Acquisitions and Dispositions

12 Months Ended

Dec. 31, 2017

During 2017, the Company completed acquisitions of 40 operating healthcare properties, 2 condominium units, and 1 parking deck located in 15 states, for an aggregate purchase price of approximately $1.37 billion. In addition, the Company completed $39.1 million of loan investments, $1.1 million of redeemable noncontrolling interest buyouts, and $2.8 million of noncontrolling interest buyouts, resulting in total investment activity of approximately $1.41 billion.

Investment activity for the year ending December 31, 2017 is summarized below:



Property (1)			Location	Acquisition Date	Purchase Price (in thousands)
Orthopedic Associates	(2)		Flower Mound, TX	January 5, 2017	$	18,750
Medical Arts Center at Hartford	(2)		Plainville, CT	January 11, 2017	30,250
Noncontrolling Interest Buyout - New Albany	(3)		New Albany, OH	January 31, 2017	2,824
CareMount - Lake Katrine MOB	(2)	(4)	Lake Katrine, NY	February 14, 2017	41,791
CareMount - Rhinebeck MOB	(2)		Rhinebeck, NY	February 14, 2017	18,639
Syracuse Condos	(2)		Fayetteville & Liverpool, NY	February 27, 2017	2,659
Monterey Medical Center - MOB	(2)		Stuart, FL	March 7, 2017	18,979
Creighton University Medical Center	(5)		Omaha, NE	March 28, 2017	33,420
Strictly Pediatrics Specialty Center	(2)	(6)	Austin, TX	March 31, 2017	78,628
MedStar Stephen's Crossing	(2)		Brandywine, MD	June 16, 2017	20,900
2017 CHI Portfolio - Tranche 1 (8 MOBs)	(5)		AR, MN, ND, NE, TN, TX	June 29, 2017	124,181
St. Vincent Portfolio (2 MOBs)	(2)		Carmel & Fishers, IN	June 29, 2017	93,880
Baylor Charles A. Sammons Cancer Center	(2)		Dallas, TX	June 30, 2017	290,000
Orthopedic & Sports Institute of the Fox Valley	(7)		Appleton, WI	June 30, 2017	27,900
Peachtree Dunwoody Medical Center - Parking Deck	(7)		Atlanta, GA	June 30, 2017	25,000
Clearview Cancer Institute	(2)		Huntsville, AL	August 4, 2017	53,250
Northside Cherokee/Town 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)	(5)		AR, MN, NE, TX	August 24, 2017 & August 31, 2017	33,694
Noncontrolling Interest Buyout - Great Falls Clinic	(8)		Great Falls, MT	September 21, 2017	1,061
Legends Park MOB & ASC	(2)		Midland, TX	September 27, 2017	30,000
Franklin MOB & ASC	(2)		Franklin, TN	October 12, 2017	9,950
Eagle Point MOB	(2)		Lake Elmo, MN	October 31, 2017	10,949
Edina East MOB	(2)		Edina, MN	October 31, 2017	7,800
Northside MOB - Center Pointe	(2)		Atlanta, GA	November 10, 2017	155,986
Gwinnett 500 Building	(2)		Lawrenceville, GA	November 17, 2017	25,297
Hudgens Professional Building	(2)		Duluth, GA	November 17, 2017	23,696
St. Vincent Building	(2)		Indianapolis, IN	November 17, 2017	60,124
Gwinnett Physicians Center	(2)	(9)	Lawrenceville, GA	December 1, 2017	51,721
Apple Valley Medical Center	(2)		Apple Valley, MN	December 18, 2017	21,500
Desert Cove MOB (57% Interest)	(2)	(10)	Scottsdale, AZ	December 18, 2017	4,560
Westgate MOB	(2)		Glendale, AZ	December 21, 2017	15,800



Property (1)		Location	Acquisition Date	Purchase Price (in thousands)
Loan Investments	(11)	Various	Various	39,063
				$	1,414,179


(1)	“MOB” means medical office building. “ASC” means ambulatory surgery center.


(2)	The Company accounted for these acquisitions as business combinations pursuant to the acquisition method and expensed total acquisition costs of $16.6 million.


(3)	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 approximately $2.8 million in aggregate.


