Announces Year-to-Date Investment Activity
of $220 Million
Provides Update on CHI Investment
First Quarter
Highlights:
- Reported first quarter 2016 total
revenue of $44.1 million, up 80% year-over-year.
- Generated first quarter normalized
funds from operations (FFO) of $0.22 per share and OP unit on a
fully diluted basis, an increase of 15.8% year-over-year, and net
income per share of $0.04 on a fully diluted basis.
- First quarter investments of
approximately $202.3 million, which includes 16 healthcare
facilities and 2 condominium units totaling 751,961 leasable square
feet and 1 mezzanine loan.
- Declared quarterly dividend of $0.225
per share for the first quarter 2016, paid April 18,
2016.
- Portfolio was 95.9% leased based on
square footage as of March 31, 2016.
- Increased gross leasable square footage
by 13.0% in the first quarter 2016 to 6,551,298 square feet.
- Issued $150 million of unsecured notes
on January 7, 2016, with an average maturity of 12 years, at an
average interest rate of 4.5%.
- Raised $321.1 million of net equity
proceeds from the upsized offering of 21,275,000 common shares on
January 25, 2016 at a price of $15.75 per share.
Subsequent Events
Highlights:
- Announced $725 million
pending transaction with Catholic Health Initiatives.
- Raised $442.7 million of net equity
proceeds from the upsized offering of 25,875,000 common shares on
April 11, 2016 at a price of $17.85 per share.
- Closed an additional $17.6 million of
investments subsequent to the quarter ended March 31,
2016.
Physicians Realty Trust (NYSE:DOC) (the “Company,” the “Trust,”
“we,” “our” and “us”), a self-managed healthcare real estate
investment trust, today announced results for the first quarter
ended March 31, 2016.
John T. Thomas, President and Chief Executive Officer of the
Trust, commented, “We began 2016 with another strong quarter of
growth, balance sheet management, and operational results. We are
particularly proud of our team that worked so hard during this high
growth quarter, maintaining attention to our existing facilities
and clients, while also underwriting, performing due diligence
upon, and documenting the investment in over 50 medical office
buildings included in the pending Catholic Health Initiatives
(“CHI”) transaction we recently announced. This is no small
accomplishment for any organization, and it is a reflection of the
high quality individuals, team effort, and medical office facility
management platform we have built since our beginning in July 2013.
We received strong outsized support from our investors in the
follow-on offerings completed in January and April of this year. In
particular, the ability to match fund the CHI investment provides
certainty to our capital plan and conservative underwriting
expectations. Our growth and attention to property operations
delivered a revenue increase of 80% compared to the first quarter
of 2015, resulting in normalized FFO of $0.22 per common share and
OP Unit during the first quarter, a 15.8% increase over the same
period last year.”
First Quarter Financial Results
Total revenue for the first quarter ended March 31, 2016
was $44.1 million, an increase of 80% from the same period in 2015.
As of March 31, 2016, the portfolio was 95.9% leased. On a pro
forma basis, if all of the 2016 first quarter acquisitions occurred
on the first day of the first quarter, total revenue would have
increased by an additional $4.1 million, to a pro forma total of
$48.3 million.
Total expenses for the first quarter 2016 were $38.7 million,
compared to $24.9 million in the first quarter 2015, or an increase
of 55%. The increase in expenses was the result of a $7.8 million
increase in depreciation and amortization, a $5.3 million increase
in operating expenses, a $2.5 million increase in interest
expenses, and a $0.8 million increase in general and administrative
expenses. Increases were partially offset by a $2.6 million
decrease in acquisition related expenses. On a pro forma basis, if
all of the 2016 first quarter acquisitions occurred on the first
day of the first quarter, depreciation and amortization expense and
operating expenses would have increased by an additional $1.8
million and $0.8 million, respectively.
Net income for the first quarter 2016 grew to $5.4 million,
compared to a net loss of $0.4 million for the first quarter
2015.
Net income attributable to common shareholders for the first
quarter 2016 was $4.4 million, or $0.04 per diluted share based on
107.1 million weighted average shares outstanding.
Funds from operations (FFO) for the first quarter 2016 consisted
of net income, less $0.3 million of net income attributable to
noncontrolling interests for partially owned properties, plus $16.0
million of depreciation and amortization, less $0.2 million of
depreciation and amortization expense for partially owned
properties, less $0.5 million of preferred distributions, resulting
in $0.19 per diluted share. Normalized FFO, which adds back $3.4
million of acquisition expenses, was $23.7 million, or $0.22 per
diluted share.
