PHYSICIANS REALTY TRUST September 2023
Woodlands Medical Arts Center
The Woodlands, TX
SUPPLEMENTAL OPERATING & FINANCIAL INFORMATION
THIRD QUARTER 2023
PHYSICIANS REALTY TRUST
NYSE: DOC
Northside Medical Midtown
Atlanta, GA
TABLE OF CONTENTS
ABOUT PHYSICIANS REALTY TRUST | 4 |
CONSOLIDATED BALANCE SHEETS | 6 |
CONSOLIDATED STATEMENTS OF INCOME | 7 |
THIRD QUARTER 2023 HIGHLIGHTS | 8 |
FINANCIAL HIGHLIGHTS | 9 |
RECONCILIATION OF NON-GAAP MEASURES: FUNDS FROM OPERATIONS ("FFO"), NORMALIZED | |
FUNDS FROM OPERATIONS ("NORMALIZED FFO"), AND NORMALIZED FUNDS AVAILABLE FOR | |
DISTRIBUTION ("NORMALIZED FAD") | 10 |
RECONCILIATION OF NON-GAAP MEASURES: NET OPERATING INCOME AND ADJUSTED EBITDAre | 11 |
MARKET CAPITALIZATION AND DEBT SUMMARY | 12 |
LEVERAGE STATISTICS AND COVENANT PERFORMANCE | 13 |
INVESTMENT ACTIVITY AND CONSTRUCTION LOAN SUMMARY | 14 |
PORTFOLIO PERFORMANCE | 15 |
LEASING ROLLFORWARD AND CAPITAL EXPENDITURES | 16 |
PORTFOLIO DIVERSIFICATION | 17 |
CONSOLIDATED LEASING RELATIONSHIPS AND EXPIRATION SCHEDULE | 18 |
REPORTING DEFINITIONS | 19 |
2
FORWARD-LOOKING STATEMENTS
Certain statements made in this supplemental information package constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")). In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, our pro forma financial statements and our statements regarding anticipated market conditions are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "outlook," "continue," "projects," "pro forma," "estimates" or "anticipates" 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.
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.
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, of new information, data or methods, future events or other changes after the date of this supplemental information package, 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. For a discussion of factors that could impact our future results, performance or transactions, see Part I, Item 1A (Risk Factors) of our Annual Report on Form
10-K for the fiscal year ended December 31, 2022 and Part II, Item 1A (Risk Factors) of our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2023.
NON-GAAP FINANCIAL MEASURES
This presentation includes EBITDAre, Adjusted EBITDAre, Net Operating Income (or "NOI"), Cash NOI, Outpatient Medical Same-Store Cash NOI, Funds From Operations (or "FFO"), Normalized FFO, and Normalized Funds Available For Distribution (or "FAD"), which are non-GAAP financial measures. For purposes of the Securities and Exchange Commission's ("SEC")
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 statements of operations, balance sheets or statements 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 presentation, GAAP refers to generally accepted accounting principles in the United States of America. Our use of the non-GAAP financial measure terms herein may not be comparable to that of other real estate investment trusts. Pursuant to the requirements of Regulation G, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
ADDITIONAL INFORMATION
The information in this supplemental information package should be read in conjunction with the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, earnings press release dated October 30, 2023, and other information filed with, or furnished to, the SEC. You can access the Company's reports and amendments to those reports filed or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act in the "Investor Relations" section on the Company's website (www.docreit.com) under the tab "SEC Filings" as soon as reasonably practicable after they are filed with, or furnished to, the SEC. The information on or connected to the Company's website is not, and shall not be deemed to be, a part of, or incorporated into this supplemental information package. You also can review these SEC filings and other information by accessing the SEC's website at http://www.sec.gov.
3
ABOUT PHYSICIANS REALTY TRUST
Physicians Realty Trust (NYSE:DOC) (the "Trust," the "Company," "DOC," "we," "our" and "us") is a self-managed health care real estate company organized in 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 typically are on a campus with a hospital or other health care facilities or strategically located and affiliated with a hospital or other health care facilities.
Our management team has significant public health care REIT experience and long established relationships with physicians, hospitals, and health care delivery system decision makers that we believe will provide quality investment opportunities to generate attractive risk-adjusted returns to our shareholders.
