Announces $0.05 Net Income per Share and
$0.25 Normalized FFO per Share for the Third Quarter of
2023
Third Quarter
Highlights:
- Reported third quarter 2023 total revenue of $138.5 million, an
increase of 5.3% over the prior year period.
- Reported net income of $12.9 million for the quarter ended
September 30, 2023, a decrease of 80.6% over the prior year period,
and third quarter net income per share of $0.05 on a fully diluted
basis. Net income in the third quarter 2022 included a $53.9
million net gain on the sale of investment properties.
- Generated third quarter Normalized Funds From Operations
(“Normalized FFO”) of $0.25 per share on a fully diluted
basis.
- Completed $16.8 million in investments, including the funding
of previous loan commitments.
- Third quarter Outpatient Medical Same-Store Cash Net Operating
Income growth was 1.5% year-over-year.
- Declared a quarterly dividend of $0.23 per share and OP Unit
for the third quarter 2023, paid on October 17, 2023.
- Third quarter weighted average leasing spread was 6.7% on
210,847 renewed square feet with 77% tenant retention on our
consolidated portfolio.
- Third quarter leasing activity on our consolidated portfolio
had positive net absorption of 23,904 square feet.
Subsequent Event
Highlights:
- Earned a score of 78 out of 100 (representing a 4%
year-over-year scoring increase) and a Green Star designation in
the 2023 GRESB Real Estate Assessment for sustainability
reporting.
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, 2023.
Third Quarter Financial Results
Total revenue for the third quarter ended September 30, 2023,
was $138.5 million, an increase of 5.3% from the third quarter
ended September 30, 2022. As of September 30, 2023, the portfolio
was approximately 94.7% leased.
Total expenses for the third quarter 2023 were $125.4 million,
compared to total expenses of $119.1 million for the third quarter
2022.
Net income for the third quarter 2023 was $12.9 million,
compared to net income of $66.3 million for the third quarter 2022.
Net income in the third quarter 2022 included a $53.9 million net
gain on the sale of investment properties.
Net income attributable to common shareholders for the third
quarter 2023 was $12.3 million. Diluted earnings per share for the
third quarter 2023 was $0.05 based on approximately 249.4 million
weighted average common shares and operating partnership units (“OP
Units”) outstanding.
Funds From Operations (“FFO”) totaled $62.8 million for the
third quarter 2023 and consisted of net income plus depreciation
and amortization on our consolidated portfolio of $47.8 million and
our unconsolidated joint ventures of $2.3 million, offset by $0.2
million of other adjustments, resulting in FFO of $0.25 per share
on a fully diluted basis. Normalized FFO, which adjusts for a $1.8
million gain on extinguishment of debt and a $0.2 million net
change in fair value of our derivatives, was $61.2 million, or
$0.25 per share on a fully diluted basis.
Normalized Funds Available for Distribution (“FAD”) for the
third quarter 2023, 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 and lease
commissions, loan reserve adjustments, and our share of adjustments
from unconsolidated investments, was $60.1 million.
Our Outpatient Medical Same-Store portfolio, which includes 270
properties representing 97% of our consolidated leasable square
footage, generated year-over-year Outpatient Medical Same-Store
Cash Net Operating Income (“Cash NOI”) growth of 1.5% for the third
quarter 2023.
Other Recent Events
Third Quarter Highlights
During the third quarter ended September 30, 2023, the Company
prepaid $36.1 million of mortgage debt that yielded an interest
rate of SOFR + 1.90%. The variable component of that mortgage debt
was fixed to 1.35% under a pay-fixed receive-variable interest rate
swap, for an all-in rate of 3.25%. The Company maintained the swap,
which expires on October 31, 2024.
Dividend Paid
On September 21, 2023, announced that 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,
2023. The dividend was paid on October 17, 2023, to common
shareholders and OP Unit holders of record as of the close of
business on October 3, 2023.