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

(5)

These acquisitions are part of the CHI Portfolio. The Company accounted for nine of these facilities, consisting of an aggregate purchase price of $143.0 million, as asset acquisitions and capitalized total acquisition costs of $0.4 million. The remaining six facilities, consisting of an aggregate purchase price of $48.3 million, were accounted for as business combinations pursuant to the acquisition method, with acquisition expense totaling $0.1 million.


(6)	The Company partially funded the purchase price of this acquisition by issuing a total of 2,247,817 OP Units valued at approximately $44.3 million in the aggregate on the date of issuance.


(7)	The Company accounted for these acquisitions as asset acquisitions and capitalized total acquisition costs of $0.5 million.


(8)	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%.


(9)	As part of this acquisition, the Company assumed a $17.6 million mortgage on the facility.


(10)	The Company acquired an additional 57.0% ownership interest in Desert Cove MOB, LLC increasing the Company’s total interest to 100%.


(11)	The loan investments listed here include 8 separate transactions at a weighted average interest rate of 8.1%.

For 2017, the Company recorded revenues and net income of $49.6 million and $8.6 million, respectively, from its 2017 acquisitions.

During 2016, the Company completed acquisitions of 95 properties (including 5 condominium units and the CHI Portfolio) and 1 land parcel, located in 23 states, for an aggregate purchase price of approximately $1.27 billion. In addition, the Company completed $0.9 million of joint venture investments, $10.2 million of loan investments, $2.5 million of redeemable noncontrolling interest buyouts, and $0.6 million of equity buyouts, resulting in total investment activity of approximately $1.29 billion.

This aggregate purchase price does not include near-term capital expenditure commitments of $12.9 million and committed tenant improvement allowances of $8.9 million related to the Company’s acquisition of the CHI Portfolio.

Investment activity for the year ending December 31, 2016 is summarized below:



Property (1)			Location	Acquisition Date	Purchase Price (in thousands)
Tinseltown - Loan Draws			Jacksonville, FL		$	2,192
Randall Road MOB - Suite 380	(3)		Elgin, IL	January 14, 2016	704
Great Falls Hospital	(2)		Great Falls, MT	January 25, 2016	29,043
Monterey Medical Center ASC	(2)		Stuart, FL	February 1, 2016	6,900
Physicians Medical Plaza MOB	(2)	(4)	Indianapolis, IN	February 1, 2016	8,500
Mezzanine Loan - Davis			Minnetonka, MN	February 4, 2016	500
Park Nicollet Clinic	(2)		Chanhassen, MN	February 8, 2016	18,600
HEB Cancer Center	(2)		Bedford, TX	February 12, 2016	13,980
Riverview Medical Center	(2)		Lancaster, OH	February 26, 2016	12,800
St. Luke's Cornwall MOB	(2)		Cornwall, NY	February 26, 2016	14,550
HonorHealth Glendale	(3)		Glendale, AZ	March 15, 2016	9,820
Columbia MOB	(2)		Hudson, NY	March 21, 2016	18,450