We are 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 Physicians Realty L.P., a Delaware limited partnership (the "operating partnership"), directly or through limited partnerships, limited liability companies, or other subsidiaries. We are the sole general partner of the operating partnership and, as of September 30, 2023, owned approximately 96.1% of the partnership interests in the operating partnership ("OP Units").
Unless otherwise indicated, portfolio statistics include amounts attributable to the Company's pro-rata share of unconsolidated joint venture assets and exclude the Company's 108,843 square foot corporate office and one 20,840 square foot retail asset.
COMPANY SNAPSHOT
As of
September 30, 2023
Gross real estate investments (thousands) Total health care properties
% Leased
Total portfolio gross leasable area (sq. ft.)
-
6,011,198
291
94.6%
16,252,156
% of consolidated GLA from outpatient medical facilities | 98% | |
% of GLA on-campus / affiliated | 90% | |
Weighted average remaining lease term for all health care properties (years) | 5.3 | |
Cash and cash equivalents (thousands) | $ | 195,772 |
Net consolidated debt to firm value | 35.6% | |
Weighted average interest rate per annum on consolidated debt | 4.1% | |
Equity market cap (thousands) | $ | 2,907,105 |
Quarterly dividend | $ | 0.23 |
Quarter end stock price | $ | 12.19 |
Dividend yield | 7.55% | |
Common shares outstanding | 238,482,769 | |
OP Units outstanding and not owned by DOC | 9,814,502 | |
Dilutive restricted common shares and units | 1,150,717 | |
Consolidated firm value (thousands) | $ | 5,031,964 |
4
ABOUT PHYSICIANS REALTY TRUST (CONTINUED)
BOARD OF TRUSTEES
Tommy G. Thompson Chairman
John T. Thomas President, Chief Executive Officer
Stanton D. Anderson, Esq. Compensation Committee Chair
Mark A. Baumgartner Audit Committee Chair
Albert C. Black Nominating and Corporate Governance Committee Chair
William A. Ebinger, M.D. Trustee
Pamela J. Kessler Trustee
Ava E. Lias-Booker, Esq. Trustee
Richard A. Weiss, Esq. Finance and Investment Committee Chair
MANAGEMENT TEAM
John T. Thomas President, Chief Executive Officer
Jeffrey N. Theiler Executive Vice President, Chief Financial Officer
D. Deeni Taylor Executive Vice President, Chief Investment Officer
Mark D. Theine Executive Vice President, Asset & Investment Management
John W. Lucey Chief Accounting and Administrative Officer
Daniel M. Klein Senior Vice President, Deputy Chief Investment Officer
Bradley D. Page Senior Vice President, General Counsel
Laurie P. Becker Senior Vice President, Controller
Amy M. Hall Senior Vice President, Leasing & Physician Strategy
W. Mark Dukes Senior Vice President, Asset Management
LOCATION AND CONTACT INFORMATION
Corporate Headquarters | Independent Registered | Corporate and REIT Tax Counsel | |
309 N. Water Street, Suite 500 | Public Accounting Firm | Baker & McKenzie LLP | |
Milwaukee, WI 53202 | Ernst & Young | Richard Lipton, Senior Counsel | |
(414) 367-5600 | Milwaukee, WI 53202 | Chicago, IL 60601 | |
(414) 273-5900 | (312) 861-8000 | ||
COVERING ANALYSTS | |||
J. Dennerlein - Bank of America Merrill Lynch | A. Hecht - JMP Securities LLC | ||
S. Valiquette - Barclays | A. Wurschmidt - Keybanc Capital Markets Inc. | ||
J. Sanabria - BMO Capital Markets Corp. | R. Kamdem - Morgan Stanley | ||
M. Gorman - BTIG | J. Hughes - Raymond James Financial Inc. | ||
M. Griffin - Citi | M. Carroll - RBC Capital Markets LLC | ||
D. Toti - Colliers Securities | W. Golladay - Robert W. Baird & Co. | ||
M. Ross - Compass Point | S. Manaker - Stifel | ||
J. Pawlowski - Green Street | M. Lewis - Truist Securities | ||
M. Mueller - J.P. Morgan | C. Siversky - Wells Fargo | ||
J. Petersen - Jefferies LLC |
The equity analysts listed above are those analysts that have published research material on the Company and are listed as covering the Company. Please note that any opinions, estimates, or forecasts regarding the Company's performance made by the analysts listed above do not represent the opinions, estimates, or forecasts of the Company or its management. The Company does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations made by any of such analysts. Interested persons may obtain copies of analysts' reports on their own, as we do not distribute these reports. Several of these firms may, from time to time, own our stock and/or hold other long or short positions on our stock, and may provide compensated services to us.
