Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Physicians Realty Trust | exhibit9912016q2earningspr.htm |
| 8-K - 8-K - Physicians Realty Trust | a8-k2016q2earnings.htm |
Children's Hospital MOB
Milwaukee, WI
SUPPLEMENTAL OPERATING
& FINANCIAL INFORMATION
SECOND QUARTER 2016
PHYSICIANS REALTY TRUST
NYSE: DOC
St. Vincent West MOB
Little Rock, AR
June 2016
2
COMPANY OVERVIEW
ABOUT PHYSICIANS REALTY TRUST 5
SECOND QUARTER HIGHLIGHTS 7
CATHOLIC HEALTH INITIATIVES ACQUISITION 8
FINANCIAL HIGHLIGHTS 9
FINANCIAL INFORMATION
RECONCILIATION OF NON-GAAP MEASURES: FUNDS FROM OPERATIONS (FFO), NORMALIZED
FUNDS FROM OPERATIONS (NORMALIZED FFO), AND NORMALIZED FUNDS AVAILABLE FOR
DISTRIBUTION (NORMALIZED FAD) 10
RECONCILIATION OF NON-GAAP MEASURES: NET OPERATING INCOME AND ADJUSTED EBITDA 11
MARKET CAPITALIZATION AND DEBT SUMMARY 12
FINANCIAL STATISTICS 13
SAME-STORE PORTFOLIO PERFORMANCE AND TENANT OCCUPANCY 14
INVESTMENT ACTIVITY AND LEASE EXPIRATION SCHEDULE 15
PORTFOLIO GEOGRAPHIC DISTRIBUTION 16
PORTFOLIO DIVERSIFICATION 17
TOP 10 HEALTH SYSTEM RELATIONSHIPS 18
CONSOLIDATED BALANCE SHEETS 19
CONSOLIDATED STATEMENTS OF INCOME 20
REPORTING DEFINITIONS 21
TABLE OF CONTENTS
Forward-looking statements:
Certain statements made in this supplemental information package constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In particular, statements pertaining to
our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, our pro
forma financial statements and our statements regarding anticipated market conditions are forward-looking statements. You can
identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,”
“should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words
and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely
to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, expectations or
intentions.
3
Forward-looking statements reflect the views of our management regarding current expectations and projections about future
events and are based on currently available information. These forward-looking statements are not guarantees of future
performance and involve numerous risks and uncertainties and you should not rely on them as predictions of future events.
Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be
able to realize them. 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:
• general economic conditions;
• adverse economic or real estate developments, either nationally or in the markets where our properties are located;
• our failure to generate sufficient cash flows to service our outstanding indebtedness;
• fluctuations in interest rates and increased operating costs;
• the availability, terms and deployment of debt and equity capital, including our unsecured revolving credit facility;
• our ability to make distributions on our common shares;
• general volatility of the market price of our common shares;
• our increased vulnerability economically due to the concentration of our investments in healthcare properties;
• our geographic concentrations in Texas and Kentucky cause us to be particularly exposed to downturns in these local
economies or other changes in local real estate market conditions;
• changes in our business or strategy;
• our dependence upon key personnel whose continued service is not guaranteed;
• our ability to identify, hire and retain highly qualified personnel in the future;
• the degree and nature of our competition;
• changes in governmental regulations, tax rates and similar matters;
• defaults on or non-renewal of leases by tenants;
• decreased rental rates or increased vacancy rates;
• difficulties in identifying healthcare properties to acquire and completing acquisitions;
• competition for investment opportunities;
• our failure to successfully develop, integrate and operate acquired properties and operations, including our ability to
integrate the portfolio of properties acquired from Catholic Health Initiatives (“CHI”);
• the impact of our investment in joint ventures;
• the financial condition and liquidity of, or disputes with, any joint venture and development partners with whom we may
make co-investments in the future;
4
• cybersecurity incidents could disrupt our business and result in the compromise of confidential information;
• our ability to operate as a public company;
• changes in accounting principles generally accepted in the United States (GAAP);
• lack of or insufficient amounts of insurance;
• other factors affecting the real estate industry generally;
• our failure to maintain our qualification as a real estate investment trust (or REIT) for U.S. federal income tax purposes;
• 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;
• 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:
◦ higher market interest rates;
◦ the number of our common shares available for future issuance or sale;
◦ our issuance of equity securities or the perception that such issuance might occur;
◦ future debt;
◦ failure of securities analysts to publish research or reports about us or our industry; and
◦ securities analysts’ downgrade of our common shares or the healthcare-related real estate sector.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any
obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of
new information, data or methods, future events or other changes after the date of this supplemental information package, except
as required by applicable law. You should not place undue reliance on any forward-looking statements that are based on
information currently available to us or the third parties making the forward-looking statements. For a 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 ended December 31, 2015, and Part II, Item 1A (Risk Factors) of our Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2016.