Normalized funds available for distribution (FAD) for the first
quarter 2016, which consists of normalized FFO adjusted for
non-cash share compensation, straight-line rent adjustments,
amortization of acquired above-market leases, amortization of lease
inducements, amortization of deferred financing fees, recurring
capital expenditures, and seller master lease and rent abatement
payments, was $21.1 million, or $0.20 per diluted share for the
first quarter 2016.
Update on CHI Investment
The CHI investment continues to be on track to close in two or
more tranches of assets during the second quarter of 2016. We
expect to close a larger first tranche of these assets than
originally anticipated, with the total investment increasing from
approximately $200 million (10 buildings) to as many as 28
buildings and as much as $335 million, with this closing expected
mid-May 2016. The second tranche and potentially smaller tranches
to complete all of the announced CHI investment remain on track to
close later in the second quarter of 2016. The second tranche will
close later in the second quarter as a result of the Catholic
Church’s requirements for approval from the Vatican, as previously
described. In addition, 1 property of the 52 properties announced,
representing approximately $6 million of the originally announced
$725 million transaction, was removed during the due diligence
process.
Other Recent Events
Dividend Paid
On March 18, 2016, our Board of Trustees authorized and we
declared a cash distribution of $0.225 per common share and OP Unit
for the quarterly period ended March 31, 2016. The
distribution was paid on April 18, 2016 to common shareholders
and OP Unit holders of record as of the close of business on
April 1, 2016.
January 2016 Notes Offering
On January 7, 2016, our operating partnership issued and sold
$150 million aggregate principal amount of senior notes, comprised
of (i) $15,000,000 aggregate principal amount of 4.03% Senior
Notes, Series A, due January 7, 2023 (the “Series A Notes”), (ii)
$45,000,000 aggregate principal amount of 4.43% Senior Notes,
Series B, due January 7, 2026 (the “Series B Notes”), (iii)
$45,000,000 aggregate principal amount of 4.57% Senior Notes,
Series C, due January 7, 2028 (the “Series C Notes”) and (iv)
$45,000,000 aggregate principal amount of 4.74% Senior Notes,
Series D, due January 7, 2031 (the “Series D Notes,” and together
with the Series A Notes, the Series B Notes, and the Series C
Notes, the “Notes”). The proceeds of the Notes were used to repay
borrowings under our unsecured revolving credit facility, for
general corporate and working capital purposes, and for funding
acquisitions.
January 2016 Follow-on Equity Offering
On January 25, 2016, we completed a follow-on public offering of
21,275,000 common shares of beneficial interest, including
2,775,000 common shares issued upon exercise of the underwriters’
overallotment option, resulting in net proceeds to us of
approximately $321.1 million. We contributed the net proceeds of
this offering to our Operating Partnership in exchange for
21,275,000 OP Units, and our Operating Partnership used the net
proceeds of the public offering to repay borrowings under our
unsecured revolving credit facility, for general corporate and
working capital purposes, and for funding acquisitions.
April 2016 Follow-on Equity Offering
On April 11, 2016, we completed a follow-on public offering of
25,875,000 common shares of beneficial interest, including
3,375,000 common shares issued upon exercise of the underwriters’
overallotment option, resulting in net proceeds to us of
approximately $442.7 million. We contributed the net proceeds
of this offering to our Operating Partnership in exchange for
25,875,000 OP Units, and our Operating Partnership used the net
proceeds of the public offering to repay borrowings under our
unsecured revolving credit facility, for general corporate and
working capital purposes, and for funding acquisitions, and expects
to use the net proceeds to fund a portion of the purchase price for
the CHI investment.
Investment Activity
In the quarter ended March 31, 2016, we completed $202.3
million of investment activity, including acquisitions of 16
healthcare properties and 2 condominium units located in 13 states
totaling $201.8 million and 751,961 square feet and a mezzanine
loan investment of $0.5 million.
Since our April 5, 2016 press release, the Company has completed
2 acquisitions of 3 healthcare properties containing an aggregate
of 51,629 net leasable square feet. This investment totals
approximately $17.6 million and is summarized below.
