Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Physicians Realty Trust | a8k2015q3earnings.htm |
| EX-99.1 - EX 99.1 - Physicians Realty Trust | exhibit9912015q3earningspr.htm |
THIRD QUARTER 2015 PHYSICIANS REALTY TRUST NYSE: DOC September 2015 SUPPLEMENTAL OPERATING & FINANCIAL INFORMATION IMS - Paradise Valley Medical Center Phoenix, AZ New Albany Medical Center New Albany, OH Exhibit 99.2
TABLE OF CONTENTS COMPANY OVERVIEW ABOUT PHYSICIANS REALTY TRUST 5 THIRD QUARTER HIGHLIGHTS 7 FINANCIAL HIGHLIGHTS 8 FINANCIAL INFORMATION NET OPERATING INCOME AND ADJUSTED EBITDA 10 MARKET CAPITALIZATION AND DEBT SUMMARY 11 FINANCIAL STATISTICS 12 SAME-STORE PORTFOLIO PERFORMANCE AND TENANT OCCUPANCY 13 INVESTMENT ACTIVITY AND LEASE EXPIRATION SCHEDULE 14 PORTFOLIO GEOGRAPHIC DISTRIBUTION 15 PORTFOLIO DIVERSIFICATION 16 TOP 10 HEALTH SYSTEM RELATIONSHIPS 17 CONSOLIDATED BALANCE SHEETS 18 CONSOLIDATED STATEMENTS OF OPERATIONS 19 REPORTING DEFINITIONS 20 Forward looking statements: 9 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,” “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 or intentions. RECONCILIATION OF NON-GAAP MEASURES: FUNDS FROM OPERATIONS (FFO), NORMALIZED FUNDS FROM OPERATIONS (NORMALIZED FFO), AND NORMALIZED FUNDS AVAILABLE FOR DISTRIBUTION (NORMALIZED FAD) 2
l general economic conditions; l adverse economic or real estate developments, either nationally or in the markets where our properties are located; l our failure to generate sufficient cash flows to service our outstanding indebtedness; l fluctuations in interest rates and increased operating costs; l the availability, terms and deployment of debt and equity capital, including our unsecured revolving credit facility; l our ability to make distributions on our common shares; l general volatility of the market price of our common shares; l our increased vulnerability economically due to the concentration of our investments in healthcare properties; l l changes in our business or strategy; l our dependence upon key personnel whose continued service is not guaranteed; l our ability to identify, hire and retain highly qualified personnel in the future; l the degree and nature of our competition; l changes in governmental regulations, tax rates and similar matters; l defaults on or non-renewal of leases by tenants; l decreased rental rates or increased vacancy rates; l difficulties in identifying healthcare properties to acquire and complete acquisitions; l competition for investment opportunities; l our failure to successfully develop, integrate and operate acquired properties and operations; l the impact of our investment in joint ventures; l l cybersecurity incidents could disrupt our business and result in the compromise of confidential information; l our ability to operate as a public company; our geographic concentrations in Texas and metro Atlanta, Georgia causes us to be particularly exposed to downturns in these economies or other changes in real estate market conditions; Forward-looking statements 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. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: the financial condition and liquidity of, or disputes with, joint venture and development partners with whom we may make co-investments in the future; 3
l changes in accounting principles generally accepted in the United States (or GAAP); l lack of or insufficient amounts of insurance; l other factors affecting the real estate industry generally; l l l l l higher market interest rates; l the number of our common shares available for future issuance or sale; l our issuance of equity securities or the perception that such issuance might occur; l future offerings of debt; l l 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 November 6, 2015 and other information filed with, or furnished to, the Securities and Exchange Commission (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. limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and our failure to qualify and maintain our qualification as a real estate investment trust (or REIT) for U.S. federal income tax purposes; While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. You should not place undue reliance on any forward-looking statements, which speak only as of the date of this report. 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 prospectus, except as required by applicable law. For a further discussion of these and other 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 December 31, 2014. changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs; and, factors that may materially adversely affect us or the per share trading price of our common shares, including: securities analysts downgrade of our common shares or the healthcare-related real estate sector. failure of securities analysts to publish research or reports about us or our industry; and 4