Property (1)			Location	Acquisition Date	Purchase Price (in thousands)
St Vincent POB 1	(2)		Birmingham, AL	March 23, 2016	10,951
St Vincent POB 2	(2)		Birmingham, AL	March 23, 2016	7,945
St Vincent POB 3	(2)		Birmingham, AL	March 23, 2016	10,455
Emerson Medical Building	(2)		Creve Coeur, MO	March 24, 2016	14,250
Randall Road MOB - Suite 160	(3)		Elgin, IL	March 24, 2016	865
Patient Partners Surgery Center	(2)		Gallatin, TN	March 30, 2016	4,750
Eye Associates of NM - Santa Fe	(3)		Santa Fe, NM	March 31, 2016	8,739
Eye Associates of NM - Albuquerque	(3)		Albuquerque, NM	March 31, 2016	10,536
Gardendale Surgery Center	(2)		Gardendale, AL	April 11, 2016	7,450
HealthEast - Curve Crest	(2)		Stillwater, MN	April 14, 2016	4,144
HealthEast - Victor Gardens	(2)		Hugo, MN	April 14, 2016	6,025
NOMS - Clyde	(3)		Clyde, OH	May 10, 2016	6,342
Blandford MOB	(3)	(5)	Little Rock, AR	May 11, 2016	2,580
Cardwell MOB	(2)	(5)	Lufkin, TX	May 11, 2016	8,444
Dacono Neighborhood Health	(3)	(5)	Dacono, CO	May 11, 2016	5,152
Franciscan Health	(3)	(5)	Tacoma, WA	May 11, 2016	9,772
Grand Island Specialty Clinic	(3)	(5)	Grand Island, NE	May 11, 2016	2,891
Hot Springs MOB	(2)	(5)	Hot Springs Village, AR	May 11, 2016	3,626
Jewish Medical Center East	(3)	(5)	Louisville, KY	May 11, 2016	85,000
Jewish Medical Center South MOB - 1	(3)	(5)	Shepherdsville, KY	May 11, 2016	17,021
Jewish Medical Plaza I	(2)	(5)	Louisville, KY	May 11, 2016	9,650
Jewish Medical Plaza II	(2)	(5)	Louisville, KY	May 11, 2016	6,124
Jewish OCC	(3)	(5)	Louisville, KY	May 11, 2016	35,600
Lakeside Three Professional Center	(2)	(5)	Omaha, NE	May 11, 2016	1,581
Lexington Surgery Center	(2)	(5)	Lexington, KY	May 11, 2016	20,169
Medical Arts Pavilion	(2)	(5)	Lufkin, TX	May 11, 2016	6,304
Memorial Outpatient Center	(3)	(5)	Lufkin, TX	May 11, 2016	4,958
Midlands Two Professional Center	(2)	(5)	Papillion, NE	May 11, 2016	1,341
Parkview MOB	(2)	(5)	Little Rock, AR	May 11, 2016	5,060
Peak One ASC	(2)	(5)	Frisco, CO	May 11, 2016	6,587
Physicians Medical Center	(2)	(5)	Tacoma, WA	May 11, 2016	6,782
St. Alexius - Minot Medical Plaza	(3)	(5)	Minot, ND	May 11, 2016	26,570
St. Clare Medical Pavilion	(2)	(5)	Lakewood, WA	May 11, 2016	10,617
St. Joseph Medical Pavilion	(2)	(5)	Tacoma, WA	May 11, 2016	13,320
St. Joseph Office Park	(2)	(5)	Lexington, KY	May 11, 2016	17,228
St. Mary - Caritas Medical II	(2)	(5)	Louisville, KY	May 11, 2016	5,603
St. Mary - Caritas Medical III	(2)	(5)	Louisville, KY	May 11, 2016	842
Thornton Neighborhood Health	(3)	(5)	Thornton, CO	May 11, 2016	3,875
Medical Village at Kissimmee	(2)		Kissimmee, FL	May 26, 2016	4,923
Medical Village at Leesburg	(2)		Leesburg, FL	May 26, 2016	4,576
St. Francis MOB	(2)	(5)	Federal Way, WA	June 2, 2016	14,287
Children's Hospital MOB	(2)		Milwaukee, WI	June 3, 2016	5,850
Jewish Medical Center South MOB - 2	(2)		Shepherdsville, KY	June 8, 2016	4,343
Good Samaritan North Annex Building	(3)	(5)	Kearney, NE	June 28, 2016	2,874
NE Heart Institute Medical Building	(3)	(5)	Lincoln, NE	June 28, 2016	19,600



