Attached files
| file | filename |
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| EX-99.1 - EX-99.1 - Physicians Realty Trust | a2021q2earningspressreleas.htm |
| 8-K - 8-K - Physicians Realty Trust | doc-20210804.htm |
SUPPLEMENTAL OPERATING & FINANCIAL INFORMATION SECOND QUARTER 2021 PHYSICIANS REALTY TRUST NYSE: DOC Exhibit 99.2 June 2021 Palm Valley MOB Goodyear, AZ Springwoods MOB Spring, TX
2 COMPANY OVERVIEW ABOUT PHYSICIANS REALTY TRUST 4 SECOND QUARTER 2021 HIGHLIGHTS 6 FINANCIAL HIGHLIGHTS 7 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) 8 RECONCILIATION OF NON-GAAP MEASURES: NET OPERATING INCOME AND ADJUSTED EBITDAre 9 MARKET CAPITALIZATION AND DEBT SUMMARY 10 LEVERAGE STATISTICS AND COVENANT PERFORMANCE 11 MOB SAME-STORE PORTFOLIO PERFORMANCE AND PORTFOLIO OCCUPANCY 12 INVESTMENT ACTIVITY AND CONSTRUCTION LOAN SUMMARY 13 PORTFOLIO DIVERSIFICATION 14 CONSOLIDATED LEASING RELATIONSHIPS AND EXPIRATION SCHEDULE 15 CONSOLIDATED BALANCE SHEETS 16 CONSOLIDATED STATEMENTS OF INCOME 17 REPORTING DEFINITIONS 18 TABLE OF CONTENTS
3 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,” "outlook,” “continue,” “projects,” “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. 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. 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 discussion of 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/A for the fiscal year ended December 31, 2020. NON-GAAP FINANCIAL MEASURES This presentation includes EBITDAre, Adjusted EBITDAre, EBITDAR, Net Operating Income (or NOI), Cash NOI, MOB Same-Store Cash NOI, Funds From Operations (or FFO), Normalized FFO, and Normalized Funds Available For Distribution (or FAD), which are non-GAAP financial measures. For purposes of the Securities and Exchange Commission’s (“SEC”) 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 statements of operations, balance sheets or statements 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 presentation, GAAP refers to generally accepted accounting principles in the United States of America. Our use of the non-GAAP financial measure terms herein may not be comparable to that of other real estate investment trusts. 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. ADDITIONAL INFORMATION The information in this supplemental information package should be read in conjunction with the Company’s Annual Report on Form 10-K/A, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, earnings press release dated August 4, 2021, and other information filed with, or furnished to, 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.
4 ABOUT PHYSICIANS REALTY TRUST Physicians Realty Trust (NYSE:DOC) (the “Trust,” the “Company,” “DOC,” “we,” “our” and “us”) is a self-managed health care real estate company organized in 2013 to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals, and health care delivery systems. We invest in real estate that is integral to providing high quality health care services. Our properties typically are on a campus with a hospital or other health care facilities or strategically located and affiliated with a hospital or other health care facilities. Our management team has significant public health care REIT experience and long established relationships with physicians, hospitals, and health care 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. 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, 2021, owned approximately 97.6% of the partnership interests in the operating partnership (“OP Units”). Unless otherwise indicated, portfolio statistics include amounts attributable to the Company's pro-rata share of unconsolidated joint venture assets and exclude the Company's corporate office building. COMPANY SNAPSHOT As of June 30, 2021 Gross real estate investments (thousands) $ 5,044,970 Total health care properties 275 % Leased 95.6% Total portfolio gross leasable area (sq. ft.) 14,662,273 % of GLA on-campus / affiliated 89% Average remaining lease term for all buildings (years) 6.6 Cash and cash equivalents (thousands) $ 1,518 Net consolidated debt to firm value 24.5% Weighted average interest rate per annum on consolidated debt 3.7% Equity market cap (thousands) $ 4,015,425 Quarterly dividend $ 0.23 Quarter end stock price $ 18.47 Dividend yield 4.98% Common shares outstanding 217,402,529 OP Units outstanding and not owned by DOC 5,404,237 Dilutive restricted common shares and units 1,419,073 Consolidated firm value (thousands) $ 5,496,166