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 August 3, 2016 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.
5
ABOUT PHYSICIANS REALTY TRUST
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 June 30, 2016, own approximately 97.2% of the partnership interests in the operating partnership (“OP Units”).
COMPANY SNAPSHOT As of
June 30, 2016
Gross real estate investments (thousands) $ 2,547,128
Total properties 222
% Leased 95.7%
Total portfolio gross leasable area 9,586,638
% of GLA on-campus / affiliated 79.4%
Average remaining lease term for all buildings (years) 8.6
Cash and cash equivalents (thousands) $ 37,945
Total debt to firm value 18.0%
Weighted average interest rate per annum on consolidated debt 2.9%
Equity market cap (thousands) $ 2,822,433
Quarterly dividend $ 0.225
Quarter end stock price $ 21.01
Dividend yield 4.28%
Common shares outstanding 134,337,589
OP Units outstanding and not owned by DOC 3,894,249
Total firm value (thousands) (1) $ 3,566,455
(1) Represents the value of outstanding shares and units based on the closing stock price on June 30, 2016 plus the amount of outstanding debt and redeemable
equity at June 30, 2016.
6
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 Trustee Trustee
President
Albert C. Black Mark A. Baumgartner Stanton D. Anderson
Compensation and Nominating 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 Chief Accounting and Asset & Investment
Administrative Officer Management
LOCATION AND CONTACT INFORMATION
Corporate Headquarters Independent Registered Corporate and REIT Tax Counsel
309 N. Water Street, Suite 500 Public Accounting Firm Baker & McKenzie LLP
Milwaukee, WI 53202 Ernst & Young Richard Lipton, Partner
(414) 367-5600 Chicago, IL 60606 Chicago, IL 60601
(312) 879-2000 (312) 861-8000
COVERING ANALYSTS
J. Sanabria - Bank of America Merrill Lynch J. Sadler - Keybanc Capital Markets Inc.
J. Kim - BMO Capital Markets Corp. V. Malhotra - Morgan Stanley
J. France - Cantor Fitzgerald J. Hughes - Raymond James Financial Inc.
P. Morgan - Canaccord Genuity Inc. M. Carroll - RBC Capital Markets LLC
S. Shaw - Compass Pt Rch & Trading LLC E. Fleming - SunTrust Robinson Humphrey
J. Roberts - J.J.B. Hilliard W.L. Lyons LLC C. Kucera - Wunderlich Securities Inc.
P. Martin - JMP Securities
The equity analysts listed above are those analysts that have published research material on the Company and are listed as covering the
Company. Please note that any opinions, estimates, or forecasts regarding the Company's performance made by the analysts listed above
do not represent the opinions, estimates, or forecasts of Physicians Realty Trust or its management. The Company does not by its reference
above imply its endorsement of or concurrence with any information, conclusions or recommendations made by any of such analysts.
Interested persons may obtain copies of analysts' reports on their own, as we do not distribute these reports. Several of these firms may,
from time to time, own our stock and/or hold other long or short positions on our stock, and may provide compensated services to us.