2023 GRESB Real Estate Assessment
The Company earned a score of 78 in the 2023 GRESB Real Estate
Assessment, outperforming the international average of 75 out of
100. This number represents a 4% year-over-year increase in our
scoring, a significant milestone in our sustainability reporting
efforts. The Company also earned the GRESB Green Star designation
for the third consecutive year since our inaugural GRESB
participation in 2021.
New in 2023, as part of customized GRESB peer group scoring
comprised of U.S.-based listed outpatient medical REITs, the
Company earned a ranking of 2 out of 6.
In addition, for the second consecutive year, the Company earned
an “A” rating and a score of 98 out of 100 in its 2023 GRESB Public
Disclosure Level, ranking first in its health care comparison
group. The GRESB Public Disclosure Level is an overall measure of
sustainability disclosure by listed property companies based on a
selection of indicators aligned with the existing GRESB Real Estate
Assessment.
Conference Call Information
The Company has decided to cancel its conference call to discuss
its financial performance and operating results for the third
quarter ended September 30, 2023, previously scheduled for Friday,
November 3, 2023 at 10:00 a.m. ET.
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, 2023,
owned approximately 96.1% 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. The
information contained on our website is not a part of, and is not
incorporated by reference into, this press release.
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, anticipated completion of development, and ability to
execute its business plan. While forward-looking statements reflect
our good faith beliefs, they are not guarantees of future
performance. Forward-looking statements should not be read as a
guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which
such performance or results will be achieved. Forward-looking
statements are based on information available at the time those
statements are made and/or management’s good faith belief as of
that time with respect to future events, and are subject to risks
and uncertainties that could cause actual performance or results to
differ materially from those expressed in or suggested by the
forward-looking statements. These forward-looking statements are
subject to various risks and uncertainties, not all of which are
known to the Company and many of which are beyond the Company’s
control, which could cause actual results to differ materially from
such statements. These risks and uncertainties are described in
greater detail in the Company’s filings with the Securities and
Exchange Commission (the “Commission”), including, without
limitation, the Company’s annual and periodic reports and other
documents filed with the Commission. Unless legally required, the
Company disclaims any obligation to update any forward-looking
statements after the date of this release, whether as a result of
new information, future events or otherwise. For a 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 for the fiscal year ended December 31,
2022 and Part II, Item 1A (Risk Factors) of the Company’s Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30,
2023.
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,
2023
2022
2023
2022
Revenues:
Rental revenues
$
94,744
$
92,073
$
281,901
$
278,230
Expense recoveries
39,776
36,563
115,195
107,525
Rental and related revenues
134,520
128,636
397,096
385,755
Interest income on real estate loans and
other
4,027
2,877
10,895
8,315
Total revenues
138,547
131,513
407,991
394,070
Expenses:
Interest expense
20,050
18,299
59,837
52,356
General and administrative
9,771
10,079
31,133
30,400
Operating expenses
47,625
43,647
138,094
128,080
Depreciation and amortization
47,932
47,040
143,555
142,002
Total expenses
125,378
119,065
372,619
352,838
Income before equity in (loss) gain of
unconsolidated entities and gain on sale of investment properties,
net:
13,169
12,448
35,372
41,232
Equity in (loss) gain of unconsolidated
entities
(278
)
(62
)
1,260
(452
)
Gain on sale of investment properties,
net
—
53,894
13
57,375
Net income
12,891
66,280
36,645
98,155
Net income attributable to noncontrolling
interests:
Operating Partnership
(505
)
(3,252
)
(1,443
)
(4,830
)
Partially owned properties (1)
(51
)
(70
)
(121
)
(384
)
Net income attributable to common
shareholders
$
12,335
$
62,958
$
35,081
$
92,941
Net income per share:
Basic
$
0.05
$
0.28
$
0.15
$
0.41
Diluted
$
0.05
$
0.28
$
0.15
$
0.41
Weighted average common shares:
Basic
238,480,299
226,529,041
238,124,981
225,743,856
Diluted
249,445,312
239,898,462
249,226,913
239,145,383
Dividends and distributions declared per
common share
$
0.23
$
0.23
$
0.69
$
0.69
- Includes amounts attributable to redeemable noncontrolling
interests.