5 ABOUT PHYSICIANS REALTY TRUST (CONTINUED) BOARD OF TRUSTEES Stanton D. Anderson Mark A. Baumgartner Albert C. Black Compensation Committee Chair Audit Committee Chair Nominating and Corporate Governance Committee Chair William A. Ebinger, M.D. Pamela J. Kessler Richard A. Weiss Trustee Trustee Finance and Investment Committee Chair MANAGEMENT TEAM D. Deeni Taylor Mark D. Theine John W. Lucey Executive Vice President Executive Vice President Chief Accounting and Chief Investment Officer Asset & Investment Management Administrative Officer 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, Senior Counsel (414) 367-5600 Chicago, IL 60606 Chicago, IL 60601 (312) 879-2000 (312) 861-8000 COVERING ANALYSTS C. Kucera - B. Riley J. Petersen - Jefferies LLC J. Dennerlein - Bank of America Merrill Lynch J. Sadler - Keybanc Capital Markets Inc. C. Siversky - Berenberg Capital Markets LLC V. Malhotra - Morgan Stanley J. Sanabria - BMO Capital Markets Corp. J. Hughes - Raymond James Financial Inc. M. Gorman - BTIG M. Carroll - RBC Capital Markets LLC D. Bernstein - Capital One Securities A. Sweitzer - Robert W. Baird & Co. N. Joseph - Citi S. Manaker - Stifel D. Toti - Colliers Securities M. Lewis - Truist Securities M. Ross - Compass Point 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 the Company 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. Tommy G. Thompson John T. Thomas Chairman President Chief Executive Officer John T. Thomas Jeffrey N. Theiler President Executive Vice President Chief Executive Officer Chief Financial Officer Daniel M. Klein Bradley D. Page Laurie P. Becker Amy M. Hall Senior Vice President Senior Vice President Senior Vice President Senior Vice President Deputy Chief Investment Officer General Counsel Controller Leasing & Physician Strategy
6 SECOND QUARTER 2021 HIGHLIGHTS OPERATING HIGHLIGHTS • Second quarter 2021 total revenue of $112.9 million, an increase of 3.5% compared to the prior year period • Second quarter 2021 rental revenue of $80.6 million, an increase of 1.0% compared to the prior year period • Generated quarterly net income per share of $0.08 on a fully diluted basis • Generated quarterly normalized funds from operations (Normalized FFO) of $0.26 per share on a fully diluted basis • Completed investments and construction loan commitments of $55.0 million during the second quarter • Second quarter MOB Same-Store Cash Net Operating Income (Cash NOI) growth of 2.4% year-over-year • Declared quarterly dividend of $0.23 per share for the second quarter • 95.6% of portfolio square footage leased as of June 30, 2021 COMPANY ANNOUNCEMENTS • May 13, 2021: Announced the Company's senior unsecured debt rating from Standard and Poor's Rating Services ("S&P") has been upgraded to 'BBB' with a stable outlook, from the previous rating of 'BBB-'. • June 7, 2021: Announced the release of our 2020 Environmental, Social, and Governance (ESG) report. • June 18, 2021: 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 June 30, 2021. The distribution was paid on July 16, 2021 to common shareholders and OP Unit holders of record as of the close of business on July 2, 2021. • July 1, 2021: Announced the Company's senior unsecured debt rating from Moody's Investors Services ("Moody's") has been upgraded to 'Baa2' with a stable outlook, from the previous rating of 'Baa3'. SECOND QUARTER INVESTMENT HIGHLIGHTS • AdventHealth Wesley Chapel MOB II, Wesley Chapel, FL • TOPA Denton, Denton, TX TOPA Denton Denton, TX AdventHealth Wesley Chapel MOB II Wesley Chapel, FL