5
CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
September 30, | December 31, | ||||
2023 | 2022 | ||||
ASSETS | (unaudited) | ||||
Investment properties: | |||||
Land and improvements | $ | 249,468 | $ | 241,559 | |
Building and improvements | 4,703,606 | 4,659,780 | |||
Construction in progress | 41,722 | 18,497 | |||
Tenant improvements | 95,447 | 88,640 | |||
Acquired lease intangibles | 509,468 | 505,335 | |||
5,599,711 | 5,513,811 | ||||
Accumulated depreciation | (1,140,208) | (996,888) | |||
Net real estate property | 4,459,503 | 4,516,923 | |||
Right-of-use lease assets, net | 227,967 | 231,225 | |||
Real estate loans receivable, net | 79,883 | 104,973 | |||
Investments in unconsolidated entities | 72,069 | 77,716 | |||
Net real estate investments | 4,839,422 | 4,930,837 | |||
Cash and cash equivalents | 195,772 | 7,730 | |||
Tenant receivables, net | 11,131 | 11,503 | |||
Other assets | 166,142 | 146,807 | |||
Total assets | $ | 5,212,467 | $ | 5,096,877 | |
LIABILITIES AND EQUITY | |||||
Liabilities: | |||||
Credit facility | $ | 393,090 | $ | 188,328 | |
Notes payable | 1,451,536 | 1,465,437 | |||
Mortgage debt | 127,630 | 164,352 | |||
Accounts payable | 4,933 | 4,391 | |||
Dividends and distributions payable | 60,928 | 60,148 | |||
Accrued expenses and other liabilities | 95,637 | 87,720 | |||
Lease liabilities | 104,802 | 105,011 | |||
Acquired lease intangibles, net | 23,170 | 24,381 | |||
Total liabilities | 2,261,726 | 2,099,768 | |||
Redeemable noncontrolling interests - partially owned properties | 3,066 | 3,258 | |||
Equity: | |||||
Common shares, $0.01 par value, 500,000,000 common shares authorized, 238,482,769 and 233,292,030 common | 2,385 | 2,333 | |||
shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | |||||
Additional paid-in capital | 3,817,545 | 3,743,876 | |||
Accumulated deficit | (1,012,869) | (881,672) | |||
Accumulated other comprehensive income | 15,216 | 5,183 | |||
Total shareholders' equity | 2,822,277 | 2,869,720 | |||
Noncontrolling interests: | |||||
Operating Partnership | 116,079 | 123,015 | |||
Partially owned properties | 9,319 | 1,116 | |||
Total noncontrolling interests | 125,398 | 124,131 | |||
Total equity | 2,947,675 | 2,993,851 | |||
Total liabilities and equity | $ | 5,212,467 | $ | 5,096,877 | |
6
CONSOLIDATED STATEMENTS OF INCOME (Unaudited and in thousands, except share and per share data)
Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Revenues: | |||||||||||
Rental revenues | $ | 94,744 | $ | 92,073 | $ | 281,901 | $ | 278,230 | |||
Expense recoveries | 39,776 | 36,563 | 115,195 | 107,525 | |||||||
Rental and related revenues | 134,520 | 128,636 | 397,096 | 385,755 | |||||||
Interest income on real estate loans and other | 4,027 | 2,877 | 10,895 | 8,315 | |||||||
Total revenues | 138,547 | 131,513 | 407,991 | 394,070 | |||||||
Expenses: | |||||||||||
Interest expense | 20,050 | 18,299 | 59,837 | 52,356 | |||||||
General and administrative | 9,771 | 10,079 | 31,133 | 30,400 | |||||||
Operating expenses | 47,625 | 43,647 | 138,094 | 128,080 | |||||||
Depreciation and amortization | 47,932 | 47,040 | 143,555 | 142,002 | |||||||
Total expenses | 125,378 | 119,065 | 372,619 | 352,838 | |||||||
Income before equity in (loss) gain of unconsolidated entities and | 13,169 | 12,448 | 35,372 | 41,232 | |||||||
