Announces Total 2015 Investment Activity of
$841.0 Million
Recent Quarter
Highlights:
- Reported fourth quarter 2015 total
revenue of $40.4 million, up 105% year-over-year.
- Generated fourth quarter normalized
funds from operations (FFO) of $0.26 per share and OP unit on a
fully diluted basis, an increase of 18% year-over-year, and net
income per share of $0.06 on a fully diluted basis.
- Fourth quarter investments of
approximately $152.8 million comprised of 19 healthcare facilities
totaling 494,567 leasable square feet and 3 mezzanine loans.
- Declared quarterly dividend of $0.225
per share for the fourth quarter 2015, paid January 29,
2016.
- Portfolio was 95.8% leased based on
square footage as of December 31, 2015.
- Increased gross leasable square footage
by 9.3% in the fourth quarter 2015 to 5,799,337 square feet.
- Closed an additional $105.6 million of
investments subsequent to the quarter ended December 31,
2015.
- 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 $320.9 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
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 fourth quarter
ended December 31, 2015.
John T. Thomas, President and Chief Executive Officer of the
Trust, commented, “We are very proud of our operating performance
and growth completed during the fourth quarter and all of 2015. As
a pure play medical office and outpatient care real estate
investor, the substantial majority of our revenues are provided by
private pay tenants, and we have no exposure to nursing homes or
senior housing facilities which are being negatively impacted by
cost pressures and increasing supply. We appreciate the strong
support by our investors in the follow-on offerings completed in
October of last year and most recently on January 25, 2016, both of
which further strengthened our balance sheet and positioned us for
continued and sustainable growth. In these turbulent market and
economic times, investors recognize the resilience of medical
office real estate, and our industry-leading occupancy. Our target
business is also highly fragmented, leading to opportunities for
outsized growth through acquisitions. Our focus on the quality of
our income has delivered normalized FFO of $0.26 per common share
and OP Unit during the fourth quarter. From the beginning of the
Company just over 2.5 years ago, we have always stressed the
importance of building a great long term organization striving to
achieve reliable rising dividends and total shareholder returns. We
believe we are well on our way to continue delivering on our strong
2015 performance into 2016 and beyond.”
Fourth Quarter Financial Results
Total revenue for the fourth quarter ended December 31,
2015 was $40.4 million, an increase of 105% from the same period in
2014. As of December 31, 2015, the portfolio was 95.8% leased.
On a pro forma basis, if all of the 2015 fourth quarter
acquisitions occurred on the first day of the fourth quarter, total
revenue would have increased by an additional $1.8 million, to a
pro forma total of $42.2 million.
Total expenses for the fourth quarter 2015 were $34.5 million,
compared to $17.7 million in the fourth quarter 2014, or an
increase of 95%. The increase in expenses was the result of an $8.2
million increase in depreciation and amortization, a $6.3 million
increase in operating expenses, a $1.3 million increase in interest
expenses, a $1.5 million increase in acquisition related expenses,
and a $1.0 million increase in general and administrative expenses.
Increases were partially offset by a $1.5 million reduction in
impairment expenses. On a pro forma basis, if all of the 2015
fourth quarter acquisitions occurred on the first day of the fourth
quarter, depreciation and amortization expense and operating
expenses would have increased by an additional $0.7 million and
$0.6 million, respectively.
Net income for the fourth quarter 2015 increased by almost 200%,
to $5.9 million, compared to net income of $2.0 million for the
fourth quarter 2014.
Net income attributable to common shareholders for the fourth
quarter 2015 was $5.1 million, or $0.06 per diluted share based on
87.9 million weighted average shares outstanding.
Funds from operations (FFO) for the fourth quarter 2015
consisted of net income, less $0.1 million of net income
attributable to noncontrolling interests for partially owned
properties, plus $14.4 million of depreciation and amortization,
less $0.1 million of depreciation and amortization expense for
partially owned properties, less $0.4 million of preferred
distributions, resulting in $0.22 per diluted share. Normalized
FFO, which adds back $3.1 million of acquisition expenses, was
$22.7 million, or $0.26 per diluted share.