Physicians Realty
Trust
Condensed Consolidated Balance
Sheets
(in thousands, except share
and per share data)
September 30,
December 31,
2023
2022
(unaudited)
ASSETS
Investment properties:
Land and improvements
$
249,468
$
241,559
Building and improvements
4,703,606
4,659,780
Construction in progress
41,722
18,497
Tenant improvements
95,447
88,640
Acquired lease intangibles
509,468
505,335
5,599,711
5,513,811
Accumulated depreciation
(1,140,208
)
(996,888
)
Net real estate property
4,459,503
4,516,923
Right-of-use lease assets, net
227,967
231,225
Real estate loans receivable, net
79,883
104,973
Investments in unconsolidated entities
72,069
77,716
Net real estate investments
4,839,422
4,930,837
Cash and cash equivalents
195,772
7,730
Tenant receivables, net
11,131
11,503
Other assets
166,142
146,807
Total assets
$
5,212,467
$
5,096,877
LIABILITIES AND EQUITY
Liabilities:
Credit facility
$
393,090
$
188,328
Notes payable
1,451,536
1,465,437
Mortgage debt
127,630
164,352
Accounts payable
4,933
4,391
Dividends and distributions payable
60,928
60,148
Accrued expenses and other liabilities
95,637
87,720
Lease liabilities
104,802
105,011
Acquired lease intangibles, net
23,170
24,381
Total liabilities
2,261,726
2,099,768
Redeemable noncontrolling interests -
partially owned properties
3,066
3,258
Equity:
Common shares, $0.01 par value,
500,000,000 common shares authorized, 238,482,769 and 233,292,030
common shares issued and outstanding as of September 30, 2023 and
December 31, 2022, respectively
2,385
2,333
Additional paid-in capital
3,817,545
3,743,876
Accumulated deficit
(1,012,869
)
(881,672
)
Accumulated other comprehensive income
15,216
5,183
Total shareholders’ equity
2,822,277
2,869,720
Noncontrolling interests:
Operating Partnership
116,079
123,015
Partially owned properties
9,319
1,116
Total noncontrolling interests
125,398
124,131
Total equity
2,947,675
2,993,851
Total liabilities and equity
$
5,212,467
$
5,096,877
Physicians Realty
Trust
Reconciliation of Non-GAAP
Measures
(in thousands, except share
and per share data) (Unaudited)
Three Months Ended
September 30,
2023
2022
Net income
$
12,891
$
66,280
Earnings per share - diluted
$
0.05
$
0.28
Net income
$
12,891
$
66,280
Net income attributable to noncontrolling
interests - partially owned properties
(51
)
(70
)
Depreciation and amortization expense
47,843
46,939
Depreciation and amortization expense -
partially owned properties
(132
)
(101
)
Gain on sale of investment properties,
net
—
(53,894
)
Proportionate share of unconsolidated
joint venture adjustments
2,271
2,298
FFO applicable to common shares
$
62,822
$
61,452
Net change in fair value of derivative
185
—
Gain on extinguishment of debt
(1,763
)
—
Proportionate share of unconsolidated
joint venture adjustments
—
(82
)
Normalized FFO applicable to common
shares
$
61,244
$
61,370
FFO per common share - diluted
$
0.25
$
0.26
Normalized FFO per common share -
diluted
$
0.25
$
0.26
Normalized FFO applicable to common
shares
$
61,244
$
61,370
Non-cash share compensation expense
3,968
4,349
Straight-line rent adjustments
(820
)
(1,478
)
Amortization of acquired
above/below-market leases/assumed debt
1,084
1,133
Amortization of lease inducements
246
225
Amortization of deferred financing
costs
763
581
Recurring capital expenditures and lease
commissions
(5,745
)
(4,129
)
Loan reserve adjustments
265
152
Proportionate share of unconsolidated
joint venture adjustments
(939
)
(403
)
Normalized FAD applicable to common
shares
$
60,066
$
61,800
Weighted average common shares outstanding
- diluted
249,445,312
239,898,462
Three Months Ended
September 30,
2023
2022
Net income
$
12,891
$
66,280
General and administrative
9,771