gain on sale of investment properties, net: | |||||||||||
Equity in (loss) gain of unconsolidated entities | (278) | (62) | 1,260 | (452) | |||||||
Gain on sale of investment properties, net | - | 53,894 | 13 | 57,375 | |||||||
Net income | 12,891 | 66,280 | 36,645 | 98,155 | |||||||
Net income attributable to noncontrolling interests: | |||||||||||
Operating Partnership | (505) | (3,252) | (1,443) | (4,830) | |||||||
Partially owned properties (1) | (51) | (70) | (121) | (384) | |||||||
Net income attributable to common shareholders | $ | 12,335 | $ | 62,958 | $ | 35,081 | $ | 92,941 | |||
Net income per share: | |||||||||||
Basic | $ | 0.05 | $ | 0.28 | $ | 0.15 | $ | 0.41 | |||
Diluted | |||||||||||
$ | 0.05 | $ | 0.28 | $ | 0.15 | $ | 0.41 | ||||
Weighted average common shares: | |||||||||||
Basic | 238,480,299 | 226,529,041 | 238,124,981 | 225,743,856 | |||||||
Diluted | |||||||||||
249,445,312 | 239,898,462 | 249,226,913 | 239,145,383 | ||||||||
Dividends and distributions declared per common share | $ | 0.23 | $ | 0.23 | $ | 0.69 | $ | 0.69 | |||
(1) Includes amounts attributable to redeemable noncontrolling interests. | |||||||||||
7
THIRD QUARTER 2023 HIGHLIGHTS
OPERATING HIGHLIGHTS
- Third quarter 2023 total revenue of $138.5 million, an increase of 5.3% compared to the prior year period
- Third quarter 2023 rental and related revenue of $134.5 million, an increase of 4.6% compared to the prior year period
- Reported net income of $12.9 million for the quarter ended September 30, 2023, a decrease of 80.6% over the prior year period due to a $53.9 million net gain on the sale of investment properties in the prior period, and third quarter net income per share of $0.05 on a fully diluted basis
- Generated quarterly normalized funds from operations ("Normalized FFO") of $0.25 per share on a fully diluted basis
- Third quarter Outpatient Medical Same-Store Cash Net Operating Income ("Cash NOI") growth of 1.5% year-over-year
- Declared quarterly dividend of $0.23 per share for the third quarter
- Third quarter weighted average leasing spread was 6.7% on 210,847 renewed square feet with 77% tenant retention on our consolidated portfolio
- Third quarter leasing activity on our consolidated portfolio had positive net absorption of 23,904 square feet
- 94.6% of portfolio square footage leased as of September 30, 2023
COMPANY ANNOUNCEMENTS
- September 21, 2023: Announced that our Board of Trustees authorized and declared a cash distribution of $0.23 per common share and OP Unit for the quarterly period ended September 30, 2023. The distribution was paid on October 17, 2023, to common shareholders and OP Unit holders of record as of the close of business on October 3, 2023.
- October 2023: The Company earned a score of 78 out of 100 (representing a 4% year-over-year scoring increase) and a Green Star designation in the 2023 GRESB Real Estate Assessment for sustainability reporting. The Company also earned a score of 98 out of 100 and an "A" rating for its GRESB Public Disclosure Level, ranking first in our health care comparison group. The Company also earned a ranking of 2 out of 6 in a customized GRESB peer group scoring comprised of U.S.-based listed outpatient medical REITs.
