Maryland (Physicians Realty Trust) Delaware (Physicians Realty L.P.) (State of Organization) | 46-2519850 80-0941870 (IRS Employer Identification No.) | |
309 N. Water Street, Suite 500 Milwaukee, Wisconsin (Address of Principal Executive Offices) | 53202 (Zip Code) |
Physicians Realty Trust | Large accelerated filer ý Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o Emerging growth company o |
Physicians Realty L.P. | Large accelerated filer o Accelerated filer o Non-accelerated filer ý (Do not check if a smaller reporting company) Smaller reporting company o Emerging growth company o |
• | a combined report enhances investors’ understanding of the Trust and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; |
• | a combined report eliminates duplicative disclosure and provides a more streamlined and readable presentation, as a substantial portion of the Company’s disclosure applies to both the Trust and the Operating Partnership; and |
• | a combined report creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. |
• | the consolidated financial statements in Part I, Item 1 of this report; |
• | certain accompanying notes to the consolidated financial statements, including Note 3 (Acquisitions and Dispositions) and Note 14 (Earnings Per Share and Earnings Per Unit); |
• | controls and procedures in Part I, Item 4 of this report; and |
• | the certifications of the Chief Executive Officer and the Chief Financial Officer included as Exhibits 31 and 32 to this report. |
Page Number | ||
Financial Statements of Physicians Realty Trust | ||
Financial Statements of Physicians Realty L.P. | ||
Notes for Physicians Realty Trust and Physicians Realty L.P. | ||
• | general economic conditions; |
• | adverse economic or real estate developments, either nationally or in the markets where our properties are located; |
• | our failure to generate sufficient cash flows to service our outstanding indebtedness, or our ability to pay down or refinance our indebtedness; |
• | fluctuations in interest rates and increased operating costs; |
• | the availability, terms and deployment of debt and equity capital, including our unsecured revolving credit facility; |
• | our ability to make distributions on our common shares; |
• | general volatility of the market price of our common shares; |
• | our increased vulnerability economically due to the concentration of our investments in healthcare properties; |
• | our geographic concentration in Texas causes us to be particularly exposed to downturns in the Texas economy or other changes in Texas market conditions; |
• | changes in our business or strategy; |
• | our dependence upon key personnel whose continued service is not guaranteed; |
• | our ability to identify, hire and retain highly qualified personnel in the future; |
• | the degree and nature of our competition; |
• | changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates, taxation of REITs, and similar matters; |
• | defaults on or non-renewal of leases by tenants; |
• | decreased rental rates or increased vacancy rates; |
• | difficulties in identifying healthcare properties to acquire and completing acquisitions; |
• | competition for investment opportunities; |
• | any adverse effects to the business, financial position or results of Catholic Health Initiatives’ (“CHI”), or one or more of the CHI-affiliated tenants, that impact the ability of CHI-affiliated tenants to pay us rent; |
• | the impact of our investments in joint ventures we may make in the future and; |
• | the financial condition and liquidity of, or disputes with, any joint venture and development partners with whom we may make co-investments in the future; |
• | cybersecurity incidents could disrupt our business and result in the compromise of confidential information; |
• | our ability to operate as a public company; |
• | changes in accounting principles generally accepted in the United States “GAAP”; |
• | lack of or insufficient amounts of insurance; |
• | other factors affecting the real estate industry generally; |
• | our failure to maintain our qualification as a REIT for U.S. federal income tax purposes; |
• | limitations imposed on our business and our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes; and |
• | Other factors that may materially adversely affect us, or the per share trading price of our common shares, including: |
• | the number of our common shares available for future issuance or sale; |
• | our issuance of equity securities or the perception that such issuance might occur; |
• | future debt; |
• | failure of securities analysts to publish research or reports about us or our industry; and |
• | securities analysts’ downgrade of our common shares or the healthcare-related real estate sector. |
June 30, 2018 | December 31, 2017 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Investment properties: | |||||||
Land and improvements | $ | $ | |||||
Building and improvements | |||||||
Tenant improvements | |||||||
Acquired lease intangibles | |||||||
Accumulated depreciation | ( | ) | ( | ) | |||
Net real estate property | |||||||
Real estate held for sale | |||||||
Real estate loans receivable | |||||||
Investments in unconsolidated entities | |||||||
Net real estate investments | |||||||
Cash and cash equivalents | |||||||
Tenant receivables, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Credit facility | $ | $ | |||||
Notes payable | |||||||
Mortgage debt | |||||||
Accounts payable | |||||||
Dividends and distributions payable | |||||||
Accrued expenses and other liabilities | |||||||
Acquired lease intangibles, net | |||||||
Total liabilities | |||||||
Redeemable noncontrolling interest - Series A Preferred Units (2018) and partially owned properties | |||||||
Equity: | |||||||
Common shares, $0.01 par value, 500,000,000 common shares authorized, 182,027,309 and 181,440,051 common shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated deficit | ( | ) | ( | ) | |||
Accumulated other comprehensive income | |||||||
Total shareholders’ equity | |||||||
Noncontrolling interests: | |||||||
Operating Partnership | |||||||
Partially owned properties | |||||||
Total noncontrolling interests | |||||||
Total equity | |||||||
Total liabilities and equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Rental revenues | $ | $ | $ | $ | |||||||||||
Expense recoveries | |||||||||||||||
Interest income on real estate loans and other | |||||||||||||||
Total revenues | |||||||||||||||
Expenses: | |||||||||||||||
Interest expense | |||||||||||||||
General and administrative | |||||||||||||||
Operating expenses | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Acquisition expenses | |||||||||||||||
Total expenses | |||||||||||||||
Income before equity in income of unconsolidated entities and (loss) gain on sale of investment properties: | |||||||||||||||
Equity in income of unconsolidated entities | |||||||||||||||
(Loss) gain on sale of investment properties | ( | ) | ( | ) | |||||||||||
Net income | |||||||||||||||
Net income attributable to noncontrolling interests: | |||||||||||||||
Operating Partnership | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Partially owned properties (1) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to controlling interests | |||||||||||||||
Preferred distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to common shareholders | $ | $ | $ | $ | |||||||||||
Net income per share: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Weighted average common shares: | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Dividends and distributions declared per common share and OP Unit | $ | $ | $ | $ |
(1) | Includes amounts attributable to redeemable noncontrolling interests. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income: | |||||||||||||||
Change in fair value of interest rate swap agreements | ( | ) | ( | ) | |||||||||||
Total other comprehensive income | ( | ) | ( | ) | |||||||||||
Comprehensive income | |||||||||||||||
Comprehensive income attributable to noncontrolling interests - Operating Partnership | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income attributable to noncontrolling interests - partially owned properties | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income attributable to common shareholders | $ | $ | $ | $ |
Par Value | Additional Paid in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Shareholders’ Equity | Operating Partnership Noncontrolling Interest | Partially Owned Properties Noncontrolling Interest | Total Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||
Balance at January 1, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Net proceeds from sale of common shares | — | — | — | — | — | ||||||||||||||||||||||||||||||
Restricted share award grants, net | — | — | — | — | |||||||||||||||||||||||||||||||
Purchase of OP Units | — | — | — | — | — | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||||
Conversion of OP Units | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||
Dividends/distributions declared | — | — | ( | ) | — | ( | ) | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||||
Preferred distributions | — | — | ( | ) | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||||||
Distributions | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Change in market value of Redeemable Noncontrolling Interest | — | — | — | — | — | ||||||||||||||||||||||||||||||
Change in fair value of interest rate swap agreements | — | — | — | — | — | ||||||||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||||||||
Adjustment for Noncontrolling Interests ownership in Operating Partnership | — | ( | ) | — | — | ( | ) | — | |||||||||||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation and amortization | |||||||
Amortization of deferred financing costs | |||||||
Amortization of lease inducements and above/below-market lease intangibles | |||||||
Straight-line rental revenue/expense | ( | ) | ( | ) | |||
Amortization of discount on unsecured senior notes | |||||||
Amortization of above market assumed debt | ( | ) | ( | ) | |||
Loss (gain) on sale of investment properties | ( | ) | |||||
Equity in income of unconsolidated entities | ( | ) | ( | ) | |||
Distributions from unconsolidated entities | |||||||
Change in fair value of derivative | ( | ) | |||||
Provision for bad debts | ( | ) | ( | ) | |||
Non-cash share compensation | |||||||
Net change in fair value of contingent consideration | ( | ) | ( | ) | |||
Change in operating assets and liabilities: | |||||||
Tenant receivables | |||||||
Other assets | |||||||
Accounts payable | ( | ) | |||||
Accrued expenses and other liabilities | |||||||
Net cash provided by operating activities | |||||||
Cash Flows from Investing Activities: | |||||||
Proceeds on sales of investment properties | |||||||
Acquisition of investment properties, net | ( | ) | ( | ) | |||
Escrowed cash - acquisition deposits/earnest deposits | ( | ) | ( | ) | |||
Capital expenditures on investment properties | ( | ) | ( | ) | |||
Issuance of real estate loans receivable | ( | ) | ( | ) | |||
Repayment of real estate loan receivable | |||||||
Issuance of note receivable | ( | ) | |||||
Repayment of note receivable | |||||||
Leasing commissions | ( | ) | ( | ) | |||
Lease inducements | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash Flows from Financing Activities: | |||||||
Net proceeds from sale of common shares | |||||||
Proceeds from credit facility borrowings | |||||||
Payment on credit facility borrowings | ( | ) | ( | ) | |||
Proceeds from issuance of mortgage debt | |||||||
Proceeds from issuance of senior unsecured notes | |||||||
Principal payments on mortgage debt | ( | ) | ( | ) | |||
Debt issuance costs | ( | ) | ( | ) | |||
Dividends paid - shareholders | ( | ) | ( | ) | |||
Distributions to noncontrolling interests - Operating Partnership | ( | ) | ( | ) | |||
Preferred distributions paid - OP Unit holder | ( | ) | ( | ) | |||
Contributions from noncontrolling interest | |||||||
Distributions to noncontrolling interests - partially owned properties | ( | ) | ( | ) | |||
Payments of employee taxes for withheld stock-based compensation shares | ( | ) | ( | ) | |||
Purchase of Series A Preferred Units | ( | ) | |||||
Purchase of OP Units | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Net increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents, beginning of period | |||||||
Cash and cash equivalents, end of period | $ | $ | |||||
Supplemental disclosure of cash flow information - interest paid during the period | $ | $ | |||||
Supplemental disclosure of noncash activity - change in fair value of interest rate swap agreements | $ | $ | ( | ) | |||
Supplemental disclosure of noncash activity - assumed debt | $ | $ | |||||
Supplemental disclosure of noncash activity - issuance of OP Units (2017) and Series A Preferred Units in connection with acquisitions | $ | $ |
June 30, 2018 | December 31, 2017 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Investment properties: | |||||||
Land and improvements | $ | $ | |||||
Building and improvements | |||||||
Tenant improvements | |||||||
Acquired lease intangibles | |||||||
Accumulated depreciation | ( | ) | ( | ) | |||
Net real estate property | |||||||
Real estate held for sale | |||||||
Real estate loans receivable | |||||||
Investments in unconsolidated entities | |||||||
Net real estate investments | |||||||
Cash and cash equivalents | |||||||
Tenant receivables, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND CAPITAL | |||||||
Liabilities: | |||||||
Credit facility | $ | $ | |||||
Notes payable | |||||||
Mortgage debt | |||||||
Accounts payable | |||||||
Distributions payable | |||||||
Accrued expenses and other liabilities | |||||||
Acquired lease intangibles, net | |||||||
Total liabilities | |||||||
Redeemable noncontrolling interest - Series A Preferred Units (2018) and partially owned properties | |||||||
Capital: | |||||||
Partners’ capital: | |||||||
General partners’ capital, 182,027,309 and 181,440,051 units issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | |||||||
Limited partners’ capital, 5,392,234 and 5,364,632 units issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | |||||||
Accumulated other comprehensive income | |||||||
Total partners’ capital | |||||||
Noncontrolling interest - partially owned properties | |||||||
Total capital | |||||||
Total liabilities and capital | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Rental revenues | $ | $ | $ | $ | |||||||||||
Expense recoveries | |||||||||||||||
Interest income on real estate loans and other | |||||||||||||||
Total revenues | |||||||||||||||
Expenses: | |||||||||||||||
Interest expense | |||||||||||||||
General and administrative | |||||||||||||||
Operating expenses | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Acquisition expenses | |||||||||||||||
Total expenses | |||||||||||||||
Income before equity in income of unconsolidated entities and (loss) gain on sale of investment properties: | |||||||||||||||
Equity in income of unconsolidated entities | |||||||||||||||
(Loss) gain on sale of investment properties | ( | ) | ( | ) | |||||||||||
Net income | |||||||||||||||
Net income attributable to noncontrolling interests - partially owned properties (1) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to controlling interests | |||||||||||||||
Preferred distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income attributable to common unitholders | $ | $ | $ | $ | |||||||||||
Net income per common unit: | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Weighted average common units: | |||||||||||||||
Basic | |||||||||||||||
Diluted | |||||||||||||||
Distributions declared per common unit | $ | $ | $ | $ |
(1) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income: | |||||||||||||||
Change in fair value of interest rate swap agreements | ( | ) | ( | ) | |||||||||||
Total other comprehensive income | ( | ) | ( | ) | |||||||||||
Comprehensive income | |||||||||||||||
Comprehensive income attributable to noncontrolling interests - partially owned properties | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income attributable to common unitholders | $ | $ | $ | $ |
General Partner | Limited Partner | Accumulated Other Comprehensive Income | Total Partners’ Capital | Partially Owned Properties Noncontrolling Interest | Total Capital | ||||||||||||||||||
Balance at January 1, 2018 | |||||||||||||||||||||||
Net proceeds from sale of Trust common shares and issuance of common units | — | — | — | ||||||||||||||||||||
Trust restricted share award grants, net | — | — | — | ||||||||||||||||||||
Purchase of OP Units | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||
Conversion of OP Units | ( | ) | — | — | |||||||||||||||||||
OP Units - distributions | ( | ) | ( | ) | — | ( | ) | — | ( | ) | |||||||||||||
Preferred distributions | ( | ) | — | — | ( | ) | — | ( | ) | ||||||||||||||
Distributions | — | — | — | ( | ) | ( | ) | ||||||||||||||||
Change in market value of Redeemable Limited Partners | — | — | — | ||||||||||||||||||||
Buyout of Noncontrolling Interest - partially owned properties | — | — | — | ||||||||||||||||||||
Change in fair value of interest rate swap agreements | — | — | |||||||||||||||||||||
Net income | — | ||||||||||||||||||||||
Adjustments for Limited Partners ownership in Operating Partnership | ( | ) | — | — | |||||||||||||||||||
Balance at June 30, 2018 | $ | $ | $ | $ | $ | $ |
Six Months Ended June 30, | |||||||
2018 | 2017 | ||||||
Cash Flows from Operating Activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation and amortization | |||||||
Amortization of deferred financing costs | |||||||
Amortization of lease inducements and above/below-market lease intangibles | |||||||
Straight-line rental revenue/expense | ( | ) | ( | ) | |||
Amortization of discount on unsecured senior notes | |||||||
Amortization of above market assumed debt | ( | ) | ( | ) | |||
Loss (gain) on sale of investment properties | ( | ) | |||||
Equity in income of unconsolidated entities | ( | ) | ( | ) | |||
Distributions from unconsolidated entities | |||||||
Change in fair value of derivative | ( | ) | |||||
Provision for bad debts | ( | ) | ( | ) | |||
Non-cash share compensation | |||||||
Net change in fair value of contingent consideration | ( | ) | ( | ) | |||
Change in operating assets and liabilities: | |||||||
Tenant receivables | |||||||
Other assets | |||||||
Accounts payable | ( | ) | |||||
Accrued expenses and other liabilities | |||||||
Net cash provided by operating activities | |||||||
Cash Flows from Investing Activities: | |||||||
Proceeds on sales of investment properties | |||||||
Acquisition of investment properties, net | ( | ) | ( | ) | |||
Escrowed cash - acquisition deposits/earnest deposits | ( | ) | ( | ) | |||
Capital expenditures on investment properties | ( | ) | ( | ) | |||
Issuance of real estate loans receivable | ( | ) | ( | ) | |||
Repayment of real estate loan receivable | |||||||
Issuance of note receivable | ( | ) | |||||
Repayment of note receivable | |||||||
Leasing commissions | ( | ) | ( | ) | |||
Lease inducements | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash Flows from Financing Activities: | |||||||
Net proceeds from sale of Trust common shares and issuance of common units | |||||||
Proceeds from credit facility borrowings | |||||||
Payment on credit facility borrowings | ( | ) | ( | ) | |||
Proceeds from issuance of mortgage debt | |||||||
Proceeds from issuance of senior unsecured notes | |||||||
Principal payments on mortgage debt | ( | ) | ( | ) | |||
Debt issuance costs | ( | ) | ( | ) | |||
OP Unit distributions - General Partner | ( | ) | ( | ) | |||
OP Unit distributions - Limited Partner | ( | ) | ( | ) | |||
Preferred OP Units distributions - Limited Partner | ( | ) | ( | ) | |||
Contributions from noncontrolling interest | |||||||
Distributions to noncontrolling interests - partially owned properties | ( | ) | ( | ) | |||
Payments of employee taxes for withheld stock-based compensation shares | ( | ) | ( | ) | |||
Purchase of Series A Preferred Units | ( | ) | |||||
Purchase of Limited Partner Units | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Net increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents, beginning of period | |||||||
Cash and cash equivalents, end of period | $ | $ | |||||
Supplemental disclosure of cash flow information - interest paid during the period | $ | $ | |||||
Supplemental disclosure of noncash activity - change in fair value of interest rate swap agreements | $ | $ | ( | ) | |||
Supplemental disclosure of noncash activity - assumed debt | $ | $ | |||||
Supplemental disclosure of noncash activity - issuance of OP Units (2017) and Series A Preferred Units in connection with acquisitions | $ | $ |
Common shares sold | Weighted average price | Net proceeds | ||||||||
Quarterly period ended March 31, 2018 | $ | $ | ||||||||
Quarterly period ended June 30, 2018 | ||||||||||
Year to date | $ | $ |
1st Quarter | 2nd Quarter | Total | |||||||||
Land | $ | $ | $ | ||||||||
Building and improvements | |||||||||||
In-place lease intangibles | |||||||||||
Above market in-place lease intangibles | |||||||||||
Below market in-place lease intangibles | ( | ) | ( | ) | |||||||
Prepaid expenses | ( | ) | ( | ) | |||||||
Issuance of Series A Preferred Units | ( | ) | ( | ) | |||||||
Net assets acquired | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
Revenues | $ | $ | |||||||||||
Income before loss on sale of investment properties: | |||||||||||||
Loss on sale of investment properties, net | ( | ) | ( | ) | |||||||||
Net (loss) income | $ | ( | ) | $ | ( | ) |
Land and improvements | $ | ||
Building and improvements | |||
Tenant improvements | |||
Acquired lease intangibles | |||
Other assets | |||
Real estate held for sale before accumulated deprecation | |||
Accumulated depreciation | ( | ) | |
