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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36007

PHYSICIANS REALTY TRUST

(Exact Name of Registrant as Specified in Its Charter)


Maryland		46-2519850
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

309 N. Water Street, Suite 500		53202
Milwaukee,	Wisconsin
(Address of Principal Executive Offices)		(Zip Code)

(414) 367-5600

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, $0.01 par value

DOC

New York Stock Exchange

Securities registered under Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ 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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 4262(b)) by the registered accounting firm that prepared or issues its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of Physicians Realty Trust’s common shares held by non-affiliates as of June 30, ~~2022~~2023 was approximately $3,~~909~~297,~~625~~969,~~049~~026 based upon the closing price reported for such date on the New York Stock Exchange.

As of February 1416, ~~2023~~2024, there were ~~237~~238,~~905~~911,~~938~~308 shares of Physicians Realty Trust’s common shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Annual Report on Form 10-K, to the extent not set forth in this Form 10-K, is incorporated herein by reference from Physicians Realty Trust’s definitive proxy statement relating to the annual meeting of shareholders to be held on May 3, 2023, to be filed with the Securities and Exchange Commission within 120 days after the end of the Registrant’s fiscal year ended December 31, 2022.

PHYSICIANS REALTY TRUST

Annual Report on Form 10-K for the Year Ended December 31, ~~2022~~2023

Table of Contents

			Page
PART I			45
Item 1. Business			45
Item 1A. Risk Factors			2321
Item 1B. Unresolved Staff Comments			4446
Item 2. Properties			45
Item 1C. Cybersecurity			46
Item 3. Legal Proceedings			47
Item 2. Properties			48
Item 4. Mine Safety Disclosures			47
Item 3. Legal Proceedings			50
PART II			48
Item 4. Mine Safety Disclosures			50
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			48
PART II			51
Item 6. [Reserved]			49
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			51
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			50
Item 6. [Reserved]			52
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			64
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			53
Item 8. Financial Statements and Supplementary Data			66
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			67
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			103
Item 8. Financial Statements and Supplementary Data			69
Item 9A. Controls and Procedures			103
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			109
Item 9B. Other Information			103
Item 9A. Controls and Procedures			109
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			103
Item 9B. Other Information			109
PART III			104
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			110
Item 10. Directors, Executive Officers and Corporate Governance			104
PART III			111
Item 11. Executive Compensation			104
Item 10. Directors, Executive Officers and Corporate Governance			111
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			104
Item 11. Executive Compensation			127
Item 13. Certain Relationships and Related Transactions, and Director Independence			104
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			151
Item 14. Principal Accountant Fees and Services			104
Item 13. Certain Relationships and Related Transactions, and Director Independence			153
PART IV			105
Item 14. Principal Accountant Fees and Services			154
Item 15. Exhibits, Financial Statement Schedules			105
PART IV			156
Item 16. Form 10-K Summary			106
Item 15. Exhibits, Financial Statement Schedules			156
Item 16. Form 10-K Summary			157

Forward-Looking Statements

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, property performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believe,” “expect,” “outlook,” “continue,” “project,” “may,” “will,” “should,” “seek,” “approximately,” “intend,” “plan,” “pro forma,” “estimate,” or “anticipate” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, expectations, or intentions.

These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. These forward-looking statements are not guarantees of future performance and involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data, or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

•risks associated with the Company Merger and the Partnership Merger (each as defined below and collectively, the “Mergers”), including our ability to consummate the Mergers on the proposed terms or on the anticipated timeline, or at all, and unanticipated difficulties or expenditures relating to the Mergers, potential difficulties in employee retention as a result of the Mergers, the occurrence of any event, change, or other circumstances that could give rise to the termination of the Mergers and the outcome of legal proceedings instituted against us, our trustees and others related to the Mergers;

•general economic conditions, including inflation and recession;

•changes in our business or strategy;

•our ability to operate as a public company;

•adverse economic or real estate developments, either nationally or in the markets where our properties are located;

•our geographic concentration in Texas may cause us to be particularly exposed to downturns in the Texas economy or other changes in Texas market conditions;

•our concentration of investment in health care properties;

•the disruption of our business and the compromise of confidential information resulting from cybersecurity attacks, breaches, and other incidents;

•any adverse effects to the business, financial position or results of operations of CommonSpirit Health (“CommonSpirit”), or one or more of the CommonSpirit-affiliated tenants, that impact the ability of CommonSpirit-affiliated tenants to pay us rent;

•the degree and nature of our competition;

•competition for investment opportunities;

•difficulties in identifying health care properties to acquire and completing acquisitions;

•the unknown duration and economic, operational, and financial impacts of the global outbreak of a novel strain of the coronavirus and any variants that have emerged or that may emerge in the future, (the “COVID-19 pandemic”) and the actions taken by governmental authorities or others in connection with the COVID-19 pandemic will have on the Company’s business;

•changes in health care laws or government reimbursement rates;

•decreased rental rates or increased vacancy rates;

•defaults on or non-renewal of leases by tenants;

•the potential impact of severe weather events and climate change;

•our failure to generate sufficient cash flows, subject to the restrictions in the Merger Agreement (as defined below), to service, pay down, or refinance our indebtedness or make distributions on our common shares;

•fluctuations and increases in interest rates and operating costs;

•the availability, terms, and issuance of debt and equity capital, including our unsecured revolving credit facility, in each case, subject to the restrictions in the Merger Agreement;

•general volatility of the market price of our common shares;

•our dependence upon key personnel whose continued service is not guaranteed;

•our ability to identify, hire, and retain highly qualified personnel in the future;

•~~the~~risks ~~impact~~related ofto our investments in joint ventures or development projects we have made and may make in the future;

•the financial condition and liquidity of, or disputes with, any joint venture and development partners with whom we may make co-investments in the future;

•changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates, taxation of real estate investment trusts (“REITs”), and similar matters;

•our failure to maintain our qualification as a REIT for U.S. federal income tax purposes;

•limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes;

•changes in accounting principles generally accepted in the United States (“GAAP”);

•lack of or insufficient amounts of insurance;

•other factors affecting the real estate industry generally; and

•other factors that may materially adversely affect us, or the per share trading price of our common shares, including:

•the number of our common shares available for future issuance or sale;

•our issuance of equity securities or the perception that such issuance might occur;

•future debt;

•failure of securities analysts to publish research or reports about us or our industry; and

•securities analysts’ downgrade of our common shares or the health care-related real estate sector.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this report, except as required by applicable law. You should not place undue reliance on any forward-looking statements that are based on information currently available to us or the third parties making the forward-looking statements.

Factors that may cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements include, without limitation, those discussed in Item 1 - “Business,” Item 1A - “Risk Factors,” Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report and our other filings with the United States Securities and Exchange Commission (“SEC”).

As used in this report, unless the context otherwise requires, references to “we,” “us,” “our,” and the “Company” refer to Physicians Realty Trust (the “Trust”), a Maryland real estate investment trust, and Physicians Realty L.P. (the “Operating Partnership”), a Delaware limited partnership and the consolidated subsidiary of the Trust through which we conduct our business.

PART I

ITEM 1. BUSINESS

Overview

Physicians Realty Trust, a Maryland real estate investment trust, and Physicians Realty L.P., a Delaware limited partnership, were organized in April 2013 to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals, and health care delivery systems. References to the “Operating Partnership” mean collectively the Operating Partnership together with its consolidated subsidiaries. We completed our initial public offering (“IPO”) in July 2013. The Trust’s common shares are listed on the New York Stock Exchange (“NYSE”) and the Trust is included in the MSCI US REIT Index and the S&P MidCap 400.

We have grown our consolidated portfolio of gross real estate investments from approximately $124 million at the time of our IPO to approximately $5.89 billion as of December 31, ~~2022~~2023. As of December 31, ~~2022~~2023, our consolidated portfolio consisted of ~~277~~278 health care properties (which excludes our Corporate headquarters and retail asset) located in 32 states with approximately 15,~~528~~653,~~879~~690 net leasable square feet, of which approximately 9594% was leased with a weighted average remaining lease term of approximately 5.51 years. As of December 31, ~~2022~~2023, approximately 90% of the net leasable square footage of our portfolio was either on the campus of a hospital or strategically affiliated with a health system.

We receive a cash rental stream from health care providers under our leases. Approximately 93% of the annualized base rent payments from our properties as of December 31, ~~2022~~2023 are from absolute net or triple-net leases pursuant to which the tenants are responsible for operating expenses subject to specific lease terms relating to the property, including, but not limited to, real estate taxes, utilities, property insurance, routine maintenance and repairs, and property management. These lease structures insulate us from increases in most operating expenses, especially increases in operating expenses that are beyond our control, and provide relatively predictable cash flow. Approximately 6% of the annualized base rent payments from our properties as of December 31, ~~2022~~2023 are from modified gross leases that allow us to recover operating expenses that exceed certain base year operating expense thresholds in such leases, thus protecting us from increases in operating expenses.

We seek to structure our leases to generate attractive returns on a long-term basis. Our leases typically have initial terms of 5 to 15 years and include annual rent escalators of approximately 1.5% to 4.0%, with an annual weighted average rent escalator of approximately 2.4%. Certain of the Company’s leases include provisions indexing annual rent escalators to changes in the Consumer Price Index (“CPI”), often with a floor or ceiling. As of December 31, ~~2022~~2023, approximately 5.79% of the Company’s annual rent escalators have CPI provisions. Our operating results depend significantly on the ability of our tenants to make required rental payments. We believe that our portfolio of outpatient medical ~~office~~facilities ~~buildings~~ and other health care facilities will enable us to generate stable cash flows over time because of the diversity of our tenants, the creditworthiness of our tenants, a staggered lease expiration schedule, long-term leases, and low historical occurrence of tenants defaulting under their leases.

As of December 31, ~~2022~~2023, leases representing a percentage of our consolidated portfolio on the basis of leased square feet will expire as follows:

Year						Portfolio Lease Expirations
MTM (1)						10.36%
2023						4.7%
2024						5.2%
2024						5.5%
2025						6.6%
2025						7.0%
2026						22.6%
2026						22.8%
2027						11.6%
2027						11.7%
2028						12.9%
2028						12.0%
2029						6.8%
2029						6.2%
2030						6.0%
2030						5.7%
2031						7.4%
2031						6.7%
2032						8.4%
2032						8.3%
2033						5.0%
Thereafter						86.19%
Total						100.0%

(1)“MTM” means month-to-month. This line also includes 12six leases which expired on December 31, ~~2022~~2023, representing 0.91% of leased square feet.

We invest in real estate that is integral to providing high-quality health care services. Our properties are typically located on a campus with a hospital or other health care facilities or strategically affiliated with a hospital or other health care system. We believe the impact of government programs and continuing trends in the health care industry create attractive opportunities for us to invest in health care-related real estate. Our management team has significant health care real estate experience and has long-established relationships with physicians, hospitals, and health care delivery system decision makers who we believe will provide quality investment and growth opportunities. Our principal investments include outpatient medical ~~office buildings (“MOBs”)~~facilities, ambulatory surgery centers (“ASCs”), ~~outpatient treatment facilities,~~ and other real estate integral to health care providers. We seek to generate attractive risk-adjusted returns for our shareholders through a combination of stable and increasing cash flow and potential long-term appreciation in the value of our properties and our common shares.

The Trust is a Maryland real estate investment trust and elected to be taxed as a REIT for U.S. federal income tax purposes. We conduct our business through an umbrella partnership REIT structure in which our properties and our ownership interest in joint ventures are owned by our Operating Partnership directly or through limited partnerships, limited liability companies, or other subsidiaries. The Trust is the sole general partner of our Operating Partnership and, as of February 1416, ~~2023~~2024, owned approximately 96.1% of the Operating Partnership Units (“OP Units”).

Our Objectives and Growth Strategy

Overview

Our principal business objective is to provide attractive risk-adjusted returns to our shareholders through a combination of (i) sustainable and increasing rental revenue and cash flow that generate reliable, increasing dividends, and (ii) potential long-term appreciation in the value of our properties and common shares.

Our primary strategy to achieve our business objective is to utilize our physician and hospital relationships nationwide to identify off-market opportunities in which to invest and own, to manage a diversified portfolio of high-quality health care properties, and to understand our tenants’ real estate strategies, which we believe will drive high retention, high occupancy, and reliable, increasing rental revenue cash flow and growth.

We intend to grow our portfolio of high-quality health care properties leased to physicians, hospitals, health care delivery systems, and other health care providers primarily through acquisitions of existing health care facilities and development of new health care facilities that provide or will provide stable revenue growth and predictable long-term cash flows. We may also selectively finance the development of new health care facilities with premier health care real estate developers. Generally, we expect to make investments in new development properties, whether self-developed or through third party developers, when approximately 80% or more of the development property has been pre-leased before construction commences. We seek to invest in properties where we can develop strategic alliances with financially sound health care

providers and health care delivery systems that offer need-based health care services in sustainable health care markets. We focus our investment activity on ~~MOBs, ASCs,~~ outpatient ~~treatment~~medical facilities, ASCs, and other real estate integral to health care providers.

We may from time to time also make investments in other health care properties. We believe that trends such as shifting consumer preferences, limited space in hospitals, the desires of patients and health care providers to limit non-essential services provided in a hospital setting, and cost considerations continue to drive the industry towards performing more procedures in outpatient facilities instead of hospital settings. As these trends continue, we believe that demand for ~~MOBs~~outpatient medical facilities and similar health care properties away from hospital settings and in convenient locations to patients will continue to rise. We intend to exploit this trend and favor outpatient facilities consistent with our investment philosophy and strategies.

While not our focus, we may decide to invest opportunistically in life science facilities, senior housing properties, skilled nursing facilities, specialty hospitals, and treatment centers. Consistent with the Trust’s qualification as a REIT, we may also opportunistically invest in companies that provide health care services, and in joint ventures with operating partners structured to comply with the REIT Investment Diversification Act of 2007 (“RIDEA”).

As of December 31, ~~2022~~2023, we have grown our consolidated portfolio of gross real estate investments to approximately $5.89 billion while maintaining a conservative balance sheet. For short-term funding purposes, we may borrow from our unsecured credit facility. From time to time, we replace these borrowings with long-term capital such as senior unsecured notes, equity, and alternative securities. We may selectively utilize capital market transactions in furtherance of our investment strategy.

Merger with Healthpeak

On October 29, 2023, the Trust and the Operating Partnership entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Healthpeak Properties, Inc. (“Healthpeak”), DOC DR Holdco, LLC (formerly known as Alpine Sub, LLC), a Maryland limited liability company and a wholly owned subsidiary of the Healthpeak (“DOC DR Holdco”) and DOC DR, LLC (formerly known as Alpine OP Sub, LLC), a Maryland limited liability company (“DOC DR OP Sub”) and a wholly owned subsidiary of Healthpeak OP, LLC, a Maryland limited liability company (“Healthpeak OP”), pursuant to which, among other things, and through a series of transactions, (i) each outstanding common share of the Trust (other than Trust common shares to be canceled in accordance with the Merger Agreement) will be automatically converted into the right to receive 0.674 (the “Exchange Ratio”) shares of Healthpeak common stock, and (ii) each outstanding OP Unit will be automatically converted into and become common units in the successor entity to the Operating Partnership equal to the Exchange Ratio.

The Merger Agreement provides for (i) the merger of the Trust with and into DOC DR Holdco (the “Company Merger”), with DOC DR Holdco surviving as a wholly owned subsidiary of Healthpeak (the “Company Surviving Entity”); (ii) immediately following the effectiveness of the Company Merger, the contribution by Healthpeak to Healthpeak OP of all of the outstanding equity interests in the Company Surviving Entity (the “Contribution”); and (iii) immediately following the Contribution, the merger of the Operating Partnership with and into DOC DR OP Sub (the “Partnership Merger”), with DOC DR OP Sub surviving as a wholly owned subsidiary of Healthpeak OP.

In connection with the Mergers, Healthpeak filed a Registration Statement on Form S-4 with the SEC on December 15, 2023, as amended on January 9, 2024. The Trust and Healthpeak filed a definitive joint proxy statement/prospectus on January 11, 2024 in connection with our respective special meetings of shareholders and stockholders, as applicable, which were held on February 21, 2024. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions.

On February 21, 2024, our shareholders voted on and approved the merger with Healthpeak. The Mergers are expected to close on or about March 1, 2024. If the Mergers are not consummated by July 31, 2024 (unless extended under certain circumstances), either we or Healthpeak may terminate the Merger Agreement.

Business Strategy

We are focused on maintaining and expanding our portfolio of high-quality health care properties leased to physicians, hospitals, health care delivery systems, and other health care providers. Our strategy includes the following key attributes:

•We seek to invest in properties occupied by health care systems with dominant market shares and high credit quality, especially those who are investing capital in their facilities. In particular, we seek to acquire off-market or selectively marketed assets with attractive demographics, economic growth, and high barriers to entry. We seek to own well-occupied properties that we believe are critical to the delivery of health care by affiliated hospital providers in desirable locations.

•We emphasize ensuring an appropriate and balanced mix of tenants and practices to provide synergies within individual buildings and broader health system campuses. Our primary tenants are health care systems, academic medical centers, and leading physician groups, which typically have strong and stable financial performance. We believe this helps ensure stability in our rental income and tenant retention over time.

•We seek to maintain a core, critical portfolio of properties and to build our reputation as a leading dedicated ~~MOB~~outpatient medical facilities owner and operator.

•We seek to maintain or increase our average rental rates, actively lease our vacant space, and reduce leasing concessions.

•We also intend to grow our portfolio through the development of new health care facilities. We may also selectively finance the development of new health care facilities with premier health care real estate developers. Generally, we expect to make investments in new development properties, whether self-developed or through third party developers, when approximately 80% or more of the development property has been pre-leased before construction commences.

We seek to invest in properties where we can develop strategic alliances with financially sound health care providers and health care delivery systems that offer need-based health care services in sustainable health care markets and consider the potential for long-term relationships and repeat business when assessing acquisition potential.

We actively manage our balance sheet to maintain our investment grade credit rating, to maintain an appropriate level of leverage, and to preserve financing flexibility for funding of future acquisitions. In particular, we:

•Seek to maintain a high level of liquidity, including borrowing availability under our unsecured revolving credit facility.

•Maintain access to multiple sources of capital, including private and public debt markets, public equity markets, bank loan markets, and private equity and joint venture partners.

•Periodically review our portfolio to consider the potential dispositions of lower quality properties to reinvest the proceeds into higher quality properties.

•Closely monitor our existing debt maturities and average interest rates, and identify refinancing opportunities.

Sustainability Strategy

Since our founding in 2013, the Company has established a track record of environmental stewardship, value creation at the community level, and strong governance. We are also committed to increased transparency and accountability through public disclosure. We believe that sustainable investments are investments in a brighter future. We are committed to being a leader in Environmental, Social, and Governance (“ESG”) performance in the real estate industry. Our ESG Committee, a management and employee-led committee, formed in 2018, is overseen by our Executive Vice President of Asset Management, who reports to the Company’s President and CEO. The Nominating and Corporate Governance Committee of our Board of Trustees (“Board”) provides Board-level oversight of the ESG Committee. Company employees from every workgroup are represented on the ESG Committee. ~~We began issuing our annual ESG Reports in June of 2020.~~

Our ESG achievements in ~~2022~~2023 include the following:

•~~Achieved~~Earned a ~~GRESB~~Green ~~Public~~Star ~~Disclosure~~rating ~~Level~~and a score of 9878 out of 100 from the Global Real Estate Sustainability Benchmark (GRESB), ~~ranking~~representing ~~first~~a in4% ~~our~~year-over-year ~~health~~increase ~~care~~in ~~comparison~~our ~~group~~scoring;

•~~Earned~~Achieved a ~~Green~~ranking ~~Star rating and a score~~ of 752 out of ~~100~~6 ~~from~~as ~~the~~part ~~Global~~of ~~Real~~customized ~~Estate~~GRESB ~~Sustainability~~peer ~~Benchmark~~group ~~(GRESB)~~scoring ~~for~~comprised ~~the~~of ~~second~~U.S.-based ~~consecutive~~listed ~~year~~outpatient medical REITs;

•~~Recognized~~Earned ~~with~~ a ~~2022-2023~~GRESB ~~Green~~Public ~~Lease~~Disclosure ~~Leaders~~Level ~~Platinum~~score ~~Certification~~of by98 ~~the~~out ~~Institute~~of ~~for~~100, ~~Market~~ranking ~~Transformation~~first ~~(IMT)~~in ~~and~~our ~~the~~health ~~DOE~~care ~~Better~~comparison ~~Buildings~~group ~~Alliance,~~for the ~~only~~second ~~health~~consecutive ~~care REIT attaining this designation~~year;

•~~Merited~~Recognized ~~ENERGY~~with ~~STAR~~a ~~Certification~~2022-2025 ~~Nation~~Green ~~Premier~~Lease ~~Member~~Leaders ~~status~~Platinum Certification by ~~receiving~~the 16Institute ~~new~~for ~~property~~Market ~~certifications~~Transformation (IMT) and the DOE Better Buildings Alliance, ~~totaling~~the 26only ~~certifications~~health ~~since~~care ~~2021~~REIT attaining this designation;

~~•Earned 10 new Institute of Real Estate Management (IREM®) Certified Sustainable Property designations, totaling 38 certifications since 2019;~~8

•Merited ENERGY STAR Certification receiving 16 new property certifications, totaling 42 certifications since 2021;

•Earned seven new Institute of Real Estate Management (IREM®) Certified Sustainable Property designations, totaling 45 certifications since 2019;

•Recognized by Nareit as the Leader in the Light winner for the Health Care sector;

•Achieved an ISS ESG Corporate “Prime” rating, recognizing our dedication to ESG performance and disclosure;

•Honored as a Modern Healthcare Best Places to Work for the ~~second~~third consecutive year; ~~and~~

•Recognized as a Top Workplaces recipient from the Milwaukee Journal Sentinel for the ~~fifth~~sixth consecutive year.; and

~~More~~•Named ~~recently, in January 2023, we were named~~ to the Bloomberg Gender-Equality Index as a first-time submitter.

We are committed to giving back to the communities we serve. In ~~2022~~2023, the Company provided ~~more~~approximately ~~than~~ $~~408~~371,~~800~~000 in philanthropic, ~~fundraising, and in-kind~~ donations to community and health care provider organizations, benefiting their research and mission initiatives~~, surpassing our 2022 goal of $375,000 by 9%~~.

Under the Company’s “volunteer time off” employee benefit program and Company volunteerism efforts, our employees contributed approximately ~~902~~756 hours of community service in ~~2022~~2023. Employees are encouraged to spend a day - with pay - volunteering for an organization in their home community. In addition, the Company organizes volunteer service opportunities as a corporate outing, benefiting charitable causes while building teamwork, leadership skills, and fostering our Company culture. For more details on our social responsibility strategies, see the discussion under Item 1 - “Business” under “Human Capital Management.”

Sustainability Accounting Standards Board (“SASB”)

The Real Estate Sustainability Accounting ~~Standard~~Standards issued by the Sustainability Accounting Standards Board (SASB) ~~proposes~~in ~~sustainability~~2018 ~~accounting~~proposed metrics designed for disclosure in mandatory filings. ~~SASB~~Beginning ~~recommendations~~with ~~serve~~our as2020 ~~the~~ESG ~~framework~~report, ~~against~~Physicians ~~which~~Realty weTrust ~~have~~has aligned our disclosures ~~for~~with ~~sustainability~~SASB ~~information.~~standards on ESG issues important to our company and mission.

Energy and water data is collected from utility bills and submeters and assured by a third party. The recommended energy and water management activity metrics for the real estate industry include:

•energy consumption data coverage as a percentage of floor area (“Energy Use Intensity”);

•total energy consumed by portfolio area (“Total Energy Consumption”);

•water withdrawal as a percentage of total floor area (“Water Intensity”); and

•total water withdrawn by portfolio area (“Total Water Consumption”).

The charts below detail our Energy Use Intensity, Total Energy Use, Water Use Intensity, and Total Water Use for 2018 through 2022, for which data on occupied and managed properties were available. Total energy use is presented in energy use intensity and gigajoules, and total water is presented in water use intensity and per cubic meters.(1)

7(1)The 2022 calendar year is the most recent year for which complete energy and water data is available and assured by a third party. The energy chart reflects the performance of 8.1 million square feet as of December 31, 2022, which is approximately 52% of our total portfolio and approximately 56% of our actively managed portfolio. The energy scope includes energy produced from fuel, gas, district cooling, and electricity. The water chart reflects the performance of 6.99 million square feet, which is approximately 45% of our portfolio. The water scope includes irrigation and domestic water. Data coverage for water differs from the coverage for energy as water is not under operational control in every reporting group location.

(1)Full 2022 calendar year energy and water data will not be available to be assured by a third party until the second quarter of 2023. 2021 is the most recent year for which complete energy and water data is available and assured by a third party. The charts reflect the performance of 4.5 million square feet as of December 31, 2021, which was approximately 27% of our portfolio and approximately 39% of our actively managed portfolio. The energy scope includes energy produced from fuel, gas, district cooling, and electricity. The water scope includes irrigation and domestic water.9

Energy Reduction Strategy

Energy reduction is a significant part of our capital improvement strategy as well as our property management training and engagement. We proactively track our assets to determine where capital upgrades, ~~such~~HVAC, ~~as LED retrofits~~ and building control systems optimizations, will maximize our efficiency impact.

Water Reduction Strategy

The Company utilizes water management policies, low-flow fixtures, and tenant education as part of our long-term mitigation strategies. We also work to optimize property irrigation systems based upon weather conditions and other environmental factors.

Climate Change Adaptation

Approximately ~~229~~205,~~100~~000 square feet of the 48.51 million square feet referenced in the chart above, representing ~~three~~five of our outpatient medical ~~office buildings~~facilities, are located in 100-year flood zones designated by the U.S. Federal Emergency Management Agency (“FEMA”) as special flood hazard areas (“SFHA”). No other tracked properties are located in a SFHA.

Severe weather events and climate change are highly uncertain and could have material adverse effects on our properties, operations, and business. To the extent that severe weather events, such as hurricanes, floods, tornadoes, earthquakes, blizzards, and extreme cold, or significant changes in climate occur in the geographic locations where our 37 properties are located or cause damage to any of the properties, we may experience revenue loss, cost increase, construction delays, tenant disruption or displacement of their operations, and decreased demand for properties located in such geographic areas or affected by such changes. Climate change and severe weather may also have indirect effects on our business by increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable, by increasing the cost of energy, maintenance, repair of water and/or wind damage, and snow removal at our properties. In addition, changes in federal and state laws and regulations intended to reduce the impacts of climate change could result in, among other things, increased capital expenditures to improve energy efficiency at our properties, increased costs of property insurance or render such insurance unavailable on terms acceptable to us, and increased costs of developing properties without corresponding increases in revenue.

Climate Resilience

We are focused on climate preparedness as part of our sustainability strategy. As a long-term owner and active manager of our real estate assets, we proactively identify climate risks and implement preventive measures to combat these risks. Responsibility for these measures is distributed across several departments within the Company, including Executive Leadership, Asset Management, Construction and Project Management, Leasing, Marketing and Communications, and Property Management. In 2020, the Company implemented certain recommendations of the Task Force on Climate-Related Financial Disclosure (“TCFD”) and expanded these efforts in 2021. By utilizing data provided by an independent third party expert, the team identified properties exposed to climate risks in seven key categories: flood, earthquake, heat stress, hurricane, sea-level rise, water stress, and wildfire. In addition, we identified the properties with a “Red Flag” or “High” risk in any of the above categories and committed to creating a mitigation plan for each affected location. Our annual ESG Report is prepared in alignment with TCFD and includes details on these risks and subsequent mitigation plans.

Reporting

A notable part of our sustainability platform is transparent reporting of ESG performance indicators, as we recognize the importance of this information to investors and other key stakeholders in understanding how the Company assesses sustainability information and evaluates risks and opportunities. We publish an ~~annual~~ ESG report that is aligned with the Global Reporting Initiative (GRI) reporting standards and the United Nations Sustainable Development Goals. The Company’s ESG Report includes our strategy, key performance indicators, annual like-for-like comparisons, and achievements. The report is available on our website at http://www.docreit.com/esg. Information contained on our website is not part of, or incorporated by reference into, this Annual Report on Form 10-K.

ISOS Group, Inc. conducted an independent third-party, moderate-level assurance of environmental data, including energy, water, waste, and greenhouse gas emissions calculations for the calendar year ended December 31, ~~2021~~2022. This moderate assurance engagement was performed under the AccountAbility 1000 Assurance Standard (AA1000AS) and with reference to ISO 14064-3: Specification with guidance for the validation and assurance of greenhouse gas assertions, World Resources Institute (WRI)/World Business Council for Sustainable Development (WBCSD) The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, and WRI/WBCSD The Greenhouse Gas Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

ISO 14064-3: Specification with guidance for the validation and assurance of greenhouse gas assertions, World Resources Institute (WRI)/World Business Council for Sustainable Development (WBCSD) The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, and WRI/WBCSD The Greenhouse Gas Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

Our Industry and Market Opportunity

The nature of health care delivery continues to evolve due to the impact of government programs, regulatory changes and consumer preferences. We believe these changes have increased the need for capital among health care providers and increased pressure on these providers to integrate more efficient real estate solutions in order enhance the delivery of quality health care. In particular, we believe the following factors and trends are creating an attractive environment in which to invest in health care properties.

$4.5 Trillion Health Care Industry Projected to ~~Grow~~encompass ~~to $6.8 Trillion (~~19.6% of U.S. GDP by ~~2030)~~2031

According to the ~~U.S.~~National ~~Centers~~Health Expenditure Projections 2022-2031 from the Center for Medicare & Medicaid Services (“CMS”), ~~health~~average ~~care~~annual ~~spending~~growth ~~accounted for 19.7% of U.S. gross domestic product (“GDP”)~~ in ~~2020. Near-term~~ National Health Expenditure (“NHE”) ~~patterns~~is ~~have~~projected ~~been~~to ~~significantly~~be ~~influenced by the COVID-19 pandemic~~5.4%, ~~According~~which towould ~~CMS’~~outpace ~~National~~the ~~Health~~projected ~~Expenditure~~average ~~Projections~~annual ~~2021-2030, NHE~~ growth inof ~~2021~~gross ~~was~~domestic ~~projected~~product to(“GDP”) ~~slow~~at to 4.~~2 percent (down from 9~~6%.7 ~~percent~~By ~~growth~~2031, inCMS ~~2020)~~projects asthat ~~federal COVID-~~19 ~~supplemental funding declined substantially~~.6% ~~Following~~of ~~the~~GDP ~~declines~~will ~~observed~~be inattributable ~~2020~~to health ~~care~~spending, ~~utilization~~compared ~~is expected~~ to ~~rebound~~18.3% ~~and~~in ~~normalize through 2024~~2021. The general aging of the population, driven by the Baby Boomer generation and advances in medical technology and services, which increase life expectancy, are expected to continue to be key drivers of the growth in health care expenditures. The anticipated continuing increase in demand for health care services, together with an evolving complex and costly regulatory environment, changes in medical technology and reductions in government reimbursements are expected to pressure capital-constrained health care providers to find cost effective solutions for their real estate needs.

We believe the demand by health care providers for health care real estate will increase as health care spending in the United States rebounds and continues to increase. According to the CMS’ National Health Expenditure Projections 2021-2030, NHEs are projected to grow 5.1 percent per year to $6.8 trillion by 2030, resulting in a projected NHE share of GDP of 19.6% in 2030.

Source: Centers for Medicare & Medicaid Services, Office of the Actuary

Aging Population

The aging of the U.S. population has a direct effect on the demand for health care as older persons generally utilize health care services at a rate well in excess of younger people. According to the U.S. Census Bureau, the U.S. population over 65 years of age is projected to more than double from 49.2 million to nearly 94.7 million, and the 85 and older population is expected to almost triple, from 6.4 million to 19.0 million, between 2016 and 2060. Also, according to the U.S. Census Bureau, the number of older Americans is growing as a percentage of the total U.S. population with the number of persons older than 65 estimated to comprise 15.2% of the total U.S. population in 2016 and projected to grow to more than 20% by 2030.

We believe health care expenditures for the population over 65 years of age will continue to rise as a disproportionate share of health care dollars is spent on older Americans. To illustrate, in 2012 the elderly (65+ years old) represented only 14% of the population while accounting for 34% of all health care-related spending. We believe the older population group increasingly will require treatment and management of chronic and acute health ailments and that this increased demand for health care services will create a substantial need for additional outpatient medical ~~office~~facilities ~~buildings~~ and other facilities that serve the health care industry in many regions of the United States. Additionally, we believe there will likely be a focus on lowering the cost of outpatient care for the aging U.S. population, which will continue to support medical office and outpatient facility property demand in the long term. For example, beginning in 2019, CMS expanded the list of procedures that can be performed and reimbursed in outpatient surgery centers to include 12 cardiac catheterization diagnostic procedures and 5 ancillary procedures. CMS further expanded the list of services for 2023, and the current year (“CY”) 2024 Outpatient Prospective Payment System and Ambulatory Surgical Center final rule created a new benefit category for intensive outpatient program services, which expands outpatient access to individuals with acute behavioral health needs. We believe these trends will result in a substantial increase in the demand for health care space in our facilities and the number of properties meeting our investment criteria.

We believe advances in medical technology will continue to enable health care providers to identify and treat once fatal illnesses and improve the survival rate of critically ill and injured patients who will require continuing medical care in outpatient medical ~~office buildings~~facilities.

1011

U.S. Population Over 65 Years Old

Source: U.S. Census Bureau

Affordable Care Act

The Patient Protection and Affordable Care Act of 2010 (the “Affordable Care Act”) constituted a significant overhaul of many aspects of health care regulations and health insurance and created new features in the framework for health care services over the near term. It required every American to have health insurance or be subjected to a tax. Those who cannot afford health insurance are offered insurance subsidies or Medicaid coverage. On December 14, 2018, a federal district court in Texas ruled that the Affordable Care Act’s individual mandate was unconstitutional. The United States Supreme Court dismissed the Texas case and upheld the Affordable Care Act in June 2021; however, we expect challenges to the Affordable Care Act may continue.

The U.S. Census Bureau estimated that approximately 50 million Americans did not have health care insurance in 2009, before the Affordable Care Act was enacted. The U.S. Census Bureau calculated that infrom 2021 to 2022, the number of Americans with health insurance increased from approximately 27300.29 million ~~Americans~~(91.7%) ~~did~~to ~~not~~304 ~~have~~million ~~health insurance~~(92.1%), continuing a trend after passage of the Affordable Care Act to reduce the number of uninsured ~~and representing a decrease in the uninsured rate from 2020 (28~~.3 ~~million).~~ The Affordable Care Act and subsequent legislation, executive orders and events, as well as their potential impact on our business, are discussed more fully under Item 1 - Business, under the caption “Certain Government Regulations.”

We believe an increase in the number of Americans with access to health insurance would result in an increase in physician office visits and an overall rise in health care utilization which in turn will drive a need for expansion of medical, outpatient, and smaller specialty hospital facilities. We also believe the increased dissemination of health research through media outlets, marketing of health care products, and availability of advanced screening techniques and medical procedures have contributed to a more engaged population of health care users and has created increased demand for customized facilities providing specialized, preventive, and integrative health care services. With the growth of electronic health care information transmission, physician offices increasingly engage with patients through telehealth. Health care payors, including Medicare, are beginning to reimburse for telehealth services when medical information is transmitted and used between patients and physicians. Telehealth services have also expanded as a result of COVID-19 ~~and the need for social distancing~~, a trend we expect to continue ~~following the end of the COVID-19 public health emergency~~.

We further believe the provisions of the Affordable Care Act that are designed to lower certain reimbursement amounts under Medicare and tie reimbursement levels to the quality of services provided will increase the pressure on health care providers to become more efficient in their business models, invest capital in their businesses, lower costs and improve the quality of care, which in turn will drive health care systems to monetize their real estate assets and create demand for new, modern and specialized facilities.

Clinical Care Continues to Shift to Outpatient Care

According to the American Hospital Association (the “AHA”), many procedures traditionally performed in hospitals, such as certain types of surgery, are increasingly moving to outpatient facilities driven by advances in clinical science, shifting consumer preferences, limited or inefficient space in existing hospitals, and lower costs in the outpatient environment. This continuing shift toward delivering health care services in an outpatient environment rather than a traditional hospital environment increases the need for additional outpatient facilities and smaller, more specialized and efficient hospitals. Studies by the Medicare Payment Advisory Commission and others have shown that health care is delivered more cost effectively and with higher patient satisfaction when it is provided on an outpatient basis. Increasingly, hospital admissions are reserved for the critically ill, and less critical patients are treated on an outpatient basis with recuperation in their own homes. We believe health care market trends toward outpatient care will continue to push health care services out of larger, older, inefficient hospitals and into newer, more efficient, and conveniently located outpatient facilities and smaller specialized hospitals. We believe that increased specialization within the medical field is also driving demand for medical facilities designed specifically for particular specialties and that physicians want to locate their practices in medical office space that is in or adjacent to these facilities.

Impact of BBA on Hospital Outpatient Care

Section 603 of the Bipartisan Budget Act of 2015 (the “2015 BBA”) generally prohibits hospital outpatient departments (“HOPDs”) from receiving hospital outpatient department rates under the Medicare Outpatient Prospective Payment System (“OPPS”) for Medicare patients treated in “off-campus” locations that are not Emergency Departments on or after January 1, 2017, potentially impacting their profitability. These higher Medicare hospital outpatient rates are only permitted if the hospital provides HOPD services in a department within 250 yards of the hospital’s main inpatient building, or within 250 yards of a hospital’s remote location (second inpatient location off the main campus). A hospital HOPD can be grandfathered from the 2015 BBA payment changes even if the location is outside the 250 yard distance. Under the statutory authority, an off-campus HOPD facility that was furnishing outpatient services on or before November 2, 2015 can be “grandfathered” and can continue to be paid at the OPPS HOPD rates, if, among other things, the hospital was billing HOPD services in that location on a HOPD basis as of November 2, 2015 and continues to provide those services in that location. On November 21, 2018, the Secretary of the U.S. Department of Health and Human Services (the “Secretary”) issued a final rule, effective January 1, 2019, that eliminates the higher, OPPS reimbursement rate for evaluation and management (“E&M”) services provided by Grandfathered HOPD locations (the “Final Rule”). The Secretary, instead, will only reimburse for E&M services at the lower, Medicare Physician Fee Schedule rate that new non-grandfathered off-campus HOPD locations receive. The AHA and a number of hospitals sued the Secretary in federal court to enforce the plain meaning of Section 603 of the 2015 BBA and restore the right to Grandfathered HOPD reimbursement rates. On September 17, 2019, a federal district judge ruled in favor of the AHA. The court stated that CMS did not have the authority to lower payments for off-campus hospital-based departments that were grandfathered under the 2015 BBA. CMS challenged this ruling and requested a stay in the decision, which the court denied on October 21, 2019. In its December 15, 2020 final rule for hospital OPPS rates, CMS continued its efforts to lower payment for certain HOPD services basing reductions on the principle of “site neutrality.” These lower payment levels were effective January 1, 2021, notwithstanding the CMS’ projections that overall payments under OPPS will increase by 2.4%. For 2023, CMS updated OPPS payment rates for hospitals that meet applicable quality reporting requirements by 3.8%. Further, CMS continued the payment rate reduction for E&M services furnished in all off-campus HOPDS in 2022. CMS stated that it intends to continue this policy in calendar year 2022 and beyond. Hospitals with “grandfathered” locations providing HOPD services in our portfolio are referred to as 603 assets in our SEC reports and other public disclosures.

We own a number of 603 assets. Rent derived from these 603 assets accounts for approximately 16% of our total consolidated portfolio annualized base rent as of December 31, 2022. Depending upon the implementation of the regulations and mix of procedures in an HOPD, the 2015 BBA may enhance the value of these 603 assets because existing HOPDs may lose their higher reimbursements rates should they choose to change locations, thus enhancing lease renewal probabilities and rent growth.12

services in that location on a HOPD basis as of November 2, 2015 and continues to provide those services in that location. On November 21, 2018, the Secretary of the U.S. Department of Health and Human Services (the “Secretary”) issued a final rule, effective January 1, 2019, that eliminates the higher, OPPS reimbursement rate for evaluation and management (“E&M”) services provided by grandfathered HOPD locations (the “Final Rule”). The Secretary, instead, will only reimburse for E&M services at the lower, Medicare Physician Fee Schedule rate that new non-grandfathered off-campus HOPD locations receive. The AHA and a number of hospitals sued the Secretary in federal court to enforce the plain meaning of Section 603 of the 2015 BBA and restore the right to grandfathered HOPD reimbursement rates. On September 17, 2019, a federal district judge ruled in favor of the AHA. The court stated that CMS did not have the authority to lower payments for off-campus hospital-based departments that were grandfathered under the 2015 BBA. CMS challenged this ruling and requested a stay in the decision, which the court denied on October 21, 2019. In its December 15, 2020 final rule for hospital OPPS rates, CMS continued its efforts to lower payment for certain HOPD services basing reductions on the principle of “site neutrality.” These lower payment levels were effective January 1, 2021, notwithstanding the CMS’ projections that overall payments under OPPS will increase by 2.4%. For 2024, CMS updated OPPS payment rates for hospitals that meet applicable quality reporting requirements by 3.1%. Further, CMS continued the payment rate reduction for E&M services furnished in all off-campus HOPDS in 2022. CMS stated that it intends to continue this policy. Hospitals with “grandfathered” locations providing HOPD services in our portfolio are referred to as 603 assets in our SEC reports and other public disclosures.

We own a number of 603 assets. Rent derived from these 603 assets accounts for approximately 16% of our total consolidated portfolio annualized base rent as of December 31, 2023. Depending upon the implementation of the regulations and mix of procedures in an HOPD, the 2015 BBA may enhance the value of these 603 assets because existing HOPDs may lose their higher reimbursements rates should they choose to change locations, thus enhancing lease renewal probabilities and rent growth.

Portfolio Summary

Please see Item 2 - “Properties” for a table that summarizes our consolidated portfolio as of December 31, ~~2022~~2023.

Geographic Concentration

As of December 31, ~~2022~~2023, approximately 1211.09% of our consolidated gross leasable area was derived from properties located in Texas.

12As a result of this geographic concentration, we are particularly exposed to downturns in the Texas economy or other changes in local real estate market conditions. Any material change in the current payment programs or regulatory, economic, environmental, or competitive conditions in Texas could have a disproportionate effect on our overall business results. In the event of negative economic or other changes in the Texas market, our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected. See the discussion under Item 1A - “Risk Factors,” under the caption, “Economic and other conditions that negatively affect geographic areas in which we conduct business, and in particular Texas, and other areas to which a greater percentage of our revenue is attributed could materially adversely affect our business, results of operations, and financial condition.”

As a result of this geographic concentration, we are particularly exposed to downturns in the Texas economy or other changes in local real estate market conditions. Any material change in the current payment programs or regulatory, economic, environmental, or competitive conditions in Texas could have a disproportionate effect on our overall business results. In the event of negative economic or other changes in the Texas market, our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected. See the discussion under Item 1A - “Risk Factors”, under the caption, “Economic and other conditions that negatively affect geographic areas in which we conduct business, and in particular Texas, and other areas to which a greater percentage of our revenue is attributed could materially adversely affect our business, results of operations, and financial condition.”

Customer Concentration

We receive substantially all of our revenue as rent payments from tenants under leases of space in our health care properties, with our five largest tenants based upon rental revenue representing approximately $7071.18 million, or 19.56%, of the annualized base rent from our consolidated properties as of December 31, ~~2022~~2023. No one tenant represents more than 5.01% of our total consolidated annualized base rent; however, 14.89% of our total consolidated annualized base rent as of December 31, ~~2022~~2023 is from tenants affiliated with CommonSpirit. We have no control over the success or failure of our tenants’ businesses and, at any time, any of our tenants may experience a downturn in its business that may weaken its financial condition. Our business, financial position, or results of operations could be materially adversely affected if CommonSpirit were to experience a material adverse effect on its business, financial position, or results of operations.

Competition

We compete with many other entities engaged in real estate investment activities for acquisitions of health care properties, including national, regional and local operators, acquirers, and developers of health care-related real estate properties and other investors such as private equity firms, some of whom may have greater financial resources and lower costs of capital than we do. The competition for health care-related real estate properties may significantly increase the price that we must pay for health care properties or other assets that we seek to acquire, and our competitors may succeed in acquiring those properties or assets themselves. In addition, our potential acquisition targets may find our competitors to be more attractive because they may have greater resources, may be willing to pay more for the properties or may have a more compatible operating philosophy. In particular, larger REITs that target health care properties may enjoy significant competitive advantages that result from, among other things, a lower cost of capital, enhanced operating efficiencies, more personnel, and market penetration and familiarity with markets. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase. Increased competition would result in increased demand for the same assets and therefore increase prices paid for them. Those higher prices for health care properties or other assets may adversely affect our returns from our investments.

We also face competition in leasing available MOBs and other facilities that serve the health care industry to prospective tenants. As a result, we may have to provide rent concessions, incur charges for tenant improvements, offer other inducements, or we may be unable to timely lease vacant space in our properties, all of which may have a material adverse impact on our results of operations. 13

or assets themselves. In addition, our potential acquisition targets may find our competitors to be more attractive because they may have greater resources, may be willing to pay more for the properties or may have a more compatible operating philosophy. In particular, larger REITs that target health care properties may enjoy significant competitive advantages that result from, among other things, a lower cost of capital, enhanced operating efficiencies, more personnel, and market penetration and familiarity with markets. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase. Increased competition would result in increased demand for the same assets and therefore increase prices paid for them. Those higher prices for health care properties or other assets may adversely affect our returns from our investments.

We also face competition in leasing available outpatient medical facilities and other facilities that serve the health care industry to prospective tenants. As a result, we may have to provide rent concessions, incur charges for tenant improvements, offer other inducements, or we may be unable to timely lease vacant space in our properties, all of which may have a material adverse impact on our results of operations.

Seasonality

Our business has not been, and we do not expect it to become, subject to material seasonal fluctuations.