ABOUT PHYSICIANS REALTY TRUST COMPANY SNAPSHOT Gross real estate investments (thousands) $ Total buildings % Leased Total portfolio gross leasable area % of GLA on-campus / affiliated Average remaining lease term for all buildings (years) Cash and cash equivalents (thousands) $ Total debt to firm value Weighted average interest rate per annum on consolidated debt Equity market cap (thousands) $ Quarterly dividend $ Quarter end stock price $ Quarter end dividend yield Common shares outstanding OP Units outstanding and not owned by DOC Total firm value (thousands) (1) $ (1) Represents the value of outstanding common shares and OP Units based on the closing stock price on September 30, 2015 plus the amount of outstanding debt and redeemable equity at September 30, 2015. 5.96% 71,320,174 3,842,763 1,714,123 Physicians Realty Trust (NYSE:DOC) (the “Trust,” the “Company,” “DOC,” “we,” “our” and “us”) is a self-managed healthcare real estate company organized in 2013 to acquire, selectively develop, own and manage healthcare properties that are leased to physicians, hospitals and healthcare delivery systems. We invest in real estate that is integral to providing high quality healthcare services. Our properties typically are on a campus with a hospital or other healthcare facilities or strategically located and affiliated with a hospital or other healthcare facilities. Our management team has significant public healthcare REIT experience and long established relationships with physicians, hospitals and healthcare 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 beginning with our short taxable year ending December 31, 2013. 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, 2015, own approximately 94.9% of the partnership interests in the operating partnership ("OP Units"). We had no business operations prior to completion of our initial public offering (the “IPO”) on July 24, 2013. Our predecessor, which is not a legal entity, is comprised of the four healthcare real estate funds managed by B.C. Ziegler & Company ("Ziegler"), which are referred to as the Predecessor Ziegler Funds, that owned directly or indirectly interests in entities that owned the initial properties we acquired through the operating partnership on July 24, 2013 in connection with completion of the IPO and related formation transactions. 33.1% 2.05% 1,076,221 0.225 As of September 30, 2015 1,500,868 132 15.09 95.5% 5,303,970 76.6% 9.0 4,718 5
ABOUT PHYSICIANS REALTY TRUST (CONTINUED) BOARD OF TRUSTEES Tommy G. Thompson Chairman John T. Thomas William A. Ebinger, M.D. Richard A. Weiss Chief Executive Officer Albert C. Black Mark A. Baumgartner Stanton D. Anderson Compensation, Nominating and Finance and Investment Audit Committee Chair Governance Committee Chair Committee Chair MANAGEMENT TEAM John T. Thomas Chief Executive Officer President John W. Sweet Jeffrey N. Theiler Deeni D. Taylor Executive Vice President Executive Vice President Executive Vice President Chief Investment Officer Chief Financial Officer Investments Bradley D. Page John W. Lucey Mark D. Theine Senior Vice President Senior Vice President Senior Vice President General Counsel Principal Accounting and Asset & Investment Reporting Officer Management LOCATION AND CONTACT INFORMATION Corporate Headquarters External Auditor Corporate and REIT Tax Counsel 309 N. Water Street, Suite 500 Ernst & Young Baker & McKenzie LLP Milwaukee, WI 53202 Chicago, IL 60606 Richard Lipton, Partner (414) 367-5600 (312) 879-2000 Chicago, IL 60601 (312) 861-8000 COVERING ANALYSTS J. Sanabria - Bank of America Merrill Lynch J. Sadler - Keybanc Capital Markets Inc. J. Kim - BMO Capital Markets Corp. S. Manaker - Oppenheimer & CO. P. Morgan - Canaccord Genuity Inc. J. Hughes - Raymond James Financial Inc. W. Graham - Compass Pt Rch & Trading LLC M. Carroll - RBC Capital Markets LLC D. Altscher - FBR Capital Markets & Co. C. Kucera - Wunderlich Securities Inc. J. Roberts - J.J.B. Hilliard W.L. Lyons LLC President 6