Real estate held for sale | $ |
June 30, 2018 | December 31, 2017 | ||||||||||||||||||||||
Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | ||||||||||||||||||
Assets | |||||||||||||||||||||||
In-place leases | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Above-market leases | ( | ) | ( | ) | |||||||||||||||||||
Leasehold interest | ( | ) | ( | ) | |||||||||||||||||||
Below-market ground leases | ( | ) | ( | ) | |||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Liabilities | |||||||||||||||||||||||
Below-market leases | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Above-market ground leases | ( | ) | ( | ) | |||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Amortization expense related to in-place leases | $ | $ | $ | $ | |||||||||||
Decrease of rental income related to above-market leases | |||||||||||||||
Decrease of rental income related to leasehold interest | |||||||||||||||
Increase of rental income related to below-market leases | |||||||||||||||
Decrease of operating expense related to above-market ground leases | |||||||||||||||
Increase in operating expense related to below-market ground leases |
Net Decrease in Revenue | Net Increase in Expenses | ||||||
2018 | $ | ( | ) | $ | |||
2019 | ( | ) | |||||
2020 | ( | ) | |||||
2021 | ( | ) | |||||
2022 | ( | ) | |||||
Thereafter | ( | ) | |||||
Total | $ | ( | ) | $ |
June 30, 2018 | December 31, 2017 | ||||||
Straight line rent receivable, net | $ | $ | |||||
Note receivable | |||||||
Interest rate swap | |||||||
Prepaid expenses | |||||||
Lease inducements, net | |||||||
Leasing commissions, net | |||||||
Earnest deposits | |||||||
Escrows | |||||||
Other | |||||||
Total | $ | $ |
June 30, 2018 | December 31, 2017 | |||||||
Fixed interest mortgage notes | $ | (1) | $ | (2) | ||||
Variable interest mortgage notes | (3) | (4) | ||||||
Total mortgage debt | ||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | ||||||||
$400 million senior unsecured notes bearing fixed interest of 4.30%, due March 2027 | ||||||||
$350 million senior unsecured notes bearing fixed interest of 3.95%, due January 2028 | ||||||||
$250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 (5) | ||||||||
$150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031 | ||||||||
$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027 | ||||||||
Total principal | ||||||||
Unamortized deferred financing costs | ( | ) | ( | ) | ||||
Unamortized discount | ( | ) | ( | ) | ||||
Unamortized fair value adjustment | ||||||||
Total debt | $ | $ |
(1) | Fixed interest mortgage notes, bearing interest from |
(2) | Fixed interest mortgage notes, bearing interest from |
(3) | Variable interest mortgage notes, bearing variable interest of LIBOR plus |
(4) | Variable interest mortgage notes, bearing variable interest of LIBOR plus |
(5) |
Credit Rating | Margin for Revolving Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee | Margin for Revolving Loans: Base Rate Loans | Margin for Term Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee | Margin for Term Loans: Base Rate Loans | ||||||
At Least A- or A3 | LIBOR + 0.85% | % | LIBOR + 1.40% | % | ||||||
At Least BBB+ or Baa1 | LIBOR + 0.90% | % | LIBOR + 1.45% | % | ||||||
At Least BBB or Baa2 | LIBOR + 1.00% | % | LIBOR + 1.55% | % | ||||||
At Least BBB- or Baa3 | LIBOR + 1.20% | % | LIBOR + 1.80% | % | ||||||
Below BBB- or Baa3 | LIBOR + 1.55% | % | LIBOR + 2.25% | % |
2018 | $ | ||
2019 | |||
2020 | |||
2021 | |||
2022 | |||
Thereafter | |||
Total Payments | $ |
Total notional amount | $ | |||
Effective fixed interest rate | (1) | % | ||
Effective date | ||||
Maturity date | ||||
Asset balance at June 30, 2018 (included in Other assets) | $ | |||
Asset balance at December 31, 2017 (included in Other assets) | $ |
(1) |
June 30, 2018 | December 31, 2017 | ||||||
Accrued interest | $ | $ | |||||
Real estate taxes payable | |||||||
Prepaid rent | |||||||
Accrued expenses | |||||||
Embedded derivative | |||||||
Security deposits | |||||||
Tenant improvement allowance | |||||||
Accrued incentive compensation | |||||||
Contingent consideration | |||||||
Other | |||||||
Total | $ | $ |
Common Shares | Weighted Average Grant Date Fair Value | |||||
Non-vested at December 31, 2017 | $ | |||||
Granted | ||||||
Vested | ( | ) | ||||
Non-vested at June 30, 2018 | $ |
Volatility | % | ||
Dividend assumption | reinvested | ||
Expected term in years | |||
Risk-free rate | % | ||
Share price (per share) | $ |
Executive Awards | Trustee Awards | ||||||||||||
Restricted Share Units | Weighted Average Grant Date Fair Value | Restricted Share Units | Weighted Average Grant Date Fair Value | ||||||||||
Non-vested at December 31, 2017 | $ | $ | |||||||||||
Granted | |||||||||||||
Vested | ( | ) | (1) | ( | ) | ||||||||
Non-vested at June 30, 2018 | $ | $ |
(1) | Restricted units vested by Company executives in 2018 resulted in the issuance of |
June 30, 2018 | December 31, 2017 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Assets: | |||||||||||||||
Real estate loans receivable | $ | $ | $ | $ | |||||||||||
Notes receivable | $ | $ | $ | $ | |||||||||||
Derivative assets | $ | $ | $ | $ | |||||||||||
Liabilities: | |||||||||||||||
Credit facility | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Notes payable | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Mortgage debt | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
2018 | $ | ||
2019 | |||
2020 | |||
2021 | |||
2022 | |||
Thereafter | |||
Total | $ |
2018 | $ | ||
2019 | |||
2020 | |||
2021 | |||
2022 | |||
Thereafter | |||
Total | $ |
Tenant | Total ABR | Percent of ABR | |||||
CHI - Nebraska | $ | % | |||||
CHI - KentuckyOne Health | % | ||||||
Baylor Scott and White Health | % | ||||||
US Oncology | % | ||||||
CHI - St. Alexius (ND) | % | ||||||
Remaining portfolio | % | ||||||
Total | $ | % |
State | Total ABR | Percent of ABR | |||||
Texas | $ | % | |||||
Georgia | % | ||||||
Nebraska | % | ||||||
Indiana | % | ||||||
Minnesota | % | ||||||
Other | % | ||||||
Total | $ | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator for earnings per share - basic: | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Net income attributable to noncontrolling interests: | |||||||||||||||
Operating Partnership | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Partially owned properties | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Preferred distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Numerator for earnings per share - basic | $ | $ | $ | $ | |||||||||||
Numerator for earnings per share - diluted: | |||||||||||||||
Numerator for earnings per share - basic | $ | $ | $ | $ | |||||||||||
Operating Partnership net income | |||||||||||||||
Numerator for earnings per share - diluted | $ | $ | $ | $ | |||||||||||
Denominator for earnings per share - basic and diluted: | |||||||||||||||
Weighted average number of shares outstanding - basic | |||||||||||||||
Effect of dilutive securities: | |||||||||||||||
Noncontrolling interest - Operating Partnership units | |||||||||||||||
Restricted common shares | |||||||||||||||
Restricted share units | |||||||||||||||
Denominator for earnings per share - diluted: | |||||||||||||||
Earnings per share - basic | $ | $ | $ | $ | |||||||||||
Earnings per share - diluted | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator for earnings per unit - basic and diluted: | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Net income attributable to noncontrolling interests - partially owned properties | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Preferred distributions | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Numerator for earnings per unit - basic and diluted | $ | $ | $ | $ | |||||||||||
Denominator for earnings per unit - basic and diluted: | |||||||||||||||
Weighted average number of units outstanding - basic | |||||||||||||||
Effect of dilutive securities: | |||||||||||||||
Restricted common shares | |||||||||||||||
Restricted share units | |||||||||||||||
Denominator for earnings per unit - diluted | |||||||||||||||
Earnings per unit - basic | $ | $ | $ | $ | |||||||||||
Earnings per unit - diluted | $ | $ | $ | $ |
• | medical office buildings; |
• | outpatient treatment and diagnostic facilities; |
• | physician group practice clinics; |
• | ambulatory surgery centers; and |
• | specialty hospitals and treatment centers. |
2018 | 2017 | Change | % | |||||||||||
Revenues: | ||||||||||||||
Rental revenues | $ | 80,392 | $ | 58,015 | $ | 22,377 | 38.6 | % | ||||||
Expense recoveries | 24,288 | 16,108 | 8,180 | 50.8 | % | |||||||||
Interest income on real estate loans and other | 2,309 | 2,476 | (167 | ) | (6.7 | )% | ||||||||
Total revenues | 106,989 | 76,599 | 30,390 | 39.7 | % | |||||||||
Expenses: | ||||||||||||||
Interest expense | 17,154 | 11,472 | 5,682 | 49.5 | % | |||||||||
General and administrative | 7,104 | 6,249 | 855 | 13.7 | % | |||||||||
Operating expenses | 30,341 | 20,519 | 9,822 | 47.9 | % | |||||||||
Depreciation and amortization | 37,725 | 28,123 | 9,602 | 34.1 | % | |||||||||
Acquisition expenses | — | 5,242 | (5,242 | ) | (100.0 | )% | ||||||||
Total expenses | 92,324 | 71,605 | 20,719 | 28.9 | % | |||||||||
Income before equity in income of unconsolidated entities and (loss) gain on sale of investment properties: | 14,665 | 4,994 | 9,671 | 193.7 | % | |||||||||
Equity in income of unconsolidated entities | 29 | 29 | — | — | % | |||||||||
(Loss) gain on sale of investment properties | (2,632 | ) | 5,308 | (7,940 | ) | (149.6 | )% | |||||||
Net income | $ | 12,062 | $ | 10,331 | $ | 1,731 | 16.8 | % |
2018 | 2017 | Change | % | |||||||||||
Revenues: | ||||||||||||||
Rental revenues | $ | 159,279 | $ | 117,107 | $ | 42,172 | 36.0 | % | ||||||
Expense recoveries | 48,596 | 32,462 | 16,134 | 49.7 | % | |||||||||
Interest income on real estate loans and other | 4,337 | 3,696 | 641 | 17.3 | % | |||||||||
Total revenues | 212,212 | 153,265 | 58,947 | 38.5 | % | |||||||||
Expenses: | ||||||||||||||
Interest expense | 33,648 | 21,287 | 12,361 | 58.1 | % | |||||||||
General and administrative | 15,563 | 10,985 | 4,578 | 41.7 | % | |||||||||
Operating expenses | 60,800 | 42,608 | 18,192 | 42.7 | % | |||||||||
Depreciation and amortization | 76,301 | 56,056 | 20,245 | 36.1 | % | |||||||||
Acquisition expenses | — | 10,647 | (10,647 | ) | (100.0 | )% | ||||||||
Total expenses | 186,312 | 141,583 | 44,729 | 31.6 | % | |||||||||
Income before equity in income of unconsolidated entities and (loss) gain on sale of investment properties: | 25,900 | 11,682 | 14,218 | 121.7 | % | |||||||||
Equity in income of unconsolidated entities | 57 | 57 | — | — | % | |||||||||
(Loss) gain on sale of investment properties | (2,563 | ) | 5,308 | (7,871 | ) | (148.3 | )% | |||||||
Net income | $ | 23,394 | $ | 17,047 | $ | 6,347 | 37.2 | % |
2018 | 2017 | ||||||
Cash provided by operating activities | $ | 102,313 | $ | 88,808 | |||
Cash used in investing activities | (99,339 | ) | (760,568 | ) | |||
Cash provided by financing activities | 3,525 | 667,778 | |||||
Increase (decrease) in cash and cash equivalents | $ | 6,499 | $ | (3,982 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 12,062 | $ | 10,331 | $ | 23,394 | $ | 17,047 | |||||||
Earnings per share - diluted | $ | 0.06 | $ | 0.06 | $ | 0.12 | $ | 0.11 | |||||||
Net income | $ | 12,062 | $ | 10,331 | $ | 23,394 | $ | 17,047 | |||||||
Net income attributable to noncontrolling interests - partially owned properties | (144 | ) | (159 | ) | (255 | ) | (326 | ) | |||||||
Preferred distributions | (284 | ) | (188 | ) | (771 | ) | (399 | ) | |||||||
Depreciation and amortization expense | 37,687 | 28,098 | 76,217 | 56,009 | |||||||||||
Depreciation and amortization expense - partially owned properties | (11 | ) | (129 | ) | (177 | ) | (281 | ) | |||||||
Loss (gain) on the sale of investment properties | 2,632 | (5,308 | ) | 2,563 | (5,308 | ) | |||||||||
FFO applicable to common shares and OP Units | $ | 51,942 | $ | 32,645 | $ | 100,971 | $ | 66,742 | |||||||
FFO per common share and OP Unit | $ | 0.28 | $ | 0.20 | $ | 0.54 | $ | 0.44 | |||||||
Net change in fair value of derivative | (10 | ) | 4 | (8 | ) | 169 | |||||||||
Acquisition expenses | — | 5,242 | — | 10,647 | |||||||||||
Net change in fair value of contingent consideration | (50 | ) | — | (50 | ) | (70 | ) | ||||||||
Normalized FFO applicable to common shares and OP Units | $ | 51,882 | $ | 37,891 | $ | 100,913 | $ | 77,488 | |||||||
Normalized FFO per common share and OP Unit | $ | 0.28 | $ | 0.24 | $ | 0.54 | $ | 0.51 | |||||||
Weighted average number of common shares and OP Units outstanding | 187,431,132 | 161,012,360 | 187,387,211 | 151,912,432 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 12,062 | $ | 10,331 | $ | 23,394 | $ | 17,047 | |||||||
Normalized FFO applicable to common shares and OP Units | $ | 51,882 | $ | 37,891 | $ | 100,913 | $ | 77,488 | |||||||
Normalized FFO applicable to common shares and OP Units | $ | 51,882 | $ | 37,891 | $ | 100,913 | $ | 77,488 | |||||||
Non-cash share compensation expense | 2,014 | 1,324 | 4,619 | 3,238 | |||||||||||
Straight-line rent adjustments | (6,150 | ) | (2,097 | ) | (12,600 | ) | (6,605 | ) | |||||||
Amortization of acquired above/below-market leases/assumed debt | 980 | 844 | 1,810 | 1,782 | |||||||||||
Amortization of lease inducements | 345 | 311 | 689 | 621 | |||||||||||
Amortization of deferred financing costs | 597 | 579 | 1,215 | 1,128 | |||||||||||
TI/LC and recurring capital expenditures | (6,213 | ) | (4,865 | ) | (10,371 | ) | (8,078 | ) | |||||||
Seller master lease and rent abatement payments | — | 244 | 229 | 498 | |||||||||||
Normalized FAD applicable to common shares and OP Units | $ | 43,455 | $ | 34,231 | $ | 86,504 | $ | 70,072 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 12,062 | $ | 10,331 | $ | 23,394 | $ | 17,047 | |||||||
General and administrative | 7,104 | 6,249 | 15,563 | 10,985 | |||||||||||
Acquisition expenses | — | 5,242 | — | 10,647 | |||||||||||
Depreciation and amortization | 37,725 | 28,123 | 76,301 | 56,056 | |||||||||||
Interest expense | 17,154 | 11,472 | 33,648 | 21,287 | |||||||||||
Net change in the fair value of derivative | (10 | ) | 4 | (8 | ) | 169 | |||||||||
Loss (gain) on sale of investment properties | 2,632 | (5,308 | ) | 2,563 | (5,308 | ) | |||||||||
NOI | $ | 76,667 | $ | 56,113 | $ | 151,461 | $ | 110,883 | |||||||
NOI | $ | 76,667 | $ | 56,113 | $ | 151,461 | $ | 110,883 | |||||||
Straight-line rent adjustments | (6,150 | ) | (2,097 | ) | (12,600 | ) | (6,605 | ) | |||||||
Amortization of acquired above/below-market leases/assumed debt | 980 | 844 | 1,810 | 1,782 | |||||||||||
Amortization of lease inducements | 345 | 311 | 689 | 621 | |||||||||||
Seller master lease and rent abatement payments | — | 244 | 229 | 498 | |||||||||||
Change in fair value of contingent consideration | (50 | ) | — | (50 | ) | (70 | ) | ||||||||
Cash NOI | $ | 71,792 | $ | 55,415 | $ | 141,539 | $ | 107,109 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 12,062 | $ | 10,331 | $ | 23,394 | $ | 17,047 | |||||||
Depreciation and amortization | 37,725 | 28,123 | 76,301 | 56,056 | |||||||||||
Interest expense | 17,154 | 11,472 | 33,648 | 21,287 | |||||||||||
Loss (gain) on sale of investment properties | 2,632 | (5,308 | ) | 2,563 | (5,308 | ) | |||||||||
EBITDAre | $ | 69,573 | $ | 44,618 | $ | 135,906 | $ | 89,082 | |||||||
Acquisition expenses | — | 5,242 | — | 10,647 | |||||||||||
Non-cash share compensation expense | 2,014 | 1,324 | 4,619 | 3,238 | |||||||||||
Non-cash changes in fair value | (60 | ) | 4 | (58 | ) | 99 | |||||||||
Adjusted EBITDAre | $ | 71,527 | $ | 51,188 | $ | 140,467 | $ | 103,066 |
• | property expenses; |
• | interest expense and scheduled principal payments on outstanding indebtedness; |
• | general and administrative expenses; and |
• | capital expenditures for tenant improvements and leasing commissions. |
Credit Rating | Margin for Revolving Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee | Margin for Revolving Loans: Base Rate Loans | Margin for Term Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee | Margin for Term Loans: Base Rate Loans | ||||||
At Least A- or A3 | LIBOR + 0.85% | — | % | LIBOR + 1.40% | 0.40 | % | ||||
At Least BBB+ or Baa1 | LIBOR + 0.90% | — | % | LIBOR + 1.45% | 0.45 | % | ||||
At Least BBB or Baa2 | LIBOR + 1.00% | 0.10 | % | LIBOR + 1.55% | 0.55 | % | ||||
At Least BBB- or Baa3 | LIBOR + 1.20% | 0.20 | % | LIBOR + 1.80% | 0.80 | % | ||||
Below BBB- or Baa3 | LIBOR + 1.55% | 0.60 | % | LIBOR + 2.25% | 1.25 | % |
Common shares sold | Weighted average price | Net proceeds | ||||||||
Quarterly period ended March 31, 2018 | 311,786 | $ | 17.85 | $ | 5,509 | |||||
Quarterly period ended June 30, 2018 | — | — | — | |||||||
Year to date | 311,786 | $ | 17.85 | $ | 5,509 |
• | existing shareholders may purchase additional common shares by reinvesting all or a portion of the dividends paid on their common shares and by making optional cash payments of not less than $50 and up to a maximum of $10,000 per month; |
• | new investors may join the DRIP by making an initial investment of not less than $1,000 and up to a maximum of $10,000; and |
• | once enrolled in the DRIP, participants may authorize electronic deductions from their bank account for optional cash payments to purchase additional shares. |
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | |||||||||
April 1, 2018 - April 30, 2018 | 54,535 | (1) | $ | 14.98 | N/A | N/A | |||||||
May 1, 2018 - May 31, 2018 | — | — | N/A | N/A | |||||||||
June 1, 2018 - June 30, 2018 | 2,419 | (2) | 15.48 | N/A | N/A | ||||||||
Total | 56,954 | $ | 15.00 | — | — |
(1) | Represents OP Units redeemed by holders in exchange for common shares. |
(2) | Pursuant to a general authorization, whereby the Trust is authorized to repurchase common shares to satisfy employee withholding tax obligations related to stock-based compensation. |
Exhibit No. | Description | |
101.INS | XBRL Instance Document (+) | |
101.SCH | XBRL Extension Schema Document (+) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (+) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document (+) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (+) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (+) |
PHYSICIANS REALTY TRUST | |
Date: August 3, 2018 | /s/ John T. Thomas |
John T. Thomas | |
Chief Executive Officer and President | |
(Principal Executive Officer) | |
Date: August 3, 2018 | /s/ Jeffrey N. Theiler |
Jeffrey N. Theiler | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
PHYSICIANS REALTY L.P. By: Physicians Realty Trust, its general partner | |
Date: August 3, 2018 | /s/ John T. Thomas |
John T. Thomas | |
Chief Executive Officer and President | |
(Principal Executive Officer) | |
Date: August 3, 2018 | /s/ Jeffrey N. Theiler |
Jeffrey N. Theiler | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Physicians Realty Trust for the three month period ended June 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 3, 2018 | /s/ John T. Thomas |
John T. Thomas | |
Chief Executive Officer and President |
1. | I have reviewed this Quarterly Report on Form 10-Q of Physicians Realty Trust for the three month period ended June 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 3, 2018 | /s/ Jeffrey N. Theiler |
Jeffrey N. Theiler | |
Executive Vice President and Chief Financial Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Physicians Realty L.P. for the three month period ended June 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 3, 2018 | /s/ John T. Thomas |
John T. Thomas | |
Chief Executive Officer and President of Physicians Realty Trust, the general partner of the registrant |
1. | I have reviewed this Quarterly Report on Form 10-Q of Physicians Realty L.P. for the three month period ended June 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 3, 2018 | /s/ Jeffrey N. Theiler |
Jeffrey N. Theiler | |
Executive Vice President and Chief Financial Officer of Physicians Realty Trust, the general partner of the registrant |
a. | the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
b. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ John T. Thomas | |
John T. Thomas | |
Chief Executive Officer and President | |
/s/ Jeffrey N. Theiler | |
Jeffrey N. Theiler | |
Executive Vice President and Chief Financial Officer |
a. | the Quarterly Report on Form 10-Q of the Operating Partnership for the fiscal quarter ended June 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
b. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Operating Partnership. |
/s/ John T. Thomas | |
John T. Thomas | |
Chief Executive Officer and President of Physicians Realty Trust, the general partner of the registrant | |
/s/ Jeffrey N. Theiler | |
Jeffrey N. Theiler | |
Executive Vice President and Chief Financial Officer of Physicians Realty Trust, the general partner of the registrant |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jul. 27, 2018 |
|
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Physicians Realty Trust | |
Entity Central Index Key | 0001574540 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding (in shares) | 182,054,612 | |
Operating Partnership | ||
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Physicians Realty L.P. | |
Entity Central Index Key | 0001583994 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 182,027,309 | 181,440,051 |
Common stock, shares outstanding (in shares) | 182,027,309 | 181,440,051 |
Operating Partnership | ||
General partners' capital account, units issued (in units) | 182,027,309 | 181,440,051 |
General partners' capital account, units outstanding (in units) | 182,027,309 | 181,440,051 |
Limited partners' capital account, units issued (in units) | 5,392,234 | 5,364,632 |
Limited partners' capital account, units outstanding (in units) | 5,392,234 | 5,364,632 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Net income | $ 12,062 | $ 10,331 | $ 23,394 | $ 17,047 |
