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Press release content from Business Wire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Business Wire
Press release content from Business Wire. The AP news staff was not involved in its creation.

Physicians Realty Trust Reports Third Quarter 2021 Financial Results

November 5, 2021 GMT

MILWAUKEE--(BUSINESS WIRE)--Nov 5, 2021--

Physicians Realty Trust (NYSE: DOC) (the “Company,” the “Trust,” “we,” “our” and “us”), a self-managed health care real estate investment trust, today announced results for the third quarter ended September 30, 2021.

John T. Thomas, President and Chief Executive Officer of the Trust, commented, “We are excited to announce our recent acquisitions and pending acquisition activity. We have continued to focus our growth efforts on high-quality medical office facilities and purchase what we believe are the most highly regarded medical office facilities, all while continuing to make selective acquisitions in off-market transactions with partners like Landmark Healthcare Facilities.

“We are also proud to earn recognition in Modern Healthcare’s 2021 Best Places to Work and to have earned a score of 75 in our inaugural submission to GRESB’s 2021 Real Estate Assessment. We are continuously working to Invest in better® and this is an indication of all of our hard work. We look forward to sharing more about our achievements, pending acquisitions, and third quarter performance during today’s conference call,” Mr. Thomas concluded.

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Third Quarter Financial Results

Total revenue for the third quarter ended September 30, 2021 was $115.3 million, an increase of 5.2% from the third quarter 2020. As of September 30, 2021, the portfolio was 95% leased, excluding assets classified as held for sale.

Total expenses for the third quarter 2021 were $97.6 million, compared to total expenses of $92.5 million for the third quarter 2020.

Net income for the third quarter 2021 was $22.0 million, compared to net income of $16.5 million for the third quarter 2020.

Net income attributable to common shareholders for the third quarter 2021 was $21.4 million. Diluted earnings per share for the third quarter 2021 was $0.10 based on approximately 224.0 million weighted average common shares and operating partnership units (OP Units) outstanding.

Funds From Operations (FFO) totaled $58.1 million for the third quarter 2021 and consisted of net income plus depreciation and amortization on our consolidated portfolio of $38.5 million and our unconsolidated joint ventures of $2.2 million and an impairment loss of $0.3 million. This was partially offset by a $4.8 million gain on the sale of investment properties and $0.2 million of other adjustments, resulting in FFO of $0.26 per share on a fully diluted basis. Normalized FFO had no additional adjustments and was also $58.1 million, or $0.26 per share on a fully diluted basis.

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Normalized Funds Available for Distribution (FAD) for the third quarter 2021, which consists of normalized FFO adjusted for non-cash share compensation, straight-line rent adjustments, amortization of acquired above-market and below-market leases and assumed debt, amortization of lease inducements, amortization of deferred financing costs, recurring capital expenditures, loan reserve adjustments, and our share of adjustments from unconsolidated investments was $54.6 million.

Our Medical Office Building (MOB) Same-Store portfolio, which includes 245 properties representing approximately 94% of our consolidated leasable square footage, generated year-over-year MOB Same-Store Cash Net Operating Income (Cash NOI) growth of 2.5% for the third quarter 2021.

Other Recent Events

Third Quarter Investment Activity

Since our August 4, 2021 press release and through September 30, 2021, the Company has acquired six health care facilities, acquired a membership interest in one joint venture, funded one mezzanine loan for $2.2 million, and also funded a previous construction loan commitment of $1.5 million.

InterMed MOB - Davis Joint Venture - On August 18, 2021, the Company contributed approximately $7.3 million to acquire a 49% interest in a 107,228 square foot medical office facility located in Portland, Maine that is 100% leased to its original tenants, with a weighted average remaining lease term of 7.1 years. This investment is valued at approximately $19.3 million, including the Company’s pro rata share of joint venture debt. The first year unlevered yield on this investment is expected to be approximately 5.5%.

Atkins Portfolio (5 MOBs) - On August 30, 2021, the Company completed the acquisition of a five property health care portfolio comprised of 180,418 square feet located in four states, for an aggregate purchase price of approximately $54.1 million. The portfolio is 100% leased, with 60% leased to investment-grade tenants, and a weighted average remaining lease term of 5.9 years. Each of the properties is affiliated with a health system, with tenant specialties including an ambulatory surgery center, orthopedics, imaging, oncology, neurology, and cardiology. The first year unlevered yield on this investment is expected to be approximately 5.5%.