THIRD QUARTER HIGHLIGHTS OPERATING l Third quarter 2015 total revenue of $34.9 million, up 146% over the prior year period l Third quarter 2015 rental revenue of $28.1 million, an increase of 125% over the prior year period l Generated quarterly normalized funds from operations (Normalized FFO) of $0.26 per share on a fully diluted basis l l Funded a $3.1 million mezzanine loan l Declared quarterly dividend of $0.225 per share for the third quarter l 95.5% of portfolio square footage leased as of September 30, 2015 l THIRD QUARTER INVESTMENTS SUBSEQUENT INVESTMENTS l Randall Road MOB - Suite 140, Elgin, IL l Catalyst Portfolio (12 MOBs), AL & FL l Medical Specialists of Palm Beach, Atlantis, FL l Truman Medical Center Mezz Loan, Kansas City, MO l Trios Health MOB, Kennewick, WA l Arete Surgical Centre, Johnstown, CO l OhioHealth - SW Health Center, Grove City, OH l l Integrated Medical Services (IMS) Portfolio l l IMS - Paradise Valley, Phoenix, AZ l IMS - Avondale, Avondale, AZ l IMS - Palm Valley, Goodyear, AZ l IMS - North Mountain, Phoenix, AZ l Warm Springs Rehab Hospital Mezz Loan, Kyle, TX l Memorial Hermann Medical Complex, Katy, TX l New Albany Medical Center, New Albany, OH l Fountain Hills, Medical Campus, Fountain Hills, AZ COMPANY ANNOUNCEMENTS l l l l l l l l October 19, 2015: Announced the closing of its upsized underwritten public offering of 15,812,500 common shares of beneficial interest, including 2,062,500 common shares issued pursuant to the exercise of an option to purchase additional common shares granted to the underwriters, at a price per share of $15.00, for net proceeds of $226.3 million after deducting the underwriting discount and commissions and estimated offering expenses payable by the Company. Closed on eight acquisitions totaling 876,113 square feet for third quarter 2015 property acquisitions of $294.0 million Net increase to gross leasable square footage of 19% to 5,303,970 square feet, as of September 30, 2015 from 4,454,640 as of June 30, 2015 July 23, 2015: Announced it has amended and upsized its unsecured revolving credit facility from $400 million to $750 million and that such credit facility also provides an accordion feature allowing for an additional $350 million of capacity, subject to customary terms and conditions, resulting in a maximum borrowing capacity of $1.1 billion. Loan, Great Falls, MT Great Falls Replacement Surgical Hospital Mezz September 28, 2015: Announced a quarterly cash dividend of $0.225 per common share for the quarter ending September 30, 2015, which was paid on October 30, 2015 to shareholders of record on October 16, 2015. October 13, 2015: Announced commencement of public offering of 12,500,000 common shares and plans to grant the underwriters a 30-day option to purchase up to an additional 1,875,000 common shares. October 13, 2015: Announced $297 million of acquisitions and $91.5 million of executed purchase and sale agreements. October 14, 2015: Announced the upsizing and pricing of a public offering of 13,750,000 common shares of beneficial interest at a public offering price per share of $15.00. Cambridge Professional Center, Waldorf, MD August 7, 2015: Announced the appointment of Deeni Taylor to the position of EVP - Investments. August 7, 2015: Announced the achievement of an investment grade rating (Baa3) from Moody's. 7
FINANCIAL HIGHLIGHTS (Unaudited and in thousands, except sq. ft. and per share data) INCOME Three Months Ended Revenues NOI Annualized Adjusted EBITDA Normalized FFO Normalized FAD Net income available to common shareholders per common share Normalized FAD per common share and OP Unit CAPITALIZATION As of ASSETS Gross Real Estate Investments (including gross lease intangibles) Total Assets DEBT AND EQUITY Total Debt Total Equity Equity Market Capitalization Implied Equity Market Capitalization (1) Total Debt / Implied Equity Market Capitalization (1) Outstanding common shares and OP Units at quarter end multiplied by share price at quarter end IPO Q3-2013 Q4-2013 Q1-2014 1,134,209 50% 1,204,354$ 1,203,456 286,774$ 868,819 1,095,619 1,154,739 25% 1,500,868$ 1,478,825 568,195$ 856,368 0.23$ 0.20$ June 30, 2015September 30, 2015 1,076,221 34,870$ 26,968 95,652 19,297 June 30, 2015September 30, 2015 29,683$ 22,264 16,913 76,712 15,657 14,990 0.05$ 0.05$ - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 IPO Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 G L A i n S F G ro ss R ea l Es ta te I n v es tm en ts Portfolio Growth Since IPO Real Estate Investments/Quarter Total GLA $1,500,868 $123,998 $234,467 $255,967 $412,011 $484,714 $712,951 $819,219 $1,047,575 $1,204,354 8