Other comprehensive income: | ||||
Change in fair value of interest rate swap agreements | 1,321 | (2,367) | 5,619 | (780) |
Total other comprehensive income | 1,321 | (2,367) | 5,619 | (780) |
Comprehensive income | 13,383 | 7,964 | 29,013 | 16,267 |
Comprehensive income attributable to noncontrolling interests - Operating Partnership | (367) | (234) | (805) | (435) |
Comprehensive income attributable to noncontrolling interests - partially owned properties | (144) | (159) | (255) | (326) |
Comprehensive income attributable to common shareholders | 12,872 | 7,571 | 27,953 | 15,506 |
Operating Partnership | ||||
Net income | 12,062 | 10,331 | 23,394 | 17,047 |
Other comprehensive income: | ||||
Change in fair value of interest rate swap agreements | 1,321 | (2,367) | 5,619 | (780) |
Total other comprehensive income | 1,321 | (2,367) | 5,619 | (780) |
Comprehensive income | 13,383 | 7,964 | 29,013 | 16,267 |
Comprehensive income attributable to noncontrolling interests - partially owned properties | (144) | (159) | (255) | (326) |
Comprehensive income attributable to common shareholders | $ 13,239 | $ 7,805 | $ 28,758 | $ 15,941 |
Consolidated Statement of Equity - 6 months ended Jun. 30, 2018 - USD ($) $ in Thousands |
Total |
Par Value |
Additional Paid in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Income |
Total Shareholders’ Equity |
Operating Partnership Noncontrolling Interest |
Partially Owned Properties Noncontrolling Interest |
Total Noncontrolling Interests |
---|---|---|---|---|---|---|---|---|---|
Balance at Dec. 31, 2017 | $ 2,547,634 | $ 1,814 | $ 2,772,823 | $ (315,417) | $ 13,952 | $ 2,473,172 | $ 73,844 | $ 618 | $ 74,462 |
Stockholders' Equity Attributable to Parent [Abstract] | |||||||||
Net proceeds from sale of common shares | 5,970 | 3 | 5,967 | 5,970 | |||||
Restricted share award grants, net | 2,944 | 2 | 2,858 | 84 | 2,944 | ||||
Purchase of OP Units | (303) | (303) | (303) | ||||||
Conversion of OP Units | 0 | 1 | 942 | 943 | (943) | (943) | |||
Dividends/distributions declared | (86,245) | (83,837) | (83,837) | (2,408) | (2,408) | ||||
Preferred distributions | (771) | (771) | (771) | ||||||
Distributions | (86) | (86) | (86) | ||||||
Change in market value of Redeemable Noncontrolling Interest | 1,431 | 155 | 1,276 | 1,431 | |||||
Change in fair value of interest rate swap agreements | 5,619 | 0 | 5,619 | 5,619 | |||||
Net income | 23,232 | 22,495 | 22,495 | 644 | 93 | 737 | |||
Adjustment for Noncontrolling Interests ownership in Operating Partnership | 0 | (878) | (878) | 878 | 878 | ||||
Balance at Jun. 30, 2018 | $ 2,499,425 | $ 1,820 | $ 2,781,867 | $ (376,170) | $ 19,571 | $ 2,427,088 | $ 71,712 | $ 625 | $ 72,337 |
Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Cash Flows from Operating Activities: | ||
Net income | $ 23,394 | $ 17,047 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization | 76,301 | 56,056 |
Amortization of deferred financing costs | 1,214 | 1,128 |
Amortization of lease inducements and above/below-market lease intangibles | 2,530 | 2,550 |
Straight-line rental revenue/expense | (12,600) | (6,605) |
Amortization of discount on unsecured senior notes | 285 | 98 |
Amortization of above market assumed debt | (31) | (147) |
Loss (gain) on sale of investment properties | 2,563 | (5,308) |
Equity in income of unconsolidated entities | (57) | (57) |
Distributions from unconsolidated entities | 56 | 83 |
Change in fair value of derivative | (8) | 169 |
Provision for bad debts | (81) | (840) |
Non-cash share compensation | 4,619 | 3,238 |
Net change in fair value of contingent consideration | (50) | (70) |
Change in operating assets and liabilities: | ||
Tenant receivables | 4,186 | 2,958 |
Other assets | 502 | 3,293 |
Accounts payable | (6,011) | 648 |
Accrued expenses and other liabilities | 5,501 | 14,567 |
Net cash provided by operating activities | 102,313 | 88,808 |
Cash Flows from Investing Activities: | ||
Proceeds on sales of investment properties | 93,187 | 18,150 |
Acquisition of investment properties, net | (157,322) | (756,862) |
Escrowed cash - acquisition deposits/earnest deposits | (2,220) | (19,577) |
Capital expenditures on investment properties | (18,735) | (8,343) |
Issuance of real estate loans receivable | (2,000) | (8,594) |
Repayment of real estate loan receivable | 10,271 | 1,507 |
Issuance of note receivable | (20,385) | 0 |
Repayment of note receivable | 0 | 16,423 |
Leasing commissions | (2,062) | (1,209) |
Lease inducements | (73) | (2,063) |
Net cash used in investing activities | (99,339) | (760,568) |
Cash Flows from Financing Activities: | ||
Net proceeds from sale of common shares | 5,970 | 383,676 |
Proceeds from credit facility borrowings | 277,000 | 488,000 |
Payment on credit facility borrowings | (143,000) | (529,000) |
Proceeds from issuance of mortgage debt | 0 | 61,000 |
Proceeds from issuance of senior unsecured notes | 0 | 396,108 |
Principal payments on mortgage debt | (46,809) | (36,440) |
Debt issuance costs | (419) | (1,065) |
Dividends paid - shareholders | (84,161) | (65,529) |
Distributions to noncontrolling interests - Operating Partnership | (2,448) | (1,917) |
Preferred distributions paid - OP Unit holder | (342) | (519) |
Contributions from noncontrolling interest | 0 | 47 |
Distributions to noncontrolling interests - partially owned properties | (262) | (434) |
Payments of employee taxes for withheld stock-based compensation shares | (1,701) | (2,431) |
Purchase of Series A Preferred Units | 0 | (19,961) |
Purchase of OP Units | (303) | (3,757) |
Net cash provided by financing activities | 3,525 | 667,778 |
Net increase (decrease) in cash and cash equivalents | 6,499 | (3,982) |
Cash and cash equivalents, beginning of period | 2,727 | 15,491 |
Cash and cash equivalents, end of period | 9,226 | 11,509 |
Supplemental disclosure of cash flow information - interest paid during the period | 25,730 | 14,876 |
Supplemental disclosure of noncash activity - change in fair value of interest rate swap agreements | 5,619 | (780) |
Supplemental disclosure of noncash activity - assumed debt | 0 | 26,379 |
Supplemental disclosure of noncash activity - issuance of OP Units (2017) and Series A Preferred Units in connection with acquisitions | 22,651 | 44,978 |
Operating Partnership | ||
Cash Flows from Operating Activities: | ||
Net income | 23,394 | 17,047 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization | 76,301 | 56,056 |
Amortization of deferred financing costs | 1,214 | 1,128 |
Amortization of lease inducements and above/below-market lease intangibles | 2,530 | 2,550 |
Straight-line rental revenue/expense | (12,600) | (6,605) |
Amortization of discount on unsecured senior notes | 285 | 98 |
Amortization of above market assumed debt | (31) | (147) |
Loss (gain) on sale of investment properties | 2,563 | (5,308) |
Equity in income of unconsolidated entities | (57) | (57) |
Distributions from unconsolidated entities | 56 | 83 |
Change in fair value of derivative | (8) | 169 |
Provision for bad debts | (81) | (840) |
Non-cash share compensation | 4,619 | 3,238 |
Net change in fair value of contingent consideration | (50) | (70) |
Change in operating assets and liabilities: | ||
Tenant receivables | 4,186 | 2,958 |
Other assets | 502 | 3,293 |
Accounts payable | (6,011) | 648 |
Accrued expenses and other liabilities | 5,501 | 14,567 |
Net cash provided by operating activities | 102,313 | 88,808 |
Cash Flows from Investing Activities: | ||
Proceeds on sales of investment properties | 93,187 | 18,150 |
Acquisition of investment properties, net | (157,322) | (756,862) |
Escrowed cash - acquisition deposits/earnest deposits | (2,220) | (19,577) |
Capital expenditures on investment properties | (18,735) | (8,343) |
Issuance of real estate loans receivable | (2,000) | (8,594) |
Repayment of real estate loan receivable | 10,271 | 1,507 |
Issuance of note receivable | (20,385) | 0 |
Repayment of note receivable | 0 | 16,423 |
Leasing commissions | (2,062) | (1,209) |
Lease inducements | (73) | (2,063) |
Net cash used in investing activities | (99,339) | (760,568) |
Cash Flows from Financing Activities: | ||
Net proceeds from sale of common shares | 5,970 | 383,676 |
Proceeds from credit facility borrowings | 277,000 | 488,000 |
Payment on credit facility borrowings | (143,000) | (529,000) |
Proceeds from issuance of mortgage debt | 0 | 61,000 |
Proceeds from issuance of senior unsecured notes | 0 | 396,108 |
Principal payments on mortgage debt | (46,809) | (36,440) |
Debt issuance costs | (419) | (1,065) |
Dividends paid - shareholders | (84,161) | (65,529) |
Distributions to noncontrolling interests - Operating Partnership | (2,448) | (1,917) |
Preferred distributions paid - OP Unit holder | (342) | (519) |
Contributions from noncontrolling interest | 0 | 47 |
Distributions to noncontrolling interests - partially owned properties | (262) | (434) |
Payments of employee taxes for withheld stock-based compensation shares | (1,701) | (2,431) |
Purchase of Series A Preferred Units | 0 | (19,961) |
Purchase of OP Units | (303) | (3,757) |
Net cash provided by financing activities | 3,525 | 667,778 |
Net increase (decrease) in cash and cash equivalents | 6,499 | (3,982) |
Cash and cash equivalents, beginning of period | 2,727 | 15,491 |
Cash and cash equivalents, end of period | 9,226 | 11,509 |
Supplemental disclosure of cash flow information - interest paid during the period | 25,730 | 14,876 |
Supplemental disclosure of noncash activity - change in fair value of interest rate swap agreements | 5,619 | (780) |
Supplemental disclosure of noncash activity - assumed debt | 0 | 26,379 |
Supplemental disclosure of noncash activity - issuance of OP Units (2017) and Series A Preferred Units in connection with acquisitions | $ 22,651 | $ 44,978 |
Consolidated Statement of Changes in Capital $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Partners' Capital [Abstract] | |
Distributions | $ (86) |
Change in fair value of interest rate swap agreements | 5,619 |
Net income | 23,232 |
Operating Partnership | |
Partners' Capital [Abstract] | |
Beginning balance | 2,547,634 |
Net proceeds from sale of Trust common shares and issuance of common units | 5,970 |
Trust restricted share award grants, net | 2,944 |
Purchase of OP Units | (303) |
Conversion of OP Units | 0 |
OP Units - distributions | (86,245) |
Preferred distributions | (771) |
Distributions | (86) |
Change in market value of Redeemable Limited Partners | 155 |
Buyout of Noncontrolling Interest - partially owned properties | 1,276 |
Change in fair value of interest rate swap agreements | 5,619 |
Net income | 23,232 |
Adjustments for Limited Partners ownership in Operating Partnership | 0 |
Ending balance | 2,499,425 |
Operating Partnership | Accumulated Other Comprehensive Income | |
Partners' Capital [Abstract] | |
Beginning balance | 13,952 |
Change in fair value of interest rate swap agreements | 5,619 |
Ending balance | 19,571 |
Operating Partnership | General Partner | |
Partners' Capital [Abstract] | |
Beginning balance | 2,459,220 |
Net proceeds from sale of Trust common shares and issuance of common units | 5,970 |
Trust restricted share award grants, net | 2,944 |
Conversion of OP Units | 943 |
OP Units - distributions | (83,837) |
Preferred distributions | (771) |
Change in market value of Redeemable Limited Partners | 155 |
Buyout of Noncontrolling Interest - partially owned properties | 1,276 |
Change in fair value of interest rate swap agreements | 0 |
Net income | 22,495 |
Adjustments for Limited Partners ownership in Operating Partnership | (878) |
Ending balance | 2,407,517 |
Operating Partnership | Limited Partner | |
Partners' Capital [Abstract] | |
Beginning balance | 73,844 |
Purchase of OP Units | (303) |
Conversion of OP Units | (943) |
OP Units - distributions | (2,408) |
Net income | 644 |
Adjustments for Limited Partners ownership in Operating Partnership | 878 |
Ending balance | 71,712 |
Operating Partnership | Total Partners’ Capital | |
Partners' Capital [Abstract] | |
Beginning balance | 2,547,016 |
Net proceeds from sale of Trust common shares and issuance of common units | 5,970 |
Trust restricted share award grants, net | 2,944 |
Purchase of OP Units | (303) |
Conversion of OP Units | 0 |
OP Units - distributions | (86,245) |
Preferred distributions | (771) |
Distributions | 0 |
Change in market value of Redeemable Limited Partners | 155 |
Buyout of Noncontrolling Interest - partially owned properties | 1,276 |
Change in fair value of interest rate swap agreements | 5,619 |
Net income | 23,139 |
Adjustments for Limited Partners ownership in Operating Partnership | 0 |
Ending balance | 2,498,800 |
Partially Owned Properties Noncontrolling Interest | |
Partners' Capital [Abstract] | |
Distributions | (86) |
Net income | 93 |
Partially Owned Properties Noncontrolling Interest | Operating Partnership | |
Partners' Capital [Abstract] | |
Beginning balance | 618 |
Distributions | (86) |
Net income | 93 |
Ending balance | $ 625 |
Organization and Business |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Business | Organization and Business Physicians Realty Trust (the “Trust”) was organized in the state of Maryland on April 9, 2013. As of June 30, 2018, the Trust was authorized to issue up to 500,000,000 common shares of beneficial interest, par value $0.01 per share (“common shares”). The Trust filed a Registration Statement on Form S-11 with the Securities and Exchange Commission (the “Commission”) with respect to a proposed underwritten initial public offering (the “IPO”) and completed the IPO of its common shares and commenced operations on July 24, 2013. The Trust contributed the net proceeds from the IPO to Physicians Realty L.P., a Delaware limited partnership, (the “Operating Partnership”), and is the sole general partner of the Operating Partnership. The Trust and the Operating Partnership are managed and operated as one entity. The Trust has no significant assets other than its investment in the Operating Partnership. The Trust’s operations are conducted through the Operating Partnership and wholly-owned and majority-owned subsidiaries of the Operating Partnership. The Trust, as the general partner of the Operating Partnership, controls the Operating Partnership and consolidates the assets, liabilities, and results of operations of the Operating Partnership. Therefore, the assets and liabilities of the Trust and the Operating Partnership are the same. The Trust is a self-managed real estate investment trust (“REIT”) formed primarily to acquire, selectively develop, own, and manage healthcare properties that are leased to physicians, hospitals, and healthcare delivery systems. ATM Program On August 5, 2016, the Trust and the Operating Partnership entered into separate At Market Issuance Sales Agreements (the “Sales Agreements”) with each of KeyBanc Capital Markets Inc., Credit Agricole Securities (USA) Inc., JMP Securities LLC, Raymond James & Associates, Inc., and Stifel Nicolaus & Company, Incorporated (the “Agents”), pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $300.0 million, through the Agents (the “ATM Program”). In accordance with the Sales Agreements, the Trust may offer and sell its common shares through any of the Agents, from time to time, by any method deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, which includes sales made directly on the New York Stock Exchange or other existing trading market, or sales made to or through a market maker. With the Trust’s express written consent, sales may also be made in negotiated transactions or any other method permitted by law. During the quarterly periods ended March 31, 2018 and June 30, 2018, the Trust’s issuance and sale of common shares pursuant to the ATM Program are as follows (in thousands, except common shares and price):
|
Summary of Significant Accounting Policies |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The accompanying unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods ended June 30, 2018 and 2017 pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements included in the Trust’s and the Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Commission on March 1, 2018. Principles of Consolidation GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). ASC 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We identify the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. We consolidate our investment in a VIE when we determine that we are the VIE’s primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. We perform this analysis on an ongoing basis. For property holding entities not determined to be VIEs, we consolidate such entities in which the Operating Partnership owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For entities in which the Operating Partnership owns less than 100% of the equity interest, the Operating Partnership consolidates the property if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements. For these entities, the Operating Partnership records a noncontrolling interest representing equity held by noncontrolling interests. Noncontrolling Interests The Company presents the portion of any equity it does not own in entities that it controls (and thus consolidates) as noncontrolling interests and classifies such interests as a component of consolidated equity, separate from the Company’s total shareholders’ equity, on the consolidated balance sheets. Operating Partnership: Net income or loss is allocated to noncontrolling interests (limited partners) based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and the Trust. Issuance of additional common shares and OP Units changes the ownership interests of both the noncontrolling interests and the Trust. Such transactions and the related proceeds are treated as capital transactions. Noncontrolling interests in the Company include OP Units held by other investors. As of June 30, 2018, the Trust held a 97.1% interest in the Operating Partnership. As the sole general partner and the majority interest holder, the Trust consolidates the financial position and results of operations of the Operating Partnership. Holders of OP Units may not transfer their OP Units without the Trust’s prior written consent, as general partner of the Operating Partnership. Beginning on the first anniversary of the issuance of OP Units, OP Unit holders may tender their units for redemption by the Operating Partnership in exchange for cash equal to the market price of the Trust’s common shares at the time of redemption or for unregistered common shares on a one-for-one basis. Such selection to pay cash or issue common shares to satisfy an OP Unit holder’s redemption request is solely within the control of the Trust. Accordingly, the Trust presents the OP Units of the Operating Partnership held by investors other than the Trust as noncontrolling interests within equity in the consolidated balance sheets. Partially Owned Properties: The Trust and Operating Partnership reflect noncontrolling interests in partially owned properties on the balance sheet for the portion of consolidated properties that are not wholly owned by the Company. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statements of income. Redeemable Noncontrolling Interests - Series A Preferred Units and Partially Owned Properties On February 5, 2015, the Company entered into a Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) which provides for the designation and issuance of the Series A Participating Redeemable Preferred Units of the Operating Partnership (“Series A Preferred Units”). Series A Preferred Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation. Holders of Series A Preferred Units are entitled to a 5% cumulative return and upon redemption, the receipt of one common share and $200. The holders of the Series A Preferred Units have agreed not to cause the Operating Partnership to redeem their Series A Preferred Units prior to one year from the issuance date. In addition, Series A Preferred Units are redeemable at the option of the holders which redemption obligation may be satisfied, at the Trust’s option, in cash or registered common shares. Instruments that require settlement in registered common shares may not be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered common shares. Due to the redemption rights associated with the Series A Preferred Units, the Company classifies the Series A Preferred Units in the mezzanine section of its consolidated balance sheets. The Series A Preferred Units were evaluated for embedded features that should be bifurcated and separately accounted for as a freestanding derivative. The Company determined that the Series A Preferred Units contained features that require bifurcation. The Company records the carrying amount of the redeemable noncontrolling interests, less the value of the embedded derivative, at the greater of the carrying value or redemption value in the consolidated balance sheets. On January 9, 2018, the acquisition of the HealthEast Clinic & Specialty Center (“Hazelwood Medical Commons”) was partially funded with the issuance of 104,172 Series A Preferred Units, with a value of $22.7 million. Due to the redemption rights associated with the Series A Preferred Units the Trust classifies the Series A Preferred Units in the mezzanine section of its consolidated balance sheet. As of June 30, 2018, the value of the embedded derivative is $3.7 million and is classified in accrued expenses and other liabilities on the consolidated balance sheets. As of June 30, 2018, there were 104,172 Series A Preferred Units outstanding. In connection with the acquisition of a medical office portfolio in Minnesota (the “Minnesota portfolio”), the Trust received a $5 million equity investment from a third party, effective March 1, 2015. This investment earns a 15% cumulative preferred return. At any point subsequent to the third anniversary of the investment, the holder can require the Trust to redeem the instrument at a price for which the investor will realize a 15% internal rate of return. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheet. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. On March 1, 2018, the equity investment was redeemed for $6.4 million. In connection with the acquisition on December 29, 2015 of a medical office building located on the campus of the Great Falls Clinic and Hospital in Great Falls, Montana, physicians affiliated with the seller retained a noncontrolling interest which may, at the holders’ option, be redeemed at any time. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheets. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. Dividends and Distributions On June 21, 2018, the Trust announced that its Board of Trustees authorized and the Trust declared a cash dividend of $0.230 per common share for the quarterly period ended June 30, 2018. The distribution was paid on July 18, 2018 to common shareholders and OP Unit holders of record as of the close of business on July 3, 2018. All distributions paid by the Operating Partnership are declared and paid at the same time as dividends are distributed by the Trust to common shareholders. It has been the Operating Partnership’s policy to declare quarterly distributions so as to allow the Trust to comply with applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), governing REITs. The declaration and payment of quarterly distributions remains subject to the review and approval of the Trust’s Board of Trustees. Our shareholders are entitled to reinvest all or a portion of any cash distribution on their common shares by participating in our Dividend Reinvestment and Share Purchase Plan (“DRIP”), subject to the terms of the plan. Tax Status of Dividends and Distributions Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes generally are taxable to shareholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain. Any cash distributions received by an OP Unit holder in respect of its OP Units generally will not be taxable to such OP Unit holder for U.S. federal income tax purposes, to the extent that such distribution does not exceed the OP Unit holder’s basis in its OP Units. Any such distribution will instead reduce the OP Unit holder’s basis in its OP Units (and OP Unit holders will be subject to tax on the taxable income allocated to them by the Operating Partnership with respect to their OP Units when such income is earned by the Operating Partnership, with such income allocation increasing the OP Unit holders’ basis in their OP Units). Purchases of Investment Properties With the adoption of ASU 2017-01 in January 2018, the majority of our future acquisitions will be accounted for as asset acquisitions, recording the purchase price for tangible and intangible assets and liabilities based on their relative fair values. Tangible assets primarily consist of land and buildings and improvements. Additionally, the purchase price includes acquisition related expenses, above- or below-market leases, in place leases, and above- or below-market debt assumed. Any future contingent consideration will be recorded when the contingency is resolved. The determination of the fair value requires us to make certain estimates and assumptions. The determination of fair value involves the use of significant judgment and estimation. The Company makes estimates of the fair value of the tangible and intangible acquired assets and assumed liabilities using information obtained from multiple sources as a result of pre-acquisition due diligence and generally includes the assistance of a third party appraiser. The Company estimates the fair value of an acquired asset on an “as-if-vacant” basis and its value is depreciated in equal amounts over the course of its estimated remaining useful life. The Company determines the allocated value of other fixed assets, such as site improvements, based upon the replacement cost and depreciates such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. The fair value of land is determined either by considering the sales prices of similar properties in recent transactions or based on an internal analysis of recently acquired and existing comparable properties within the Company’s portfolio. The value of above- or below-market leases is estimated based on the present value (using a discount rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market lease intangibles are amortized as a reduction or addition to rental income over the estimated remaining term of the respective leases plus the term of any renewal options that the lessee would be economically compelled to exercise. In determining the value of in-place leases, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions, tenant improvements, legal, and other related costs based on current market demand. The values assigned to in-place leases are amortized to amortization expense over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off, net of any required lease termination payments. The Company calculates the fair value of any long-term debt assumed by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which the Company approximates based on the rate it would expect to incur on a replacement instrument on the date of acquisition, and recognizes any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument. Based on these estimates, the Company recognizes the acquired assets and assumed liabilities at their estimated relative fair values, which are generally determined using Level 3 inputs, such as market rental rates, capitalization rates, discount rates, or other available market data. Impairment of Intangible and Long-Lived Assets The Company periodically evaluates its long-lived assets, primarily consisting of investments in real estate, for impairment indicators or whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable. If indicators of impairment are present, the Company evaluates the carrying value of the related real estate properties in relation to the undiscounted expected future cash flows of the underlying operations. In performing this evaluation, management considers market conditions and current intentions with respect to holding or disposing of the real estate property. The Company adjusts the net book value of real estate properties to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. The Company recognizes an impairment loss at the time it makes any such determination. If the Company determines that an asset is impaired, the impairment to be recognized is measured as the amount by which the recorded amount of the asset exceeds its fair value. Fair value is typically determined using a discounted future cash flow analysis or other acceptable valuation techniques, which are based, in turn, upon Level 3 inputs, such as revenue and expense growth rates, capitalization rates, discount rates, or other available market data. The Company did not record any impairment charges in the three and six month periods ended June 30, 2018 and 2017. Assets Held for Sale The Company may sell properties from time to time for various reasons, including favorable market conditions. The Company classifies certain long-lived assets as held for sale once the criteria, as defined by GAAP, has been met. The Company classifies a real estate property, or portfolio, as held for sale when: (i) management has approved the disposal, (ii) the property is available for sale in its present condition, (iii) an active program to locate a buyer has been initiated, (iv) it is probable that the property will be disposed of within one year, (v) the property is being marketed at a reasonable price relative to its fair value, and (vi) it is unlikely that the disposal plan will significantly change or be withdrawn. Following the classification of a property as “held for sale,” no further depreciation is recorded on the assets and the assets are written down to the lower of carrying value or fair market value, less cost to sell. As of June 30, 2018, the Company classified one disposition group as held for sale, which includes 17 properties. Investments in Unconsolidated Entities The Company reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, the Company’s share of the investee’s earnings or losses is included in its consolidated statements of income. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the equity interest. Real Estate Loans Receivable Real estate loans receivable consists of eight mezzanine loans and two term loans as of June 30, 2018. Generally, each mezzanine loan is collateralized by an ownership interest in the respective borrower, while each term loan is secured by a mortgage of a related medical office building. Interest income on the loans is recognized as earned based on the terms of the loans, subject to evaluation of collectability risks, and is included in the Company’s consolidated statements of income. On a quarterly basis, the Company evaluates the collectability of its loan portfolio, including related interest income receivable, and establishes a reserve for loan losses, if necessary. No such losses have been recognized to date. Rental Revenue Rental revenue is recognized on a straight-line basis over the terms of the related leases when collectability is reasonably assured. Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue for amounts more or less than amounts currently due from tenants. Amounts recognized in excess of amounts currently due from tenants, excluding assets classified as held for sale, net of related allowances, are included in other assets and were approximately $54.8 million and $47.6 million as of June 30, 2018 and December 31, 2017, respectively. If the Company determines that collectability of straight-line rents is not reasonably assured, the Company limits future recognition to amounts contractually owed and, where appropriate, establishes an allowance for estimated losses. Allowance for doubtful accounts was approximately $0.3 million and $4.9 million as of June 30, 2018 and December 31, 2017, respectively. Rental revenue is adjusted by amortization of lease inducements and above or below market rents on certain leases. Lease inducements and above or below market rents are amortized over the remaining life of the lease. Expense Recoveries Expense recoveries relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized as expense recovery revenue in the period the applicable expenses are incurred. The reimbursements are recorded gross, as the Company is generally the primary obligor with respect to real estate taxes and purchasing goods and services from third-party suppliers, has discretion in selecting the supplier, and bears the credit risk of tenant reimbursement. The Company has certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses. Derivative Instruments When the Company has derivative instruments embedded in other contracts, it records them either as an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sale exception. When specific hedge accounting criteria are not met, changes in the Company’s derivative instruments’ fair value are recognized currently in earnings. Changes in the fair market values of the Company’s derivative instruments are recorded in the consolidated statements of income if the derivative instruments do not qualify for, or the Company does not elect to apply for, hedge accounting. If hedge accounting is applied to a derivative instrument, such changes are reported in accumulated other comprehensive income within the consolidated statement of equity or capital, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of June 30, 2018, the Company had five outstanding interest rate swap contracts that are designated as cash flow hedges of interest rate risk. For presentational purposes, they are shown as one derivative due to the identical nature of their economic terms. Further detail is provided in Note 7 (Derivatives). The effective portion of the change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) on the consolidated balance sheets and is subsequently reclassified into earnings as interest expense for the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. For the three and six months ended June 30, 2018 and the three months ended June 30, 2017, hedge ineffectiveness was insignificant. For the six months ended June 30, 2017, the Company recorded a $0.2 million loss as a result of hedge ineffectiveness. The Company expects hedge ineffectiveness to be insignificant in the next 12 months. Income Taxes The Trust elected to be taxed as a REIT for federal tax purposes commencing with the filing of its tax return for the short taxable year ending December 31, 2013. The Trust had no taxable income prior to electing REIT status. To qualify as a REIT, the Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its shareholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Trust generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its shareholders. If the Trust fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Trust relief under certain statutory provisions. Such an event could materially adversely affect the Trust’s net income and net cash available for distribution to shareholders. However, the Trust intends to continue to operate in such a manner as to continue qualifying for treatment as a REIT. Although the Trust continues to qualify for taxation as a REIT, in various instances, the Trust is subject to state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. As discussed in Note 1 (Organization and Business), the Trust conducts substantially all of its operations through the Operating Partnership. As a partnership, the Operating Partnership generally is not liable for federal income taxes. The income and loss from the operations of the Operating Partnership is included in the tax returns of its partners, including the Trust, who are responsible for reporting their allocable share of the partnership income and loss. Accordingly, no provision for income taxes has been made on the accompanying consolidated financial statements. Tenant Receivables, Net Tenant accounts receivable are stated net of the applicable allowance. Rental payments under these contracts are primarily due monthly. The Company assesses the collectability of tenant receivables, including straight-line rent receivables, and defers recognition of revenue if collectability is not reasonably assured. The Company bases its assessment of the collectability of rent receivables on several factors, including, among other things, payment history, the financial strength of the tenant, and current economic conditions. If management’s evaluation of these factors indicates it is probable that the Company will be unable to recover the full value of the receivable, the Company provides a reserve against the portion of the receivable that it estimates may not be recovered. At June 30, 2018 and December 31, 2017, the allowance for doubtful accounts was $0.5 million and $1.6 million, respectively. Management Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the amounts of revenue and expenses reported in the period. Significant estimates are made for the fair value assessments with respect to purchase price allocations, impairment assessments, and the valuation of financial instruments. Actual results could differ from these estimates. Contingent Liabilities Certain of our acquisitions provide for additional consideration to the seller in the form of an earn-out associated with lease-up contingencies. The Company recognizes the contingent liabilities only if certain parameters or other substantive contingencies are met, at which time the consideration becomes payable. Resolved contingent liabilities increase our acquired assets and reduce our liabilities. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The Company adopted ASU 2017-01 on January 1, 2018. As such, the Company will record the majority of future real estate investments as asset acquisitions and any future contingent consideration will be recorded when the contingency is resolved. Prior to January 1, 2018, the Company recorded certain contingent liabilities which are included in accrued expenses and other liabilities on its consolidated balance sheets. These were recorded at fair value as of the acquisition date and until they expire, the Company reassesses the fair value at the end of each reporting period, with any changes being recognized in earnings. Reclassifications Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the previously reported consolidated balance sheets or consolidated statements of income. Segment Reporting Under the provision of Codification Topic 280, Segment Reporting, the Company has determined that it has one reportable segment with activities related to leasing and managing healthcare properties. New Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We adopted ASU 2014-09 as of January 1, 2018 under the modified retrospective approach. Based on our assessment, we have identified all of our revenue streams and concluded rental income from leasing arrangements represents a substantial portion of our revenue. Income from leasing arrangements is specifically excluded from Topic 606 and will be evaluated with the anticipated adoption of ASU 2016-02, Leases. Therefore, the impact of adopting ASU 2014-09 was minimal on our current recognition and presentation of non-lease revenue. Upon adoption of ASU 2016-02, Topic 606 may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and other reimbursement revenue), even when the revenue for such activities is not separately stipulated in the lease. In that case, the revenue from these items previously recognized on a straight -line basis under the current lease guidance would be recognized under the new revenue guidance as the related services are delivered. In February 2016, the FASB issued ASU 2016-02, Leases. The update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard provides the option of a modified retrospective transition approach or a cumulative effect for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The FASB also issued an Exposure Draft on January 5, 2018 proposing to amend ASU 2016-02, which would provide lessors with a practical expedient, by class of underlying assets, to not separate non-lease components from the related lease components and, instead, to account for those components as a single lease component, if certain criteria are met. ASU 2016-02 and the related Exposure Draft are not effective for us until January 1, 2019, with early adoption permitted. We are continuing to evaluate this guidance and the impact to us, as both lessor and lessee, on our Consolidated Financial Statements. We expect to utilize the practical expedients proposed in the Exposure Draft as part of our adoption of ASU 2016-02. As a result of adopting the practical expedients, the Company will recognize all of its operating leases for which it is the lessee, including ground leases, on its consolidated balance sheets. We have detailed our future minimum lease obligations under non-cancelable leases in Note 12 (Rent Expense). The Company is evaluating the impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incur losses as required currently by the other-than-temporary impairment model. ASU 2016-13 will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures (e.g., loan commitments). ASU 2016-13 is effective for reporting periods beginning after December 15, 2019, with early adoption permitted, and will be applied as a cumulative adjustment to retained earnings as of the effective date. We are currently assessing the potential effect the adoption of ASU 2016-13 will have on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payment. ASU 2016-15 clarifies the guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Company adopted ASU 2016-15 on January 1, 2018, with no material effect on its consolidated financial statements and no adjustments made to prior periods. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which will require companies to include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. ASU 2016-18 will require disclosure of a reconciliation between the balance sheet and the statement of cash flows when the balance sheet includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. An entity with material restricted cash and restricted cash equivalents balances will be required to disclose the nature of the restrictions. ASU 2016-18 is effective for reporting periods beginning after December 15, 2017 and is required to be applied retrospectively to all periods presented. The Company adopted ASU 2016-18 on January 1, 2018, with no material effect on its consolidated financial statements and no adjustments made to prior periods. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. This ASU is to be applied prospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted ASU 2017-01 on January 1, 2018 and as a result, have classified our real estate acquisitions completed during the six months ended June 30, 2018 as asset acquisitions rather than business combinations due to the fact that substantially all of the fair value of the gross assets acquired were concentrated in a single asset or group of similar identifiable assets. The Company has recorded identifiable assets acquired, liabilities assumed, and any noncontrolling interests associated with any asset acquisitions at cost on a relative fair value basis and has capitalized transaction costs incurred. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. It also includes certain targeted improvements to simplify the application of current guidance related to hedge accounting. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating the effects this standard will have on its consolidated financial statements.
