$202 Million of Medical Facility Investments
Completed in First Quarter 2016
Acquisition Guidance for 2016 increased from
a range of $750 Million to $1.0 Billion to a range of $1.0 Billion
to $1.25 Billion
Physicians Realty Trust (NYSE:DOC) (the “Company”), a
self-managed healthcare properties REIT, announced today that the
Company has executed purchase and sale agreements for 47 medical
office facilities, a signed letter of intent (“LOI”) for 3 medical
office facilities and is negotiating to purchase 2 additional
medical office facilities owned and anchored by Catholic Health
Initiatives regional health systems for a total purchase price of
approximately $724.9 million. The Company’s Board of Trustees has
approved the acquisition unanimously. The Company also announced
the closing of approximately $96.7 million of previously
unannounced medical real estate investments, made directly or
indirectly through its operating partnership (as defined below).
Total investment activity since January 1, 2016 is approximately
$202.3 million.
CHI Medical Office Facility Portfolio
The Company announced today the execution of a series of
purchase and sale agreements and an LOI (and negotiations to
purchase with respect to two medical office facilities) with
regional health systems controlled by Catholic Health Initiatives
(Moody’s: “A2”; S&P: “A-”) (“CHI” or the “CHI Hospitals”), the
fifth largest non-profit healthcare system in the United States, to
acquire 52 medical office facilities from CHI containing 3,159,495
rentable square feet (“rsf”) located in 10 states. The CHI
portfolio is 94.4% leased and the weighted average lease term
remaining is 8.6 years. Approximately $40.6 million, or 93%, of the
first year in place net operating income of $43.5 million will be
represented by new 10-year leases with associated CHI health
systems.
The purchase price for these facilities is approximately $724.9
million, which includes $32.9 million of future capital
improvements, the majority of which should be completed within 5
years. The Company expects to use proceeds from its unsecured line
of credit, the proceeds from its announced follow-on offering of
common shares of the Company, and has secured a commitment for a
$400.0 million 1 year bridge loan from KeyBank, N.A. to fund the
purchase, if necessary. The Company expects to close the
acquisition in two tranches; the first tranche is expected to close
in April 2016, for a total purchase price of approximately $202
million. The second tranche, expected to include most, if not all
of the remaining properties not included in the first tranche, is
expected to close before the end of the second quarter of 2016, for
a total purchase price of approximately $490 million. The remaining
$32.9 million of future capital commitments for capital
improvements to these facilities are expected to be funded within 5
years. The in place leases are expected to generate $43.5 million
of cash NOI, which equates to a 6.3% unlevered cash yield on the
purchase price prior to future capital commitments.
John Thomas, the Company’s President and Chief Executive
Officer, stated, “Today we announce what we believe to be one of
the largest and most important medical office facility
relationships established by a REIT directly with a major
healthcare system. Catholic Health Initiatives, the fifth largest
non-profit health system in the United States, has over 103
hospitals, 3,950 employed affiliated physicians, and 95,000
employees. In 2015, these providers served over 16 million
outpatient visitors and 500,000 inpatient patients, realizing more
than $15 billion in revenue. We are honored and humbled to be
selected to monetize these facilities and enhance CHI’s healthcare
real estate service delivery platform through this partnership. Our
investment provides substantial liquidity to CHI. More importantly,
we are helping to free CHI executives, management, physicians,
providers and staff to focus on their primary Mission, to nurture
the healing ministry of the Church, supported by education and
research, while we provide real estate capital, management, and
strategic intellectual support to enhance their existing
facilities, physician recruiting and outpatient strategies.
Altogether, this relationship empowers CHI to enhance and provide
greater access to care to the communities they serve.”
The CHI acquisitions described in this press release are subject
to customary closing conditions, and with respect to those
properties subject to an LOI, or subject to negotiations, are
subject to the negotiation and execution of definitive purchase
agreements. In addition, due to the sponsorship of CHI by the
Catholic Church, the Company’s purchase of 35 facilities will
require Vatican approval, and is contingent upon such approval, in
addition to other Closing conditions applicable to each such
facility, as the case may be. There can be no assurance the Company
will complete any of these transactions or acquire any of these
buildings on the expected terms, or at all.
2016 Year to Date Investments
The Company previously announced in February 2016 acquisitions
and investments totaling approximately $104.4 million during 2016.
In addition to these previously announced acquisitions, the Company
also completed the approximately $96.7 million of acquisitions.
These acquisitions are described below:
HonorHealth - Glendale. On March 15,
2016, the Company closed on the acquisition of a brand new 28,057
square foot medical office building in Glendale, Arizona, for a
purchase price of approximately $9.8 million. The facility is 100%
leased to HonorHealth (S&P: “A-”) as its flagship ambulatory
center. The first year unlevered cash yield on this investment is
expected to be approximately 6.0%.