7
SECOND QUARTER 2016 HIGHLIGHTS
OPERATING HIGHLIGHTS
• Second quarter 2016 total revenue of $53.2 million, up 79% over the prior year period
• Second quarter 2016 rental revenue of $42.2 million, an increase of 79% over the prior year period
• Generated quarterly EPS of $0.05 on a fully diluted basis
• Generated quarterly normalized funds from operations (Normalized FFO) of $0.22 per share on a fully diluted basis
• Completed $679.5 million of total second quarter investment activity, including 55 healthcare properties totaling $676.6
million representing 3,034,240 square feet and loan investments of $2.9 million
• Declared quarterly dividend of $0.225 per share for the second quarter
• 95.7% of portfolio square footage leased as of June 30, 2016
• Net increase to gross leasable square footage of 46.3% to 9,586,638 square feet as of June 30, 2016 from 6,551,298 as of
March 31, 2016
COMPANY ANNOUNCEMENTS
• April 5, 2016: Announced the execution of a series of purchase and sale agreements and letters of intent with regional
health systems controlled by Catholic Health Initiatives to acquire 52 properties for a purchase price of $724.9 million,
as well as the closing of an additional $96.7 million in unrelated acquisitions since January 1, 2016.
• April 11, 2016: Announced the closing of its upsized underwritten public offering of 25,875,000 common shares of
beneficial interest, including 3,375,000 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 $17.85, for net proceeds of $442.7 million.
• May 5, 2016: Announced first quarter 2016 financial results, as well as the completion of $17.6 million of investments
since April 5, 2016.
• May 12, 2016: Announced the closure of the first tranche of the CHI portfolio, consisting of 26 facilities representing a
total investment of $324 million.
• June 13, 2016: Announced the amendment and upsizing of its unsecured credit facility and added a $250.0 million term
loan (drawn on July 7, 2016), increasing maximum facility capacity to $1.6 billion.
• July 5, 2016: Announced the closure of the second tranche of the CHI portfolio, consisting of 20 facilities representing a
total investment of $305 million, as well as the completion of additional investments totaling $43.5 million.
SECOND QUARTER INVESTMENTS SUBSEQUENT ACQUISITIONS
• Catholic Health Initiatives Portfolio - 46 Properties • Prairie Care MOB, Maplewood, MN
• Gardendale Surgery Center, Gardendale, AL • Real Estate Loan - El Paso, TX
• HealthEast Facilities, Minneapolis-St.Paul, MN • Springwoods MOB, Spring, TX
• NOMS - Clyde, Clyde, OH • Mezzanine Loan - Hazelwood, Maplewood, MN
• Medical Village Facilities, Kissimmee & Leesburg, FL • Tennessee Land Purchase, Jackson, TN
• Children's Hospital MOB, Milwaukee, WI
• Jewish Medical Center South MOB - 2, Shepherdsville, KY
• Pilot Medical Center, Birmingham, AL
• Mezzanine Loan - Catalyst, Pensacola, FL
8
CATHOLIC HEALTH INITIATIVES ACQUISITION
HIGHLIGHTS AND STATISTICS
As of June 30, 2016, we have completed the acquisition of 46 medical office facilities from CHI, totaling 2,816,986 square feet
and representing an aggregate purchase price of $615.5 million. Subsequent to June 30, 2016, we have completed the acquisition
of 1 additional medical office facility from CHI for a purchase price of $19.9 million. Acquisitions of 3 additional CHI facilities
are anticipated to be completed in the third quarter, with an additional acquisition anticipated to be completed in early 2017.
(1) Total GLA for DOC Holdings as of March 31, 2016 is adjusted for an 1,100 SF property remeasurement occurring during the period.