Gardendale Surgery Center. On April 11, 2016, the Company
closed the acquisition of a 15,000 square foot ambulatory surgical
center in Gardendale, AL, for a purchase price of approximately
$7.5 million. The facility is 100% leased to an affiliate of
Brookwood Medical Center, a subsidiary of TENET Healthcare
(NYSE:THC; S&P, “B”). The first year unlevered yield on this
investment is expected to be approximately 6.9%.
Health East Facilities. On April 14, 2016, the Company
closed on the acquisition of two facilities containing 36,629 net
leasable square feet in the Minneapolis-St. Paul, Minnesota
metropolitan area, for a purchase price of approximately $10.2
million. The multi-tenant facilities are 90% occupied, with 73%
anchored by the HealthEast Health System (Moody’s “Ba1”). The first
year unlevered yield on this investment is expected to be
approximately 6.5%.
2016 Acquisition Guidance
The Company expects to acquire between $1 billion and $1.25
billion of total real estate investments in 2016, subject to
favorable capital market conditions. This guidance is inclusive of
any previously announced acquisitions, including those detailed in
the “Recent Events” portion of this press release.
Conference Call Information
The Company has scheduled a conference call on Thursday,
May 5, 2016, at 2:00 p.m. ET to discuss its financial
performance and operating results for the first quarter ended
March 31, 2016. The conference call can be accessed by dialing
(877) 407-0784 from within the U.S. or (201) 689-8560 for
international callers. Participants can reference the Physicians
Realty Trust First Quarter Earnings Call or passcode 13629942. The
conference call also will be available via a live listen-only
webcast and can be accessed through the Investor Relations section
of the Company’s website, www.docreit.com. A replay of the conference call
will be available beginning May 5, 2016, at 5:00 p.m. ET
until May 26, 2016, at 11:59 p.m. ET, by dialing (877)
870-5176 (U.S.) or (858) 384-5517 (International); passcode:
13629942. A replay of the webcast also will be accessible on the
Investor Relations website for one year following the event. After
May 5, 2016, the Company’s supplemental information package
for the first quarter 2016 also will be accessible through the
Investor Relations section of the Company’s website under the
“Supplemental Information” tab.
About Physicians Realty Trust
Physicians Realty Trust is a self-managed healthcare real estate
company organized to acquire, selectively develop, own and manage
healthcare properties that are leased to physicians, hospitals and
healthcare delivery systems. The Company invests in real estate
that is integral to providing high quality healthcare. The Company
conducts its business through an UPREIT structure in which its
properties are owned by Physicians Realty L.P., a Delaware limited
partnership (the “operating partnership”), directly or through
limited partnerships, limited liability companies or other
subsidiaries. The Company is the sole general partner of the
operating partnership and, as of March 31, 2016, owned
approximately 96.5% of the partnership interests in our operating
partnership (“OP Units”).
Investors are encouraged to visit the Investor Relations portion
of the Company’s website (www.docreit.com) for additional information,
including 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, press releases,
supplemental information packages and investor presentations.
Forward-Looking Statements
This press release contains statements that are “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the use of words such as
“anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”,
and “project” and other similar expressions that predict or
indicate future events or trends or that are not statements of
historical matters. These forward looking statements may include
statements regarding the Company’s strategic and operational plans,
the Company’s ability to generate internal and external growth, the
future outlook, anticipated cash returns, cap rates or yields on
properties, anticipated closing of property acquisitions, and
ability to execute its business plan. While forward-looking
statements reflect our good faith beliefs, they are not guarantees
of future performance. Forward looking statements should not be
read as a guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward looking
statements are based on information available at the time those
statements are made and/or management’s good faith belief as of
that time with respect to future events, and are subject to risks
and uncertainties that could cause actual performance or results to
differ materially from those expressed in or suggested by the
forward looking statements. These forward-looking statements are
subject to various risks and uncertainties, not all of which are
known to the Company and many of which are beyond the Company’s
control, which could cause actual results to differ materially from
such statements. These risks and uncertainties are described in
greater detail in the Company’s filings with the Securities and
Exchange Commission (the “Commission”), including, without
limitation, the Company’s annual and periodic reports and other
documents filed with the Commission. Unless legally required, the
Company disclaims any obligation to update any forward-looking
statements after the date of this release, whether as a result of
new information, future events or otherwise. For a description of
factors that may cause the Company’s actual results or performance
to differ from its forward-looking statements, please review the
information under the heading “Risk Factors” included in the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2015 filed by the Company with the Commission on
February 29, 2016.