10,079
Depreciation and amortization expense
47,932
47,040
Interest expense
20,050
18,299
Corporate high yield interest income
(2,307
)
—
Swap income
(244
)
—
Net change in the fair value of
derivative
185
—
Gain on sale of investment properties,
net
—
(53,894
)
Proportionate share of unconsolidated
joint venture adjustments
3,542
3,463
NOI
$
91,820
$
91,267
NOI
$
91,820
$
91,267
Straight-line rent adjustments
(820
)
(1,478
)
Amortization of acquired
above/below-market leases
1,084
1,133
Amortization of lease inducements
246
225
Loan reserve adjustments
265
152
Proportionate share of unconsolidated
joint venture adjustments
(101
)
(176
)
Cash NOI
$
92,494
$
91,123
Cash NOI
$
92,494
$
91,123
Assets not held for all periods
(1,516
)
(478
)
Non-outpatient medical facilities
(2,816
)
(2,775
)
Lease termination fees
—
13
Interest income on real estate loans
(1,572
)
(2,517
)
Joint venture and other income
(3,581
)
(3,618
)
Outpatient Medical Same-Store Cash NOI
$
83,009
$
81,748
Three Months Ended
September 30,
2023
2022
Net income
$
12,891
$
66,280
Depreciation and amortization expense
47,932
47,040
Interest expense
20,050
18,299
Corporate high yield interest income
(2,307
)
—
Swap income
(244
)
—
Gain on sale of investment properties,
net
—
(53,894
)
Proportionate share of unconsolidated
joint venture adjustments
3,526
3,545
EBITDAre
$
81,848
$
81,270
Non-cash share compensation expense
3,968
4,349
Non-cash changes in fair value
185
—
Pursuit costs
241
149
Non-cash intangible amortization
1,330
1,358
Proportionate share of unconsolidated
joint venture adjustments
—
(82
)
Pro forma adjustments for investment
activity
45
871
Adjusted EBITDAre
$
87,617
$
87,915
This press release includes Funds From Operations (“FFO”),
Normalized FFO, Normalized Funds Available For Distribution
(“FAD”), Net Operating Income (“NOI”), Cash NOI, Outpatient Medical
Same-Store Cash NOI, Earnings Before Interest, Taxes, Depreciation
and Amortization for Real Estate (“EBITDAre”) and Adjusted
EBITDAre, 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, gain on extinguishment of debt, and other
normalizing items. Our Normalized FFO computation includes our
share of required adjustments from our unconsolidated joint
ventures and 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 building, site, and
tenant improvements, leasing commissions, 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, corporate high yield interest income,
swap income, 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.
Outpatient Medical 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-outpatient medical facility assets,
and other normalizing items not specifically related to the
same-store property portfolio. Management considers Outpatient
Medical 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
Outpatient Medical 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 EBITDAre in accordance with standards established
by Nareit and define EBITDAre as net income or loss computed in
accordance with GAAP plus depreciation and amortization, interest
expense, corporate high yield interest income, swap income, 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 EBITDAre, which excludes from
EBITDAre non-cash share compensation expense, non-cash changes in
fair value, pursuit costs, non-cash intangible amortization,
corporate high yield interest income, the pro forma impact of
investment activity, and other normalizing items. We consider
EBITDAre and Adjusted EBITDAre 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030197200/en/
Physicians Realty Trust John T. Thomas President and CEO (214)
549-6611 jtt@docreit.com
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