Human Capital Management

Our Company is focused on human capital management, which our Board believes is vital to the health of the Company. We believe that the success of our business depends on a strong, talented, and committed workforce to ensure excellence on behalf of our clients and shareholders. Therefore, we prioritize the well-being of our employees and offer comprehensive benefits packages, opportunities for personal and group volunteer efforts, and paths for life-long learning to our employees. Our employees work with various business units across the Company to diversify their skill sets. Employees are offered challenging projects, stock ownership as a form of compensation, and a collaborative and inclusive environment with exposure to our top executives.

We are an equal opportunity employer, and we are committed to making employment decisions without regard to race, creed, color, religion, sex, age, ancestry, national origin, sexual preference, sexual orientation, marital status, disability, protected veteran status, or any other legally protected status. As of December 31, ~~2022~~2023, we had ~~101~~104 full-time employees, none of whom were subject to a collective bargaining agreement. We believe that relations with our employees are positive.

13The nominating and corporate governance committee retains oversight over human capital matters, including diversity, equity, and inclusion policies and initiatives, and oversees the Company's Diversity, Equity, and Inclusion (“DEI”) Council. Our Board receives regular reports from our CEO regarding annual employee engagement results conducted through an independent third party. In 2023, the Company had approximately 91% participation in this survey. In 2023, our voluntary employee retention rate was approximately 92%. Our Board members periodically attend employee events, participate in our annual Management Summit event, and attend all-team holiday gatherings. In January 2023, we were named to the Bloomberg Gender-Equality Index as a first-time submitter.

The nominating and corporate governance committee retains oversight over human capital matters, including diversity, equity, and inclusion policies and initiatives, and oversees the Company's Diversity, Equity, and Inclusion (“DEI”) Council. Our Board receives regular reports from our CEO regarding annual employee engagement results conducted through an independent third party. In 2022, the Company had approximately 95% participation in this survey, representing a year-over-year increase in participation of over 2%. We are pleased to report that in 2022 our employee retention rate is 94%, a year-over-year increase of over 4%. Our Board members periodically attend employee events, participate in our annual Management Summit event, and attend all-team holiday gatherings. Also, in 2022, as part of the Company’s ongoing Women in Leadership series, we were honored to have the newest member of our Board of Trustees, Ava Lias-Booker, Esq., hold a leadership discussion with our employees during a company-wide meeting. In January 2023, we were named to the Bloomberg Gender-Equality Index as a first-time submitter.

Employee Engagement

In ~~2022~~2023, the Company offered team member training, including courses on leadership, work/life balance, mental health, and cybersecurity, among other topics. Our team also routinely participates in training opportunities related to ESG and workplace best practices to pursue continued professional development. In addition, employees participate in ~~an annual book club discussion and training events, including~~ regular Company-wide “lunch and learn” discussions on leadership, wellness, mentorship, and team-building~~, the REIT industry, and advanced computer skills~~.

AtIn ~~Physicians Realty Trust~~addition, our employees ~~are~~contribute ~~heavily~~to ~~invested in~~ building a stronger and more inclusive workplace environment. Employees lead committees focusing on social, environmental, philanthropic, and health and wellness topics that shape the Company’s policies. As mentioned above, annual engagement surveys are conducted by an independent third party to provide anonymous team member feedback, the response rate to this survey was approximately 9591% in ~~2022~~2023. We believe that continuous improvement and investment in our team are the keys to our continued success.

The Company also created a new Culture Specialist position to focus on sustaining and improving our culture. In addition to day-to-day human resource responsibilities, the Culture Specialist will support our employees’ general health, well-being, and engagement by fostering a strong, supportive, and productive work environment. Prioritizing our most important asset--our people--through this position, especially in an era of hybrid working environments, we expect will ensure a sense of belonging and shared mission to energize our Company in the future.

Diversity, Equity, and Inclusion

The Company values diversity and embraces the unique qualities of our employees. In 2019, we formed our DEI Council, which ~~sets ambitious~~, ~~attainable,~~among ~~and~~other ~~authentic goals~~things, develops educational platforms, and plans activities to promote DEI at all levels of our ~~organization, creating a culture of fairness and respect for our employees. We believe we are a stronger organization when our workforce represents a diversity of ideas and experiences.~~

We take a personalized approach, driven by a 20-member DEI Council that represents all workgroups within our Company. Strategies include attracting and retaining top talent while intentionally including diverse candidates in recruitment efforts, providing enhanced career development support, and supporting DEI awareness and education for our employees.

Our DEI Council, which meets monthly, operates under the direction and full support of our Senior Vice President and Deputy Chief of Investments, who reports on activities to our President and CEO. In addition, the DEI Council is overseen by the nominating and corporate governance committee and reports to the entire Board as needed. We feel that this level of visibility leads to high engagement, accountability, and fulfillment of our DEI goals.

2022 Successes

At DOC, our longstanding commitment to our health care partners and the patients they serve is to C.A.R.E.: Collaborate and Communicate, Act with Integrity, Respect the Relationship, and Execute Consistently. Each of these values is reflected in our DEI Council and its work to ensure our actions reflect our DEI values and help us achieve our goals.

~~Our~~organization, ~~2022~~creating ~~successes~~a ~~tie~~culture ~~directly~~of tofairness and respect for our ~~Company’s~~employees. ~~shared~~We ~~vision~~believe towe Care a stronger organization when our workforce represents a diversity of ideas and experiences.~~A.R.E.:~~

~~Collaborate~~We take a personalized approach, driven by an 18-member DEI Council that represents all workgroups within our Company. Our DEI Council, which meets monthly, operates under the direction and ~~Communicate~~full support of our Senior Vice President and Deputy Chief of Investments, who reports on activities to our President and CEO. In addition, the DEI Council is overseen by the nominating and corporate governance committee and reports to the entire Board as needed. We feel that this level of visibility leads to high engagement, accountability, and fulfillment of our DEI goals.

Build CRE Diversity Pipeline: In 2022, the Company surpassed its goal to hire 50% or more diverse candidates in our summer internship program, representing those who identify as Black, Indigenous, people of color, female, veteran, or LGBTQIA+. This goal supports our efforts to build a young, diverse, and talented leadership pipeline. In addition, all internal and external candidate recruitment focuses on seeking diverse candidates, using organizations, resources, and job boards with diverse followings.

Support Company Education via Communications Channels: The DEI Council provided educational touchpoints via the Company’s new SharePoint DEI Hub site with over 6,000-lifetime site visits to date. To promote transparency, resources include news stories, Council files, our DEI mission statement, working goals, meeting schedules, DEI Council member directory, and an anonymous, third-party administered team suggestion box. The Council also authors news articles based on team interviews and research on holidays, traditions, and observances to promote understanding and inclusion.

Industry Representation: We are also proud of our 2022 representation on the Nareit Communications Council, DEI Working Group, Real Estate Sustainability Council, and Social Responsibility Council, and our employees regularly attend continuing education on DEI matters through Nareit conferences.

Act with Integrity

Attract Top Talent: The DEI Council conducted a comprehensive benefits review to ensure the Company remains competitive in our offerings to current and prospective employees. As a result, recommendations that we anticipate will be implemented in 2023 include a wellness incentives program and an onboarding Buddy Program for new hires to foster connections and professional development.

Wraparound Tools for Mental Health and Wellness: In a Company survey conducted in January 2022, mental health and work/life balance were the most-requested topics for DEI programming. The Company took a holistic approach, offering over eight hours of mental health programming, paid access to an award-winning mental health and wellness app, and a new yearly paid time off day for mental health and wellness. We also provided resources surrounding observances of World Mental Health Day, Mental Health Awareness Month, and Stress Awareness Day.

Create a Consistent Feedback Loop to Further Belonging and Allyship: The DEI Council added DEI touchpoint questions to quarterly manager/team member reviews and measured engagement/perception of DEI through a new yearly survey. Participation in this survey increased by 11% year-over-year, and positive responses increased in every category. Separately, the DEI Council also incorporated gender identity, sexual orientation, and allyship questions in our annual anonymous top workplaces survey administered through a third party to better understand and support our internal diversity.

Respect the Relationship

Mentor Diverse Future Leaders: In 2022, the Company continued its ongoing partnership with Year Up, a national organization whose mission connects talented young adults and top companies to launch careers, power businesses, and build communities. Our activities included virtual networking events and mock interviews that have fostered ongoing mentorships between our employees and recent program graduates.

Financial Investments: In coordination with NAIOP Wisconsin and the Marquette University Center for Real Estate, the Company supported the MKE CRE week-long summer immersion program through financial investments and as a key event organizer. This organization's mission is to expose diverse high school students to career opportunities in commercial real estate. Students learned about designing, building, managing, owning, and selling commercial real estate through in-person instruction, hands-on experiences, site visits, and intentional interaction with real estate professionals working locally and across the country. In addition, the Company provided $7,500 in financial support, as a Presenting Sponsor, toward scholarships for diverse high school students interested in careers in commercial real estate.

Execute Consistently

Execute Team Programming: The Company offered four All-Team Lunch & Learn sessions on generational diversity, work/life balance, mental health, and intersectionality. These sessions included video watch parties, guest speakers, breakouts, and lively group discussions. The DEI Council also debuted three optional, informal, and small-group “Coffee Talks” to discuss

working styles and recognition differences, imposter syndrome, and perfectionism. Also, in 2022, as part of the Company’s ongoing DEI-led Women in Leadership series, we were honored to host the newest member of our Board of Trustees, Ava Lias-Booker, Esq. The Council also assisted in selecting two topics and speakers for the Company’s 2022 Management Summit - a virtual breakout on conflict de-escalation strategies geared toward property management professionals and our 2022 main stage keynote session on tactical negotiation strategies, utilizing tools such as a DEI lens.

Share our Progress to Date: We were proud to be honored as the 2022 CRE Insight Journal “Excellence in DEI” Award Winner, recognizing the culture of transparency and integrity that guides our business and shapes our strategy in addressing DEI opportunities for positive change.

Looking Ahead

Our team continues to develop targeted DEI goals to make a tangible and meaningful impact on our Company, industry, and communities, ultimately advancing DEI principles and better business performance. Our forthcoming ESG Report will showcase our efforts in greater detail.

Beginning in 2023, our long-term incentive plan includes a DEI element as part of our new ESG scorecard, with a goal of providing annual training to all employees with 100% participation.

COVID-19 Response

Throughout the COVID-19 pandemic, we prioritized our employees’ health and safety. In 2022, to encourage and support COVID-19 vaccination, the Company provided one paid “wellness day” to allow our employees to get vaccinated and deal with any immediate side effects. Employees could also use their wellness day for overall mental health and wellness. In addition, in 2022, the Company took a wraparound approach to increase mental health support for employees by also facilitating communication and education related to mental health and wellness. These efforts included a Company-wide, team-led town hall discussion facilitated by a licensed clinical psychologist. The Company also held a small group “Coffee Talk” series on mental health related to perfectionism and imposter syndrome. Finally, the Company supported mental health through a new benefit: paid access to a mental health and wellness app.

In addition, we supported various COVID-19 relief efforts alongside our health care partners across the country. Our past efforts have included donating supplies, allowing local government agencies to store personal protective equipment at our facilities, establishing a temporary COVID-19 vaccine site at one of our facilities available for lease, establishing and managing drive-through COVID-19 testing locations at our facilities, and coordinating COVID-19 screening at building entrances.

Compensation and Benefits

Our leadership has championed the importance of providing a robust benefits package. We offer competitive pay and compensation packages, including an annual bonus, paid medical and dental insurance, paid time off benefits, paid holidays, yearly paid volunteer time off, one paid mental health and wellness day, summer Friday hours, 401(k) match with immediate vesting, Company-sponsored short- and long-term disability benefits, voluntary life and accident insurance, paid parental leave, and pet insurance. We provide equity compensation after six months of employment. Through our employee stock purchase program and annual stock grant, our employees are also owners of the Company. The Company also offers a health plan option with a health savings account, which to date, has included an annual company contribution, an onsite gym in Milwaukee, and numerous team-building activities throughout the year.

One of the Company’s continuing education benefits, our graduate degree sponsorship program, is awarded based on a competitive submission process. ~~In 2022, we were proud to celebrate the graduation of a team member who earned her master’s degree in accounting.~~ This program was launched in 2019 and has two graduates.

InThe ~~response to the COVID-19 pandemic, the~~ Company has ~~adopted~~ a hybrid ~~return-to-~~work approach tailored to the decisions and responsibilities of each workgroup, ~~including several fully remote work options,~~ which we believe ~~will~~maximizes ~~maximize~~ company-wide productivity. Additionally, the Company has a yearly four-week “work from anywhere” policy.

Community and Philanthropy

The Company provides monetary support to various nonprofit organizations. In ~~2022~~2023, the Company contributed ~~over~~approximately $~~408~~371,~~800~~000 in ~~philanthropy~~philanthropic giving~~, exceeding our 2022 goal of $375,000~~. Separately, we ~~fundraised~~raised $~~150~~75,000 to support charitable causes nationwide. Employees are actively involved in the Company’s philanthropic decisions through a team-led committee, an annual philanthropy survey, and quarterly “Jeans Week” drives with charitable recipients chosen from team-nominated organizations nationwide. The Company does not make contributions of any kind to any political action committees or political candidates or their campaigns.

16Under the Company’s all-team volunteerism efforts, our employees contributed 396 hours through Company-sponsored team volunteer opportunities in 2023. Additionally, through the Company’s Volunteer Time Off (VTO) program launched in 2019, we encourage and empower our employees to give back to the community in personally meaningful ways. In 2023, our employees spent 360 hours serving their communities individually.

committee, an annual philanthropy survey, and quarterly “Jeans Week” drives with charitable recipients chosen from team-nominated organizations nationwide. The Company does not make contributions of any kind to any political action committees or political candidates or their campaigns.

Under the Company all-team volunteerism efforts, our employees contributed 455 hours through Company-sponsored team volunteer opportunities in 2022.

Additionally, through the Company’s Volunteer Time Off (VTO) program launched in 2019, we encourage and empower our employees to give back to the community in personally meaningful ways. In 2022, our employees spent 447 hours serving their communities individually, representing a 47% year-over-year increase in usage of the Company’s VTO program. This change was primarily driven by a new VTO team-based challenge that created meaningful opportunities for our team to bond over shared causes while encouraging each other to take full advantage of these opportunities to make a difference. The winning team collectively completed over 80% of their total possible VTO hours, and the Company contributed to the charity of their choice in recognition of this effort.

Environmental Matters

As an owner of real estate, we are subject to various federal, state, and local environmental laws, regulations, and ordinances and also could be liable to third parties as a result of environmental contamination or noncompliance at our properties even if we no longer own such properties. See the discussion under Item 1A, “Risk Factors,” under the caption “Environmental compliance costs and liabilities associated with owning, leasing, developing, and operating our properties may affect our results of operations.”

Certain Government Regulations

Overview

Our tenants and operators are typically subject to extensive and complex federal, state, and local health care laws and regulations relating to fraud and abuse practices, government reimbursement, licensure, protection of patient health information, and certificate of need (“CON”) and similar laws governing the operation of health care facilities, and we expect that the health care industry, in general, will continue to face increased regulation and pressure in the areas of fraud, waste and abuse, cost control, health care management, and provision of services, among others. These regulations are wide-ranging and can subject our tenants and operators to civil, criminal and administrative sanctions. Affected tenants and operators may find it increasingly difficult to comply with this complex and evolving regulatory environment because of a relative lack of guidance in many areas as certain of our health care properties are subject to oversight from several government agencies and the laws may vary from one jurisdiction to another. Changes in laws and regulations, reimbursement enforcement activity and regulatory non-compliance by our tenants and operators can all have a significant effect on their operations and financial condition, which in turn may adversely impact us, as detailed below and set forth under Item 1A, “Risk Factors,” under the caption “The health care industry is heavily regulated, and new laws or regulations, changes to existing laws and regulations, health policies, reimbursement levels from third-party payors, loss of licensure, or failure to obtain licensure could adversely impact our company and result in the inability of our tenants to make rent payments to us.”

In 2017, Congress came within a single vote of repealing of the Affordable Care Act and substantially reducing funding to the Medicaid program. New legislation may be introduced in the future, proposing changes, if not full repeal of the Affordable Care Act. Beyond this, significant changes to commercial health insurance and government-sponsored insurance (e.g., Medicare and Medicaid) remain possible. Commercial and government payors are likely to continue imposing larger discounts and tighter cost controls upon operators, through reductions in reimbursement rates and changes in payment methodologies, discounted fee structures, the assumption by health care providers of all or a portion of the financial risk or otherwise. A shift toward less comprehensive health insurance coverage and increased consumer cost-sharing on health expenditures could have a material adverse effect on certain of our operators’ liquidity, financial condition, and results of operations and, in turn, their ability to satisfy their contractual obligations, including making rental payments under and otherwise complying with the terms of our leases.15

difficult to comply with this complex and evolving regulatory environment because of a relative lack of guidance in many areas as certain of our health care properties are subject to oversight from several government agencies and the laws may vary from one jurisdiction to another. Changes in laws and regulations, reimbursement enforcement activity and regulatory non-compliance by our tenants and operators can all have a significant effect on their operations and financial condition, which in turn may adversely impact us, as detailed below and set forth under Item 1A, “Risk Factors,” under the caption “The health care industry is heavily regulated, and new laws or regulations, changes to existing laws and regulations, health policies, reimbursement levels from third-party payors, loss of licensure, or failure to obtain licensure could adversely impact our company and result in the inability of our tenants to make rent payments to us.”

In 2017, Congress came within a single vote of repealing the Affordable Care Act and substantially reducing funding to the Medicaid program. New legislation may be introduced in the future, proposing changes, if not full repeal of the Affordable Care Act. Beyond this, significant changes to commercial health insurance and government-sponsored insurance (e.g., Medicare and Medicaid) remain possible. Commercial and government payors are likely to continue imposing larger discounts and tighter cost controls upon operators, through reductions in reimbursement rates and changes in payment methodologies, discounted fee structures, the assumption by health care providers of all or a portion of the financial risk or otherwise. A shift toward less comprehensive health insurance coverage and increased consumer cost-sharing on health expenditures could have a material adverse effect on certain of our operators’ liquidity, financial condition, and results of operations and, in turn, their ability to satisfy their contractual obligations, including making rental payments under and otherwise complying with the terms of our leases.

The following is a discussion of certain laws and regulations generally applicable to our operators, and in certain cases, to us.

Health Care Legislation

Health Reform Laws. On March 23, 2010, then President Obama signed into law the Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, which amends the Affordable Care Act (collectively with other subsequently enacted federal health care laws and regulations, the “Health Reform Laws”). The Health Reform Laws contain various provisions that may directly impact us or the operators and tenants of our properties. Some provisions of the Health Reform Laws may have a positive impact on our operators’ or tenants’ revenues, by, for example, increasing coverage of uninsured individuals, while others may have a negative impact on the reimbursement of our operators or tenants by, for example, altering the market basket adjustments for certain types of health care facilities. The Health Reform Laws also enhance certain fraud and abuse penalty provisions that could apply to our operators and tenants, in the event of one or more violations of the federal health care regulatory laws. In addition, there are provisions that impact the health coverage that we and our operators and tenants provide to our respective employees. The Health Reform Laws also provide additional Medicaid funding to allow states to carry out the expansion of Medicaid coverage to certain financially eligible individuals beginning in 2014, and have also permitted states to expand their Medicaid coverage to these individuals since April 1, 2010, if certain conditions are met. On June 28, 2012, the United States Supreme Court upheld the individual mandate of the Health Reform Laws but partially invalidated the expansion of Medicaid. The ruling on Medicaid expansion allows states to decide whether or not to participate in the expansion. As a result, states that choose not to participate in the expansion-and to forego funding for the Medicaid expansion-may do so without losing their existing Medicaid funding. As of December 1, ~~2022~~2023, 1210 states have pursued the option not to adopt the Medicaid expansion. ~~Thirty~~Forty-~~nine~~one states and the District of Columbia have adopted the expansion. The participation by states in the Medicaid expansion could have the dual effect of increasing our tenants’ revenues, through new patients, but could also further strain state budgets. While the federal government paid for approximately 100% of those additional costs from 2014 to 2016, states now are expected to pay for part of those additional costs.

Challenges to the Health Reform Laws and Potential Repeal and/or Further Reforms under Trump Administration. Since the enactment of the Health Reform Laws, there have been multiple attempts through legislative and regulatory action, ~~and~~as well as legal challenge to repeal or amend the Health Reform Laws, including the case that was before the U.S. Supreme Court, King v. Burwell. Although the Supreme Court in Burwell upheld the use of subsidies to individuals in federally facilitated health care exchanges on June 25, 2015, which ultimately did not disrupt significantly the implementation of the Health Reform Laws, we cannot predict whether other current or future efforts to repeal, amend or challenge the validity of all or part of the Health Reform Laws will be successful, nor can we predict the impact that such a repeal, amendment or challenge would have on our operators or tenants and their ability to meet their obligations to us.

In 2017, then President Trump and Congress unsuccessfully sought to repeal and replace the Affordable Care Act. On January 20, 2017, then President Trump issued an Executive Order stating that it was the administration’s official policy to repeal the Affordable Care Act and instructing the Secretary of Health and Human Services and the heads of all other executive departments and agencies with authority and responsibility under the Affordable Care Act to, among other matters, delay implementation of or grant an exemption from any provision of the Affordable Care Act that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, and others. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act, among other things, reduces the Affordable Care Act’s individual mandate penalty to zero beginning in 2019. The elimination of the penalties does not remove the requirement to obtain health care coverage; however, without penalties there effectively will be no enforcement. On December 14, 2018, a federal district court in Texas ruled that the Affordable Care Act’s individual mandate was unconstitutional. The court also ruled that the provisions of the individual mandate were not severable from the remainder of the Affordable Care Act, rendering the remainder of the Affordable Care Act invalid as well. President Biden formally revoked former President Trump’s Executive Order regarding the Affordable Care Act on January 28, 2021. The United States Supreme Court heard the Texas case following a series of appeals and dismissed the case and upheld the Affordable Care Act in June 2021. Despite action by the current administration and the Supreme Court’s decision to uphold the Affordable Care Act, it is possible that Congress will continue to consider other legislation to repeal the Affordable Care Act or repeal and replace some or all elements of the Affordable Care Act.

The US Department of Labor (“DOL”) issued a final rule on June 21, 2018 authorizing the creation of Association Health Plans (“AHP”). This rule was one of three components of a 2017 Executive Order to increase consumer health insurance options and also created short-term limited duration health insurance and health reimbursement arrangements. On March 28, 2019, the US District Court for the District of Columbia vacated the AHP. On April 26, 2019, the Department of Justice (“DOJ”) appealed that decision and the appeal is ongoing.16

Onimplementation ~~June~~of 24or grant an exemption from any provision of the Affordable Care Act that would impose a fiscal burden on any state or a cost, ~~2019~~fee, ~~then~~tax, ~~President~~penalty, ~~Trump~~or ~~signed~~regulatory anburden ~~Executive~~on ~~Order~~individuals, onfamilies, ~~Improving~~health ~~Price~~care providers, health insurers, patients, and ~~Quality~~others. ~~Transparency~~On inDecember ~~American~~22, ~~Health~~2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act, among other things, reduced the Affordable Care Act’s individual mandate penalty to ~~Put~~zero ~~Patients~~beginning ~~First~~in 2019. The ~~order~~elimination ~~was~~of ~~intended~~the penalties does not remove the requirement to ~~increase~~obtain health care coverage; however, without penalties there effectively will be no enforcement. On December 14, 2018, a federal district court in Texas ruled that the ~~availability~~Affordable Care Act’s individual mandate was unconstitutional. The court also ruled that the provisions of ~~meaningful~~the ~~price~~individual mandate were not severable from the remainder of the Affordable Care Act, rendering the remainder of the Affordable Care Act invalid as well. President Biden formally revoked former President Trump’s Executive Order regarding the Affordable Care Act on January 28, 2021. The United States Supreme Court heard the Texas case following a series of appeals and ~~quality~~dismissed ~~information~~the case for ~~patients.~~lack ~~CMS~~of ~~included~~standing, effectively upholding the Affordable Care Act in ~~its~~June ~~final~~2021. ~~rule~~Despite ~~for~~action ~~Medicare~~by ~~hospital~~the ~~outpatient~~current ~~payment~~administration and the Supreme Court’s decision to uphold the Affordable Care Act, litigation to invalidate parts of the Affordable Care Act continues; another case in Texas is currently moving through the court system regarding the ACA’s requirement for coverage of clinical preventive services. Moreover, it is possible that ~~hospitals~~Congress will continue to consider other legislation to repeal the Affordable Care Act or repeal and replace some or all elements of the Affordable Care Act.

18The US Department of Labor (“DOL”) issued a final rule on June 21, 2018 authorizing the creation of Association Health Plans (the “AHP Rule”). This rule was one of three components of a 2017 Executive Order to increase consumer health insurance options and also created short-term limited duration health insurance and health reimbursement arrangements. On March 28, 2019, the US District Court for the District of Columbia set aside a number of the AHP Rule’s provisions. On April 26, 2019, the Department of Justice (“DOJ”) appealed that decision, but following a change in administration, on December 20, 2023, the Department of Labor proposed to rescind the AHP Rule. The proposed rule is currently in the comment period until February 20, 2024.

On June 24, 2019, then President Trump signed an Executive Order on Improving Price and Quality Transparency in American Health Care to Put Patients First. The order was intended to increase the availability of meaningful price and quality information for patients. CMS included in its final rule for Medicare hospital outpatient payment, the requirement that hospitals make public their standard charges, along with payer-specific negotiated rates, in a consumer-friendly format. This requirement was to be effective January 1, 2020. In 2019, the AHA and other hospital groups initiated litigation against the U.S. Department of Health and Human Services (“HHS”) and CMS to prevent implementation of this price transparency rule. The AHA challenge was unsuccessful and the rule became effective January 1, 2021. On November 22, 2023, CMS reiterated its commitment and refinement of price transparency in the CY 2024 Medicare OPPS and ASC Final Rule, which among other things, requires hospitals to use CMS templates for Machine-Readable Files (“MRFs”), display estimated allowed amounts in certain circumstances, and provide price transparency information on their websites. The public availability of hospital charges may give patients information to select physician office-based care rather than in the hospital.

We cannot predict the effect of Trump or Biden Executive Orders, the Tax Act’s 2019 repeal of the individual mandate penalty on the Affordable Care Act, or whether future attempts by Congress to challenge or change the law will be successful. Further, we cannot predict how the Affordable Care Act might be amended or modified, ~~either~~ through the legislative, regulatory or judicial process, and how any such modification might impact our tenants’ operations or the net effect of this law on us. If the operations, cash flows or financial condition of our operators and tenants are materially adversely impacted by any repeal or modification of the law, our revenue and operations may be materially adversely affected as well.

No Surprises Act. Effective January 1, 2022, facilities and providers must comply with several new policies required by No Surprises Act (“NSA”). Specifically, the NSA prohibits “balance billing” for: (i) emergency services provided by an out-of-network provider; and (ii) non-emergency (e.g., scheduled) services provided by an out-of-network provider at an in-network facility. For such out-of-network services, health plans are prohibited from imposing higher cost-sharing amounts (i.e., copayment, coinsurance, or deductible) than the amount that would have applied had the service been provided by an in-network provider. The NSA allows the patient to waive their balance billing and cost-sharing protections in some scenarios, but this requires the out-of-network provider to comply with the patient notice and consent requirements under the Act, and does not apply to most ancillary physician services (e.g., emergency, radiology, anesthesiology, pathology, neonatology, and services provided by hospitalists, assistant surgeons, and intensivists). For purposes of compliance with the balance billing and patient cost-sharing protections, a “facility” is defined under the NSA to include hospitals, critical access hospitals, hospital outpatient departments, and ASCs.

~~The~~In addition to the balance billing prohibition, the NSA also requires providers and facilities to provide a good faith estimate (“GFE”) of expected charges to uninsured and self-pay patients upon scheduling or upon request. ~~HHS~~Note, ~~delayed enforcement of~~ the GFE requirements ~~for~~are ~~one~~limited ~~year~~in toapplicability ~~allow providers and facilities~~ to ~~develop~~uninsured ~~systems~~ and ~~processes~~self-pay ~~for~~patients ~~the~~at ~~exchange~~this ~~of required information between (i) the providers/facilities with which the primary service was initially scheduled or from which the GFE was initially requested and (ii) co-providers/co-facilities~~time. ~~That~~In ~~one‑year~~August ~~delay~~2021, ~~however,~~HHS ~~proved~~announced ~~insufficient~~its as facilities and providers struggled to develop and implement solutions to comply with the GFE co-provider requirement in advance of the January 1, 2023, enforcement deadline, without any sub-regulatory or interpretive guidance from HHS.

In response to industry comments, HHS issued updated guidance in the form of an “FAQ,” which now delays enforcement of the GFE co-provider requirement until HHS issues additional guidance through formal rulemaking. Currently there is no new enforcement deadline, and according to the FAQ, any future rulemaking will include a prospective applicability date that gives providers and facilities “a reasonable amount of time to comply with any new requirements.” Nevertheless, the FAQ cautions that certain states are the primary enforcers of the GFE requirements, rather than the federal government. Those states do not have to follow HHS’ lead to delay enforcement of the co-provider requirement, though HHS encourages states to take a similar approach. Providers in states that are enforcing the GFE rules directly may have enhanced risk of enforcement at this time. While the balance billing and patient cost-sharing requirements (described above) do not apply to freestanding physician clinics, such freestanding clinics must comply with the GFE requirements under the NSA. The NSA requires providers and facilities to provide patients with disclosures of their new rights under the law.17

~~The~~intention ~~enforcement provisions under the NSA permit the Secretary~~ to ~~apply~~delay aenforcement ~~civil monetary penalty against a provider/facility in an amount not to exceed $10,000 per violation~~ of the ~~NSA,~~GFE ~~including:~~requirements ~~(i)~~for ~~violations~~patients ofwho ~~the~~are ~~balance~~enrolled ~~billing~~in ~~protections~~a ~~under~~health ~~the~~plan ~~NSA (including all mandated disclosures~~ and ~~notices);~~are ~~and~~seeking ~~(ii) in circumstances where a provider/facility fails~~ to ~~provide~~submit a ~~good~~claim ~~faith estimate (“GFE”) of expected charges~~ to ~~uninsured/self-pay patients in violation of~~ the ~~NSA.~~plan ~~Notably,~~for ~~the~~items ~~balance billing, patient cost sharing protections,~~ and ~~GFE~~services ~~requirements~~until ~~under~~rulemaking ~~NSA are in addition~~ to ~~any~~fully ~~requirements~~implement ~~under~~this ~~applicable state law~~requirement. ~~Many of our operators and tenants are now subject to these laws, and some of them may be subject to monetary penalties if they fail to comply with applicable laws.~~

19 HHS further delayed enforcement of the requirement that the GFE includes expected charges from co-providers or co-facilities indefinitely until HHS issues additional guidance through formal rulemaking. Currently there is no new enforcement deadline, and according to the FAQ, any future rulemaking will include a prospective applicability date that gives providers and facilities “a reasonable amount of time to comply with any new requirements.” Nevertheless, the FAQ cautions that certain states are the primary enforcers of the GFE requirements, rather than the federal government. Those states do not have to follow HHS’ lead to delay enforcement of the co-provider requirement, though HHS encourages states to take a similar approach. Providers in states that are enforcing the GFE rules directly may have enhanced risk of enforcement at this time. While the balance billing and patient cost-sharing requirements (described above) do not apply to freestanding physician clinics, the GFE requirements under the NSA apply to all licensed health care facilities and health care providers, including freestanding physician clinics. The NSA requires providers and facilities to provide patients with disclosures of their new rights under the law.

The enforcement provisions under the NSA permit the Secretary to apply a civil monetary penalty against a provider/facility in an amount not to exceed $10,000 per violation of the NSA, including: (i) violations of the balance billing protections under the NSA (including all mandated disclosures and notices); and (ii) in circumstances where a provider/facility fails to provide a GFE of expected charges to uninsured/self-pay patients in violation of the NSA. Notably, the balance billing, patient cost sharing protections, and GFE requirements under NSA are in addition to any requirements under applicable state law. Many of our operators and tenants are now subject to these laws, and some of them may be subject to monetary penalties if they fail to comply with applicable laws.

Information Blocking

Published on May 1, 2020, the Information Blocking Regulations (“IB Regulations”) went into effect April 5, 2021. The IB Regulations prohibit “Actors” (e.g., health care providers, health information exchanges, health information technology developers) from taking action that is likely to interfere with, prevent or materially discourage access, exchange or use of electronic health information. The scope of the IB Regulations were recently expanded to prohibit health care providers from blocking or interfering with patient access to any electronic information in a “designated record set,” as the term is defined under the Health Insurance Portability and Accountability Act, commonly referred to as HIPAA, effective October 6, 2022. Except to the extent covered by an exception, the IB Regulations obligate an Actor to provide a requestor (a patient, a patient’s representative or person seeking a connection to the Actor’s technology) with access to the electronic health information (“EHI”) within its control or possession. The exceptions to the IB Regulations permit an Actor to deny access, limit the amount of access, delay access, condition the type of access or charge a fee for access, all subject to the detailed limitations stated in the applicable exception. Further guidance is pending from CMS and the Office of the Inspector General (“OIG”) regarding enforcement of the rule; however, exclusion and $1 million per violation civil monetary penalties have been cited as potential penalties. In addition to the potential for penalties, providers are likely to incur additional costs in training staff and updating medical records systems and policies to ensure appropriate access to medical records.

On July 3, 2023, the Office of the Inspector General (“OIG”) finalized a rule that established civil monetary penalties up to $1 million per violation for health IT developers, entities offering certified health IT, health information exchanges, and health information networks. And on November 1, 2023, OIG proposed a rule to establish disincentives for providers that are determined to have committed information blocking. If finalized, the disincentives would include monetary and non-monetary penalties. In addition to the potential for monetary and non-monetary penalties, providers are likely to incur additional costs in training staff and updating medical records systems and policies to ensure appropriate access to medical records.

Fraud and Abuse Enforcement

There are various extremely complex federal and state laws and regulations governing health care providers’ relationships and arrangements and prohibiting fraudulent and abusive practices by such providers. These laws include (i) federal and state false claims acts, which, among other things, prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other federal or state health care programs, (ii) federal and state anti-kickback and fee-splitting statutes, including the Medicare and Medicaid anti-kickback statute, which prohibit the payment or receipt of remuneration to induce referrals or recommendations of health care items or services and the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), an all-payor statute enacted in 2018 prohibiting kickbacks related to remuneration for referrals to recovery homes, clinical treatment facilities and laboratories, (iii) federal and state physician self-referral laws (commonly referred to as the “Stark Law”), which generally prohibit referrals by physicians to entities with which the physician or an immediate family member has a financial relationship, (iv) the federal Civil Monetary Penalties Law, which prohibits, among other things, the knowing presentation of a false or fraudulent claim for certain health care services and (v) federal and state privacy laws, including the privacy and security rules contained in the Health Insurance Portability and Accountability Act of 1996, which provide for the privacy and security of personal health information. Violations of health care fraud and abuse laws carry civil, criminal, and administrative sanctions, including punitive sanctions, monetary penalties, imprisonment, denial of Medicare and Medicaid reimbursement, and potential exclusion from Medicare, Medicaid, or other federal or state health care programs. These laws are enforced by a variety of federal, state, and local agencies and can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. Many of our operators and tenants are subject to these laws, and some of them may in the future become the subject of governmental enforcement actions if they fail to comply with applicable laws.

Accountability Act of 1996, which provide for the privacy and security of personal health information. Violations of health care fraud and abuse laws carry civil, criminal, and administrative sanctions, including punitive sanctions, monetary penalties, imprisonment, denial of Medicare and Medicaid reimbursement, and potential exclusion from Medicare, Medicaid, or other federal or state health care programs. These laws are enforced by a variety of federal, state, and local agencies and can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. Many of our operators and tenants are subject to these laws, and some of them may in the future become the subject of governmental enforcement actions if they fail to comply with applicable laws.

Reimbursement

Sources of revenue for many of our tenants and operators include, among other sources, governmental health care programs, such as the federal Medicare program, state Medicaid programs, and non-governmental payors, such as insurance payors, managed care organizations (“MCOs”), health maintenance organizations (“HMOs”), and Accountable Care Organizations (“ACOs”). As federal and state governments focus on health care reform initiatives, and as the federal government and many states face significant budget deficits, efforts to reduce costs by these payors will likely continue, which may result in reduced or slower growth in reimbursement for certain services provided by some of our tenants and operators.

We cannot predict whether future Congressional action will reduce physician reimbursements. Efforts by other payors to reduce health care costs are likely to continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. Further, revenue realizable under third-party payor agreements can change after examination and retroactive adjustment by payors during the claims settlement process or as a result of post-payment audits. For example, payors may disallow requests for reimbursement based on determinations that certain costs are not reimbursable or reasonable, because additional documentation is necessary or because certain services were not covered or were not medically necessary. The Health Care Reform Laws and regulatory changes could impose further limitations on government and private payments to health care providers. In some cases, states have enacted or are considering enacting measures designed to reduce their Medicaid expenditures and to make changes to private health care insurance. In addition, the failure of any of our tenants to comply with various laws and regulations could lead to overpayments and resulting repayment obligations to, as well as jeopardize their ability to continue participating in Medicare, Medicaid, and other government sponsored payment programs. The financial impact on our tenants’ failure to comply with such laws and regulations could restrict their ability to make rent payments to us.

programs. The financial impact on our tenants’ failure to comply with such laws and regulations could restrict their ability to make rent payments to us.

Health Care Licensure and CON

Certain health care facilities in our portfolio are subject to extensive federal, state, and local licensure, certification and inspection laws, and regulations. In addition, various licenses and permits are required to dispense narcotics, operate pharmacies and laboratories, handle radioactive materials, and operate equipment. Many states require certain health care providers to obtain a CON, which requires prior approval for the construction, expansion, purchase of certain capital equipment, and closure of certain health care facilities. The approval process related to state CON laws may impact some of our tenants’ and operators’ abilities to expand or change their businesses.

COVID-19 Pandemic

COVID-19 Relief. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (2020) and the Coronavirus Response and Consolidated Appropriations Act (2021) (“CAA”) provided economic assistance for health care providers. The CAA continued many of these programs by adding new phases, new allocations, and new guidance to address issues related to the continuation of the COVID-19 pandemic. Through the CARES Act, the federal government authorized $175 billion in payments to be distributed through the Public Health and Social Services Emergency Fund (“Provider Relief Fund” or “PRF”). The CAA added another $3 billion in funding to the PRF program. The government has apportioned the PRF in several tranches, including (i) a $50 billion Phase 1 general distribution to Medicare providers, (ii) a $18 billion Phase 2 general distribution to Medicaid providers, (iii) a $24.5 billion Phase 3 general distribution based on financial losses and expenses attributable to COVID-19, and (iv) approximately $60 billion in targeted distributions to hospitals in high-impact areas and certain other specific providers.

Payments from the PRF are not loans and, therefore, they are generally not subject to repayment. However, as a condition to receiving distributions, providers ~~must~~agreed ~~agree~~ to certain terms and conditions, including, among other things, that the funds are ~~being~~ used for lost revenues and certain COVID-related expenses, and that the providers will not seek collection of out‑of‑pocket payments from a COVID-19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network provider. Recipients of PRF payments must comply with reporting requirements described in the terms and conditions and specified in HHS reporting guidelines. HHS has indicated that it will be closely monitoring and, along with the OIG, auditing providers to ensure that recipients comply with the terms and conditions of the PRF program and to prevent fraud and abuse. Providers will be subject to civil and criminal penalties for any deliberate omissions, misrepresentations or falsifications of any information given to HHS. Noncompliance with applicable terms and conditions is grounds for HHS to recoup some or all of the payments made from the PRF. Further, HHS has indicated that PRF payments that have not been expended for permitted uses by applicable deadlines must be returned to HHS. Reporting obligations are ongoing for providers that accepted grants from the Provider Relief Fund and will continue into 2024. Notably, HHS has begun issuing Repayment Request Notices to recipients of PRF payments who are required to repay funds.

More recently, on December 10, 2021, Congress passed the Protecting Medicare and American Farmers from Sequester Cuts Act, extending the moratorium on the 2% Medicare sequestration until April 2022, then reducing the amount taken from payments to 1% for another three months. The law also prevents the statutory Pay-As-You-Go cuts to Medicare, which total 4% of Medicare payments, and certain rate cuts finalized in the Medicare Physician Fee Schedule final rule from November 2021. Additionally, the law will delay payment cuts for clinical laboratories and postpone the launch of the radiation oncology bundled payment model, which was slated to start in January 2022. These changes are intended to support the financial viability of physician practices and maintain access to outpatient care during the continuing public health emergency.19

~~Based~~closely onmonitoring ~~the continued uncertainty around reporting~~ and, ~~potential~~along ~~recoupment~~with ofthe ~~PRF funds~~OIG, weauditing ~~cannot~~providers ~~provide~~to ~~any~~ensure ~~assurances~~that asrecipients tocomply ~~whether~~with ~~any~~the ~~tenant~~terms orand ~~operator~~conditions ~~may~~of bethe ~~required~~PRF toprogram ~~derecognize~~ and ~~return~~to ~~any~~prevent ~~portion~~fraud ofand ~~PRF~~abuse. ~~funds~~Providers itare ~~has~~subject ~~recognized~~to ascivil ~~income,~~and orcriminal ~~predict~~penalties ~~whether~~for aany ~~tenant~~deliberate oromissions, ~~operator~~misrepresentations ~~may~~or befalsifications ~~eligible~~of ~~to receive~~ any ~~additional~~information ~~allocations~~given ofto ~~Provider~~HHS. ~~Relief~~Noncompliance ~~Funds~~with inapplicable ~~the~~terms ~~future~~and orconditions ~~whether~~is itgrounds ~~will~~for beHHS ~~able~~ to ~~recognize~~recoup ~~such~~some ~~amounts~~or asall ~~PRF~~of ~~grant~~the ~~income~~payments ~~under~~made ~~HHS~~from ~~reporting~~the ~~requirements~~PRF. ~~There~~Reporting obligations are ~~also~~ongoing nofor ~~assurances~~providers ~~regarding~~that ~~the~~accepted ~~future~~grants offrom ~~Medicare~~the ~~Physician~~Provider ~~Fee~~Relief ~~Schedule~~Fund ~~payments~~ and ~~scheduled~~will ~~reductions~~continue tointo ~~payments thereunder~~2025. ~~These~~Notably, ~~ongoing~~HHS ~~risks~~is ~~will~~issuing ~~continue~~Repayment toRequest ~~create~~Notices ~~risk~~to recipients of ~~non-payment~~PRF ofpayments ~~rent~~who ~~from~~are ~~our~~required ~~tenants~~to repay funds.

On December 10, 2021, Congress passed the Protecting Medicare and American Farmers from Sequester Cuts Act, extending the moratorium on the 2% Medicare sequestration until April 2022, then reducing the amount taken from payments to 1% for another three months. The law also prevents the statutory Pay-As-You-Go cuts to Medicare, which total 4% of Medicare payments, and certain rate cuts finalized in the Medicare Physician Fee Schedule final rule from November 2021. Additionally, the law delayed payment cuts for clinical laboratories and postpone the launch of the radiation oncology bundled payment model, which was slated to start in January 2022. These changes were intended to support the financial viability of physician practices and maintain access to outpatient care during the continuing public health emergency, but have begun unfolding as the COVID-19 public health emergency ended on May 11, 2023. In April of 2022, CMS resumed sequestration reductions and ramped up to a 2% sequestration beginning in July 2022. Moreover, CMS’s final CY 2024 Physician Fee Schedule included a payment rate reduction of 1.25%, compared to CY 2023, with a conversion factor decrease of 3.4%.

Based on the continued uncertainty around reporting and potential recoupment of PRF funds, we cannot provide any assurances as to whether any tenant or operator may be required to derecognize and return any portion of PRF funds it has recognized as income, or predict whether a tenant or operator may be eligible to receive any additional allocations of Provider Relief Funds in the future or whether it will be able to recognize such amounts as PRF grant income under HHS reporting requirements. And while the CY 2024 Physician Fee Schedule included payment reductions, there are no assurances regarding the future of payment rates and scheduled reductions to payments thereunder. These ongoing risks will continue to create risk of non-payment of rent from our tenants.

Vaccine Mandates. On November 4, 2021, CMS released its Interim Final Rule (“IFR”) requiring COVID-19 vaccinations for individuals working in Medicare- and Medicaid-participating facilities, as well as individuals working in certain other settings involving face-to-face interactions with patients. On the same date, the Occupational Safety and Health Administration (“OSHA”) released its new Emergency Temporary Standard (“ETS”) requiring companies with 100 or more employees to mandate vaccination of their employees.

21On January 13, 2022, the Supreme Court handed down a pair of decisions on the CMS vaccine mandate rule and the OSHA vaccine-or-test rule. In short, the Court ruled in its opinion that CMS is not prohibited from implementing its IFR. In a separate opinion, the Court held that OSHA may not enforce or implement its ETS. In October 2022, the Supreme Court declined to hear a challenge from 10 states seeking to appeal a ruling affirming the CMS mandate. More recently, the Supreme Court in December 2023 vacated a series of conflicting appellate rulings regarding the vaccine mandate, and remanded them with instructions to dismiss them as moot.

On January 13, 2022, the Supreme Court handed down a pair of decisions on the CMS vaccine mandate rule and the OSHA vaccine-or-test rule. In short, the Court ruled in its opinion that CMS is not prohibited from implementing its IFR. In a separate opinion, the Court held that OSHA may not enforce or implement its ETS. More recently, in October 2022, the Supreme Court declined to hear a challenge from 10 states seeking to appeal a ruling affirming the CMS mandate.

These quickly evolving (and at times, conflicting) regulatory requirements and court decisions will likely create legal and operational challenges for health care providers, including our tenants that are hospitals, surgery centers, and certain physician practices, and may exacerbate existing challenges around staffing, leading to increased costs for temporary or contract labor and potential business disruptions, any of which may adversely affect our tenants’ ability to pay us rent.

Available Information

Our website address is www.docreit.com. We make available, free of charge through the Investor Relations portion of the website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Reports of beneficial ownership filed pursuant to Section 16(a) of the Exchange Act are also available on our website. These reports and other information are also available, free of charge, at www.sec.gov.

