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Acquisitions and Dispositions
 9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Acquisitions and Dispositions Acquisitions and Dispositions
 
During the nine months ended September 30, 2017, the Company completed acquisitions of 29 operating healthcare properties, 2 condominium units, and 1 parking deck located in 15 states for an aggregate purchase price of approximately $984.0 million. In addition, the Company completed $38.8 million of loan transactions and $3.9 million of noncontrolling interest buyouts, resulting in total investment activity of approximately $1.0 billion.

Investment activity for the three months ended September 30, 2017 is summarized below:
Property (1)
 
 
 
Location
 
Acquisition
Date
 
Purchase
Price
(in thousands)
Clearview Cancer Institute
(2)
 
 
Huntsville, AL
 
August 4, 2017
 
$
53,250

Northside Cherokee/Towne Lake MOB
(2)
 
 
Atlanta, GA
 
August 15, 2017
 
37,127

HonorHealth Mesa MOB
(2)
 
 
Mesa, AZ
 
August 15, 2017
 
4,800

2017 CHI Portfolio - Tranche 2 (5 MOBs)
(2)
 
 
AR, MN, NE, TX
 
August 24, 2017 & August 31, 2017
 
33,694

NCI Buyout - Great Falls Clinic
(4)
 
 
Great Falls, MT
 
September 21, 2017
 
1,061

Legends Park MOB & ASC
(2)
 
 
Midland, TX
 
September 27, 2017
 
30,000

Loan Investments
(3)
 
 
Various
 
Various
 
30,251

 
 
 
 
 
 
 
 
$
190,183

(1)
“MOB” means medical office building and “ASC” means ambulatory surgery center.
(2)
The Company accounted for three of these facilities as asset acquisitions and capitalized total acquisition costs of $0.1 million. The remaining six facilities were accounted for as business combinations pursuant to the acquisition method, with acquisition expense totaling $2.2 million, which includes costs related to properties pursued but not acquired.
(3)
Loan investments listed here include two separate transactions at a weighted average interest rate of 8.0%.
(4)
The Company acquired an additional 3.2% interest in the Great Falls Clinic joint venture from the predecessor owner, increasing the Company’s total interest to 85.0%.

For the three months ended September 30, 2017, the Company recorded revenues and net income from its 2017 acquisitions of $18.5 million and $5.2 million, respectively. For the nine months ended September 30, 2017, the Company recorded revenues and net income from its 2017 acquisitions of $25.8 million and $3.0 million, respectively.
 
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):
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
Total
Land
$
14,190

 
$
5,662

 
$
5,004

 
$
24,856

Building and improvements
187,239

 
537,952

 
134,305

 
859,496

In-place lease intangible
27,670

 
38,766

 
19,233

 
85,669

Above market in-place lease intangible
13,406

 
2,815

 
550

 
16,771

Below market in-place lease intangible
(757
)
 
(2,097
)
 
(705
)
 
(3,559
)
Above market in-place ground lease
—

 
(4,172
)
 
(448
)
 
(4,620
)
Below market in-place ground lease
1,042

 
3,245

 
1,471

 
5,758

Receivables
480

 
(46
)
 
—

 
434

Debt assumed
(26,379
)
 
—

 
—

 
(26,379
)
Issuance of OP Units
(44,978
)
 
—

 
—

 
(44,978
)
Net assets acquired
$
171,913


$
582,125

 
$
159,410


$
913,448



For acquisitions classified as a business combination, preliminary allocations are subject to revision within the measurement period, not to exceed one year from the date of the acquisitions.

Dispositions

On February 23, 2017, the Company executed an agreement to sell a portfolio of four medical office buildings located in Georgia (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 for a gain of $5.3 million.

The following table summarizes revenues and net income related to the Georgia Portfolio for the periods presented (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues
—

 
425

 
438

 
1,259

 
 
 
 
 
 
 
 
Income before gain on sale of investment properties:
—

 
112

 
87

 
308

Gain on sale of investment properties
—

 
—

 
5,303

 
—

Net income
—

 
112

 
5,390

 
308



On August 15, 2017, the Company completed the disposition of land with a carrying value of $7.7 million in a sale-leaseback at the Peachtree Dunwoody Medical Center. The Company entered into a 90 year term ground lease at closing with all rent prepaid in consideration of the full present value of rent owed. There was no gain or loss recognized as a result of this transaction.

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 as of January 1, 2016 (in thousands, except share and per share amounts):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
95,623

 
$
89,349

 
$
283,152

 
$
230,026

Net income
13,174

 
15,799

 
37,179

 
28,509

Net income available to common shareholders
12,635

 
14,772

 
35,251

 
25,743

Earnings per share - basic
$
0.07

 
$
0.08

 
$
0.22

 
$
0.16

Earnings per share - diluted
$
0.07

 
$
0.08

 
$
0.22

 
$
0.16

Weighted average number of shares outstanding - basic
177,847,424

 
177,847,424

 
157,542,167

 
157,542,167

Weighted average number of shares outstanding - diluted
183,298,145

 
183,298,145

 
162,480,918

 
162,480,918



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 as of January 1, 2016 (in thousands, except unit and per unit amounts):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
95,623

 
$
89,349

 
$
283,152

 
$
230,026

Net income
13,174

 
15,799

 
37,179

 
28,509

Net income available to common unitholders
13,015

 
15,187

 
36,295

 
26,535

Earnings per unit - basic
$
0.07

 
$
0.08

 
$
0.22

 
$
0.16

Earnings per unit - diluted
$
0.07

 
$
0.08

 
$
0.22

 
$
0.16

Weighted average number of units outstanding - basic
183,227,405

 
183,227,405

 
162,205,324

 
162,205,324

Weighted average number of units outstanding - diluted
183,298,145

 
183,298,145

 
162,480,918

 
162,480,918