Normalized funds available for distribution (FAD) for the fourth
quarter 2015, 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 $21.2 million, or $0.24 per diluted share for the
fourth quarter 2015.
Recent Events
Dividend Paid
On January 4, 2016, our Board of Trustees authorized and we
declared a cash distribution of $0.225 per common share and common
OP Unit for the quarterly period ended December 31, 2015. The
distribution was paid on January 29, 2016 to common
shareholders and OP Unit holders of record as of the close of
business on January 15, 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 and for
general corporate and working capital purposes and 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 $320.9 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
secured revolving credit facility and for general corporate and
working capital purposes and funding acquisitions.
Investment Activity
In the quarter ended December 31, 2015, we completed $152.8
million of investment activity, including acquisitions of 11
healthcare properties located in 11 states totaling $142.6 million
and 494,567 square feet and loan investments of $10.2 million.
During 2015, we completed $841.0 million of investment activity,
including acquisitions of 66 healthcare properties located in 22
states for an aggregate purchase price of approximately $818.6
million, 5 mezzanine loan investments totaling approximately $21.4
million, and 3 advances totaling approximately $1.0 million on a
construction loan.
Since our January 19, 2016 press release, the Company has
completed 7 acquisitions of 7 healthcare properties in 7 states
containing an aggregate of 323,681 net leasable square feet. These
investments total approximately $104.4 million and are summarized
below. The Company also entered into 1 mezzanine loan for $0.5
million.
Great Falls Hospital. On January 25,
2016, the Company closed the acquisition a medical office facility
in Great Falls, Montana, for a purchase price of approximately
$29.0 million. The Company had previously provided a mezzanine loan
in the amount of approximately $4.5 million to help fund a
replacement surgical facility, which has now been completed. The
facility is 63,254 square feet and adjacent to the Company’s Great
Falls Clinic medical office facility acquired in the fourth quarter
of 2015. This new facility replaced another surgical facility,
moving it to a location more efficient to the physician owners and
in closer proximity with the patients they serve. The first year
unlevered yield on this investment is expected to be approximately
8.8%. The building is expected to be 100% occupied.
Monterey Medical Center ASC. On
February 1, 2016, the Company closed the acquisition of a
medical office facility in Stuart, Florida, for a purchase price of
approximately $6.9 million. The 9,500 square foot facility is 100%
leased. The primary anchor tenant is Treasure Coast Surgery Center.
The first year unlevered cash yield is expected to be approximately
6.5%.
Physicians Medical Plaza MOB. On
February 1, 2016, the Company closed the acquisition of a
medical office facility in Indianapolis, Indiana, for a purchase
price of approximately $8.5 million. The 40,936 square foot
facility is located on the campus of St. Vincent Hospital, in
Indianapolis, Indiana. St. Vincent is a flagship hospital in
Ascension Health (S&P: “AA+”). The multi-tenant facility houses
services in the areas of women’s health, oncology, and diagnostic
imaging and is anchored by St. Vincent. The facility is 100%
leased. The first year unlevered cash yield is expected to be
approximately 7.0%.
Park Nicollet Clinic. On February 8,
2016, the Company closed the acquisition of a 56,600 square foot
medical office facility in Chanhassen, Minnesota, a suburb of
Minneapolis, for a purchase price of approximately $18.6 million.
This single tenant MOB is 100% leased to and occupied by the Park
Nicollet Clinic, a subsidiary affiliate of HealthPartners (S&P:
“A”). The first year unlevered cash yield is expected to be
approximately 6.8%.
HEB Cancer Center. On February 12, 2016,
the Company closed the acquisition of an on campus medical office
facility located on the campus of Texas Health Harris Methodist
Hospital in Bedford, Texas, a Dallas-Fort Worth suburb, for a
purchase price of approximately $14.0 million. The 38,182 square
foot facility is 100% leased by Texas Oncology, a subsidiary of
U.S. Oncology and McKesson Corporation (Moody’s: “Baa2”/S&P:
“BBB+”). The first year unlevered cash yield is expected to be
approximately 5.9%.