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Acquisitions and Dispositions |
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Acquisitions and Dispositions | Acquisitions and Dispositions 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 statements of operations. Certain acquisitions that occurred prior to January 1, 2018, were accounted for as business combinations. During the six months ended June 30, 2018, the Company completed acquisitions of 3 operating healthcare properties and 1 land parcel located in 4 states for an aggregate purchase price of approximately $170.7 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 $179.1 million. During the three months ended June 30, 2018, the Company completed the acquisition of the HMG Medical Plaza located in Kingsport, TN for approximately $71.3 million. For the three months ended June 30, 2018, the Company recorded revenues and net income from its 2018 acquisitions of $3.5 million and $1.5 million, respectively. For the six months ended June 30, 2018, the Company recorded revenues and net income from its 2018 acquisitions of $5.4 million and $2.0 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):
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. During the three months ended June 30, 2018, the Company sold 15 medical office buildings located in three states for approximately $90.7 million and recognized a net loss on the sale of approximately $2.6 million. The following table summarizes revenues and net income related to the disposed properties for the periods presented (in thousands):
Assets Held for Sale As of June 30, 2018, the Company classified one portfolio comprised of 17 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 June 30, 2018.
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Intangibles |
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Intangibles | Intangibles The following is a summary of the carrying amount of intangible assets and liabilities, excluding assets classified as held for sale if applicable, as of June 30, 2018 and December 31, 2017 (in thousands):
The following is a summary of the acquired lease intangible amortization for the three and six month periods ended June 30, 2018 and 2017, respectively (in thousands):
For the three months ended June 30, 2018, the Company wrote off in-place lease intangible assets of approximately $0.8 million with accumulated amortization of $0.2 million, for a net loss of approximately $0.6 million. For the six months ended June 30, 2018, the Company wrote off in-place lease intangible assets of approximately $0.9 million with accumulated amortization of $0.3 million, as well as certain insignificant above market lease intangible assets. Intangible write-offs for the six months ended June 30, 2018 resulted in an aggregate net loss of approximately $0.7 million to rental income from intangible amortization. Future aggregate net amortization of the acquired lease intangibles, excluding 17 assets classified as held for sale, as of June 30, 2018, is as follows (in thousands):
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Other Assets |
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Other Assets, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Assets | Other Assets Other assets consisted of the following, excluding assets classified as held for sale if applicable, as of June 30, 2018 and December 31, 2017 (in thousands):
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Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The following is a summary of debt as of June 30, 2018 and December 31, 2017 (in thousands):
On June 10, 2016, the Operating Partnership, as borrower, and the Trust entered into an amended and restated Credit Agreement with KeyBank National Association, as administrative agent, KeyBanc Capital Markets Inc., BMO Capital Markets, and Citizens Bank N.A., as joint lead arrangers and co-book runners, BMO Capital Markets and Citizens Bank N.A., as co-syndication agents, and the lenders party thereto (the “Credit Agreement”) which increased the maximum principal amount available under an unsecured revolving credit facility from $750 million to $850 million. The Credit Agreement contains a 7-year term loan feature allowing the Operating Partnership to borrow in a single drawing up to $250 million, increasing the borrowing capacity to an aggregate $1.1 billion. The Credit Agreement also includes a swingline loan commitment for up to 10% of the maximum principal amount and provides an accordion feature allowing the Trust to increase borrowing capacity by up to an additional $500 million, subject to customary terms and conditions, resulting in a maximum borrowing capacity of $1.6 billion. On July 7, 2016, the Operating Partnership borrowed $250.0 million under the 7-year term loan feature of the Credit Agreement. Borrowings under the term loan feature of the Credit Agreement bear interest on the outstanding principal amount at a rate which is determined by the Trust’s credit rating, currently equal to LIBOR + 1.80%. The Trust simultaneously entered into a pay-fixed receive-variable rate swap for the full borrowing amount, fixing the LIBOR component of the borrowing rate to 1.07%, for an all-in fixed rate of 2.87%. Both the borrowing and pay-fixed receive-variable swap have a maturity date of June 10, 2023. The Credit Agreement has a maturity date of September 18, 2020 and includes a one-year extension option. Borrowings under the Credit Agreement bear interest on the outstanding principal amount at an adjusted LIBOR rate, which is based on the Trust’s investment grade rating under the Credit Agreement. As of June 30, 2018, the Trust had an investment grade rating of Baa3 from Moody’s and BBB- from S&P. As such, borrowings under the revolving credit facility of the Credit Agreement accrued interest on the outstanding principal at a rate of LIBOR plus 1.20%. The Credit Agreement includes a facility fee equal to 0.25% per annum, which is also determined by the Trust’s investment grade rating. The Credit Agreement contains financial covenants that, among other things, require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as covenants that may limit the Trust’s and the Operating Partnership’s ability to incur additional debt or make distributions. The Company may, at any time, voluntarily prepay term borrowings or any revolving or swingline loan under the Credit Agreement in whole or in part without premium or penalty. As of June 30, 2018, the Company was in compliance with all financial covenants related to the Credit Agreement. The Credit Agreement includes customary representations and warranties by the Trust and the Operating Partnership and imposes customary covenants on the Operating Partnership and the Trust. The Credit Agreement also contains customary events of default, and if an event of default occurs and continues, the Operating Partnership is subject to certain actions by the administrative agent, including without limitation, the acceleration of repayment of all amounts outstanding under the Credit Agreement. The Credit Agreement provides for revolving credit and term loans to the Trust and the Operating Partnership. Base Rate Loans, Adjusted LIBOR Rate Loans, and Letters of Credit (each, as defined in the Credit Agreement) will be subject to interest rates, based upon the Trust’s investment grade rating as follows:
As of June 30, 2018, the company had $214.0 million of borrowings outstanding under its unsecured revolving credit facility, and $250.0 million of borrowings outstanding under the term loan feature of the Credit Agreement. The Company has also issued a letter of credit for $17.0 million with no outstanding balance as of June 30, 2018. As defined by the Credit Agreement, $619.0 million is available to borrow without adding additional properties to the unencumbered borrowing base of assets. On January 7, 2016, the Operating Partnership issued and sold $150.0 million aggregate principal amount of senior notes, comprised of (i) $15.0 million aggregate principal amount of 4.03% Senior Notes, Series A, due January 7, 2023, (ii) $45.0 million aggregate principal amount of 4.43% Senior Notes, Series B, due January 7, 2026, (iii) $45.0 million aggregate principal amount of 4.57% Senior Notes, Series C, due January 7, 2028, and (iv) $45.0 million aggregate principal amount of 4.74% Senior Notes, Series D, due January 7, 2031. On August 11, 2016, the note agreement for these notes was amended to make certain changes to its terms, including certain changes to affirmative covenants, negative covenants and definitions contained therein. Interest on each respective series of the January 2016 Senior Notes is payable semi-annually. On August 11, 2016, the Operating Partnership issued and sold $75.0 million aggregate principal amount of senior notes, comprised of (i) $25.0 million aggregate principal amount of 4.09% Senior Notes, Series A, due August 11, 2025, (ii) $25.0 million aggregate principal amount of 4.18% Senior Notes, Series B, due August 11, 2026, and (iii) $25.0 million aggregate principal amount of 4.24% Senior Notes, Series C, due August 11, 2027. Interest on each respective series of the August 2016 Senior Notes is payable semi-annually. On March 7, 2017, the Operating Partnership issued and sold $400.0 million aggregate principal amount of 4.30% Senior Notes which will mature on March 15, 2027. The Senior Notes began accruing interest on March 7, 2017 and began paying interest semi-annually beginning September 15, 2017. The Senior Notes were sold at an issue price of 99.68% of their face value, before the underwriters’ discount. Our net proceeds from the offering, after deducting underwriting discounts and expenses, were approximately $396.1 million. On December 1, 2017, the Operating Partnership issued and sold $350.0 million aggregate principal amount of 3.95% Senior Notes which will mature on January 15, 2028. The Senior Notes began accruing interest on December 1, 2017 and will begin paying interest semi-annually beginning July 15, 2018. The Senior Notes were sold at an issue price of 99.78% of their face value, before the underwriters’ discount. Our net proceeds from the offering, after deducting underwriting discounts and expenses, were approximately $347.0 million. Certain properties have mortgage debt that contains financial covenants. As of June 30, 2018, the Trust was in compliance with all mortgage debt financial covenants. Scheduled principal payments due on debt as of June 30, 2018, are as follows (in thousands):
As of June 30, 2018, the Company had total consolidated indebtedness of approximately $1.6 billion. The weighted average interest rate on consolidated indebtedness was 3.89% (based on the 30-day LIBOR rate as of June 30, 2018, of 2.07%). |
Derivatives |
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Derivative Instrument Detail [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Derivatives | Derivatives In the normal course of business, a variety of financial instruments are used to manage or hedge interest rate risk. The Company has implemented ASC 815, Derivatives and Hedging (ASC 815), which establishes accounting and reporting standards requiring that all derivatives, including certain derivative instruments embedded in other contracts, be recorded as either an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, ASC 815 requires that changes in a derivative’s fair value be recognized currently in earnings. Changes in the fair market values of the Company’s derivative instruments are recorded in the consolidated statements of income if such derivatives do not qualify for, or the Company does not elect to apply for, hedge accounting. If hedge accounting is applied to a derivative instrument, such changes are reported in accumulated other comprehensive income within the consolidated statement of equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of June 30, 2018, the Company had five outstanding interest rate swap contracts that are designated as cash flow hedges of interest rate risk. For presentational purposes, they are shown as one derivative due to the identical nature of their economic terms. The effective portion of the change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) on the consolidated balance sheets and is subsequently reclassified into earnings as interest expense for the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Hedge ineffectiveness was insignificant for the three and six months ended June 30, 2018 and the three months ended June 30, 2017. For the six months ended June 30, 2017 the Company recognized a $0.2 million loss as a result of hedge ineffectiveness. The Company expects hedge ineffectiveness to be insignificant in the next 12 months. The following table summarizes the location and aggregate fair value of the interest rate swaps on the Company’s consolidated balance sheets (in thousands):
(1) 1.07% effective swap rate plus 1.80% spread per Credit Agreement.