In addition, the Board has established a Code of Business Conduct and Ethics that applies to our officers, including our President and Chief Executive Officer, Chief Financial Officer, trustees, and employees. The Code of Business Conduct and Ethics provides a statement of the Company’s policies and procedures for conducting business legally and ethically. A copy of the Code of Business Conduct and Ethics is available in the Investor Relations section of our website (www.docreit.com) under the tab “Corporate Information - Governance Documents.” Any amendments to or waivers from the Code of Business Conduct and Ethics will be disclosed on our website. Information contained on our website is not part of, or incorporated by reference into, this Annual Report on Form 10-K.20

ITEM 1A. RISK FACTORS

Summary Risk Factors

An investment in our common shares involves a high degree of risk. You should carefully read and consider the risks discussed below and described more fully along with other risks in Part I, Item 1A “Risk Factors” of this report, before investing in our common shares. The following summarizes what we believe to be the most significant risks of purchasing or owning our securities based on information currently available to us. Additional unknown risks may also impair our financial performance and business operations. Our business, financial condition, and/or results of operation may be materially adversely affected by the nature and impact of these risks. In such case, the market value of our securities could be detrimentally affected, and investors may lose part or all of the value of their investment. You should carefully consider the risks and uncertainties described below.

Risks Related to the Mergers

•The pendency of the Merger Agreement could have an adverse effect on the business of the Company.

•Completion of the Mergers is subject to the satisfaction or waiver of certain conditions.

•An adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement could have a material adverse impact on the business of the Company.

•The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Healthpeak or the Trust.

•Failure to complete the Mergers could negatively affect the share prices and the future business and financial results of the Company.

•Completion of the Mergers is subject to many conditions, and if these conditions are not satisfied or waived, the Mergers will not be completed, which could result in a requirement that the Trust pay certain termination fees.

•The Merger Agreement contains provisions that could discourage a potential competing acquiror of the Company or could result in any competing proposal being at a lower price than it might otherwise be.

•Either the Company or Healthpeak may terminate the Merger Agreement, if the Mergers are not consummated by July 31, 2024.

•If the Company Merger does not qualify as a reorganization, there may be adverse tax consequences.

•Trust shareholders will be significantly diluted by the Mergers.

Risks Related to Our Business

•Recent macroeconomic trends, including inflation and rising interest rates, may adversely affect our business, financial condition, and results of operations.

•Economic and other conditions that negatively affect geographic areas in which we conduct business could materially adversely affect our business, financial condition, or results of operations.

•Our portfolio is concentrated in health care properties, making us dependent on the health care industry generally, and possibly more vulnerable economically than if our investments were diversified across different industries.

•Cybersecurity incidents, attacks, or other significant disruptions of our information technology systems or the information technology systems of our third party property managers could disrupt our business and result in the compromise of confidential information of ours and third parties, including our tenants.

•Our health care properties and tenants face competition and we may not realize the benefits that we anticipate from focusing on health care properties that are strategically aligned with a care delivery system and from the relationships established through such strategic alignments.

•We may not be successful in identifying and consummating suitable investment acquisitions or investment opportunities, which may impede our growth and negatively affect our business, financial condition, and results of operations.

•We have and may in the future make investments in development projects, which may not yield anticipated returns which could directly affect our operating results and reduce the amount of funds available for distributions.

•Environmental compliance costs and liabilities associated with owning, leasing, developing, and operating our properties may affect our results of operations.

~~•Our business and operations and those of our tenants have been and may continue to be adversely affected by the COVID-19 pandemic.~~21

Risks Related to the Health Care Industry

•The health care industry is heavily regulated, and new laws or regulations, changes to existing laws, regulations, health policies, or reimbursement levels from third-party payors, loss of licensure or failure to obtain licensure could adversely impact our company and result in the inability of our tenants to make rent payments to us.

•Changes to health care laws and regulations, including to government reimbursement programs such as Medicare and reimbursement rates applicable to our current and future tenants, could have a material adverse effect on the financial condition of our tenants and, consequently, their ability to meet obligations to us.

•Our tenants and our company are subject to fraud and abuse laws, the violation of which, by a tenant, may jeopardize the tenant’s ability to make rent payments to us.

•The COVID-19 pandemic has adversely affected the operations and financial condition of our tenants and operators and could continue to adversely affect their operations and financial condition in the future, which may negatively impact our tenants’ and operators’ ability to meet their obligations to us.

Risks Related to the Real Estate Industry

•Our operating performance is subject to risks associated with the real estate industry, including vacancies or our inability to lease space on favorable terms, our inability to collect rent from tenants, changes in the demand for certain health care-related properties, and impacts from periods of economic slowdown or recession such as the recent U.S. economic downturn.

•We face risks associated with the potential impacts of severe weather events and climate change.

•Our investments in, or originations of, mezzanine and term loans will be subject to specific risks relating to the particular property or entity obligated to repay the loan, and our loans will involve greater risks of loss than senior loans secured by income-producing properties.

Risks Related to Financings

•Required payments of principal and interest on our indebtedness may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT and may expose us to the risk of default under our debt obligations.

•We rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.

Risks Related to Our Portfolio and Structure

•Our business could be harmed if key personnel terminate their employment with us or if we are unsuccessful in integrating new personnel into our operations.

•Certain provisions of Maryland law, the Trust’s declaration of trust and the partnership agreement of the Operating Partnership contain limits and restrictions on the transferability of our outstanding shares of beneficial interest, which may have the effect of delaying, discouraging or preventing a transaction or change of control of our company.

Risks Related to Our Qualification and Operation as a REIT

•If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that would substantially reduce funds available for distributions to our shareholders.

•Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

Risks Relating to the Mergers

The pendency of the Merger Agreement could have an adverse effect on the business of the Company.

The pendency of the Mergers could cause disruption in the business of the Company, including the potential loss or disruption of current and prospective commercial relationships due to the uncertainties about the Mergers. For example, some of the tenants, prospective tenants, or vendors of the Company may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows, and expenses of the Company, regardless of whether the Mergers are completed. Similarly, current and prospective employees of the Company may experience uncertainty about their future roles with the Combined Company (as defined in the Merger Agreement) following the Mergers, which may adversely affect the ability of the Company to attract, retain, and motivate current, prospective, and key personnel during the pendency of the Mergers.

The Merger Agreement generally requires the Company to use commercially reasonable efforts to operate its business in the ordinary course of business pending consummation of the Mergers, but includes certain contractual restrictions on the

conduct of its business prior to completion of the Mergers, which may adversely affect the ability of the Company to raise capital or pursue other strategic actions, even if such actions would prove beneficial.

In addition, matters relating to the Mergers (including integration planning) will require substantial commitments of time and resources by the Company’s management, which could divert their time, resources, and attention that could otherwise have been devoted to other opportunities that may have been beneficial to the Company. Furthermore, there are certain inherent risks, costs, and uncertainties associated with integrating the businesses successfully, and as a result, the anticipated benefits of the Mergers may not be realized in the time frame currently anticipated or at all. The Company has also incurred, and will continue to incur, significant non-recurring costs, expenses, and fees, and could in the future be exposed to unexpected costs, liabilities, and delays, in connection with the Mergers that may be unrecoverable.

The aforementioned risks, and adverse effects, of any disruption could be exacerbated by a delay in completion of the Mergers or termination of the Merger Agreement.

Completion of the Mergers is subject to the satisfaction or waiver of certain conditions.

Completion of the Mergers is subject to the satisfaction or waiver of certain conditions, including: (i) approval for listing on the NYSE of the shares of Healthpeak common stock to be issued in the Mergers or reserved for issuance in connection therewith, (ii) no temporary restraining order, preliminary or permanent injunction or other order, decree or judgment being in effect enjoining, preventing, restraining, making illegal, or otherwise prohibiting the consummation of the Mergers, (iii) no law having been enacted, issued, entered, promulgated, or enforced by any governmental authority and being in effect that would have the effect of enjoining, preventing, restraining, making illegal, or otherwise prohibiting the consummation of the Mergers, (iv) accuracy of each party’s representations, subject in most cases to materiality or “material adverse effect” (as defined in the Merger Agreement) qualifications, (v) compliance in all material respects with each party’s covenants, (vi) absence of a material adverse effect on either the Company or Healthpeak, (vii) receipt by each of the Company and Healthpeak of an opinion to the effect that the Company Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), (viii) receipt by Healthpeak of an opinion that the Trust qualifies as a REIT under the Code and receipt by the Company of an opinion that Healthpeak qualifies as a REIT under the Code, and (ix) receipt by each party of customary officer’s certificates certifying the satisfaction of the Company’s and Healthpeak’s respective closing conditions.

The Company cannot provide assurance that these conditions to completing the Mergers will be satisfied or waived, and accordingly, that the proposed Mergers will be completed on the timeline that the Company anticipates or at all. Failure to complete the Mergers could negatively affect the Trust’s share price and the future business and financial results of the Company.

In addition, if the Merger Agreement is terminated under certain circumstances specified therein, the Company or Healthpeak may be required to pay the other party a termination fee and/or an expense reimbursement amount.

An adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement, or the transactions contemplated thereby, could have a material adverse impact on the business of the Company and its ability to consummate the transactions contemplated by the Merger Agreement.

Transactions like the Mergers are frequently the subject of litigation or other legal proceedings, including actions alleging that either the Board of Trustees or the Healthpeak board of directors, as applicable, breached its respective duties to its stockholders or shareholders, respectively, or other equity holders by entering into the Merger Agreement, by failing to obtain a greater value in the transaction for the Trust’s shareholders or Healthpeak’s stockholders or other equity holders or otherwise or any other claims (contractual or otherwise) arising out of the Mergers or the transactions related thereto. Purported shareholders of the Trust have filed (and additional shareholders or stockholders, as applicable, of the Trust and/or Healthpeak may file) a complaint relating to the Mergers. As discussed in Note 15 (Commitments and Contingencies) to our accompanying consolidated financial statements, four purported shareholders of the Company have filed (and additional shareholders or stockholders, as applicable, of the Company and/or the Healthpeak may file) complaints relating to the Mergers, and we have received correspondence from multiple purported shareholders relating to the Mergers. With respect to such litigation, and if additional litigation or other legal proceedings are brought against the Company, the Board of Trustees or the Healthpeak board of directors, respectively, or subsidiaries in connection with the Merger Agreement, or the transactions contemplated thereby, the respective parties to the proceeding intend to defend against it but they might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the Company’s or Healthpeak’s ability to consummate the Mergers or on their respective business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel. See

Note 15 (Commitments and Contingencies) to our accompanying consolidated financial statements for additional information regarding litigation relating to the Mergers.

The Exchange Ratio is fixed and will not be adjusted in the event of any change in the stock or share prices, respectively, of either the Trust or Healthpeak.

As a result of the Mergers, and through a series of transactions, (i) each outstanding Trust common share (other than Trust common shares to be canceled in accordance with the Merger Agreement) will be converted into the right to receive 0.674 shares of Healthpeak common stock (the “Exchange Ratio”), without interest, plus cash in lieu of consideration for fractional shares, but subject to any withholding required under applicable tax laws (the “Merger Consideration”), and (ii) each OP Unit will be converted into common units in a subsidiary of Healthpeak OP equal to the Exchange Ratio. The Exchange Ratio will not be adjusted for changes in the market prices of either Trust common shares or shares of Healthpeak common stock. Changes in the market price of Trust common shares prior to the effective time of the Mergers will affect the market value of the Merger Consideration that Trust shareholders will receive upon completion of the Mergers. Share price changes may result from a variety of factors (many of which are beyond the Company’s or Healthpeak’s control), including the following factors:

•market reaction to the announcement of the Mergers and the prospects of the Combined Company;

•changes in the respective businesses, operations, assets, liabilities, and prospects of the Company and Healthpeak;

•changes in market assessments of the business, operations, financial position, and prospects of either the Company or Healthpeak or the Combined Company;

•market assessments of the likelihood that the Mergers will be completed;

•interest rates, general market and economic conditions, and other factors generally affecting the market prices of Trust common shares and Healthpeak common stock;

•federal, state and local legislation, governmental regulation, and legal developments in the businesses in which the Company and Healthpeak operate; and

•other factors beyond the control of the Company and Healthpeak, including those described or referred to in this “Risk Factors” section.

The price of Healthpeak common stock at the closing of the Mergers may vary from its price on the date the Merger Agreement was executed, on the date of the joint proxy statement/prospectus and on the date of the special meetings of the Trust and Healthpeak. As a result, the market value of the Merger Consideration represented by the Exchange Ratio will also vary.

Because the Mergers will be completed after the dates of the special meetings, Trust shareholders will not know the exact market value of the Healthpeak common stock that they will receive upon completion of the Company Merger, which may itself involve certain risks, including:

•if the price of Healthpeak common stock increases between the date the Merger Agreement was signed or the date of the Trust special meeting and the closing of the Mergers, Trust shareholders will receive shares of Healthpeak common stock that have a market value upon completion of the Company Merger that is greater than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the Trust special meeting, respectively; and

•if the price of Healthpeak common stock declines between the date the Merger Agreement was signed or the date of the Trust special meeting and the closing of the Mergers, including for any of the reasons described above, Trust shareholders will receive shares of Healthpeak common stock that have a market value upon completion of the Company Merger that is less than the market value of such shares calculated pursuant to the Exchange Ratio on the date the Merger Agreement was signed or on the date of the Trust special meeting, respectively.

Therefore, while the number of shares of Healthpeak common stock to be issued per Trust common share is fixed, Trust shareholders cannot be sure of the market value of the consideration they will receive upon completion of the Mergers.

Failure to complete the Mergers could negatively affect the share prices and the future business and financial results of the Company.

If the Mergers are not completed, the ongoing business of the Company may be adversely affected and the Company will be subject to numerous risks associated with the failure to complete the Mergers, including the following:

•the Company being required, under certain circumstances, to pay to Healthpeak a termination fee of $111.0 million and/or reimburse Healthpeak’s transaction expenses up to an amount equal to $20.0 million;

•the Company having to pay certain costs relating to the proposed Mergers, such as legal, accounting, financial advisor, filing, printing and mailing fees;

•the management of the Company focusing on the Mergers instead of on pursuing other opportunities that could be beneficial to the Company without realizing any of the benefits of the Mergers having been completed; and

•the failure of the Company to retain key employees during the pendency of the Mergers.

If the Mergers are not completed, the Company cannot assure the Trust’s shareholders that these risks will not materialize and will not materially affect the business, financial results and share prices of the Company.

The Merger Agreement contains provisions that could discourage a potential competing acquiror of the Company or could result in any competing proposal being at a lower price than it might otherwise be.

Pursuant to the Merger Agreement, the Company has agreed not to (i) solicit proposals relating to certain alternative transactions, (ii) engage in discussions or negotiations or provide non-public information in connection with any proposal for an alternative transaction from a third party or (iii) approve or enter into any agreements providing for any such alternative transaction, in each case, subject to certain exceptions to permit members of the Board of Trustees to comply with their duties under applicable law. Notwithstanding these “no-shop” restrictions, prior to obtaining approval from the Trust’s shareholders of the Company Merger, under specified circumstances the Board of Trustees may change its recommendation, but the Company cannot terminate the Merger Agreement in connection with such events, and will still be required to put the applicable proposals to a vote of the Trust’s shareholders.

The Merger Agreement provides that, in connection with the termination of the Merger Agreement under specified circumstances, the Company may be required to pay to Healthpeak a termination fee of $111.0 million and/or reimburse Healthpeak’s transaction expenses up to an amount equal to $20.0 million.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of the Company from considering or proposing such an acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the Mergers, or might result in a potential competing acquirer proposing to pay a lower per share value than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the Merger Agreement.

If the Merger Agreement is terminated and the Company determines to seek another business combination, the Company may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Mergers contemplated by the Merger Agreement.

If the Mergers are not consummated by July 31, 2024 (unless extended under certain circumstances), either the Company or Healthpeak may terminate the Merger Agreement.

Either the Company or Healthpeak may terminate the Merger Agreement if the Mergers have not been consummated by July 31, 2024. However, this termination right will not be available to a party whose material breach of any provision of the Merger Agreement was the primary cause of, or resulted in, the failure of the Mergers to occur on or before July 31, 2024. Any termination of the Merger Agreement may adversely affect the Company’s results of operations, financial condition and business.

If the Company Merger does not qualify as a reorganization within the meaning of Section 368(a) of the Code, there may be adverse tax consequences.

The Company Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to the completion of the Mergers that the Company and Healthpeak receive written opinions from their respective counsel to the effect that the Company Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The foregoing opinions, however, are limited to the factual representations provided by the Company and Healthpeak to counsel and the assumptions set forth therein and are not a guarantee that the Company Merger will, in fact, qualify as a reorganization. Furthermore, such opinions are not binding on the IRS. Neither the Company nor Healthpeak has requested or plans to request a ruling from the IRS that the Company Merger qualifies as a reorganization. If the Company Merger were to fail to qualify as a reorganization, then each United States holder of the Trust common shares generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the shares of Healthpeak common stock and cash in lieu of any fractional share of Healthpeak common stock received by such holder in the Company Merger; and (ii) such holder’s adjusted tax basis in its Trust common shares.

Trust shareholders will be significantly diluted by the Mergers.

The Mergers will result in Trust shareholders having an ownership stake in Healthpeak that is smaller than their current stake in the Trust. Upon completion of the Mergers, based on the number of Trust common shares and shares of Healthpeak common stock outstanding as of January 8, 2024, it is estimated that legacy Healthpeak common stockholders will own approximately 77% of the common stock of the Combined Company, and legacy Trust common shareholders will own approximately 23% of the common stock of the Combined Company. Additionally, because Healthpeak is issuing shares of Healthpeak common stock to certain holders of OP Units in the Partnership Merger, each outstanding share of Healthpeak common stock after the completion of the Mergers will represent a smaller percentage of the voting power of Healthpeak than if such shares of common stock had not been issued in the Partnership Merger. Healthpeak may also issue additional shares of common stock or preferred stock in the future, which would create further dilution. Consequently, Trust shareholders, as a general matter, will have less influence over the management and policies of Healthpeak after the effective time of the Mergers than they currently exercise over the management and policies of the Company.

Risks Related To Our Business

Our performance is subject to general economic conditions and risks associated with our real estate assets.

Income from and the value of our properties may be adversely affected by, among other things:

•an economic crisis in the United States or globally that results in increased budget deficits and weakened financial condition of international, national, and local governments, which may lead to reduced governmental spending, tax increases, job losses, increased interest rates, currency devaluations, defaults on debt obligations, or other adverse economic events;

•other periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur;

•tenant turnover, the attractiveness of our properties to potential tenants, and changes in supply of, or demand for, similar or competing properties in an area (including from general overbuilding or excess supply in the market);

•changes in the cost or availability of insurance;

•unanticipated changes in costs associated with adverse environmental conditions;

•periods of tight money supply;

•the occurrence of an epidemic or a pandemic such as the COVID-19 pandemic;

•future terrorist attacks, which may result in declining economic activity, which could reduce the demand for, and the value of, our properties, and may adversely affect our tenants’ business and their ability to continue to honor their existing lease; and

•disruptions in the global supply chain caused by political, regulatory, or other factors, including geopolitical developments outside the United States.

In addition, our investments could be materially adversely affected by changes in national and international political, environmental, and socioeconomic circumstances~~, including the escalating conflict between Russia and Ukraine or actions taken by governments in response to the conflict~~.

Rising interest rates may adversely affect our business, financial condition, and results of operations. Increases in interest rates have increased and may continue to increase our interest expense and adversely affect our cash flows, our ability to service our indebtedness, and our ability to make distributions to our shareholders, and could cause our stock price to decline. Failure to hedge effectively against interest rate changes may adversely affect our results of operations.

During the fiscal year ended December 31, ~~2022~~2023, inflation in the United States ~~increased~~decreased ~~and~~but ismay ~~currently~~remain ~~expected to continue~~ at an elevated level in ~~2023~~2024. Rising inflation increases our variable rate debt and general and administrative expenses and other costs. In 2022 and 2023, the Federal Reserve ~~began~~ significantly ~~raising~~raised interest rates, and isit ~~expected~~may ~~to continue to~~ raise interest rates toagain ~~combat~~in ~~inflation~~the ~~and restore price stability into 2023~~future.

The dividend yield on common shares (as a percentage of the price of our common shares) relative to market interest rates is one of the factors that influences the market price of our common shares. Increases in interest rates will increase interest cost on new fixed and variable debt and on existing variable rate debt. Such increases in the cost of capital have adversely impacted our ability to acquire and develop properties and may impact our ability to refinance existing debt, and could cause our earnings and funds available for distribution to decline. Additionally, increased interest rates may also result in less liquid property markets, limiting our ability to sell assets or contribute existing assets to a joint venture.

Further increases in market interest rates may lead prospective purchasers of our common shares to expect a higher dividend yield (with a resulting decline in the market price of our common shares) and higher interest rates would likely increase our borrowing costs for both our existing and future indebtedness and potentially decrease funds available for distribution. Thus, higher market interest rates have caused and could continue to cause the market price of our common shares to decrease.

Additionally, as of December 31, ~~2022~~2023, we had approximately $~~298~~104.27 million of variable-rate indebtedness outstanding that has not been swapped for a fixed interest rate. Certain indebtedness in the future, including borrowings under our unsecured revolving credit facility since December 31, ~~2022~~2023, and thereafter, will be subject to variable interest rates. Increases in interest rates on any variable rate indebtedness will increase our interest expense, which could adversely affect our cash flow and our ability to pay distributions to our shareholders.

In certain cases, we may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements. Hedging involves risks, such as the risk that the counterparty may fail to honor its obligations under an arrangement, that the arrangements may not be effective in reducing our exposure to interest rate changes, that these arrangements may result in higher interest rates than we would otherwise have, and that a court could rule that such an agreement is not legally enforceable. In addition, we may be limited in the type and amount of hedging transactions that we may use in the future by our need to satisfy the REIT income tests under the Code. Failure to hedge effectively against interest rate changes may have an adverse effect on our business, financial condition, results of operations, our ability to make distributions to our shareholders, and the market price of our common shares.

Economic and other conditions that negatively affect geographic areas in which we conduct business, and in particular Texas, and other areas to which a greater percentage of our revenue is attributed could materially adversely affect our business, results of operations, and financial condition.

Our operating results depend upon our ability to maintain and increase occupancy levels and rental rates at our properties. Adverse economic or other conditions in the geographic markets in which we operate, including periods of economic slowdown or recession, industry slowdowns, periods of deflation, relocation of businesses, changing demographics, pandemics, hurricanes, tornadoes, floods, the effects of climate change, earthquakes and other natural disasters, fires, terrorist acts, migrant crises, civil disturbances or acts of war, and other man-made disasters which may result in uninsured or underinsured losses, and changes in tax, real estate, zoning, and other laws and regulations, may lower our occupancy levels and limit our ability to increase rents or require us to offer rental concessions.

As of December 31, ~~2022~~2023, approximately 1.9 million square feet of our gross leasable area and $49.23 million of our total consolidated annualized base rent was derived from properties located in Texas (1211.09% of our gross leasable area and 13.74% of our total consolidated annualized base rent). As a result of this geographic concentration, we are particularly exposed to downturns in the Texas economy or other changes in local real estate market conditions. Any material change in the current payment programs or regulatory, economic, environmental, or competitive conditions in Texas could have a disproportionate effect on our overall business results. In the event of negative economic or other changes in any of the markets in which we conduct business, our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected.

One of our strategies is to capitalize on shifting consumer preferences and other demographic and market trends by pursuing off-campus properties consistent with our investment philosophy and strategies. We may not be successful in identifying and acquiring suitable off-campus properties that meet our investment criteria or that we can acquire on satisfactory terms. Further, if such preferences and trends do not continue, such off-campus properties may not produce the expected benefits or command the same rent as our on-campus affiliated properties, and we may not be able to lease such properties on terms acceptable to us, or at all. If we are unable to successfully acquire, lease, and operate such off-campus properties, our business, financial condition, and results of operations could be adversely impacted.

Our real estate investments are concentrated in health care properties, and any downturn in the health care industry could materially affect our business.

We acquire, own, manage, operate, and selectively develop properties for lease primarily to physicians, hospitals, and health care delivery systems. We are subject to risks inherent in concentrating investments in real estate, and further from the concentration of our investments in the health care sector. Any adverse effects that result from these risks could be more pronounced than if we diversified our investments outside of health care properties. Given our concentration in this sector, our tenant base is especially concentrated and dependent upon the health care industry generally, and any industry downturn could adversely affect the ability of our tenants to make lease payments and our ability to maintain current rental and occupancy rates. Our tenant mix could become even more concentrated if a significant portion of our tenants practice in a particular medical field or are reliant upon a particular health care delivery system. Accordingly, a downturn in the health care industry generally, or in the health care-related facility specifically, could adversely affect our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares.

Any failure, inability, or unwillingness by our tenants to pay rent or other amounts under leases could materially adversely affect our financial results; we may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases, especially for our properties located in smaller markets.

Our portfolio of health care properties is leased to physicians, hospitals, health care delivery systems, and other health care providers and our revenues are subject to the financial strength of our tenants. We cannot provide assurance that our tenants will have sufficient assets, income, and access to financing to enable them to satisfy their respective obligations to us, and any failure, inability or unwillingness by our tenants to do so could adversely affect our financial results.

We cannot predict whether our tenants will renew or extend existing leases beyond their current terms. Nearly all of our properties are subject to leases which have multi-year terms. As of December 31, ~~2022~~2023, leases representing 45.72% and 56.56% of leased square feet at our consolidated properties will expire in ~~2023~~2024 and ~~2024~~2025, respectively, and leases representing 0.91% of leased square feet had expired as of December 31, ~~2022~~2023. If any of our leases are not renewed or extended, or if a tenant defaults under the terms of its lease or becomes insolvent, we would attempt to relet those spaces or properties to other tenants or new tenants. In case of non-renewal, we generally have advance notice before expiration of the lease term to arrange for reletting or repositioning of the spaces or the properties and our tenants are required to continue to perform all of their obligations (including the payment of all rental amounts) under the non-renewed leases until such expiration. However, following expiration of a lease term or if we exercise our right to replace a tenant in default, rental payments on the related properties could decline or cease altogether while we relet or reposition the spaces or the properties with suitable replacement tenants. We also might not be successful in identifying suitable replacement tenants or entering into leases with new tenants on a timely basis or on terms as favorable to us as our current leases, or at all, and we may be required to fund certain expenses and obligations (e.g., real estate taxes, debt costs, and maintenance expenses) to preserve or improve the value of, and avoid the imposition of liens on, our properties while they are being relet or repositioned. Our ability to relet or reposition our properties, or spaces within our properties, with suitable tenants could be significantly delayed or limited by state licensing, receivership, CON or other laws, as well as by the Medicare and Medicaid change-of-ownership rules. We could also incur substantial additional expenses in connection with any licensing, receivership, or change-of-ownership proceedings. In addition, our ability to locate suitable replacement tenants could be impaired by the specialized health care uses or contractual restrictions on use of the properties, and we may be required to spend substantial amounts to adapt the properties to other uses. Any such delays, limitations and expenses could adversely impact our ability to collect rent, obtain possession of leased properties, or otherwise exercise remedies for tenant default and could have a material adverse effect on us or cause us to take an impairment charge on a property.

All of these risks may be greater in smaller markets, where there may be fewer potential replacement tenants, making it more difficult to replace tenants, especially for specialized spaces, like hospital or outpatient treatment facilities located in our properties, and could have a material adverse effect on us.

If the business, financial position, or results of operations of CommonSpirit or one or more of our CommonSpirit- tenants suffer or are adversely affected, it could have a material adverse effect on our business, financial position, or results of operations.

As of December 31, ~~2022~~2023, tenants affiliated with CommonSpirit, represented approximately 14.89% of our total consolidated annualized base rent. Although CommonSpirit is not a party to nor a guarantor of the related lease agreements, it controls each of the subsidiaries and affiliates that are parties to a master lease agreement we have with CommonSpirit tenants. Given this control, if CommonSpirit’s business, financial position, or results of operations suffer or are adversely affected, it could adversely affect its ability to provide any financial or operational support for the subsidiaries and affiliates it controls, which could adversely affect one or more of the CommonSpirit-affiliated tenants’ ability to pay rent to us. In addition, if CommonSpirit were to cause its subsidiaries or affiliates to terminate any of their leases, vacate the leased premises, or consolidate, downsize, or relocate their operations from any of our premises, or if the subsidiaries and affiliates do not comply with the health care regulations to which the leased properties and operations are subject, we may be required to find other lessees for any affected leased properties and there could be a decrease or cessation of rental payments by CommonSpirit’s subsidiaries and affiliates. Additionally, if CommonSpirit’s business, financial position, or results of operations were to suffer or its credit ratings were to be downgraded, it could cause investors to lose confidence in our ability to collect rent from CommonSpirit-affiliated tenants and could cause our stock price to decline. Moreover, there can be no assurance that CommonSpirit’s subsidiaries and affiliates will have sufficient assets, income, and access to financing to enable them to satisfy their payment obligations under their lease agreements. The inability of any of these subsidiaries and affiliates to meet their rent obligations could materially adversely affect our business, financial position, or results of operations including our ability to pay dividends to our stockholders as required to maintain our status as a REIT. The inability of CommonSpirit’s subsidiaries and affiliates to satisfy their other obligations under their lease agreements such as the payment of taxes, insurance, and utilities could have a material adverse effect on the condition of the leased properties as well as on our business, financial position, and results of operations. For these reasons, if CommonSpirit were to experience a material adverse effect on its business, financial position, or results of operations, our business, financial position, or results of operations could also be materially adversely affected.

which could adversely affect one or more of the CommonSpirit-affiliated tenants’ ability to pay rent to us. In addition, if CommonSpirit were to cause its subsidiaries or affiliates to terminate any of their leases, vacate the leased premises, or consolidate, downsize, or relocate their operations from any of our premises, or if the subsidiaries and affiliates do not comply with the health care regulations to which the leased properties and operations are subject, we may be required to find other lessees for any affected leased properties and there could be a decrease or cessation of rental payments by CommonSpirit’s subsidiaries and affiliates. Additionally, if CommonSpirit’s business, financial position, or results of operations were to suffer or its credit ratings were to be downgraded, it could cause investors to lose confidence in our ability to collect rent from CommonSpirit-affiliated tenants and could cause our stock price to decline. Moreover, there can be no assurance that CommonSpirit’s subsidiaries and affiliates will have sufficient assets, income, and access to financing to enable them to satisfy their payment obligations under their lease agreements. The inability of any of these subsidiaries and affiliates to meet their rent obligations could materially adversely affect our business, financial position, or results of operations including our ability to pay dividends to our stockholders as required to maintain our status as a REIT. The inability of CommonSpirit’s subsidiaries and affiliates to satisfy their other obligations under their lease agreements such as the payment of taxes, insurance, and utilities could have a material adverse effect on the condition of the leased properties as well as on our business, financial position, and results of operations. For these reasons, if CommonSpirit were to experience a material adverse effect on its business, financial position, or results of operations, our business, financial position, or results of operations could also be materially adversely affected.

Cybersecurity incidents could disrupt our business and result in the compromise of confidential information.

Our business is at risk from and may be impacted by cybersecurity attacks, or other significant disruptions to the Company’s information technology systems involving us, our ~~MOBs~~outpatient medical facilities, our tenants, or any third party property managers, including attempts to gain unauthorized access to our confidential data and to block access to our data, and other electronic security breaches, including those resulting from human error or technology failures. Cybersecurity incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future. These cybersecurity risks may be heightened as a result of our tenants increased use of telehealth services. Such cyber attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. In the past, we have experienced cybersecurity breaches, which to date have not had a material impact on our operations, but there can be no assurance that any future breach or disruption will not have a material adverse effect on our business, financial condition or operations. While we employ a number of measures to prevent, detect and mitigate these threats, there is no guarantee such efforts will be successful in preventing a cyber attack. Even well-protected information technology systems remain vulnerable, as techniques used in such attempted attacks continually evolve and in some cases are designed not to be detected and may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.

In addition, we rely on third party property managers to manage certain of our properties and real estate assets. We face risks associated with cybersecurity attacks or breaches affecting such third party property managers. A cybersecurity attack or a security breach at any such third party could be perceived as a cybersecurity attack or a breach of our information technology systems. Cybersecurity incidents or other disruptions could disrupt our business, compromise confidential information of ours and third parties, including our tenants, damage our reputation, and subject us to liability claims or regulatory penalties, all of which could have an adverse effect on our business, financial condition, and results of operations.

We have and may in the future make investments in joint ventures, which could be adversely affected by our lack of decision-making authority, our reliance upon our joint venture partners’ financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.

partnership, joint venture or other entity. Joint ventures generally involve risks not present with respect to our wholly-owned properties, including the following:

•our joint venture partners may make decisions with which we disagree or that are not in our best interest;

•we may be prevented from taking actions that are opposed by our joint venture partners;

•our ability to transfer our interest in a joint venture to a third party may be restricted;

•our joint venture partners might become bankrupt or fail to fund their share of required capital contributions which may delay construction or development of a health care related facility or increase our financial commitment to the joint venture;

•our joint venture partners may have economic or business interests or goals with respect to the health care related facility or the joint venture that are or become inconsistent with our business interests and goals which could increase the likelihood of disputes regarding the ownership, management, or disposition of the health care related facility or the joint venture may compete with us for property acquisitions;

•disputes may develop with our joint venture partners over decisions affecting the health care related facility or the joint venture which may result in litigation or arbitration that would increase our expenses and distract our officers and/or trustees from focusing their time and effort on our business and possibly disrupt the daily operations of the health care related facility;

•we may suffer losses as a result of the actions of our joint venture partners with respect to our joint venture investments; and

•our joint venture partners may be structured differently than us for tax purposes, which could create conflicts of interest and risks to our REIT status.

Joint venture investments involve risks that may not be present with other methods of ownership. In addition to those risks identified above, our partners may be in a position to take action or withhold consent contrary to our instructions or requests. In the future, in certain instances, we or our partners may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partners’ interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partners’ interest may be limited if we do not have sufficient cash, available borrowing capacity, or other capital resources. In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition, or financing of a property.

Our health care properties and tenants face competition from nearby hospitals and other health care properties, and we may not realize the benefits that we anticipate from focusing on health care properties that are strategically aligned with a health care delivery system and from the relationships established through such strategic alignments. Further, we may not be able to maintain or expand our relationships with our existing and future hospital and health care delivery system clients.

As part of our business strategy, we focus on health care properties that are strategically aligned with a health care delivery system by (i) seeking to acquire, own, manage, and develop health care properties that are located on medical campuses where the underlying land is owned by a health care delivery system or by us, or (ii) seeking to acquire, own, manage, and develop health care properties located in close proximity to a health care delivery system or strategically aligned with a health care delivery system through leasing or other arrangements. We may not realize the benefits that we anticipate as a result of these strategic relationships, such as increased rents and reduced tenant turnover rates as compared to health care properties that are not strategically aligned. Moreover, building a portfolio of health care properties that are strategically aligned does not assure the success of any given property. The associated health care delivery system may not be successful and the strategic alignment that we seek for our health care properties could dissolve, and we may not succeed in replacing them. In addition, our health care properties, the associated health care delivery systems with which our health care properties are strategically aligned, and our tenants may be unable to compete successfully with nearby hospitals, medical practices, other health care properties that provide comparable services, pharmacies, and other retailers, like CVS, Walmart, Walgreens, and others, that may initiate or expand health care clinic operations and services to compete with our tenants. Any of our properties may be materially and adversely affected if the health care delivery system with which it is strategically aligned is unable to compete successfully. If we do not realize the benefits that we anticipate from our business strategy and our strategic alignments dissolve and we are not successful in replacing them, our reputation, business, financial results, and prospects may be adversely affected.

system clients deteriorate, if a conflict of interest or non-compete arrangement prevents us from expanding these relationships, or if a hospital on or near whose campus one of our properties is located fails or becomes unable to meet its financial obligations, the business of our tenants could be adversely affected or our ability to secure new acquisition and development opportunities or other advisory, property management, and hospital project management projects could be adversely impacted and our professional reputation within the industry could be damaged.

We may not be successful in identifying and completing off-market acquisitions and other suitable acquisitions or investment opportunities, which may impede our growth and adversely affect our business, financial condition, and results of operations.

An important component of our growth strategy is to acquire “off-market” properties before they are widely marketed by the owners. Facilities that are acquired off-market are typically more attractive to us as a purchaser because of the absence of a formal marketing process, which could lead to higher prices or other unattractive terms. If we cannot obtain off-market deal flow in the future, our ability to locate and acquire facilities at attractive prices could be adversely affected. We expect to compete with many other entities engaged in real estate investment activities for acquisitions of health care properties, including national, regional, and local operators, acquirers and developers of health care-related real estate properties, and other investors such as private equity firms, some of whom may have greater financial resources and lower costs of capital than we do. The competition for health care-related real estate properties has increased the price that we must pay for health care properties or other assets that we seek to acquire, and our competitors may succeed in acquiring those properties or assets themselves. In addition, our potential acquisition targets may find our competitors to be more attractive because they may have greater resources, may be willing to pay more for the properties, or may have a more compatible operating philosophy. In particular, larger REITs that target health care properties may enjoy significant competitive advantages that result from, among other things, a lower cost of capital, enhanced operating efficiencies, more personnel and market penetration, and familiarity with markets. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase. Increased competition has increased demand for these assets and therefore increases prices paid for them. Those higher prices for health care properties or other assets may adversely affect our returns from our investments.

We have and may in the future make investments in development projects, which may not yield anticipated returns which could directly affect our operating results and reduce the amount of funds available for distributions.

A component of our growth strategy is exploring development opportunities, some of which may arise through strategic joint ventures. In deciding whether to make an investment in a particular development, we make certain assumptions regarding the expected future performance of that property. To the extent that we consummate development opportunities, our investment in these projects will be subject to the following risks:

•we may not be able to obtain financing for development projects on favorable terms or at all;

•we may not complete development projects on schedule or within budgeted amounts;

•we may encounter delays in obtaining or fail to obtain all necessary zoning, land use, building, occupancy, environmental and other governmental permits and authorizations, or underestimate the costs necessary to develop the property to market standards;

•development or construction delays may provide tenants the right to terminate preconstruction leases or cause us to incur additional costs;

•volatility in the price of construction materials or labor may increase our development costs;

•hospitals or health systems may maintain significant decision-making authority with respect to the development schedule;

•we may incorrectly forecast risks associated with development in new geographic regions;

•tenants may not lease space at the quantity or rental rate levels projected;

•demand for our development project may decrease prior to completion, including due to competition from other developments; and

•lease rates and rents at newly developed properties may fluctuate based on factors beyond our control, including market and economic conditions.

If our investments in development projects do not yield anticipated returns for any reason, including those set forth above, our business, financial condition, and results of operations, our ability to make distributions to our shareholders and the trading price of our common shares may be adversely affected.

29We have and may in the future make investments in joint ventures, which could be adversely affected by our lack of decision-making authority, our reliance upon our joint venture partners’ financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.

We have and may in the future make co-investments with third parties through partnerships, joint ventures, or other entities, acquiring noncontrolling interests in or sharing responsibility for the management of the affairs of a property, partnership, joint venture or other entity. Joint ventures generally involve risks not present with respect to our wholly-owned properties, including the following:

•our joint venture partners may make decisions with which we disagree or that are not in our best interest;

•we may be prevented from taking actions that are opposed by our joint venture partners;

•our ability to transfer our interest in a joint venture to a third party may be restricted;

•we may suffer losses as a result of the actions of our joint venture partners with respect to our joint venture investments; and

•our joint venture partners may be structured differently than us for tax purposes, which could create conflicts of interest and risks to our REIT status.

campuses where the underlying land is owned by a health care delivery system or by us, or (ii) seeking to acquire, own, manage, and develop health care properties located in close proximity to a health care delivery system or strategically aligned with a health care delivery system through leasing or other arrangements. We may not realize the benefits that we anticipate as a result of these strategic relationships, such as increased rents and reduced tenant turnover rates as compared to health care properties that are not strategically aligned. Moreover, building a portfolio of health care properties that are strategically aligned does not assure the success of any given property. The associated health care delivery system may not be successful and the strategic alignment that we seek for our health care properties could dissolve, and we may not succeed in replacing them. In addition, our health care properties, the associated health care delivery systems with which our health care properties are strategically aligned, and our tenants may be unable to compete successfully with nearby hospitals, medical practices, other health care properties that provide comparable services, pharmacies, and other retailers, like CVS, Walmart, Walgreens, and others, that may initiate or expand health care clinic operations and services to compete with our tenants. Any of our properties may be materially and adversely affected if the health care delivery system with which it is strategically aligned is unable to compete successfully. If we do not realize the benefits that we anticipate from our business strategy and our strategic alignments dissolve and we are not successful in replacing them, our reputation, business, financial results, and prospects may be adversely affected.

The success of our business depends, to a large extent, on our current and future relationships with hospital and health care delivery system clients. We invest a significant amount of time to develop, maintain, and be responsive to these relationships, and our relationships have helped us to secure acquisition and development opportunities, as well as other advisory, property management, and projects, with both new and existing clients. If our relationships with hospital or health system clients deteriorate, if a conflict of interest or non-compete arrangement prevents us from expanding these relationships, or if a hospital on or near whose campus one of our properties is located fails or becomes unable to meet its financial obligations, the business of our tenants could be adversely affected or our ability to secure new acquisition and development opportunities or other advisory, property management, and hospital project management projects could be adversely impacted and our professional reputation within the industry could be damaged.

An important component of our growth strategy is to acquire “off-market” properties before they are widely marketed by the owners. Facilities that are acquired off-market are typically more attractive to us as a purchaser because of the absence of a formal marketing process, which could lead to higher prices or other unattractive terms. If we cannot obtain off-market deal flow in the future, our ability to locate and acquire facilities at attractive prices could be adversely affected. We expect to compete with many other entities engaged in real estate investment activities for acquisitions of health care properties, including national, regional, and local operators, acquirers and developers of health care-related real estate properties, and other investors such as private equity firms, some of whom may have greater financial resources and lower costs of capital than we do. The competition for health care-related real estate properties has increased the price that we must pay for health care properties or other assets that we seek to acquire, and our competitors may succeed in acquiring those properties or assets themselves. In addition, our potential acquisition targets may find our competitors to be more attractive because they may have greater resources, may be willing to pay more for the properties, or may have a more compatible operating philosophy. In particular, larger REITs that target health care properties may enjoy significant competitive advantages that result from, among other things, a lower cost of capital, enhanced operating efficiencies, more personnel and market penetration, and familiarity with markets. Further, limited construction during the COVID-19 pandemic has reduced the number of new properties that are available for acquisition. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase. Increased competition has increased demand for these assets and therefore increases prices paid for them. Those higher prices for health care properties or other assets may adversely affect our returns from our investments.

Some of our existing properties are, and properties we acquire in the future may be, subject to ground leases with fixed lease terms, use restrictions, rights reserved by ground lessors, and restrictions on doing business with competitors.

Ninety-seven of our consolidated properties, representing approximately 51.32% of our total leasable square feet and 51.0% of our annualized revenue based on rental payments as of December 31, ~~2022~~2023, are subject to ground leases that contain certain fixed lease terms and use restrictions and rights reserved by ground lessors. As a lessee under a ground lease, we are exposed to the possibility of losing the property upon expiration of the initial term, and any extension terms of the ground lease, or upon the earlier termination of the ground lease due to our breach of the ground lease. Our ground leases typically include restrictions on our ability to lease space to competitors and to other tenants who are not affiliated with, or on the staff of, the hospital or health system that owns the land underlying the ~~MOB~~outpatient medical facility and limits the types of medical procedures that our tenants may perform in the ~~MOB~~outpatient medical facility. Our ground leases also include rights reserved by the hospitals or health systems that own the underlying land, like purchase rights and rights of first offer and first refusal with respect to sales of the property. Our ground leases also restrict us from selling the property to competitors, usually within certain geographic limitations.

If we are required to accept lower rental rates than anticipated or if we are required to undertake significant capital expenditures to procure new tenants, then our business and results of operations may suffer.

Our growth could be impeded if we are required to lease or re-lease space in our ~~MOBs~~outpatient medical facilities at lower than expected rental rates, including annual rent escalators. We may not be able to lease or re-lease space on terms that are favorable to us or at all. Further, we may be required to undertake significant capital expenditures to renovate or reconfigure space to attract new tenants. If we are unable to promptly lease or re-lease space in our ~~MOBs~~outpatient medical facilities, if the rates upon such leasing or re-leasing are significantly lower than expected, or if we are required to undertake significant capital expenditures in connection with leasing or re-leasing the space in our ~~MOBs~~outpatient medical facilities, our business, financial condition and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected.

Uninsured losses or losses in excess of our insurance coverage could adversely affect our financial condition and our cash flows.

We maintain, and we require our tenants, property managers, and vendors to maintain when appropriate, desirable, or necessary, comprehensive liability property (including fire, flood, earthquake, wind as deemed necessary or as required by our lenders), extended coverage, builders risk, pollution, and business interruption and rental loss insurance with respect to our properties. Certain types of losses, however, may be either uninsurable or not economically insurable, such as losses due to pandemics and other communicable diseases, riots, acts of war, or terrorism. Should an uninsured loss occur, we could lose both our investment in and anticipated profits and cash flows from a health care-related facility. If any such loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss. In addition, future lenders may require such insurance, and our failure to obtain such insurance could constitute a default under loan agreements. We may determine not to insure some or all of our properties at levels considered customary in our industry, which would expose us to an increased risk of loss. As a result, our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected.

Environmental compliance costs and liabilities associated with owning, leasing, developing, and operating our properties may affect our results of operations.