7 FINANCIAL HIGHLIGHTS (Unaudited and in thousands, except sq. ft. and per share data) (1) Unadjusted for unamortized fair value adjustments, unamortized discount, and unamortized deferred financing costs. G ro ss R ea l E st at e In ve st m en ts G LA in SF Portfolio Growth Since IPO Gross Real Estate Assets Gross Real Estate Investments/Quarter Total Health Care Property GLA 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 Q3-2016 Q4-2016 Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018 Q2-2018 Q3-2018 Q4-2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 $5,500,000 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 INCOME Three Months Ended June 30, 2021 March 31, 2021 Revenues $ 112,925 $ 113,339 Net income 18,681 17,805 NOI 82,627 82,496 Annualized Adjusted EBITDAre 312,944 311,452 Net income available to common shareholders per common share $ 0.08 $ 0.08 Normalized FFO 58,223 57,668 Normalized FFO per common share $ 0.26 $ 0.27 Normalized FAD 55,046 54,463 CAPITALIZATION As of ASSETS June 30, 2021 March 31, 2021 Gross Real Estate Investments (including gross lease intangibles) 5,044,970 5,019,592 Total Assets 4,357,667 4,370,895 DEBT AND EQUITY Consolidated Debt (1) 1,347,624 1,432,076 Total Equity 2,783,163 2,735,231 Equity Market Capitalization 4,015,425 3,760,577 Consolidated Firm Value 5,496,166 5,319,355 Consolidated Debt / Total Firm Value 24.5% 26.9% $123,998 $5,044,970
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 June 30, 2021 Six Months Ended June 30, 2021 Net income $ 18,681 36,486 Net income attributable to NCI - partially owned properties (151) (303) Preferred distributions — (13) Depreciation and amortization expense 38,000 75,877 Depreciation and amortization expense - partially owned properties (70) (140) Gain on the sale of investment properties, net (378) (354) Proportionate share of unconsolidated joint venture adjustments 2,141 4,338 FFO applicable to common shares $ 58,223 $ 115,891 Net change in fair value of derivative — — Net change in fair value of contingent consideration — — Normalized FFO applicable to common shares $ 58,223 $ 115,891 Net income available to common shareholders per common share $ 0.08 $ 0.17 FFO per common share $ 0.26 $ 0.53 Normalized FFO per common share $ 0.26 $ 0.53 Normalized FFO applicable to common shares $ 58,223 $ 115,891 Non-cash share compensation expense 3,468 7,175 Straight-line rent adjustments (2,380) (5,105) Amortization of acquired above/below market leases/assumed debt 860 1,724 Amortization of lease inducements 264 528 Amortization of deferred financing costs 582 1,163 TI/LC and recurring capital expenditures (5,673) (11,311) Loan reserve adjustments (84) (131) Proportionate share of unconsolidated joint venture adjustments (214) (425) Normalized FAD applicable to common shares $ 55,046 $ 109,509 Weighted average number of common shares outstanding 222,660,502 220,053,306
9 RECONCILIATION OF NON-GAAP MEASURES: NET OPERATING INCOME AND ADJUSTED EBITDAre (Unaudited and in thousands) NET OPERATING INCOME Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 Net income $ 18,681 $ 36,486 General and administrative 9,117 18,582 Depreciation and amortization expense 38,105 76,081 Interest expense 13,541 27,256 Gain on the sale of investment properties, net (378) (354) Proportionate share of unconsolidated joint venture adjustments 3,561 7,072 NOI $ 82,627 $ 165,123 NOI $ 82,627 $ 165,123 Straight-line rent adjustments (2,380) (5,105) Amortization of acquired above/below market leases 875 1,755 Amortization of lease inducements 264 528 Loan reserve adjustments (84) (131) Proportionate share of unconsolidated joint venture adjustments (145) (316) Cash NOI $ 81,157 $ 161,854 Cash NOI $ 81,157 Assets not held for all periods (1,732) LTACH & Hospital Cash NOI (4,375) Lease termination fees (157) Interest income on real estate loans (3,907) Joint ventures and other income (3,241) MOB Same-Store Cash NOI $ 67,745 EBITDAre Three Months Ended June 30, 2021 Net income $ 18,681 Depreciation and amortization expense 38,105 Interest expense 13,541 Gain on the sale of investment properties, net (378) Proportionate share of unconsolidated joint venture adjustments 3,498 EBITDAre $ 73,447 Non-cash share compensation expense 3,468 Pursuit costs 70 Non-cash intangible amortization 1,126 Pro forma adjustments for investment activity 125 Adjusted EBITDAre $ 78,236 Adjusted EBITDAre Annualized (1) $ 312,944 (1) Amounts are annualized and actual full year results may differ significantly from the annualized amounts shown.