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Accrued Expenses and Other Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Liabilities | Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following as of June 30, 2018 and December 31, 2017 (in thousands):
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Stock-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | Stock-based Compensation The Company follows ASC 718, Compensation - Stock Compensation (“ASC 718”), in accounting for its share-based payments. This guidance requires measurement of the cost of employee services received in exchange for stock compensation based on the grant-date fair value of the employee stock awards. This cost is recognized as compensation expense ratably over the employee’s requisite service period. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized when incurred. Share-based payments classified as liability awards are marked to fair value at each reporting period. Any common shares issued pursuant to the Company's incentive equity compensation and employee stock purchase plans will result in the Operating Partnership issuing OP Units to the Trust on a one-for-one basis, with the Operating Partnership receiving the net cash proceeds of such issuances. Certain of the Company’s employee stock awards vest only upon the achievement of performance targets. ASC 718 requires recognition of compensation cost only when achievement of performance conditions is considered probable. Consequently, the Company’s determination of the amount of stock compensation expense requires a significant level of judgment in estimating the probability of achievement of these performance targets. Subsequent changes in actual experience are monitored and estimates are updated as information is available. In connection with the IPO, the Trust adopted the 2013 Equity Incentive Plan (“2013 Plan”), which made available 600,000 common shares to be administered by the Compensation Committee of the Board of Trustees. On August 7, 2014, at the Annual Meeting of Shareholders of Physicians Realty Trust, the Trust’s shareholders approved an amendment to the 2013 Plan to increase the number of common shares authorized for issuance under the 2013 Plan by 1,850,000 common shares, for a total of 2,450,000 common shares authorized for issuance. Restricted Common Shares Restricted common shares granted under the 2013 Plan are eligible for dividends as well as the right to vote. In the six month period ended June 30, 2018, the Trust granted a total of 206,446 restricted common shares with a total value of $3.1 million to its officers and certain of its employees, which have a vesting period of one to three years. A summary of the status of the Trust’s non-vested restricted common shares as of June 30, 2018 and changes during the six month period then ended follow:
For all service awards, the Company records compensation expense for the entire award on a straight-line basis over the requisite service period. For both of the three month periods ended June 30, 2018 and 2017, the Company recognized non-cash share compensation of $0.8 million. For the six month periods ended June 30, 2018 and 2017, the Company recognized non-cash share compensation of $1.5 million and $1.6 million, respectively. Unrecognized compensation expense at June 30, 2018 was $2.6 million. Restricted Share Units In March 2018, under the 2013 Plan, the Trust granted restricted share units at a target level of 254,282 to its officers and certain of its employees and 50,745 to its trustees, which are subject to certain performance, timing, and market conditions and three-year and two-year service periods for officers/employees and trustees, respectively. In addition, each restricted share unit contains one dividend equivalent. The recipient will accrue dividend equivalents on awarded share units equal to the cash dividend that would have been paid on the awarded share unit had the awarded share unit been an issued and outstanding common share on the record date for the dividend. Approximately 40% of the restricted share units issued to officers and certain employees vest based on certain market conditions. The market conditions were valued with the assistance of independent valuation specialists. The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $19.28 per unit for the March 2018 grant using the following assumptions:
The remaining 60% of the restricted share units issued to officers and certain employees, and 100% of restricted share units issued to trustees, vest based upon certain performance or timing conditions. With respect to the performance conditions of the March 2018 grant, the grant date fair value of $14.78 per unit was based on the share price at the date of grant. The combined weighted average grant date fair value of the March 2018 restricted share units issued to officers and certain employees is $16.58 per unit. The following is a summary of the activity in the Trust’s restricted share units during the six months ended June 30, 2018:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurement (“ASC 820”), requires certain assets and liabilities be reported and/or disclosed at fair value in the financial statements and provides a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the valuation techniques and inputs used to measure fair value. In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset or liability. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The Company’s derivative instruments as of June 30, 2018 consist of one embedded derivative as detailed in the Redeemable Noncontrolling Interests - Series A Preferred Units and Partially Owned Properties section of Note 2 (Summary of Significant Accounting Policies) and five interest rate swaps. For presentational purposes, the Company’s interest rate swaps are shown as a single derivative due to the identical nature of their economic terms, as detailed in the Derivative Instruments section of Note 2 (Summary of Significant Accounting Policies) and Note 7 (Derivatives). Neither the embedded derivative nor the interest rate swaps are traded on an exchange. The Company’s derivative assets and liabilities are recorded at fair value based on a variety of observable inputs including contractual terms, interest rate curves, yield curves, measure of volatility, and correlations of such inputs. The Company measures its derivatives at fair value on a recurring basis. The fair values are based on Level 2 inputs described above. The Company considers its own credit risk, as well as the credit risk of its counterparties, when evaluating the fair value of its derivatives. The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. This generally includes assets subject to impairment. There were no such assets measured at fair value as of June 30, 2018. The carrying amounts of cash and cash equivalents, tenant receivables, payables, and accrued interest are reasonable estimates of fair value because of the short-term maturities of these instruments. Fair values for real estate loans receivable and mortgage debt are estimated based on rates currently prevailing for similar instruments of similar maturities and are based primarily on Level 2 inputs. As of June 30, 2018, the Company classified one portfolio, comprised of 17 properties, as held for sale. Upon classification as held for sale, the Company records the portfolio at the lower of its carrying amount or fair value, less costs to sell. Fair value is generally based on discounted cash flow analyses, which involved management’s best estimate of market participants’ holding period, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods, and capital requirements. As of June 30, 2018, fair value exceeds carrying value of our assets classified as held for sale and therefore, are recorded at respective carrying value. The following table presents the fair value of the Company’s financial instruments (in thousands):
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Tenant Operating Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Tenant Operating Leases | Tenant Operating Leases The Company is lessor of medical office buildings and other healthcare facilities. Leases have expirations from 2018 through 2045. As of June 30, 2018, the future minimum rental payments on non-cancelable leases, exclusive of expense recoveries and 17 assets classified as held for sale, were as follows (in thousands):
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Rent Expense |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Rent Expense | Rent Expense The Company leases the rights to parking structures at two of its properties, the air space above one property, and the land upon which 77 of its properties are located from third party land owners pursuant to separate leases. In addition, the Company leases four individual office spaces. The Company’s leases require fixed rental payments and may also include escalation clauses and renewal options. These leases have terms of up to 87 years remaining, excluding extension options. As of June 30, 2018, the future minimum lease obligations under non-cancelable parking, air, ground, and office leases, exclusive of the 17 assets classified as held for sale, were as follows (in thousands):
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Credit Concentration |
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Concentration Risks, Types, No Concentration Percentage [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Concentration | Credit Concentration The Company uses annualized base rent (“ABR”) as its credit concentration metric. Annualized base rent is calculated by multiplying contractual base rent for the month ended June 30, 2018 by 12, excluding the impact of concessions and straight-line rent. The following table summarizes certain information about the Company’s top five tenant credit concentrations as of June 30, 2018, excluding assets classified as held for sale (in thousands):
Annualized base rent collected from the Company’s top five tenant relationships comprises 18.2% of its total annualized base rent for the period ending June 30, 2018. Total annualized base rent from CHI affiliated tenants totals 19.7%, including the affiliates disclosed above. Consolidated financial statements of CHI, the parent of the subsidiaries and affiliates of the entities party to master lease agreements, are publicly available on the Catholic Health Initiatives website (www.catholichealthinitiatvies.org/). Information included on the CHI website is not incorporated by reference within this Quarterly Report on Form 10-Q. The following table summarizes certain information about the Company’s top five geographic concentrations as of June 30, 2018, excluding 17 assets classified as held for sale (in thousands):
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Earnings Per Share and Earnings Per Unit |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share and Earnings Per Unit | Earnings Per Share and Earnings Per Unit The following table shows the amounts used in computing the Trust’s basic and diluted earnings per share (in thousands, except share and per share data):
For the three and six months ended June 30, 2018, total restricted share units of 600,313 were excluded from the computation of diluted earnings per share and diluted earnings per unit as their impact would have been anti-dilutive. The following table shows the amounts used in computing the Operating Partnership’s basic and diluted earnings per unit (in thousands, except unit and per unit data):
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Subsequent Events |
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Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events |
Summary of Significant Accounting Policies (Policies) |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation GAAP requires us to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). ASC 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. We identify the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. We consolidate our investment in a VIE when we determine that we are the VIE’s primary beneficiary. We may change our original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. We perform this analysis on an ongoing basis. |
Noncontrolling Interests | Noncontrolling Interests The Company presents the portion of any equity it does not own in entities that it controls (and thus consolidates) as noncontrolling interests and classifies such interests as a component of consolidated equity, separate from the Company’s total shareholders’ equity, on the consolidated balance sheets. Operating Partnership: Net income or loss is allocated to noncontrolling interests (limited partners) based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and the Trust. Issuance of additional common shares and OP Units changes the ownership interests of both the noncontrolling interests and the Trust. Such transactions and the related proceeds are treated as capital transactions. Noncontrolling interests in the Company include OP Units held by other investors. As of June 30, 2018, the Trust held a 97.1% interest in the Operating Partnership. As the sole general partner and the majority interest holder, the Trust consolidates the financial position and results of operations of the Operating Partnership. Holders of OP Units may not transfer their OP Units without the Trust’s prior written consent, as general partner of the Operating Partnership. Beginning on the first anniversary of the issuance of OP Units, OP Unit holders may tender their units for redemption by the Operating Partnership in exchange for cash equal to the market price of the Trust’s common shares at the time of redemption or for unregistered common shares on a one-for-one basis. Such selection to pay cash or issue common shares to satisfy an OP Unit holder’s redemption request is solely within the control of the Trust. Accordingly, the Trust presents the OP Units of the Operating Partnership held by investors other than the Trust as noncontrolling interests within equity in the consolidated balance sheets. Partially Owned Properties: The Trust and Operating Partnership reflect noncontrolling interests in partially owned properties on the balance sheet for the portion of consolidated properties that are not wholly owned by the Company. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as noncontrolling interests in partially owned properties in the consolidated statements of income. Redeemable Noncontrolling Interests - Series A Preferred Units and Partially Owned Properties On February 5, 2015, the Company entered into a Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) which provides for the designation and issuance of the Series A Participating Redeemable Preferred Units of the Operating Partnership (“Series A Preferred Units”). Series A Preferred Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation. Holders of Series A Preferred Units are entitled to a 5% cumulative return and upon redemption, the receipt of one common share and $200. The holders of the Series A Preferred Units have agreed not to cause the Operating Partnership to redeem their Series A Preferred Units prior to one year from the issuance date. In addition, Series A Preferred Units are redeemable at the option of the holders which redemption obligation may be satisfied, at the Trust’s option, in cash or registered common shares. Instruments that require settlement in registered common shares may not be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered common shares. Due to the redemption rights associated with the Series A Preferred Units, the Company classifies the Series A Preferred Units in the mezzanine section of its consolidated balance sheets. The Series A Preferred Units were evaluated for embedded features that should be bifurcated and separately accounted for as a freestanding derivative. The Company determined that the Series A Preferred Units contained features that require bifurcation. The Company records the carrying amount of the redeemable noncontrolling interests, less the value of the embedded derivative, at the greater of the carrying value or redemption value in the consolidated balance sheets. On January 9, 2018, the acquisition of the HealthEast Clinic & Specialty Center (“Hazelwood Medical Commons”) was partially funded with the issuance of 104,172 Series A Preferred Units, with a value of $22.7 million. Due to the redemption rights associated with the Series A Preferred Units the Trust classifies the Series A Preferred Units in the mezzanine section of its consolidated balance sheet. As of June 30, 2018, the value of the embedded derivative is $3.7 million and is classified in accrued expenses and other liabilities on the consolidated balance sheets. As of June 30, 2018, there were 104,172 Series A Preferred Units outstanding. In connection with the acquisition of a medical office portfolio in Minnesota (the “Minnesota portfolio”), the Trust received a $5 million equity investment from a third party, effective March 1, 2015. This investment earns a 15% cumulative preferred return. At any point subsequent to the third anniversary of the investment, the holder can require the Trust to redeem the instrument at a price for which the investor will realize a 15% internal rate of return. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheet. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. On March 1, 2018, the equity investment was redeemed for $6.4 million. In connection with the acquisition on December 29, 2015 of a medical office building located on the campus of the Great Falls Clinic and Hospital in Great Falls, Montana, physicians affiliated with the seller retained a noncontrolling interest which may, at the holders’ option, be redeemed at any time. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheets. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. |
Dividends and Distributions | Dividends and Distributions On June 21, 2018, the Trust announced that its Board of Trustees authorized and the Trust declared a cash dividend of $0.230 per common share for the quarterly period ended June 30, 2018. The distribution was paid on July 18, 2018 to common shareholders and OP Unit holders of record as of the close of business on July 3, 2018. All distributions paid by the Operating Partnership are declared and paid at the same time as dividends are distributed by the Trust to common shareholders. It has been the Operating Partnership’s policy to declare quarterly distributions so as to allow the Trust to comply with applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), governing REITs. The declaration and payment of quarterly distributions remains subject to the review and approval of the Trust’s Board of Trustees. Our shareholders are entitled to reinvest all or a portion of any cash distribution on their common shares by participating in our Dividend Reinvestment and Share Purchase Plan (“DRIP”), subject to the terms of the plan. Tax Status of Dividends and Distributions Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes generally are taxable to shareholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (non-dividend distributions) and thereafter as taxable gain. |
Purchase of Investment Properties | Purchases of Investment Properties With the adoption of ASU 2017-01 in January 2018, the majority of our future acquisitions will be accounted for as asset acquisitions, recording the purchase price for tangible and intangible assets and liabilities based on their relative fair values. Tangible assets primarily consist of land and buildings and improvements. Additionally, the purchase price includes acquisition related expenses, above- or below-market leases, in place leases, and above- or below-market debt assumed. Any future contingent consideration will be recorded when the contingency is resolved. The determination of the fair value requires us to make certain estimates and assumptions. The determination of fair value involves the use of significant judgment and estimation. The Company makes estimates of the fair value of the tangible and intangible acquired assets and assumed liabilities using information obtained from multiple sources as a result of pre-acquisition due diligence and generally includes the assistance of a third party appraiser. The Company estimates the fair value of an acquired asset on an “as-if-vacant” basis and its value is depreciated in equal amounts over the course of its estimated remaining useful life. The Company determines the allocated value of other fixed assets, such as site improvements, based upon the replacement cost and depreciates such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. The fair value of land is determined either by considering the sales prices of similar properties in recent transactions or based on an internal analysis of recently acquired and existing comparable properties within the Company’s portfolio. The value of above- or below-market leases is estimated based on the present value (using a discount rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market lease intangibles are amortized as a reduction or addition to rental income over the estimated remaining term of the respective leases plus the term of any renewal options that the lessee would be economically compelled to exercise. In determining the value of in-place leases, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions, tenant improvements, legal, and other related costs based on current market demand. The values assigned to in-place leases are amortized to amortization expense over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off, net of any required lease termination payments. The Company calculates the fair value of any long-term debt assumed by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which the Company approximates based on the rate it would expect to incur on a replacement instrument on the date of acquisition, and recognizes any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument. |
Impairment of Intangible and Long-Lived Assets | Impairment of Intangible and Long-Lived Assets |
Assets Held for Sale | Assets Held for Sale |
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities |
Real Estate Loans Receivable | Real Estate Loans Receivable |
Rental Revenue | Rental Revenue |
Expense Recoveries | Expense Recoveries Expense recoveries relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized as expense recovery revenue in the period the applicable expenses are incurred. The reimbursements are recorded gross, as the Company is generally the primary obligor with respect to real estate taxes and purchasing goods and services from third-party suppliers, has discretion in selecting the supplier, and bears the credit risk of tenant reimbursement. |
Derivative Instruments | Derivative Instruments When the Company has derivative instruments embedded in other contracts, it records them either as an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sale exception. When specific hedge accounting criteria are not met, changes in the Company’s derivative instruments’ fair value are recognized currently in earnings. Changes in the fair market values of the Company’s derivative instruments are recorded in the consolidated statements of income if the derivative instruments do not qualify for, or the Company does not elect to apply for, hedge accounting. If hedge accounting is applied to a derivative instrument, such changes are reported in accumulated other comprehensive income within the consolidated statement of equity or capital, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. To manage interest rate risk for certain of its variable-rate debt, the Company uses interest rate swaps as part of its risk management strategy. These derivatives are designed to mitigate the risk of future interest rate increases by providing a fixed interest rate for a limited, pre-determined period of time. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of June 30, 2018, the Company had five outstanding interest rate swap contracts that are designated as cash flow hedges of interest rate risk. For presentational purposes, they are shown as one derivative due to the identical nature of their economic terms. Further detail is provided in Note 7 (Derivatives). |
Income Taxes | Income Taxes The Trust elected to be taxed as a REIT for federal tax purposes commencing with the filing of its tax return for the short taxable year ending December 31, 2013. The Trust had no taxable income prior to electing REIT status. To qualify as a REIT, the Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its shareholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Trust generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its shareholders. If the Trust fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Trust relief under certain statutory provisions. Such an event could materially adversely affect the Trust’s net income and net cash available for distribution to shareholders. However, the Trust intends to continue to operate in such a manner as to continue qualifying for treatment as a REIT. Although the Trust continues to qualify for taxation as a REIT, in various instances, the Trust is subject to state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. |
Tenant Receivables, Net | Tenant Receivables, Net |
Management Estimates | Management Estimates |
Contingent Liabilities | Contingent Liabilities Certain of our acquisitions provide for additional consideration to the seller in the form of an earn-out associated with lease-up contingencies. The Company recognizes the contingent liabilities only if certain parameters or other substantive contingencies are met, at which time the consideration becomes payable. Resolved contingent liabilities increase our acquired assets and reduce our liabilities. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The Company adopted ASU 2017-01 on January 1, 2018. As such, the Company will record the majority of future real estate investments as asset acquisitions and any future contingent consideration will be recorded when the contingency is resolved. Prior to January 1, 2018, the Company recorded certain contingent liabilities which are included in accrued expenses and other liabilities on its consolidated balance sheets. These were recorded at fair value as of the acquisition date and until they expire, the Company reassesses the fair value at the end of each reporting period, with any changes being recognized in earnings. |
Reclassifications | Reclassifications |
Segment Reporting | Segment Reporting |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We adopted ASU 2014-09 as of January 1, 2018 under the modified retrospective approach. Based on our assessment, we have identified all of our revenue streams and concluded rental income from leasing arrangements represents a substantial portion of our revenue. Income from leasing arrangements is specifically excluded from Topic 606 and will be evaluated with the anticipated adoption of ASU 2016-02, Leases. Therefore, the impact of adopting ASU 2014-09 was minimal on our current recognition and presentation of non-lease revenue. Upon adoption of ASU 2016-02, Topic 606 may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and other reimbursement revenue), even when the revenue for such activities is not separately stipulated in the lease. In that case, the revenue from these items previously recognized on a straight -line basis under the current lease guidance would be recognized under the new revenue guidance as the related services are delivered. In February 2016, the FASB issued ASU 2016-02, Leases. The update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard provides the option of a modified retrospective transition approach or a cumulative effect for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The FASB also issued an Exposure Draft on January 5, 2018 proposing to amend ASU 2016-02, which would provide lessors with a practical expedient, by class of underlying assets, to not separate non-lease components from the related lease components and, instead, to account for those components as a single lease component, if certain criteria are met. ASU 2016-02 and the related Exposure Draft are not effective for us until January 1, 2019, with early adoption permitted. We are continuing to evaluate this guidance and the impact to us, as both lessor and lessee, on our Consolidated Financial Statements. We expect to utilize the practical expedients proposed in the Exposure Draft as part of our adoption of ASU 2016-02. As a result of adopting the practical expedients, the Company will recognize all of its operating leases for which it is the lessee, including ground leases, on its consolidated balance sheets. We have detailed our future minimum lease obligations under non-cancelable leases in Note 12 (Rent Expense). The Company is evaluating the impact of the adoption of ASU 2016-02 on January 1, 2019 to its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which changes the impairment model for most financial instruments by requiring companies to recognize an allowance for expected losses, rather than incur losses as required currently by the other-than-temporary impairment model. ASU 2016-13 will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures (e.g., loan commitments). ASU 2016-13 is effective for reporting periods beginning after December 15, 2019, with early adoption permitted, and will be applied as a cumulative adjustment to retained earnings as of the effective date. We are currently assessing the potential effect the adoption of ASU 2016-13 will have on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payment. ASU 2016-15 clarifies the guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. The Company adopted ASU 2016-15 on January 1, 2018, with no material effect on its consolidated financial statements and no adjustments made to prior periods. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which will require companies to include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. ASU 2016-18 will require disclosure of a reconciliation between the balance sheet and the statement of cash flows when the balance sheet includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents. An entity with material restricted cash and restricted cash equivalents balances will be required to disclose the nature of the restrictions. ASU 2016-18 is effective for reporting periods beginning after December 15, 2017 and is required to be applied retrospectively to all periods presented. The Company adopted ASU 2016-18 on January 1, 2018, with no material effect on its consolidated financial statements and no adjustments made to prior periods. In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 states that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not a business. If this initial test is not met, a set cannot be considered a business unless it includes an acquired input and a substantive process that together significantly contribute to the ability to create outputs. In addition, ASU 2017-01 clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. This ASU is to be applied prospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company adopted ASU 2017-01 on January 1, 2018 and as a result, have classified our real estate acquisitions completed during the six months ended June 30, 2018 as asset acquisitions rather than business combinations due to the fact that substantially all of the fair value of the gross assets acquired were concentrated in a single asset or group of similar identifiable assets. The Company has recorded identifiable assets acquired, liabilities assumed, and any noncontrolling interests associated with any asset acquisitions at cost on a relative fair value basis and has capitalized transaction costs incurred. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities, which expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. It also includes certain targeted improvements to simplify the application of current guidance related to hedge accounting. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating the effects this standard will have on its consolidated financial statements.
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Organization and Business (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Trust's common shares issuance and sale | During the quarterly periods ended March 31, 2018 and June 30, 2018, the Trust’s issuance and sale of common shares pursuant to the ATM Program are as follows (in thousands, except common shares and price):
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Acquisitions and Dispositions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of preliminary purchase price allocations of assets acquired and liabilities assumed | 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):
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Revenues and net income related to disposition | The following table summarizes revenues and net income related to the disposed properties for the periods presented (in thousands):
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Real estate held for sale | In accordance with this classification, the following assets are classified as held for sale in the accompanying consolidated balance sheets at June 30, 2018.
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Intangibles (Tables) |
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Finite-Lived Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the carrying amount of intangible assets and liabilities | The following is a summary of the carrying amount of intangible assets and liabilities, excluding assets classified as held for sale if applicable, as of June 30, 2018 and December 31, 2017 (in thousands):
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Summary of the carrying amount of acquired lease intangibles | The following is a summary of the acquired lease intangible amortization for the three and six month periods ended June 30, 2018 and 2017, respectively (in thousands):
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Schedule of future amortization of the acquired lease intangibles | Future aggregate net amortization of the acquired lease intangibles, excluding 17 assets classified as held for sale, as of June 30, 2018, is as follows (in thousands):
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Other Assets (Tables) |
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Other Assets, Unclassified [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other assets | Other assets consisted of the following, excluding assets classified as held for sale if applicable, as of June 30, 2018 and December 31, 2017 (in thousands):
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Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The following is a summary of debt as of June 30, 2018 and December 31, 2017 (in thousands):
(5) The Trust’s borrowings under the term loan feature of the Credit Agreement bear interest at a rate which is determined by the Trust’s credit rating, currently equal to LIBOR + 1.80%. The Trust has entered into a pay-fixed receive-variable interest rate swap, fixing the LIBOR component of this rate at 1.07%.