HonorHealth - Sonoran MOB - On September 23, 2021, the Company completed the acquisition of a newly constructed 59,827 square foot medical office facility located in Phoenix, Arizona for a purchase price of approximately $31.8 million. This property is connected to HonorHealth’s (Moody’s: A2) 70-bed Sonoran Crossing Medical Center and is 100% leased, with 93% leased to HonorHealth. The property has a weighted average remaining lease term of 7.1 years and includes services such as an on-site endoscopy surgery center and cardiology. The first year unlevered yield on this investment is expected to be approximately 4.8%.

Third Quarter Disposition Activity and Held for Sale Assets

During the third quarter 2021, the Company completed the disposition of two hospital-leased administrative properties for approximately $27.4 million and recognized a net gain of approximately $4.8 million representing an exit cash cap rate of 5.5% based on in-place NOI and generating an unlevered rate of return of 14% during the Company’s ownership.

As of September 30, 2021, the Company classified four assets as held for sale, including each of the Company’s three LTACH properties.

Capital Activity

On September 24, 2021, the Company executed a Third Amended and Restated Credit Agreement (the “Credit Agreement”) to extend the maturity date in respect of the revolving credit facility from September 18, 2022 to September 24, 2025, reduce the interest rate margins, increase the amount of commitments under the revolving credit facility from $850.0 million to $1.0 billion, and modify certain covenants and terms thereunder to provide the Company with greater flexibility.

On October 13, 2021, the Operating Partnership issued and sold $500.0 million aggregate principal amount of 2.625% senior notes which will mature on November 1, 2031. The senior notes were sold at an issue price of 99.789% of their face value, before the underwriters’ discount. The Company’s net proceeds from the offering, after deducting underwriting discounts and expenses, were approximately $495.1 million.

On October 13, 2021, the Company used the proceeds from the senior notes to pay off the existing balance of the unsecured revolving credit facility and the term loan feature of the Credit Agreement. The Operating Partnership simultaneously terminated each of the existing pay-fixed receive-variable rate swaps associated with the term loan borrowing.

Since September 30, 2021, the Company issued 2,877,988 shares pursuant to its 2021 ATM program at a weighted average price of $18.61 for net proceeds of $53.0 million.

Dividend Paid

On September 22, 2021, 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, 2021. The dividend was paid on October 15, 2021 to common shareholders and OP Unit holders of record as of the close of business on October 4, 2021.

Credit Rating Upgrades

On July 1, 2021, Moody’s Investors Service upgraded each of the Company’s senior unsecured debt ratings to ‘Baa2’ with a stable outlook, from the previous rating of ‘Baa3’.

Pending Acquisitions and Recent Acquisition Activity

On October 1, 2021, the Company entered into a master transaction agreement with Landmark Healthcare Companies LLC to acquire 15 medical office buildings comprising approximately 1,460,000 net leasable square feet (the “Landmark Portfolio”). Subject to the satisfaction of certain conditions to closing, the Company expects to complete the acquisition of the Landmark Portfolio in the fourth quarter of 2021. There can be no assurance that any or all of the conditions to closing will be satisfied or, if satisfied, that the Company will complete the acquisition of the Landmark Portfolio in a timely manner or at all.

Since September 30, 2021, the Company has completed the acquisition of one medical office facility and the remaining 51% membership interest in one of our joint ventures.

MedCore Realty Eden Hill, LLC - On October 15, 2021, the Company contributed $33.2 million to acquire the remaining 51% membership interest in a 140,205 square foot medical office facility that is 95% leased and is located in Dover, Delaware. The stabilized yield on this investment is expected to be approximately 5.0%.

HonorHealth Neuroscience Institute - On October 27, 2021, the Company completed the acquisition of a 109,423 square foot medical office facility located in Scottsdale, Arizona for a purchase price of approximately $67.3 million. This newly constructed facility is located on the HonorHealth (Moody’s: A2) 325-bed Scottsdale Osborn Medical Center campus and includes services such as neurology, physical medicine and rehabilitation, therapy, and an infusion center. The stabilized yield on this investment is expected to be approximately 4.5%.

On November 2, 2021, the Company sold the LifeCare portfolio, which included three LTACH properties, for approximately $62.0 million and recognized a net gain on the sale of approximately $18.7 million, generating an unlevered rate of return of 9%. These assets were also classified as held for sale as of September 30, 2021.