RECONCILIATION OF NON-GAAP MEASURES: FUNDS FROM OPERATIONS (FFO), NORMALIZED FUNDS FROM OPERATIONS (NORMALIZED FFO) AND NORMALIZED FUNDS AVAILABLE FOR DISTRIBUTION (NORMALIZED FAD) (Unaudited and in thousands, except share and per share data) Three Months Ended Net income Preferred distributions Depreciation and amortization expense Gain on the sale of investment properties FFO applicable to common shares and OP Units FFO per common share and OP Unit Net change in fair value of derivative Acquisition related expenses Normalized FFO applicable to common shares and OP Units Normalized FFO per common share and OP Unit Normalized FFO applicable to common shares and OP Units Non-cash share compensation expense Straight-line rent adjustments Amortization of acquired above/below market leases Amortization of lease inducements Amortization of deferred financing costs TI/LC and recurring capital expenditures Seller master lease and rent abatement payments Normalized FAD applicable to common shares and OP Units Normalized FAD per common share and OP Unit Weighted average number of common shares and OP Units outstanding Nine Months Ended September 30, 2015 6,832$ 31,055 (130) (145) 12,464 3,983$ September 30, 2015 (116)38 36,966$ 0.51$ 0.21$ 16,002$ (300) (791) 48,614$ 0.67$ 0.26$ 19,297$ 11,7643,257 48,614 2,424 (6,262) (2,373) 818 19,297 1,151 414 953 359 157 544 (3,974) 44,371$ 0.61$ 73,040,84675,104,821 0.23$ 16,913$ (2,159) 270 1,051 9
NET OPERATING INCOME AND ADJUSTED EBITDA (Unaudited and in thousands, except share and per share data) NET OPERATING INCOME Net income General and administrative Acquisition related expenses Depreciation and amortization Interest expense Net change in fair value of derivative Gain on sale of investment properties NOI NOI Straight-line rent adjustments Amortization of acquired above/below market leases Amortization of lease inducement Seller master lease and rent abatement payments Cash NOI ADJUSTED EBITDA Three Months Ended Net income Depreciation and amortization Interest expense Net change in fair value of derivative EBITDA Acquisition related expenses Non-cash share compensation Adjusted EBITDA Adjusted EBITDA Annualized September 30, 2015 Three Months Ended (145) 3,341 12,476 3,257 26,968$ 26,968$ 4,018 38 3,983$ 157 544 (2,373) (6,262) 1,151 414 818 3,257 19,838$ 38 3,341 11,764 2,424 7,244 (116) 45,027$ 78,953$ 95,652$ 23,913$ 59,215$ Nine Months Ended September 30, 2015 6,832$ 11,359 11,764 31,067 7,244 (130) 68,020$ 68,020$ (116) 64,374$ September 30, 2015 270 1,051 25,566$ Nine Months Ended 6,832$ 31,067 12,476 3,983$ September 30, 2015 10
MARKET CAPITALIZATION AND DEBT SUMMARY (Unaudited and in thousands, except share data) MARKET CAPITALIZATION Revolving credit facility debt Mortgage debt Total Debt Redeemable equity Share price Total common shares outstanding Total OP Units outstanding Implied equity market capitalization Total Firm Value (Debt + Pref. + Equity) Total Debt/Total Assets Total Debt/Total Firm Value DEBT SUMMARY Revolving Credit Facility Debt (3) Mortgage Debt Canton MOB Firehouse Square Hackley Medical Center MeadowView Professional Center Mid Coast Hospital MOB Remington Medical Commons Valley West Hospital MOB Oklahoma City, OK MOB Crescent City Surgical Center San Antonio Hospital Savage MOB (2) Plaza HCA MOB (2) (1) Weighted average maturity of mortgage debt only (2) Excludes market value adjustments totaling $0.7 million (3) Extended one year on July 22, 2015 2017 2017 2017 2017 2016 2017 2020 2021 2019 5,788 5.5% 2/1/2022 5.0% 2.1% 11,886 6.1% 8/1/2017 Maturity Date 9/18/2019 6/6/2017 9/6/2017 1/6/2017 1/23/2019 6/26/2022 3.19 (1) 1.4% 4.8% 6/6/2017 5/16/2016 9/28/2017 12/1/2020 1/10/2021 18,750 2.9% 4.8% 4.7% 5.0% 4,796 Interest Rate: 15.09$ As of September 30, 2015 473,000$ 95,195 568,195$ 71,320 1,134,209$ 38.4% 33.1% 1,714,123$ Balance as of 9/30/2015 3,843 11,719$ 473,000$ 6,127 2,716 5,312 10,272 567,461$ 5.9% 6.6% 5.9% 5.8% 9,289 7,710 4,297 7,518 Debt is 33% of Firm Value Debt Equity $- $7,710 $40,610 $- $491,750 $4,796 $7,518 $15,077 $- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 2015 2016 2017 2018 2019 2020 2021 2022 Debt Maturity Schedule as of September 30, 2015 11
FINANCIAL STATISTICS (Unaudited and in thousands, except share and per share data) Annualized dividend rate(1) Price per share(2) Annualized dividend yield Total debt Net debt (less cash) Adjusted EBITDA (annualized)* Net Debt / Adjusted EBITDA Ratio Adjusted EBITDA (annualized)* Cash interest expense (annualized)* Interest Coverage Ratio Total interest Secured debt principal amortization Total fixed charges Adjusted EBITDA Adjusted EBITDA fixed charge coverage ratio Equity market cap Redeemable equity Total debt Total Firm Value Total debt Total assets Total Debt / Total Assets Total Debt / Total Firm Value Weighted average common shares Weighted average unvested restricted common shares and share units Weighted average OP Units not owned by DOC Weighted Average Common Shares and OP Units - Diluted (1) Annualized rate based on $0.225 quarterly dividend for the quarter ending September 30, 2015. Actual dividend amounts will be determined by the Trust's board of trustees based on a variety of factors. (2) Closing common share price of $15.09 as of September 30, 2015. * Amounts are annualized and actual amounts may differ significantly from the annualized amounts shown. 