Riverview Medical Center. On
February 26, 2016, the Company closed the acquisition of a
medical office facility in Lancaster, Ohio for a purchase price of
approximately $12.8 million. The facility is 73,465 square feet and
is 100% leased, with Fairfield Medical Center (Moody’s: “Baa2”)
leasing approximately 46% of the facility. The stabilized first
year unlevered cash yield of this investment is expected to be
approximately 7.8%.
St. Luke's Cornwall MOB. On February 26,
2016, the Company closed the acquisition of a medical office
facility in Cornwall, New York, on the campus of St. Luke’s
Cornwall Hospital, for an aggregate purchase price of approximately
$14.6 million. The Cornwall facility is 41,744 rentable square feet
and is 84% leased, with St. Luke’s Cornwall (Moody’s: “-Aaa”)
leasing approximately 32% of the facility. The first year unlevered
cash yield of these investments is expected to be approximately
7.0%.
2016 Acquisition Guidance
The Company expects to acquire between $750 million and $1
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 Monday,
February 29, 2016, at 10:00 a.m. ET to discuss its
financial performance and operating results for the fourth quarter
ended December 31, 2015. 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 Fourth Quarter Earnings Call or passcode
13627414. 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 February 29, 2016, at 1:00
p.m. ET until March 23, 2016, at 11:59 p.m. ET, by
dialing (877) 870-5176 (U.S.) or (858) 384-5517 (International);
passcode: 13627414. A replay of the webcast also will be accessible
on the Investor Relations website for one year following the event.
After February 29, 2016, the Company’s supplemental
information package for the fourth quarter 2015 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 December 31, 2015, owned
approximately 95.7% 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, 2014 filed by the Company with the Commission on
March 12, 2015.
Physicians Realty Trust Condensed Consolidated
Statements of Operations
(in thousands, except share and per
share data)
Three Months Ended Twelve Months
Ended December 31, December 31, 2015
2014 2015 2014 Revenues:
Rental revenues $ 31,863 $ 16,842 $ 103,974 $ 46,397 Expense
recoveries 7,322 2,426 21,587 5,871 Interest income on real estate
loans and other 1,219 426 3,880 1,066
Total revenues 40,404 19,694 129,441 53,334
Expenses:
Interest expense 3,392 2,058 10,636 6,907 General and
administrative 3,549 2,573 14,908 11,440 Operating expenses 10,047
3,787 31,026 10,154 Depreciation and amortization 14,404 6,166
45,471 16,731 Acquisition expenses 3,129 1,643 14,893 10,897
Impairment loss — 1,500 — 1,750 Total
expenses 34,521 17,727 116,934 57,879
Income (loss) before equity in income of unconsolidated entity,
gain on sale of investment properties, and noncontrolling
interests: 5,883 1,967 12,507 (4,545 ) Equity in income of
unconsolidated entity 26 26 104 95 Gain on sale of investment
properties — (2 ) 130 32 Net income (loss)
5,909 1,991 12,741 (4,418 ) Net (income) loss attributable to
noncontrolling interests: Operating Partnership (243 ) (192 ) (576
) 695 Partially owned properties (122 ) (88 ) (377 ) (314 ) Net
income (loss) attributable to controlling interest 5,544 1,711
11,788 (4,037 ) Preferred distributions (398 ) — (1,189 ) —
Net income (loss) attributable to common shareholders
$ 5,146 $ 1,711 $ 10,599 $ (4,037 ) Net income
(loss) per share: Basic $ 0.06 $ 0.04 $ 0.15 $
(0.12 ) Diluted $ 0.06 $ 0.04 $ 0.15 $ (0.12 )
Weighted average common shares: Basic 83,761,536 48,145,409
72,750,724 33,063,093 Diluted 87,911,097