Physicians Realty Trust Condensed Consolidated Statements
of Operations
(in thousands, except share and per
share data)
Three Months Ended March 31,
2016 2015 Revenues: Rental revenues $
34,855 $ 20,341 Expense recoveries 7,903 3,536 Interest income on
real estate loans and other 1,376 607 Total revenues
44,134 24,484
Expenses: Interest expense 4,197 1,710 General
and administrative 4,121 3,352 Operating expenses 11,037 5,709
Depreciation and amortization 16,010 8,240 Acquisition expenses
3,377 5,932 Total expenses 38,742 24,943
Income (loss) before equity in income of unconsolidated
entity and loss on sale of investment property: 5,392 (459 )
Equity in income of unconsolidated entity 32 26 Loss on sale of
investment property — (15 ) Net income (loss) 5,424 (448 )
Net (income) loss attributable to noncontrolling interests:
Operating Partnership (173 ) 24 Partially owned properties (317 )
(32 ) Net income (loss) attributable to controlling interest 4,934
(456 ) Preferred distributions (548 ) (66 )
Net income (loss)
attributable to common shareholders $ 4,386 $ (522 ) Net
income (loss) per share: Basic $ 0.04 $ (0.01 ) Diluted $
0.04 $ (0.01 ) Weighted average common shares: Basic
102,704,008 65,649,478 Diluted 107,148,380
65,649,478 Dividends and distributions declared per
common share and OP Unit $ 0.225 $ 0.225
Physicians Realty Trust Condensed Consolidated Balance
Sheets
(in thousands, except share and per
share data)
March 31, December 31,
2016 2015
ASSETS
Investment properties: Land and improvements $ 141,152 $ 130,788
Building and improvements 1,452,885 1,284,863 Tenant improvements
10,455 9,243 Acquired lease intangibles 228,788 205,168
1,833,280 1,630,062 Accumulated depreciation (108,239 )
(91,250 ) Net real estate property 1,725,041 1,538,812 Real estate
loans receivable 35,937 39,349 Investment in unconsolidated entity
1,327 1,322 Net real estate investments 1,762,305
1,579,483 Cash and cash equivalents 22,906 3,143 Tenant
receivables, net 6,024 2,977 Other assets 59,657 53,283
Total assets
$ 1,850,892 $ 1,638,886
LIABILITIES AND
EQUITY
Liabilities: Credit facility $ 115,789 $ 389,375 Notes payable
149,551 — Mortgage debt 114,816 94,240 Accounts payable 1,659 644
Dividends payable 25,701 20,783 Accrued expenses and other
liabilities 28,948 24,473 Acquired lease intangibles, net 6,407
5,950 Total liabilities 442,871 535,465
Redeemable noncontrolling interest - Operating Partnership
and partially owned properties 27,065 26,960 Equity: Common
shares, $0.01 par value, 500,000,000 common shares authorized,
108,379,324 and 86,864,063 common shares issued and outstanding as
of March 31, 2016 and December 31, 2015, respectively. 1,087 872
Additional paid-in capital 1,451,347 1,129,284 Accumulated deficit
(129,183 ) (109,024 ) Total shareholders’ equity 1,323,251
1,021,132 Noncontrolling interests: Operating Partnership 47,567
45,451 Partially owned properties 10,138 9,878 Total
noncontrolling interests 57,705 55,329 Total equity
1,380,956 1,076,461 Total liabilities and equity $
1,850,892 $ 1,638,886
Physicians Realty
Trust Reconciliation of Non-GAAP Measures
(in thousands, except share and per
share data)
Three Months Ended March 31,
2016 2015 Net income (loss) 5,424 (448 ) Net
income attributable to noncontrolling interests - partially owned
properties (317 ) (32 ) Preferred distributions (548 ) (66 )
Depreciation and amortization expense 15,989 8,240 Depreciation and
amortization expense - partially owned properties (195 ) (100 )
Loss on the sale of investment property — 15 FFO
applicable to common shares and OP Units $ 20,353 $ 7,609
FFO per common share and OP Unit $ 0.19 $ 0.11
Net change in fair value of derivative (40 ) (13 ) Acquisition
related expenses 3,377 5,932 Normalized FFO
applicable to common shares and OP Units $ 23,690 $ 13,528
Normalized FFO per common share and OP Unit $ 0.22 $
0.19 Normalized FFO applicable to common shares and OP Units
23,690 13,528 Non-cash share compensation expense 815 703
Straight-line rent adjustments (3,185 ) (2,012 ) Amortization of
acquired above/below market leases/assumed debt 745 222
Amortization of lease inducements 158 119 Amortization of deferred
financing costs 448 293 TI/LC and recurring capital expenditures
(1,878 ) (1,028 ) Seller master lease and rent abatement payments
270 511 Normalized FAD applicable to common shares
and OP Units 21,063 12,336 Normalized FAD per common
share and OP Unit 0.20 0.18 Weighted average