10 (1) Unadjusted for unamortized fair value adjustments, unamortized discount, and unamortized deferred financing costs. (2) Weighted average maturity of Mortgage Debt is 3.0 years. Debt is 25% of Firm Value Debt Equity MARKET CAPITALIZATION AND DEBT SUMMARY (Unaudited and in thousands, except share and per share data) MARKET CAPITALIZATION June 30, 2021 Unsecured credit facility debt $ 322,000 Unsecured notes 975,000 Mortgage debt 50,624 Consolidated Debt (1) 1,347,624 Pro rata share of unconsolidated joint venture debt 136,396 Enterprise debt $ 1,484,020 Redeemable equity $ 7,091 Share price $ 18.47 Total common shares outstanding 217,402,529 Total OP Units outstanding 5,404,237 Total dilutive restricted common shares and units 1,419,073 Implied equity market capitalization $ 4,141,451 Consolidated Firm Value (Debt + Pref. + Equity) $ 5,496,166 Consolidated Debt/Gross Assets 26.3% Consolidated Debt/Total Firm Value 24.5% ENTERPRISE DEBT SUMMARY (1) Balance as of June 30, 2021 Interest Rate Maturity Date Revolving Credit Facility Debt $ 72,000 1.0 % 9/18/2022 Credit Facility Term Debt 250,000 2.1 % 6/10/2023 Senior Unsecured Notes January '16 - Series A 15,000 4.0 % 1/7/2023 January '16 - Series B 45,000 4.4 % 1/7/2026 January '16 - Series C 45,000 4.6 % 1/7/2028 January '16 - Series D 45,000 4.7 % 1/7/2031 August '16 - Series A 25,000 4.1 % 8/11/2025 August '16 - Series B 25,000 4.2 % 8/11/2026 August '16 - Series C 25,000 4.2 % 8/11/2027 March '17 400,000 4.3 % 3/15/2027 December '17 350,000 4.0 % 1/15/2028 Pro Rata Share Of Unconsolidated Joint Venture Debt 136,396 3.7 % Various Mortgage Debt, Maturing:(2) 2021 — — % 2022 20,280 5.0 % 2023 — — % Thereafter 30,344 4.3 % $ 1,484,020 3.7 % Enterprise Debt Repayment Schedule as of June 30, 2021 $919 $92,825 $266,008 $41,334 $25,476 $152,219 $425,476 $479,763 2021 2022 2023 2024 2025 2026 2027 Thereafter $0 $150,000 $300,000 $450,000 $600,000
11 LEVERAGE STATISTICS AND COVENANT PERFORMANCE (Unaudited and in thousands, except share and per share data) CONSOLIDATED LEVERAGE STATISTICS Quarter Ended June 30, 2021 Consolidated debt $ 1,347,624 Net consolidated debt (less cash) 1,346,106 Adjusted EBITDAre $ 78,236 Less: Amounts attributable to Unconsolidated Joint Ventures (3,498) Consolidated Adjusted EBITDAre $ 74,738 Consolidated Adjusted EBITDAre (annualized)* $ 298,952 Net Consolidated Debt / Consolidated Adjusted EBITDAre Ratio 4.50x Consolidated Adjusted EBITDAre $ 74,738 Cash interest expense 12,974 Interest Coverage Ratio 5.76x Consolidated interest expense $ 13,541 Capitalized interest 115 Secured debt principal amortization 452 Total fixed charges $ 14,108 Consolidated Adjusted EBITDAre 74,738 Consolidated Adjusted EBITDAre / Fixed Charge Coverage Ratio 5.30x Implied equity market cap $ 4,141,451 Redeemable equity 7,091 Consolidated debt 1,347,624 Consolidated Firm Value $ 5,496,166 Net consolidated debt (less cash) $ 1,346,106 Gross assets 5,116,830 Net Consolidated Debt / Gross Assets 26.3 % Net Consolidated Debt / Consolidated Firm Value 24.5 % Weighted average common shares 215,837,520 Weighted average OP Units not owned by DOC 5,403,909 Dilutive effect of unvested restricted common shares and share units 1,419,073 Weighted Average Common Shares and OP Units - Diluted 222,660,502 * Amounts are annualized and actual results may differ significantly from the annualized amounts shown. COVENANT PERFORMANCE Required June 30, 2021 Total Leverage Ratio ≤ 60.0% 28.3% Total Secured Leverage Ratio ≤ 40.0% 1.1% Maintenance of Unencumbered Assets ≥ 1.5x 3.6x Consolidated Debt Service (Trailing Four Quarters) ≥ 1.5x 5.1x ENTERPRISE LEVERAGE STATISTICS Quarter Ended June 30, 2021 Enterprise debt $ 1,484,020 Net enterprise debt (less cash) 1,482,502 Adjusted EBITDAre (annualized)* 312,944 Net Enterprise Debt / Adjusted EBITDAre Ratio 4.74x