Under various U.S. federal, state, and local laws, ordinances, and regulations, current and prior owners and tenants of real estate may be jointly and severally liable for the costs of investigating, remediating, and monitoring certain hazardous substances or other regulated materials on or in such property. In addition to these costs, the past or present owner or tenant of a property from which a release emanates could be liable for any personal injury or property damage that results from such releases, including for the unauthorized release of asbestos-containing materials and other hazardous substances into the air, as well as any damages to natural resources or the environment that arise from such releases. These environmental laws often impose such liability without regard to whether the current or prior owner or tenant knew of, or was responsible for, the presence or release of such substances or materials. Moreover, the release of hazardous substances or materials, or the failure to properly remediate such substances or materials, may adversely affect the owner’s or tenant’s ability to lease, sell, develop, or rent such property or to borrow by using such property as collateral. Persons who transport or arrange for the disposal or treatment of hazardous substances or other regulated materials may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, regardless of whether or not such facility is owned or operated by such person.

Certain environmental laws impose compliance obligations on owners and tenants of real property with respect to the management of hazardous substances and other regulated materials. For example, environmental laws govern the management 32

30Certain environmental laws impose compliance obligations on owners and tenants of real property with respect to the management of hazardous substances and other regulated materials. For example, environmental laws govern the management and removal of asbestos-containing materials and lead-based paint. In addition, compliance with new laws or regulations or stricter interpretation of existing laws may require us to incur significant expenditures. For example, proposed legislation to address climate change could result in increased capital expenditures to improve the energy efficiency and resiliency of our existing properties. Failure to comply with these laws can result in penalties or other sanctions. If we incur substantial costs to comply with these environmental laws or we are held liable under these laws, our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected.

and removal of asbestos-containing materials and lead-based paint. In addition, compliance with new laws or regulations or stricter interpretation of existing laws may require us to incur significant expenditures. For example, proposed legislation to address climate change could result in increased capital expenditures to improve the energy efficiency and resiliency of our existing properties. Failure to comply with these laws can result in penalties or other sanctions. If we incur substantial costs to comply with these environmental laws or we are held liable under these laws, our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares may be adversely affected.

We may be unable to make distributions which could result in a decrease in the market price of our common shares.

Substantially all of our assets are held through the Operating Partnership, which holds substantially all of its properties and assets through subsidiaries. Our Operating Partnership’s cash flow is dependent upon cash distributions to it by its subsidiaries, and in turn, substantially all of the Trust’s cash flow is dependent upon cash distributions to it by the Operating Partnership. The creditors of each of our direct and indirect subsidiaries are entitled to payment of that subsidiary’s obligation to them, as and when due and payable, before distributions may be made by that subsidiary to its equity holders. Therefore, our Operating Partnership’s ability to make distributions to holders of OP Units, including the Trust, depends on its subsidiaries’ ability first to satisfy their obligations to their creditors and then to make distributions to the Operating Partnership. Finally, the Trust’s ability to pay dividends to holders of common shares depends upon our Operating Partnership’s ability to first satisfy its obligations to its creditors and then to make distributions to the Trust.

While we expect to make regular quarterly distributions to the holders of our common shares, if sufficient cash is not available for distribution from our operations, we may have to fund distributions from working capital, borrow to provide funds for such distributions, or reduce the amount of such distributions. To the extent we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distributions from what they otherwise would have been. If cash available for distribution generated by our assets is less than expected, or if such cash available for distribution decreases in future periods from expected levels, our inability to make distributions could result in a decrease in the market price of our common shares. All distributions are made at the discretion of our Board of Trustees. Any inability to make distributions, or to make distributions at expected levels in the future, could result in a decrease in the market price of our common shares.

A failure to meet market expectations with respect to our business could negatively affect the market price of our common shares and thereby limit our ability to raise capital.

The availability of equity capital to us will depend, in part, upon the market price of our common shares which, in turn, will depend upon various market conditions and other factors that may change from time to time. Our failure to meet the market’s expectation with regard to future earnings, acquisitions, and investment activity or the capitalization rates or expected return on investments, and amount of any cash distributions may adversely affect the market price of our common shares and, as a result, the cost and availability of equity capital to us.

In addition, the vesting of any restricted shares granted to trustees, executive officers, and other employees under our 2013 Equity Incentive Plan, the issuance of our common shares or OP Units in connection with future property, portfolio or business acquisitions, and other issuances of our common shares, including pursuant to our ATM programs, may cause dilution to our shareholders and could have an adverse effect on the per share market price of our common shares and may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

The income from certain of our properties is dependent on the ability of third party property managers to successfully manage those properties.

We depend upon the performance of third party property managers to effectively manage certain of our properties and real estate assets. Approximately 4038.63% of our total portfolio gross leasable area is managed by third party property managers. We do not control third party property managers, and are accordingly subject to various risks generally associated with outsourcing of management of day-to-day activities. The income we recognize from any properties managed by third party property managers is dependent on the ability of the property manager of such property to successfully manage the property, which such property management is not within our control. Property managers generally compete with other companies in the management of properties, with respect to the quality of care provided, reputation, physical appearance of the property, and price and location, among other attributes. A property manager’s inability to successfully compete with other companies on one or more of the foregoing aspects could adversely impact our business and results of operations. Additionally, because we do not control third party property managers, any adverse events such as issues related to insufficient internal controls, cybersecurity incidents, or other adverse events may impact the income we recognize from properties managed by such third party property

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control third party property managers, any adverse events such as issues related to insufficient internal controls, cybersecurity incidents, or other adverse events may impact the income we recognize from properties managed by such third party property managers. We may be unable to anticipate such events or properly assess the magnitude of any such events because we do not control third party property managers who provide property management services to us.

Our business and operations have and may continue to be adversely affected by the COVID-19 pandemic, and may be adversely affected by other outbreaks of pandemic disease.

The COVID-19 pandemic and the measures taken to address the effects of the pandemic, have had immaterial adverse effects on our business, results of operations, and financial condition. Any other global outbreaks of pandemic disease could have a material adverse effect on our business, results of operations, and financial condition. The extent of the impact of the COVID-19 pandemic on the Company’s business, financial condition, and results of operations, including liquidity, capital, and financing resources will depend on numerous evolving conditions that the Company cannot predict.

Adverse economic conditions resulting from the COVID-19 pandemic, especially any downturns in the geographic areas in which we operate, and particularly in Texas and Georgia, or any downturn in the health care industry as a whole, may lower our occupancy levels. In certain cases, we restructured a tenant’s long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place.

Certain of our employees work remotely, while many others are on hybrid schedules spending a percentage of each week in the office and the remainder working from home. The effects of periods of remote work arrangements could create increased vulnerability to cybersecurity breaches or incidents involving us or our third party managers, which could disrupt our business, compromise our confidential information and confidential information of our tenants and other third parties, damage our reputation, and subject us to liability claims or regulatory penalties, any and all of which could have an adverse effect on our business, financial condition, and results of operations.

The extent to which the COVID-19 pandemic impacts, and may continue to impact, our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted, including the scope, severity, and duration of the pandemic including whether there are additional waves, other additional periods of increased COVID-19 cases, or the emergence of other new or more contagious variants that may render vaccines ineffective or less effective. As well as the availability and effectiveness of vaccines or an effective treatment, the willingness of individuals to receive a vaccine or otherwise comply with various mandates, and the direct and indirect economic effects of the pandemic and containment measures, among others. If we are unable to respond and manage the impact of these events, our business, financial condition, and results of operations including liquidity, capital, and financing resources may continue to be adversely affected.

Risks Related to the Health Care Industry

The health care industry is heavily regulated, and new laws or regulations, changes to existing laws and regulations, health policies, reimbursement levels from third-party payors, loss of licensure, or failure to obtain licensure could adversely impact our company and result in the inability of our tenants to make rent payments to us.

The health care industry is heavily regulated by U.S. federal, state, and local governmental authorities. Our tenants generally are subject to laws and regulations covering, among other things, licensure, certification for participation in government programs, billing for services, privacy and security of health information, and relationships with physicians and other referral sources. In addition, new laws and regulations, changes in existing laws and regulations or changes in the interpretation of such laws or regulations could negatively affect our financial condition and the financial condition of our tenants. These changes, in some cases, could apply retroactively. The enactment, timing, or effect of legislative or regulatory changes cannot be predicted.

The Affordable Care Act, along with other U.S. health care reform efforts, has resulted in significant health care reform since it was signed into law in 2010, including by changing how health care services are covered, delivered, and reimbursed through expanded coverage of uninsured individuals and reduced Medicare program spending. The complexities and ramifications of the Affordable Care Act are significant and were implemented in a phased approach which began in 2010. It remains difficult to predict the full effects of the Affordable Care Act and its impact on our business, our revenues, and financial condition and those of our tenants due to the law’s complexity, lack of implementing regulations or interpretive guidance, gradual implementation, partial repeal, and possible full repeal. Further, we are unable to foresee how individuals and businesses will respond to the choices afforded them by the Affordable Care Act, or the effect of any potential changes made to the Affordable Care Act or other health care laws and programs. The Affordable Care Act could adversely affect the reimbursement rates received by our tenants, the financial success of our tenants and strategic partners, and consequently us.

32On January 20, 2017, then-President Trump issued an Executive Order stating that it was the administration’s official policy to repeal the Affordable Care Act and instructing the Secretary of HHS and the heads of all other executive departments and agencies with authority and responsibility under the Affordable Care Act to, among other matters, minimize the economic and regulatory impacts of the Affordable Care Act to the extent permitted by law. On December 22, 2017, the Tax Act was signed into law. The Tax Act, amongst other things, zeroed out the Affordable Care Act’s individual mandate penalty beginning in 2019. The elimination of the monetary penalties does not remove the requirement to obtain health care coverage; however, without penalties there effectively will be no enforcement. On December 14, 2018, a federal district court in Texas ruled that the Affordable Care Act’s individual mandate was unconstitutional. President Biden formally revoked President Trump’s Executive Order regarding the Affordable Care Act on January 28, 2021. The United States Supreme Court heard the Texas case following a series of appeals, and dismissed the case and upheld the Affordable Care Act in June 2021.

On January 20, 2017, then-President Trump issued an Executive Order stating that it is the administration’s official policy to repeal the Affordable Care Act and instructing the Secretary of HHS and the heads of all other executive departments and agencies with authority and responsibility under the Affordable Care Act to, among other matters, minimize the economic and regulatory impacts of the Affordable Care Act to the extent permitted by law. On December 22, 2017, the Tax Act was signed into law. The Tax Act, amongst other things, repeals the Affordable Care Act’s individual mandate penalty beginning in 2019. The elimination of the penalties does not remove the requirement to obtain health care coverage; however, without penalties there effectively will be no enforcement. On December 14, 2018, a federal district court in Texas ruled that the Affordable Care Act’s individual mandate was unconstitutional. President Biden formally revoked President Trump’s Executive Order regarding the Affordable Care Act on January 28, 2021. The United States Supreme Court heard the Texas case following a series of appeals, and dismissed the case and upheld the Affordable Care Act in June 2021.

Despite action by the current administration and the Supreme Court’s decision to uphold the Affordable Care Act we cannot predict how the Affordable Care Act may be amended or modified, either through the legislative or judicial process, and how any such modification might impact our tenants’ operations or the net effect of this law on us. Both our tenants and we may be materially adversely affected by the law or its repeal, amendment, or replacement, and if the operations, cash flows, or financial condition of our operators and tenants are materially adversely impacted by any repeal or modification of the law, our revenue and operations may be materially adversely affected as well.

~~Additionally~~Moreover, ~~certain~~policy innovations continue to drive changes in the delivery of ~~our~~health ~~operators~~care. ~~and~~For ~~tenants~~example, ~~will~~in beJune ~~subject~~2023, toCMS announced the ~~requirements~~Making ofCare ~~the~~Primary ~~NSA~~Model, ~~and~~which atwill ~~risk~~be ~~for~~piloted ~~civil~~to ~~monetary~~offer ~~penalties~~certain ~~for~~small, ~~violations~~independent, ofrural ~~its~~and ~~requirements.~~safety-net ~~This~~providers ~~could~~an ~~adversely~~avenue ~~affect~~through ~~their~~which ~~ability~~they tocan ~~pay~~enter usinto ~~rent~~value-based ~~and~~care ~~accordingly~~arrangements. Moreover, ~~could~~CMS ~~have~~has indicated a ~~material~~goal ~~adverse~~to ~~effect~~have onall ~~our~~traditional ~~financial~~Medicare ~~condition~~beneficiaries and ~~results~~the majority of ~~operations.~~Medicaid ~~Enforcement~~beneficiaries ofin ~~the~~accountable ~~new~~care IBrelationships ~~Regulations~~by ~~could~~2030. ~~create~~While ~~additional~~changes ~~risk~~in ofhealth ~~nonpayment~~care ~~given~~delivery ~~increased~~mechanisms ~~costs~~are ~~and~~intended ~~the~~to ~~potential~~promote ~~for~~quality ~~penalties~~care ~~associated~~and ~~with~~align ~~such~~economic ~~requirements,~~incentives ~~though~~between ~~the~~patients ~~magnitude~~and ofproviders, ~~such~~it ~~risk~~ is ~~still~~unclear ~~uncertain~~how ~~pending~~such ~~further~~changes ~~guidance~~will oneconomically ~~enforcement~~impact ~~from the government~~providers.

Additionally, certain of our operators and tenants will be subject to the requirements of the NSA, and at risk for civil monetary penalties for violations of its requirements. This could adversely affect their ability to pay us rent and accordingly, could have a material adverse effect on our financial condition and results of operations. Enforcement of the IB Regulations

could create additional risk of nonpayment given increased costs and the potential for penalties associated with such requirements.

These quickly evolving (and at time conflicting) laws, regulations or other requirements and court decisions will likely create legal and operational challenges for health care providers, including our tenants that are hospitals, surgery centers, and certain physicians practices, and may exacerbate existing challenges around staffing, leading to increased costs for temporary or contract labor and potential business disruptions, any of which may adversely affect our tenant’s ability to pay us rent.

Changes to health care laws and regulations, including to government reimbursement programs such as Medicare and reimbursement rates applicable to our current and future tenants, could have a material adverse effect on the financial condition of our tenants and, consequently, their ability to meet obligations to us.

Statutory, regulatory, and reimbursement policy changes and judicial decisions may impact one or more specific providers that lease space in any of our facilities. The laws and regulations applicable to the health care industry are subject to frequent and substantial changes that may have a dramatic effect on the permissible or impermissible activities, costs of doing business, availability, and amount of reimbursement by both government and other third-party payors, and the costs of complying with such laws and regulations. Such changes could adversely affect the ability of our tenants to make rent payments to us, which may have an adverse effect on our business, operations, and financial condition. This may in turn have an adverse effect on our ability to make distributions to our shareholders and the market price of our common shares.

For example, our tenants are generally subject to laws and regulations covering, among other things, laws protecting consumers against deceptive practices, laws relating to the operation of properties and businesses, such as fire, health and safety, data security and privacy laws, laws affecting hospitals, clinics, and other health care providers that participate in Medicare and/or Medicaid that specify reimbursement rates, pricing, reimbursement procedures, payment policies, HOPD eligibility, quality of services and care, background checks, anti-kickback and physician referral laws, EKRA, the Americans with Disabilities Act of 1990 (“ADA”) and similar state and local laws, regulations established by the OSHA, requirements and regulations established by CMS, and other legislation such as the CARES Act and the CAA.

These laws, policies and regulations and any amendments or newly established laws or regulations may have an adverse financial impact on the net operating revenues and profitability of many of our tenants, including ~~MOBs~~outpatient medical facilities and other physician offices. This could adversely affect their ability to pay us rent and accordingly, could have a material adverse effect on our financial condition and results of operations.

Many states also regulate the establishment and construction of health care facilities and services, and the expansion of existing health care facilities and services through CON laws, which may include regulation of certain types of beds, medical equipment, and capital expenditures. Under such laws, the applicable state regulatory body must determine a need exists for a project before the project can be undertaken. If any of our tenants seeks to undertake a CON-regulated project, but are not authorized by the applicable regulatory body to proceed with the project, or encounter delays in approvals due to a backlog or staff shortage following the COVID-19 pandemic, these tenants could be prevented or delayed from operating in their intended manner and could be materially adversely affected.

authorized by the applicable regulatory body to proceed with the project, or encounter delays in approvals due to the ongoing COVID-19 pandemic, these tenants could be prevented or delayed from operating in their intended manner and could be materially adversely affected.

The application of lower reimbursement rates to our tenants or failure to qualify for existing rates under certain exceptions, the failure to comply with these laws and regulations, or the failure to secure CON approval to undertake a desired project could adversely affect our tenants’ ability to make rent payments to us which may have an adverse effect on our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares.

Adverse trends in health care provider operations may negatively affect our lease revenues and our ability to make distributions to our shareholders.

The health care industry is currently experiencing, among other things:

•changes in the demand for and methods of delivering health care services, such as telehealth services;

•changes in third party reimbursement methods and policies;

•consolidation and pressure to integrate within the health care industry through acquisitions, joint ventures, and managed service organizations;

•increased scrutiny of billing, pricing, referral, and other practices by U.S. federal and state authorities;

•competition among health care providers;

•staffing and supply chain shortages and increased costs ~~resulting~~following ~~from~~ the COVID-19 pandemic; and

•increased scrutiny of control over release of confidential patient medical information.

These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our lease revenues, which may have a material adverse effect on our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares.

Reductions in reimbursement from third party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rent payments to us or renew their leases.

Sources of revenue for our tenants typically include private insurance payors, the U.S. federal Medicare program, state Medicaid programs, MCOs, HMOs, and ACOs. Health care providers continue to face government and private payor pressure to control or reduce health care costs and significant reductions in health care reimbursement, including changes to payment methodologies under the Affordable Care Act and other federal or state health care legislation. In some cases, private insurers rely upon all or portions of the Medicare payment systems to determine payment rates which may result in decreased reimbursement from private insurers.

The recent slowdown in the United States economy has negatively affected state budgets, thereby putting pressure on states to decrease spending on state programs including Medicaid. The need to control Medicaid expenditures may be exacerbated by the potential for increased enrollment in state Medicaid programs due to unemployment and declines in family incomes. Historically, states have often attempted to reduce Medicaid spending by limiting benefits and tightening Medicaid eligibility requirements. Many states have adopted, or are considering the adoption of, legislation designed to enroll Medicaid recipients in managed care programs and/or impose additional taxes on hospitals to help finance or expand the states’ Medicaid systems. On September 15, 2020, CMS advised states on implementing value-based care (“VBC”) programs, with a particular emphasis on Medicaid. VBC programs hold providers financially accountable for providing quality care, reducing health disparities, eliminating unnecessary procedures, and lowering costs. Potential reductions to Medicaid program spending in response to state budgetary pressures could negatively impact the ability of our tenants to successfully operate their businesses. In addition, if a partial or total federal government shutdown were to occur for a prolonged period of time, federal government payment obligations, including its obligations under Medicaid and Medicare, may be delayed. Similarly, if state government shutdowns were to occur, state payment obligations may be delayed. If the federal or state governments fail to make payments under these programs on a timely basis, our business could suffer, and our financial position, results of operations or cash flows may be materially affected.

Efforts by payors to reduce health care costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. A reduction in reimbursements to our tenants from third party payors for any reason could adversely affect our tenants’ ability to make rent payments to us which may have a material adverse effect on our businesses, financial condition and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares.

Our tenants and our company are subject to fraud and abuse laws, the violation of which by a tenant may jeopardize the tenant’s ability to make rent payments to us.

There are various federal and state laws prohibiting fraudulent and abusive business practices by health care providers who participate in, receive payments from, or are in a position to make referrals in connection with government-sponsored health care programs, including the Medicare and Medicaid programs. Our lease arrangements with certain tenants may also be subject to these fraud and abuse laws.

Violations of these laws may result in criminal and/or significant civil penalties that range from punitive sanctions, damage assessments, penalties, imprisonment, denial of Medicare and Medicaid payments, and/or exclusion from the Medicare and Medicaid programs. In addition, the Affordable Care Act clarifies that the submission of claims for items or services generated in violation of the Anti-Kickback Statute constitutes a false or fraudulent claim under the False Claims Act. Further, the government has taken the position, and some courts have held, that violations of these and other laws, such as the Stark Law, can also be a violation of the False Claims Act. We expect government enforcement of federal fraud and abuse laws to continue.

Imposition of any of these penalties upon one of our tenants or strategic partners could jeopardize that tenant’s ability to operate or to make rent payments or affect the level of occupancy in our health care properties, which may have a material adverse effect on our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares. Further, we enter into leases and other financial relationships with health care delivery systems that are subject to or impacted by these laws. We also have other investors who are health care providers in certain of our subsidiaries that own our health care properties. If any of our relationships, including those related to the other investors in our subsidiaries, are found not to comply with these laws, we and our health care provider investors may be subject to significant civil and/or criminal penalties.

health care delivery systems that are subject to or impacted by these laws. We also have other investors who are health care providers in certain of our subsidiaries that own our health care properties. If any of our relationships, including those related to the other investors in our subsidiaries, are found not to comply with these laws, we and our health care provider investors may be subject to significant civil and/or criminal penalties.

Our health care-related tenants may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us, and we could be subject to health care industry violations.

As is typical in the health care industry, our tenants may become subject to claims that their services have resulted in patient injury or other adverse effects. Many of these tenants may have experienced an increasing trend in the frequency and severity of professional liability and general liability insurance claims and litigation asserted against them. The insurance coverage maintained by these tenants may not cover all claims made against them nor continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be available to these tenants due to state law prohibitions or limitations of availability. As a result, these types of tenants of our health care properties and health care-related facilities operating in these states may be liable for punitive damage awards that are either not covered or are in excess of their insurance policy limits.

We also believe that there has been, and will continue to be, an increase in governmental investigations of certain health care providers, particularly in the area of Medicare/Medicaid false claims, as well as an increase in enforcement actions resulting from these investigations. Insurance is generally not available to cover such losses. Any adverse determination in a legal proceeding or governmental investigation, any settlements of such proceedings, or investigations in excess of insurance coverage, whether currently asserted or arising in the future, could have a material adverse effect on a tenant’s financial condition. If a tenant is unable to obtain or maintain insurance coverage, if judgments are obtained or settlements reached in excess of the insurance coverage, if a tenant is required to pay uninsured punitive damages, or if a tenant is subject to an uninsurable government enforcement action or investigation, the tenant could be exposed to substantial additional liabilities, which may affect the tenant’s ability to pay rent, which in turn could have a material adverse effect on our business, financial condition, and results of operations, our ability to pay distributions to our shareholders, and the market price of our common shares. We could also be subject to costly government investigations or other enforcement actions which could have a material adverse effect on our business, financial condition, and results of operations, our ability to pay distributions to our shareholders, and the market price of our common shares.

HIPAA was established to set national standards for the confidentiality, security, and transmission of personal health information (“PHI”). Health care providers are required, under HIPAA and its implementing regulations, to protect and keep confidential any PHI. HIPAA also sets limits and conditions on use and disclosure of PHI without patient authorization. The law gives patients specific rights to their health information, including rights to obtain a copy of or request corrections to their medical records. The physician or the medical practice can be liable if there are improper disclosures of PHI, including from employee mishandling of PHI, medical records security breaches, lost or stolen electronic devices, hacking, social media breaches or failure to get patient authorizations. Violations could result in multi-million dollar penalties. Actual or potential violations of HIPAA could subject our tenants to government investigations, litigation or other enforcement actions which could adversely affect our tenants’ ability to pay rent and could have a material adverse effect on our business, financial condition, and results of operations, our ability to pay distributions to our shareholders, and the market price of our common shares. In October 2023, the HHS Office of Civil Rights (“OCR") released guidance regarding sanction policies for HIPAA compliance. Following up on a 2022 threat brief, the OCR guidance emphasized the importance of sanction policies as a means to support accountability, improve cybersecurity and data protection, and create a culture of HIPAA compliance. Also in October 2023, the Biden Administration issued an executive order outlining guiding principles and directives to regulate artificial intelligence (“AI”). The executive order includes, among other things, a directive for the development of an HHS AI Task Force that will be responsible for developing a strategic plan for policies and frameworks, including potential regulatory action, on the use of AI.

employee mishandling of PHI, medical records security breaches, lost or stolen electronic devices, hacking, social media breaches or failure to get patient authorizations. Violations could result in multi-million dollar penalties. Actual or potential violations of HIPAA could subject our tenants to government investigations, litigation or other enforcement actions which could adversely affect our tenants’ ability to pay rent and could have a material adverse effect on our business, financial condition, and results of operations, our ability to pay distributions to our shareholders, and the market price of our common shares.

The COVID-19 pandemic is affecting operations and financial condition of tenants and operators and future results of operations could continue to be negatively impacted and, consequently, their ability to meet obligations to us.

Increased demands for care put strain on resources and staff, which may require tenants and operators to utilize higher-cost temporary labor and to pay premiums above standard compensation for essential workers. Even with appropriate protective measures, exposure to COVID-19 increases the risk that physicians, nurses and other workers contract the virus, which could result in workforce disruptions and impact tenants’ ability to treat patients who seek care. Tenants and operators may be subject to lawsuits from patients, employees and others exposed to COVID-19 and/or related to vaccine requirements.

The COVID-19 pandemic or disruptions to manufacturing or supply chain operations could further impact the cost of medical supplies, and supply shortages and delays may impact tenants’ and operators’ ability to treat patients. The pandemic has placed additional stress on information technology systems, and the risk of cybersecurity threats or other disruption to these systems is elevated in the current environment. Broad economic factors resulting from the COVID-19 pandemic, including increased unemployment rates and reduced consumer spending, may impact service volumes and revenues. Business closings and layoffs may lead to increases in the uninsured and underinsured populations and adversely affect demand for services, as well as the ability of patients to pay for services.

The CARES Act and related legislative and regulatory actions have provided relief measures intended to mitigate some of the economic disruption caused by the COVID-19 pandemic; however, interpretations of and regulations relating to these laws are subject to change in ways that may adversely affect tenants’ receipt of funding or eligibility to participate. Federal, state, and local governments may consider additional stimulus and relief efforts, but we are unable to predict whether any such measures will be enacted or their impact on tenants’ operations. There can be no assurance that the amounts or benefits received under current or future relief measures related to the COVID-19 pandemic will be sufficient to offset negative impacts on the tenants or operators arising from the COVID-19 pandemic.

Trends in the methods of delivering health care services could reduce demand for medical office space.

The health care industry is experiencing, among other things, changes in the demand for and methods of delivering health care services such as telehealth, and telehealth services ~~have also~~ expanded rapidly in response to the COVID-19 pandemic ~~and the need for social distancing~~. During the COVID-19 pandemic, both government and other third-party payors ~~have~~ incentivized physicians, providers, and patients to utilize technology for medical encounters by paying and reimbursing for such encounters as if they were in-office encounters, and CMS has made several changes in the manner in which Medicare will pay for telehealth visits. It is unclear whether these incentives and other changes will remain in place permanently ~~or will be rolled-back following the COVID-19 pandemic~~, ~~although~~but ~~the~~many ~~Company~~have ~~expects~~been ~~that~~initially ~~the~~extended ~~availability~~following ~~and popularity of patients using telehealth services will continue to increase from pre-COVID levels over time. While~~ the ~~revenues~~end ~~and efficiencies~~ of ~~telehealth services may increase~~ the service offerings of our tenants, a long-term increase in telehealth services could reduce demand for medical office space, which could increase non-renewal of leases by our tenants and adversely impact our ability to maintain current rental and occupancy rates and could adversely affect our revenues, financial condition, and results of operations.

COVID-19 pandemic. The Company expects that the availability and popularity of patients using telehealth services will continue to increase over time. While the revenues and efficiencies of telehealth services may increase the service offerings of our tenants, a long-term increase in telehealth services could reduce demand for medical office space, which could increase non-renewal of leases by our tenants and adversely impact our ability to maintain current rental and occupancy rates and could adversely affect our revenues, financial condition, and results of operations.

Risks Related to the Real Estate Industry

Our operating performance is subject to risks associated with the real estate industry.

Real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control. Certain events may decrease cash available for distributions as well as the value of our properties. These events include, but are not limited to:

•vacancies or our inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights, or tenant-favorable renewal options;

•inability to collect rent from tenants;

•competition from other real estate investors with significant capital, including other real estate operating companies, REITs, and institutional private equity or other investment funds;

•reductions in the level of demand for health care properties and changes in the demand for certain health care-related properties;

•increases in the supply of medical office space;

•increases in expenses associated with our real estate operations, including, but not limited to, insurance costs, third party management fees, energy prices, real estate assessments, and other taxes and costs of compliance with laws, regulations and governmental policies, and restrictions on our ability to pass such expenses on to our tenants; and

•changes in, and changes in interpretation or enforcement of, laws, regulations, and governmental policies associated with real estate, including, without limitation, health, safety, environmental, real estate and zoning and tax laws, increases in real property tax rates and taxation of REITs, governmental fiscal policies, and the ADA.

In addition, periods of economic slowdown or recession, such as the recent U.S. economic downturn, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases. If we cannot operate our properties to meet our financial expectations, our business, financial condition, results of operations, cash flow, per share market price of our common shares, and ability to satisfy our debt service obligations and to make distributions to our shareholders could be adversely affected.

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of any of our properties.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more of our properties in response to changing economic, financial, and investment conditions is limited. The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, and other factors, including supply and demand, that are beyond our control. We cannot predict whether we will be able to sell any of our properties for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us or at all. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of any of our properties. We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure that we will have funds available to correct those defects or to make those improvements.

In acquiring a property, we may agree to transfer restrictions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed on that property. These transfer restrictions would impede our ability to sell a property even if we deem it necessary or appropriate. These facts and any others that would impede our ability to respond to adverse changes in the performance of our properties may have an adverse effect on our business, financial condition, results of operations, or ability to make distributions to our shareholders and the market price of our common shares.

Uncertain market conditions could cause us to sell our health care properties at a loss in the future.

We intend to hold our various real estate investments until such time as we determine that a sale or other disposition appears to be advantageous to achieve our investment objectives. Our Executive Leadership and the Trust’s Board of Trustees may exercise their discretion as to whether and when to sell a property, and we will have no obligation to sell our buildings at any particular time. We generally intend to hold our health care properties for an extended period of time, and we cannot predict with any certainty the various market conditions affecting real estate investments that will exist at any particular time in the future. Because of the uncertainty of market conditions that may affect the future disposition of our health care properties, we may not be able to sell our properties at a profit in the future or at all. In addition, if we are unable to access the capital markets for financing in the future, we may need to sell some of our properties to raise capital. We may incur prepayment penalties in the event that we sell a property subject to a mortgage earlier than we otherwise had planned. Additionally, we could be forced to sell health care properties at inopportune times which could result in us selling the affected property at a substantial loss. Accordingly, the extent to which we will pay cash distributions and realize potential appreciation on our real estate investments will, among other things, be dependent upon fluctuating market conditions. Any inability to sell a health care property could adversely impact our ability to make debt payments and distributions to our shareholders.

We face risks associated with the potential impacts of severe weather events and climate change.

Severe weather events and climate change are highly uncertain and could have material adverse effects on our properties, operations, and business. To the extent that severe weather events, such as hurricanes, floods, tornadoes, earthquakes, blizzards, and extreme cold, or significant changes in climate occur in the geographic locations where our properties are located or cause damage to any of the properties, we may experience revenue loss, cost increase, construction delays, tenant disruption or displacement of their operations, and decreased demand for properties located in such geographic areas or affected by such changes. Climate change and severe weather may also have indirect effects on our business by increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable, by increasing the cost of energy, maintenance, repair of water and/or wind damage, and snow removal at our properties. In addition, changes in federal and state laws and regulations intended to reduce the impacts of climate change could result in, among other things, increased capital expenditures to improve energy efficiency at our properties, increased costs of property insurance or render such insurance unavailable on terms acceptable to us, and increased costs of developing properties without corresponding increases in revenue.

properties are located or cause damage to any of the properties, we may experience revenue loss, cost increase, construction delays, tenant disruption or displacement of their operations, and decreased demand for properties located in such geographic areas or affected by such changes. Climate change and severe weather may also have indirect effects on our business by increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable, by increasing the cost of energy, maintenance, repair of water and/or wind damage, and snow removal at our properties. In addition, changes in federal and state laws and regulations intended to reduce the impacts of climate change could result in, among other things, increased capital expenditures to improve energy efficiency at our properties, increased costs of property insurance or render such insurance unavailable on terms acceptable to us, and increased costs of developing properties without corresponding increases in revenue.

Our assets may be subject to impairment charges.

We periodically evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based upon factors such as market conditions, tenant performance, and legal structure. For example, the termination of a lease by a major tenant may lead to an impairment charge. If we determine that an impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset, which could have an adverse effect on our results of operations in the period in which the impairment charge is recorded. We have had tenant defaults that have caused us to record impairment charges in the past, and it is possible we may have tenant defaults in the future, which could lead to impairment charges.

Our investments in, or originations of, mezzanine and term loans will be subject to specific risks relating to the particular property or entity obligated to repay the loan, and our loans will involve greater risks of loss than senior loans secured by income-producing properties.

As of December 31, ~~2022~~2023, we have ~~eight~~ten mezzanine loans, five term loans, and ~~one~~four construction ~~loan~~loans outstanding, and in the future, we may originate further loans. These investments involve special risks relating to the particular borrower, including its financial condition, liquidity, results of operations, business, and prospects. We may also originate other real estate-related investments which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity that owns the interest in the entity owning the property or other properties. These types of assets involve a higher degree of risk than long-term senior mortgage lending secured by income producing real property because the loan is in a subordinated position and there may not be sufficient proceeds remaining to repay the loan after foreclosure and sale of the property by the senior lender. In the event of a bankruptcy of the entity providing the pledge of its ownership interests as security, we may not have full recourse to the assets of such entity, or the assets of the entity may not be sufficient to satisfy such loan. If a borrower defaults on a loan or debt senior to our loan, or in the event of a borrower bankruptcy, such loan will be satisfied only after the senior debt. We may be unable to enforce guaranties of payment and/or performance given as security for some loans. As a result, we may not recover some or all of our initial expenditure. Mezzanine and term loans may partially finance the construction of real estate projects and so involve additional risks inherent in the construction process, such as adherence to budgets and construction schedules. In addition, mezzanine and term loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Significant losses related to our mezzanine and term loans would result in operating losses for us and may limit our ability to make distributions to our shareholders.

adherence to budgets and construction schedules. In addition, mezzanine and term loans may have higher loan-to-value ratios than conventional mortgage loans, resulting in less equity in the property and increasing the risk of loss of principal. Significant losses related to our mezzanine and term loans would result in operating losses for us and may limit our ability to make distributions to our shareholders.

Risks Related to Financings

Required payments of principal and interest on borrowings may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT and may expose us to the risk of default under our debt obligations.

We historically borrow on our unsecured revolving credit facility to acquire properties. Then, as market conditions dictate, we have issued equity or long-term fixed rate debt to repay borrowings under our unsecured revolving credit facility. We are subject to risks associated with debt financing, including the risk that existing indebtedness may not be refinanced or that the terms of refinancing may not be as favorable as the terms of current indebtedness. The majority of our borrowings were completed under indentures or contractual agreements that limit the amount of indebtedness we may incur. Accordingly, in the event that we are unable to raise additional equity or borrow money because of these limitations, our ability to acquire additional properties may be limited.

As of December 31, ~~2022~~2023, we had approximately $~~164~~127.9 million of mortgage debt on individual properties and approximately $~~193~~400.0 million of borrowings outstanding under our unsecured credit facility. In addition, in January 2016, August 2016, March 2017, December 2017, and October 2021 we issued and sold $150.0 million, $75.0 million, $400.0 million, $350.0 million, and $500.0 million respectively, aggregate principal amount of senior notes. During the year ended December 31, 2023, the Company paid off $15.0 million of our January 2016 senior notes. We expect to incur additional debt in the future. We do not anticipate that our internally generated cash flow will be adequate to repay our existing indebtedness upon maturity, and, therefore, we expect to repay our indebtedness through refinancings and future offerings of equity and debt securities, either of which we may be unable to secure on favorable terms or at all. Our level of debt and the limitations imposed upon us by our debt agreements could have adverse consequences, including the following:

August 2016, March 2017, December 2017, and October 2021 we issued and sold $150.0 million, $75.0 million, $400.0 million, $350.0 million, and $500.0 million respectively, aggregate principal amount of senior notes. We expect to incur additional debt in the future. We do not anticipate that our internally generated cash flow will be adequate to repay our existing indebtedness upon maturity, and, therefore, we expect to repay our indebtedness through refinancings and future offerings of equity and debt securities, either of which we may be unable to secure on favorable terms or at all. Our level of debt and the limitations imposed upon us by our debt agreements could have adverse consequences, including the following:

•our cash flow may be insufficient to meet our required principal and interest payments;

•we may be unable to borrow additional funds as needed or on favorable terms, including to make acquisitions;

•we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;

•because a portion of our debt bears, or is expected to bear, interest at variable rates, an increase in interest rates could materially increase our interest expense;

•we may fail to effectively hedge against interest rate volatility;

•we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms if we are able to do so at all;

•our leverage could place us at a competitive disadvantage compared to our competitors who have less debt;

•we may experience increased vulnerability to economic and industry downturns, reducing our ability to respond to changing business and economic conditions;

•we may default on our obligations and the lenders or mortgagees may foreclose on our properties that secure their loans and receive an assignment of rents and leases;

•we may violate financial covenants contained in our various loan documents which would cause a default on our obligations, giving lenders various remedies, including increased interest rates, foreclosure, and liability for additional expenses;

•we may inadvertently violate non-financial restrictive covenants in our loan documents, such as covenants that require us to maintain the existence of entities, maintain insurance policies and provide financial statements, which would entitle the lenders to accelerate our debt obligations; and

•our default under any of our mortgage loans with cross-default or cross-collateralization provisions could result in default on other indebtedness and result in the foreclosures of other properties.

The realization of any or all of these risks may have an adverse effect on our business, financial condition, and results of operations, our ability to make distributions to our shareholders, and the market price of our common shares.

As of December 31, 2022, we had approximately $193.0 million of borrowings outstanding under our unsecured credit facility. Since 2016, we have issued an aggregate of $1.5 billion of debt. All of these items are senior to our common shares upon liquidation, and we may in the future make offerings of debt or preferred equity securities which may be senior to our common shares for purposes of dividend distributions or upon liquidation, any of which may materially adversely affect the per share market price of our common shares.40

As of December 31, ~~2022~~2023, ~~there~~we ~~were~~had approximately $~~193~~400.0 million of borrowings outstanding under our unsecured credit facility. Since 2016, we have issued an aggregate of $1.5 billion of ~~aggregate~~debt. ~~principal~~All ~~amount~~ of ~~senior~~these ~~notes.~~items Inare ~~the~~senior ~~future, we may attempt~~ to ~~increase~~ our ~~capital~~common resources by making additional offerings of debt or equity securities (or causing the Operating Partnership to issue debt securities), including medium-term notes, senior or subordinated notes, and classes or series of preferred shares. ~~Upon~~upon liquidation, ~~holders of our debt securities~~ and, ~~lenders~~subject ~~with respect~~ to ~~other~~the ~~borrowings~~restrictions ~~will~~in ~~be entitled to receive our available assets prior to distribution to~~ the ~~holders~~Merger ~~of our common shares. Additionally~~Agreement, ~~any convertible or exchangeable securities that~~ we ~~issue~~may in the future ~~may~~make ~~have~~offerings ~~rights,~~of ~~preferences,~~debt ~~and~~or ~~privileges~~preferred ~~more~~equity ~~favorable~~securities ~~than~~which ~~those of our common shares and~~ may ~~result~~be insenior ~~dilution~~ to ~~owners of~~ our common shares. ~~Holders~~for purposes of ~~our~~dividend ~~common~~distributions ~~shares are not entitled to preemptive rights~~ or ~~other~~upon ~~protections~~liquidation, ~~against dilution. Because our decision to issue securities in~~ any ~~future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature~~ of ~~our~~which ~~future~~may ~~offerings.~~materially ~~Thus,~~adversely ~~our~~affect ~~shareholders bear~~ the ~~risk that our future offerings could reduce the~~ per share market price of our common shares ~~and dilute their interest in us~~.

As of December 31, 2023, there were approximately $400.0 million of borrowings outstanding under our unsecured credit facility. Since 2016, we have issued $1.5 billion of aggregate principal amount of senior notes. In the future, subject to the restrictions in the Merger Agreement, we may attempt to increase our capital resources by making additional offerings of debt or equity securities (or causing the Operating Partnership to issue debt securities), including medium-term notes, senior or subordinated notes, and classes or series of preferred shares. Upon liquidation, holders of our debt securities and lenders with respect to other borrowings will be entitled to receive our available assets prior to distribution to the holders of our common shares. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences, and privileges more favorable than those of our common shares and may result in dilution to owners of our common shares. Holders of our common shares are not entitled to preemptive rights or other protections against dilution. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings. Thus, our shareholders bear the risk that our future offerings could reduce the per share market price of our common shares and dilute their interest in us.

The derivative instruments that we may use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on our shareholders’ investment.

We may use derivative instruments to hedge exposure to changes in interest rates on certain of our variable rate loans, but no hedging strategy can protect us completely. We cannot assure our shareholders that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging of these transactions will not result in losses. Any settlement charges incurred to terminate unused derivative instruments may result in increased interest expense, which may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests.

expense, which may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests.

We rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.

In order to qualify as a REIT under the ~~Internal Revenue~~ Code ~~of 1986~~, ~~as amended (the “Code”),~~ we are required, among other things, to distribute each year to our shareholders at least 90% of our taxable income, without regard to the deduction for dividends paid and excluding net capital gain. Because of this distribution requirement, we may not be able to fund all of our future capital needs from cash retained from operations, including capital needed to make investments and to satisfy or refinance maturing obligations. As a result, we expect to rely upon external sources of capital, including debt and equity financing, to fund future capital needs, subject to the restrictions in the Merger Agreement. If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business or to meet our obligations and commitments as they mature. Our access to capital will depend upon a number of factors over which we have little or no control, including general stock and bond market conditions and investor interest, the market’s perception of our current and potential future earnings, analyst reports about us and the REIT industry, cash distributions and the market price of our common shares, and other factors such as governmental regulatory action and changes in REIT tax laws. We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable to access the capital markets on a timely basis on favorable terms. Moreover, additional equity offerings may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase our leverage, either of which could cause the per share price of our common shares to decline.

If we become highly leveraged in the future, the resulting increase in outstanding debt could adversely affect our ability to make debt service payments, to pay our anticipated distributions, to obtain additional financing, and to make the distributions required to qualify as a REIT.

As of December 31, ~~2022~~2023, our consolidated indebtedness represented approximately 3031% of our gross assets. If we become more highly leveraged, the resulting increase in outstanding debt could adversely affect our ability to make debt service payments, to pay our anticipated distributions, to obtain additional financing, and to make the distributions required to qualify as a REIT. The occurrence of any of the foregoing risks could adversely affect our business, financial condition, and results of operations, or credit ratings, our ability to make distributions to our shareholders, and the market price of our common shares.

We are subject to covenants in our debt agreements that may restrict or limit our operations and acquisitions and our failure to comply with the covenants in our debt agreements could have a material adverse impact on our business, results of operations, and financial condition.

The terms of the instruments governing our existing indebtedness require us to comply with a number of customary financial and other covenants, such as maintaining certain leverage and coverage ratios and minimum tangible net worth requirements. Our continued ability to incur additional debt and to conduct business in general is subject to our compliance with these covenants, which limit our operational flexibility. Breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness, in addition to any other indebtedness cross-defaulted against such instruments. Any such default could have a material adverse impact on our business, results of operations, and financial condition, or our ability to make distributions to our shareholders.

A downgrade in our credit ratings could materially adversely affect our business and financial condition.

Our credit rating and the credit ratings assigned to our debt securities could change based upon, among other things, our financial condition. These ratings are subject to ongoing evaluation by credit rating agencies, and any rating could be changed or withdrawn by a rating agency in the future if, in its judgment, circumstances warrant such action.

If any of the credit rating agencies that have rated our securities downgrades or lowers its credit rating, or if any credit rating agency indicates that it has placed any such rating on a “watch list” for a possible downgrade or lowering, or otherwise indicates that its outlook for that rating is negative, such action could have a material adverse effect on our costs and availability of funding, which could in turn have a material adverse effect on our financial condition, results of operations, cash flows, the market price of our securities, and our ability to satisfy our debt service obligations, among other obligations.

If securities analysts downgrade our common shares or the health care-related real estate sector, the market price of our common shares could decline.

The market for our common shares depends in part upon the research and reports that industry or financial analysts publish about us and our industry. We have no control over these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the price of our common shares could decline. If one or more of these analysts ceases coverage of our company, we could lose attention in the market which in turn could cause the market price of our common shares to decline.

Risks Related to Our Portfolio and Structure

We have no direct operations and rely upon funds received from the Operating Partnership to meet our obligations.

The Trust conducts substantially all of its operations through the Operating Partnership. As of February 1416, ~~2023~~2024, the Trust owned approximately 96.1% of the OP Units and apart from this ownership interest, the Trust does not have any independent operations. As a result, the Trust relies upon distributions from the Operating Partnership to pay any distributions that the Trust might declare on the Trust’s common shares. We also rely upon distributions from the Operating Partnership to the Trust to meet our obligations, including tax liability on taxable income allocated to the Trust from the Operating Partnership (which might make distributions to the Trust not equal to the tax on such allocated taxable income). Consequently, shareholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of the Operating Partnership and its subsidiaries. Therefore, in the event of bankruptcy, liquidation or reorganization of the Trust, claims of the Trust’s shareholders will be satisfied only after all of the Trust’s and the Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

Our business could be harmed if key personnel terminate their employment with us or if we are unsuccessful in integrating new personnel into our operations.

Our success depends, to a significant extent, on the continued services of Mr. Thomas, our President and Chief Executive Officer, the rest of our executive leadership team, and other key employees. We do not maintain key person life insurance on any of our officers. Our ability to continue to acquire and develop health care properties depends upon the significant relationships that our senior management team has developed over many years.