Modern Healthcare - Best Places to Work

The Company has been included in Modern Healthcare’s 2021 Best Places to Work and recognized as the highest-rated health care real estate provider among the honorees. Based on extensive and anonymous team member survey results, these prestigious nationwide rankings are the gold standard in the health care industry for recognizing workplaces that empower employees to provide patients and customers the best possible care, products, and services.

Conference Call Information

The Company has scheduled a conference call on Friday, November 5, 2021, at 10:00 a.m. ET to discuss its financial performance and operating results for the third quarter ended September 30, 2021. 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 Third Quarter Earnings Call or passcode: 13723133. 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 November 5, 2021, at 1:00 p.m. ET until December 5, 2021, at 11:59 p.m. ET, by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International); passcode: 13723133. A replay of the webcast also will be accessible on the Investor Relations website for one year following the event. Beginning November 5, 2021, the Company’s supplemental information package for the third quarter 2021 will be accessible through the Investor Relations section of the Company’s website under the “Supplemental” tab.

About Physicians Realty Trust

Physicians Realty Trust is a self-managed health care real estate company organized to acquire, selectively develop, own and manage health care properties that are leased to physicians, hospitals and health care delivery systems. The Company invests in real estate that is integral to providing high quality health care. 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 September 30, 2021, owned approximately 97.6% of 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”, “continue”, “intend”, 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, ability to execute its business plan, and the impact of the Coronavirus and its variants, including the Delta variant and any future variants which may emerge, (COVID-19) pandemic on the Company’s business. 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 discussion of factors that could impact the Company’s results, performance, or transactions, see Part I, Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2020.

 

Physicians Realty Trust

Condensed Consolidated Statements of Income

(in thousands, except share and per share data) (Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

Rental revenues

$

81,096

 

 

$

78,091

 

 

$

242,062

 

 

$

235,762

 

Expense recoveries

29,218

 

 

26,271

 

 

83,955

 

 

76,099

 

Rental and related revenues

110,314

 

 

104,362

 

 

326,017

 

 

311,861

 

Interest income on real estate loans and other

4,997

 

 

5,204

 

 

15,558

 

 

14,199

 

Total revenues

115,311

 

 

109,566

 

 

341,575

 

 

326,060

 

Expenses:

 

 

 

 

 

 

 

Interest expense

13,498

 

 

13,698

 

 

40,754

 

 

43,521

 

General and administrative

9,534

 

 

8,346

 

 

28,116

 

 

25,565

 

Operating expenses

35,679

 

 

32,503

 

 

103,069

 

 

94,495

 

Depreciation and amortization

38,582

 

 

37,952

 

 

114,663

 

 

111,744

 

Impairment loss

340

 

 

 

 

340

 

 

 

Total expenses

97,633

 

 

92,499

 

 

286,942

 

 

275,325

 

Income before equity in loss of unconsolidated entities and gain on sale of investment properties, net:

17,678

 

 

17,067

 

 

54,633

 

 

50,735

 

Equity in loss of unconsolidated entities

(390

)

 

(592

)

 

(1,213

)

 

(856

)

Gain on sale of investment properties, net

4,757

 

 

 

 

5,111

 

 

 

Net income

22,045

 

 

16,475

 

 

58,531

 

 

49,879

 

Net income attributable to noncontrolling interests:

 

 

 

 

 

 

 

Operating Partnership

(529

)

 

(425

)

 

(1,405

)

 

(1,305

)

Partially owned properties (1)

(152

)

 

(151

)

 

(455

)

 

(441

)

Net income attributable to controlling interest

21,364

 

 

15,899

 

 

56,671

 

 

48,133

 

Preferred distributions

 

 

(317

)

 

(13

)

 

(951

)

Net income attributable to common shareholders

$

21,364

 

 

$

15,582

 

 

$

56,658

 

 

$

47,182

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.10

 

 

$

0.07

 

 

$

0.26

 

 

$

0.23

 

Diluted

$

0.10

 

 

$

0.07

 

 

$

0.26

 

 

$

0.23

 

Weighted average common shares:

 

 

 

 

 

 

 

Basic

217,406,657

 

 

208,187,129

 

 

214,616,482

 

 

202,717,190

 

Diluted

223,992,049

 

 

215,129,968

 

 

221,399,649

 

 

209,555,060

 

 

 

 

 

 

 

 

 

Dividends and distributions declared per common share

$

0.23

 

 

$

0.23

 

 

$

0.69

 

 

$

0.69

 

(1)

Includes amounts attributable to redeemable noncontrolling interests.