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Schedule of adjusted LIBOR rate loans and interest rates based on credit rating | Base Rate Loans, Adjusted LIBOR Rate Loans, and Letters of Credit (each, as defined in the Credit Agreement) will be subject to interest rates, based upon the Trust’s investment grade rating as follows:
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Schedule of principal payments due on debt | Scheduled principal payments due on debt as of June 30, 2018, are as follows (in thousands):
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Derivatives (Tables) |
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Derivative Instrument Detail [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Rate Derivatives | The following table summarizes the location and aggregate fair value of the interest rate swaps on the Company’s consolidated balance sheets (in thousands):
(1) 1.07% effective swap rate plus 1.80% spread per Credit Agreement.
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Accrued Expenses and Other Liabilities (Tables) |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses and other liabilities | Accrued expenses and other liabilities consisted of the following as of June 30, 2018 and December 31, 2017 (in thousands):
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Stock-based Compensation (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of non-vested restricted common shares | A summary of the status of the Trust’s non-vested restricted common shares as of June 30, 2018 and changes during the six month period then ended follow:
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Schedule of weighted average grant date fair value assumptions | The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $19.28 per unit for the March 2018 grant using the following assumptions:
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Summary of the activity in the restricted share units | The following is a summary of the activity in the Trust’s restricted share units during the six months ended June 30, 2018:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of other financial instruments | The following table presents the fair value of the Company’s financial instruments (in thousands):
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Tenant Operating Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental payments on non-cancelable leases, exclusive of expense recoveries | As of June 30, 2018, the future minimum rental payments on non-cancelable leases, exclusive of expense recoveries and 17 assets classified as held for sale, were as follows (in thousands):
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Rent Expense (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of future minimum lease obligations under non-cancelable ground leases | As of June 30, 2018, the future minimum lease obligations under non-cancelable parking, air, ground, and office leases, exclusive of the 17 assets classified as held for sale, were as follows (in thousands):
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Credit Concentration (Tables) - Sales Revenue, Services, Net |
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Customer Concentration Risk | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration Risk [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedules of Concentration of Risk, by Risk Factor | The following table summarizes certain information about the Company’s top five tenant credit concentrations as of June 30, 2018, excluding assets classified as held for sale (in thousands):
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Geographic Concentration Risk | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedules of Concentration of Risk, by Risk Factor | The following table summarizes certain information about the Company’s top five geographic concentrations as of June 30, 2018, excluding 17 assets classified as held for sale (in thousands):
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Earnings Per Share and Earnings Per Unit (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amounts used in computing basic and diluted earnings per share | The following table shows the amounts used in computing the Trust’s basic and diluted earnings per share (in thousands, except share and per share data):
|
Organization and Business - Additional Information (Details) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Organization and Business - ATM Program (Details) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Aug. 05, 2016 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Jun. 30, 2018 |
Jul. 27, 2018 |
|
Subsequent Event | |||||
Class of Stock [Line Items] | |||||
Sale of stock, remaining authorized amount | $ 168,200,000 | ||||
Private Placement | 2016 ATM Program | |||||
Class of Stock [Line Items] | |||||
Common shares sold (in shares) | 0 | 311,786 | 311,786 | ||
Weighted average price (in usd per share) | $ 0 | $ 17.85 | $ 17.85 | ||
Net proceeds | $ 0 | $ 5,509,000 | $ 5,509,000 | ||
Maximum | Private Placement | 2016 ATM Program | |||||
Class of Stock [Line Items] | |||||
Aggregate offering price of common stock | $ 300,000,000.0 |
Summary of Significant Accounting Policies - Principals of Consolidation (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Ownership interest in consolidated subsidiaries (as a percent) | 100.00% |
Summary of Significant Accounting Policies - Noncontrolling Interests (Details) $ / shares in Units, $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jan. 09, 2018
USD ($)
shares
|
Mar. 01, 2015
USD ($)
|
Feb. 05, 2015
$ / shares
|
Jun. 30, 2018
USD ($)
shares
|
Dec. 31, 2017
USD ($)
|
|
Business Acquisition [Line Items] | |||||
Percentage of interest held | 97.10% | ||||
Unit conversion ratio | 1 | ||||
Embedded derivative | $ 3,696 | $ 0 | |||
Equity method investment | $ 5,000 | ||||
Percentage of internal rate of return | 15.00% | ||||
HealthEast Clinic & Specialty Center | |||||
Business Acquisition [Line Items] | |||||
Number of units issued for funding purchase price (in shares) | shares | 104,172 | 104,172 | |||
Consideration transferred, equity interests issued and issuable | $ 22,700 | ||||
Redeemable Noncontrolling Interest Buyouts | |||||
Business Acquisition [Line Items] | |||||
Redemption value of equity investment | $ 6,400 | ||||
Series A Preferred Units | |||||
Business Acquisition [Line Items] | |||||
Cumulative preferred return | 5.00% | ||||
Redeemable noncontrolling interest, equity, preferred, redemption shares in exchange | 1 | ||||
Redemption value (in dollars per share) | $ / shares | $ 200 | ||||
Period in which preferred units will be redeemable | 1 year |
Summary of Significant Accounting Policies - Dividends and Distributions (Details) - $ / shares |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 21, 2018 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Accounting Policies [Abstract] | |||||
Dividends and distributions declared per common share and OP Unit (dollars per share) | $ 0.230 | $ 0.230 | $ 0.230 | $ 0.460 | $ 0.455 |
Summary of Significant Accounting Policies - Impairment (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Accounting Policies [Abstract] | ||
Impairment charges | $ 0 | $ 0 |
Summary of Significant Accounting Policies - Assets Held for Sale (Details) |
Jun. 30, 2018
properties
disposition_group
|
---|---|
Accounting Policies [Abstract] | |
Number of disposition groups classified as held for sale | disposition_group | 1 |
Number of properties, held for sale | properties | 17 |
Summary of Significant Accounting Policies - Real Estate Loans Receivable (Details) |
Jun. 30, 2018
mezzanine_loan
|
---|---|
Mezzanine Loan Receivable | |
Property, Plant and Equipment [Line Items] | |
Number of mezzanine loans collateralized | 8 |
Term Loan Receivable | |
Property, Plant and Equipment [Line Items] | |
Number of mezzanine loans collateralized | 2 |
Summary of Significant Accounting Policies - Rental Revenue (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Straight line rent receivable, net | $ 54,828 | $ 47,599 |
Allowance against straight line rent | $ 300 | $ 4,900 |
Summary of Significant Accounting Policies - Derivative Instruments (Details) - Cash Flow Hedging - Interest Rate Swap $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
instruments
|
|
Derivative [Line Items] | ||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 5,000 | |
Derivative, net hedge ineffectiveness gain (loss) | $ | $ 0.2 |
Summary of Significant Accounting Policies - Tenant Receivables, Net (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts receivable | $ 0.5 | $ 1.6 |
Summary of Significant Accounting Policies - Segment Reporting (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018
segment
| |
Accounting Policies [Abstract] | |
Number of reportable segments | 1 |
Acquisitions and Dispositions - Additional Information (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
states
healthcareproperty
land
|
Jun. 30, 2017
USD ($)
|
|
Business Acquisition [Line Items] | ||||
Number of land parcels | land | 1 | |||
Payments to acquire businesses, gross | $ 170,700 | |||
Revenues | $ 106,989 | $ 76,599 | 212,212 | $ 153,265 |
Net income | 12,062 | $ 10,331 | $ 23,394 | $ 17,047 |
Series of Individually Immaterial Business Acquisitions | ||||
Business Acquisition [Line Items] | ||||
Number of operating healthcare properties | healthcareproperty | 3 | |||
Number of states in which operating healthcare properties and land parcel located | states | 4 | |||
Payments to acquire businesses, gross | $ 179,100 | |||
Revenues | 3,500 | 5,400 | ||
Net income | 1,500 | 2,000 | ||
Redeemable Noncontrolling Interest Buyouts | ||||
Business Acquisition [Line Items] | ||||
Net income (loss) attributable to redeemable noncontrolling interest | 6,400 | |||
Loan Investment | ||||
Business Acquisition [Line Items] | ||||
Purchase price | $ 2,000 | |||
HMG Medical Plaza | ||||
Business Acquisition [Line Items] | ||||
Purchase price | $ 71,300 |
Acquisitions and Dispositions - Acquisition Date Fair Values of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Mar. 31, 2018 |
---|---|---|
Business Acquisition [Line Items] | ||
Land | $ 7,684 | |
Building and improvements | 146,377 | |
Prepaid expenses | (2,628) | |
Issuance of Series A Preferred Units | (22,651) | |
Net assets acquired | 150,917 | |
In-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Intangible assets | 22,125 | |
Above market in-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Intangible assets | 969 | |
Below market in-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Below market in-place lease intangibles | (959) | |
1st Quarter | ||
Business Acquisition [Line Items] | ||
Land | $ 7,684 | |
Building and improvements | 82,180 | |
Prepaid expenses | (2,628) | |
Issuance of Series A Preferred Units | (22,651) | |
Net assets acquired | 77,797 | |
1st Quarter | In-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Intangible assets | 13,202 | |
1st Quarter | Above market in-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Intangible assets | 969 | |
1st Quarter | Below market in-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Below market in-place lease intangibles | $ (959) | |
2nd Quarter | ||
Business Acquisition [Line Items] | ||
Land | 0 | |
Building and improvements | 64,197 | |
Prepaid expenses | 0 | |
Issuance of Series A Preferred Units | 0 | |
Net assets acquired | 73,120 | |
2nd Quarter | In-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Intangible assets | 8,923 | |
2nd Quarter | Above market in-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Intangible assets | 0 | |
2nd Quarter | Below market in-place lease intangibles | ||
Business Acquisition [Line Items] | ||
Below market in-place lease intangibles | $ 0 |
Acquisitions and Dispositions - Dispositions (Details) - Disposal Group, Disposed of by Sale, Not Discontinued Operations $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018
USD ($)
states
buildings
|
Mar. 31, 2018
USD ($)
buildings
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
|
Dispositions, First and Second Quarter 2018 | |||||
Business Acquisition [Line Items] | |||||
Revenues | $ 5,448 | $ 6,129 | |||
Income before loss on sale of investment properties: | 973 | 2,222 | |||
Loss on sale of investment properties, net | (2,563) | 0 | |||
Net (loss) income | $ (1,590) | $ 2,222 | |||
Dispositions, First Quarter 2018 | |||||
Business Acquisition [Line Items] | |||||
Number of medical office buildings | buildings | 2 | ||||
Proceeds from divestiture of businesses | $ 2,500 | ||||
Loss on sale of investment properties, net | $ 100 | ||||
Dispositions, Second Quarter 2018 | |||||
Business Acquisition [Line Items] | |||||
Number of medical office buildings | buildings | 15 | ||||
Proceeds from divestiture of businesses | $ 90,700 | ||||
Number of states in which operating healthcare properties and land parcel located | states | 3 | ||||
Revenues | $ 2,747 | $ 3,056 | |||
Income before loss on sale of investment properties: | 526 | 1,099 | |||
Loss on sale of investment properties, net | (2,632) | 0 | |||
Net (loss) income | $ (2,106) | $ 1,099 |
Acquisitions and Dispositions - Assets Held for Sale (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
properties
portfolio
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Number of portfolios comprised of properties held for sale | portfolio | 1 | |
Number of properties, held for sale | properties | 17 | |
Real estate held for sale before accumulated deprecation | $ 129,143 | |
Accumulated depreciation | (17,732) | |
Real estate held for sale | 111,411 | $ 0 |
Land and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Real estate held for sale before accumulated deprecation | 12,856 | |
Building and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Real estate held for sale before accumulated deprecation | 91,510 | |
Tenant improvements | ||
Property, Plant and Equipment [Line Items] | ||
Real estate held for sale before accumulated deprecation | 67 | |
Acquired lease intangibles | ||
Property, Plant and Equipment [Line Items] | ||
Real estate held for sale before accumulated deprecation | 21,802 | |
Other assets | ||
Property, Plant and Equipment [Line Items] | ||
Real estate held for sale before accumulated deprecation | $ 2,908 |
Intangibles - Summary of Carrying Amount of Intangible Assets and Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Assets | ||
Cost | $ 446,127 | $ 458,713 |
Accumulated Amortization | (108,080) | (98,919) |
Net | 338,047 | 359,794 |
Liabilities | ||
Cost | 20,835 | 20,309 |
Accumulated Amortization | (5,954) | (4,607) |
Net | 14,881 | 15,702 |
In-place lease intangibles | ||
Assets | ||
Cost | 339,438 | 343,429 |
Accumulated Amortization | (94,637) | (85,424) |
Net | 244,801 | 258,005 |
Above market in-place lease intangibles | ||
Assets | ||
Cost | 45,553 | 54,148 |
Accumulated Amortization | (11,396) | (11,968) |
Net | 34,157 | 42,180 |
Leasehold interest | ||
Assets | ||
Cost | 712 | 712 |
Accumulated Amortization | (213) | (183) |
Net | 499 | 529 |
Below-market ground leases | ||
Assets | ||
Cost | 60,424 | 60,424 |
Accumulated Amortization | (1,834) | (1,344) |
Net | 58,590 | 59,080 |
Below-market leases | ||
Liabilities | ||
Below market lease, cost | 14,870 | 14,344 |
Below market lease, accumulated amortization | (5,756) | (4,479) |
Below market lease, net | 9,114 | 9,865 |
Above-market ground leases | ||
Liabilities | ||
Cost | 5,965 | 5,965 |
Accumulated Amortization | (198) | (128) |
Net | $ 5,767 | $ 5,837 |
Intangibles - Summary of Acquired Amortization (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
In-place lease intangibles | ||||
Intangibles | ||||
Amortization expense related to in-place leases | $ 10,975 | $ 8,327 | $ 21,977 | $ 17,066 |
Above market in-place lease intangibles | ||||
Intangibles | ||||
Decrease of rental income | 1,438 | 1,263 | 2,917 | 2,652 |
Decrease of rental income related to leasehold interest | ||||
Intangibles | ||||
Decrease of rental income | 15 | 15 | 30 | 29 |
Below market in-place lease intangibles | ||||
Intangibles | ||||
Increase of rental income related to below-market leases | 651 | 511 | 1,494 | 1,080 |
Decrease of operating expense related to above-market ground leases | ||||
Intangibles | ||||
Decrease (increase) of operating expense | 36 | 7 | 71 | 15 |
Below-market ground leases | ||||
Intangibles | ||||
Decrease (increase) of operating expense | $ 245 | $ 188 | $ 489 | $ 373 |
Intangibles - Additional Information (Details) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2018
USD ($)
properties
|
Jun. 30, 2018
USD ($)
properties
|
|
Intangibles | ||
Number of properties, held for sale | properties | 17 | 17 |
Weighted average amortization period for lease intangibles | 19 years | |
Weighted average amortization period for lease intangible liability | 20 years | |
In-place lease intangibles | ||
Intangibles | ||
Finite-lived intangible assets, disposals | $ 0.8 | $ 0.9 |
Impairment of intangible assets, accumulated amortization | 0.2 | 0.3 |
Impairment of intangible assets | $ (0.6) | $ (0.7) |
Intangibles - Future Aggregate Net Amortization of Acquired Lease Intangibles (Details 4) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Net Decrease in Revenue | |
2018 | $ (1,127) |
2019 | (2,545) |
2020 | (2,682) |
2021 | (2,646) |
2022 | (2,191) |
Thereafter | (14,351) |
Total | (25,542) |
Net Increase in Expenses | |
2018 | 19,363 |
2019 | 35,044 |
2020 | 32,316 |
2021 | 30,062 |
2022 | 26,258 |
Thereafter | 154,581 |
Total | $ 297,624 |
Other Assets - Schedule of Other Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Other Assets, Unclassified [Abstract] | ||
Straight line rent receivable, net | $ 54,828 | $ 47,599 |
Note receivable | 20,628 | 0 |
Interest rate swap | 20,290 | 14,693 |
Prepaid expenses | 14,321 | 18,103 |
Lease inducements, net | 13,726 | 14,232 |
Leasing commissions, net | 5,591 | 4,128 |
Earnest deposits | 5,000 | 2,780 |
Escrows | 1,549 | 1,996 |
Other | 3,840 | 2,771 |
Total | $ 139,773 | $ 106,302 |
Debt - Summary of Debt (Details) |
6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2018
USD ($)
healthcareproperty
Rate
|
Dec. 31, 2017
USD ($)
properties
|
Dec. 01, 2017
USD ($)
|
Mar. 07, 2017
USD ($)
|
Aug. 11, 2016
USD ($)
|
Jan. 07, 2016
USD ($)
|
|
Debt | ||||||
Long-term debt, gross | $ 1,578,871,000 | $ 1,491,680,000 | ||||
Unamortized deferred financing costs | (7,126,000) | (7,808,000) | ||||
Unamortized discount | (6,378,000) | (6,663,000) | ||||
Unamortized fair value adjustment | 229,000 | 259,000 | ||||
Total debt | 1,565,596,000 | 1,477,468,000 | ||||
Mortgages | ||||||
Debt | ||||||
Long-term debt, gross | 139,871,000 | 186,680,000 | ||||
Senior notes | ||||||
Debt | ||||||
Effective fixed interest rate (as a percent) | 3.95% | 4.30% | ||||
Debt instrument, face amount | $ 350,000,000.0 | $ 400,000,000.0 | $ 75,000,000.0 | $ 150,000,000.0 | ||
Fixed interest mortgage notes | Mortgages | ||||||
Debt | ||||||
Long-term debt, gross | $ 125,740,000 | $ 158,171,000 | ||||
Weighted average interest rate | 4.39% | 4.45% | ||||