number of common shares and OP Units outstanding 107,148,380
69,490,587
This press release includes Funds From Operations, or FFO, and
Normalized Funds Available For Distribution, or FAD, which are
non-GAAP financial measures. For purposes of the SEC’s Regulation
G, 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 press release,
GAAP refers to generally accepted accounting principles in the
United States of America. Pursuant to the requirements of
Regulation G, the Company has provided reconciliations of the
non-GAAP financial measures to the most directly comparable GAAP
financial measures.
The Company calculates and reports FFO in accordance with the
definition and interpretive guidelines issued by the National
Association of Real Estate Investment Trusts (“NAREIT”), and
consequently, FFO is defined as net income/loss available to common
share and unit holders, adjusted for the effects of asset
dispositions and certain non-cash items, primarily depreciation and
amortization and impairments on real estate assets. The Company
believes that FFO is an important supplemental measure of its
operating performance. Because the historical cost accounting
convention used for real estate assets requires depreciation
(except on land), such accounting presentation implies that the
value of real estate assets diminishes predictably over time, while
real estate values instead have historically risen or fallen with
market conditions. The term FFO was designed by the real estate
industry to address this issue. FFO described herein is not
necessarily comparable to FFO of other real estate investment
trusts, or REITs, that do not use the same definition or
implementation guidelines or interpret the standards differently
from the Company.
The Company uses FFO as one of several criteria to measure the
operating performance of its business. The Company further believes
that by excluding the effect of depreciation, amortization,
impairments on real estate assets and gains or losses from sales of
real estate, all of which are based on historical costs and which
may be of limited relevance in evaluating current performance, FFO
can facilitate comparisons of operating performance between periods
and between other REITs. The Company offers this measure to assist
the users of its financial statements in analyzing its performance;
however, this is not a measure of financial performance under GAAP
and should not be considered a measure of liquidity, an alternative
to net income or an indicator of any other performance measure
determined in accordance with GAAP. Investors and potential
investors in the Company’s securities should not rely on this
measure as a substitute for any GAAP measure, including net
income.
Normalized FFO is calculated as FFO available to common share
and unit holders excluding the impact of non-cash stock-based
compensation and certain revenue and expense items identified in
the table above. The Company believes that Normalized FFO provides
an enhanced measure of the operating performance of the Company’s
core portfolio as a REIT. The Company’s computation of Normalized
FFO is not comparable to the NAREIT definition of FFO or to similar
measures reported by other REITs, but the Company believes it is an
appropriate measure for the Company.
The Company defines Normalized FAD, a non-GAAP measure, which
excludes from Normalized FFO, non-cash compensation expense,
straight-line rent adjustments, amortization of acquired above or
below market leases, amortization of deferred financing costs and
amortization of lease inducements and includes cash payments from
seller master leases and rent abatement payments. The Company
believes Normalized FAD provides a meaningful supplemental measure
of its ability to fund its ongoing distributions. Normalized FAD
should not be considered as an alternative to net income or loss
attributable to controlling interest (computed in accordance with
GAAP) as an indicator of the Company’s financial performance or to
cash flow from operating activities (computed in accordance with
GAAP) as an indicator of the Company’s liquidity. Normalized FAD
should be reviewed in connection with other GAAP measurements.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160505005575/en/
Physicians Realty TrustJohn T. Thomas, 214-549-6611President and
CEOjtt@docreit.comJeffrey N. Theiler, 414-367-5610Executive Vice
President and CFOjnt@docreit.com
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