 

Physicians Realty Trust

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data) (Unaudited)

 

 

 

 

 

September 30,

 

December 31,

 

2021

 

 

2020

 

ASSETS

 

 

 

Investment properties:

 

 

 

Land and improvements

$

231,162

 

 

$

231,621

 

Building and improvements

3,879,810

 

 

3,824,796

 

Tenant improvements

81,605

 

 

73,145

 

Acquired lease intangibles

409,048

 

 

406,935

 

 

4,601,625

 

 

4,536,497

 

Accumulated depreciation

(779,910

)

 

(687,554

)

Net real estate property

3,821,715

 

 

3,848,943

 

Real estate held for sale

44,706

 

 

 

Right-of-use lease assets, net

141,967

 

 

137,180

 

Real estate loans receivable, net

181,125

 

 

198,800

 

Investments in unconsolidated entities

78,562

 

 

77,755

 

Net real estate investments

4,268,075

 

 

4,262,678

 

Cash and cash equivalents

5,366

 

 

2,515

 

Tenant receivables, net

5,545

 

 

4,757

 

Other assets

130,489

 

 

144,000

 

Total assets

$

4,409,475

 

 

$

4,413,950

 

LIABILITIES AND EQUITY

 

 

 

Liabilities:

 

 

 

Credit facility

$

401,548

 

 

$

412,322

 

Notes payable

969,313

 

 

968,653

 

Mortgage debt

50,042

 

 

57,875

 

Accounts payable

5,760

 

 

7,007

 

Dividends and distributions payable

53,730

 

 

52,116

 

Accrued expenses and other liabilities

79,621

 

 

91,929

 

Lease liabilities

78,682

 

 

74,116

 

Acquired lease intangibles, net

5,829

 

 

6,641

 

Total liabilities

1,644,525

 

 

1,670,659

 

 

 

 

 

Redeemable noncontrolling interests - Series A Preferred Units (2020) and partially owned properties

7,039

 

 

28,289

 

 

 

 

 

Equity:

 

 

 

Common shares, $0.01 par value, 500,000,000 common shares authorized, 217,409,035 and 209,550,592 common shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

2,174

 

 

2,096

 

Additional paid-in capital

3,443,748

 

 

3,303,231

 

Accumulated deficit

(751,150

)

 

(658,171

)

Accumulated other comprehensive loss

(4,054

)

 

(5,859

)

Total shareholders’ equity

2,690,718

 

 

2,641,297

 

Noncontrolling interests:

 

 

 

Operating Partnership

66,736

 

 

73,302

 

Partially owned properties

457

 

 

403

 

Total noncontrolling interests

67,193

 

 

73,705

 

Total equity

2,757,911

 

 

2,715,002

 

Total liabilities and equity

$

4,409,475

 

 

$

4,413,950

 

 

Physicians Realty Trust

Reconciliation of Non-GAAP Measures

(in thousands, except share and per share data) (Unaudited)

 

 

Three Months Ended

September 30,

 

2021

 

 

2020

 

Net income

$

22,045

 

 

$

16,475

 

Earnings per share - diluted

$

0.10

 

 

$

0.07

 

 

 

 

 

Net income

$

22,045

 

 

$

16,475

 

Net income attributable to noncontrolling interests - partially owned properties

(152

)

 

(151

)

Preferred distributions

 

 

(317

)

Depreciation and amortization expense

38,463

 

 

37,855

 

Depreciation and amortization expense - partially owned properties

(70

)

 

(69

)

Gain on sale of investment properties, net

(4,757

)

 

 

Impairment loss

340

 

 

 

Proportionate share of unconsolidated joint venture adjustments

2,226

 

 

1,876

 

FFO applicable to common shares

$

58,095

 

 

$

55,669

 

Net change in fair value of derivative

 

 

(14

)

Net change in fair value of contingent consideration

 

 

(715

)

Normalized FFO applicable to common shares

$

58,095

 

 

$

54,940

 

 

 

 

 

FFO per common share

$

0.26

 

 

$

0.26

 