THIRD QUARTER INVESTMENT HIGHLIGHTS
- Palos Heights Surgery Center, Palos Heights, IL ($2.6 million)
HEB Cancer Center | St. Vincent Fishers Medical Center |
Bedford, TX | Fishers, IN |
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FINANCIAL HIGHLIGHTS
(Unaudited and in thousands, except sq. ft. and per share data)
INCOME
Three Months Ended
September 30, 2023 | June 30, 2023 |
Revenues | $ | 138,547 | $ | 135,100 |
Net income | 12,891 | 13,085 | ||
NOI | 91,820 | 93,585 | ||
Annualized Adjusted EBITDAre | 350,468 | 348,176 | ||
Net income available to common shareholders per common share | $ | 0.05 | $ | 0.05 |
Normalized FFO | 61,244 | 61,175 | ||
Normalized FFO per common share | $ | 0.25 | $ | 0.25 |
Normalized FAD | 60,066 | 60,177 |
CAPITALIZATION | As of | |||
ASSETS | September 30, 2023 | June 30, 2023 | ||
Gross Real Estate Investments (including gross lease intangibles) | 6,011,198 | 5,997,402 | ||
Total Assets | 5,212,467 | 5,279,538 | ||
DEBT AND EQUITY | ||||
Consolidated Debt (1) | 1,988,127 | 2,024,427 | ||
Total Equity | 2,947,675 | 2,982,859 | ||
Equity Market Capitalization | 2,907,105 | 3,335,941 | ||
Consolidated Firm Value | 5,031,964 | 5,514,978 | ||
Consolidated Debt / Total Firm Value | 39.5% | 36.7% |
- Unadjusted for unamortized fair value adjustments, unamortized discount, and unamortized deferred financing costs.
Portfolio Growth Since IPO
$6,011,198 | |||||||||||||
$6,000,000 | 18,000,000 | ||||||||||||
Gross Real Estate Investments | $5,000,000 | 15,000,000 | |||||||||||
$4,000,000 | 12,000,000 | Gross Leasable Area | |||||||||||
$3,000,000 | 9,000,000 | ||||||||||||
$2,000,000 | 6,000,000 | ||||||||||||
$1,000,000 | 3,000,000 | ||||||||||||
$123,998 | |||||||||||||
$0 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 0 | |||
IPO | 2022 | Q3 | |||||||||||
2023 | |||||||||||||
Gross Real Estate Assets
Gross Real Estate Investments/Year | Portfolio GLA | |
9
RECONCILIATION OF NON-GAAP MEASURES: FUNDS FROM OPERATIONS ("FFO"),
NORMALIZED FUNDS FROM OPERATIONS ("NORMALIZED FFO"),
AND NORMALIZED FUNDS AVAILABLE FOR DISTRIBUTION ("NORMALIZED FAD") (Unaudited and in thousands, except share and per share data)
Three Months Ended | Three Months Ended | ||||
September 30, 2023 | September 30, 2022 | ||||
Net income | $ | 12,891 | $ | 66,280 | |
Net income attributable to noncontrolling interests - partially owned properties | (51) | (70) | |||
Depreciation and amortization expense | 47,843 | 46,939 | |||
Depreciation and amortization expense - partially owned properties | (132) | (101) | |||
Gain on the sale of investment properties, net | - | (53,894) | |||
Proportionate share of unconsolidated joint venture adjustments | 2,271 | 2,298 | |||
FFO applicable to common shares | $ | 62,822 | $ | 61,452 | |
Net change in fair value of derivative | 185 | - | |||
Gain on extinguishment of debt | (1,763) | - | |||
Proportionate share of unconsolidated joint venture adjustments | - | (82) | |||
Normalized FFO applicable to common shares | $ | 61,244 | $ | 61,370 | |
Net income available to common shareholders per common share | $ | 0.05 | $ | 0.28 | |
FFO per common share - diluted | $ | 0.25 | $ | 0.26 | |
Normalized FFO per common share - diluted | $ | 0.25 | $ | 0.26 | |
Normalized FFO applicable to common shares | $ | 61,244 | $ | 61,370 | |
Non-cash share compensation expense | 3,968 | 4,349 | |||
Straight-line rent adjustments | (820) | (1,478) | |||
Amortization of acquired above/below market leases/assumed debt | 1,084 | 1,133 | |||
Amortization of lease inducements | 246 | 225 | |||
Amortization of deferred financing costs | 763 | 581 | |||
Recurring capital expenditures and lease commissions | (5,745) | (4,129) | |||
Loan reserve adjustments | 265 | 152 | |||
Proportionate share of unconsolidated joint venture adjustments | (939) | (403) | |||
Normalized FAD applicable to common shares | $ | 60,066 | $ | 61,800 | |
Weighted average common shares outstanding - diluted | 249,445,312 | 239,898,462 | |||
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Physicians Realty Trust published this content on 30 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 October 2023 11:05:00 UTC.
