Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2018

Business Combinations [Abstract]

Acquisitions and Dispositions

Acquisitions and Dispositions

During the three months ended March 31, 2018, the Company completed acquisitions of 2 operating healthcare properties and 1 land parcel located in 3 states for an aggregate purchase price of approximately $99.4 million. In addition, the Company completed a noncontrolling interest buyout for $6.4 million and a $2.0 million loan transaction, resulting in total investment activity of approximately $107.8 million.

Effective January 1, 2018, with our adoption of ASU 2017-01, transaction costs incurred for asset acquisitions are capitalized as a component of purchase price and all other non-capitalizable costs are reflected in “Operating Expenses” on our consolidated statement of operations. Certain acquisitions that occurred prior to January 1, 2018, were accounted for as business combinations. 

Investment activity for the three months ended March 31, 2018 is summarized below:

Property		Location	Acquisition Date	Purchase Price (in thousands)
Hazelwood Medical Commons	(1)	Maplewood, MN	January 9, 2018	$	70,702
Lee's Hill Medical Plaza		Fredericksburg, VA	January 23, 2018	28,000
Scottsdale, Arizona Land	(2)	Scottsdale, AZ	February 16, 2018	700
Loan Investment	(3)	Pensacola, FL	February 16, 2018	2,000
Noncontrolling Interest Buyout - Minnesota portfolio	(4)		March 1, 2018	6,406
				$	107,808

(1) The Company partially funded the purchase price of this acquisition by issuing a total of 104,172 Series A Preferred Units valued at approximately $22.7 million in the aggregate on the date of issuance.

(2) The Company acquired the land beneath a previously acquired facility.

(3) Has an interest rate of 8.9%.

(4) The Company acquired an additional 4.2% interest in the Minnesota portfolio joint venture, increasing the Company’s total interest in the joint venture to 99.6%.

For the three months ended March 31, 2018, the Company recorded revenues and net income from its 2018 acquisitions of $1.9 million and $0.6 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):

Land	$	7,684
Building and improvements	82,180
In-place lease intangible	13,202
Above market in-place lease intangible	969
Below market in-place lease intangible	(959		)
Prepaid Expenses	(2,628		)
Issuance of Series A Preferred Units	(22,651		)
Net assets acquired	$	77,797

Dispositions

During the three months ended March 31, 2018, the Company sold two medical office buildings located in Michigan and Florida for approximately $2.5 million and recognized a net gain on the sale of approximately $0.1 million.

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

	Three Months Ended March 31,
	2018			2017
Revenues	$	48		$	142
Income (loss) before gain on sale of investment properties:	(46		)	29
Gain on sale of investment properties, net	69			—
Net income	$	23		$	29

Assets Held for Sale

As of March 31, 2018, the Company classified one portfolio comprised of 15 properties, as held for sale. In accordance with this classification, the following assets are classified as held for sale in the accompanying consolidated balance sheets at March 31, 2018.

Land and improvements	$	10,166
Building and improvements	80,517
Tenant improvements	6,046
Acquired lease intangibles	12,967
Other Assets	3,898
Real estate held for sale before accumulated deprecation	113,594
Accumulated depreciation	(20,305		)
Real estate held for sale	$	93,289

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 2018 acquisitions as of January 1, 2017 (in thousands, except share and per share amounts):

	Three Months Ended March 31,
	2018		2017
Revenue	$	106,047	$	79,183
Net income	12,009		7,298
Net income available to common shareholders	11,065		6,756
Earnings per share - basic	$	0.06	$	0.04
Earnings per share - diluted	$	0.06	$	0.04
Weighted average number of shares outstanding - basic	181,809,570		181,809,570
Weighted average number of shares outstanding - diluted	187,317,243		187,317,243

Physicians Realty L.P.

The following table illustrates the pro forma consolidated revenue, net income, and earnings per unit as if the Company had acquired the 2018 acquisitions as of January 1, 2017 (in thousands, except unit and per unit amounts):

	Three Months Ended March 31,
	2018		2017
Revenue	$	106,047	$	79,183
Net income	12,009		7,298
Net income available to common unitholders	11,411		6,920
Earnings per unit - basic	$	0.06	$	0.04
Earnings per unit - diluted	$	0.06	$	0.04
Weighted average number of units outstanding - basic	187,264,064		187,264,064
Weighted average number of units outstanding - diluted	187,317,243		187,317,243