Physicians Realty Trust Reports Third Quarter 2023 Financial Results

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

 

  1. 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.

Contacts

Physicians Realty Trust



John T. Thomas

President and CEO

(214) 549-6611

jtt@docreit.com

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