1,478,825 38.4% 33.1% 8.02x 3,341$ 521 1,714,123$ 568,195$ 11,719 Quarter Ended September 30, 2015 0.90$ 15.09$ 5.96% 568,195$ 563,477 95,652 5.89x 71,034,747 240,144 3,829,930 75,104,821 3,862$ 23,913 6.19x 1,134,209$ 568,195 95,652$ 11,928 12
SAME-STORE PORTFOLIO PERFORMANCE AND TENANT OCCUPANCY (Unaudited and in thousands, except square footage data) SAME-STORE PORTFOLIO ANALYSIS Portfolio 3 Months Ended 09/30/15 Ended 09/30/15 Number of properties Gross leasable area Cash NOI % Leased SAME-STORE PORTFOLIO PERFORMANCE Year-over-year Comparison Sequential Comparison 3Q15 3Q14 Change Number of properties Gross leasable area % Leased Rental revenues Operating expenses Same-property Cash NOI TENANT OCCUPANCY Quarter Ending Total GLA Total square feet beginning of quarter Acquired GLA Disposed GLA Total square feet end of quarter Occupied GLA Occupied GLA beginning of quarter Lease expiring in quarter Leases renewed in quarter Retention Rate New leases commencing in quarter Net absorption/(vacancy Loss) Net occupied GLA acquired / (disposed) Occupied GLA end of quarter 0.4% 46 1,683,085 9,448$ 95.5% 96.8% 132 5,303,970 25,566$ +4.8% -0.7%9,233 - - 30 bps +2.8% 79.5% -0.4% 4,215,226 (19,019) 0.3% 46 1,683,085 46 1,683,085 96.5% 11,665 (2,432) - 30 bps +0.4% (2,544) 9,448 11,992 96.8% +4.6% +2.3% 96.5% 11,939 100.0% 16.5% (2,428) 9,511 3Q15 2Q15 46 1,683,085 96.8% 11,992 (2,544) 9,448 46 1,683,085 Change - 876,113 (26,783) Percentage of Total GLA at 09/30/15 84.0% -0.5% 3 Months Same-Store 0.3% 15.7% 95.5%5,065,211 835,424 09/30/15 14,836 78% 18,744 14,561 5,303,970 4,454,640 Same-Store Cash NOI, 37% Other Cash NOI, 63% 13
INVESTMENT ACTIVITY AND LEASE EXPIRATION SCHEDULE INVESTMENT ACTIVITY Acquisition Cash % Purchase Property Location Date Cap Rate Leased Price GLA Randall Road MOB - Suite 140 (1) Elgin, IL 7/17/2015 6.5% 100% Medical Specialists of Palm Beach Atlantis, FL 7/24/2015 6.3% 100% OhioHealth - SW Health Center Grove City, OH 7/31/2015 7.2% 100% Trios Health MOB Kennewick, WA 7/31/2015 6.6% 100% Integrated Medical Services (IMS) Portfolio IMS - Paradise Valley MOB Phoenix, AZ 8/14/2015 8.3% 83% IMS - Avondale MOB Avondale, AZ 8/19/2015 7.0% 100% IMS - Palm Valley MOB Goodyear, AZ 8/19/2015 6.2% 94% IMS - North Mountain MOB Phoenix, AZ 8/31/2015 6.0% 100% Warm Springs Rehab Hospital Mezz Loan Kyle, TX 8/21/2015 8.5% - Memorial Hermann Medical Complex (2 MOBs) Katy, TX 9/1/2015 6.5% 100% New Albany Medical Center New Albany, OH 9/9/2015 7.5% 86% Fountain Hills Medical Campus Fountain Hills, AZ 9/30/2015 7.0% 89% Total / Weighted Average 6.7% 95% (1) Acquired 14 condos on June 30, 2015 and one on July 17, 2015 out of 19 total condo units. LEASE EXPIRATION SCHEDULE (As of September 30, 2015) Expiration Expiring Expiring Lease % of Total Expiring Lease % of Total Average Rent Leases GLA GLA ABR ABR Per SF 18 43 77 59 43 41 28 21 33 53 Thereafter: 155 15 - Total/W.A. 586 5,303,970 100.0% 3.3% 5.9% 6.2% 5.7% 3.0% 3.4% 3.8% 6.0% 10.7% 45.7% 41,093 238,759 0.8% 4.5% 115,173$ 49,05413,250 21.16 876,113 23.94 22.68 19.09 23.25 19.27 21.48$ 0.8% 20.77 4.2% 328,180 906$ 6,325 300,057 2,427,216 3.5% 160,009 182,244 202,363 317,630 566,559 42,179 186,267 0.8% 311,414 6.1% 22.26 100.0% 23.00$ 7,069 11,039 59,787 9.6% 51.9% 19.48 24.63 0.3% 9.13 375 60,00011,200 40,400 1,750$ 5,489 11,460 50,000 64,000 161,885 11,051 34,537 121,97651,740 31,814 22,144 35,184 122,580 61,614 101,241 107,737 3,138 - Vacant Year 2020 2021 2022 2023 2024 2015 2016 2017 2018 2019 MTM 297,131$ 3,786 4,844 5.9% 2.7% 6,805 3,055 3,941 6.3% 5.5% 3.4% 7,241 14
PORTFOLIO GEOGRAPHIC DISTRIBUTION (As of September 30, 2015) TOP TEN STATES State GLA Texas Georgia Arizona Ohio Indiana Michigan Pennsylvania Minnesota Florida Washington Other Total 5,303,970 687,581 631,402 469,265 443,830 407,746 371,541 370,255 348,750 239,217 192,959 1,141,424 Texas, 13% Georgia, 12% Arizona, 9% Ohio, 8% Indiana, 8% Michigan, 7% Pennsylvania, 7% Minnesota, 7% Florida, 4% Washington, 4% Other, 21% 15