12 MOB SAME-STORE PORTFOLIO PERFORMANCE AND PORTFOLIO OCCUPANCY (Unaudited and in thousands, except property count and sq. ft. data.) MOB SAME-STORE PORTFOLIO PERFORMANCE Year-Over-Year Comparison Sequential Comparison Q2'21 Q2'20 Change Q2'21 Q1'21 Change Number of MOBs 248 248 — 248 248 — Gross leasable area 13,115,438 13,115,438 — 13,115,438 13,115,438 — % Leased 95.4 % 95.4 % — bps 95.4 % 95.4 % — bps Rental revenues $ 99,593 $ 96,177 +3.6 % $ 99,593 $ 100,133 (0.5) % Operating expenses (31,848) (29,993) +6.2 % (31,848) (32,593) (2.3) % MOB Same-Store Cash NOI $ 67,745 $ 66,184 +2.4 % $ 67,745 $ 67,540 +0.3 % Cash NOI $ 81,157 $ 78,106 $ 81,157 $ 80,697 Cash NOI from: Assets not held for all periods (1,732) (561) (1,732) (1,444) Repositioning assets — — — — LTACH & Hospital Cash NOI (4,375) (5,497) (4,375) (4,336) Lease termination fees (157) (235) (157) — Interest income on real estate loans (3,907) (3,061) (3,907) (4,107) Joint ventures and other income (3,241) (2,568) (3,241) (3,270) MOB Same-Store Cash NOI $ 67,745 $ 66,184 $ 67,745 $ 67,540 MOB SAME-STORE PORTFOLIO ANALYSIS Portfolio MOB Same-Store Quarter Ended Quarter Ended June 30, 2021 June 30, 2021 Number of health care properties 275 248 Gross leasable area 14,662,273 13,115,438 Cash NOI $ 81,157 $ 67,745 % Leased 95.6 % 95.4 % PORTFOLIO OCCUPANCY Quarter Ended Percentage of Total GLA June 30, 2021 June 30, 2021 Total GLA Total square feet beginning of quarter 14,550,809 99.2 % Acquired GLA(1) 131,264 0.9 % Disposed GLA (19,800) (0.1) % Total square feet end of quarter 14,662,273 100.0 % Leased GLA Leased GLA beginning of quarter 13,938,101 95.1 % Expirations (415,061) (2.8) % Renewals 361,175 2.5 % Retention Rate 87 % New leases commencing in quarter 44,819 0.3 % Net absorption (9,067) (0.1) % Net leased GLA acquired / (disposed) 95,121 0.6 % Leased GLA end of quarter 14,024,155 95.6 % (1) Includes remeasurements of existing properties totaling 1,504 square feet. MOB Same- Store Cash NOI, 83.5% Other Cash NOI, 16.5%
13 INVESTMENT ACTIVITY AND CONSTRUCTION LOAN SUMMARY (Unaudited and in thousands, except sq. ft. data) QUARTERLY INVESTMENTS Acquisition Date First Year Cash Yield Investment AmountInvestment Location % Leased GLA Atlanta Medical Condominium Investment (1) Atlanta, GA 4/7/2021 N/A —% $ 943 3,260 AdventHealth Wesley Chapel MOB II Wesley Chapel, FL 4/21/2021 5.4% 88% 35,251 96,768 Mezzanine Loan - Brooklyn Park Brooklyn Park, MN 5/6/2021 8.0% — 1,850 — TOPA Denton (2) Denton, TX 6/11/2021 6.0% 100% 15,500 29,732 Construction Loan Draws Fort Worth, TX Various 6.0% — 1,426 — Total / Weighted Average 5.7% 90.0% $ 54,970 129,760 (1) With this acquisition, the units purchased by the Company represent 28% of the larger building square feet and are 83% occupied. This property is 105,000 square feet and consists of additional condominium units the Company intends to pursue in the near future. (2) The Company funded this investment through the conversion and satisfaction of a previously outstanding construction loan of $15.5 million. CONSTRUCTION LOAN SUMMARY Construction Loan Location Estimated Date of Completion Interest Rate Quarterly Fundings Amount Drawn to Date Total Commitment Purchase Option Cap Rate TOPA Hillwood Fort Worth, TX 2Q 2022 6.0% 1,426 3,983 10,500 6.2% QUARTERLY DISPOSITIONS Property Location Date Proceeds GLA Brookstone Physician Center Jacksonville, AL 6/7/2021 $ 2,600 19,800 Vacant El Paso Land (three parcels) El Paso, TX 6/10/2021 1,206 — Total $ 3,806 19,800 Woodlands Medical Arts Center The Woodlands, TX St. Vincent Carmel Women's Clinic Carmel, IN
