincent Fishers Medical Center

   Fishers    IN      120,158        August-08  

Seton Medical Center Hays MOB

   Kyle    TX      96,829        December-09  

St. Vincent Carmel Women’s Center

   Carmel    IN      85,847        January-15  

 

F-3


DUKE REALTY HEALTHCARE PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUES IN EXCESS OF CERTAIN

EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2016

 

St. Vincent Joshua Max Simon MOB

  

Indianapolis

   IN      84,436        November-11  

Columbia St. Mary’s—Mequon

  

Mequon

   WI      66,927        October-12  

TriHealth Rehabilitation Hospital

  

Cincinnati

   OH      69,511        May-16  

Good Samaritan Western Ridge MOB II

  

Cincinnati

   OH      29,490        July-11  

Northside Center Pointe I and II

  

Sandy Springs

   GA      363,174        June-07  

Northside Cherokee / Towne Lake

  

Woodstock

   GA      100,797        July-13  

Mountain View Regional Medical Center MOB

  

Las Cruces

   NM      107,506        October-12  

Longview Regional Medical Center 1

  

Longview

   TX      100,740        October-12  

Longview Regional Medical Center 2

  

Longview

   TX      77,797        April-16  

Cedar Park Regional Medical Center MOB 1

  

Cedar Park

   TX      83,393        December-11  

South Texas Regional Medical Center MOB—Jourdanton

  

Jourdanton

   TX      48,556        October-14  

Florida Hospital Wesley Chapel Wellness Plaza

  

Pasco County

   FL      95,939        March-13  

Florida Hospital Celebration MOB

  

Celebration

   FL      83,896        October-12  

Florida Hospital Kissimmee MOB

  

Kissimmee

   FL      79,438        October-12  

Florida Hospital East Orlando MOB/ASC

  

Orlando

   FL      56,903        October-12  

Florida Hospital Heartland Medical Center MOB/ASC

  

Sebring

   FL      38,949        October-12  

Harbin Clinic Martha Berry

  

Rome

   GA      122,111        September-12  

Harbin Clinic Specialty Center

  

Rome

   GA      75,054        September-12  

Harbin Clinic Cancer Center

  

Rome

   GA      55,195        September-12  

Harbin Clinic Heart Center

  

Rome

   GA      47,438        September-12  

Harbin Clinic Cedartown Dialysis

  

Cedartown

   GA      19,497        September-12  

Harbin Clinic Summerville Dialysis

  

Summerville

   GA      7,520        September-12  

Harbin Clinic Rome Dialysis

  

Rome

   GA      6,766        September-12  

Kindred Community Rehabilitation Hospital—Indianapolis

  

Indianapolis

   IN      61,398        June-13  

Kindred Mercy Rehabilitation Hospital—Springfield

  

Springfield

   MO      58,727        April-14  

Kindred University Rehabilitation Hospital—Cleveland

  

Avon

   OH      54,800        January-16  

Kindred Baptist Rehabilitation Hospital—Memphis

  

Germantown

   TN      54,416        October-14  

James A. Haley VA Primary Care MOB—Tampa

  

Tampa

   FL      117,037        February-14  

William “Bill” Kling VA Clinic—Sunrise

  

Sunrise

   FL      107,000        October-12  

Conifer Administration Building

  

Frisco

   TX      199,800        February-14  

Carolinas Health Morehead MOB

  

Charlotte

   NC      190,773        December-10  

Houston Methodist St. Catherine MOB 1

  

Katy

   TX      48,542        November-11  

Houston Methodist St. Catherine MOB 2

  

Katy

   TX      72,107        November-11  

Houston Methodist St. Catherine MOB 3

  

Katy

   TX      48,201        November-11  

SCL Health Community Hospital—Southwest

  

Littleton

   CO      37,485        May-16  

SCL Health Community Hospital—Westminster

  

Westminster

   CO      37,130        November-15  

WakeMed MOB—Raleigh

  

Raleigh

   NC      87,378        June-12  

WakeMed Brier Creek Healthplex

  

Raleigh

   NC      48,314        December-11  

Loyola University Medicine—Burr Ridge

  

Burr Ridge

   IL      104,912        January-12  

Inova Fair Oaks MOB 3

  

Fairfax

   VA      100,952        October-12  

Jewish Hospital MOB

  

Cincinnati

   OH      80,074        December-01  

UNC REX Holly Springs

  

Holly Springs

   NC      30,370        December-11  

Hackensack UMC Palisades MOB

  

North Bergen

   NJ      57,411        February-15  

Edward-Elmhurst Plainfield MOB

  

Plainfield

   IL      56,531        February-07  

WellStar North Fulton MOB 2

  

Roswell

   GA      52,175        October-12  

Eastside New Hampton Place MOB

  

Snellville

   GA      39,759        May-11  

II. Properties Excluded from Combined Statement due to Less than Three Months of Rental History

 

Property Name

  

City

   State    Square
Feet
     Month/Year
Placed in
Service/Acquired
 

SCL Health Community Hospital—Northglenn

   Northglenn    CO      54,714        December-16  

SCL Health Community Hospital—Aurora

   Aurora    CO      37,104        November-16  

III. Properties Under Development and Expansion Projects Excluded from Combined Statement

 