PORTFOLIO DIVERSIFICATION (As of September 30, 2015) Coverage # of Buildings GLA % of Total % Leased Ratio Single-tenant MOBs 56 N/A Multi-tenant MOBs 68 N/A Hospitals 4 3.9x LTACHs 3 3.7x Corporate office 1 N/A Total 132 THREE MONTH PERIOD ENDING 9/30/15 99.3% 93.0% 100.0% 100.0% 95.5% 77.6% 32.5% 54.4% 5.1% 5.9% 100.0% 2.1% 1,725,920 2,888,930 269,925 310,352 5,303,970 108,843 On- Campus / Affiliated, 78% Off- Campus, 22% Campus Proximity (Based on Cash NOI) NNN, 57% Modified Gross, 9% Gross, 5% Lease Type (Based on Cash NOI) LTACH, 5% Hospital, 11% MOB, 84% Building Type (Based on Cash NOI) Medicare, 48% Private Pay, 52% Hospital and LTACH Payor Mix (Trailing Twelve Months) On-Campus / Affiliated, 78% ff- Campus, 22% Campus Proximity (Based on Cash NOI) NNN, 57% Modified Gross, 9% Gross, 5% Absolute Net, 29% Lease Type (Based on Revenue) LTACH, 5% Hospital, 11% MOB, 84% Building Type (Based on Cash N I) Medicare, 48% Private Pay, spital and ayor Mix ( railing elve ths) 16
TOP 10 HEALTH SYSTEM RELATIONSHIPS (As of September 30, 2015, $ in thousands) Weighted Avg. % of Total Remaining Leased % of Total Annualized Annualized Tenant Lease Term GLA GLA Base Rent Base Rent LifeCare 12.3 5.9% 4.2% Trios Health 29.8 3.1% 3.7% East El Paso Physicians Medical Center 12.9 1.4% 3.1% Wayne State University Physician Group 14.0 3.3% 2.8% Crescent City Surgical Centre 13.0 1.1% 2.7% FSH Hospital of San Antonio 11.0 1.3% 2.6% Mid-Ohio Oncology/Hematology 8.7 1.8% 2.0% Northside Hospital 7.2 1.7% 2.0% University of Rochester Cancer Center 4.7 1.8% 1.7% Columbus Regional Healthcare System 9.2 2.4% 1.6% Total/W.A. 12.3 23.8% 26.4% 68,786 310,352 161,885 77,000 176,000 60,000 98,325 88,003 98,221 125,189 1,263,761 4,803$ 4,250$ 3,585$ 3,247$ 3,090$ 30,413$ 2,971$ 2,322$ 2,291$ 1,945$ 1,909$ IMS - Avondale MOB Avondale, AZ OhioHealth Southwest Health Center Grove City, OH IMS - Palm Valley MOB Goodyear, AZ IMS - North Mountain MOB Phoenix, AZ 17
CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS Investment properties: Land and improvements Building and improvements Tenant improvements Acquired lease intangibles Accumulated depreciation Net real estate property Real estate loans receivable Investment in unconsolidated entity Net real estate investments Cash and cash equivalents Tenant receivables, net Deferred costs, net Other assets Total assets LIABILITIES AND EQUITY Liabilities: Credit facility Mortgage debt Accounts payable Dividends payable Accrued expenses and other liabilities Acquired lease intangibles, net Total liabilities Redeemable Noncontrolling Interest - Operating Partnership and partially owned properties - Equity: Common shares, $0.01 par value, 500,000,000 common shares authorized, 71,040,502 and 50,640,863 common shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively Additional paid-in capital Accumulated deficit Total shareholders' equity Noncontrolling interests: Operating Partnership Partially owned properties Total noncontrolling interest Total equity Total liabilities and equity 4,718 3,047 7,118 138,000$ 78,105 473,000$ 95,195 15,806 811,573$ 33,951 1,478,825$ 72,985 802,019 15,923 1,324 4,870 (45,569) 756,450 15,876 1,324 773,650 700 16,548 6,140 1,393 17,059 19,038 510 586,017 713 904,939 2,871 242,364 5,053 610,738 11,719 (51,797) 534,730 33,727 (94,370) 811,282 43,737 752 34,479 569,209 811,573$ 1,349 45,086 856,368 1,478,825$ December 31, 2014 79,334$ 644,086 5,614 (audited) 1,323 1,429,991 123,240$ 1,167,768 8,524 176,087 1,475,619 September 30, 2015 (75,930) 1,399,689 28,979 (unaudited) 18
CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except share and per share data) Revenues: Rental revenues Expense recoveries Interest income on real estate loans and other Total revenues Expenses: Interest expense General and administrative Operating expenses Depreciation and amortization Acquisition expenses Impairment loss Total expenses Income (loss) before equity in income of unconsolidated entity, gain on sale of investment property, and noncontrolling interests: Equity in income of unconsolidated entity Gain on sale of investment properties Net income (loss) Net (income) loss attributable to noncontrolling interests: Operating Partnership Partially owned properties Net income (loss) attributable to controlling interest Preferred distributions Net income (loss) attributable to common shareholders Net income (loss) per share: Basic Diluted Weighted average common shares Basic Diluted Dividends and distributions declared per common share and OP Unit 14,265 3,445 7,244 4,849 2,661 640 89,037 33,640 20,979 6,367 4,018 7,966 31,067 10,565 82,413 40,152 3,812 (2,311) 16,472 2,922 130 34 26 145 26 34 (2,094) (333) 6,832 (6,409) 3,983 (200) (2,251) 233 0.225$ 69,040,121 27,980,408 36,313,644 0.08$ (0.21)$ 73,040,846 27,980,408 0.675$ 0.675$ (0.06)$ (0.21)$ 0.08$ 72,111$ 29,555$ 5,821 904 34,870 887 78 69 11,764 9,254 6,624 (6,512) 11,359 8,867 28,145$ - 250 - 250 - (2,094)$ 3,341 75,104,821 5,453$ (5,748)$ (791) - 6,244 (5,748) (79) 3,704 (300) 3,404$ (255) (226) 0.05$ 71,034,747 36,313,644 0.05$ (0.06)$ 0.225$ Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 (76) 1,911 4,445 2,531 4,413 12,506$ 1,355 300 14,161 12,476 3,257 31,058 19