48,354,493 76,792,073 33,063,093
Dividends and distributions declared per common share and OP Unit $
0.225 $ 0.225 $ 0.900 $ 0.900
Physicians Realty Trust Condensed Consolidated Balance
Sheets
(in thousands, except share and per
share data)
December 31, December 31,
2015 2014
ASSETS
Investment properties: Land and improvements $ 130,788 $ 79,334
Building and improvements 1,284,863 644,086 Tenant improvements
9,243 5,614 Acquired lease intangibles 205,168 72,985
1,630,062 802,019 Accumulated depreciation (91,250 ) (45,569 ) Net
real estate property 1,538,812 756,450 Real estate loans receivable
39,349 15,876 Investment in unconsolidated entity 1,322
1,324 Net real estate investments 1,579,483 773,650 Cash and
cash equivalents 3,143 15,923 Tenant receivables, net 2,977 1,324
Deferred costs, net 7,037 4,870 Other assets 52,231 15,806
Total assets $ 1,644,871 $ 811,573
LIABILITIES AND
EQUITY
Liabilities: Credit facility $ 395,000 $ 138,000 Mortgage debt
94,600 78,105 Accounts payable 644 700 Dividends payable 20,783
16,548 Accrued expenses and other liabilities 24,473 6,140 Acquired
lease intangibles, net 5,950 2,871 Total liabilities
541,450 242,364 Redeemable noncontrolling
interest - Operating Partnership and partially owned properties
26,960 — Equity: Common shares, $0.01 par
value, 500,000,000 common shares authorized, 86,864,063 and
50,640,863 common shares issued and outstanding as of December 31,
2015 and December 31, 2014, respectively. 872 510 Additional
paid-in capital 1,129,284 586,017 Accumulated deficit (109,024 )
(51,797 ) Total shareholders’ equity 1,021,132 534,730
Noncontrolling interests: Operating Partnership 45,451 33,727
Partially owned properties 9,878 752 Total
noncontrolling interests 55,329 34,479 Total equity
1,076,461 569,209 Total liabilities and equity $
1,644,871 $ 811,573
Physicians Realty
Trust Reconciliation of Non-GAAP Measures
(in thousands, except share and per
share data)
Three Months Ended December 31,
2015 2014 Net income 5,909 1,991 Net (income)
attributable to noncontrolling interests - partially owned
properties (122 ) (88 ) Preferred distributions (398 ) —
Depreciation and amortization expense 14,390 6,166 Depreciation and
amortization expense - partially owned properties (135 ) (66 ) Gain
on the sale of investment properties — 2 Impairment charge —
1,500 FFO applicable to common shares and OP Units $ 19,644
$ 9,505 FFO per common share and OP Unit $ 0.22
$ 0.18 Net change in fair value of derivative (50 )
(23 ) Acquisition related expenses 3,129 1,643 Acceleration of
deferred financing costs — 37 Normalized FFO
applicable to common shares and OP Units $ 22,723 $ 11,162
Normalized FFO per common share and OP Unit $ 0.26 $
0.22 Normalized FFO applicable to common shares and OP Units
22,723 11,162 Non-cash share compensation expense 660 619
Straight-line rent adjustments (2,738 ) (1,474 ) Amortization of
acquired above/below market leases/assumed debt 681 184
Amortization of lease inducements 158 54 Amortization of deferred
financing costs 420 293 TI/LC and recurring capital expenditures
(1,014 ) (449 ) Seller master lease and rent abatement payments 270
— Normalized FAD applicable to common shares and OP
Units 21,160 10,389 Normalized FAD per common share
and OP Unit 0.24 0.20 Weighted average number
of common shares and OP Units outstanding 87,911,097
51,654,244
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/20160229005547/en/
Physicians Realty TrustJohn T. Thomas,
214-549-6611jtt@docreit.comPresident and CEOorJeffrey N. Theiler,
414-367-5610Executive Vice President and CFOjnt@docreit.com
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