HR

Business Context and Reporting Period

Company: Healthcare Trust of America, Inc. (HTA) and Healthcare Trust of America Holdings, LP (HTALP).

Reporting Period: Quarterly period ended June 30, 2016 (Form 10-Q).

Business Overview: HTA operates as a Real Estate Investment Trust (REIT) and is the general partner of HTALP, which holds substantially all assets. The Company is one of the largest publicly-traded REITs focused on medical office buildings (MOBs) in the United States. As of June 30, 2016, the portfolio consisted of approximately 17.0 million square feet of Gross Leasable Area (GLA) across 31 states, with 97% located on or aligned with healthcare system campuses.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 11.5% ($22.7 million) year-over-year, driven primarily by acquisitions in 2015 and 2016 and contractual rent increases.
• Profitability: Net income attributable to common stockholders increased 42.4% ($6.8 million) compared to the prior year period. Diluted earnings per share (EPS) rose to $0.17 from $0.13.
• Acquisitions: The Company invested $435.8 million in real estate during the six months ended June 30, 2016, expanding into Birmingham, Hartford/New Haven, and Portland, and deepening presence in Charleston, Columbus, Dallas, and Houston.
• Dispositions: Completed the sale of four senior care facilities for $26.5 million, generating a net gain of $4.2 million. No dispositions occurred in the comparable 2015 period.
• Occupancy: Leased rate increased to 92.2% and occupancy rate to 91.6% as of June 30, 2016, compared to 91.7% and 91.1% respectively in the prior year.
• Capital Structure: Issued $365.6 million in equity (underwritten offering and ATM program) and increased debt slightly to fund acquisitions and operations.

Guidance, Outlook, and Risks

• Capital Strategy: Management intends to maintain a low-leveraged balance sheet. As of June 30, 2016, leverage was 26.2%. The Company has $583.5 million available on its unsecured revolving credit facility and $177.1 million remaining under its At-The-Market (ATM) equity program.
• Dividends: Declared a quarterly cash dividend of $0.30 per share on August 1, 2016, payable October 7, 2016. The Company intends to continue paying dividends to maintain REIT status.
• Subsequent Financing: Subsequent to the reporting period, the Company issued $350.0 million of senior unsecured 10-year notes at a 3.50% coupon to repay indebtedness and fund general corporate purposes.
• Capital Expenditures: Estimated capital improvement expenditures for the remainder of 2016 range from $15 million to $20 million.
• Risks: Key risks include national economic conditions affecting real estate, tenant creditworthiness, interest rate fluctuations (mitigated by swaps), and the ability to refinance debt. The filing notes no material changes to risk factors from the 2015 10-K.

Investor Verification Checklist

• Acquisition Integration: Verify the accretive nature of the $435.8 million in acquisitions and the timeline for full revenue recognition.
• Debt Maturities: Review the debt maturity schedule, noting $465.1 million due in 2019 and $310.8 million in 2020, to assess refinancing needs.
• Derivative Exposure: Confirm the effectiveness of interest rate swaps in hedging variable rate debt, as fair value changes impacted net income.
• Same-Property Performance: Analyze the 3.1% increase in Same-Property Cash NOI to gauge organic growth independent of acquisitions.
• Equity Dilution: Assess the impact of the 10.4 million shares issued in the first half of 2016 on future per-share metrics.