CHI PORTFOLIO DISTRIBUTION
CHI INVESTMENT DETAIL - BY HEALTH SYSTEM
DOC Holdings as
of March 31, 2016 CHI Portfolio
Other Q2
Acquisitions
(non-CHI)
Total DOC
Portfolio as of
June 30, 2016
Total properties 167 46 9 222
Total gross leasable area (GLA) (1) 6,552,398 2,816,986 217,254 9,586,638
% Leased 96.1% 94.4% 98.3% 95.7%
Average remaining lease term (years) 8.6 8.6 8.8 8.6
% of GLA on-campus / affiliated 72.8% 100.0% 11.3% 79.4%
Health System Number of Properties
Aggregate Purchase Price
($MM) Aggregate Square Footage
CHI - KentuckyOne Health 10 $ 206.1 928,652
CHI - Nebraska 10 129.0 645,827
CHI - Franciscan 7 88.0 365,608
CHI - Alexius 6 85.6 345,767
CHI - St Vincent 4 25.4 118,306
CHI - Lukes 1 21.2 96,199
CHI - Lukes - Memorial 3 19.7 117,170
CHI - Health 1 17.3 82,000
Centura 3 15.6 32,620
CHI - Memorial 1 7.6 84,837
Total 46 $ 615.5 2,816,986
9
FINANCIAL HIGHLIGHTS
(Unaudited and in thousands, except sq. ft. and per share data)
(1) Unadjusted for unamortized fair value adjustments and deferred financing costs
(2) Outstanding common shares and OP Units at quarter end, multiplied by share price at quarter end
INCOME Three Months Ended
June 30, 2016 March 31, 2016
Revenues $ 53,216 $ 44,134
NOI 39,417 33,089
Annualized Adjusted EBITDA 142,588 119,132
Net income available to common shareholders per common share $ 0.05 $ 0.04
Normalized FFO 29,537 23,690
Normalized FFO per common share and OP Unit $ 0.22 $ 0.22
Normalized FAD 26,971 21,063
CAPITALIZATION As of
ASSETS June 30, 2016 March 31, 2016
Gross Real Estate Investments (including gross lease intangibles) 2,547,128 1,864,137
Total Assets 2,532,912 1,850,892
DEBT AND EQUITY
Total Debt (1) 642,337 385,886
Total Equity 1,798,068 1,380,956
Equity Market Capitalization 2,822,433 2,013,688
Implied Equity Market Capitalization (2) 2,904,251 2,086,257
Total Debt / Implied Equity Market Capitalization 22% 18%
Gross Real Estate Investments Real Estate Investments/Quarter Total GLA
Portfolio Growth Since IPO
$2,800,000
$2,600,000
$2,400,000
$2,200,000
$2,000,000
$1,800,000
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
G
ro
ss
R
ea
lE
st
at
e
In
ve
st
m
en
ts
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
G
LA
in
SF
IPO Q3-2013
Q4-2013
Q1-2014
Q2-2014
Q3-2014
Q4-2014
Q1-2015
Q2-2015
Q3-2015
Q4-2015
Q1-2016
Q2-2016
$123,998
$234,467
$255,967
$412,011
$484,714
$712,951
$819,219
$1,047,575
$1,204,354
$1,500,868
$1,664,783
$1,864,137
$2,547,128
10
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
June 30, 2016
Six Months Ended
June 30, 2016
Net income $ 7,184 $ 12,608
Net income attributable to NCI - partially owned properties (60) (377)
Preferred distributions (437) (985)
Depreciation and amortization expense 19,778 35,767
Depreciation and amortization expense - partially owned properties (157) (352)
FFO applicable to common shares and OP Units $ 26,308 $ 46,661
FFO per common share and OP Unit $ 0.19 $ 0.38
Net change in fair value of derivative (27) (67)
Acquisition expenses 3,256 6,633
Normalized FFO applicable to common shares and OP Units $ 29,537 $ 53,227
Net income available to common shareholders per common share and OP Unit $ 0.05 $ 0.09
Normalized FFO per common share and OP Unit $ 0.22 $ 0.44
Normalized FFO applicable to common shares and OP Units 29,537 53,227
Non-cash share compensation expense 1,156 1,971
Straight-line rent adjustments (4,019) (7,204)
Amortization of acquired above/below market leases 767 1,512
Amortization of lease inducements 201 359
Amortization of deferred financing costs 499 947
TI/LC and recurring capital expenditures (1,423) (3,301)
Seller master lease and rent abatement payments 253 523
Normalized FAD applicable to common shares and OP Units $ 26,971 $ 48,034
Weighted average number of common shares and OP Units outstanding 135,944,722 121,575,247