REPORTING DEFINITIONS Adjusted Earnings Before Interest Taxes, Depreciation and Amortization (Adjusted EBITDA): We define Adjusted EBITDA for DOC as net (loss) income computed in accordance with GAAP plus depreciation, amortization, interest expense and net change in the fair value of derivative financial instruments, net (loss) included from discontinued operations, stock based compensation, acquisition-related expenses, and other non-reoccurring items. We consider Adjusted EBITDA an important measure because it provides 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. Annualized Base Rent: Annualized base rent is calculated by multiplying contractual base rent for September 2015 by 12 (but excluding the impact of concessions and straight-line rent). Earnings Before Interest Taxes, Depreciation, Amortization and Rent (EBITDAR): We define EBITDAR for DOC as net (loss) income computed in accordance with GAAP plus depreciation, amortization, interest expense and net change in the fair value of derivative financial instruments, net (loss) included from discontinued operations, stock based compensation, acquisition-related expenses and lease expense. We consider EBITDAR an important measure because it provides additional information to allow management, investors, and our current and potential creditors to evaluate and compare our tenants ability to fund their rent obligations. Funds From Operations (FFO): Funds from operations, or FFO, is a widely recognized measure of REIT performance. Although FFO is not computed in accordance with generally accepted accounting principles, or GAAP, we believe that information regarding FFO is helpful to shareholders and potential investors because it facilitates an understanding of the operating performance of our initial properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. Because real estate values have historically increased or decreased with market conditions, we believe that FFO provides a more meaningful and accurate indication of our performance. We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, ("NAREIT"). NAREIT defines FFO as net income (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 and extraordinary items (computed in accordance with GAAP), plus real estate related depreciation and amortization (excluding amortization of deferred financing costs). Our FFO computation may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with 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 (loss), 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 result, 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 (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. Gross Leasable Area (GLA): Gross leasable area (in square feet). Gross Real Estate Investments: Based on acquisition price (and includes lease intangibles). Health System-Affiliated: Properties are considered affiliated with a health system if one or more of the following conditions are met: 1) the land parcel is contained within the physical boundaries of a hospital campus; 2) the land parcel is located adjacent to the campus; 3) the building is physically connected to the hospital regardless of the land ownership structure; 4) a ground lease is maintained with a health system entity; 5) a master lease is maintained with a health system entity; 6) significant square footage is leased to a health system entity; 7) the property includes an ambulatory surgery center with a hospital partnership interest; or (8) a significant square footage is leased to a physician group that is either employed, directly or indirectly by a health system, or has a significant clinical and financial affiliation with the health system. Hospitals: Hospitals refer to specialty surgical hospitals. These hospitals provide a wide range of inpatient and outpatient services, including but not limited to, surgery and clinical laboratories. LTACHs: Long-term acute care hospitals (LTACH) provide inpatient services for patients with complex medical conditions who require more sensitive care, monitoring or emergency support than that available