Property (1)			Location	Acquisition Date	Purchase Price (in thousands)
St. Vincent West MOB	(3)	(5)	Little Rock, AR	June 29, 2016	14,120
Meridan MOB	(3)	(5)	Englewood, CO	June 29, 2016	17,329
St. Mary - Caritas Medical I	(2)	(5)	Louisville, KY	June 29, 2016	8,864
St. Alexius - Medical Arts Pavilion	(3)	(5)	Bismarck, ND	June 29, 2016	12,983
St. Alexius - Mandan Clinic	(3)	(5)	Mandan, ND	June 29, 2016	8,390
St. Alexius - Orthopaedic Center	(2)	(5)	Bismarck, ND	June 29, 2016	14,727
St. Alexius - Rehab Center	(3)	(5)	Bismarck, ND	June 29, 2016	6,215
St. Alexius - Tech & Ed	(3)	(5)	Bismarck, ND	June 29, 2016	16,680
Good Samaritan MOB	(2)	(5)	Kearney, NE	June 29, 2016	24,198
Lakeside Two Professional Building	(2)	(5)	Omaha, NE	June 29, 2016	13,691
Lakeside Wellness Center	(3)	(5)	Omaha, NE	June 29, 2016	10,138
McAuley Center	(3)	(5)	Omaha, NE	June 29, 2016	18,382
Memorial Health Center	(3)	(5)	Grand Island, NE	June 29, 2016	34,042
Missionary Ridge MOB	(2)	(5)	Chattanooga, TN	June 29, 2016	7,635
Pilot Medical Center	(3)		Birmingham, AL	June 29, 2016	17,351
St. Joseph Medical Clinic	(2)	(5)	Tacoma, WA	June 30, 2016	16,444
Woodlands Medical Arts Center	(2)	(5)	The Woodlands, TX	June 30, 2016	21,227
FESC MOB	(3)	(5)	Tacoma, WA	June 30, 2016	16,748
Mezzanine Loan - Catalyst			Pensacola, FL	June 30, 2016	1,340
Prairie Care MOB	(2)		Maplewood, MN	July 6, 2016	4,886
RE Loan - Chihuahua Development LLC			El Paso, TX	July 7, 2016	1,300
Springwoods MOB	(2)	(5)	Spring, TX	July 21, 2016	19,925
Equity Buyout - Foundation	(6)		TX / OK	July 26, 2016	611
Mezzanine Loan - Hazelwood			Minnetonka, MN	July 29, 2016	3,375
Jackson, Tennessee Land	(3)		Jackson, TN	August 2, 2016	1,000
Unity Portfolio (4 MOBs)	(2)		West Lafayette, IN	August 8, 2016	28,751
Medical Village at Maitland	(2)		Orlando, FL	August 23, 2016	23,211
Tri-State Orthopaedics MOB	(2)		Evansville, IN	August 30, 2016	22,000
Maury Regional Healthcare MOB	(2)	(8)	Spring Hill, TN	September 30, 2016	18,500
Spring Ridge Medical Center	(2)		Wyomissing, PA	September 30, 2016	6,100
Doctors Community Hospital POB	(2)		Lanham, MD	September 30, 2016	26,750
Gig Harbor Medical Pavilion	(3)	(5)	Gig Harbor, WA	September 30, 2016	4,766
Midlands One Professional Center	(2)	(5)	Papillion, NE	September 30, 2016	14,856
Noncontrolling Interest Buyout - Great Falls Clinic	(7)		Great Falls, MT	September 30, 2016	1,015
N.W. Michigan Surgery Center - Units #1 & #2	(3)	(9)	Traverse City, MI	October 28, 2016	29,448
United Surgical Partners Joint Venture	(10)		Scottsdale, AZ	October 31, 2016	903
N.W. Michigan Surgery Center - Unit #4	(3)	(11)	Traverse City, MI	November 4, 2016	2,715
Syracuse Portfolio (2 MOBs)	(2)		Syracuse, NY	November 23, 2016	54,239
Cincinnati Eye Institute	(3)		Cincinnati, OH	November 23, 2016	38,100
Curie Building Loan			El Paso, TX	December 2, 2016	1,500
HonorHealth - Scottsdale MOB	(3)		Scottsdale, AZ	December 2, 2016	6,900
Fox Valley Hematology & Oncology	(3)		Appleton, WI	December 8, 2016	28,200
Gastrointestinal Associates MOB	(2)		Powell, TN	December 9, 2016	6,287
Northern Vision Eye Center	(3)		Traverse City, MI	December 15, 2016	2,777



Property (1)		Location	Acquisition Date	Purchase Price (in thousands)
Noncontrolling Interest Buyout - Great Falls Clinic	(12)	Great Falls, MT	December 15, 2016	1,497
Flower Mound Portfolio (3 MOBs)	(3)	Flower Mound, TX	December 16, 2016	27,800
HonorHealth IRF	(3)	Scottsdale, AZ	December 22, 2016	25,628
				$	1,285,185


(1)	“MOB” means medical office building. “ASC” means ambulatory surgical center. “POB” means professional office building. “IRF” means inpatient rehabilitation facility.