11
RECONCILIATION OF NON-GAAP MEASURES: NET OPERATING INCOME AND ADJUSTED EBITDA
(Unaudited and in thousands, except share and per share data)
NET OPERATING INCOME
Three Months Ended
June 30, 2016
Six Months Ended
June 30, 2016
Net income $ 7,184 $ 12,608
General and administrative 4,926 9,047
Acquisition expenses 3,256 6,633
Depreciation and amortization expense 19,799 35,809
Interest expense 4,279 8,476
Net change in fair value of derivative (27) (67)
NOI $ 39,417 $ 72,506
NOI $ 39,417 $ 72,506
Straight-line rent adjustments (4,019) (7,204)
Amortization of acquired above/below market leases 826 1,571
Amortization of lease inducements 201 359
Seller master lease and rent abatement payments 253 523
Cash NOI $ 36,678 $ 67,755
ADJUSTED EBITDA
Three Months Ended
June 30, 2016
Six Months Ended
June 30, 2016
Net income $ 7,184 $ 12,608
Depreciation and amortization 19,799 35,809
Interest expense 4,279 8,476
Net change in fair value of derivative (27) (67)
EBITDA $ 31,235 $ 56,826
Acquisition expenses 3,256 6,633
Non-cash share compensation expense 1,156 1,971
Adjusted EBITDA $ 35,647 $ 65,430
Adjusted EBITDA Annualized $ 142,588 $ 130,860
12
MARKET CAPITALIZATION AND DEBT SUMMARY
(Unaudited and in thousands, except share and per share data)
As of
MARKET CAPITALIZATION June 30, 2016
Revolving credit facility debt $ 378,000
Unsecured notes 150,000
Mortgage debt 114,337
Total Debt (1) $ 642,337
Redeemable equity $ 19,867
Share price $ 21.01
Total common shares outstanding 134,337,589
Total OP Units outstanding 3,894,249
Implied equity market capitalization $ 2,904,251
Total Firm Value (Debt + Pref. + Equity) $ 3,566,455
Total Debt/Total Assets 25.4%
Total Debt/Total Firm Value 18.0%
Debt Equity
Debt is 18% of Firm Value
Balance as of
DEBT SUMMARY (1) June 30, 2016 Interest Rate Maturity Date
Revolving Credit Facility Debt $ 378,000 1.7 % 9/18/2020
Senior Unsecured Notes
Series A 15,000 4.0 % 1/7/2023
Series B 45,000 4.4 % 1/7/2026
Series C 45,000 4.6 % 1/7/2028
Series D 45,000 4.7 % 1/7/2031
Mortgage Debt, Maturing (2):
2016 — — %
2017 39,989 5.7 %
2018 29,047 3.4 %
Thereafter 45,301 5.0 %
$ 642,337 2.9%
Debt Maturity Schedule as of June 30, 2016
$400,000
$300,000
$200,000
$100,000
$0
2016 2017 2018 2019 2020 2021 2022 Thereafter
$—
$39,989 $29,047 $18,750
$382,711
$7,384 $14,456
$150,000
(1) Unadjusted for unamortized fair value adjustments and deferred financing costs
(2) Weighted average maturity of Mortgage Debt is 2.4 years
13
FINANCIAL STATISTICS
(Unaudited and in thousands, except share and per share data)
Quarter Ended
June 30, 2016
Annualized dividend rate (1) $ 0.90
Price per share (2) $ 21.01
Annualized Dividend Yield 4.28%
Total debt (3) $ 642,337
Net debt (less cash) 604,392
Adjusted EBITDA (annualized)* 142,588
Net Debt / Adjusted EBITDA Ratio 4.24x
Adjusted EBITDA (annualized)* $ 142,588
Cash interest expense (annualized)* 15,120
Interest Coverage Ratio 9.43x
Total interest $ 4,279
Secured debt principal amortization 1,089
Total fixed charges $ 5,368
Adjusted EBITDA 35,647
Adjusted EBITDA Fixed Charge Coverage Ratio 6.64x
Equity market cap $ 2,904,251
Redeemable equity 19,867
Total debt (3) 642,337
Total Firm Value 3,566,455
Total debt (3) $ 642,337
Total assets 2,532,912
Total Debt / Total Assets 25.4%
Total Debt / Total Firm Value 18.0%
Weighted average common shares 131,481,329
Weighted average unvested restricted common shares and share units 593,050
Weighted average OP Units not owned by DOC 3,870,343
Weighted Average Common Shares and OP Units - Diluted 135,944,722
(1) Annualized rate based on $0.225 quarterly dividend for the quarter ending June 30, 2016. 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 $21.01 as of June 30, 2016.
(3) Unadjusted for unamortized fair value adjustments and deferred financing costs.