in most skilled nursing facilities. Medical Office Building (MOB): Medical office buildings are office and clinic facilities, often located near hospitals or on hospital campuses, specifically constructed and designed for use by physicians and other health care personnel to provide services to their patients. They may also include ambulatory surgery centers that are used for general or specialty surgical procedures not requiring an overnight stay in a hospital. Medical office buildings may contain sole and group physician practices and may provide laboratory and other patient services. Net Operating Income (NOI): NOI is a non-GAAP financial measure that is defined as net income or loss, computed in accordance with GAAP, generated from DOC’s total portfolio of properties before general and administrative expenses, acquisition-related expenses, depreciation and amortization expense, REIT expenses, interest expense and net change in the fair value of derivative financial instruments, and gains or loss on the sale of discontinued properties. DOC believes that NOI provides an accurate measure of operating performance of its operating assets because NOI excludes certain items that are not associated with management of the properties. Additionally, DOC’s 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. 20
REPORTING DEFINITIONS (continued) Cash Net Operating Income (NOI): Cash NOI is a non-GAAP financial measure which excludes from NOI straight-line rent adjustments, amortization of acquired below and above market leases and other non-cash and normalizing items. Other non-cash and normalizing items include items such as the amortization of lease inducements, and payment received from a seller master lease. DOC believes that Cash NOI provides an accurate measure of the operating performance of its operating assets because it excludes certain items that are not associated with management of the properties. Additionally, DOC believes that Cash NOI is a widely accepted measure of comparative operating performance in the real estate community. However, DOC’s 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. Normalized Funds Available for Distribution (Normalized FAD): DOC defines Normalized FAD, a non-GAAP measure, which excludes from Normalized FFO, non-cash compensation expense, straight-line rent adjustments, amortization of acquired above market leases, amortization of deferred financing costs and amortization of lease inducements and recurring capital expenditures, including leasing costs and tenant and capital improvements. FAD includes payments received from a seller master lease. DOC 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 DOC’s financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of DOC’s liquidity. Normalized FAD should be reviewed in connection with other GAAP measurements. Normalized Funds From Operations (Normalized FFO): Changes in the accounting and reporting rules under GAAP have prompted a significant increase in the amount of non-operating items included in FFO, as defined. Therefore, DOC uses Normalized FFO, which excludes from FFO acquisition-related expenses, net change in fair value of derivative financial instruments, non-controlling income from operating partnership units included in diluted shares, acceleration of deferred financing costs, and other normalizing items. However, DOC’s 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 attributable to controlling interest (computed in accordance with GAAP) as an indicator of DOC’s financial performance or to cash flow operating activities (computed in accordance with GAAP) as an indicator of DOC’s liquidity, nor its indicative of funds available to fund DOC’s cash needs, including its ability to make distributions. Normalized FFO should be reviewed in connection with other GAAP measurements. Occupancy: Occupancy represents the percentage of total gross leasable area that is leased, including month-to-month leases and leases that are signed but not yet commenced, as of the date reported. Off-Campus: A building portfolio that is not located on or adjacent to key hospital based-campuses and is not affiliated with recognized healthcare systems. On-Campus / Affiliated: On-campus refers to a property that is located on or within a quarter mile to a healthcare system. Affiliated refers to a property that is not on the campus of a healthcare system, but anchored by a healthcare system. Same-Store Portfolio: The same-store portfolio consists of properties held by the Company for the entire preceding year and not currently slated for disposition. 21