Healthcare Realty Trust IncHR
Healthcare Realty Trust Inc Leases Disclosure
Leases
Lessor Accounting Under ASC 842
The Company’s properties generally are leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2052. Some leases provide tenants with fixed rent renewal terms while others have market rent renewal terms. Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. The Company’s single-tenant net leases generally require the lessee to pay minimum rent and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.
The Company's leases typically have escalators that are either based on a stated percentage or an index such as the CPI. In addition, most of the Company's leases include nonlease components, such as reimbursement of operating expenses as additional rent, or include the reimbursement of expected operating expenses as part of the lease payment. The Company adopted an accounting policy to combine lease and nonlease components. Rent escalators
based on indices and reimbursements of operating expenses that are not included in the lease rate are considered variable lease payments. Variable payments are recognized in the period earned. Lease income for the Company's operating leases recognized for the years ended December 31, 2025, 2024 and 2023 was $1.1 billion, $1.2 billion and $1.3 billion, respectively.
Future minimum lease payments under the non-cancelable operating leases, excluding any reimbursements, as of December 31, 2025 were as follows:
| In thousands | |||||
| 2026 | $ | 763,752 | |||
| 2027 | 681,288 | ||||
| 2028 | 579,445 | ||||
| 2029 | 485,714 | ||||
| 2030 | 384,798 | ||||
| 2031 and thereafter | 1,499,975 | ||||
| $ | 4,394,972 | ||||
Revenue Concentrations
The Company’s real estate portfolio is leased to a diverse tenant base. The Company did not have any customers that account for 10% or more of the Company's revenues for the years ended December 31, 2025, 2024 and 2023.
Purchase Option Provisions
Certain of the Company’s leases include purchase option provisions. The provisions vary by agreement but generally allow the lessee to purchase the property covered by the agreement at fair market value or an amount equal to the Company’s gross investment. The Company expects that the purchase price from its purchase options will be greater than its net investment in the properties at the time of potential exercise by the lessee. The Company had gross investments of approximately $55.7 million in three real estate properties as of December 31, 2025 that were subject to purchase options that were exercisable.
Lessee Accounting Under ASC 842
As of December 31, 2025, the Company was obligated, as the lessee, under operating lease agreements consisting primarily of the Company’s ground leases. Contracts evaluated and treated as leases are those that convey the right to control the use of identified assets for a period of time in exchange for consideration. ASC 842 requires the recording of these leases based on the aggregate future cash flows, discounted utilizing the implicit rate in the lease, or, if not readily determinable, based upon the lessee's incremental borrowing rate, to which the Company utilizes market inputs that are both similar to the Company's credit profile and corresponding term of the leases. As of December 31, 2025, the Company had 168 properties totaling 12.4 million square feet that were held under ground leases. Some of the ground leases include fixed rent renewal terms and others have market rent renewal terms. The ground leases typically have initial terms of 40 to 99 years with expiration dates through 2119. Any rental increases related to the Company’s ground leases are generally either stated or based on the CPI. The Company had 60 prepaid ground leases as of December 31, 2025. The amortization of the prepaid rent, included in the operating lease right-of-use asset, represented approximately $1.4 million, $1.4 million and $1.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company’s future lease payments (primarily for its 108 non-prepaid ground leases) as of December 31, 2025 were as follows:
| In thousands | OPERATING | FINANCING | ||||||
| 2026 | $ | 9,305 | $ | 2,066 | ||||
| 2027 | 9,438 | 2,105 | ||||||
| 2028 | 9,557 | 2,137 | ||||||
| 2029 | 9,598 | 2,169 | ||||||
| 2030 | 9,471 | 2,204 | ||||||
| 2031 and thereafter | 422,051 | 379,720 | ||||||
| Total undiscounted lease payments | $ | 469,420 | $ | 390,401 | ||||
| Discount | (306,498) | (317,271) | ||||||
| Lease liabilities | $ | 162,922 | $ | 73,130 | ||||
The following table provides details of the Company's total lease expense for the years ended December 31, 2025 and 2024:
| YEAR ENDED DECEMBER 31 | ||||||||
| In thousands | 2025 | 2024 | ||||||
| Operating lease cost | ||||||||
| Operating lease expense | $ | 17,640 | $ | 18,076 | ||||
| Variable lease expense | 5,268 | 4,939 | ||||||
| Finance lease cost | ||||||||
| Amortization of right-of-use assets | 1,480 | 1,533 | ||||||
| Interest on lease liabilities | 3,695 | 3,727 | ||||||
| Total lease expense | $ | 28,083 | $ | 28,275 | ||||
| Other information | ||||||||
| Operating cash outflows related to operating leases | $ | 16,238 | $ | 15,545 | ||||
| Operating cash outflows related to financing leases | $ | 2,235 | $ | 2,107 | ||||
| Financing cash outflows related to financing leases | $ | 53 | $ | 17 | ||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | — | $ | 3,855 | ||||
| Weighted-average remaining lease term (excluding renewal options) - operating leases | 40.1 | 44.1 | ||||||
| Weighted-average remaining lease term (excluding renewal options) - finance leases | 56.9 | 57.8 | ||||||
| Weighted-average discount rate - operating leases | 5.6 | % | 5.7 | % | ||||
| Weighted-average discount rate - finance leases | 5.0 | % | 5.0 | % | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 18, 2020 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.