Although the Trust has entered into employment agreements with our management team we cannot provide any assurance that any of them will remain employed by the Trust. Our ability to retain our leadership team, or to attract suitable replacements should any member of the senior management team leave, is dependent on the competitive nature of the employment market. Failure to attract, retain, and motivate highly qualified employees, or failure to develop and implement a viable succession plan, could result in inadequate depth of institutional knowledge, an ineffective culture, or lack of certain skill sets, significantly impacting our future performance and adversely affecting our business. Competition for talented employees is intense, and we cannot guarantee that we will retain our key officers and employees or that we will be able to attract and retain other highly qualified individuals in the future.

employment market. Failure to attract, retain, and motivate highly qualified employees, or failure to develop and implement a viable succession plan, could result in inadequate depth of institutional knowledge, an ineffective culture, or lack of certain skill sets, significantly impacting our future performance and adversely affecting our business. Competition for talented employees is intense, and we cannot guarantee that we will retain our key officers and employees or that we will be able to attract and retain other highly qualified individuals in the future. In addition, we face risks related to our ability to retain key personnel in connection with the pending Mergers. See “Following the Mergers and the transactions contemplated by the Merger Agreement, the Combined Company may be unable to retain key employees” above for additional information.

Certain provisions of Maryland law, the Trust’s declaration of trust and the partnership agreement of the Operating Partnership contain limits and restrictions on transferability of our outstanding shares of beneficial interest, which may have the effect of delaying, discouraging, or preventing a transaction or change of control of our company.

In order for us to qualify as a REIT, no more than 50% of the value of the Trust’s outstanding shares of beneficial interest may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year. Subject to certain exceptions, the Trust’s declaration of trust prohibits any shareholder from owning beneficially or constructively more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of any class or series of our shares of beneficial interest, though the Trust has granted, and may in the future grant, a waiver from the ownership limitations. The constructive ownership rules under the Code are complex and may cause the outstanding shares owned by a group of related individuals or entities to be deemed to be constructively owned by one individual entity. As a result, the acquisition of less than 9.8% of our outstanding shares of any class or series by an individual or entity could cause that individual or entity to own constructively in excess of 9.8% of the outstanding shares of any class or series of our shares of beneficial interest and to be subject to the Trust’s declaration of trust’s ownership limit. The Trust’s declaration of trust also prohibits, among other prohibitions, any person from owning our shares of beneficial interest that would result in our being “closely held” under Section 856(h) of the Code, or otherwise cause us to fail to qualify as a REIT. Further, the partnership agreement of the Operating Partnership contains certain provisions such as redemption rights, restrictions on transfer of OP Units, consent and other rights of the Trust as the general partner of the Operating Partnership, and rights of the limited partners of the Operating Partnership to consent to certain transfers of the general partnership interest. The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit, and other restrictions contained in the Trust’s declaration of trust and the Operating Partnership’s partnership agreement may inhibit market activity in our shares of beneficial interest, restrict our business combination opportunities, or otherwise delay, deter or prevent a transaction or change of control that our shareholders otherwise believe to be in their best interests.

of the Operating Partnership to consent to certain transfers of the general partnership interest. The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit, and other restrictions contained in the Trust’s declaration of trust and the Operating Partnership’s partnership agreement may inhibit market activity in our shares of beneficial interest, restrict our business combination opportunities, or otherwise delay, deter or prevent a transaction or change of control that our shareholders otherwise believe to be in their best interests.

In addition, certain provisions of the Maryland General Corporation Law, (“MGCL”), applicable to Maryland real estate investment trusts may have the effect of inhibiting, delaying, deferring, or preventing a third party from making a proposal to acquire the Trust (and, indirectly, the Operating Partnership) or of impeding or delaying a change of control under circumstances that otherwise could provide the Trust’s common shareholder with the opportunity to realize a premium over the then-prevailing market price of shares, including:

•“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who was the beneficial owner directly or indirectly, of 10% or more of the voting power of our shares at any time within the two-year period immediately prior to the date in question) or an affiliate thereof for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter imposes certain minimum price and/or supermajority shareholder voting requirements on these combinations; and

•“control share” provisions that provide that holders of “control shares” of our Trust (defined as shares that, when aggregated with all other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares,” subject to certain exceptions) have no voting rights with respect to their control shares, except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

The Trust’s Board of Trustees has by resolution exempted any business combination between us and any other person from the business combination provisions of the MGCL, provided that the business combination is first approved by the Board of Trustees (including a majority of trustees who are not affiliates or associates of such person). In addition, the Trust’s bylaws contain a provision exempting any and all acquisitions of our shares from the control share provisions of the MGCL. However, the Board of Trustees may at any time alter or repeal the resolution exempting certain businesses from the business combination ~~provisions of the MGCL and we may at any time amend or eliminate the provision of our bylaws exempting acquisitions of our shares from the control share provisions of the MGCL.~~

provisions of the MGCL and we may at any time amend or eliminate the provision of our bylaws exempting acquisitions of our shares from the control share provisions of the MGCL.

Certain provisions of the MGCL permit the Board of Trustees, without shareholder approval and regardless of what is currently provided in the Trust’s declaration of trust or bylaws, to implement certain corporate governance provisions with respect to the Trust, some of which (for example, a classified board) are not currently applicable to us. If implemented, these provisions may have the effect of limiting or precluding a third party from making an unsolicited acquisition proposal for us or of delaying, deferring, or preventing a change in control of us under circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then current market price. Pursuant to our declaration of trust, we have elected to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our Board of Trustees.

We could increase the number of authorized shares, classify and reclassify unissued shares, and issue shares without shareholder approval.

The Trust’s Board of Trustees, without shareholder approval, has the power under the Trust’s declaration of trust to amend our declaration of trust to increase or decrease the aggregate number of shares or the number of shares of any class or series of the Trust that we are authorized to issue, and to authorize us to issue authorized but unissued common shares or preferred shares. In addition, under the declaration of trust, the Board of Trustees has the power to classify or reclassify any unissued common or preferred shares into one or more classes or series of shares and set or change the preference, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or terms or conditions of redemption for such newly classified or reclassified shares. As a result, we may issue series or classes of common shares or preferred shares with preferences, dividends, powers, and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common shares. Although the Board of Trustees has no such intention at the present time, it could establish a class or series of preferred shares that could, depending on the terms of such class or series, delay, defer, or prevent a transaction or a change of control that might involve a premium price for our common shares or that our shareholders otherwise believe to be in their best interests.

Risks Related to Our Qualification and Operation as a REIT

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that would substantially reduce funds available for distributions to our shareholders.

Since our formation, the Trust has been organized and has operated in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws, and we intend to continue to operate in such a manner, but no assurances can be given that we will operate in a manner so as to qualify or remain qualified as a REIT.

Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distribution to our shareholders. If we fail to qualify as a REIT in any taxable year, we would face serious tax consequences that would substantially reduce the funds available for distribution to our shareholders because:

•we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

•we could possibly be subject to increased state and local taxes; and

•unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our shares of beneficial interest.

Failure to make required distributions would subject us to U.S. federal corporate income tax.

We intend to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. In order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our shareholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income at regular corporate rates. In addition, we will be subject to a 4% nondeductible ~~excise tax to the extent that the actual amount that we pay out to our shareholders in a calendar year is less than a separate minimum amount specified under the Code.~~

excise tax to the extent that the actual amount that we pay out to our shareholders in a calendar year is less than a separate minimum amount specified under the Code.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders, and the ownership of our shares of beneficial interest. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries (“TRSs”), and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs, and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs. Debt instruments that do not otherwise qualify as real estate assets (because they are not secured by interests in real property or in certain entities that directly or indirectly own real property or because they are not issued by other publicly offered REITs) will generally not be taken into account for purposes of the aforementioned limitation on owning more than 10% of the total value of the outstanding securities of any one issuer. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.

The prohibited transactions tax may limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property, other than “foreclosure property,” held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transactions tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor from the characterization of the sale of real property by a REIT as a prohibited transaction is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through any TRS that we may form, which would be subject to federal and state income taxation.

Any ownership of a TRS will be subject to limitations and our transactions with a TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In addition, the Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor the value of our respective investments in any TRS for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with any TRS on terms that we believe are arm’s-length to avoid incurring a 100% excise tax on such transactions. There can be no assurance, however, that we will be able to comply with the 20% limitation or avoid application of the 100% excise tax.

If leases of our properties are not respected as true leases for federal income tax purposes, we could fail to qualify as a REIT and could be subject to higher taxes and have less cash available for distribution to our shareholders.

To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rents paid to the Operating Partnership by third party lessees and any TRS lessee pursuant to the leases of our properties will constitute substantially all of our gross income. In order for such ~~rent~~rents to qualify as “rents from real property” for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and not be treated as service contracts, joint ventures, or some other type of arrangement. If our leases are not respected as true leases for federal income tax purposes, we could fail to qualify as a REIT.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation, or administrative interpretation, will be adopted, promulgated, or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations, or administrative interpretations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

44ITEM 1C. CYBERSECURITY

Risk Management and Strategy

We assess, identify and manage material risks from cybersecurity threats through the cyber risk management program supervised by our Chief Informational Security Officer (“CISO”). The cybersecurity program utilizes our cloud security backbone along with complementary tools to identify, prevent, detect, respond to, and recover from cybersecurity incidents, including:

•regular cybersecurity awareness training for employees and contractors on our policies and emerging risks from cybersecurity threats, as well as regular phishing awareness training;

•internal and third party cybersecurity testing, including penetration testing of our information systems and devices;

•protective and detective cybersecurity controls built into our systems and applications;

•cybersecurity incident monitoring and response efforts, including our security breach incident response plan (the “Incident Response Plan”), to identify, assess, escalate, investigate, contain, and remediate incidents; and

•disaster recovery and business continuity planning efforts.

Our cybersecurity team utilizes a cyber risk management and quantification system (“CRQ”). The CRQ provides intelligence and insights on potential areas of cyber risk and analyzes risk across the major stages of typical cyberattacks and covers a number of entities in our environment, including third party providers. The CISO monitors the CRQ to help ensure that cyber risk assessment and reduction is integrated into the Company’s overall risk management system.

As part of the above processes, we regularly collaborate with third-party entities to enhance and fortify our cybersecurity risk management program, including through internal and external penetration testing and cybersecurity awareness training. As needed, we require third party service providers to adhere to certain cybersecurity standards and processes and agree to be subject to cybersecurity audits.

A discussion of how our business, financial condition, and results of operations could be materially adversely affected by risks from cybersecurity threats is contained under “Cybersecurity incidents could disrupt our business and result in the compromise of confidential information” in Item 1A. Risk Factors.

Governance

Our Board has risk oversight responsibility for the Company, which it administers directly and with assistance from its committees. In connection with its assessment of the Company’s risk environment, the Board receives comprehensive updates on cybersecurity risks every quarter from the CISO.

The audit committee assists the Board in fulfilling its oversight responsibility with respect to, among other things, enterprise risk management, including information technology and cybersecurity risks. In performing these functions, the audit committee meets regularly with our management to review any significant risks or exposures.

Pursuant to the Incident Response Plan, our Incident Response Team is responsible for our incident handling capability, which includes preparation, detection, analysis, containment, eradication, recovery, and follow-up capabilities in response to cybersecurity incidents. The Incident Response Team is led by the CISO and includes management from the

Administration, Legal, Information Security and Technology, Physical Security and Facilities Management, Communications and Public Relations and Human Resources fields. When required, or if otherwise appropriate, management informs the Board and/or Board committee of any cybersecurity incidents. The CISO conducts semi-annual meetings of the Incident Response Team to review and document compliance with the Incident Response Plan. In collaboration with the Incident Response Team, the CISO reviews and updates the Incident Response Plan as necessary annually. In addition, the Chair of the Audit Committee conducts an annual review of the Incident Response Plan.

The CISO has more than thirteen years of previous professional experience across diverse roles, including managing information security, establishing robust information and cybersecurity programs, crafting business continuity and disaster recovery strategies, and managing complex IT environments as an IT Director, IT Manager, and Senior IT Systems Administrator. He attended the University of Wisconsin Milwaukee for his undergraduate in Management & Information Systems. He has worked in industries such as banking and investments, health care, real estate, private equity, and property management. He is an active member of the Midwest Cybersecurity Alliance and regularly participates in industry cybersecurity meetings and conferences to stay abreast of trends and collaborate with cybersecurity professionals.

The members of the Incident Response Team are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the Incident Response Plan processes described above.

ITEM 2. PROPERTIES

Geographic Diversification/Concentration

The following table lists the states in which our consolidated properties are located and provides certain information regarding our consolidated portfolio’s geographic diversification/concentration as of December 31, ~~2022~~2023:

State	Number of Properties	GLA (1)(square feet)	Percent of GLA		Annualized Base Rent (2) (thousands)		Percent of Annualized Base Rent
Alabama	78	~~312~~384,~~439~~994	2.05	%	$	810,~~171~~325	2.37	%
Arizona	15	903,062	5.8	%	21,~~443~~286		5.98	%
Arkansas	7	270,200	1.7	%	4,~~755~~881		1.3	%
California	5	93,011	0.6	%	2,~~258~~314		0.6	%
Colorado	5	134,331	0.9	%	3,~~244~~320		0.9	%
Connecticut	4	166,196	1.1	%	4,~~365~~507		1.2	%
Delaware	1	140,205	0.9	%	3,~~432~~263		1.0.9	%
Florida	25	890,650	5.7	%	25,499		7.1	%
Florida (3)	24	876,364	5.6	%	24,756		6.6	%
Georgia	89	1,~~072~~104,~~222~~557	67.90	%	2627,~~093~~676		7.35	%
Illinois	34	~~139~~165,~~450~~903	01.91	%	23,~~780~~345		0.89	%
Indiana	22	1,042,071	6.87	%	2223,~~996~~580		6.34	%
Kentucky	12	~~980~~1,~~639~~011,109	6.35	%	1819,~~120~~699		5.03	%
Louisiana	4	249,832	1.6	%	8,~~466~~305		2.43	%
Maine	1	44,677	0.3	%	1,~~381~~415		0.4	%
Maryland	3	166,594	1.1	%	4,~~508~~683		1.3	%
Michigan	9	662,055	4.32	%	1516,~~827~~304		4.4	%
Minnesota	19	~~828~~830,~~008~~479	5.3	%	1719,~~579~~229		45.92	%
Mississippi	3	261,480	1.7	%	6,~~007~~099		1.7	%
Missouri	3	159,340	1.0	%	4,~~695~~641		1.3	%
Nebraska	13	~~981~~987,~~490~~274	6.3	%	19,~~393~~668		5.43	%
New Jersey	2	115,967	0.7	%	4,~~379~~481		1.2	%
New Mexico	2	53,029	0.3	%	1,~~523~~553		0.4	%
New York	14	~~699~~703,~~087~~729	4.5	%	17,~~795~~769		4.98	%
North Dakota	8	434,215	2.8	%	8,~~654~~886		2.4	%
Ohio	14	~~808~~802,~~488~~568	5.21	%	1614,~~074~~967		4.51	%
Oklahoma	1	52,000	0.3	%	~~613~~643		0.2	%
Pennsylvania	1312	~~394~~364,726	2.53	%	7,~~582~~623		2.1	%
Tennessee	8	706,805	4.65	%	14,~~022~~617		34.90	%
Texas	29	1,863,733	1211.19	%	49,~~176~~328		13.64	%
Virginia	2	153,567	1.0	%	3,~~643~~924		1.01	%
Washington	9	543,~~425~~732	3.5	%	10,~~507~~992		23.90	%
Wisconsin (3)	6	205,885	1.3	%	4,883		1.4	%
Wisconsin (4)	6	205,885	1.2	%	4,999		1.3	%
Total	~~277~~278	15,~~528~~653,~~879~~690	100.0	%	$	~~359~~369,~~863~~078	100.0	%

(1)“GLA” means gross leasable area.

(2)Annualized base rent is calculated by multiplying (a) base rental payments for the month ended December 31, ~~2022~~2023, by (b) 12.

(3)Excludes the Company’s ~~108~~20,~~843~~840 square foot ~~corporate~~retail ~~office building~~asset.

45(4)Excludes the Company’s 108,843 square foot corporate office building.

Scheduled Lease Expirations

The following table provides a summary of lease expirations for our consolidated properties as of December 31, ~~2022~~2023, for the periods indicated:

Expiration (1)	Number of Leases Expiring	GLA	Percent of GLA		Annualized Base Rent(thousands)		Percent of Annualized Base Rent		Annualized Base Rent Leased per Square Foot (2)
2023	150	700,132	4.5	%	$	16,871	4.7	%	$	24.10
2024	133	768,237	4.9	%	$	18,711	5.1	%	$	24.36
2024	130	808,590	5.2	%	19,824		5.5	%	24.52
2025	171	973,808	6.2	%	25,515		6.9	%	26.20
2025	163	1,029,578	6.6	%	26,174		7.3	%	25.42
2026	196	3,332,019	21.3	%	77,614		21.0	%	23.29
2026	181	3,367,273	21.7	%	77,207		21.5	%	22.93
2027	151	1,711,326	10.9	%	40,682		11.0	%	23.77
2027	147	1,720,998	11.1	%	39,493		11.0	%	22.95
2028	170	1,902,982	12.2	%	46,187		12.5	%	24.27
2028	119	1,767,008	11.4	%	41,723		11.6	%	23.61
2029	78	1,003,163	6.4	%	31,620		8.6	%	31.52
2029	58	907,984	5.8	%	28,522		7.9	%	31.41
2030	71	888,656	5.7	%	21,866		5.9	%	24.61
2030	61	846,153	5.4	%	20,173		5.6	%	23.84
2031	49	1,096,973	7.0	%	26,616		7.2	%	24.26
2031	44	986,374	6.4	%	23,807		6.6	%	24.14
2032	76	1,232,471	7.9	%	32,022		8.7	%	25.98
2032	76	1,225,821	7.9	%	31,064		8.6	%	25.34
2033	36	744,131	4.8	%	18,888		5.1	%	25.38
Thereafter	4538	1,~~207~~012,~~295~~200	76.84	%	3027,~~924~~259		87.64	%	2526.6193
Month to month (3)	5246	~~184~~89,~~857~~281	10.26	%	42,~~081~~098		10.16	%	2223.0850
Vacant	—	~~776~~898,~~816~~443	5.07	%	—		—		—
Total / Weighted average	1,~~226~~215	15,~~528~~653,~~879~~690	100.0	%	$	~~359~~369,~~863~~078	100.0	%	$	2425.3901

(1)Excludes leases related to the Company’s 108,843 square foot corporate office building and one 20,840 square foot retail asset.

(2) Annualized base rent per leased square foot is calculated by dividing (a) annualized base rent as of December 31, ~~2022~~2023 by (b) square footage under executed leases as of December 31, ~~2022~~2023.

(3)Includes 12six leases which expired on December 31, ~~2022~~2023, representing 0.81% of portfolio leasable square feet.

Tenants

As of December 31, ~~2022~~2023, our consolidated properties were approximately 9594% leased. No single tenant accounted for more than 5.01% of our total annualized base rent or 5.0% of total base revenue as of December 31, ~~2022~~2023; however, 14.89% of our total annualized base rent as of December 31, ~~2022~~2023 was from tenants affiliated with CommonSpirit.

The following table sets forth certain information about the 10 largest tenants in our consolidated portfolio based on total annualized base rent as of December 31, ~~2022~~2023:

Tenant	# ofProperties	Leased GLA	% Leased GLA		Annualized BaseRent(thousands)		% of PortfolioAnnualized Base Rent
CommonSpirit - CHI - Nebraska	13	~~899~~903,~~928~~777	6.1	%	$	18,~~105~~667	5.01	%
Northside Hospital	7	~~688~~696,~~992~~840	4.7	%	16,~~254~~953		4.56	%
UofL Health - Louisville, Inc.	9	~~621~~669,~~913~~026	4.25	%	1314,~~136~~987		34.71	%
US Oncology	108	~~403~~377,~~751~~091	2.76	%	1110,~~443~~925		3.20	%
HonorHealth	8	~~415~~387,~~791~~744	2.86	%	1110,~~192~~244		32.18	%
Baylor Scott and White Health	2	268,639	1.8	%	8,~~356~~510		2.3	%
Ascension - St. Vincent's - Indianapolis	34	~~361~~363,~~767~~221	2.5	%	8,~~040~~228		2.2	%
UF Health - Jacksonville	2	223,748	1.5	%	78,~~973~~172		2.2	%
CommonSpirit - CHI - St. Alexius	7	359,209	2.4	%	67,~~987~~161		1.9	%
UnitedHealth Group Incorporated	78	~~193~~197,~~579~~303	1.3	%	56,~~997~~135		1.86	%
Total	68	4,~~437~~446,~~317~~598	30.0	%	$	~~107~~109,~~483~~982	29.98	%

Before entering into a lease and during the lease term, we seek to manage our exposure to significant tenant credit issues. In most instances, we seek to obtain tenant financial information, including credit reports, financial statements, and tax ~~returns. Where appropriate, we seek to obtain financial commitments in the form of letters of credit, security deposits, or~~

4649

returns. Where appropriate, we seek to obtain financial commitments in the form of letters of credit, security deposits, or personal guarantees from tenants. On an ongoing basis, we monitor accounts receivable and payment history for both tenants and properties and seek to identify any credit concerns as quickly as possible. In addition, we keep in close contact with our tenants in an effort to identify and address negative changes to their businesses prior to such adverse changes affecting their ability to pay rent to us.

Ground and Air Space Leases

We lease the land upon which 97 of our consolidated properties are built and the air which one property occupies, representing approximately 51.86% of our total leasable square feet and 51.4% of our annualized base revenue as of December 31, ~~2022~~2023. The ground and air leases subject these properties to certain restrictions. These restrictions may limit our ability to lease space in such facilities to tenants who are not affiliated with the health care delivery system that owns the underlying land and may limit the types of medical procedures that may be performed at the facilities. On-campus ground leases typically include purchase options, rights of first offer and rights of first refusal for the underlying health system or hospital owner, and restrictions from doing business with competitors.

ITEM 3. LEGAL PROCEEDINGS

~~From~~A description of any material legal proceedings to which we are a party is included in Note 15 (Commitments and Contingencies) to our accompanying consolidated financial statements, and is incorporated into this Item 3 by reference. In addition, from time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, we expect to have a material effect on our business, financial condition, or results of operations if determined adversely to us.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Trust’s common shares are traded on the NYSE under the symbol “DOC.” As of February 1416, ~~2023~~2024, the Trust had ~~437~~425 registered shareholders of record of the Trust’s common shares.

It has been the Trust’s policy to declare quarterly dividends to its shareholders so as to comply with applicable provisions of the Code governing REITs. The declaration and payment of quarterly dividends remains subject to the review and approval of the Board of Trustees. The Merger Agreement permits the Trust to pay regular quarterly dividends to our shareholders at a rate not to exceed $0.23 per common share per quarter, in accordance with past practice. Pursuant to the Merger Agreement, the parties shall take all actions necessary to cause the holders of Physicians Realty Trust common shares and the holders of shares of Healthpeak common stock to receive dividends covering the same periods prior to the Closing Date.

Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Physicians Realty Trust under the Securities Act or the Exchange Act.

The graph below compares the cumulative total return of our common shares, the Standard & Poor’s MidCap 400, and the MSCI US REIT Index (RMS), from the date of our listing on the NYSE on July 19, 2013 through December 31, ~~2022~~2023. The comparison assumes $100 was invested on July 19, 2013 in our common shares and in each of the foregoing indexes and assumes reinvestment of dividends, as applicable. The MSCI US REIT Index consists of equity REITs that are included in the MSCI US Investable Market 2500 Index, except for specialty equity REITS that do not generate a majority of their revenue and income from real estate rental and leasing operations. We have included the MSCI US REIT Index and the Standard & Poor’s MidCap 400 because we joined these indexes in November 2014 and May 2020, respectively, and we believe that both are representative of the industry in which we compete and are relevant to an assessment of our performance.

4851

	Index
Period Ending	Physicians Realty Trust		Standard & Poor’s MidCap 400		MSCI US REIT (RMS)
7/19/2013	$	100.00	$	100.00	$	100.00
12/31/2013	$	112.34	$	109.53	$	91.70
12/31/2014	$	156.36	$	120.23	$	119.56
12/31/2015	$	167.72	$	117.61	$	122.57
12/31/2016	$	197.82	$	142.01	$	133.11
12/31/2017	$	196.89	$	165.07	$	139.86
12/31/2018	$	185.68	$	146.78	$	133.47
12/31/2019	$	234.20	$	185.23	$	167.96
12/31/2020	$	229.91	$	210.53	$	155.24
12/31/2021	$	256.17	$	262.66	$	222.09
12/31/2022	$	207.78	$	228.36	$	167.65
12/31/2023	$	204.45	$	265.89	$	190.69

Recent Sales of Unregistered Securities

From time to time, the Operating Partnership issues OP Units to the Trust, as required by the Partnership Agreement, to reflect additional issuances of common shares by the Trust and to preserve equitable ownership ratios.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

~~The~~There ~~following~~were ~~table~~no ~~sets forth information relating to~~ repurchases of our common shares of beneficial interest and OP Units during the three months ended December 31, ~~2022:~~2023.

~~ISSUER~~Equity ~~PURCHASES~~Compensation OFPlan ~~EQUITY SECURITIES~~Information

Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1, 2022 - October 31, 2022	1,783,712	(1)	$	15.43	N/A	N/A
November 1, 2022 - November 30, 2022	—		—		N/A	N/A
December 1, 2022 - December 31, 2022	—		—		N/A	N/A
Total	1,783,712		$	15.43	—	—

The table below presents information as of December 31, 2023, for the Equity Plan and the Employee Stock Purchase Plan. The Company does not have any equity compensation plans that have not been approved by shareholders. The Company plans to terminate the Equity Plan and the Employee Stock Purchase Plan upon the closing of the Mergers.

(1)Represents OP Units redeemed by holders in exchange for cash and common shares of the Company.


Plan Category	Number of securities to be issued upon exercise of outstanding warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(c)
Equity compensation plans approved by shareholders	5,067,707	(1)	—	4,039,171	(2)
Equity compensation plans not approved by shareholders	—		—	—
Total	5,067,707		—	4,039,171

(1)Includes (i) 2022 and 2023 performance-based restricted stock units at maximum level granted to our officers under the Equity Plan, which will vest, pursuant to the Merger Agreement, based on maximum level of achievement of the applicable performance goals over the three-year performance period as provided in the award agreements, (ii) a 2020 time-based restricted stock unit award to our CEO, which vests one-half after four years and one-half after five years from the grant date, and (iii) time-based restricted stock units granted to our non-employee trustees under the Equity Plan. Performance-based restricted stock units granted in 2021 vested at the actual performance level of 198.8% based on performance as of December 31, 2023.

(2)Represents 3,661,927 shares under the Equity Plan and 377,244 shares under the 2015 Employee Stock Purchase Plan (“ESPP”) available for future issuance as of December 31, 2023. The Company plans to terminate the Equity Plan and the ESPP upon the closing of the Mergers.

ITEM 6. [RESERVED]

4952

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial statements, including the notes to those statements, included in this report, and the Section entitled “Cautionary Statement Regarding Forward-Looking Statements” in this report. As discussed in more detail in the Section entitled “Cautionary Statement Regarding Forward-Looking Statements,” this discussion contains forward-looking statements which involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause those differences include those discussed in Part I, Item 1. “Business” and Part I, Item 1A. “Risk Factors” and elsewhere in this report.

Company Highlights:

•~~Reported~~Announced ~~total~~an ~~revenue~~all-stock ofmerger ~~$526.6 million for the year ended December 31, 2022, compared to total revenue~~ of ~~$457.7~~equals ~~million~~with ~~for~~Healthpeak ~~the year ended December 31~~Properties, ~~2021, an increase of 15~~Inc.~~1%.~~

•Reported ~~net~~total ~~income~~revenue of $~~110~~543.05 million for the year ended December 31, ~~2022~~2023, compared to ~~net~~total ~~income~~revenue of $86526.86 million for the year ended December 31, ~~2021~~2022, an increase of 263.82%.

•~~Generated~~Reported net income ~~per share~~ of $043.468 ~~for~~million ~~the~~and ~~year~~generated ~~ended~~income ~~December~~per ~~31,~~share ~~2022~~of $0.17, on a fully diluted basis, ~~compared to net income per share of $0.39~~ for the year ended December 31, ~~2021, on a fully diluted basis~~2023.

•Generated Normalized FFO of $10.0499 per share for the year ended December 31, ~~2022~~2023, on a fully diluted basis~~, consistent with the year ended December 31, 2021~~.

•Completed $~~159~~128.74 million of investments, including the funding of previous loan commitments, during the year ended December 31, ~~2022~~2023.

•~~For~~Issued ~~the~~and ~~year~~sold ~~ended~~4,400,000 ~~December~~common ~~31,~~shares ~~2022,~~at ~~the~~a ~~Company~~weighted ~~sold~~average ~~five~~price ~~properties~~of $15.10 per share, resulting in ~~three~~net ~~states~~proceeds ~~for~~of approximately $~~124~~65.78 million ~~and~~pursuant ~~recognized~~to athe ~~net~~2023 ~~gain~~ATM ofProgram ~~$57.4~~(as ~~million~~defined herein) during the year ended December 31, 2023.

•~~Issued~~Achieved ~~and~~ENERGY ~~sold~~STAR ~~6,678,177~~Certification ~~common~~receiving ~~shares~~16 atnew aproperty ~~weighted average price of $15.89 per share~~certifications, ~~resulting~~totaling in42 ~~net~~certifications ~~proceeds~~since ~~of approximately $105.1 million pursuant to the~~ 2021 ~~ATM Program (as defined herein) during the year ended December 31, 2022~~.

•~~Achieved~~Earned ~~ENERGY~~seven ~~STAR®~~new ~~Certification~~Institute ~~Nation~~of ~~Premier~~Real ~~Member~~Estate ~~status~~Management by(IREM®) ~~receiving~~Certified 16Sustainable ~~new~~Property ~~property certifications~~designations, totaling 2645 certifications since ~~2021~~2019.

•Earned 10 new Institute of Real Estate Management Certified Sustainable Property (“IREM® CSP”) designations, totaling 38 certifications since 2019.

Subsequent Event Highlights:

•~~Completed~~On ~~the~~February ~~acquisition~~21, of2024, aour ~~medical~~shareholders ~~condominium~~voted ~~unit~~on ~~located~~and inapproved anthe ~~Atlanta~~merger ~~“Pill~~with ~~Hill”~~Healthpeak. ~~MOB~~Consummation ~~for a purchase price~~ of ~~approximately~~the ~~$1.3~~merger ~~million~~is ~~and~~subject ato ~~parcel~~the ofsatisfaction ~~land~~or ~~adjacent~~waiver ~~to one~~ of ~~our~~customary ~~medical~~closing ~~office~~conditions. ~~facilities~~The ~~located~~merger inis ~~Avondale,~~expected ~~Arizona~~to ~~for~~close aon ~~purchase~~or ~~price~~about ofMarch ~~approximately~~1, $02024.~~8 million.~~

•On January 7, 2023, the Company paid its $15.0 million senior unsecured notes bearing fixed interest of 4.03% upon maturity.

•Disposed of a 30,000 square foot medical office building on January 17, 2023 for $2.6 million recognizing an immaterial net gain on the sale.

•Sold 4,400,000 common shares pursuant to the ATM program at a weighted average price of $15.10 since December 31, 2022, resulting in net proceeds of $65.8 million.

Overview

We are a self-managed health care real estate company organized in April 2013 to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals, and health care delivery systems. We invest in real estate that is integral to providing high quality health care services. Our properties are typically located on a campus with a hospital or other health care facilities or strategically affiliated with a hospital or other health care facilities. We believe the impact of government programs and continuing trends in the health care industry create attractive opportunities for us to invest in health care-related real estate. In particular, we believe the demand for health care will continue to increase as a result of the aging population as older persons generally utilize health care services at a rate well in excess of younger people. Our management team has significant health care real estate experience and has long-established relationships with physicians, hospitals, and health care delivery system decision makers that we believe will provide quality investment and growth opportunities. Our principal investments include outpatient medical ~~office buildings~~facilities, outpatient treatment facilities, as well as other real estate integral to health care providers. In recent years, we have seen increased competition for health care properties and we expect this trend to continue. We seek to generate attractive risk-adjusted returns for our shareholders through a combination of stable and increasing dividends and potential long-term appreciation in the value of our properties and our common shares.

5053

~~expect~~As ~~this~~of ~~trend~~December to31, ~~continue.~~2023, Weleases ~~seek~~representing ~~to generate attractive risk-adjusted returns for our shareholders through~~ a ~~combination~~percentage of ~~stable~~our ~~and~~consolidated ~~increasing~~portfolio ~~dividends~~on ~~and potential long-term appreciation in~~ the ~~value~~basis of ~~our~~leased ~~properties~~square ~~and~~feet ~~our~~will ~~common~~expire ~~shares.~~ as follows:

As of December 31, 2022, leases representing a percentage of our consolidated portfolio on the basis of leased square feet will expire as follows:


Year						Portfolio Lease Expirations
MTM (1)						0.6%
2024						5.2%
2025						6.6%
2026						22.6%
2027						11.6%
2028						12.9%
2029						6.8%
2030						6.0%
2031						7.4%
2032						8.4%
2033						5.0%
Thereafter						6.9%
Total						100.0%

Year						Portfolio Lease Expirations
MTM (1)						1.3%
2023						4.7%
2024						5.5%
2025						7.0%
2026						22.8%
2027						11.7%
2028						12.0%
2029						6.2%
2030						5.7%
2031						6.7%
2032						8.3%
Thereafter						8.1%
Total						100.0%

(1)Includes six leases which expired on December 31, 2023, representing 0.1% of portfolio occupied leasable square feet.

~~(1)Includes~~We 12receive a cash rental stream from these health care providers under our leases. ~~which~~Approximately ~~expired~~93% onof the annualized base rent payments from our properties as of December 31, ~~2022~~2023 are from absolute net and triple net leases, ~~representing~~pursuant 0to which the tenants are responsible for operating expenses subject to specific lease terms relating to the property, including but not limited to real estate taxes, utilities, property insurance, routine maintenance and repairs, and property management.9% ofThis ~~portfolio~~structure ~~occupied~~helps ~~leasable~~insulate ~~square~~us ~~feet~~from increases in certain operating expenses and provides more predictable cash flow.

~~We receive a cash rental stream from these health care providers under our leases.~~ Approximately 936% of the annualized base rent payments from our properties as of December 31, ~~2022~~2023 are from ~~absolute~~modified ~~net~~gross ~~and~~leases ~~triple~~which ~~net~~allow ~~leases~~us to pass through certain increases in operating expenses (e.g., ~~pursuant~~property totax ~~which~~and ~~the~~insurance) to tenants ~~are~~for ~~responsible~~reimbursement, ~~for~~thus protecting us from increases in such operating expenses. ~~subject~~We seek to ~~specific~~structure ~~lease~~our ~~terms~~triple-net ~~relating~~leases to ~~the~~generate ~~property,~~attractive ~~including~~returns ~~but~~on ~~not~~a ~~limited~~long-term basis. Our leases typically have initial terms of 5 to ~~real~~15 ~~estate~~years ~~taxes~~and include annual rent escalators of approximately 1.5% to 4.0%, ~~utilities~~with an annual weighted average rent escalator of approximately 2.4%. However, ~~property~~certain ~~insurance~~of the Company’s leases contain annual rent escalators indexed to changes in the CPI, ~~routine~~oftentimes ~~maintenance~~subject to a floor or ceiling and ~~repairs~~a cap. As of December 31, ~~and~~2023, ~~property~~approximately ~~management~~5.9% ~~This~~of ~~structure~~the ~~helps~~Company’s ~~insulate~~annual usrent ~~from~~escalators ~~increases~~have inCPI ~~certain~~provisions. Our operating ~~expenses~~results depend significantly upon the ability of our tenants to make required rental payments. We believe that our portfolio of outpatient medical facilities and ~~provides~~other ~~more~~health ~~predictable~~care facilities will enable us to generate stable cash ~~flow~~flows over time because of the diversity of our tenants, staggered lease expiration schedule, long-term leases, and low historical occurrence of tenants defaulting under their leases.

~~Approximately~~Subject 6%to of the ~~annualized~~restrictions ~~base~~in ~~rent~~the ~~payments~~Merger ~~from~~Agreement, ~~our~~we ~~properties~~intend asto ofgrow ~~December~~our ~~31,~~portfolio ~~2022~~of ~~are~~high-quality ~~from~~health ~~modified~~care ~~gross~~properties ~~leases~~leased ~~which allow us~~ to ~~pass~~physicians, ~~through~~hospitals, ~~certain~~health ~~increases~~care indelivery ~~operating expenses (e.g.~~systems, ~~property tax~~ and ~~insurance)~~other tohealth ~~tenants~~care ~~for~~providers ~~reimbursement,~~primarily ~~thus~~through ~~protecting~~acquisitions usof ~~from~~existing ~~increases~~health incare ~~such~~facilities ~~operating~~that ~~expenses.~~provide Westable ~~seek~~revenue togrowth ~~structure~~and ~~our~~predictable ~~triple-net leases to generate attractive returns on a~~ long-term ~~basis~~cash flows. ~~Our~~We ~~leases~~may ~~typically~~also ~~have~~selectively ~~initial~~finance, ~~terms~~subject ~~of 5~~ to 15the ~~years~~restrictions ~~and~~in ~~include~~the ~~annual~~Merger ~~rent escalators of approximately 1.5% to 4.0%~~Agreement, ~~with~~the andevelopment ~~annual~~of ~~weighted~~new ~~average~~health ~~rent~~care ~~escalator~~facilities ofthrough ~~approximately~~joint ~~2.4%.~~venture ~~However,~~or ~~certain~~fee ofarrangements ~~the~~with ~~Company’s~~health ~~leases~~care ~~contain~~real ~~annual~~estate ~~rent~~developers ~~escalators~~or ~~indexed~~health tosystem ~~changes~~development inprofessionals. ~~the CPI~~Generally, ~~oftentimes~~we ~~subject~~expect to amake ~~floor~~investments orin ~~ceiling~~new ~~and~~development aproperties ~~cap.~~when ~~As of December 31, 2022,~~ approximately ~~5.7~~80% or more of the ~~Company’s~~development ~~annual~~property ~~rent~~has ~~escalators~~been ~~have~~pre-leased ~~CPI~~before ~~provisions~~construction commences. ~~Our~~We ~~operating~~seek ~~results~~to ~~depend~~invest ~~significantly~~in ~~upon~~properties ~~the~~where ~~ability~~we ofcan ~~our~~develop ~~tenants~~strategic toalliances ~~make~~with ~~required~~financially ~~rental~~sound ~~payments.~~health Wecare ~~believe~~providers ~~that our portfolio of medical office buildings~~ and ~~other~~ health care ~~facilities~~delivery ~~will~~systems ~~enable~~that usoffer toneed-based ~~generate~~health ~~stable~~care ~~cash~~services ~~flows~~in ~~over~~sustainable ~~time~~health ~~because~~care ofmarkets. ~~the~~We ~~diversity~~focus of our ~~tenants,~~investment ~~staggered~~activity ~~lease~~on ~~expiration~~outpatient ~~schedule,~~medical ~~long-term~~facilities ~~leases,~~ and ~~low~~ambulatory ~~historical~~surgery ~~occurrence of tenants defaulting under their leases~~centers.

We ~~intend~~believe tothat ~~grow~~trends ~~our~~such ~~portfolio~~as ofshifting ~~high-quality~~consumer ~~health~~preferences, ~~care~~limited ~~properties~~space ~~leased~~in ~~to physicians,~~ hospitals, ~~health~~the ~~care~~desire ~~delivery~~of ~~systems,~~patients and ~~other~~ health care providers ~~primarily~~to ~~through~~limit ~~acquisitions~~non-essential ofservices ~~existing~~provided ~~health~~in ~~care~~a ~~facilities~~hospital ~~that~~setting, ~~provide stable revenue growth~~ and ~~predictable~~cost ~~long-term~~considerations, ~~cash~~continue ~~flows.~~to Wedrive ~~may~~the ~~also~~industry ~~selectively~~towards ~~finance~~performing ~~the~~more ~~development~~procedures ofin ~~new~~outpatient ~~health care~~ facilities ~~through~~versus ~~joint~~the ~~venture~~hospital orsetting. ~~fee~~As ~~arrangements~~these ~~with~~trends ~~health~~continue, ~~care~~we ~~real~~believe ~~estate~~that ~~developers~~demand orfor ~~health~~outpatient ~~system~~medical ~~development~~facilities ~~professionals.~~and ~~Generally,~~similar wehealth ~~expect~~care ~~to make investments in new development~~ properties ~~when~~away ~~approximately~~from ~~80%~~hospital orsettings ~~more~~and ofin ~~the~~convenient ~~development~~locations ~~property~~to ~~has~~patients ~~been~~will ~~pre-leased~~continue ~~before~~to ~~construction commences~~rise. We ~~seek~~intend to ~~invest~~exploit inthis ~~properties~~trend ~~where~~and weseek ~~can~~outpatient ~~develop~~properties ~~strategic~~consistent ~~alliances~~ with ~~financially sound health care providers and health care delivery systems that offer need-based health care services in sustainable health care markets. We focus~~ our investment ~~activity~~philosophy ~~on medical office buildings~~ and ~~ambulatory surgery centers~~strategies.

WeWhile ~~believe~~not ~~that~~our ~~trends such as shifting consumer preferences~~focus, ~~limited~~we ~~space~~may inchoose ~~hospitals, the desire of patients and health care providers~~ to ~~limit~~invest ~~non-essential~~opportunistically ~~services provided~~ in alife ~~hospital~~science ~~setting~~facilities, ~~and~~senior ~~cost~~housing ~~considerations~~properties, ~~continue~~skilled tonursing ~~drive the industry towards performing more procedures in outpatient~~ facilities, ~~versus~~specialty ~~the hospital setting. As these trends continue~~hospitals, ~~we believe that demand for medical office buildings~~ and ~~similar~~treatment ~~health care properties away from hospital settings and in convenient locations to patients will continue to rise~~centers. WeConsistent ~~intend~~with toour ~~exploit~~qualification ~~this~~as ~~trend~~a ~~and~~REIT, ~~seek~~we ~~outpatient~~may ~~properties~~also ~~consistent with our investment philosophy and strategies.~~

5154

~~While not our focus, we may choose to invest~~ opportunistically in life science facilities, senior housing properties, skilled nursing facilities, specialty hospitals, and treatment centers. Consistent with our qualification as a REIT, we may also opportunistically invest in companies that provide health care services, and in joint venture entities with operating partners, structured to comply with the REIT Investment Diversification Act of 2007.

The Trust is a Maryland real estate investment trust and elected to be taxed as a REIT for U.S. federal income tax purposes. We conduct our business through an UPREIT structure in which our properties are owned by our Operating Partnership directly or through limited partnerships, limited liability companies, or other subsidiaries. The Trust is the sole general partner of our Operating Partnership and, as of December 31, ~~2022~~2023, owned approximately 9596.91% of the OP Units. As of February 1416, ~~2023~~2024, we have ~~237~~238,~~905~~911,~~938~~308 common shares outstanding.

~~2022~~2023 Investment Activity

During ~~2022~~2023, the Company executed contractual commitments related to a $40.5 million development project, with $21.6 million spent on construction in progress thus far, completed the acquisition of ~~two~~three outpatient medical ~~office~~ facilities and ~~one~~three medical condominium units for an investment of $~~109~~38.65 million, ~~and~~completed ~~acquired~~the ~~membership~~acquisition ~~interest~~of intwo ~~additional~~parcels ~~assets~~ of ~~the~~land ~~Davis~~adjacent ~~Joint~~to ~~Venture~~existing ~~(as~~outpatient ~~defined~~medical ~~herein)~~facilities for ~~an aggregate purchase price of~~ $81.07 million., ~~The~~and ~~Company also~~ paid $62.42 million of additional purchase consideration under ~~five~~six earn-out agreements ~~and~~for ~~funded~~prior ~~one~~acquisitions. ~~mezzanine~~The ~~loan~~Company ~~for~~also ~~$5.8~~closed ~~million,~~four ~~three~~construction ~~term~~ loans for an aggregate of $22126.74 million, and has funded $231.19 million ofin ~~previous~~the ~~construction~~aggregate ~~loan~~for ~~commitments~~those loans to date. Additionally, the Company ~~invested~~funded an aggregate of $521.02 million inrelated ~~funds~~to ~~managed~~the byclosing aof ~~venture~~three ~~capital~~new ~~firm~~term ~~specializing~~loans, previously announced loan commitments, and other investments, including a $1.3 million investment in ~~real~~IJRI ~~estate~~Properties, ~~technology~~LLC, ~~resulting~~which is an entity constructing and operating an outpatient medical facility in ~~total~~Indiana. ~~investment~~The Company contributed $11.3 million to the Davis Joint Venture to fund acquisitions and additional purchase consideration under an earn-out agreement. Investment activity oftotaled approximately $~~159~~128.74 million during the twelve months ended December 31, 2023.

During ~~2022~~2023, the Company sold ~~five~~one ~~medical~~outpatient ~~facilities, which included four~~ medical ~~office~~facility ~~buildings~~containing ~~and one hospital~~30,000 ~~representing 212,295~~ square feet for approximately $~~124~~2.76 million, realizing an ~~aggregate~~insignificant ~~net~~ gain ~~of approximately $57~~.~~4 million.~~

Recent Developments

On ~~December 22~~October 29, ~~2022~~2023, the Trust’s ~~Board~~and the Operating Partnership entered into the Merger Agreement with Healthpeak and certain subsidiaries of ~~Trustees~~Healthpeak, ~~authorized~~pursuant to which, among other things, and ~~declared~~through athe ~~cash~~Mergers, ~~distribution~~(i) each outstanding common share of $the Trust (other than Trust common shares to be canceled in accordance with the Merger Agreement) will be automatically converted into the right to receive 0.23674 ~~per~~shares of Healthpeak common ~~share~~stock, and (ii) each outstanding OP Unit ~~for~~will be automatically converted into and become common units in the ~~quarterly~~successor ~~period~~entity ~~ended~~to the Operating Partnership equal to the Exchange Ratio. In connection with the Mergers, Healthpeak filed a Registration Statement on Form S-4 with the SEC on December 3115, ~~2022~~2023, as amended on January 9, 2024. The ~~distribution~~Trust ~~was~~and ~~paid~~Healthpeak filed a definitive joint proxy statement/prospectus on January 18 11, ~~2023~~2024 toin ~~common~~connection ~~shareholders~~with ~~and~~our OPrespective ~~Unit~~special ~~holders~~meetings of ~~record~~shareholders and stockholders, as ofapplicable, which were held on February 21, 2024. On February 21, 2024, our shareholders voted on and approved the ~~close~~merger ofwith ~~business~~Healthpeak. The Mergers are expected to close on ~~January~~or about March 41, ~~2023~~2024. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions.