Columbia MOB. On March 21, 2016, the Company
closed the acquisition of a 65,965 square foot medical office
building in Cornwall, New York, on the campus of Columbia Memorial
Hospital, for a purchase price of approximately $18.5 million. The
facility is 100% leased to Columbia Memorial Hospital (Moody’s:
“BBB-”). The first year unlevered cash yield on this investment is
expected to be approximately 6.5%.
Birmingham, Alabama MOBs. On March 23, 2016,
the Company closed on the acquisition of 3 on-campus medical office
buildings in Birmingham, Alabama, for an aggregate purchase price
of approximately $29.3 million. The portfolio contains
approximately 224,876 square feet located on the campus of St.
Vincent's Birmingham Hospital. St. Vincent Birmingham is a part of
the larger St. Vincent's Health System, a subsidiary of Ascension
Health (S&P: “AA+”). The multi-tenant facilities are 95%
occupied, with 30% anchored by the hospital and the balance
occupied by physicians on the medical staff of the hospital. The
first year unlevered cash yield expected to be approximately
7.1%.
Emerson MOB. On March 24, 2016, the Company
closed the acquisition of a 39,184 square foot medical office
facility in Creve Coeur, Missouri, for a purchase price of
approximately $14.3 million. This multi-tenant facility is 100%
occupied; 45% of which is leased to an ambulatory surgery center
owned by a joint venture including physicians and United Surgical
Partners, Inc. (“USPI”), a subsidiary of Tenet Healthcare (“Tenet”;
NYSE: THC, S&P “B”), and an additional 27% is leased to Mercy
Health (S&P, “AA-”). The first year unlevered cash yield is
expected to be approximately 7.2%.
Patient Partners Surgery Center. On March 30,
2016, the Company closed the acquisition of a 9,890 square foot
ambulatory surgical center in Gallatin, Tennessee, for a purchase
price of approximately $4.8 million. The facility is 100% leased to
a joint venture including physicians and USPI. The first year
unlevered cash yield is expected to be approximately 7.3%.
Eye Associates of New Mexico. On
March 31, 2016, the Company closed on the acquisition of two
medical office buildings, one in Albuquerque, New Mexico and one in
Santa Fe, New Mexico, totaling 52,630 square feet, for a combined
purchase price of approximately $19.2 million. The facilities are
100% leased to the Eye Associates of New Mexico. The first year
unlevered cash yield is expected to be approximately 7.0%.
Miscellaneous Acquisition. The Company
completed a $0.8 million acquisition of the final condominium
interest not previously owned by the Company in the Randall Road
Medical Office Building located in Elgin, Illinois. The Company now
owns 100% of this facility, which is adjacent to Advocate Sherman
Hospital, and it is 100% occupied. The Company's aggregate
investment is approximately $17.3 million, and the first year
unlevered cash yield is expected to be approximately 8.1%.
With respect to first quarter acquisitions completed, John
Thomas added, “substantially all of the acquisitions completed
during the first quarter were off-market or relationship driven
investments. These investments included our third acquisition
affiliated with Honor Health, our 6th, 7th, and 8th acquisition
anchored by a USPI affiliated and managed ambulatory surgery
center, and our 5th acquisition affiliated with Ascension Health.
We are also excited to expand into the New Mexico market, with high
quality facilities and ophthalmology surgeons located in optimal
locations. We continue to source, diligence and acquire excellent
medical office and outpatient facilities affiliated with the best
healthcare providers in the United States. With our acquisitions to
date and completion of the CHI investments, we will have achieved
near the high end of our 2016 acquisition guidance. We continue to
see additional opportunities for growth in the second half of the
year, and have therefore revised our investment guidance to $1.0 -
$1.25 billion of total investments for 2016.”
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
is a Maryland real estate investment trust and has elected to be
taxed as a REIT for U.S. federal income tax purposes. 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 controlled by the operating partnership.
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, 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”), 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 Exchange Act, 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. 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.
These forward-looking statements include any statements regarding
the Company’s strategic and operational plans. 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
performance or results to differ materially from those expressed in
or suggested by the forward-looking 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, whether as a result of new
information, future events or otherwise. The Company undertakes no
obligation to update these statements after the date of this
release.
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version on businesswire.com: http://www.businesswire.com/news/home/20160405006741/en/
Physicians Realty TrustJohn T. Thomas, 214-549-6611President and
CEOorJeff N. Theiler, 414-367-5610EVP and CFO
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