Normalized FFO per common share

$

0.26

 

 

$

0.26

 

 

 

 

 

Normalized FFO applicable to common shares

$

58,095

 

 

$

54,940

 

Non-cash share compensation expense

3,665

 

 

3,114

 

Straight-line rent adjustments

(2,171

)

 

(2,618

)

Amortization of acquired above/below-market leases/assumed debt

833

 

 

816

 

Amortization of lease inducements

394

 

 

289

 

Amortization of deferred financing costs

581

 

 

595

 

TI/LC and recurring capital expenditures

(6,673

)

 

(5,345

)

Loan reserve adjustments

20

 

 

138

 

Proportionate share of unconsolidated joint venture adjustments

(153

)

 

(72

)

Normalized FAD applicable to common shares

$

54,591

 

 

$

51,857

 

 

 

 

 

Weighted average number of common shares outstanding

223,992,049

 

 

215,129,968

 

 

Three Months Ended

September 30,

 

2021

 

 

2020

 

Net income

$

22,045

 

 

$

16,475

 

General and administrative

9,534

 

 

8,346

 

Depreciation and amortization expense

38,582

 

 

37,952

 

Interest expense

13,498

 

 

13,698

 

Net change in the fair value of derivative

 

 

(14

)

Gain on sale of investment properties, net

(4,757

)

 

 

Impairment loss

340

 

 

 

Proportionate share of unconsolidated joint venture adjustments

3,653

 

 

2,753

 

NOI

$

82,895

 

 

$

79,210

 

 

 

 

 

NOI

$

82,895

 

 

$

79,210

 

Straight-line rent adjustments

(2,171

)

 

(2,618

)

Amortization of acquired above/below-market leases

849

 

 

832

 

Amortization of lease inducements

394

 

 

289

 

Loan reserve adjustments

20

 

 

138

 

Change in fair value of contingent consideration

 

 

(715

)

Proportionate share of unconsolidated joint venture adjustments

(143

)

 

(35

)

Cash NOI

$

81,844

 

 

$

77,101

 

 

 

 

 

Cash NOI

$

81,844

 

 

$

77,101

 

Assets not held for all periods or held for sale

(3,801

)

 

(2,198

)

Hospital Cash NOI

(3,221

)

 

(3,158

)

Lease termination fees

(158

)

 

(53

)

Interest income on real estate loans

(3,797

)

 

(3,190

)

Joint ventures and other income

(3,350

)

 

(2,650

)

MOB Same-Store Cash NOI

$

67,517

 

 

$

65,852

 

 

Three Months Ended

September 30,

 

2021

 

 

2020

 

Net income

$

22,045

 

 

$

16,475

 

Depreciation and amortization expense

38,582

 

 

37,952

 

Interest expense

13,498

 

 

13,698

 

Gain on sale of investment properties, net

(4,757

)

 

 

Impairment loss

340

 

 

 

Proportionate share of unconsolidated joint venture adjustments

3,627

 

 

2,734

 

EBITDA re

$

73,335

 

 

$

70,859

 

Non-cash share compensation expense

3,665

 

 

3,114

 

Non-cash changes in fair value

 

 

(729

)

Pursuit costs

75

 

 

35

 

Non-cash intangible amortization

1,227

 

 

1,105

 

Pro forma adjustments for investment activity

585

 

 

284

 

Adjusted EBITDA re

$

78,887

 

 

$

74,668

 

This press release includes Funds From Operations (FFO), Normalized FFO, Normalized Funds Available For Distribution (FAD), Net Operating Income (NOI), Cash NOI, MOB Same-Store Cash NOI, Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDA re ) and Adjusted EBITDA re, 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, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

We believe that information regarding FFO is helpful to shareholders and potential investors because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (Nareit). Nareit defines FFO as net income or loss (computed in accordance with GAAP) before noncontrolling interests of holders of OP units, excluding preferred distributions, gains (or losses) on sales of depreciable operating property, impairment write-downs on depreciable assets, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs). Our FFO computation includes our share of required adjustments from our unconsolidated joint ventures and may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the Nareit definition or that interpret the Nareit definition differently than we do. The GAAP measure that we believe to be most directly comparable to FFO, net income, includes depreciation and amortization expenses, gains or losses on property sales, impairments, and noncontrolling interests. In computing FFO, we eliminate these items because, in our view, they are not indicative of the results from the operations of our properties. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in our financial statements. FFO does not represent cash generated from operating activities in accordance with GAAP, should not be considered to be an alternative to net income or loss (determined in accordance with GAAP) as a measure of our liquidity and is not indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.