(2)	The Company accounted for these acquisitions as business combinations pursuant to the acquisition method and expensed total acquisition costs of $14.8 million.


(3)	The Company accounted for these acquisitions as asset acquisitions and capitalized total acquisition costs of $3.0 million.


(4)	The Company partially funded the purchase price of this acquisition by issuing a total of 174,085 OP Units valued at approximately $2.9 million in the aggregate on the date of issuance.


(5)	These acquisitions are part of the CHI portfolio.


(6)	The Company acquired the previously outstanding 1% noncontrolling interest retained by the predecessor owner on three properties, El Paso, Texas and Oklahoma City, Oklahoma.


(7)	The Company acquired an additional 3% interest in the Great Falls Clinic joint venture from the predecessor owner, increasing the Company’s total interest to 77.3%.


(8)	The Company acquired 99.7% of the ownership interest in this property, the remainder of which was retained by the seller.


(9)	The Company partially funded the purchase price of the acquisition of two condominium units within the Northwest Michigan Surgery Center through unregistered issuance of 947,936 common shares of beneficial interest.


(10)	The Company’s investment in the United Surgical Partners J.V. represents a 43% ownership interest.


(11)	The Company partially funded the purchase price of the acquisition of one additional condominium unit within the Northwest Michigan Surgery Center through the unregistered issuance of 88,602 common shares of beneficial interest.


(12)	The company acquired an additional 4.6% interest in the Great Falls Clinic joint venture from the predecessor owner, increasing the Company’s total interest to 81.8%.

For 2016, the Company recorded revenues and net income of $66.7 million and $14.9 million, respectively, from its 2016 acquisitions.

The following table summarizes the preliminary purchase price allocations of the assets acquired and the liabilities assumed, which the Company determined using Level 2 and Level 3 inputs (in thousands):



	December 31, 2017			December 31, 2016
Land	$	38,358		$	57,847
Building and improvements	1,168,741			1,112,746
In-place lease intangible	128,370			58,666
Above-market in-place lease intangible	18,967			9,359
Below-market in-place lease intangible	(4,270		)	(4,518		)
Above-market in-place ground lease	(4,620		)	(644		)
Below-market in-place ground lease	17,683			28,937
Contingent consideration	(765		)	(156		)
Receivable	434			104
Debt assumed	(43,989		)	—
Issuance of OP Units	(44,978		)	(2,869		)
Investment in unconsolidated entity	(2,871		)	903
Lease inducement	—			8,945
Prepaid expenses	—			2,659
Issuance of Common Shares	—			(20,980		)
Noncontrolling interest	—			(50		)
Net assets acquired	$	1,271,060		$	1,250,949

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

Dispositions

On April 7, 2017, the Company closed an agreement to sell a portfolio of four medical office buildings located in Georgia (the “Georgia Portfolio”), for approximately $18.2 million, which reflects a gain of approximately $5.2 million.

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 recorded as a result of this transaction.

On December 18, 2017, the Company sold one 20,939 square foot medical office building located in Nebraska for approximately $2.5 million, recording a gain of approximately $0.7 million.

The following table summarizes revenues and net income related to the disposition properties for the periods presented (in thousands):



	Year Ended December 31,
	2017		2016		2015
Revenue	$	823	$	1,967	$	1,666

Income before gain on sale of investment properties	108		433		421
Gain on sale of investment properties	5,870		—		—
Net income	$	5,978	$	433	$	421

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):



	Year Ended December 31,
	2017		2016
Revenue	$	405,320	$	352,432
Net income	42,149		39,233
Net income available to common shareholders	39,759		35,614
Earnings per share - basic	$	0.24	$	0.22
Earnings per share - diluted	$	0.24	$	0.22
Weighted average number of shares outstanding - basic	163,123,109		163,123,109
Weighted average number of shares outstanding - diluted	168,231,299		168,231,299

Physicians Realty L.P.



	Year Ended December 31,
	2017		2016
Revenue	$	405,320	$	352,432
Net income	42,149		39,233
Net income available to common unitholders	40,927		36,660
Earnings per unit - basic	$	0.24	$	0.22
Earnings per unit - diluted	$	0.24	$	0.22
Weighted average number of units outstanding - basic	167,963,076		167,963,076
Weighted average number of units outstanding - diluted	168,231,299		168,231,299