14 % of Coverage # of Properties GLA % of Total Q2 Cash NOI % Leased Ratio Single-tenant MOBs 124 5,323,174 36.3% 38.5% 99.7% N/A Multi-tenant MOBs 131 8,133,254 55.5% 52.0% 92.9% N/A Specialty Hospitals 5 313,959 2.1% 4.1% 100.0% 6.2x(1) LTACHs 3 310,352 2.1% 1.6% 100.0% 2.6x Consolidated Total 263 14,080,739 96.0% 96.2% 95.8% Pro Rata Unconsolidated Joint Venture Assets 12 581,534 4.0% 3.8% 92.6% N/A Portfolio Total 275 14,662,273 100.0% 100.0% 95.6% PORTFOLIO DIVERSIFICATION (As of June 30, 2021, $ in thousands) UNCONSOLIDATED JOINT VENTURE SUMMARY Joint Venture % Ownership # of Properties GLA Q2 Cash NOI % Leased PMAK Joint Venture 12.3% 60 2,923,589 $ 14,052 90.2% Davis Joint Venture 49.0% 8 309,777 1,683 98.4% MedCore Realty Eden Hill, LLC 49.0% 1 140,205 800 92.1% DOC's Pro Rata Share 17.2% 12 581,534 $ 2,949 92.6% Absolute Net, 12% NNN, 81% Modified Gross, 5% Gross, 2% On-Campus / Adjacent, 51% Off-Campus / Affiliated, 37% Off-Campus / Unaffiliated, 12% 603 Assets, 16% Non-603 Assets, 84% (1) Excludes the Company's El Paso Specialty Hospital. Texas, 14% Indiana, 8% Georgia, 7% Nebraska, 7% Kentucky, 7% Minnesota, 6%Tennessee, 5% Arizona, 5% Ohio, 5% New York, 4% Other, 32% Top Ten States (Based on GLA) Lease Type (Based on Annualized Base Revenue) Campus Proximity (Based on Annualized Base Revenue) Consolidated 603 Asset Mix (Based on Annualized Base Revenue)
15 CONSOLIDATED LEASING RELATIONSHIPS AND EXPIRATION SCHEDULE (As of June 30, 2021, $ in thousands) LEASE EXPIRATION SCHEDULE Expiration Expiring Expiring Lease % of Total Expiring Lease % of Total Average Rent Year Leases GLA GLA ABR ABR per SF 2021 91 275,425 2.0% $ 6,346 2.0% $23.04 2022 112 576,013 4.1% 14,000 4.5% 24.30 2023 122 656,340 4.7% 15,253 4.9% 23.24 2024 104 825,068 5.9% 19,083 6.1% 23.13 2025 135 869,188 6.2% 21,492 6.9% 24.73 2026 125 3,237,792 23.0% 71,349 22.9% 22.04 2027 94 1,420,793 10.1% 30,889 9.9% 21.74 2028 81 1,389,062 9.9% 31,333 10.0% 22.56 2029 37 588,895 4.2% 15,685 5.0% 26.64 2030 50 612,903 4.4% 13,533 4.3% 22.08 Thereafter 127 2,974,108 20.9% 72,161 23.2% 24.26 MTM 37 60,231 0.4% 948 0.3% 15.73 Vacant 594,921 4.2% Total / W.A. 1,115 14,080,739 100.0% $ 312,072 100.0% $23.14 (1) Represents direct leases to investment grade entities and their subsidiaries. Parent rating used where direct tenant is not rated. INVESTMENT GRADE TENANCY (1) % of Total Credit Rating Leased % of Leased Annualized Annualized Relationship (Moody's / S&P) GLA GLA Base Rent Base Rent CommonSpirit Health Baa1/BBB+ 2,776,384 20.6% $ 51,959 16.6% Ascension Health Alliance Aa2/AA+ 612,675 4.5% 15,250 4.9% University of Louisville Baa1/A+ 598,560 4.4% 12,526 4.0% McKesson Corporation Baa2/BBB+ 396,967 2.9% 10,940 3.5% Baylor Scott and White Health Aa3/AA- 268,639 2.0% 8,156 2.6% HonorHealth A2/NA 257,506 1.9% 6,485 2.1% UnitedHealth Group Incorporated A3/A+ 226,004 1.7% 6,769 2.2% Trinity Health Credit Group Aa3/AA- 176,649 1.3% 4,328 1.4% Fairview Health Services A3/A+ 157,730 1.2% 4,258 1.4% University of Pittsburg Medical Center A2/A 149,492 1.1% 3,196 1.0% Other 2,166,474 16.1% 51,537 16.5% Total 7,787,080 57.7% $ 175,404 56.2% TOP 10 TENANTS BY ABR Weighted Avg. % of Total Remaining Leased % of Leased Annualized Annualized Tenant Lease Term GLA GLA Base Rent Base Rent CommonSpirit - CHI - Nebraska 5.4 898,975 6.7% $ 17,591 5.6% Northside Hospital 9.4 662,816 4.9% 15,175 4.9% UofL Health - Louisville, Inc. 5.1 598,560 4.4% 12,526 4.0% US Oncology 6.3 396,967 2.9% 10,940 3.5% Baylor Scott and White Health 4.5 268,639 2.0% 8,156 2.6% Ascension - St. Vincent's - Indianapolis 5.9 366,096 2.7% 7,877 2.5% CommonSpirit - CHI - St. Alexius (ND) 5.1 359,209 2.7% 6,816 2.2% HonorHealth 8.9 257,506 1.9% 6,485 2.1% Great Falls Clinic 14.1 185,085 1.4% 5,607 1.8% CommonSpirit - CHI - Franciscan 4.9 292,736 2.2% 5,588 1.8% Total / Weighted Average 6.6 4,286,589 31.8% $ 96,761 31.0%