On December 21, 2023, ~~Activity~~the Trust’s Board of Trustees authorized and declared a cash distribution of $0.23 per common share and OP Unit for the quarterly period ended December 31, 2023. The distribution was paid on January 18, 2024, to common shareholders and OP Unit holders of record as of the close of business on January 3, 2024.

~~Since~~2024 December 31, 2022, the Company completed the acquisition of a medical condominium unit located in an Atlanta “Pill Hill” MOB for a purchase price of approximately $1.3 million and a parcel of land adjacent to one of its medical office facilities located in Avondale, Arizona for a purchase price of approximately $0.8 million. The Company also paid its $15.0 million senior unsecured notes bearing fixed interest of 4.03% upon maturity and sold one 30,000 square foot medical office building located in Harrisburg, Pennsylvania for $2.6 million recognizing an immaterial net gain on the sale.Activity

52On February 21, 2024, our shareholders voted on and approved the merger with Healthpeak. The Mergers are expected to close on or about March 1, 2024.

Results of Operations

Year Ended December 31, ~~2022~~2023 compared to the Year Ended December 31, ~~2021~~2022.

The following table summarizes our results of operations for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

	2022		2021		Change		%
	2023		2022		Change		%
Revenues:
Rental and related revenues	$	~~515~~528,~~373~~093	$	~~440~~515,~~198~~373	$	7512,~~175~~720	172.15	%
Interest income on real estate loans and other	1115,~~262~~370		1711,~~501~~262		(64,~~239)~~108		~~(35~~36.6)5	%
Total revenues	~~526~~543,~~635~~463		~~457~~526,~~699~~635		6816,~~936~~828		153.12	%
Expenses:
Interest expense	7281,~~234~~351		6072,~~136~~234		129,~~098~~117		2012.16	%
General and administrative	4038,~~209~~756		3740,~~757~~209		2(1,~~452~~453)		6(3.56)	%
Operating expenses	~~171~~182,~~100~~661		~~137~~171,~~408~~100		3311,~~692~~561		246.58	%
Depreciation and amortization	~~189~~191,~~641~~091		~~157~~189,~~870~~641		311,~~771~~450		200.18	%
Impairment loss	—		340		(340)		NM
Merger and transaction-related expense	6,934		—		6,934		NM
Total expenses	~~473~~500,~~184~~793		~~393~~473,~~511~~184		7927,~~673~~609		205.28	%
Income before equity in loss of unconsolidated entities and gain on sale of investment properties, net:	53,451		64,188		(10,737)		(16.7)	%
Income before equity in income (loss) of unconsolidated entities and gain on sale of investment properties, net:	42,670		53,451		(10,781)		(20.2)	%
Equity in loss of unconsolidated entities	(790)		(1,570)		780		49.7	%
Equity in income (loss) of unconsolidated entities	1,084		(790)		1,874		237.2	%
Gain on sale of investment properties, net	~~57,375~~13		2457,~~165~~375		33(57,~~210~~362)		NM
Net income	$	~~110~~43,~~036~~767	$	86110,~~783~~036	$	23(66,~~253~~269)	26(60.82)	%

NM = Not Meaningful

Revenues

Total revenues increased $6816.98 million, or 153.12%, for the year ended December 31, ~~2022~~2023 as compared to the year ended December 31, ~~2021~~2022. An analysis of selected revenues follows.

Rental and related revenues. Rental and related revenues increased $7512.27 million, or 172.15%, for the year ended December 31, ~~2022~~2023 compared to the year ended December 31, ~~2021~~2022. Rental and related revenues was comprised of the following based upon contractual billing terms (in thousands):

	2022		2021		Change		%
	2023		2022		Change		%
Rental revenues	$	~~371~~376,~~727~~762	$	~~328~~371,~~144~~727	$	435,~~583~~035	131.34	%
Expense recoveries	~~143~~151,~~646~~331		~~112~~143,~~054~~646		317,~~592~~685		285.23	%
Rental and related revenues	$	~~515~~528,~~373~~093	$	~~440~~515,~~198~~373	$	7512,~~175~~720	172.15	%

Rental revenues increased $435.60 million, or 131.34%, for the year ended December 31, ~~2022~~2023 as compared to the year ended December 31, ~~2021~~2022. Rental revenues increased $496.50 million from our properties acquired in ~~2022~~2023 and ~~2021,~~2022 ~~including~~and $362.95 million ~~related to the 14 medical office buildings acquired on December 20, 2021~~ from ~~Landmark Healthcare Facilities LLC (the “Landmark Portfolio”). Rental revenues also increased $0.3 million from~~ our existing portfolio ~~and $2~~.1 ~~million due to revenue related to the recovery of certain variable tenant reimbursements.~~ These increases were partially offset by a decrease in rental revenue of $83.4 million associated with properties sold during ~~2022~~2023 and ~~2021~~2022.

Expense recoveries increased $317.67 million, or 285.23%, for the year ended December 31, ~~2022~~2023 as compared to the year ended December 31, ~~2021~~2022. Expense recoveries increased $242.9 million from our properties acquired ~~in 2022~~ and ~~2021,~~sold ~~including~~in ~~$19.3~~2023 ~~million~~and ~~related~~2022 toand ~~the 14 medical office buildings acquired on December 20, 2021 from the Landmark Portfolio. Expense recoveries also increased~~ $74.7 million due to an increase in operating expenses from our existing portfolio, explained below.

Interest income on real estate loans and other. Interest income on real estate loans and other ~~decreased~~increased $64.21 million, or 3536.65%, for the year ended December 31, ~~2022~~2023 as compared to the year ended December 31, ~~2021~~2022. Interest income on real estate loan and other increased by $5.7 million due to interest earned on $214.0 million of proceeds remaining from our new $400.0 million term loan executed on May 24, 2023. This was offset by a decrease of $1.3 million due to lower average real estate loan balances in 2023 compared to 2022 and a decrease in other income of $0.2 million.

5356

loan and other decreased $6.0 million due to an approximate $79.6 million lower average real estate loan balance in 2022 compared to 2021. An associated $0.2 million net decrease in our current expected credit loss reserves (“CECL”) was also the result of the lower average real estate loan balances discussed above.

Expenses

Total expenses increased by $7927.76 million, or 205.28%, for the year ended December 31, ~~2022~~2023 as compared to the year ended December 31, ~~2021~~2022. An analysis of selected expenses follows.

Interest expense. Interest expense increased $129.1 million, or 2012.16%, for the year ended December 31, ~~2022~~2023 compared to the year ended December 31, ~~2021~~2022. ~~The~~Interest ~~issuance~~expense ofincreased ~~the 2031 Senior Notes (as defined herein) in October 2021 resulted in an increase of~~ $1015.6 million, ~~new~~from ~~mortgage~~the ~~debt~~$400.0 ~~resulted~~million interm anloan ~~increase~~executed ofon ~~$4.7~~May ~~million~~24, 2023, and ~~an increase of~~ $42.45 million ~~was~~from ~~due~~increasing ~~to a higher effective~~ interest ~~rate~~rates on our ~~credit~~mortgage ~~facility~~debt. ~~Our~~These ~~weighted~~increases ~~average~~were ~~effective~~partially ~~interest~~offset ~~rate~~by onfavorable ~~our~~effects ~~credit~~of ~~facility~~our ~~was~~interest ~~2.5%~~rate ~~and~~swaps 0of $6.9%4 ~~for the years ended December 31~~million, ~~2022~~including ~~and 2021, respectively~~$1.8 ~~These~~million ~~increases~~due ~~were~~to ~~partially offset by a loss on~~ the ~~extinguishment~~de-designation of ~~debt~~an ininterest ~~2021~~rate ~~for~~swap, ~~$4.0 million~~ and a ~~reduction~~decrease ofin interest expense of $2.25 million ~~and $1.9 million~~ related to the ~~October 2021~~ pay ~~off~~down of ~~our~~the unsecured revolving credit facility ~~term~~under ~~loan~~our ~~and~~Credit ~~the~~Agreement ~~associated~~in ~~pay-fixed receive-variable rate swaps, respectively~~2023.

General and administrative. General and administrative expenses ~~increased~~decreased $21.5 million, or 63.56%, for the year ended December 31, ~~2022~~2023 compared to the year ended December 31, ~~2021~~2022. The ~~increase~~decrease is mainly attributable to ~~increased~~a ~~travel~~decrease ~~expenses~~in ofpayroll ~~$0.8 million, non-cash compensation of $0.6 million, legal~~ and ~~professional~~benefits ~~fees~~ of $01.58 million, ~~office~~ and ~~administrative~~travel expenses of $0.46 million,. ~~and~~This ~~marketing~~is ~~expenses~~offset ofby ~~$0.2~~an ~~million. The~~ increase in ~~travel,~~legal ~~office~~ and ~~administrative,~~professional ~~and~~fees ~~marketing expenses were the result~~ of ~~resuming~~$0.9 ~~normal activities previously limited by the COVID-19 pandemic~~million.

Operating expenses. Operating expenses increased $3311.76 million, or 246.58%, for the year ended December 31, ~~2022~~2023 compared to the year ended December 31, ~~2021~~2022. The net operating expenses from properties purchased and sold in ~~2022~~2023 and ~~2021~~2022 increased $263.12 million, ~~including~~and a net increase of $200.7 million ~~related~~in toour ~~the~~current ~~Landmark~~expected ~~Portfolio~~credit loss reserves (“CECL”). Operating expenses on ~~the~~our remaining ~~properties~~portfolio increased by $7.75 million, or 54.84% year over year, ~~mainly~~ due to increased ~~utility~~insurance costs of $30.63 million, ~~maintenance~~utility costs of $20.4 million, ~~insurance~~maintenance costs of $15.06 million, and property management costs of $2.0 million, offset by a decrease of $0.78 million in real estate taxes year over year.

Depreciation and amortization. Depreciation and amortization increased $311.85 million, or 200.18%, for the year ended December 31, ~~2022~~2023 compared to the year ended December 31, ~~2021~~2022. Depreciation and amortization increased $372.5 million for the properties purchased ~~in 2022~~ and ~~2021,~~sold ~~including~~in ~~$28.0~~2023 ~~million~~and ~~related to the Landmark Portfolio~~2022. This was offset by a ~~reduction in depreciation and amortization of $3.3 million associated with properties sold during 2022 and 2021, and a~~ decrease in our existing portfolio of $20.49 million due to fully amortized lease intangibles.

~~Impairment~~Merger ~~Loss~~and transaction-related expense. During the year ended December 31, ~~2021~~2023, the Company recorded anmerger ~~impairment~~and ~~charge~~transaction-related expense of $06.39 million related to athe ~~medical~~proposed ~~office~~merger ~~building~~with ~~in Traverse City~~Healthpeak, ~~Michigan.~~which ~~The~~are ~~Company~~primarily ~~did~~comprised ~~not~~of ~~record~~legal, ~~any~~accounting, ~~impairment~~tax, ~~for~~and ~~the~~other ~~year~~costs ~~ended~~incurred ~~December~~prior ~~31,~~to ~~2022~~year-end.

Equity in loss of unconsolidated entities. The change in equity in loss of unconsolidated entities for the year ended December 31, ~~2022~~2023 compared to the year ended December 31, ~~2021~~2022 is primarily due to ~~our~~a ~~additional investment of~~ $81.08 million ingain on our share of the ~~Davis~~sale ~~Joint~~of ~~Venture~~two inassets ~~January~~held ~~2022~~within our unconsolidated joint venture portfolio.

Gain on sale of investment properties, net. In ~~2022~~2023 we sold ~~five~~one ~~medical~~property ~~facilities,~~in ~~which~~Pennsylvania ~~included~~containing ~~four~~30,000 ~~medical~~square ~~office~~feet ~~buildings and one hospital,~~ for approximately $~~124~~2.76 million, realizing an ~~aggregate~~insignificant ~~net~~ gain ~~of approximately $57~~.4 ~~million.~~ In ~~2021~~2022 we sold ~~seven~~five ~~properties~~medical ~~and~~facilities, ~~five~~which ~~adjacent~~included ~~parcels~~four ofoutpatient ~~vacant~~medical ~~land~~facilities and one hospital, for approximately $94124.47 million, ~~and~~realizing ~~recognized~~an aaggregate net gain of approximately $2457.24 million.

Year Ended December 31, ~~2021~~2022 compared to the Year Ended December 31, ~~2020~~2021.

A discussion of the results of operations for the year ended December 31, ~~2020~~2022 is found in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, filed with the SEC on February 24, ~~2022~~2023, which is available free of charge on the SEC’s website at www.sec.gov and in the Investor Relations portion of our website (www.docreit.com). Information contained on our website is not part of, or incorporated by reference into, this Annual Report on Form 10-K.

5457

Cash Flows

Year Ended December 31, ~~2022~~2023 compared to the Year Ended December 31, ~~2021~~2022 (in thousands).

	2022		2021
	2023		2022
Cash provided by operating activities	$	~~258~~273,~~400~~430	$	~~246~~258,~~774~~400
Cash used in investing activities	(38114,~~472~~021)		(~~602~~38,~~439~~472)
Cash (used in) provided by financing activities	(222,074)		363,026
Cash used in financing activities	(10,360)		(222,074)
(Decrease) increase in cash and cash equivalents	$	(2,146)	$	7,361
Increase (decrease) in cash and cash equivalents	$	149,049	$	(2,146)

Cash flows from operating activities. Cash flows provided by operating activities were $~~258~~273.4 million during the year ended December 31, ~~2022~~2023 compared to $~~246~~258.84 million during the year ended December 31, ~~2021~~2022, representing an increase of $1115.60 million. ~~Net~~The increase in cash provided by operating activities ~~increased~~is primarily due to the ~~impact~~timing of ~~our~~payment ~~2022~~on ~~and~~our ~~2021~~tenant ~~acquisitions,~~receivables ~~including the Landmark Portfolio,~~ and ~~contractual~~accrued ~~rent~~expenses ~~increases. These increases are partially offset by our 2022~~ and ~~2021~~other ~~dispositions~~liabilities.

Cash flows from investing activities. Cash flows used in investing activities was $38114.50 million during the year ended December 31, ~~2022~~2023 compared to cash flows used in investing activities of $~~602~~38.45 million during the year ended December 31, ~~2021~~2022, representing a change of $~~564~~75.05 million. The ~~decrease~~change in cash ~~flows~~ used in investing activities was primarily ~~attributable~~due to a ~~net~~ decrease in proceeds received from the sale of investment properties of $~~601~~120.26 million, inan increase of net cash spent on the ~~acquisitions~~development of ~~investment~~real ~~properties~~estate and ~~unconsolidated~~capital ~~entities~~expenditures ~~along~~of ~~with~~$23.6 million, an increase in ~~cash~~net real estate loan issuances of $308.53 million, ~~due~~and toan ~~the~~increase ~~proceeds~~in onleasing ~~sale~~commissions of ~~investment~~$0.5 ~~properties~~million. This was partially offset by aless ~~decrease~~cash inspent ~~net~~on ~~investments~~the inacquisition ~~real~~of ~~estate~~investments ~~loan receivables~~ of $6073.36 million and ~~cash~~additional ~~spent~~returns on ~~capital~~our ~~expenditures~~investment ~~which~~in ~~increased~~unconsolidated byentities of $7.3.7 million.

Cash flows from financing activities. Cash flows used in financing activities was $~~222~~10.14 million during the year ended December 31, ~~2022~~2023 compared to ~~cash flows provided by financing activities of~~ $~~363~~222.01 million during the year ended December 31, ~~2021~~2022, representing a change of $~~585~~211.17 million. ~~This~~The change in cash ~~flow~~used isin financing activities was primarily due to aan ~~decrease~~increase in ~~cash provided by~~ proceeds from ~~issuance~~credit offacility ~~senior~~borrowings ~~unsecured notes~~ of $~~495~~219.70 million, a decrease ofin ~~$136.1~~paydowns ~~million~~under in the ~~issuance~~credit facility of ~~mortgage~~$69.0 ~~debt~~million, ~~and~~an aincrease ~~decrease~~ in ~~net~~contributions ~~proceeds~~ from ~~the~~noncontrolling ~~sale~~interests of ~~common~~$7.6 ~~shares~~million, ~~pursuant~~a todecrease ~~the~~of ~~ATM~~distributions ~~Program~~to noncontrolling interests of $~~162.~~1 ~~million~~.5 ~~Additionally~~million, ~~there~~and ~~was~~ a decrease ~~of cash used~~ in the ~~redemption~~purchase of ~~Series~~OP ~~A Preferred~~ Units of $~~151~~6.27 million,. asThese nosources ~~redemptions~~of cash were ~~made~~partially inoffset ~~2022,~~by ~~net~~a ~~paydowns~~decrease ~~under~~in the ~~credit~~sale ~~facility~~of ~~decreased~~common byshares ~~$61.0~~pursuant ~~million,~~to ~~payments~~the ~~made~~ATM onProgram ~~financing~~of ~~leases decreased~~ $839.38 million, ~~and~~the ~~debt~~repayment ~~issuance~~of ~~costs~~senior ~~decreased~~unsecured ~~$7.3~~notes ~~million.~~and ~~These~~mortgage ~~decreases~~debt ~~were~~of ~~offset~~$36.0 bymillion, an increase of ~~$10.9 million in~~ dividends paid to shareholders, of $511.50 million, ofan ~~distributions~~increase toin ~~noncontrolling~~debt ~~interests,~~issuance ~~and~~costs of $3.18 million, and an increase of ~~principal~~$1.6 million for payments onof ~~mortgage~~employee ~~debt~~taxes withheld for stock-based compensation.

Year Ended December 31, ~~2021~~2022 compared to Year Ended December 31, ~~2020~~2021 (in thousands).

A discussion of cash flows for the year ended December 31, ~~2020~~2022 is found in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, filed with the SEC on February 24, ~~2022~~2023, which is available free of charge on the SEC’s website at www.sec.gov and in the Investor Relations portion of our website (www.docreit.com). Information contained on our website is not part of, or incorporated by reference into, this Annual Report on Form 10-K.

Non-GAAP Financial Measures

This report includes Funds From Operations (“FFO”), Normalized FFO, Normalized Funds Available For Distribution (“FAD”), Net Operating Income (“NOI”), and Cash NOI, which are non-GAAP financial measures. For purposes of Item 10(e) of Regulation S-K promulgated under the Securities Act, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable financial measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet, or statement of cash flows (or equivalent statements) of the company, or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable financial measure so calculated and presented. As used in this report, GAAP refers to generally accepted accounting principles in the United States of America. Pursuant to the requirements of Item 10(e) of Regulation S-K promulgated under the Securities Act, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

5558

FFO and Normalized FFO

We believe that information regarding FFO is helpful to shareholders and potential investors because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as net income or loss (computed in accordance with GAAP) before noncontrolling interests of holders of OP units, excluding preferred distributions, gains (or losses) on sales of depreciable operating property, impairment write-downs on depreciable assets, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs). Our FFO computation includes our share of required adjustments from our unconsolidated joint ventures and may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the Nareit definition or that interpret the Nareit definition differently than we do. The GAAP measure that we believe to be most directly comparable to FFO, net income, includes depreciation and amortization expenses, gains or losses on property sales, impairments, and noncontrolling interests. In computing FFO, we eliminate these items because, in our view, they are not indicative of the results from the operations of our properties. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in our financial statements. FFO does not represent cash generated from operating activities in accordance with GAAP, should not be considered to be an alternative to net income or loss (determined in accordance with GAAP) as a measure of our liquidity and is not indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.

We use Normalized FFO, which excludes from FFO net change in fair value of derivative financial instruments, acceleration of deferred financing costs, net change in fair value of contingent consideration, gain on extinguishment of debt, merger and transaction related expenses, and other normalizing items. Our Normalized FFO computation includes our share of required adjustments from our unconsolidated joint ventures and our use of the term Normalized FFO may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. Normalized FFO should not be considered as an alternative to net income or loss (computed in accordance with GAAP), as an indicator of our financial performance or of cash flow from operating activities (computed in accordance with GAAP), or as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Normalized FFO should be reviewed in connection with other GAAP measurements.

5659

The following is a reconciliation from net income, the most direct financial measure calculated and presented in accordance with GAAP, to FFO and Normalized FFO (in thousands, except per share data):

	Year Ended December 31,
	2022		2021		2020
	2023		2022		2021
Net income	$	~~110~~43,~~036~~767	$	86110,~~783~~036	$	6886,~~488~~783
Earnings per share - diluted	$	0.4617	$	0.3946	$	0.3239
Net income	$	~~110~~43,~~036~~767	$	86110,~~783~~036	$	6886,~~488~~783
Net income attributable to noncontrolling interests - partially owned properties	(~~430~~169)		(~~607~~430)		(~~574~~607)
Preferred distributions	—		~~(13)~~—		(~~1,241~~13)
Depreciation and amortization expense	~~189~~190,~~221~~706		~~157~~189,~~437~~221		~~149~~157,~~208~~437
Depreciation and amortization expense - partially owned properties	(~~379~~536)		(~~280~~379)		(~~297~~280)
Gain on sale of investment properties, net	(~~57,375~~13)		(2457,~~165~~375)		(524,~~842~~165)
Impairment loss	—		~~340~~—		~~4,872~~340
Proportionate share of unconsolidated joint venture adjustments	97,~~289~~280		89,~~860~~289		78,~~063~~860
FFO applicable to common shares	$	~~250~~241,~~362~~035	$	~~228~~250,~~355~~362	$	~~221~~228,~~677~~355
Loss on extinguishment of debt	—		4,025		—
Net change in fair value of derivative	660		—		—
Net change in fair value of contingent consideration	—		—		(715)
Merger and transaction-related expense (1)	6,934		—		—
Proportionate share of unconsolidated joint venture adjustments	(340)		—		—
(Gain) loss on extinguishment of debt	(1,763)		—		4,025
Normalized FFO applicable to common shares	$	250,022	$	232,380	$	220,962
Proportionate share of unconsolidated joint venture adjustments	—		(340)		—
FFO per common share - diluted	$	1.04	$	1.02	$	1.05
Normalized FFO applicable to common shares	$	246,866	$	250,022	$	232,380
Normalized FFO per common share - diluted	$	1.04	$	1.04	$	1.05
FFO per common share - diluted	$	0.97	$	1.04	$	1.02
Weighted average common shares outstanding - diluted	239,610,285		223,060,556		211,145,917
Normalized FFO per common share - diluted	$	0.99	$	1.04	$	1.04
Weighted average common shares outstanding - diluted	249,344,713		239,610,285		223,060,556

(1)During the year ended December 31, 2023, the Company recorded merger and transaction-related expense of $6.9 million related to the proposed merger with Healthpeak, which are primarily comprised of legal, accounting, tax, and other costs incurred prior to year-end.

Normalized FAD

We define Normalized FAD, a non-GAAP measure, which excludes from Normalized FFO non-cash share compensation expense, straight-line rent adjustments, amortization of acquired above-market or below-market leases and assumed debt, amortization of lease inducements, amortization of deferred financing costs, and loan reserve adjustments, including our share of all required adjustments from unconsolidated joint ventures. We also adjust for recurring capital expenditures related to building, site, and tenant improvements, leasing commissions, cash payments from seller master leases, and rent abatement payments, including our share of all required adjustments for unconsolidated joint ventures. Other REITs or real estate companies may use different methodologies for calculating Normalized FAD, and accordingly, our computation may not be comparable to those reported by other REITs. Although our computation of Normalized FAD may not be comparable to that of other REITs, we believe Normalized FAD provides a meaningful supplemental measure of our performance due to its frequency of use by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. Normalized FAD should not be considered as an alternative to net income or loss attributable to controlling interest (computed in accordance with GAAP) or as an indicator of our financial performance. Normalized FAD should be reviewed in connection with other GAAP measurements.

5760

The following is a reconciliation from net income, the most direct financial measure calculated and presented in accordance with GAAP, to Normalized FAD (in thousands):

Year Ended December 31,

2022

2021

2020

2023

2022

2021

Net income

~~110~~43,~~036~~767

86110,~~783~~036

6886,~~488~~783

Normalized FFO applicable to common shares

~~250~~246,~~022~~866

~~232~~250,~~380~~022

~~220~~232,~~962~~380

Normalized FFO applicable to common shares

~~250~~246,~~022~~866

~~232~~250,~~380~~022

~~220~~232,~~962~~380

Non-cash share compensation expense

15,~~672~~676

15,~~032~~672

1215,~~486~~032

Straight-line rent adjustments

(63,~~847~~232)

(86,~~671~~847)

(128,~~395~~671)

Amortization of acquired above/below-market leases/assumed debt

4,~~924~~392

34,~~459~~924

3,~~462~~459

Amortization of lease inducements

~~900~~962

~~1,157~~900

1,~~156~~157

Amortization of deferred financing costs

2,~~314~~791

2,~~325~~314

2,~~372~~325

TI/LC and recurring capital expenditures

(23,853)

(25,532)

(19,042)

Recurring capital expenditures and lease commissions

(23,415)

(23,853)

(25,532)

Loan reserve adjustments

75786

~~(133)~~75

84(133)

Proportionate share of unconsolidated joint venture adjustments

(12,~~018~~314)

(~~998~~1,018)

(~~624~~998)

Normalized FAD applicable to common shares

242,~~189~~512

~~219~~242,~~019~~189

~~208~~219,~~461~~019

NOI and Cash NOI

NOI is a non-GAAP financial measure that is defined as net income or loss, computed in accordance with GAAP, generated from our total portfolio of properties and other investments before general and administrative expenses, depreciation and amortization expense, merger and transaction related expenses, interest expense, corporate high yield interest income, swap income, net change in the fair value of derivative financial instruments, gain or loss on the sale of investment properties, and impairment losses, including our share of all required adjustments from our unconsolidated joint ventures. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. Our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

Cash NOI is a non-GAAP financial measure which excludes from NOI straight-line rent adjustments, amortization of acquired above and below market leases, and other non-cash and normalizing items, including our share of all required adjustments from unconsolidated joint ventures. Other non-cash and normalizing items include items such as the amortization of lease inducements, loan reserve adjustments, payments received from seller master leases and rent abatements, and changes in fair value of contingent consideration. We believe that Cash NOI provides an accurate measure of the operating performance of our operating assets because it excludes certain items that are not associated with management of the properties. Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance in the real estate community. Our use of the term Cash NOI may not be comparable to that of other real estate companies as such other companies may have different methodologies for computing this amount.

5861

The following is a reconciliation from the Trust’s net income, the most direct financial measure calculated and presented in accordance with GAAP, to NOI, and Cash NOI (in thousands):

	Year Ended December 31,
	2022		2021		2020
	2023		2022		2021
Net income	$	~~110~~43,~~036~~767	$	86110,~~783~~036	$	6886,~~488~~783
General and administrative	4038,~~209~~756		3740,~~757~~209		3337,~~763~~757
Depreciation and amortization	189,641		157,870		149,590
Merger and transaction-related expense (1)	6,934		—		—
Interest expense	72,234		60,136		57,179
Depreciation and amortization	191,091		189,641		157,870
Gain on sale of investment properties, net	(57,375)		(24,165)		(5,842)
Interest expense	81,351		72,234		60,136
Impairment loss	—		340		4,872
Corporate high yield interest income	(5,654)		—		—
Proportionate share of unconsolidated joint venture adjustments	13,925		14,358		10,458
Swap income	(604)		—		—
NOI	$	368,670	$	333,079	$	318,508
Net change in the fair value of derivative	660		—		—
NOI	$	368,670	$	333,079	$	318,508
Gain on sale of investment properties, net	(13)		(57,375)		(24,165)
Straight-line rent adjustments	(6,847)		(8,671)		(12,395)
Impairment loss	—		—		340
Amortization of acquired above/below-market leases	4,935		3,521		3,524
Proportionate share of unconsolidated joint venture adjustments	12,677		13,925		14,358
Amortization of lease inducements	900		1,157		1,156
NOI	$	368,965	$	368,670	$	333,079
Loan reserve adjustments	75		(133)		84
NOI	$	368,965	$	368,670	$	333,079
Change in fair value of contingent consideration	—		—		(715)
Straight-line rent adjustments	(3,232)		(6,847)		(8,671)
Proportionate share of unconsolidated joint venture adjustments	(485)		(690)		(581)
Amortization of acquired above/below-market leases	4,392		4,935		3,521
Cash NOI	$	367,248	$	328,263	$	309,581
Amortization of lease inducements	962		900		1,157
Loan reserve adjustments	786		75		(133)
Proportionate share of unconsolidated joint venture adjustments	(367)		(485)		(690)
Cash NOI	$	371,506	$	367,248	$	328,263

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of operating and interest expenses and other expenditures directly associated with our properties, including:

•property expenses;

•interest expense and scheduled principal payments on outstanding indebtedness;

•general and administrative expenses; and

•capital expenditures for tenant improvements and leasing commissions.

In addition, we will require funds for future distributions expected to be paid to our common shareholders and OP Unit holders in our Operating Partnership.

As of December 31, ~~2022~~2023, we had a total of $7156.78 million of cash and cash equivalents and $~~807~~1.0 ~~million~~billion of near-term availability on our unsecured revolving credit facility. Our primary sources of cash include rent we collect from our tenants, borrowings under our unsecured credit facility, and financings of debt and equity securities. We believe that our existing cash and cash equivalents, cash flow from operating activities, and borrowings available under our unsecured revolving credit facility will be adequate to fund any existing contractual obligations to purchase properties and other obligations through the next year. However, because of the 90% distribution requirement under the REIT tax rules under the Internal Revenue Code, we may not be able to fund all of our future capital needs from cash retained from operations, including capital needed to make investments and to satisfy or refinance maturing obligations. As a result, we expect to rely upon external sources of capital, including debt and equity financing, to fund future capital needs. If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business or to meet our obligations and commitments as they mature. We will rely upon external sources of capital to fund future capital needs, and, if we encounter ~~difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.~~

difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.

Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, recurring and non-recurring capital expenditures, and scheduled debt maturities. We expect to satisfy our long-term liquidity needs through cash flow from operations, unsecured borrowings, issuances of equity and debt securities, proceeds from select property dispositions and joint venture transactions, and, in connection with acquisitions of additional properties, the issuance of OP Units of our Operating Partnership.

Our ability to access capital in a timely and cost-effective manner is essential to the success of our business strategy as it affects our ability to satisfy existing obligations, including repayment of maturing indebtedness, and to make future investments and acquisitions. Factors such as general market conditions, interest rates, credit ratings on our debt and equity securities, expectations of our potential future earnings and cash distributions, and the market price of our common shares, each of which are beyond our control and vary or fluctuate over time, all impact our access to and cost of capital. In particular, to the extent interest rates continue to rise, we may continue to experience a decline in the trading price of our common shares, which may impact our decision to conduct equity offerings for capital raising purposes. We have experienced and will likely continue to experience higher borrowing costs as interest rates rise, which may also impact our decisions to incur additional indebtedness, or to engage in transactions that we may need to fund through borrowing. We expect to continue to utilize equity and debt financings to support our future growth and investment activity.

We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our primary unsecured credit facility and the proceeds from financing transactions such as those discussed above. Our investments generate cash from net operating income and principal payments on loans receivable. Permanent financing for future investments, which generally replaces funds drawn under our primary unsecured credit facility, has historically been provided through a combination of the issuance of debt and equity securities and the incurrence or assumption of secured debt.

We intend to invest in additional properties as suitable opportunities arise and adequate sources of financing are available. We are currently evaluating additional potential investments consistent with the normal course of our business. There can be no assurance as to whether or when any portion of these investments will be completed. Our ability to complete investments is subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with sellers and our ability to finance the investment. We may not be successful in identifying and consummating suitable acquisitions or investment opportunities, which may impede our growth and negatively affect our results of operations and may result in the use of a significant amount of management’s resources. We expect that future investments in properties will depend on and will be financed by, in whole or in part, our existing cash, borrowings, including under our unsecured revolving credit facility, or the proceeds from additional issuances of equity or debt securities.

We currently do not expect to sell any of our properties to meet our liquidity needs, although we may do so in the future.

We currently are in compliance with all debt covenants on our outstanding indebtedness.

The foregoing discussion regarding the Company’s liquidity and capital resources is subject to applicable restrictions in the Merger Agreement.

Credit Facility

On September 24, 2021, the Operating Partnership, as borrower, and the Trust, as guarantor, executed the ~~Third Amended and Restated~~ Credit Agreement ~~(the “Credit Agreement”),~~ which extended the maturity date of the revolving credit facility under the Credit Agreement to September 24, 2025 and reduced the interest rate margin applicable to borrowings. The Credit Agreement includes an unsecured revolving credit facility of $1.0 billion and contains a term loan feature of $250.0 million, which the Company borrowed on, bringing total borrowing capacity to $1.325 billion. The Credit Agreement also includes a swingline loan commitment for up to 10% of the maximum principal amount and provides an accordion feature allowing the Trust to increase borrowing capacity by up to an additional $500 million, subject to customary terms and conditions, resulting in a maximum borrowing capacity of $1.75 billion. On October 13, 2021, the Company paid off the $250.0 million term loan feature of the Credit Agreement and the term loan feature is no longer available to the Company. The revolving credit facility under the Credit Agreement also includes two six-month extension options.

As of December 31, 2022, the Company had $193.0 million of borrowings outstanding under its unsecured revolving credit facility. As defined by the Credit Agreement, $807.0 million is available to borrow without adding additional properties to the unencumbered borrowing base of assets. On October 13, 2021, the Company used the proceeds from the 2031 Senior Notes (as defined herein) to pay off and extinguish the $250 million term loan feature of the Credit Agreement. The Operating Partnership simultaneously terminated the existing pay-fixed receive-variable rate swaps associated with the full term loan borrowing of $250.0 million. As defined by the Credit Agreement, the term loan feature is no longer available to the Company. See Note 6 (Debt) to our accompanying consolidated financial statements for a further discussion of our credit facility.63

60On March 31, 2023, the Operating Partnership, as borrower, and the Trust, as guarantor, executed a First Amendment to the Credit Agreement which expanded the accordion feature allowing the Operating Partnership to increase borrowing capacity by up to an additional $500.0 million, resulting in a maximum borrowing capacity of $2.25 billion, and replaced the LIBOR-based benchmark rates applicable to borrowings under the Amended Credit Agreement with SOFR based benchmark rates.

On May 24, 2023, the Operating Partnership, as borrower, and the Trust, as guarantor, executed a Second Amendment to the Credit Agreement, which added a new $400.0 million unsecured term loan with a scheduled maturity date of May 24, 2028, expanded the accordion feature, and allows the Operating Partnership to increase borrowing capacity under the Credit Agreement by up to an additional $500.0 million, subject to customary terms and conditions, for a maximum aggregate principal amount of all revolving commitments and term loans under the Credit Agreement of $1.9 billion. On the same day, the Operating Partnership borrowed $400.0 million under the five-year term loan feature of the Credit Agreement. Borrowings under the term loan feature of the Credit Agreement bear interest on the outstanding principal amount at a rate which is determined by the Trust’s credit rating, currently equal to 1.10%, inclusive of a 0.10% SOFR index adjustment, plus Daily Simple SOFR. The Company simultaneously entered into fixed-for-floating interest rate swaps for the full borrowing amount under the term loan, fixing the Daily Simple SOFR (as defined in the Credit Agreement) component of the borrowing rate to 3.593%, for an all-in fixed rate of 4.693%. Both the borrowing and the fixed-for-floating rate swaps have a maturity date of May 24, 2028. A portion of the proceeds from the term loan were used to repay all amounts outstanding on the unsecured revolving credit facility.

As of December 31, 2023, the Company did not have any borrowings outstanding under its $1.0 billion unsecured revolving credit facility or the $500.0 million accordion feature, as defined by the Credit Agreement. Of the aggregate $1.9 billion available under the Credit Agreement, the Company had $400.0 million of borrowings outstanding under the term loan feature as of December 31, 2023. See Note 6 (Debt) to our accompanying consolidated financial statements for a further discussion of our credit facility.

Senior Notes

As of December 31, ~~2022~~2023, we had $1.5 billion aggregate principal amount of senior notes issued and outstanding by the Operating Partnership, comprised of $~~15.0 million maturing in 2023, $~~25.0 million maturing in 2025, $70.0 million maturing in 2026, $425.0 million maturing in 2027, $395.0 million maturing in 2028, and $545.0 million maturing in 2031. See Note 6 (Debt) to our accompanying consolidated financial statements for a further discussion of our senior notes.

On October 13, 2021, the Operating Partnership issued $500.0 million in aggregate principal amount of 2.625% Senior Notes due November 1, 2031 (the “2031 Senior Notes”) in a public offering (the “October Debt Offering”) through underwriters for whom J.P. Morgan Securities LLC, Credit Agricole Securities (USA) Inc., and PNC Capital Markets LLC acted as representatives (the “Representatives”) pursuant to an underwriting agreement, dated October 7, 2021, among the Operating Partnership, the Trust, and the Representatives.

The 2031 Senior Notes were registered under the Securities Act on the Trust’s and the Operating Partnership’s automatic shelf registration statement on Form S-3ASR (File No. 333-236725), filed with the Commission on February 27, 2020.

The 2031 Senior Notes began accruing interest on October 13, 2021 and began paying interest semi-annually beginning May 1, 2022. The 2031 Senior Notes were sold at an issue price of 99.789% of their face value, before the underwriters’ discount. Our net proceeds from the offering, after deducting underwriting discounts and expenses, were approximately $495.1 million. We used the net proceeds of the October Debt Offering to pay off the existing balance of the unsecured revolving credit facility and the term loan feature of the Credit Agreement. The Operating Partnership simultaneously terminated each of the existing pay-fixed receive-variable rate swaps associated with the term loan borrowing.

The 2031 Senior Notes are subject to customary events of default, which may result in the accelerated maturity of the 2031 Senior Notes

ATM Program

During the fiscal year-ended December 31, ~~2022~~2023, we issued and sold pursuant to the 2023 ATM Program (as defined herein) 64,~~678~~400,~~177~~000 common shares at a weighted average price of $15.8910 per share, resulting in net proceeds to us of approximately $~~105~~65.18 million. See Note 1 (Organization and Business) to our accompanying consolidated financial statements for further detail. In connection with the Merger Agreement, the Trust suspended the 2023 ATM Program. The Trust plans to terminate the 2023 ATM Program upon the closing of the Mergers.

Dividend Reinvestment and Share Purchase Plan

On December 2, 2014, we adopted a Dividend Reinvestment and Share Purchase Plan (the “DRIP”). Under the DRIP:

•existing shareholders may purchase additional common shares by reinvesting all or a portion of the dividends paid on their common shares and by making optional cash payments of not less than $50 and up to a maximum of $10,000 per month;

•new investors may join the DRIP by making an initial investment of not less than $1,000 and up to a maximum of $10,000; and

•once enrolled in the DRIP, participants may authorize electronic deductions from their bank account for optional cash payments to purchase additional shares.

The DRIP is administered by our transfer agent, Computershare Trust Company, N.A. Our common shares sold under the DRIP will be newly issued or purchased in the open market, as further described in the DRIP. As of December 31, ~~2022~~2023, the Company had issued ~~210~~240,~~910~~746 common shares under the DRIP since its inception. The Company plans to terminate the DRIP upon the closing of the Mergers.

Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with GAAP, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of our accounting policies that we believe are critical to the preparation of our consolidated financial statements.

Lease Accounting

We, as lessor, make a determination with respect to each of our leases whether they should be accounted for as operating leases or direct financing leases. The classification criteria are based on estimates regarding the fair value of the leased facilities, minimum lease payments, effective cost of funds, the economic life of the facilities, the existence of a bargain purchase option, and certain other terms in the lease agreements. We believe all of our tenant leases should be accounted for as operating leases. Payments received under operating leases are accounted for in our consolidated statements of income as rental revenue for actual rent collected plus or minus a straight-line adjustment for estimated minimum lease escalators, adjustments relating to amortization of lease inducements and above/below-market leases, and rent abatements. Assets subject to operating leases are reported as real estate investments in the consolidated balance sheets.

Substantially all of our leases contain fixed or formula-based rent escalators. To the extent that escalator increases are tied to an index with a floor or a fixed rate, lease payments are accounted for on a straight-line basis over the life of the lease.

Purchase of Investment Properties

We expect to record the majority of our future investments as asset acquisitions and as a result will capitalize acquisition costs. The purchase price, inclusive of acquisition costs, will be allocated to tangible and intangible assets and liabilities based on their relative fair values. Tangible assets primarily consist of land, buildings, and improvements. Intangible assets primarily consist of above-market or below-market leases, in-place leases, above-market or below-market debt assumed, right-of-use assets, and lease liabilities. Any future contingent consideration will be recorded when the contingency is resolved. The determination of the fair value requires the Company to make certain estimates and assumptions. See Note 2 (Summary of Significant Accounting Policies) to our accompanying consolidated financial statements for details on our policies for recording purchases of investment properties.

Real Estate Investment Properties and Identified Intangible Assets

We are required to make subjective assessments of the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because if we were to shorten the expected useful lives of our investments in real estate, we would depreciate such investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis. Real estate investment properties and identified intangible assets are carried at cost, net of accumulated depreciation and amortization. ~~Medical~~Outpatient ~~office~~medical ~~buildings~~facilities are depreciated over their estimated useful lives, typically ranging up to 40 years, using the straight-line method. Tenant improvements and in-place leases are amortized over the lease life of the in-place leases or the tenant’s respective lease term. Cost of maintenance and repairs are charged to expense when incurred.

We periodically assess the carrying value of real estate ~~investments~~properties and related intangible assets in accordance with ASC Topic 360, Property, Plant & Equipment (“ASC 360”), to determine if facts and circumstances exist that would suggest that the recorded amount of an asset might be impaired or that the estimated useful life should be modified. In the event impairment in value occurs and a portion of the carrying amount of the real estate ~~investment~~property will not be recovered in part or in whole, a provision will be recorded to reduce the carrying basis of the real estate ~~investment~~property and related intangibles to their estimated fair value. The estimated fair value of our real estate ~~investments~~properties is determined by use of a number of customary industry standard methods that include discounted cash flow modeling using appropriate discount and capitalization rates and/or estimated cash proceeds received upon the anticipated disposition of the asset from market comparables. Estimates of future cash flows are based on a number of factors including ~~the~~ historical operating results, leases in place, known trends, and other market or economic factors affecting the real estate investment. The evaluation of anticipated cash flows is subjective and is based on assumptions regarding future occupancy, occupancy rates, lease rates, and capitalization rates that could differ materially from actual results. If our anticipated holding periods change or estimated cash flows decline based on market conditions or other unforeseen factors, impairment may be recorded. Long-lived assets classified as held-for-sale are recorded at the lower of carrying value or fair value less estimated costs to sell.

6265

Revenues

We recognize rental revenues in accordance with ASC 842, Leases. ASC 842 requires that rental revenue and adjustments relating to lease inducements and above-market and below-market leases be recognized on a straight-line basis over the term of the lease when collectability is probable. Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue for amounts more or less than amounts currently due from tenants. Amounts recognized in excess of amounts currently due are included in other assets on the consolidated balance sheets. If the Company determines that collectability of straight-line rents is not probable, rental revenue is limited to the lease payments collected from the lessee, including any variable lease payments.

Rental and related revenues also include expense recoveries, which relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized in the period the applicable expenses are incurred. The reimbursements are recorded gross, as these costs are incurred by the Company and reimbursed by the tenants. We have certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses and we do not recognize expense recoveries.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are made for the valuation of real estate and related intangibles, valuation of financial instruments, impairment assessments, and fair value assessments with respect to purchase price allocations. Actual results could differ from those estimates.

REIT Qualification Requirements

We are subject to a number of operational and organizational requirements necessary to qualify and maintain our qualification as a REIT. If we fail to qualify as a REIT or fail to remain qualified as a REIT in any taxable year, our income would be subject to federal income tax at regular corporate rates and potentially increased state and local taxes and we could incur substantial tax liabilities which could have an adverse impact upon our results of operations, liquidity, and distributions to our shareholders.

Off-Balance Sheet Arrangements

As of December 31, ~~2022~~2023, we have investments in two unconsolidated joint ventures with ownership interests of 4549.10% and 12.3%. The aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately $~~806~~791.43 million (of which our proportionate share is approximately $~~144~~156.07 million). See Note 2 (Summary of Significant Accounting Policies) to our accompanying consolidated financial statements for additional information. We have no other off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Inflation

Some of our lease agreements contain provisions designed to mitigate the adverse impact of inflation. These provisions include clauses that enable us to receive increased rent pursuant to escalation clauses which generally increase rental rates during the terms of the leases. These escalation clauses often provide for fixed rent increases or indexed escalations (based upon changes in the consumer price index or other measures). However, some of these contractual rent increases may be less than the actual rate of inflation. As of December 31, ~~2022~~2023, 5.79% of the Company’s annual rent escalators are determined by changes in CPI or other measures. Most of our lease agreements also require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes, and insurance. This requirement reduces our exposure to increases in these costs and operating expenses resulting from inflation.

6366

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future income, cash flows, and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use certain derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. Our derivative instruments consist of ~~one~~four interest rate ~~swap~~swaps of which three are designated as cash flow hedges of interest rate risk. See Note 2 (Summary of Significant Accounting Policies) and Note 7 (Derivatives) to our consolidated financial statements included in Item 7 to this report for further detail on our interest rate swap.

Interest rate risk amounts are our management’s estimates and were determined by considering the effect of hypothetical interest rates on our consolidated financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

Fixed Interest Rate Debt

As of December 31, ~~2022~~2023, our consolidated fixed interest rate debt totaled $1.5 billion, which represented 8174.86% of our total consolidated debt, excluding the impact of ~~our~~ interest rate ~~swap~~swaps. We entered into ~~a pay-~~fixed ~~receive~~-~~variable~~for-floating interest rate ~~swap~~swaps for ~~$36.1 million~~the full borrowing amount of our ~~mortgage~~$400.0 million ~~debt~~term loan, fixing the ~~LIBOR~~Daily Simple SOFR (as defined in the Credit Agreement) component of the borrowing rate to 13.43593%, for an all-in fixed rate as of December 31, ~~2022~~2023 of 34.33693%. Both the borrowing and ~~pay-fixed~~the ~~receive~~fixed-~~variable~~for-floating ~~swap~~rate swaps have a maturity date of ~~October~~May 3124, ~~2024~~2028.