* Amounts are annualized and actual amounts may differ significantly from the annualized amounts shown.
14
SAME-STORE PORTFOLIO PERFORMANCE AND TENANT OCCUPANCY
(Unaudited and in thousands)
SAME-STORE PORTFOLIO ANALYSIS
Portfolio Same-Store
Quarter Ended Quarter Ended
June 30, 2016 June 30, 2016
Number of properties 222 107
Gross leasable area 9,586,638 3,876,138
Cash NOI $ 36,678 $ 19,314
% Leased 95.7% 95.5%
SAME-STORE PORTFOLIO PERFORMANCE
Year-Over-Year Comparison Sequential Comparison
Q2'16 Q2'15 Change Q2'16 Q1'16 Change
Number of properties 107 107 — 107 107 —
Gross leasable area 3,876,138 3,876,138 — 3,876,138 3,876,138 —
% Leased 95.5% 95.6% -10 bps 95.5% 95.6% -10 bps
Rental revenues 26,062 25,832 +0.9% 26,062 26,225 (0.6)%
Operating expenses (6,748) (6,834) (1.3)% (6,748) (7,050) (4.3)%
Same-Store Cash NOI 19,314 18,998 +1.7% 19,314 19,175 +0.7%
TENANT OCCUPANCY
Quarter Ended Percentage of total GLA
June 30, 2016 June 30, 2016
Total GLA
Total square feet beginning of quarter 6,551,298 68.3 %
Acquired GLA 3,035,340 31.7 %
Disposed GLA — — %
Total square feet end of quarter 9,586,638 100.0 %
Occupied GLA
Occupied GLA beginning of quarter 6,284,928 65.6 %
Expirations (53,257) (0.6)%
Renewals 32,392 0.3 %
Retention Rate 61%
New leases commencing in quarter 34,428 0.4 %
Net absorption / (vacancy loss) 13,563 0.1 %
Net occupied GLA acquired 2,873,987 30.0 %
Occupied GLA end of quarter 9,172,478 95.7 %
Same-Store Cash
NOI, 52.7%
Other Cash
NOI, 47.3%
15
INVESTMENT ACTIVITY AND LEASE EXPIRATION SCHEDULE
LEASE EXPIRATION SCHEDULE
(As of June 30, 2016)
Expiration Expiring Expiring Lease % of Total Expiring Lease % of Total Average Rent
Year Leases GLA GLA ABR ABR per SF
2016 64 196,060 2.0% $ 3,872 2.0% $ 19.75
2017 116 425,372 4.4% 10,832 5.7% 25.46
2018 100 464,997 4.9% 8,977 4.7% 19.31
2019 76 445,892 4.7% 9,202 4.8% 20.64
2020 86 380,663 4.0% 7,494 3.9% 19.69
2021 66 332,409 3.5% 6,404 3.4% 19.27
2022 42 397,863 4.2% 8,918 4.7% 22.41
2023 47 389,033 4.1% 7,699 4.0% 19.79
2024 62 771,052 8.0% 15,451 8.1% 20.04
2025 97 728,550 7.6% 16,748 8.8% 22.99
Thereafter: 146 4,569,441 47.7% 94,194 49.4% 20.61
MTM 22 71,146 0.7% 876 0.5% 12.31
Vacant 414,160 4.3%
Total / W.A. 924 9,586,638 100% $ 190,667 100% $ 20.90
INVESTMENT ACTIVITY
Acquisition First Year Purchase
Property Location Date Cash Yield % Leased Price GLA
CHI Portfolio - 46 Facilities (1) — — 6.2% 94.4% $ 615,546 2,816,986
Tinseltown Construction Loan (2) Jacksonville, FL — 9.0% — 1,638 —
Gardendale Surgery Center Gardendale, AL 4/11/2016 6.9% 100.0% 7,450 15,000
HealthEast - Curve Crest Stillwater, MN 4/14/2016 7.0% 100.0% 4,144 15,000
HealthEast - Victor Gardens Hugo, MN 4/14/2016 6.0% 83.0% 6,025 21,629
NOMS - Clyde Clyde, OH 5/10/2016 6.8% 100.0% 6,342 23,000
Medical Village at Kissimmee Kissimmee, FL 5/26/2016 9.5% 100.0% 4,923 20,600
Medical Village at Leesburg Leesburg, FL 5/26/2016 9.0% 100.0% 4,576 20,411
Children's Hospital MOB Milwaukee, WI 6/3/2016 7.0% (3) 100.0% 5,850 18,054
Jewish Medical Center South MOB - 2 Shepherdsville, KY 6/8/2016 7.2% 100.0% 4,343 24,491
Pilot Medical Center Birmingham, AL 6/29/2016 6.6% 100.0% 17,351 59,069
Mezzanine Loan - Catalyst Pensacola, FL 6/30/2016 9.5% — 1,340 —
Total / Weighted Average 6.3% $ 679,528 3,034,240
(1) See "Catholic Health Initiatives" section - Page 8
(2) We made additional advances on a construction loan to Tinseltown Partners, LLC to fund the renovations and additions of two re-purposed
buildings in Jacksonville, Florida. Figures presented above represent aggregate activity during the quarter.