16 CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, 2021 December 31, 2020 ASSETS (unaudited) Investment properties: Land and improvements $ 233,073 $ 231,621 Building and improvements 3,873,370 3,824,796 Tenant improvements 78,423 73,145 Acquired lease intangibles 409,156 406,935 4,594,022 4,536,497 Accumulated depreciation (759,163) (687,554) Net real estate property 3,834,859 3,848,943 Right-of-use lease assets, net 140,860 137,180 Real estate loans receivable, net 176,819 198,800 Investments in unconsolidated entities 73,406 77,755 Net real estate investments 4,225,944 4,262,678 Cash and cash equivalents 1,518 2,515 Tenant receivables, net 4,846 4,757 Other assets 125,359 144,000 Total assets $ 4,357,667 $ 4,413,950 LIABILITIES AND EQUITY Liabilities: Credit facility $ 319,331 $ 412,322 Notes payable 969,087 968,653 Mortgage debt 50,498 57,875 Accounts payable 5,424 7,007 Dividends and distributions payable 53,852 52,116 Accrued expenses and other liabilities 84,605 91,929 Lease liabilities 78,615 74,116 Acquired lease intangibles, net 6,001 6,641 Total liabilities 1,567,413 1,670,659 Redeemable noncontrolling interests - Series A Preferred Units (2020) and partially owned properties 7,091 28,289 Equity: Common shares, $0.01 par value, 500,000,000 common shares authorized, 217,402,529 and 209,550,592 common shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 2,174 2,096 Additional paid-in capital 3,440,314 3,303,231 Accumulated deficit (722,587) (658,171) Accumulated other comprehensive loss (4,519) (5,859) Total shareholders’ equity 2,715,382 2,641,297 Noncontrolling interests: Operating Partnership 67,349 73,302 Partially owned properties 432 403 Total noncontrolling interests 67,781 73,705 Total equity 2,783,163 2,715,002 Total liabilities and equity $ 4,357,667 $ 4,413,950
17 CONSOLIDATED STATEMENTS OF INCOME (Unaudited and in thousands, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenues: Rental revenues $ 80,572 $ 79,801 $ 160,967 $ 157,671 Expense recoveries 27,176 24,952 54,736 49,828 Interest income on real estate loans and other 5,177 4,313 10,561 8,995 Total revenues 112,925 109,066 226,264 216,494 Expenses: Interest expense 13,541 14,197 27,256 29,823 General and administrative 9,117 8,242 18,582 17,219 Operating expenses 33,456 31,029 67,390 61,992 Depreciation and amortization 38,105 37,045 76,081 73,792 Total expenses 94,219 90,513 189,309 182,826 Income before equity in loss of unconsolidated entities and gain on sale of investment properties, net: 18,706 18,553 36,955 33,668 Equity in loss of unconsolidated entities (403) (109) (823) (264) Gain on sale of investment properties, net 378 — 354 — Net income 18,681 18,444 36,486 33,404 Net income attributable to noncontrolling interests: Operating Partnership (417) (476) (876) (880) Partially owned properties (1) (151) (148) (303) (290) Net income attributable to controlling interest 18,113 17,820 35,307 32,234 Preferred distributions — (317) (13) (634) Net income attributable to common shareholders $ 18,113 $ 17,503 $ 35,294 $ 31,600 Net income per share: Basic $ 0.08 $ 0.09 $ 0.17 $ 0.16 Diluted $ 0.08 $ 0.09 $ 0.16 $ 0.16 Weighted average common shares: Basic 215,837,520 203,692,604 213,198,272 199,952,166 Diluted 222,660,502 210,405,776 220,053,306 206,699,177 Dividends and distributions declared per common share $ 0.23 $ 0.23 $ 0.46 $ 0.46 (1) Includes amounts attributable to redeemable noncontrolling interests.