Assuming the effects of the interest rate swap agreement, our fixed interest rate debt would represent 8394.7% of our total consolidated debt. Interest rate fluctuations on our fixed interest rate debt will generally not affect our future earnings or cash flows unless such instruments mature or are otherwise terminated. However, interest rate changes could affect the fair value of our fixed interest rate debt.

As of December 31, ~~2022~~2023, the fair value and the carrying value of our consolidated fixed interest rate debt were approximately $1.4 billion and $1.5 billion, respectively. The fair ~~values~~value estimate of our fixed~~-rate~~ ~~unsecured~~interest ~~notes~~rate ~~payable~~debt ~~are~~was estimated using ~~quoted market prices. If quoted market prices are not available, then the fair value is estimated using~~ a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated on December 31, ~~2022~~2023. AsWe we expect to hold our fixed interest rate debt instruments to maturity, based on the underlying structure of the debt instrument, and the amounts due under such instruments are limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that market fluctuations in interest rates, and the resulting change in fair value of our fixed interest rate debt instruments, would have a significant impact on our operating cash flows.

Variable Interest Rate Debt

As of December 31, ~~2022~~2023, our consolidated variable interest rate debt totaled $~~334~~504.27 million, which represented 1825.24% of our total consolidated debt. Assuming the effects of the interest rate swap agreement, our variable interest rate debt would represent 165.3% of our total consolidated debt. Interest rate changes on our variable rate debt could impact our future earnings and cash flows but would not significantly affect the fair value of such debt. As of December 31, ~~2022~~2023, we were exposed to market risks related to fluctuations in interest rates on $~~298~~104.27 million of consolidated borrowings. Assuming no increase in the amount of our variable rate debt, if ~~LIBOR~~PRIME and SOFR were to change by 100 basis points, total interest expense on our variable rate debt as of December 31, ~~2022~~2023 would change by approximately $~~2.0 million and $~~1.0 million annually~~, respectively~~.

Derivative Instruments

As of December 31, ~~2022~~2023, we had ~~one~~four outstanding interest rate ~~swap~~swaps ~~that~~of ~~was~~which three are designated as a cash flow ~~hedge~~hedges of interest rate risk, with a total notional amount of $36436.1 million. See Note 7 (Derivatives) within our consolidated financial statements for further detail on our interest rate swap. We are exposed to credit risk of the counterparty to our interest rate swap agreements in the event of non-performance under the terms of the agreements. If we were not able to replace this swap in the event of non-performance by the counterparty, we would be subject to variability of the interest rate on the amount outstanding under our debt that is fixed through the use of the swap.

6467

Indebtedness

As of December 31, ~~2022~~2023, we had total consolidated indebtedness of approximately $12.80 billion. The weighted average interest rate on our consolidated indebtedness was 34.9807% (based on the 30-day ~~LIBOR~~SOFR rate of 45.3338% and a ~~SOFR~~PRIME rate of 48.3050% as of December 31, ~~2022~~2023). As of December 31, ~~2022~~2023, we had approximately $~~298~~104.27 million, or approximately 165.3%, of our outstanding long-term debt exposed to fluctuations in short-term interest rates.

The following table sets forth certain information with respect to our consolidated indebtedness outstanding as of December 31, ~~2022~~2023 (in thousands):

Principal

Fixed/FloatingRate

Rate

Maturity

Senior Unsecured Revolving Credit Facility

~~193,000~~—

Floating

~~LIBOR~~SOFR + 0.8595%

9/24/2025

Term Debt (1)

400,000

Fixed

4.69

5/24/2028

Senior Unsecured Notes

January 2016 - Series A

15,000

Fixed

4.03

1/7/2023

January 2016 - Series B

45,000

Fixed

4.43

1/7/2026

January 2016 - Series C

45,000

Fixed

4.57

1/7/2028

January 2016 - Series D

45,000

Fixed

4.74

1/7/2031

August 2016 - Series A

25,000

Fixed

4.09

8/11/2025

August 2016 - Series B

25,000

Fixed

4.18

8/11/2026

August 2016 - Series C

25,000

Fixed

4.24

8/11/2027

March 2017 Notes

400,000

Fixed

4.30

3/15/2027

December 2017 Notes

350,000

Fixed

3.95

1/15/2028

October 2021 Notes

500,000

Fixed

2.625

11/1/2031

Mid Coast Hospital MOB (1)

5,153

Floating

LIBOR + 2.75%

11/13/2028

Mid Coast Hospital Outpatient Medical Facility (2)

4,678

Floating

PRIME

11/13/2028

Eden Hill Medical Center (2)

36,050

Fixed

3.33

10/31/2024

CareMount Medical - Lake Katrine

23,194

Fixed

4.63

11/6/2024

CareMount Medical - Lake Katrine MOB

23,726

Fixed

4.63

11/6/2024

University of Florida Health North

60,000

Floating

SOFR + 1.85%

12/20/2026

University of Florida Health North MOB

60,000

Floating

SOFR + 1.85%

12/20/2026

Jackson Baptist Medical Center - Belhaven

20,000

Floating

SOFR + 1.85%

12/16/2026

Old Bridge Medical Office Building

20,000

Floating

SOFR + 1.85%

12/20/2026

Old Bridge Outpatient Medical Facility

20,000

Floating

SOFR + 1.85%

12/20/2026

Total principal

1,~~832~~987,~~929~~872

Unamortized deferred financing costs

(78,~~453~~580)

Unamortized discounts

(76,~~359~~255)

Total

1,~~818~~973,~~117~~037

(1)WeOur ~~own~~borrowings under the term loan feature of the Credit Agreement (as defined herein) bear interest at a 66rate equal to 1.310%, ~~interest~~inclusive inof ~~the~~a ~~joint~~0.10% ~~venture~~SOFR ~~that~~index ~~owns~~adjustment, ~~this~~plus ~~property~~Daily Simple SOFR as of December 31, 2023 based on the Company’s current credit rating. ~~Debt~~We ~~shown~~entered ininto ~~this~~fixed-for-floating ~~schedule~~interest israte swaps for the full borrowing amount, offixing the ~~mortgage~~SOFR ~~indebtedness~~component onof this ~~property~~rate at 3.59%, and a current all-in fixed rate of 4.69%.

(2)~~Our~~We ~~mortgage~~own ~~debt~~a ~~related~~66.3% ~~to Eden Hill Medical Center bears~~ interest atin athe ~~rate~~joint ~~equal~~venture tothat ~~LIBOR~~owns +this 1property.~~90%.~~ WeDebt ~~have~~shown ~~entered~~in ~~into~~this aschedule ~~pay-fixed~~is ~~receive-variable interest~~the ~~rate~~full ~~swap,~~amount ~~fixing~~of the ~~LIBOR~~mortgage ~~component~~indebtedness ofon this ~~rate at 1~~property.~~43%, resulting in an effective interest rate of 3.33%.~~

6568

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

						Page
Report of Independent Registered Public Accounting Firm						6770
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting						6972
Consolidated Balance Sheets at December 31, 2022 and 2021						70
Consolidated Balance Sheets at December 31, 2023 and 2022						73
Consolidated Statements of Income for the Years Ended December 31, 2022, 2021, and 2020						71
Consolidated Statements of Income for the Years Ended December 31, 2023, 2022, and 2021						74
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021, and 2020						72
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022, and 2021						75
Consolidated Statements of Equity for the Years Ended December 31, 2022, 2021, and 2020						73
Consolidated Statements of Equity for the Years Ended December 31, 2023, 2022, and 2021						76
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020						74
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021						77
Notes to Consolidated Financial Statements						7578
The report of Physicians Realty Trust’s independent registered public accounting firm (PCAOB ID:42) with respect to the above-referenced financial statements and their report on internal control over financial reporting are included in Item 8 of this Form 10-K at the page number referenced above. Their consent appears as Exhibit 23 of this Form 10-K.

6669

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of Physicians Realty Trust

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Physicians Realty Trust (the “Company”) as of December 31, ~~2022~~2023 and ~~2021~~2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, ~~2022~~2023, and the related notes and financial statement schedules included in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2022~~2023 and ~~2021~~2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2022~~2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2022~~2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 2422, ~~2023~~2024 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

6770

						Evaluation of net real estate property for impairment
Description of the Matter						As of December 31, ~~2022~~2023, the Company’s consolidated balance sheet included net real estate property of $4.54 billion. As described in Note 2 to the consolidated financial statements, the Company periodically evaluates its long-lived assets, primarily consisting of investments in real estate, for impairment whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable. If indicators of impairment are present, the Company evaluates the carrying value of the related long-lived assets in relation to its expected undiscounted future cash flows. The Company adjusts the net book value of long-lived assets to fair value if the sum of the expected future undiscounted cash flows is less than book value.Auditing management’s long-lived assets impairment analysis was complex and involved a high degree of subjectivity due to the significant estimation required to determine the estimated undiscounted future cash flows of long-lived assets. In particular, the future cash flow estimates were sensitive to significant assumptions such as future rental revenues, ~~operating expenses,~~ occupancy, and capitalization rates which are affected by expectations about future market or economic conditions, as well as management’s intent to hold and operate the property over the term and in the manner assumed in the analysis.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s long-lived assets impairment review process, including controls over management’s review of the significant assumptions described above.To test the Company’s evaluation of long-lived assets for impairment, we performed audit procedures that included, among others, assessing the methodologies used, evaluating the significant assumptions discussed above, and testing the completeness and accuracy of the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to current market data and performed sensitivity analyses of the significant assumptions discussed above. The evaluation of the Company’s methodology and significant assumptions was performed with the assistance of our valuation specialists.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2014.

Milwaukee, Wisconsin

February 2422, ~~2023~~2024

6871

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of Physicians Realty Trust

Opinion on Internal Control over Financial Reporting

We have audited Physicians Realty Trust’s internal control over financial reporting as of December 31, ~~2022~~2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Physicians Realty Trust (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2022~~2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Physicians Realty Trust at December 31, ~~2022~~2023 and ~~2021~~2022, the related consolidated statements of income, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, ~~2022~~2023, and the related notes and financial statement schedules included in the Index at Item 15 and our report dated February 2422, ~~2023~~2024 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management'’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

February 2422, ~~2023~~2024

6972

Physicians Realty Trust

Consolidated Balance Sheets

(In thousands, except share and per share data)

	December 31,
ASSETS	~~2022~~2023		~~2021~~2022
Investment properties:
Land and improvements	$	~~241~~249,~~559~~470	$	~~235~~241,~~453~~559
Building and improvements	4,~~674~~705,~~011~~870		4,~~612~~659,~~561~~780
Tenant improvements	92,906		86,018
Construction in progress	53,319		18,497
Acquired lease intangibles	505,335		498,221
Tenant improvements	100,834		88,640
	5,513,811		5,432,253
Acquired lease intangibles	509,468		505,335
Accumulated depreciation	(996,888)		(821,036)
	5,618,961		5,513,811
Net real estate property	4,516,923		4,611,217
Accumulated depreciation	(1,187,952)		(996,888)
Real estate held for sale	—		1,964
Net real estate property	4,431,009		4,516,923
Right-of-use lease assets, net	~~231~~226,~~225~~824		~~235~~231,~~483~~225
Real estate loans receivable, net	~~104~~98,~~973~~277		~~117~~104,~~844~~973
Investments in unconsolidated entities	7778,~~716~~218		6977,~~793~~716
Net real estate investments	4,~~930~~834,~~837~~328		54,~~036~~930,~~301~~837
Cash and cash equivalents	7156,~~730~~779		97,~~876~~730
Tenant receivables, net	11,~~503~~955		411,~~948~~503
Other assets	~~146~~152,~~807~~559		~~131~~146,~~584~~807
Total assets	$	5,~~096~~155,~~877~~621	$	5,~~182~~096,~~709~~877
LIABILITIES AND EQUITY
Liabilities:
Credit facility	$	~~188~~393,~~328~~718	$	~~267~~188,~~641~~328
Notes payable	1,~~465~~451,~~437~~905		1,~~464~~465,~~008~~437
Mortgage debt	~~164~~127,~~352~~413		~~180~~164,~~269~~352
Accounts payable	48,~~391~~364		64,~~651~~391
Dividends and distributions payable	6061,~~148~~186		5760,~~246~~148
Accrued expenses and other liabilities	8796,~~720~~087		8687,~~254~~720
Lease liabilities	~~105~~104,~~011~~844		~~104~~105,~~957~~011
Acquired lease intangibles, net	2422,~~381~~578		2124,~~569~~381
Total liabilities	2,~~099~~266,~~768~~095		2,~~188~~099,~~595~~768
Redeemable noncontrolling interests - partially owned properties	3,~~258~~008		73,~~081~~258
Equity:
Common shares, $0.01 par value, 500,000,000 common shares authorized, 233,292,030 and 224,678,116 common shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively	2,333		2,247
Common shares, $0.01 par value, 500,000,000 common shares authorized, 238,519,554 and 233,292,030 common shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively	2,385		2,333
Additional paid-in capital	3,~~743~~821,~~876~~718		3,~~610~~743,~~954~~876
Accumulated deficit	(~~881~~1,~~672~~061,293)		(~~776~~881,~~001~~672)
Accumulated other comprehensive income (loss)	5,183		(892)
Accumulated other comprehensive income	717		5,183
Total shareholders’ equity	2,~~869~~763,~~720~~527		2,~~836~~869,~~308~~720
Noncontrolling interests:
Operating Partnership	~~123~~113,~~015~~662		~~150~~123,~~241~~015
Partially owned properties	19,~~116~~329		~~484~~1,116
Total noncontrolling interests	~~124~~122,~~131~~991		~~150~~124,~~725~~131
Total equity	2,~~993~~886,~~851~~518		2,~~987~~993,~~033~~851
Total liabilities and equity	$	5,~~096~~155,~~877~~621	$	5,~~182~~096,~~709~~877

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

7073

Physicians Realty Trust

Consolidated Statements of Income

(In thousands, except share and per share data)

	December 31,
	2022		2021		2020
	2023		2022		2021
Revenues:
Rental and related revenues	$	~~515~~528,~~373~~093	$	~~440~~515,~~198~~373	$	~~421~~440,~~134~~198
Interest income on real estate loans and other	1115,~~262~~370		1711,~~501~~262		1617,~~371~~501
Total revenues	~~526~~543,~~635~~463		~~457~~526,~~699~~635		~~437~~457,~~505~~699
Expenses:
Interest expense	7281,~~234~~351		6072,~~136~~234		5760,~~179~~136
General and administrative	4038,~~209~~756		3740,~~757~~209		3337,~~763~~757
Operating expenses	~~171~~182,~~100~~661		~~137~~171,~~408~~100		~~128~~137,~~198~~408
Depreciation and amortization	~~189~~191,~~641~~091		~~157~~189,~~870~~641		~~149~~157,~~590~~870
Impairment loss	—		340		4,872
Merger and transaction-related expense (1)	6,934		—		—
Total expenses	473,184		393,511		373,602
Impairment loss	—		—		340
Income before equity in loss of unconsolidated entities and gain on sale of investment properties, net:	53,451		64,188		63,903
Total expenses	500,793		473,184		393,511
Equity in loss of unconsolidated entities	(790)		(1,570)		(1,257)
Income before equity in income (loss) of unconsolidated entities and gain on sale of investment properties, net:	42,670		53,451		64,188
Gain on sale of investment properties, net	57,375		24,165		5,842
Equity in income (loss) of unconsolidated entities	1,084		(790)		(1,570)
Net income	110,036		86,783		68,488
Gain on sale of investment properties, net	13		57,375		24,165
Net income	43,767		110,036		86,783
Net income attributable to noncontrolling interests:
Operating Partnership	(51,~~240~~722)		(25,~~211~~240)		(12,~~797~~211)
Partially owned properties (1)	(430)		(607)		(574)
Partially owned properties (2)	(169)		(430)		(607)
Net income attributable to controlling interest	~~104~~41,~~366~~876		83104,~~965~~366		6683,~~117~~965
Preferred distributions	—		~~(13)~~—		(~~1,241~~13)
Net income attributable to common shareholders	$	~~104~~41,~~366~~876	$	83104,~~952~~366	$	6483,~~876~~952
Net income per share:
Basic	$	0.4618	$	0.3946	$	0.3239
Diluted	$	0.4617	$	0.3946	$	0.3239
Weighted average common shares:
Basic	~~226~~238,~~598~~216,~~474~~847		~~216~~226,~~135~~598,~~385~~474		~~204~~216,~~243~~135,~~768~~385
Diluted	~~239~~249,~~610~~344,~~285~~713		~~223~~239,~~060~~610,~~556~~285		~~211~~223,~~145~~060,~~917~~556
Dividends and distributions declared per common share	$	0.92	$	0.92	$	0.92

(1)~~Includes~~During ~~amounts~~the ~~attributable~~year ended December 31, 2023, the Company recorded merger and transaction-related expense of $6.9 million related to ~~redeemable~~the ~~noncontrolling~~proposed ~~interests~~merger with Healthpeak, which are primarily comprised of legal, accounting, tax, and other costs incurred prior to year-end.

(2)Includes amounts attributable to redeemable noncontrolling interests.

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

7174

Physicians Realty Trust

Consolidated Statements of Comprehensive Income

(In thousands)

December 31,

2022

2021

2020

2023

2022

2021

Net income

~~110~~43,~~036~~767

86110,~~783~~036

6886,~~488~~783

Other comprehensive income (loss):

Other comprehensive (loss) income:

Change in fair value of interest rate swap agreements, net

6(2,~~075~~703)

16,~~672~~075

~~(10~~1,~~180)~~672

Reclassification of accumulated losses on interest rate swap to earnings

—(1,763)

~~3,295~~—

—3,295

Total other comprehensive income (loss)

6,075

4,967

(10,180)

Total other comprehensive (loss) income

(4,466)

6,075

4,967

Comprehensive income

~~116~~39,~~111~~301

91116,~~750~~111

5891,~~308~~750

Comprehensive income attributable to noncontrolling interests - Operating Partnership

(51,~~490~~546)

(25,~~461~~490)

(12,~~522~~461)

Comprehensive income attributable to noncontrolling interests - partially owned properties

(~~430~~169)

(~~607~~430)

(~~574~~607)

Comprehensive income attributable to common shareholders

~~110~~37,~~191~~586

88110,~~682~~191

5688,~~212~~682

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

7275

Physicians Realty Trust

Consolidated Statements of Equity

(In thousands)

	ParValue		AdditionalPaid inCapital		AccumulatedDeficit		Accumulated Other Comprehensive (Loss) Income		TotalShareholders’Equity		OperatingPartnershipNoncontrollinginterest		PartiallyOwnedPropertiesNoncontrollingInterest		Total NoncontrollingInterests		TotalEquity
Balance at January 1, 2020	$	1,900	$	2,931,921	$	(529,194)	$	4,321	$	2,408,948	$	71,697	$	339	$	72,036	$	2,480,984
Balance at January 1, 2021	$	2,096	$	3,303,231	$	(658,171)	$	(5,859)	$	2,641,297	$	73,302	$	403	$	73,705	$	2,715,002
Cumulative effect of changes in accounting standards	—		(147)		—		—		(147)		—		—		—		(147)
Net proceeds from sale of common shares	194		364,194		—		—		364,388		—		—		—		364,388
Restricted share award grants, net	2		9,510		(1,783)		—		7,729		—		—		—		7,729
Purchase of OP Units	—		—		—		—		—		(515)		—		(515)		(515)
Conversion of OP Units	—		41		—		—		41		(41)		—		(41)		—
Dividends/distributions declared	—		—		(190,751)		—		(190,751)		(5,123)		—		(5,123)		(195,874)
Preferred distributions	—		—		(1,241)		—		(1,241)		—		—		—		(1,241)
Issuance of OP Units in connection with acquisitions	—		—		—		—		—		3,067		—		3,067		3,067
Distributions	—		—		—		—		—		—		(210)		(210)		(210)
Change in market value of Redeemable Noncontrolling Interests	—		132		(1,319)		—		(1,187)		—		—		—		(1,187)
Change in fair value of interest rate swap agreements	—		—		—		(10,180)		(10,180)		—		—		—		(10,180)
Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		(2,420)		—		—		(2,420)		2,420		—		2,420		—
Net income	—		—		66,117		—		66,117		1,797		274		2,071		68,188
Balance at December 31, 2020	2,096		3,303,231		(658,171)		(5,859)		2,641,297		73,302		403		73,705		2,715,002
Net proceeds from sale of common shares	147		267,979		—		—		268,126		—		—		—		268,126
Restricted share award grants, net	4		10,722		(1,312)		—		9,414		—		—		—		9,414
Purchase of OP Units	—		—		—		—		—		(6,237)		—		(6,237)		(6,237)
Dividends/distributions declared	—		—		(200,926)		—		(200,926)		(6,457)		—		(6,457)		(207,383)
Preferred distributions	—		—		(13)		—		(13)		—		—		—		(13)
Issuance of OP Units in connection with acquisitions	—		—		—		—		—		116,467		—		116,467		116,467
Distributions	—		—		—		—		—		—		(224)		(224)		(224)
Change in market value of Redeemable Noncontrolling Interests	—		(23)		456		—		433		—		—		—		433
Derecognition of cash flow hedge	—		—		—		3,295		3,295		—		—		—		3,295
Change in fair value of interest rate swap agreements	—		—		—		1,672		1,672		—		—		—		1,672
Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		29,045		—		—		29,045		(29,045)		—		(29,045)		—
Net income	—		—		83,965		—		83,965		2,211		305		2,516		86,481
Balance as of December 31, 2021	2,247		3,610,954		(776,001)		(892)		2,836,308		150,241		484		150,725		2,987,033
Net proceeds from sale of common shares	67		105,952		—		—		106,019		—		—		—		106,019
Restricted share award grants, net	4		11,277		(2,468)		—		8,813		—		—		—		8,813
Purchase of OP Units	—		—		—		—		—		(6,741)		—		(6,741)		(6,741)
Conversion of OP Units	15		23,073		—		—		23,088		(23,088)		—		(23,088)		—
Dividends/distributions declared	—		—		(210,326)		—		(210,326)		(10,017)		—		(10,017)		(220,343)
Contributions	—		—		—		—		—		—		569		569		569
Distributions	—		—		—		—		—		—		(238)		(238)		(238)
Change in market value of Redeemable Noncontrolling Interest in partially owned properties	—		—		2,757		—		2,757		—		—		—		2,757
Change in fair value of interest rate swap agreement	—		—		—		6,075		6,075		—		—		—		6,075
Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		(7,380)		—		—		(7,380)		7,380		—		7,380		—
Net income	—		—		104,366		—		104,366		5,240		301		5,541		109,907
Balance as of December 31, 2022	$2,333	~~2,333~~	$3,743,876	~~3,743,876~~	$(881,672)	~~(881,672)~~	$5,183	~~5,183~~	$2,869,720	~~2,869,720~~	$123,015	~~123,015~~	$1,116	~~1,116~~	$124,131	~~124,131~~	$2,993,851	~~2,993,851~~
Net proceeds from sale of common shares	43		66,212		—		—		66,255		—		—		—		66,255
Restricted share award grants, net	7		9,638		(1,748)		—		7,897		—		—		—		7,897
Purchase of OP Units	—		—		—		—		—		(72)		—		(72)		(72)
Conversion of OP Units	2		2,769		—		—		2,771		(2,769)		—		(2,769)		2
Dividends/distributions declared	—		—		(219,749)		—		(219,749)		(9,011)		—		(9,011)		(228,760)
Contributions	—		—		—		—		—		—		8,171		8,171		8,171
Distributions	—		—		—		—		—		—		(213)		(213)		(213)
Reclassification of accumulated gains on interest rate swap to earnings	—		—		—		(1,763)		(1,763)		—		—		—		(1,763)
Change in fair value of interest rate swap agreement	—		—		—		(2,703)		(2,703)		—		—		—		(2,703)
Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		(777)		—		—		(777)		777		—		777		—
Net income	—		—		41,876		—		41,876		1,722		255		1,977		43,853
Balance as of December 31, 2023	$	2,385	$	3,821,718	$	(1,061,293)	$	717	$	2,763,527	$	113,662	$	9,329	$	122,991	$	2,886,518

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

7376

Physicians Realty Trust

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2022		2021		2020
	2023		2022		2021
Cash Flows from Operating Activities:
Net income	$	~~110~~43,~~036~~767	$	86110,~~783~~036	$	6886,~~488~~783
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	~~189~~191,~~641~~091		~~157~~189,~~870~~641		~~149~~157,~~590~~870
Amortization of deferred financing costs	2,~~314~~791		2,~~325~~314		2,~~372~~325
Amortization of lease inducements and above/below-market lease intangibles	5,~~834~~354		45,~~678~~834		4,~~680~~678
Straight-line rental (revenue) expense, net	(63,~~847~~232)		(86,~~671~~847)		(128,~~395~~671)
Amortization of discount on unsecured senior notes	1,~~064~~104		~~737~~1,064		~~629~~737
Amortization of above market assumed debt	~~(10)~~—		(6210)		(62)
Derecognition of cash flow hedge	—		3,295		—
(Gain) loss on extinguishment of debt	(1,763)		—		3,295
Loss on extinguishment of deferred financing costs	—		~~730~~—		—730
Gain on sale of investment properties, net	(~~57,375~~13)		(2457,~~165~~375)		(524,~~842~~165)
Equity in loss of unconsolidated entities	790		1,570		1,257
Equity in (income) loss of unconsolidated entities	(1,084)		790		1,570
Distributions from unconsolidated entities	7,~~874~~657		67,~~928~~874		56,~~515~~928
Change in fair value of derivatives	—660		—		15—
Provision for bad debts	~~180~~1,270		~~(90)~~180		~~513~~(90)
Non-cash share compensation	15,~~672~~676		15,~~032~~672		1215,~~486~~032
Net change in fair value of contingent consideration	—		—		(715)
Impairment on investment properties	—		—		340
Impairment on investment properties	—		340		4,872
Change in operating assets and liabilities:
Tenant receivables	(~~7,652~~540)		(27,~~863~~652)		(12,~~404~~863)
Other assets	(~~2,317~~850)		3(2,~~404~~317)		(73,~~380)~~404
Accounts payable	(23,~~260)~~973		(~~356~~2,260)		~~659~~(356)
Accrued expenses and other liabilities	17,~~456~~569		~~(711)~~1,456		~~9,840~~(711)
Net cash provided by operating activities	~~258~~273,~~400~~430		~~246~~258,~~774~~400		~~233~~246,~~118~~774
Cash Flows from Investing Activities:
Proceeds on sale of investment properties	~~123~~2,~~179~~553		92123,~~711~~179		2092,~~269~~711
Acquisition of investment properties, net	(~~112~~39,~~455~~346)		(~~718~~112,~~179~~455)		(73718,~~040~~179)
Investment in unconsolidated entities	(13,~~587~~053)		(913,~~069~~587)		(189,~~390~~069)
Capital expenditures on investment properties	(39,869)		(32,566)		(33,887)
Returns of investment in unconsolidated entities	3,737		—		—
Issuances of real estate loans receivable	(30,611)		(16,213)		(115,220)
Development of real estate	(21,604)		—		—
Repayments of real estate loans receivable	38,994		84,874		21,194
Capital expenditures on investment properties	(41,905)		(39,869)		(32,566)
Leasing commissions	(3,623)		(3,997)		(2,660)
Issuances of mezzanine and real estate loans receivable	(51,400)		(30,611)		(16,213)
Lease inducements	(500)		—		—
Repayments of mezzanine and real estate loans receivable	51,528		38,994		84,874
Net cash used in investing activities	(38,472)		(602,439)		(201,734)
Leasing commissions	(4,132)		(3,623)		(3,997)
Lease inducements	(399)		(500)		—
Net cash used in investing activities	(114,021)		(38,472)		(602,439)
Cash Flows from Financing Activities:
Net proceeds from sale of common shares	~~106~~66,~~019~~255		~~268~~106,~~126~~019		~~364~~268,~~388~~126
Proceeds from credit facility borrowings	~~294~~513,000		~~710~~294,~~541~~000		~~364~~710,~~000~~541
Repayments on credit facility borrowings	(~~375~~306,000)		(~~852~~375,~~541~~000)		(~~537~~852,~~000~~541)
Proceeds from issuance of mortgage debt	—		136,050		—
Repayment of senior unsecured notes	(15,000)		—		—
Proceeds from issuance of senior unsecured notes	—		495,695		—
Proceeds from issuance of mortgage debt	—		—		136,050
Principal payments on mortgage debt	(16,094)		(13,027)		(25,477)
Proceeds from issuance of senior unsecured notes	—		—		495,695
Debt issuance costs	(74)		(7,380)		(63)
Principal payments on mortgage debt	(37,058)		(16,094)		(13,027)
Payments made on financing leases	—		(8,300)		—
Debt issuance costs	(3,917)		(74)		(7,380)
Dividends paid - shareholders	(209,417)		(198,541)		(186,721)
Payments made on financing leases	—		—		(8,300)
Distributions to noncontrolling interests - Operating Partnership	(10,493)		(5,024)		(5,092)
Dividends paid - shareholders	(220,429)		(209,417)		(198,541)
Preferred distributions paid - OP Unit holders	—		(303)		(1,268)
Distributions to noncontrolling interests - Operating Partnership	(9,041)		(10,493)		(5,024)
Contributions to noncontrolling interests	569		—		—
Preferred distributions paid - OP Unit holders	—		—		(303)
Distributions to noncontrolling interests - partially owned properties	(588)		(648)		(628)
Contributions to noncontrolling interests	8,171		569		—
Payments of employee taxes for withheld stock-based compensation shares	(4,255)		(4,183)		(2,848)
Distributions to noncontrolling interests - partially owned properties	(378)		(588)		(648)
Purchases of Series A Preferred Units	—		(151,202)		—
Payments of employee taxes for withheld stock-based compensation shares	(5,891)		(4,255)		(4,183)
Purchases of OP Units	(6,741)		(6,237)		(515)
Purchases of Series A Preferred Units	—		—		(151,202)
Net cash (used in) provided by financing activities	(222,074)		363,026		(31,224)
Purchases of OP Units	(72)		(6,741)		(6,237)
Net (decrease) increase in cash and cash equivalents	(2,146)		7,361		160
Net cash (used in) provided by financing activities	(10,360)		(222,074)		363,026
Cash and cash equivalents, beginning of year	9,876		2,515		2,355
Net increase (decrease) in cash and cash equivalents	149,049		(2,146)		7,361
Cash and cash equivalents, end of year	$	7,730	$	9,876	$	2,515
Cash and cash equivalents, beginning of year	7,730		9,876		2,515
Supplemental disclosure of cash flow information - interest paid during the year	$	70,207	$	50,814	$	54,813
Cash and cash equivalents, end of year	$	156,779	$	7,730	$	9,876
Supplemental disclosure of noncash activity—settlement of note receivable in exchange for Series A Preferred Units	$	—	$	20,646	$	—
Supplemental disclosure of cash flow information - interest paid during the year	$	80,502	$	70,207	$	50,814
Supplemental disclosure of noncash activity - change in fair value of interest rate swap agreements	$	6,075	$	1,672	$	(10,180)
Supplemental disclosure of noncash activity—settlement of note receivable in exchange for Series A Preferred Units	$	—	$	—	$	20,646
Supplemental disclosure of noncash activity - issuance of OP Units and Series A Preferred Units in connection with acquisitions	$	—	$	263,008	$	3,067
Supplemental disclosure of noncash activity - change in fair value of interest rate swap agreements	$	(2,703)	$	6,075	$	1,672
Supplemental disclosure of noncash activity—Conversion of loan receivable in connection to the acquisition of investment property	$	5,700	$	15,500	$	—
Supplemental disclosure of noncash activity - issuance of OP Units and Series A Preferred Units in connection with acquisitions	$	—	$	—	$	263,008
Supplemental disclosure of noncash activity—Conversion of loan receivable in connection to the acquisition of investment property	$	5,397	$	5,700	$	15,500

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

7477

Physicians Realty Trust

Notes to Consolidated Financial Statements

Unless otherwise indicated or unless the context requires otherwise the use of the words “we,” “us,” “our,” and the “Company,” refer to Physicians Realty Trust, together with its consolidated subsidiaries, including Physicians Realty L.P.

Note 1. Organization and Business

The Trust was organized in the state of Maryland on April 9, 2013. As of December 31, ~~2022~~2023, the Trust was authorized to issue up to 500,000,000 common shares of beneficial interest, par value $0.01 per share. The Trust filed a Registration Statement on Form S-11 with the Securities and Exchange Commission (the “Commission”) with respect to a proposed underwritten initial public offering (the “IPO”) and completed the IPO of its common shares and commenced operations on July 24, 2013.

The Trust contributed the net proceeds from the IPO to the Operating Partnership. The Trust and the Operating Partnership are managed and operated as one entity, and the Trust has no significant assets other than its investment in the Operating Partnership. The Trust’s operations are conducted through the Operating Partnership and wholly-owned and majority-owned subsidiaries of the Operating Partnership. The Trust, as the general partner of the Operating Partnership, controls the Operating Partnership and consolidates the assets, liabilities, and results of operations of the Operating Partnership. Therefore, the assets and liabilities of the Trust and the Operating Partnership are the same.

The Trust is a self-managed REIT formed primarily to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals, and health care delivery systems.

Merger Agreement

On October 29, 2023, the Trust and the Operating Partnership entered into the Merger Agreement with Healthpeak and certain subsidiaries of Healthpeak, pursuant to which, among other things, and through the Mergers, (i) each outstanding common share of the Trust (other than Trust common shares to be canceled in accordance with the Merger Agreement) will be automatically converted into the right to receive 0.674 shares of Healthpeak common stock, and (ii) each outstanding OP Unit will be automatically converted into and become common units in the successor entity to the Operating Partnership equal to the Exchange Ratio. In connection with the Mergers, Healthpeak filed a Registration Statement on Form S-4 with the SEC on December 15, 2023, as amended on January 9, 2024. The Trust and Healthpeak filed a definitive joint proxy statement/prospectus on January 11, 2024 in connection with our respective special meetings of shareholders and stockholders, as applicable, which were held on February 21, 2024. On February 21, 2024, our shareholders voted on and approved the merger with Healthpeak. The Mergers are expected to close on or about March 1, 2024. Consummation of the Mergers are subject to the satisfaction or waiver of customary closing conditions.

ATM Programs

In ~~November~~May ~~2019~~2021, the Trust and the Operating Partnership entered into ~~separate~~an At Market Issuance Sales ~~Agreements~~Agreement (the “~~2019~~2021 Sales ~~Agreements~~Agreement”) with ~~each of~~ KeyBanc Capital Markets Inc., Credit Agricole Securities (USA) Inc., BMO Capital Markets Corp., and Raymond James & Associates, Inc., in their capacity as agents for the Company and/or forward sellers and Stifel, Nicolaus & Company, Incorporated, in ~~their~~its capacity as ~~agents~~sales agent for the Company (collectively, the “2021 Agents”) and Bank of Montreal, Credit Agricole Corporate and Investments Bank, KeyBanc Capital Markets Inc., and Raymond James & Associates, Inc. as forward ~~sellers~~purchasers for the Company (the “~~2019~~2021 ~~Agents~~Forward Purchasers”), pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $500 million, through the ~~2019~~2021 Agents (the “~~2019~~2021 ATM Program”). The ~~2019~~2021 Sales ~~Agreements~~Agreement ~~contemplate~~contemplates that, in addition to the issuance and sale of the Trust’s common shares through the ~~2019~~2021 Agents, the Trust may also enter into one or more forward sales agreements from time to time in the future with each of ~~KeyBanc~~the ~~Capital~~2021 ~~Markets,~~Forward ~~Inc~~Purchasers.~~, Credit Agricole Securities (USA) Inc., BMO Capital Markets Corp., Raymond James & Associates, Inc., and Stifel, Nicolaus & Company, Incorporated, or one of their respective affiliates.~~

In May 2021, the Trust and the Operating Partnership entered into an At Market Issuance Sales Agreement (the “2021 Sales Agreement”) with KeyBanc Capital Markets Inc., Credit Agricole Securities (USA) Inc., BMO Capital Markets Corp., and Raymond James & Associates, Inc. in their capacity as agents for the Company and/or forward sellers and Stifel, Nicolaus & Company, Incorporated in its capacity as sales agent for the Company (collectively, the “2021 Agents”) and Bank of Montreal, Credit Agricole Corporate and Investments Bank, KeyBanc Capital Markets Inc., and Raymond James & Associates, Inc. as forward purchasers for the Company (the “Forward Purchasers”), pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $500 million through the 2021 Agents (the “2021 ATM Program” and, together with the 2019 ATM Program the “ATM Programs”). The 2021 Sales Agreement contemplates that, in addition to the issuance and sale of the Trust’s common shares through the 2021 Agents, the Trust may also enter into one or more forward sales agreements from time to time in the future with each of the Forward Purchasers. Upon entry into the 2021 Sales Agreement, the Trust terminated the 2019 ATM Program.78

75In August 2023, the Trust and the Operating Partnership entered into an At Market Issuance Sales Agreement (the “2023 Sales Agreement”) with BMO Capital Markets Corp., Credit Agricole Securities (USA) Inc., KeyBanc Capital Markets Inc., Raymond James & Associates, Inc., Regions Securities LLC and Stifel, Nicolaus & Company, Incorporated as sales agents for the Company and/or forward sellers (collectively, “2023 Agents”), and Bank of Montreal, Crédit Agricole Corporate and Investment Bank, KeyBanc Capital Markets Inc., Raymond James & Associates, Inc., Regions Securities LLC and Stifel, Nicolaus & Company, Incorporated (collectively, “2023 Forward Purchasers”), pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $600 million through the 2023 Agents (the “2023 ATM Program”). The 2023 Sales Agreement contemplates that, in addition to the issuance and sale of the Trust’s common shares through the 2023 Agents, the Trust may also enter into one or more forward sales agreements from time to time in the future with each of the 2023 Forward Purchasers. Upon entry into the 2023 Sales Agreement, we terminated the 2021 ATM Program. As of February 16, 2024, the Trust had $600.0 million remaining available under the 2023 ATM Program which was suspended in connection with the Merger Agreement. The Trust plans to terminate the 2023 ATM Program upon the closing of the Mergers.

During ~~2022~~2023 and ~~2021~~2022, the Trust’s issuance and sale of common shares pursuant to the ATM Programs was as follows (in thousands, except common shares and price):

2022

2021

2023

2022

Commonshares sold

Weightedaverage price

Netproceeds

Commonshares sold

Weightedaverage price

Netproceeds

Quarterly period ended March 31

~~259~~4,~~977~~400,000

1815.9310

465,~~871~~776

2259,~~887,296~~977

18.3293

524,~~358~~871

Quarterly period ended June 30

~~977,800~~—

~~18.61~~—

~~18,020~~—

4977,~~532,343~~800

18.3961

8218,~~519~~020

Quarterly period ended September 30

~~440,400~~—

~~18.15~~—

~~7,913~~—

—440,400

—18.15

—7,913

Quarterly period ended December 31

~~5,000,000~~—

~~15.00~~—

~~74,250~~—

75,~~236~~000,~~439~~000

1815.5400

~~132~~74,~~824~~250

Year ended December 31

64,~~678~~400,~~177~~000

15.8910

~~105~~65,~~054~~776

146,~~656~~678,~~078~~177

1815.4589

~~267~~105,~~701~~054

As of February 14, 2023, the Trust had $158.6 million remaining available under the 2021 ATM Program.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

GAAP requires identification of entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). ASC 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Company identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Company consolidates its investment in a VIE when it determines that it is the VIE’s primary beneficiary. The Company may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Company performs this analysis on an ongoing basis.

For property holding entities not determined to be VIEs, the Company consolidates such entities in which the Operating Partnership owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation.

Noncontrolling Interests

The Company presents the portion of any equity it does not own in entities that it controls (and thus consolidates) as noncontrolling interests and classifies such interests as a component of consolidated equity, separate from the Company’s total shareholders’ equity, on the consolidated balance sheets.

Operating Partnership: Noncontrolling interests in the Company include OP Units held by other investors. Net income or loss is allocated to noncontrolling interests (limited partners) based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and the Trust. Issuance of additional common shares and OP Units ~~changes the ownership interests of both the noncontrolling interests and the Trust. Such transactions and the related proceeds are treated as capital transactions.~~

During the year ended December 31, 2021, the Operating Partnership issued 6,561,521 OP Units valued at approximately $116.5 million on the date of issuance to partially fund the acquisition of a portfolio. The portfolio had a total aggregate purchase price of approximately $750.0 million.79

Aschanges ofthe ~~December~~ownership ~~31,~~interests ~~2022~~of ~~and~~both ~~2021,~~ the ~~Trust~~noncontrolling ~~held~~interests ~~a 95.9%~~ and ~~95.0% interest in~~ the ~~Operating Partnership, respectively~~Trust. AsSuch ~~the~~transactions ~~sole general partner~~ and the ~~majority~~related ~~interest~~proceeds ~~holder,~~are ~~the~~treated ~~Trust~~as ~~consolidates~~capital ~~the financial position and results of operations of the Operating Partnership~~transactions.

~~Holders~~As of OPDecember ~~Units~~31, ~~may~~2023 ~~not~~and ~~transfer~~2022, ~~their units without~~ the Trust’s ~~prior~~held ~~written~~a ~~consent,~~96.1% asand ~~general~~95.9% ~~partner~~interest ofin the Operating Partnership, respectively. ~~Beginning~~As on the ~~first~~sole ~~anniversary~~general ofpartner and the ~~issuance~~majority ofinterest OPholder, ~~Units~~the toTrust consolidates the ~~respective~~financial ~~holders,~~position OPand ~~Unit~~results ~~holders~~of operations of the Operating Partnership.

76Holders of OP Units may not transfer their units without the Trust’s prior written consent, as general partner of the Operating Partnership. Beginning on the first anniversary of the issuance of OP Units to the respective holders, OP Unit holders may tender their units for redemption by the Operating Partnership in exchange for cash equal to the market price of the Trust’s common shares at the time of redemption or for unregistered common shares on a one-for-one basis. Such selection to pay cash or issue common shares to satisfy an OP Unit holder’s redemption request is solely within the control of the Trust. Accordingly, the Trust presents the OP Units of the Operating Partnership held by investors other than the Trust as noncontrolling interests within equity in the consolidated balance sheets.

may tender their units for redemption by the Operating Partnership in exchange for cash equal to the market price of the Trust’s common shares at the time of redemption or for unregistered common shares on a one-for-one basis. Such selection to pay cash or issue common shares to satisfy an OP Unit holder’s redemption request is solely within the control of the Trust. Accordingly, the Trust presents the OP Units of the Operating Partnership held by investors other than the Trust as noncontrolling interests within equity in the consolidated balance sheets.

Partially Owned Properties: The Trust reflects noncontrolling interests in partially owned properties on the consolidated balance sheets for the portion of consolidated properties that are not wholly owned by the Company. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statements of income.

Redeemable Noncontrolling Interests - Partially Owned Properties

In connection with the Company’s acquisitions of the outpatient medical ~~office building~~facility, ambulatory surgery center, and hospital located on the Great Falls Hospital campus in Great Falls, Montana, physicians affiliated with the sellers retained non-controlling interests which were, at the holders’ option, able to be redeemed at any time after May 1, 2023. Due to the redemption provision, which was outside of the control of the Trust, the Trust classified the investment in the mezzanine section of its consolidated balance sheets. On July 14, 2022, the Company disposed of these three properties and removed the related redeemable noncontrolling interest from its consolidated balance sheets.

Through a consolidated joint venture with MedProperties Realty Advisors, LLC (“MedProperties”), the Company acquired Calko Medical Center in Brooklyn, New York. As part of the joint venture, MedProperties can redeem its interest, at their option, at any time after September 9, 2025. Due to the redemption provision, which is outside of the control of the Company, the Company classifies the noncontrolling interests in the mezzanine section of its consolidated balance sheets. The Company records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value.

Dividends and Distributions

Dividends and distributions for the years ended December 31, ~~2022~~2023, ~~2021~~2022, and ~~2020~~2021 are as follows:

Declaration Date

Record Date

Payment Date

Cash Dividendper Share/Unit

December 21, 2023

January 3, 2024

January 18, 2024

0.23

September 21, 2023

October 3, 2023

October 17, 2023

0.23

June 16, 2023

July 5, 2023

July 18, 2023

0.23

March 17, 2023

April 4, 2023

April 18, 2023

0.23

December 22, 2022

January 4, 2023

January 18, 2023

0.23

September 23, 2022

October 4, 2022

October 14, 2022

0.23

June 17, 2022

July 5, 2022

July 19, 2022

0.23

March 18, 2022

March 31, 2022

April 14, 2022

0.23

December 22, 2021

January 4, 2022

January 18, 2022

0.23

September 22, 2021

October 4, 2021

October 15, 2021

0.23

June 18, 2021

July 2, 2021

July 16, 2021

0.23

March 19, 2021

April 2, 2021

April 16, 2021

0.23

December 18, 2020

January 5, 2021

January 20, 2021

0.23

September 21, 2020

October 2, 2020

October 16, 2020

0.23

June 18, 2020

July 2, 2020

July 17, 2020

0.23

March 19, 2020

April 2, 2020

April 16, 2020

0.23

The Company’s shareholders are entitled to reinvest all or a portion of any cash distribution on their shares of the Company’s common stock by participating in the DRIP, subject to the terms of the plan.80

Tax Status of Dividends and Distributions

The Company’s distributions of current and accumulated earnings and profits for U.S. federal income tax purposes generally are taxable to shareholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain.