(3) Refers to first year cash yield at stabilization.
16
PORTFOLIO GEOGRAPHIC DISTRIBUTION
(As of June 30, 2016)
TOP TEN STATES
State GLA
Texas 989,000
Kentucky 972,030
Nebraska 645,827
Georgia 631,402
Washington 558,567
Ohio 541,095
Arizona 524,592
Indiana 448,682
Minnesota 441,979
Alabama 396,515
Other 3,436,949
Total 9,586,638
Texas, 10%
Kentucky, 10%
Nebraska, 7%
Georgia, 7%
Washington, 6%
Ohio, 6%
Arizona, 5%Indiana, 5%
Minnesota, 5%
Alabama, 4%
Other, 35%
17
PORTFOLIO DIVERSIFICATION
(As of June 30, 2016)
THREE MONTHS ENDED JUNE 30, 2016
Campus Proximity
(Based on Cash NOI)
Off-Campus,
23%
On-Campus /
Affiliated, 77%
Coverage
# of Properties GLA % of Total % Leased Ratio
Single-tenant MOBs 101 3,413,916 35.6% 99.7% N/A
Multi-tenant MOBs 112 5,419,153 56.6% 92.2% N/A
Hospitals 5 334,374 3.5% 100.0% 3.4x
LTACHs 3 310,352 3.2% 100.0% 2.8x
Corporate Office 1 108,843 1.1% 85.0% N/A
Total 222 9,586,638 100.0% 95.7%
Lease Type
(Based on Revenue)
Absolute
Net, 40%
NNN,
45%Modified Gross,
12%
Gross,
3%
Hospital and LTACH Payor Mix
(Trailing Twelve Months)
Medicare,
43%
Private
Pay, 57%
Building Type
(Based on Cash NOI)
MOB,
87%
LTACH,
3%
Hospital,
10%
18
TOP 10 HEALTH SYSTEM RELATIONSHIPS
(As of June 30, 2016, $ in thousands, determined by ABR)
Weighted Avg. % of Total
Remaining Leased % of Total Annualized Annualized
Tenant Lease Term GLA GLA Base Rent Base Rent
CHI - KentuckyOne Health 9.8 731,616 7.6% $ 12,655 6.6%
CHI - Nebraska 9.8 472,287 4.9% 6,636 3.5%
CHI - St. Alexius 10.0 320,407 3.3% 5,278 2.8%
Great Falls Hospital 19.1 185,085 1.9% 5,145 2.7%
LifeCare 11.5 310,352 3.3% 4,911 2.6%
CHI - Franciscan 9.9 292,300 3.1% 4,839 2.5%
Trios Health 29.1 161,885 1.7% 4,584 2.4%
IMS / Dignity Health 8.9 160,001 1.7% 3,760 2.0%
EEPPMC Partners 12.2 77,000 0.8% 3,585 1.9%
Wayne State University Physician Group 13.2 176,000 1.8% 3,247 1.7%
Total / W.A. 11.9 2,886,933 30.1% $ 54,640 28.7%
Jewish Medical Center - South MOB
Shepherdsville, KY
McAuley Center
Omaha, NE
19
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30,
2016
December 31,
2015
ASSETS
Investment properties:
Land and improvements $ 160,718 $ 130,788
Building and improvements 2,080,192 1,284,863
Tenant improvements 11,519 9,243
Acquired lease intangibles 263,919 205,168
2,516,348 1,630,062
Accumulated depreciation (129,136) (91,250)
Net real estate property 2,387,212 1,538,812
Real estate loans receivable 38,774 39,349
Investment in unconsolidated entity 1,354 1,322
Net real estate investments 2,427,340 1,579,483
Cash and cash equivalents 37,945 3,143
Tenant receivables, net 3,427 2,977
Other assets 64,200 53,283
Total assets $ 2,532,912 $ 1,638,886
LIABILITIES AND EQUITY
Liabilities:
Credit facility $ 369,685 $ 389,375
Notes payable 149,561 —
Mortgage debt 114,296 94,240
Accounts payable 1,723 644
Dividends payable 31,771 20,783
Accrued expenses and other liabilities 38,593 24,473
Acquired lease intangibles, net 9,348 5,950
Total liabilities 714,977 535,465
Redeemable noncontrolling interest - Operating Partnership and partially owned properties 19,867 26,960
Equity:
Common shares, $0.01 par value, 500,000,000 common shares authorized, 134,337,589 and 86,864,063
common shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively. 1,348 872
Additional paid-in capital 1,890,016 1,129,284
Accumulated deficit (153,243) (109,024)
Total shareholders' equity 1,738,121 1,021,132
Noncontrolling interests:
Operating Partnership 50,155 45,451
Partially owned properties 9,792 9,878
Total noncontrolling interest 59,947 55,329
Total equity 1,798,068 1,076,461
Total liabilities and equity $ 2,532,912 $ 1,638,886
20
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share and per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Revenues:
Rental revenues $ 42,196 $ 23,625 $ 77,051 $ 43,966
Expense recoveries 9,552 4,908 17,455 8,444
Interest income on real estate loans and other 1,468 1,150 2,844 1,757
Total revenues 53,216 29,683 97,350 54,167
Expenses:
Interest expense 4,279 2,193 8,476 3,903
General and administrative 4,926 3,989 9,047 7,341
Operating expenses 13,798 7,304 24,835 13,013
Depreciation and amortization 19,799 10,351 35,809 18,591
Acquisition expenses 3,256 2,575 6,633 8,507
Total expenses 46,058 26,412 84,800 51,355
Income before equity in income of unconsolidated entity, loss on
sale of investment property, and noncontrolling interests: 7,158 3,271 12,550 2,812
Equity in income of unconsolidated entity 26 26 58 52
Loss on sale of investment property — — — (15)
Net income 7,184 3,297 12,608 2,849
Net income attributable to noncontrolling interests:
Operating Partnership (201) (157) (374) (133)
Partially owned properties (60) (144) (377) (176)
Net income attributable to controlling interest 6,923 2,996 11,857 2,540
Preferred distributions (437) (425) (985) (491)
Net income attributable to common shareholders $ 6,486 $ 2,571 $ 10,872 $ 2,049
Net income per share:
Basic $ 0.05 $ 0.04 $ 0.09 $ 0.03
Diluted $ 0.05 $ 0.04 $ 0.09 $ 0.03
Weighted average common shares
Basic 131,481,329 70,376,959 117,092,668 68,026,278
Diluted 135,944,722 74,267,283 121,575,247 71,862,249
Dividends and distributions declared per common share and OP Unit $ 0.225 $ 0.225 $ 0.450 $ 0.450
21
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 (ABR): Annualized base rent is calculated by multiplying contractual base rent for June 2016 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. 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 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, 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.
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.
22
REPORTING DEFINITIONS (continued)
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.
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 or below market leases and
assumed debt, amortization of deferred financing costs, amortization of lease inducements, and recurring capital expenditures related to tenant
improvements and leasing commissions, and includes cash payments from seller master leases and rent abatement payments. 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 the Company’s computation of Normalized FAD may not be comparable to that of other REITs, the
Company believes Normalized FAD provides a meaningful supplemental measure of its 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 the Company’s financial
performance. 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 net
change in fair value of derivative financial instruments, acquisition-related expenses, acceleration of deferred financing costs, 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 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, leases in holdover
status, 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.
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.