We use Normalized FFO, which excludes from FFO net change in fair value of derivative financial instruments, acceleration of deferred financing costs, net change in fair value of contingent consideration, and other normalizing items. However, our use of the term Normalized FFO may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. Normalized FFO should not be considered as an alternative to net income or loss (computed in accordance with GAAP), as an indicator of our financial performance or of cash flow from operating activities (computed in accordance with GAAP), or as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Normalized FFO should be reviewed in connection with other GAAP measurements.

We define Normalized FAD, a non-GAAP measure, which excludes from Normalized FFO non-cash share compensation expense, straight-line rent adjustments, amortization of acquired above-market or below-market leases and assumed debt, amortization of lease inducements, amortization of deferred financing costs, and loan reserve adjustments, including our share of all required adjustments from unconsolidated joint ventures. We also adjust for recurring capital expenditures related to tenant improvements and leasing commissions, and cash payments from seller master leases and rent abatement payments, including our share of all required adjustments for unconsolidated joint ventures. Other REITs or real estate companies may use different methodologies for calculating Normalized FAD, and accordingly, our computation may not be comparable to those reported by other REITs. Although our computation of Normalized FAD may not be comparable to that of other REITs, we believe Normalized FAD provides a meaningful supplemental measure of our performance due to its frequency of use by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. Normalized FAD should not be considered as an alternative to net income or loss attributable to controlling interest (computed in accordance with GAAP) or as an indicator of our financial performance. Normalized FAD should be reviewed in connection with other GAAP measurements.

NOI is a non-GAAP financial measure that is defined as net income or loss, computed in accordance with GAAP, generated from our total portfolio of properties and other investments before general and administrative expenses, depreciation and amortization expense, interest expense, net change in the fair value of derivative financial instruments, gain or loss on the sale of investment properties, and impairment losses, including our share of all required adjustments from our unconsolidated joint ventures. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. Our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

Cash NOI is a non-GAAP financial measure which excludes from NOI straight-line rent adjustments, amortization of acquired above and below market leases, and other non-cash and normalizing items, including our share of all required adjustments from unconsolidated joint ventures. Other non-cash and normalizing items include items such as the amortization of lease inducements, loan reserve adjustments, payments received from seller master leases and rent abatements, and changes in fair value of contingent consideration. We believe that Cash NOI provides an accurate measure of the operating performance of our operating assets because it excludes certain items that are not associated with management of the properties. Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance in the real estate community. Our use of the term Cash NOI may not be comparable to that of other real estate companies as such other companies may have different methodologies for computing this amount.

MOB Same-Store Cash NOI is a non-GAAP financial measure which excludes from Cash NOI assets not held for the entire preceding five quarters, non-MOB assets, and other normalizing items not specifically related to the same-store property portfolio. Management considers MOB Same-Store Cash NOI a supplemental measure because it allows investors, analysts, and Company management to measure unlevered property-level operating results. Our use of the term MOB Same-Store Cash NOI may not be comparable to that of other real estate companies, as such other companies may have different methodologies for computing this amount.

We calculate EBITDA re in accordance with standards established by Nareit and define EBITDA re as net income or loss computed in accordance with GAAP plus depreciation and amortization, interest expense, gain or loss on the sale of investment properties, and impairment loss, including our share of all required adjustments from unconsolidated joint ventures. We define Adjusted EBITDA re, which excludes from EBITDA re non-cash share compensation expense, non-cash changes in fair value, pursuit costs, non-cash intangible amortization, the pro forma impact of investment activity, and other normalizing items. We consider EBITDA re and Adjusted EBITDA re important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt.

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CONTACT: Physicians Realty Trust

John T. Thomas

President and CEO

(214) 549-6611

jtt@docreit.comJeffrey N. Theiler

Executive Vice President and CFO

(414) 367-5610

jnt@docreit.com

KEYWORD: WISCONSIN UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: HEALTH HOSPITALS PRACTICE MANAGEMENT COMMERCIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY GENERAL HEALTH REIT

SOURCE: Physicians Realty Trust

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PUB: 11/05/2021 07:49 AM/DISC: 11/05/2021 07:49 AM

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