Any cash distributions received by an OP Unit holder in respect of its OP Units generally will not be taxable to such OP Unit holder for U.S. federal income tax purposes, to the extent that such distribution does not exceed the OP Unit holder’s basis in its OP Units. Any such distribution will instead reduce the OP Unit holder’s basis in its OP Units (and OP Unit holders will be subject to tax on the taxable income allocated to them by the Operating Partnership in respect of their OP Units when such income is earned by the Operating Partnership, with such income allocation increasing the OP Unit holders’ basis in their OP Units).

The following table sets forth the federal income tax status of distributions per common share and OP Unit for the periods presented:

		Year Ended December 31,
		2022		2021		2020
		2023		2022		2021
Per common share and OP Unit:
Ordinary dividends		$	—	$	—	$	—
Section 199A Qualified REIT Dividend		0.~~4724~~4726		0.~~4856~~4724		0.~~4798~~4856
Qualified dividends		—		—		—
Long-term capital gain	(1)	~~0.1999~~—		—0.1999		—
Unrecaptured Section 1250 gain		~~0.0544~~—		—0.0544		—
Non-dividend distributions		0.~~1933~~4474		0.~~4344~~1933		0.~~4402~~4344
Total		$	0.9200	$	0.9200	$	0.9200

(1)For distributions classified as Long-Term Capital Gain, the One Year Amounts Disclosure is $0, the Three Year Amounts Disclosure is $0, and $0.1999 is Section 1231 gain for purposes of Internal Revenue Code Section 1061.

Purchases of Investment Properties

With the adoption of ASU 2017-01 in January 2018, the Company’s acquisitions of investment properties and the majority of its future investments will be accounted for as asset acquisitions. This is because substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or group of similar identifiable assets, and will result in the capitalization of acquisition costs. The purchase price, inclusive of acquisition costs, will be allocated to tangible and intangible assets and liabilities based on their relative fair values. Tangible assets primarily consist of land, buildings, and improvements. Intangible assets primarily consist of above-market or below-market leases, in-place leases, above-market or below-market debt assumed, right-of-use assets, and lease liabilities. Any future contingent consideration will be recorded when the contingency is resolved. The determination of the fair value requires the Company to make certain estimates and assumptions.

The determination of fair value involves the use of significant judgment and estimation. The Company makes estimates of the fair value of the tangible and intangible acquired assets and assumed liabilities using information obtained from multiple sources as a result of pre-acquisition due diligence and generally includes the assistance of a third party appraiser. The Company estimates the fair value of an acquired asset on an “as-if-vacant” basis and its value is depreciated in equal amounts over the course of its estimated remaining useful life. The Company determines the allocated value of other fixed assets, such as site improvements, based upon the replacement cost and depreciates such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. The fair value of land is determined either by considering the sales prices of similar properties in recent transactions or based on an internal analysis of recently acquired and existing comparable properties within the Company’s portfolio.

The value of above-market or below-market leases is estimated based on the present value (using a discount rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market lease intangibles are amortized as a reduction or addition to rental income over the estimated remaining term of the respective leases plus the term of any renewal options that the lessee would be economically compelled to exercise.

In determining the value of in-place leases, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions, tenant improvements, legal, and other related costs based on current market demand. The values assigned to in-place leases are amortized to amortization expense over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off, net of any required lease termination payments.

The Company calculates the fair value of any long-term debt assumed by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which the Company approximates based on the rate it would expect to incur on a replacement instrument on the date of acquisition, and recognizes any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument.

Based on these estimates, the Company recognizes the acquired assets and assumed liabilities based on their estimated fair values, which are generally determined using Level 3 inputs, such as market rental rates, capitalization rates, discount rates, or other available market data.

Impairment of Intangible and Long-Lived Assets

The Company periodically evaluates its long-lived assets, primarily consisting of investments in real estate, for impairment indicators or whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable. If indicators of impairment are present, the Company evaluates the carrying value of the related real estate properties in relation to the undiscounted expected future cash flows of the underlying operations. In performing this evaluation, management considers market conditions and current intentions with respect to holding or disposing of the real estate property. The evaluation of anticipated cash flows is subjective and is based on assumptions regarding future occupancy, lease rates, and cap rates that could differ materially from actual results. The Company adjusts the net book value of real estate properties to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. The Company recognizes an impairment loss at the time it makes any such determination. If the Company determines that an asset is impaired, the impairment to be recognized is measured as the amount by which the recorded amount of the asset exceeds its fair value. Fair value is typically determined using a discounted future cash flow analysis or other acceptable valuation techniques which are based, in turn, upon Level 3 inputs, such as revenue and expense growth rates, capitalization rates, discount rates, or other available market data. With the adoption of ASC 842, on January 1, 2019, the Company periodically evaluates the right-of-use assets for impairment as detailed above.

The Company ~~did not~~ record an impairment charge ~~for the year ended December 31, 2022. The Company recorded an impairment charge~~ of $0.3 million on one outpatient medical ~~office~~facility ~~building~~ in Traverse City, Michigan during the year ended December 31, 2021 ~~and an impairment charge of $4~~.~~9 million~~ onThe ~~one~~Company ~~medical~~did ~~office~~not ~~building~~record inany ~~Grand~~impairment ~~Rapids,~~for ~~Michigan during~~ the ~~year~~years ended December 31, ~~2020~~2023 and 2022.

Assets Held for Sale and Discontinued Operations

The Company may sell properties from time to time for various reasons, including favorable market conditions. The Company classifies certain long-lived assets as held for sale once the criteria, as defined by GAAP, has been met. The Company classifies a real estate property, or portfolio, as held for sale when: (i) management has approved the disposal, (ii) the property is available for sale in its present condition, (iii) an active program to locate a buyer has been initiated, (iv) it is probable that the property will be disposed of within one year, (v) the property is being marketed at a reasonable price relative to its fair value, and (vi) it is unlikely that the disposal plan will significantly change or be withdrawn. Following the classification of a property as “held for sale,” no further depreciation or amortization is recorded on the assets and the assets are written down to the lower of carrying value or fair market value, less cost to sell. There were no properties classified as held for sale as of December 31, ~~2022~~2023 and ~~one property classified as held for sale as of December 31, 2021~~2022. Dispositions during the years ended December 31, ~~2022~~2023, ~~2021~~2022, and ~~2020~~2021 did not qualify as discontinued operations.

Investments in Unconsolidated Entities

The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, the Company’s share of the investee’s earnings or losses is included in its consolidated statements of income. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the equity interest.

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its equity method investments may not be recoverable or realized. If indicators of potential impairment are identified, the Company evaluates its equity method investments for impairment based on a comparison of the fair value of the investment to its carrying value. The fair value is estimated based on discounted cash flows that include all estimated cash inflows and outflows over a specified holding period and any estimated debt premiums or discounts. If, based on this analysis, the Company does not believe that it will be able to recover the carrying value of its equity method investment, the Company would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of its equity method investment and to the extent that any decline in value is considered other than temporary.

79On November 22, 2019, the Company contributed two properties valued at $39.0 million and paid additional consideration of $17.0 million for a 12.3% equity interest in the PMAK MOB JV REOC, LLC (“PMAK Joint Venture”). As of December 31, 2023 this joint venture owned 58 medical office facilities located in 18 states.

OnSince ~~November~~December 2211, ~~2019~~2020, the Company contributed ~~two properties valued at~~ $3946.06 million, ~~and~~to ~~paid~~acquire ~~additional consideration of $17.0 million for~~ a ~~12.3%~~membership ~~equity~~ interest in ~~the~~Davis ~~PMAK~~Medical ~~MOB JV REOC~~Investors, LLC (“~~PMAK~~Davis Joint Venture”). As of December 31, ~~2022~~2023, ~~this~~the ~~joint~~Company ~~venture~~holds ~~owned~~a 6049.0% membership interest in the Davis Joint Venture, which owns 15 medical office facilities located in 19seven states.

~~Since~~Real ~~December 11,~~Estate ~~2020,~~Loans ~~the Company contributed $33.6 million~~Receivable, to acquire a membership interest in Davis Medical Investors, LLC (“Davis Joint Venture”). As of December 31, 2022, the Company holds a 45.1% membership interest in the Davis Joint Venture, which owns 13 medical office facilities located in five states.Net

Real ~~Estate~~estate ~~Loans~~loans ~~Receivable~~receivable consists of ten mezzanine loans, four construction loans, and five term loans as of December 31, 2023. Typically, each mezzanine loan is collateralized by an ownership interest in the respective borrower, each term loan is secured by a mortgage on a related outpatient medical facility, and each construction loans is secured by a mortgage on the land and improvements as constructed, generally with guarantees from the borrowers. Interest income on loans is recognized as earned based on the terms of the loans subject to evaluation of collectability risks and is included in the Company’s consolidated statements of income. On a quarterly basis, the Company evaluates the collectability of its loan portfolio, including related interest income receivable, and establishes a reserve for loan losses, if necessary. For the years ended December 31, 2023 and December 31, 2022, the Company’s loan loss reserves were $1.0 million and $0.2 million, respectively.

Real estate loans receivable consists of eight mezzanine loans, one construction loan, and five term loans as of December 31, 2022. Generally, each mezzanine loan is collateralized by an ownership interest in the respective borrower, each term loan is secured by a mortgage of a related medical office building, and the construction loan is secured by a mortgage on the land and improvements as constructed. Interest income on loans is recognized as earned based on the terms of the loans subject to evaluation of collectability risks and is included in the Company’s consolidated statements of income. On a quarterly basis, the Company evaluates the collectability of its loan portfolio, including related interest income receivable, and establishes a reserve for loan losses, if necessary. For the years ended December 31, 2022 and December 31, 2021, the Company’s loan loss reserves were $0.2 million and $0.1 million, respectively.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and short-term investments with maturities of three months or fewer from the date of purchase. The Company is subject to concentrations of credit risk as a result of its temporary cash investments. The Company places its temporary cash investments with high credit quality financial institutions in order to mitigate that risk.

Rental and Related Revenues

Rental revenue is recognized on a straight-line basis over the terms of the related leases when collectability is probable. Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue for amounts more or less than amounts currently due from tenants. Amounts recognized in excess of amounts currently due from tenants are included in other assets and were approximately $~~101~~105.38 million and $95101.43 million as of December 31, ~~2022~~2023 and December 31, ~~2021~~2022, respectively~~, excluding the asset classified as held for sale in 2021~~. If the Company determines that collectability of straight-line rents is not probable, income recognition is limited to the lesser of cash collected, or lease income reflected on a straight-line basis, plus variable rent when it becomes accruable.

In accordance with ASC 842, Leases, Topic 842, if the collectability of a lease changes after the commencement date, any difference between lease income that would have been recognized and the lease payments shall be recognized as an adjustment to lease income. Bad debt recognized as an adjustment to rental revenues was $01.21 million, $0.42 million, and $0.54 million for the years ended December 31, ~~2022~~2023, December 31, ~~2021~~2022, and December 31, ~~2020~~2021, respectively.

Rental revenue is adjusted by the amortization of lease inducements and above-market or below-market rents on certain leases. Lease inducements and above-market or below-market rents are amortized on a straight-line basis over the remaining lease term. Rental and related revenues also include expense recoveries, which relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized in the period the applicable expenses are incurred. The reimbursements are recorded gross, as these costs are incurred by the Company and reimbursed by the tenants. We have certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses and we do not recognize expense recoveries.

remaining lease term. Rental and related revenues also include expense recoveries, which relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized in the period the applicable expenses are incurred. The reimbursements are recorded gross, as these costs are incurred by the Company and reimbursed by the tenants. The Company has certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses and the Company does not recognize expense recoveries.

Tenant Receivables, Net

Tenant receivables primarily represent amounts accrued and unpaid from tenants in accordance with the terms of the respective leases, subject to the Company’s revenue recognition policy. The Company reviews receivables monthly and writes-off the remaining balance when, in the opinion of management, collection of substantially all remaining payments is not probable. When the Company determines substantially all remaining lease payments are not probable of collection, it recognizes a reduction of rental revenues and expense recoveries for all outstanding balances, including accrued straight-line rent receivables. Any subsequent receipts are recognized as rental revenues and expense recoveries in the period received.

Derivative Instruments

When the Company has derivative instruments ~~embedded in other contracts~~, it records them either as an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sale exception. When specific hedge accounting criteria are not met or if the Company does not elect to apply for hedge accounting, changes in the Company’s derivative instruments’ fair value are recognized currently in earnings. AsIf ~~a result of the Company’s adoption of ASC 815 as of January 1, 2019, if~~ hedge accounting is applied to a derivative instrument, the entire change in the fair value of its derivatives designated and qualified as cash flow hedges are recorded in accumulated other comprehensive income (“AOCI”) on the consolidated balance sheets and are subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings.

To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, ~~2022~~2023, the Company had ~~one~~three outstanding interest rate ~~swap,~~swaps designated as a cash flow ~~hedge~~hedges of interest rate risk, and one interest rate swap that was de-designated as a hedging instrument during the year ended December 31, 2023 but remains outstanding. Further detail is provided in Note 7 (Derivatives).

Income Taxes

The Trust elected to be taxed as a REIT for federal tax purposes commencing with the filing of its tax return for the short taxable year ending December 31, 2013. The Trust had no taxable income prior to electing REIT status. To qualify as a REIT, the Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its shareholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Trust generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its shareholders. If the Trust fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Trust relief under certain statutory provisions. Such an event could materially adversely affect the Trust’s net income and net cash available for distribution to shareholders. However, the Trust intends to continue to operate in such a manner as to continue qualifying for treatment as a REIT. Although the Trust continues to qualify for taxation as a REIT, in various instances, the Trust is subject to state and local taxes on its income and property, and federal income and excise taxes on its undistributed income.

As discussed in Note 1 (Organization and Business), the Trust conducts substantially all of its operations through the Operating Partnership. As a partnership, the Operating Partnership generally is not liable for federal income taxes. The income and loss from the operations of the Operating Partnership is included in the tax returns of its partners, including the Trust, who are responsible for reporting their allocable share of the partnership income and loss. Accordingly, no provision for income taxes has been made on the accompanying consolidated financial statements.

Management Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the amounts of revenue and expenses reported in the period. Significant estimates are made for the fair value assessments with respect to purchase price allocations, impairment assessments, and the valuation of financial instruments. Actual results could differ from these estimates.

Commitments

Certain of the Company’s acquisitions provide for additional consideration to the seller in the form of an earn-out associated with lease-up contingencies. The Company recognizes the earn-out related to asset acquisitions only if certain parameters or other substantive contingencies are met, at which time the consideration becomes payable.

Certain of the Company’s leases also provide for consideration available to tenants as a tenant improvement allowance. Based on existing leases as of December 31, ~~2022~~2023, committed but unspent tenant related obligations were $4465.70 million.

Related Parties

The Company recognized rental revenues totaling $8.37 million in ~~2022~~2023, $78.93 million in ~~2021~~2022, and $7.59 million in ~~2020~~2021 from Baylor Scott and White Health, a health care system affiliated with a member of the Trust’s Board of Trustees.

Segment Reporting

Under the provision of Codification Topic 280, Segment Reporting, the Company has determined that it has one reportable segment with activities related to leasing and managing health care properties.

New Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ~~that~~which provides optional relief to applying reference rate reform to changing reference rates, contracts, hedging relationships, and other transactions that reference ~~LIBOR,~~the ~~which~~London ~~has~~Inter-Bank ~~been~~Offered ~~discontinued~~Rate ~~at the end of 2021~~(“LIBOR”). The amendments in this update ~~are effective immediately and~~ may be applied through December 31, ~~2022, though in October 2022, the FASB extended this date through December 31,~~ 2024. The Company will continue to use published LIBOR rates through June of 2023 at which time the Company does not expect the replacement benchmark to have a material impact on the Company’s consolidated financial statements.

InOn ~~August~~March 31, ~~2020~~2023, the ~~FASB~~Operating ~~issued~~Partnership, ~~ASU~~as ~~2020-06~~borrower, ~~Debt—Debt~~and ~~with~~the ~~Conversion~~Trust, ~~and~~as ~~Other~~guarantor, ~~Options~~executed ~~(Subtopic~~a ~~470-20)~~First ~~and~~Amendment ~~Derivatives~~to ~~and~~the ~~Hedging—Contracts~~Third inAmended ~~Entity’s~~and ~~Own~~Restated ~~Equity~~Credit ~~(Subtopic~~Agreement ~~815-40),~~to ~~which~~update ~~simplifies~~ the ~~accounting~~benchmark ~~for~~provisions ~~certain~~to ~~financial~~replace ~~instruments~~LIBOR with ~~characteristics~~the ofSecured ~~liabilities~~Overnight ~~and~~Financing ~~equity~~Rate (“SOFR”), ~~including~~as ~~convertible~~the ~~instruments~~reference ~~and~~rate ~~contracts~~for onthe anpurpose ~~entity’s~~of ~~own~~calculating ~~equity~~interest under the agreement. The ~~ASU~~Company isalso ~~part~~amended ofits fixed interest rate swap agreement on its mortgage debt to update the ~~FASB’s~~reference ~~simplification~~rate ~~initiative~~from LIBOR to SOFR. As a result, ~~which~~the ~~aims~~Company elected to ~~reduce~~apply ~~unnecessary~~the ~~complexity~~hedge inaccounting ~~U.S.~~expedients ~~GAAP.~~related ~~This~~to ~~guidance~~probability isand ~~effective~~the assessments of effectiveness for ~~fiscal~~future ~~years,~~LIBOR-indexed ~~and~~cash ~~interim~~flows ~~periods~~to ~~within~~assume ~~those~~that ~~fiscal~~the ~~years,~~index ~~beginning~~upon ~~after~~which ~~December~~future ~~15,~~hedged ~~2021,~~transactions ~~with~~will ~~early~~be ~~adoption~~based ~~permitted~~matches the index on the corresponding derivatives. ~~The~~Application ~~Company~~of ~~adopted~~these ~~ASU~~expedients ~~2020-06~~maintains onthe ~~January~~presentation 1,of ~~2022,~~derivatives consistent with nopast presentation. The adoption of this ASU did not have a material ~~effect~~impact on ~~its~~the Company’s consolidated financial statements.

Note 3. Investment and Disposition Activity

During ~~2022~~2023, the Company executed contractual commitments related to a $40.5 million development project, with $21.6 million spent on construction in progress thus far, completed the acquisition of ~~two~~three outpatient medical ~~office~~ facilities and ~~one~~three medical condominium ~~unit~~units for an investment of $~~109~~38.65 million, ~~and~~completed ~~acquired~~the ~~membership~~acquisition ~~interest~~of intwo ~~additional~~parcels ~~assets~~ of ~~the~~land ~~Davis~~adjacent ~~Joint~~to ~~Venture~~existing ~~for~~outpatient anmedical ~~aggregate~~facilities ~~purchase~~for ~~price of~~ $81.0 7 million., ~~The~~and ~~Company also~~ paid $62.4 2 million of additional purchase consideration under ~~five~~six earn-out agreements ~~and~~for ~~funded~~prior ~~one~~acquisitions. ~~mezzanine~~The ~~loan~~Company ~~for~~also ~~$5.8~~closed ~~million,~~four ~~three~~construction ~~term~~ loans for an aggregate of $22126.74 million, and has funded $231.19 million ofin ~~previous~~the ~~construction~~aggregate ~~loan~~for ~~commitments~~those loans to date. Additionally, the Company ~~invested~~funded an aggregate of $521.02 million inrelated ~~funds~~to ~~managed~~the byclosing aof ~~venture~~three ~~capital~~new ~~firm~~term ~~specializing~~loans, inpreviously ~~real~~announced ~~estate~~loan ~~technology~~commitments, ~~resulting~~and inother ~~total~~investments, ~~investment~~including ~~activity~~a ~~of approximately~~ $~~159~~1.7 3 million asinvestment ofin ~~December~~IJRI 31Properties, ~~2022~~LLC, which is an entity constructing and operating an outpatient medical facility in Indiana. AsThe ~~part~~Company ofcontributed ~~these~~$11.3 million ~~investments,~~to the ~~Company~~Davis ~~incurred~~Joint Venture to fund acquisitions and additional purchase consideration and under an earn-out agreement. Investment activity totaled approximately $2128.34 million ofduring ~~capitalized~~the ~~costs.~~

8285

twelve months ended December 31, 2023. As part of these investments, the Company incurred approximately $2.0 million of capitalized acquisition costs.

Investment activity for the year ending December 31, 2023 is summarized below:

Investment

Location

Acquisition
Date

Investment Amount
(in thousands)

Emory Dunwoody ASC

Dunwoody, GA

May 16, 2023

5,250

CVA Building

Birmingham, AL

May 31, 2023

28,000

Palos Heights Surgery Center

Palos Heights, IL

July 20, 2023

2,600

IJRI Properties Investment

(1)

Indianapolis, IN

September 30, 2023

1,250

Atlanta Medical Condominium Investments

Atlanta, GA

Various

2,620

Davis Joint Venture Investments

Woodbury, MN

Various

11,314

Adjacent Land

Various

1,717

Development Costs

Buford, GA

Various

21,604

Earnouts

Various

2,201

Private Equity Fund Investment

(2)

N/A

Various

434

Loan Investments

Various

51,400

128,390

(1) The Company invested 15.9% in a joint venture that is developing a single outpatient medical facility located in Indiana.

(2) The Company invested additional funds managed by a venture capital firm specializing in real estate technology.

During 2023, the Company recorded revenues and net income of $2.7 million and $0.5 million, respectively, from its 2023 acquisitions.

During 2022, the Company completed the acquisition of two outpatient medical facilities and one medical condominium unit for an investment of $109.6 million and acquired indirect ownership interests in additional assets through acquisitions by Davis Joint Venture for an aggregate purchase price of $8.0 million. The Company also paid $6.4 million of additional purchase consideration under five earn-out agreements and funded one mezzanine loan for $5.8 million, three term loans for $22.7 million, and $2.1 million of previous construction loan commitments. Additionally, the Company invested $5.0 million in funds managed by a venture capital firm specializing in real estate technology, resulting in total investment activity of approximately $159.7 million as of December 31, 2022 As part of these investments, the Company incurred approximately $2.3 million of capitalized transaction costs.

Investment activity for the year ending December 31, 2022 is summarized below:

Investment

Location

Acquisition
Date

Investment Amount
(in thousands)

City Place Portfolio - Davis Joint Venture

(1)

Woodbury, MN

January 12, 2022

8,032

New Albany Medical Center II

New Albany, OH

April 26, 2022

27,688

Calko Medical Center

Brooklyn, NY

September 9, 2022

81,500

Atlanta Medical Condominium Investment

Atlanta, GA

December 5, 2022

400

Earnouts

Various

6,401

Private Equity Fund Investment

(2)

N/A

Various

5,049

Loan Investments

Various

30,609

159,679

(1)The Company acquired a 49% membership interest in three properties through the Davis Joint Venture representing 107,886 square feet at an aggregate valuation of $43.9 million, including an $8.0 million equity contribution and a $14.0 million pro rata share of joint venture debt. On November 21, 2022, the Davis Joint Venture acquired a property representing 42,467 square feet at an aggregate valuation of $16.4 million. The Company did not make an equity contribution towards this property but did acquire a $4.6 million pro rata share of joint venture debt.

(2)The Company invested in funds managed by a venture capital firm specializing in real estate technology.

~~During 2022, the Company recorded revenues and net loss of $3.6 million and $0.2 million, respectively, from its 2022 acquisitions.~~ 86

~~During~~For ~~2021~~2022, the Company ~~completed~~recorded ~~the~~revenues ~~acquisition of 24 operating health care properties, which includes the remaining 51% membership interest in the Eden Hill Joint Venture,~~ and ~~three~~net ~~medical~~loss ~~condominium units located in 14 states, for an aggregate purchase price~~ of ~~approximately~~ $~~973.2 million, excluding the conversion of a previously outstanding construction loan of $15.5 million. The Company also paid $0.~~3 ~~million of additional purchase consideration on one property under an earn-out agreement~~.6 ~~Additionally, the Company funded three mezzanine loans for $8.9~~ million, and ~~closed on a~~ $100.~~5 million~~2 ~~construction loan, funding $7.3~~ million ~~as of December 31~~, ~~2021. The Company also acquired membership interests in one joint venture for approximately $7.3 million~~respectively, ~~resulting~~from inits ~~total~~2022 ~~investment activity of approximately $997~~acquisitions.~~0 million. As part of these investments, the Company incurred approximately $5.9 million of capitalized transaction costs.~~

Investment activity for the year ending December 31, 2021 is summarized below:

Investment

Location

AcquisitionDate

Investment Amount(in thousands)

Earnout - TOPA Fort Worth MOB

Fort Worth, TX

January 11, 2021

298

AdventHealth Wesley Chapel MOB II

Wesley Chapel, FL

April 21, 2021

35,251

TOPA Denton

(1)

Denton, TX

June 11, 2021

—

InterMed MOB - Davis Joint Venture

(2)

Portland, ME

August 18, 2021

7,291

Atkins Portfolio (5 MOBs)

Various

August 30, 2021

54,090

HonorHealth - Sonoran MOB

Phoenix, AZ

September 23, 2021

31,750

Eden Hill Medical Center

(3)

Dover, DE

October 15, 2021

33,180

HonorHealth - Neuroscience Institute

Scottsdale, AZ

October 27, 2021

67,250

Landmark Portfolio (14 MOBs)

(4)

Various

December 20, 2021

750,000

Atlanta Medical Condominium Investment

Atlanta, GA

Various

1,653

Loan Investments

Various

16,214

996,977

(1)The Company funded this investment through the conversion and satisfaction of a previously outstanding construction loan of $15.5 million.

(2)The Company purchased a 49% membership interest in this property through the Davis Joint Venture.

(3)The Company purchased the remaining 51% membership interest in the MedCore Realty Eden Hill, LLC joint venture, and as of December 31, 2021 owns 100% of this property.

(4)This portfolio was funded through an aggregate 6,561,521 OP Units and 672,978 Series A Preferred Units issued by the Operating Partnership valued at approximately $116.5 million and $146.5 million, respectively, on the date of issuance. The Company also financed an aggregate $100.0 million through three new mortgages and paid $386.3 million of cash. On December 28, 2021, all of the Series A Preferred Units were redeemed for a total value of $146.5 million and as a result of this redemption, there are no Series A Preferred Units outstanding.

For 2021, the Company recorded revenues and net loss of $8.7 million and $1.3 million, respectively, from its 2021 acquisitions.

The following table summarizes the preliminary purchase price allocations of the assets acquired and the liabilities assumed, which the Company determined using Level 2 and Level 3 inputs (in thousands):

	December 31, 2022		December 31, 2021
	December 31, 2023		December 31, 2022
Land	$	98,~~260~~719	$	159,~~497~~260
Building and improvements	9832,~~433~~167		~~840~~98,~~591~~433
In-place lease intangibles	124,~~845~~410		9012,~~336~~845
Above market in-place lease intangibles	~~2,768~~—		132,~~804~~768
Below market in-place lease intangibles	(~~4,923~~553)		(164,~~326~~923)
Right-of-use asset	79—		~~100,589~~79
Prepaid expenses	—		129
Net assets acquired	$	44,743	$	118,462
Lease liability	—		(39,400)
NCI-redeemable	—		(3,307)
Net assets acquired (1)	$	118,462	$	1,005,220
Satisfaction of real estate loans receivable	(5,397)		(2,700)
Issuance of Series A Preferred Units	—		(146,541)
Cash used in acquisition of investment property	$	39,346	$	112,455
Issuance of OP Units	—		(116,467)
NCI-redeemable	(3,307)		—
Satisfaction of real estate loans receivable and conversion of JV interest	(2,700)		(24,033)
Cash used in acquisition of investment property	$	112,455	$	718,179

(1)Net assets acquired does not include acquisition credits of $6.8 million for the year ended December 31, 2021, which consist primarily of future tenant improvements and capital expenditure commitments received as credits at the time of acquisition.

Dispositions

For the year ended December 31, ~~2022~~2023, the Company sold ~~five~~one ~~medical~~outpatient ~~facilities, which included four~~ medical ~~office~~facility ~~buildings and one hospital, representing 212,295 square feet~~ for approximately $~~124~~2.76 million, realizing an ~~aggregate~~insignificant net gain ~~of approximately $57~~.~~4 million.~~

For the year ended December 31, ~~2021~~2022, the Company sold ~~seven~~five ~~properties~~medical ~~and~~facilities, ~~five~~which ~~adjacent~~included ~~parcels~~four ofoutpatient ~~vacant~~medical ~~land~~facilities ~~located~~and inone ~~five~~hospital, ~~states~~representing 212,295 square feet for approximately $94124.47 million, ~~and~~realizing ~~recognized~~an aaggregate net gain of approximately $2457.24 million.

Note 4. Intangibles

The following is a summary of the carrying amount of intangible assets and liabilities as of December 31, ~~2022~~2023 and ~~2021,~~2022 ~~excluding the asset classified as held for sale in 2021~~ (in thousands):

December 31, 2022

December 31, 2021

December 31, 2023

December 31, 2022

Cost

AccumulatedAmortization

Net

Cost

AccumulatedAmortization

Net

Assets

In-place leases

~~445~~449,~~583~~716

(~~241~~282,~~643~~285)

~~203~~167,~~940~~431

~~441~~445,~~072~~583

(~~201~~241,~~885~~643)

~~239~~203,~~187~~940

Above-market leases

59,752

(3035,~~096~~622)

2924,~~656~~130

5759,~~149~~752

(2430,~~437~~096)

3229,~~712~~656

Liabilities

Below-market leases

3736,~~002~~962

(1214,~~621~~384)

2422,~~381~~578

3237,~~155~~002

(1012,~~585~~621)

2124,~~570~~381

The following is a summary of the Company’s acquired lease intangible amortization for the years ended December 31, ~~2022~~2023, ~~2021~~2022, and ~~2020~~2021 (in thousands):

	December 31,
	2022		2021		2020
	2023		2022		2021
Amortization expense related to in-place leases	$	4340,~~526~~920	$	3443,~~570~~526	$	34,~~691~~570
Decrease of rental income related to above-market leases	5,~~824~~526		35,~~808~~824		3,~~846~~808
Increase of rental income related to below-market leases	2,~~111~~356		12,~~398~~111		1,~~417~~398

~~Future aggregate net amortization of the Company’s acquired lease intangibles as of December 31, 2022, is as follows (in thousands):~~ 87

	Net Decrease (Increase) in Revenue		Net Increase inExpenses
2023	$	3,191	$	40,616
2024	2,929		34,718
2025	2,357		29,208
2026	1,203		23,095
2027	1,036		20,173
Thereafter	(5,441)		56,130
Total	$	5,275	$	203,940

Future aggregate net amortization of the Company’s acquired lease intangibles as of December 31, 2023, is as follows (in thousands):

For the year ended December 31, 2022, the weighted average amortization periods for asset lease intangibles and liability lease intangibles are 7 years and 15 years, respectively. Further detail is provided in Note 2 (Summary of Significant Accounting Policies).


	Net Decrease (Increase) in Revenue		Net Increase in Expenses
2024	$	2,887	$	35,184
2025	2,316		29,663
2026	1,161		23,548
2027	994		20,625
2028	922		16,941
Thereafter	(6,728)		41,470
Total	$	1,552	$	167,431

85For the year ended December 31, 2023, the weighted average amortization periods for asset lease intangibles and liability lease intangibles are 7 years and 15 years, respectively. Further detail is provided in Note 2 (Summary of Significant Accounting Policies).

Note 5. Other Assets

Other assets consisted of the following as of December 31, ~~2022~~2023 and ~~2021,~~2022 ~~excluding the asset classified as held for sale in 2021,~~ (in thousands):

	December 31,
	2022		2021
	2023		2022
Straight-line rent receivable, net	$	~~101~~105,~~306~~773	$	95101,~~443~~306
Leasing commissions, net	1314,~~231~~962		1113,~~627~~231
Prepaid expenses	1110,~~009~~416		811,~~910~~009
Lease inducements, net	7,~~894~~332		87,~~293~~894
Interest rate swap	2,045		—
Escrows	1,715		1,565
Escrows	1,565		1,780
Interest rate swap	1,103		2,045
Notes receivable, net	~~370~~324		~~1,097~~370
Other	910,~~387~~934		49,~~434~~387
Total	$	~~146~~152,~~807~~559	$	~~131~~146,~~584~~807

Note 6. Debt

The following is a summary of debt as of December 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

	December 31,
	2022		2021
	2023		2022
Fixed interest mortgage notes (1)	$	5923,~~776~~194	$	7559,~~395~~776
Variable interest mortgage notes (2)	~~105~~104,~~153~~678		105,~~629~~153
Total mortgage debt	~~164~~127,~~929~~872		~~181~~164,~~024~~929
$1.0 billion unsecured revolving credit facility bearing variable interest of LIBOR plus 0.85%, due September 2025	193,000		274,000
$1.0 billion unsecured revolving credit facility due September 2025 (3)	—		193,000
$400 million unsecured term borrowing bearing fixed interest of 4.693%, due May 2028 (4)	400,000		—
$400 million senior unsecured notes bearing fixed interest of 4.30%, due March 2027	400,000		400,000
$350 million senior unsecured notes bearing fixed interest of 3.95%, due January 2028	350,000		350,000
$500 million senior unsecured notes bearing fixed interest of 2.625%, due November 2031	500,000		500,000
$150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031	150,000		150,000
Senior unsecured notes (5)	135,000		150,000
$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027	75,000		75,000
Total principal	1,~~832~~987,~~929~~872		1,~~930~~832,~~024~~929
Unamortized deferred financing costs	(78,~~453~~580)		(97,~~694~~453)
Unamortized discounts	(76,~~359~~255)		(87,~~423~~359)
Unamortized fair value adjustments	—		11
Total debt	$	1,973,037	$	1,818,117
Total debt	$	1,818,117	$	1,911,918

(1)As of December 31, ~~2022~~2023, one fixed interest mortgage ~~notes~~note ~~bear~~bears interest ~~from~~of ~~3.33% to~~ 4.63%, due in 2024, and is collateralized by one property with a ~~weighted~~net ~~average~~book ~~interest~~value ~~rate~~ of 3$37.~~85%~~1 million. As of December 31, ~~2021~~2022, fixed interest mortgage notes bear interest from 3.33% ~~and~~to 4.8363%, due in ~~2022 and~~ 2024, with a weighted average interest rate of 43.0585%. ~~The~~and the notes are collateralized by two ~~properties~~ ~~with a net book value of $94.9 million as of December 31, 2022 and three~~ properties with a net book value of $~~151~~94.9 million ~~as of December 31, 2021~~. One mortgage bears interest at LIBOR + 1.90% and the Trust entered into a pay-fixed receive-variable interest rate swap, fixing the ~~LIBOR~~variable component ~~of this rate~~ at 1.43% as of December 31, 2022.

(2)Variable interest mortgage notes bear variable interest of ~~LIBOR~~SOFR plus 21.7585% and PRIME for a weighted average interest rate of 7.29% as of December 31, 2023. Variable interest mortgage notes bear variable interest of SOFR plus 1.85% and LIBOR plus 2.75% for a weighted average interest rate of 6.20% ~~and 1.95%~~ as of December 31, 2022 ~~and 2021, respectively~~. The notes are due in 2026 and 2028 and collateralized by four properties with a net book value of $~~295~~282.50 million as of December 31, ~~2022~~2023 and $~~307~~295.25 million as of December 31, ~~2021~~2022.

On(3)The ~~September 24,~~unsecured ~~2021,~~revolving ~~the~~credit ~~Operating~~facility ~~Partnership,~~bears asvariable ~~borrower,~~interest ~~and~~of ~~the~~SOFR ~~Trust,~~plus ~~as guarantor~~0.95%, ~~executed~~inclusive of a ~~Third~~0.10% ~~Amended~~SOFR ~~and~~index ~~Restated~~adjustment, ~~Credit~~as ~~Agreement (the “Credit Agreement”) which extended the maturity date~~ of ~~the~~December ~~revolving credit facility under the Credit Agreement to September 24~~31, ~~2025~~2023 and ~~reduced~~LIBOR ~~the~~plus ~~interest~~0.85% ~~rate~~as ~~margin~~of ~~applicable~~December to31, ~~borrowings~~2022. ~~The~~

86(4)The Company’s borrowings under the term loan feature of the Credit Agreement (as defined herein) bear interest at a rate equal to 1.10%, inclusive of a 0.10% SOFR index adjustment, plus Daily Simple SOFR as of December 31, 2023 based on the Company’s current credit rating. The Company entered into fixed-for-floating interest rate swaps for the full borrowing amount, fixing the SOFR component of this rate at 3.59%, and a current all-in fixed rate of 4.69%.

~~Credit~~(5)As ~~Agreement~~of ~~includes~~December an31, ~~unsecured~~2023, ~~revolving credit facility of~~ $1135.0 million ~~billion~~senior ~~and~~unsecured ~~contains~~notes abearing ~~term~~fixed ~~loan~~interest ~~feature~~ of ~~$250~~4.043% ~~million, bringing total borrowing capacity~~ to $14.~~3 billion. The Credit Agreement also includes a swingline loan commitment for up to 10~~74%, ofdue ~~the~~January ~~maximum~~2026 ~~principal amount and provides an accordion feature allowing the Operating Partnership~~ to ~~increase~~2031. ~~borrowing~~As ~~capacity~~of byDecember up31, to2022, ~~an additional~~ $~~500~~150.0 million, ~~subject~~senior tounsecured ~~customary~~notes ~~terms~~bearing ~~and~~fixed ~~conditions,~~interest ~~resulting in a maximum borrowing capacity~~ of $14.7503% ~~billion~~to 4.74%, ~~The~~due ~~revolving~~January ~~credit~~2023 ~~facility~~to ~~under the Credit Agreement also includes two, six-month extension options~~2031.

~~Borrowings~~On ~~under~~September 24, 2021, the ~~Credit~~Operating ~~Agreement~~Partnership, ~~bear~~as ~~interest~~borrower, onand the ~~outstanding~~Trust, ~~principal~~as ~~amount~~guarantor, atexecuted ana ~~adjusted~~Third ~~LIBOR~~Amended ~~rate,~~and ~~which~~Restated isCredit ~~based~~Agreement on(as amended, the ~~Trust’s~~“Credit ~~investment~~Agreement”) ~~grade~~which ~~rating~~extended ~~under~~ the ~~Credit~~maturity ~~Agreement.~~date As of ~~December~~the ~~31,~~revolving ~~2022,~~credit facility under the ~~Trust~~Credit ~~had~~Agreement ~~investment~~to ~~grade~~September 24, ~~ratings~~2025 ofand ~~BBB~~reduced ~~from~~the ~~S&P~~interest ~~and~~rate ~~Baa2~~margin ~~from~~applicable ~~Moody’s~~to borrowings. AsThe ~~such,~~Credit ~~borrowings~~Agreement ~~under~~includes ~~the~~an unsecured revolving credit facility of ~~the~~$1.0 ~~Credit~~billion ~~Agreement~~and ~~accrue~~contains ~~interest~~a onterm ~~the~~loan ~~outstanding~~feature ~~principal~~of at$250.0 amillion, ~~rate~~bringing oftotal ~~LIBOR~~borrowing +capacity 0to $1.~~85%~~3 billion. The Credit Agreement also includes a ~~facility~~swingline ~~fee~~loan ~~equal~~commitment for up to ~~0.20~~10% ~~per~~of ~~annum~~the asmaximum ofprincipal ~~December~~amount 31and provides an accordion feature allowing the Operating Partnership to increase borrowing capacity by up to an additional $500.0 million, ~~2022~~subject to customary terms and conditions, ~~which~~resulting isin ~~also~~a ~~determined~~maximum byborrowing capacity of $1.75 billion. The revolving credit facility under the ~~Trust’s~~Credit ~~investment~~Agreement ~~grade~~also ~~rating~~includes two, six-month extension options.

On ~~July 7~~March 31, ~~2016~~2023, the Operating Partnership, ~~borrowed~~as ~~$250.0~~borrower, ~~million~~and ~~under~~ the ~~7-year~~Trust, ~~term~~as ~~loan~~guarantor, ~~feature~~executed ofa ~~the~~First ~~Credit~~Amendment ~~Agreement. Pursuant~~ to the ~~credit agreement, borrowings under the term loan feature of the~~ Credit Agreement ~~bear interest on the outstanding principal amount at a rate~~ which isexpanded ~~determined by~~ the ~~Trust’s~~accordion ~~credit~~feature ~~rating,~~allowing ~~currently equal to LIBOR + 1.00%. The Trust simultaneously entered into a pay-fixed receive-variable rate swap for~~ the ~~full~~Operating ~~borrowing~~Partnership ~~amount, fixing the LIBOR component of the borrowing rate~~ to ~~1.07%,~~increase ~~for an all-in fixed rate of 2.07%. Both the~~ borrowing ~~and pay-fixed receive-variable swap had a maturity date of June 10, 2023.~~

On October 13, 2021, the Company used the proceeds from the senior notes to pay off the $250.0 million term loan feature of the Credit Agreement. As defined by the Credit Agreement, the term loan feature is no longer available to the Company. The Operating Partnership simultaneously terminated the existing pay-fixed receive-variable rate swaps associated with the full term loan borrowing of $250.0 million. As part of the termination, the Company made total cash payments of $3.3 million to the counterparties of the swap agreements.89

capacity by up to an additional $500.0 million, and replaced the LIBOR-based benchmark rates applicable to borrowings under the Credit Agreement with SOFR based benchmark rates plus a SOFR index adjustment of 0.10%.

On May 24, 2023, the Operating Partnership, as borrower, and the Trust, as guarantor, executed a Second Amendment to the Credit Agreement, which added a new $400.0 million unsecured term loan with a scheduled maturity date of May 24, 2028 and expanded the accordion feature, which allows the Operating Partnership to increase borrowing capacity under the Credit Agreement by up to an additional $500.0 million, subject to customary terms and conditions, for a maximum aggregate principal amount of all revolving commitments and term loans under the Credit Agreement of $1.9 billion. On the same day, the Operating Partnership borrowed $400.0 million under the term loan feature of the Credit Agreement. Borrowings under the term loan feature of the Credit Agreement bear interest on the outstanding principal amount at a rate equal to 1.10%, inclusive of a 0.10% SOFR index adjustment, plus Daily Simple SOFR as defined in the Credit Agreement. The Company simultaneously entered into fixed-for-floating interest rate swaps for the full borrowing amount under the term loan, fixing the Daily Simple SOFR component of the borrowing rate at 3.593%, for a current all-in fixed rate of 4.693%. Both the borrowing and the fixed-for-floating interest rate swaps have a maturity date of May 24, 2028.

As of December 31, 2023, the borrower had investment grade ratings of BBB from S&P and Baa2 from Moody’s. As such, borrowings under the revolving credit facility of the Credit Agreement accrue interest on the outstanding principal at a rate of SOFR plus 0.95%, inclusive of a 0.10% SOFR index adjustment. The Credit Agreement includes a facility fee equal to 0.20% per annum, which is also determined by the borrower’s investment grade rating.

Base Rate Loans, Adjusted LIBOR Rate Loans, and Letters of Credit (each, as defined in the Credit Agreement) will be subject to interest rates, based upon the Trust’s investment grade rating as follows:


Credit Rating	Applicable Margin for Revolving Loans: LIBOR Rate Loans and Letter of Credit Fee	Applicable Margin for Revolving Loans: Base Rate Loans		Applicable Margin for Term Loans: LIBOR Rate Loans and Letter of Credit Fee	Applicable Margin for Term Loans: Base Rate Loans
At Least A- or A3	LIBOR + 0.725%	—	%	LIBOR + 0.85%	—	%
At Least BBB+ or Baa1	LIBOR + 0.775%	—	%	LIBOR + 0.90%	—	%
At Least BBB or Baa2	LIBOR + 0.85%	—	%	LIBOR + 1.00%	—	%
At Least BBB- or Baa3	LIBOR + 1.05%	0.05	%	LIBOR + 1.25%	0.25	%
Below BBB- or Baa3	LIBOR + 1.40%	0.40	%	LIBOR + 1.65%	0.65	%

The Credit Agreement contains financial covenants that, among other things, require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as covenants that may limit the Trust’s and the Operating Partnership’s ability to incur additional debt, grant liens, or make distributions. ~~The~~Subject ~~Company~~to ~~may,~~the atrestrictions ~~any~~in ~~time~~the Merger Agreement, the Company may voluntarily prepay any revolving or term loan under the Credit Agreement in whole or in part without premium or penalty. As of December 31, ~~2022~~2023, the Company was in compliance with all financial covenants related to the Credit Agreement.

The Credit Agreement includes customary representations and warranties by the Trust and the Operating Partnership and imposes customary covenants on the Operating Partnership and the Trust. The Credit Agreement also contains customary events of default, and if an event of default occurs and continues, the Operating Partnership is subject to certain actions by the administrative agent, including without limitation, the acceleration of repayment of all amounts outstanding under the Credit Agreement.

As of December 31, ~~2022~~2023, the Company ~~had~~did ~~$193.0~~not ~~million~~have ofany borrowings outstanding under its $1.0 billion unsecured revolving credit facility. Asfeature ~~defined~~or by the ~~Credit~~$500.0 million ~~Agreement,~~accordion ~~the~~feature ~~unencumbered borrowing base as~~ of ~~December 31, 2022 allows~~ the ~~Company~~Credit toAgreement ~~borrow~~and anhad ~~additional~~ $~~807~~400.0 million ~~before~~of ~~reaching~~borrowings outstanding under the ~~maximum~~term ~~allowed~~loan ~~under~~feature of the ~~credit~~Credit ~~facility~~Agreement.

Notes Payable

On January 7, 2016, the Operating Partnership issued and sold $150.0 million aggregate principal amount of senior notes (the “January 2016 Notes”), comprised of (i) $1545.0 million aggregate principal amount of 4.0343% Senior Notes, Series AB, due January 7, ~~2023~~2026, (ii) $45.0 million aggregate principal amount of 4.4357% Senior Notes, Series BC, due January 7, ~~2026~~2028, (iii) $45.0 million aggregate principal amount of 4.5774% Senior Notes, Series CD, due January 7, ~~2028~~2031, and (iv) $4515.0 million ~~aggregate principal amount~~ of 4.7403% Senior Notes, Series DA, ~~due~~which ~~January~~was 7paid off during the year ended December 31, ~~2031~~2023. On August 11, 2016, the note agreement for these notes was amended to make certain change

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