18 REPORTING DEFINITIONS Adjusted Earnings Before Interest Taxes, Depreciation and Amortization for Real Estate (Adjusted EBITDAre): We define Adjusted EBITDAre as EBITDAre, computed in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), plus non-cash compensation, other non-recurring items, pursuit costs, non-cash intangible amortization, and pro forma impact of investment activity. We consider Adjusted EBITDAre 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 reported base rent for June 2021 by 12 (but excluding the impact of straight- line rent). Cash Net Operating Income (NOI): 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. Coverage Ratio: Reflects the ratio of full-year EBITDAR to rent of indicated properties. Coverage ratios are calculated one quarter in arrears, beginning the first full quarter after acquisition, for all properties the company has owned for fifteen months. Management fee is standardized to 4% of revenues for LTACHs. Earnings Before Interest Taxes, Depreciation, Amortization and Rent (EBITDAR): We define EBITDAR 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. Earnings Before Interest Taxes, Depreciation and Amortization for Real Estate (EBITDAre): In 2017, Nareit issued a white paper defining EBITDA for real estate as net income or loss computed in accordance with GAAP plus interest expense, income tax expense, depreciation and amortization expense, impairment, gains or losses from the sale of real estate; and the proportionate share of joint venture depreciation, amortization and other adjustments. We adopted the use of EBITDAre in the first quarter of 2018. 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 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. Gross Leasable Area (GLA): Gross leasable area (in square feet). Gross Real Estate Investments: Based on acquisition price (and includes lease intangibles). Health System: We define an entity to be a health system if each of the following criteria are met: 1) the entity provides inpatient or outpatient services in the primary course of business; 2) services are provided at more than one campus or site of care; and 3) if the entity only provides outpatient services, they must employ a minimum of 50 physicians. 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 ownership 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. Hospital Campus: We define a hospital campus to be the physical area immediately adjacent to a hospital institution's main buildings, including other areas and structures that are located within 250 yards of the main buildings.
19 REPORTING DEFINITIONS (continued) 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. MOB Same-Store Cash Net Operating Income (NOI): MOB Same-Store Cash NOI is a non-GAAP financial measure which excludes from Cash NOI assets not held for the entire preceding five quarters, non-MOB assets, lease termination fees, and other normalizing items not specifically related to the same-store property portfolio. Management considers MOB Same-Store Cash NOI a supplemental measure because it allows investors, analysts, and Company management to measure unlevered property-level operating results. Our use of the term MOB Same-Store Cash NOI may not be comparable to that of other real estate companies, as such other companies may have different methodologies for computing this amount. MOB Same-Store Portfolio: The MOB same-store portfolio consists of medical office properties held by the Company for the entire preceding five quarters. 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 our total portfolio of properties and other investments before general and administrative expenses, depreciation and amortization expense, interest expense, net change in the fair value of derivative financial instruments, gain or loss on the sale of investment properties, and impairment losses, including our share of all required adjustments from our unconsolidated joint ventures. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. Our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. Normalized Funds Available for Distribution (Normalized FAD): We define Normalized FAD, a non-GAAP measure, which excludes from Normalized FFO non-cash share compensation expense, straight-line rent adjustments, amortization of acquired above-market or below-market leases and assumed debt, amortization of lease inducements, amortization of deferred financing costs, and loan reserve adjustments, including our share of all required adjustments from unconsolidated joint ventures. We also adjust for recurring capital expenditures related to tenant improvements and leasing commissions, and cash payments from seller master leases and rent abatement payments, including our share of all required adjustments for unconsolidated joint ventures. Other REITs or real estate companies may use different methodologies for calculating Normalized FAD, and accordingly, our computation may not be comparable to those reported by other REITs. Although our computation of Normalized FAD may not be comparable to that of other REITs, we believe Normalized FAD provides a meaningful supplemental measure of our performance due to its frequency of use by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. Normalized FAD should not be considered as an alternative to net income or loss attributable to controlling interest (computed in accordance with GAAP) or as an indicator of our financial performance. Normalized FAD should be reviewed in connection with other GAAP measurements. 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, we use Normalized FFO, which excludes from FFO net change in fair value of derivative financial instruments, acceleration of deferred financing costs, net change in fair value of contingent consideration, and other normalizing items. However, our use of the term Normalized FFO may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. Normalized FFO should not be considered as an alternative to net income or loss (computed in accordance with GAAP), as an indicator of our financial performance or of cash flow from operating activities (computed in accordance with GAAP), or as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including 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: Refers to a property that is either located within a quarter mile of a hospital campus or is located more than a quarter mile from a hospital campus but is affiliated with a health system. Section 603 Assets: For the purposes of this Supplemental Information, "603 Asset" is defined to be our estimate of Annualized Base Revenue (ABR) as a percentage of all our ABR, derived from leases to hospitals for hospital outpatient department space located in an off-campus medical office building at least 250 yards from the hospital's main campus inpatient location, and that was billing Medicare for outpatient department services provided in that off-campus location as of November 2, 2015. ABR that is "not-603" for the purposes of this Supplemental Information could and would include ABR from space leased to a hospital outpatient department services provided in leased space within the 250 yard requirement for on-campus locations or in buildings that are more than 250 yards from the hospital service provider's main campus, but the hospital did not start billing for that service in the location until after November 2, 2015. djac