Property Name

   City    State    Square
Feet
 

Northside Cherokee / Towne Lake (expansion)

   Woodstock    GA      2,200  

 

F-4


DUKE REALTY HEALTHCARE PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUES IN EXCESS OF CERTAIN

EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2016

 

Baylor Scott & White Emergency Med. Ctr—Grand Prairie

   Grand Prairie    TX      27,149  

Main Line Bryn Mawr MOB

   Bryn Mawr    PA      101,228  

Centegra Health MOB

   Huntley    IL      80,973  

Baptist Memorial Oxford MOB

   Oxford    MS      79,585  

Facey Medical

   Santa Clarita    CA      37,000  

UNC Rex Holly Springs (expansion)

   Holly Springs    NC      45,000  

IV. Unconsolidated Joint Venture Properties Excluded from Combined Statement

 

Property Name

  

City

   State    Square
Feet
     Month/Year
Placed in
Service/Acquired
 

Baylor Charles A. Sammons Cancer Center at Dallas

  

Dallas

   TX      458,396        March-11  

Eskenazi Administration Building

  

Indianapolis

   IN      273,479        November-13  

(2) Basis of Presentation

The accompanying Combined Statement has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. The Combined Statement is not representative of the actual results of operations of the Duke Realty Healthcare Properties for the year ended December 31, 2016, due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Duke Realty Healthcare Properties:

 

    Depreciation and amortization.

 

    Property management fees.

 

    Amortization of above and below market rents, concessions and deferred revenue.

 

    Other costs not directly related to the proposed future operations of the Duke Realty Healthcare Properties.

(3) Summary of Significant Accounting Policies

(A) Revenue Recognition

Rental income from leases with scheduled rental increases during their term are recognized for financial reporting purposes on a straight-line basis.

(B) Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting period to prepare the Combined Statement in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

(4) Rental Revenue

Space is leased to tenants under various operating leases with initial terms ranging up to twenty years. The leases provide for reimbursement of real estate taxes, common area maintenance and certain other operating expenses.

 

F-5


DUKE REALTY HEALTHCARE PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUES IN EXCESS OF CERTAIN

EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2016

 

Future minimum rentals related to the 67 properties included in the Combined Statement to be received under noncancelable operating leases in effect at December 31, 2016 are as follows:

 

Future Minimum Rentals       

2017

   $ 121,704,660  

2018

     116,977,328  

2019

     111,125,402  

2020

     103,109,773  

2021

     94,065,203  

Thereafter

     599,602,021  
  

 

 

 
   $ 1,146,584,387  
  

 

 

 

In addition to minimum rentals, certain leases require reimbursements of specified operating expenses that amounted to $38,446,305 during the year ended December 31, 2016, which are included in the Combined Statement.

(5) Unaudited Interim Statement

The combined statement of revenues and certain expenses for the three months ended March 31, 2017 (the “Interim Statement”), is unaudited.

The interim statement includes the results for the two properties disclosed in Note 1, which did not have sufficient rental history to be included in the Combined Statement. In addition to the properties disclosed in Note 1, which are owned by unconsolidated joint ventures, the following properties were excluded from the Interim Statement either due to (i) having limited rental history or (ii) still being under development:

I. Properties Excluded from Interim Statement due to Less than Three Months of Rental History

 

Property Name

   City    State    Square
Feet
     Month/Year
Placed in
Service/Acquired
 

Main Line Bryn Mawr MOB

   Bryn Mawr    PA      101,228        February -17  

Centegra Health MOB

   Huntley    IL      80,973        March -17  

Memorial Hermann MOB 1

   Humble    TX      71,224        March -17  

II. Properties Under Development and Expansion Projects Excluded from Interim Statement

 

Property Name

   City    State    Square
Feet
 

Northside Cherokee / Towne Lake (expansion)

   Woodstock    GA      2,200  

Baylor Scott & White Emergency Med. Ctr—Grand Prairie

   Grand Prairie    TX      27,149  

Baptist Memorial Oxford MOB

   Oxford    MS      79,585  

Facey Medical

   Santa Clarita    CA      37,000  

UNC Rex Holly Springs (expansion)

   Holly Springs    NC      45,000  

Memorial Herman MOB II

   Humble    TX      98,862  

(6) Subsequent Events

The Properties evaluated subsequent events through April 28, 2017, the date the financial statements were available to be issued.

 

F-6


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

 

  Healthcare Trust of America, Inc.
Date: May 1, 2017     By:  

/s/ Scott D. Peters

      Name: Scott D. Peters
      Title: Chief Executive Officer, President and Chairman
 

Healthcare Trust of America Holdings, LP

    By:   Healthcare Trust of America, Inc.,
      its General Partner
Date: May 1, 2017     By:  

/s/ Scott D. Peters

      Name: Scott D. Peters
      Title: Chief Executive Officer, President and Chairman


(d) Exhibits.
2.1    Agreement of Purchase and Sale (Pool I), dated April 29, 2017, by and among HTA Acquisition Sub, LLC and the Sellers named therein.*
23.1    Consent of KPMG LLC.
99.1    Press Release dated May 1, 2017.
99.2    Press Release dated May 1, 2017.

 

* Certain schedules and exhibits omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.