Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

During the three months ended March 31, 2017, the Company completed acquisitions of 7 operating healthcare properties and 2 condominium units located in 5 states for an aggregate purchase price of approximately $243.2 million. In addition, the Company completed $2.3 million of loan transactions and $2.8 million of noncontrolling interest buyouts, resulting in total investment activity of approximately $248.3 million.

Investment activity for the three months ended March 31, 2017 is summarized below:

Property (1)			Location	Acquisition Date	Purchase Price (in thousands)
Tinseltown - Loan Draw	(2)		Jacksonville, FL		$	516
Hazelwood Mezzanine Loan - Amendment	(3)		Minnetonka, MN		1,763
Orthopedic Associates	(4)		Flower Mound, TX	January 5, 2017	18,750
Medical Arts Center at Hartford	(4)		Plainville, CT	January 11, 2017	30,250
Noncontrolling Interest Buyout - New Albany	(5)		New Albany, OH	January 31, 2017	2,824
CareMount - Lake Katrine MOB	(4)	(6)	Lake Katrine, NY	February 14, 2017	41,791
CareMount - Rhinebeck MOB	(4)		Rhinebeck, NY	February 14, 2017	18,639
Syracuse Condos	(4)		Fayetteville & Liverpool, NY	February 27, 2017	2,659
Monterey Medical Center MOB	(4)		Stuart, FL	March 7, 2017	18,979
Creighton University Medical Center	(7)	(8)	Omaha, NE	March 28, 2017	33,529
Strictly Pediatrics Specialty Center	(4)	(9)	Austin, TX	March 31, 2017	78,628
					$	248,328

(1) “MOB” means medical office building.

(2) This investment represents the final Tinseltown draw, resulting in a total loan balance of $12.6 million.

(3) The existing Hazelwood Mezzanine Loan was amended, resulting in a total outstanding principal balance of $5.1 million.

(4) The Company accounted for these acquisitions as business combinations pursuant to the acquisition method. Acquisition costs expensed during the period total $5.4 million.

(5) The Company acquired the previously outstanding interest in the New Albany MOB from the predecessor owner. As consideration, the Operating Partnership paid approximately $2.1 million in cash and issued 38,641 OP Units, representing an aggregate $2.8 million.

(6) The Company partially funded this acquisition through the assumption of an existing mortgage valued at approximately $26.4 million.

(7) The Company accounted for this acquisition as an asset acquisition and capitalized total acquisition costs of $0.1 million.

(8) This acquisition is part of the CHI portfolio.

(9) The Company partially funded this acquisition through the issuance of 2,247,817 OP Units valued at approximately $44.3 million.

For the three months ended March 31, 2017, the Company recorded revenues of $1.8 million from its first quarter acquisitions. Net loss attributable to acquisitions completed during the three months ended March 31, 2017 was $2.8 million as a result of related closing expenses totaling $3.3 million.

The following table summarizes the acquisition date fair values of the assets acquired and the liabilities assumed, which the Company determined using Level 2 and Level 3 inputs (in thousands):

Land	$	14,190
Building and improvements	187,239
In-place lease intangible	27,670
Above market in-place lease intangible	13,406
Below market in-place lease intangible	(757		)
Below market in-place ground lease	1,042
Receivables	480
Debt assumed	(26,379		)
Issuance of OP Units	(44,978		)
Net assets acquired	$	171,913

These preliminary allocations are subject to revision within the measurement period, not to exceed one year from the date of the acquisitions.

Georgia Portfolio Disposition

On February 23, 2017, the Company executed an agreement to sell a portfolio of four medical office buildings (the “Georgia Portfolio”), representing an aggregate 80,292 square feet, for approximately $18.2 million. On April 7, 2017, the Company closed on the sale of the Georgia Portfolio. The disposition met the Company’s held for sale criteria at March 31, 2017. In accordance with this classification, the following assets are classified as held for sale in the accompanying consolidated balance sheets at March 31, 2017 (in thousands):

Land and improvements	$	2,578
Building and improvements	13,404
Tenant improvements	469
Acquired lease intangibles	2,137
Real estate held for sale before accumulated depreciation	18,588
Accumulated depreciation	(6,662		)
Real estate held for sale	$	11,926

Unaudited Pro Forma Financial Information

Physicians Realty Trust

The following table illustrates the pro forma consolidated revenue, net income, and earnings per share as if the Company had acquired the 2017 acquisitions detailed above as of January 1, 2016 (in thousands, except share and per share amounts):

	Three Months Ended March 31,
	2017		2016
Revenue	$	79,922	$	49,155
Net income	7,426		5,994
Net income available to common shareholders	6,903		4,937
Earnings per share - basic	$	0.05	$	0.04
Earnings per share - diluted	$	0.05	$	0.04
Weighted average number of shares outstanding - basic	138,986,629		138,986,629
Weighted average number of shares outstanding - diluted	142,605,930		142,605,930

Physicians Realty L.P.

The following table illustrates the pro forma consolidated revenue, net income, and earnings per share as if the Company had acquired the 2017 acquisitions detailed above as of January 1, 2016 (in thousands, except unit and per unit amounts):

	Three Months Ended March 31,
	2017		2016
Revenue	$	79,922	$	49,155
Net income	7,426		5,994
Net income available to common unitholders	7,048		5,129
Earnings per unit - basic	$	0.05	$	0.04
Earnings per unit - diluted	$	0.05	$	0.04
Weighted average number of units outstanding - basic	142,172,746		142,172,746
Weighted average number of units outstanding - diluted	142,605,930		142,605,930