Pledged assets separately reported real estate pledged as collateral number | 7 | 9 | ||||
Pledged assets, not separately reported, real estate | $ 216,400,000 | $ 267,700,000 | ||||
Fixed interest mortgage notes | Minimum | Mortgages | ||||||
Debt | ||||||
Interest rate (as a percent) | 3.00% | 3.00% | ||||
Fixed interest mortgage notes | Maximum | Mortgages | ||||||
Debt | ||||||
Interest rate (as a percent) | 5.50% | 5.50% | ||||
Variable interest mortgage notes | Mortgages | ||||||
Debt | ||||||
Long-term debt, gross | $ 14,131,000 | $ 28,509,000 | ||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | $850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | ||||||
Debt | ||||||
Long-term debt, gross | $ 214,000,000 | 80,000,000 | ||||
Reference rate (as a percent) | 1.20% | |||||
Debt instrument, face amount | $ 850,000,000 | |||||
$400 million senior unsecured notes bearing fixed interest of 4.30%, due March 2027 | Senior notes | ||||||
Debt | ||||||
Long-term debt, gross | $ 400,000,000 | 400,000,000 | ||||
Interest rate (as a percent) | 4.30% | |||||
Debt instrument, face amount | $ 400,000,000 | |||||
$350 million senior unsecured notes bearing fixed interest of 3.95%, due January 2028 | Senior notes | ||||||
Debt | ||||||
Long-term debt, gross | $ 350,000,000 | 350,000,000 | ||||
Interest rate (as a percent) | 3.95% | |||||
Debt instrument, face amount | $ 350,000,000 | |||||
$250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 (5) | $250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 (5) | ||||||
Debt | ||||||
Long-term debt, gross | $ 250,000,000 | 250,000,000 | ||||
Interest rate (as a percent) | 2.87% | |||||
Debt instrument, face amount | $ 250,000,000 | |||||
$150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031 | Senior notes | ||||||
Debt | ||||||
Long-term debt, gross | 150,000,000 | 150,000,000 | ||||
Debt instrument, face amount | $ 150,000,000 | |||||
$150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031 | Minimum | Senior notes | ||||||
Debt | ||||||
Interest rate (as a percent) | 4.03% | |||||
$150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031 | Maximum | Senior notes | ||||||
Debt | ||||||
Interest rate (as a percent) | 4.74% | |||||
$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027 | Senior notes | ||||||
Debt | ||||||
Long-term debt, gross | $ 75,000,000 | $ 75,000,000 | ||||
Debt instrument, face amount | $ 75,000,000 | |||||
$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027 | Minimum | Senior notes | ||||||
Debt | ||||||
Interest rate (as a percent) | 4.09% | |||||
$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027 | Maximum | Senior notes | ||||||
Debt | ||||||
Interest rate (as a percent) | 4.24% | |||||
Mortgage notes bearing variable interest due in 2018 and 2022 | Mortgages | ||||||
Debt | ||||||
Pledged assets separately reported real estate pledged as collateral number | healthcareproperty | 2 | |||||
Pledged assets, not separately reported, real estate | $ 31,800,000 | |||||
Mortgage notes bearing variable interest due 2018 | Mortgages | ||||||
Debt | ||||||
Weighted average interest rate | 4.50% | |||||
Pledged assets separately reported real estate pledged as collateral number | properties | 3 | |||||
Pledged assets, not separately reported, real estate | $ 39,200,000 | |||||
London Interbank Offered Rate (LIBOR) | $250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 (5) | $250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 (5) | ||||||
Debt | ||||||
Reference rate (as a percent) | 1.80% | |||||
Effective fixed interest rate (as a percent) | Rate | 1.07% | |||||
London Interbank Offered Rate (LIBOR) | Mortgage notes bearing variable interest due in 2018 and 2022 | Minimum | Mortgages | ||||||
Debt | ||||||
Reference rate (as a percent) | 1.75% | |||||
London Interbank Offered Rate (LIBOR) | Mortgage notes bearing variable interest due in 2018 and 2022 | Maximum | Mortgages | ||||||
Debt | ||||||
Reference rate (as a percent) | 2.25% | |||||
London Interbank Offered Rate (LIBOR) | Mortgage notes bearing variable interest due 2018 | Minimum | Mortgages | ||||||
Debt | ||||||
Reference rate (as a percent) | 2.25% | |||||
London Interbank Offered Rate (LIBOR) | Mortgage notes bearing variable interest due 2018 | Maximum | Mortgages | ||||||
Debt | ||||||
Reference rate (as a percent) | 3.25% |
Debt - Additional Information (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 01, 2017 |
Mar. 07, 2017 |
Jun. 10, 2016 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
Aug. 11, 2016 |
Jul. 07, 2016 |
Jun. 09, 2016 |
Jan. 07, 2016 |
|
Debt | ||||||||||||||
Long-term debt, gross | $ 1,578,871,000 | $ 1,491,680,000 | ||||||||||||
Interest expense, debt | $ 17,600,000 | $ 10,900,000 | $ 33,500,000 | $ 20,200,000 | ||||||||||
Credit Agreement Amendment | ||||||||||||||
Debt | ||||||||||||||
Current borrowing capacity | $ 1,100,000,000 | |||||||||||||
Maximum borrowing capacity as a percentage of maximum principal amount | 10.00% | |||||||||||||
Accordion feature, increase limit | $ 500,000,000 | |||||||||||||
Maximum borrowing capacity under accordion feature | 1,600,000,000 | |||||||||||||
Unused fee (as a percent) | 0.25% | |||||||||||||
Credit Agreement Amendment | London Interbank Offered Rate (LIBOR) | ||||||||||||||
Debt | ||||||||||||||
Reference rate (as a percent) | 1.20% | |||||||||||||
Series A | ||||||||||||||
Debt | ||||||||||||||
Interest rate (as a percent) | 4.09% | 4.03% | ||||||||||||
Series B | ||||||||||||||
Debt | ||||||||||||||
Interest rate (as a percent) | 4.18% | 4.43% | ||||||||||||
Series C | ||||||||||||||
Debt | ||||||||||||||
Interest rate (as a percent) | 4.57% | |||||||||||||
Series D | ||||||||||||||
Debt | ||||||||||||||
Interest rate (as a percent) | 4.74% | |||||||||||||
Revolving credit facility | ||||||||||||||
Debt | ||||||||||||||
Current borrowing capacity | 619,000,000.0 | |||||||||||||
Amount outstanding | 214,000,000.0 | |||||||||||||
Term of extension option | 1 year | |||||||||||||
Revolving credit facility | Credit Agreement Amendment | Minimum | ||||||||||||||
Debt | ||||||||||||||
Current borrowing capacity | $ 750,000,000 | |||||||||||||
Revolving credit facility | Credit Agreement Amendment | Maximum | ||||||||||||||
Debt | ||||||||||||||
Current borrowing capacity | 850,000,000 | |||||||||||||
Term Loan | ||||||||||||||
Debt | ||||||||||||||
Amount outstanding | 250,000,000.0 | $ 250.0 | ||||||||||||
Term Loan | Credit Agreement Amendment | ||||||||||||||
Debt | ||||||||||||||
Current borrowing capacity | $ 250,000,000 | |||||||||||||
Debt instrument, term | 7 years | |||||||||||||
Letter of Credit | ||||||||||||||
Debt | ||||||||||||||
Amount outstanding | $ 17,000,000.0 | |||||||||||||
Senior notes | ||||||||||||||
Debt | ||||||||||||||
Effective fixed interest rate (as a percent) | 3.95% | 4.30% | ||||||||||||
Debt instrument, face amount | $ 350,000,000.0 | $ 400,000,000.0 | $ 75,000,000.0 | $ 150,000,000.0 | ||||||||||
Redemption price, percentage | 99.78% | 99.68% | ||||||||||||
Proceeds from issuance of debt | $ 347,000,000.0 | $ 396,100,000 | ||||||||||||
Senior notes | Series A | ||||||||||||||
Debt | ||||||||||||||
Debt instrument, face amount | 25,000,000.0 | 15,000,000.0 | ||||||||||||
Senior notes | Series B | ||||||||||||||
Debt | ||||||||||||||
Debt instrument, face amount | $ 25,000,000.0 | 45,000,000.0 | ||||||||||||
Senior notes | Series C | ||||||||||||||
Debt | ||||||||||||||
Interest rate (as a percent) | 4.24% | |||||||||||||
Debt instrument, face amount | $ 25,000,000.0 | 45,000,000.0 | ||||||||||||
Senior notes | Series D | ||||||||||||||
Debt | ||||||||||||||
Debt instrument, face amount | $ 45,000,000.0 | |||||||||||||
Interest Rate Swap | Unsecured Debt | London Interbank Offered Rate (LIBOR) | ||||||||||||||
Debt | ||||||||||||||
Effective fixed interest rate (as a percent) | 1.07% | 1.07% | 2.87% | 1.07% | ||||||||||
Interest rate (as a percent) | 2.87% | |||||||||||||
Operating Partnership | Revolving credit facility | ||||||||||||||
Debt | ||||||||||||||
Interest rate at end of period (as a percent) | 3.89% | 3.89% | ||||||||||||
Operating Partnership | Revolving credit facility | London Interbank Offered Rate (LIBOR) | ||||||||||||||
Debt | ||||||||||||||
Reference rate (as a percent) | 2.07% |
Debt - Trust Investment Grade Rating (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
At Least A- or A3 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 0.85% |
At Least A- or A3 | Adjusted LIBOR rate term loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.40% |
At Least BBB or Baa1 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 0.90% |
At Least BBB or Baa1 | Adjusted LIBOR rate term loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.45% |
At Least BBB or Baa2 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.00% |
At Least BBB or Baa2 | Adjusted LIBOR rate term loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.55% |
At Least BBB- or Baa3 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.20% |
At Least BBB- or Baa3 | Adjusted LIBOR rate term loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.80% |
Below BBB- or Baa3 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 1.55% |
Below BBB- or Baa3 | Adjusted LIBOR rate term loans and letter of credit | London Interbank Offered Rate (LIBOR) | |
Debt | |
Reference rate (as a percent) | 2.25% |
Margin for Revolving Loans: Base Rate Loans | At Least A- or A3 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.00% |
Margin for Revolving Loans: Base Rate Loans | At Least BBB or Baa1 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.00% |
Margin for Revolving Loans: Base Rate Loans | At Least BBB or Baa2 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.10% |
Margin for Revolving Loans: Base Rate Loans | At Least BBB- or Baa3 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.20% |
Margin for Revolving Loans: Base Rate Loans | Below BBB- or Baa3 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.60% |
Margin for Term Loans: Base Rate Loans | At Least A- or A3 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.40% |
Margin for Term Loans: Base Rate Loans | At Least BBB or Baa1 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.45% |
Margin for Term Loans: Base Rate Loans | At Least BBB or Baa2 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.55% |
Margin for Term Loans: Base Rate Loans | At Least BBB- or Baa3 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 0.80% |
Margin for Term Loans: Base Rate Loans | Below BBB- or Baa3 | Base rate loans | Base rate | |
Debt | |
Reference rate (as a percent) | 1.25% |
Debt - Scheduled Principal Payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
2018 | $ 7,908 | |
2019 | 44,524 | |
2020 | 244,023 | |
2021 | 8,624 | |
2022 | 25,066 | |
Thereafter | 1,248,726 | |
Total Payments | $ 1,578,871 | $ 1,491,680 |
Derivatives - Additional Information (Details) - Cash Flow Hedging - Interest Rate Swap $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
instruments
|
|
Derivative [Line Items] | ||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 5,000 | |
Derivative, net hedge ineffectiveness gain (loss) | $ | $ 0.2 |
Derivatives - Location and Aggregate Fair Value of Interest Rate Swaps (Details) - USD ($) $ in Thousands |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jul. 07, 2016 |
|
Derivative [Line Items] | |||||
Total notional amount | $ 250,000 | ||||
Effective date | Jul. 07, 2016 | ||||
Maturity date | Jun. 10, 2023 | ||||
Unsecured Debt | London Interbank Offered Rate (LIBOR) | Interest Rate Swap | |||||
Derivative [Line Items] | |||||
Effective fixed interest rate (as a percent) | 1.07% | 2.87% | 1.07% | ||
$250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 (5) | Unsecured Debt | London Interbank Offered Rate (LIBOR) | |||||
Derivative [Line Items] | |||||
Effective fixed interest rate (as a percent) | 1.07% | ||||
Reference rate (as a percent) | 1.80% | ||||
Carrying Amount | Recurring basis | Interest Rate Swap | |||||
Derivative [Line Items] | |||||
Asset balance (included in Other assets) | $ 20,290 | $ 14,693 |
Accrued Expenses and Other Liabilities - Schedule of Accrued Expense and Other Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Accrued interest | $ 17,797 | $ 11,107 |
Real estate taxes payable | 16,871 | 16,103 |
Prepaid rent | 12,494 | 10,496 |
Accrued expenses | 4,550 | 8,751 |
Embedded derivative | 3,696 | 0 |
Security deposits | 2,752 | 2,882 |
Tenant improvement allowance | 2,592 | 3,065 |
Accrued incentive compensation | 1,964 | 1,625 |
Contingent consideration | 753 | 1,454 |
Other | 2,646 | 922 |
Total | $ 66,115 | $ 56,405 |
Stock-based Compensation - Additional Information (Details) - Restricted common shares - 2013 Plan - shares |
Aug. 07, 2014 |
Jul. 24, 2013 |
---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Maximum number of shares authorized (in shares) | 2,450,000 | 600,000 |
Increase in number of common shares authorized for issuance (in shares) | 1,850,000 |
Stock-based Compensation - Restricted Common Shares (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Non-cash share compensation | $ 4,619 | $ 3,238 | ||
2013 Plan | Restricted common shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted (in shares) | 206,446 | |||
Non-cash share compensation | $ 800 | $ 800 | $ 1,500 | $ 1,600 |
Unrecognized compensation expense | $ 2,600 | $ 2,600 | ||
Officers and Certain Employees | 2013 Plan | Restricted common shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Granted (in shares) | 206,446 | |||
Grant date value | $ 3,100 | |||
Minimum | Officers and Certain Employees | 2013 Plan | Restricted common shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period | 1 year | |||
Maximum | Officers and Certain Employees | 2013 Plan | Restricted common shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period | 3 years |
Stock-based Compensation - Summary of the Status of the Trust's Non-Vested Restricted Common Shares (Details) - 2013 Plan - Restricted common shares |
6 Months Ended |
---|---|
Jun. 30, 2018
$ / shares
shares
| |
Common Shares | |
Non-vested at the beginning of the period (in shares) | shares | 173,276 |
Granted (in shares) | shares | 206,446 |
Vested (in shares) | shares | (140,432) |
Non-vested at the end of the period (in shares) | shares | 239,290 |
Weighted Average Grant Date Fair Value | |
Non-vested at beginning of period (in dollars per share) | $ / shares | $ 19.36 |
Granted (in dollars per share) | $ / shares | 14.87 |
Vested (in dollars per share) | $ / shares | 19.63 |
Non-vested at end of period (in dollars per share) | $ / shares | $ 15.33 |
Stock-based Compensation - Restricted Share Units (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|---|
Mar. 31, 2018 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Non-cash share compensation | $ 4,619 | $ 3,238 | |||
2013 Plan | Restricted share units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of dividend equivalent included in each award | 1 | ||||
Non-cash share compensation | $ 1,200 | $ 1,000 | 3,100 | $ 1,700 | |
Unrecognized compensation expense | $ 7,600 | $ 7,600 | |||
2013 Plan | Performance based restricted stock units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in dollars per share) | $ 16.58 | ||||
Performance conditions grant date fair value (in dollars per share) | $ 14.78 | ||||
Officers and Certain Employees | 2013 Plan | Restricted share units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | 254,282 | ||||
Vesting period | 3 years | ||||
Officers and Certain Employees | 2013 Plan | Market Based Restricted Stock Units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 40.00% | ||||
Granted (in dollars per share) | $ 19.28 | ||||
Officers and Certain Employees | 2013 Plan | Performance based restricted stock units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Vesting percentage | 60.00% | ||||
Trustees | 2013 Plan | Restricted share units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | 50,745 | ||||
Vesting period | 2 years | ||||
Trustees | 2013 Plan | Performance based restricted stock units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Percentage of restricted share units issued to trustees | 100.00% |
Stock-based Compensation - Restricted Share Assumptions (Details) - 2013 Plan - Restricted share units (RSUs) - $ / shares |
1 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Jun. 30, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 21.70% | |
Expected term in years | 2 years 9 months 18 days | |
Risk-free rate | 2.40% | |
Share price (per share) | $ 14.78 |
Stock-based Compensation - Summary of Activity in the Trust's Restricted Share Units (Details) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Weighted Average Grant Date Fair Value | ||
Common stock, shares issued (in shares) | 182,027,309 | 181,440,051 |
2013 Plan | Executive Awards | ||
Restricted Share Units | ||
Non-vested at the beginning of the period (in shares) | 354,123 | |
Granted (in shares) | 254,282 | |
Vested (in shares) | (75,250) | |
Non-vested at the end of the period (in shares) | 533,155 | |
Weighted Average Grant Date Fair Value | ||
Non-vested at beginning of period (in dollars per share) | $ 26.30 | |
Granted (in dollars per share) | 16.58 | |
Vested (in dollars per share) | 21.16 | |
Non-vested at end of period (in dollars per share) | $ 22.66 | |
Common stock, shares issued (in shares) | 126,108 | |
Restricted stock shares issued net of tax withholdings (in shares) | 56,502 | |
2013 Plan | Trustee Awards | ||
Restricted Share Units | ||
Non-vested at the beginning of the period (in shares) | 51,220 | |
Granted (in shares) | 50,745 | |
Vested (in shares) | (34,807) | |
Non-vested at the end of the period (in shares) | 67,158 | |
Weighted Average Grant Date Fair Value | ||
Non-vested at beginning of period (in dollars per share) | $ 19.04 | |
Granted (in dollars per share) | 14.78 | |
Vested (in dollars per share) | 18.67 | |
Non-vested at end of period (in dollars per share) | $ 16.01 |
Fair Value Measurements - Additional Information (Details) |
Jun. 30, 2018
USD ($)
instruments
properties
portfolio
|
---|---|
Fair value of other financial instruments | |
Number of portfolios comprised of properties held for sale | portfolio | 1 |
Number of properties, held for sale | properties | 17 |
Fair value, measurements, nonrecurring | |
Fair value of other financial instruments | |
Assets subject to impairment fair value disclosure | $ | $ 0 |
Cash Flow Hedging | Interest Rate Swap | |
Fair value of other financial instruments | |
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 5,000 |
Fair Value Measurements - Fair Value of Company's Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Assets [Abstract] | ||
Note receivable | $ 20,628 | $ 0 |
Liabilities: | ||
Credit facility | (459,262) | (324,394) |
Notes payable | (966,586) | (966,603) |
Carrying Amount | Recurring basis | ||
Assets [Abstract] | ||
Real estate loans receivable | 68,151 | 76,195 |
Note receivable | 20,628 | 0 |
Liabilities: | ||
Credit facility | (464,000) | (330,000) |
Notes payable | (975,000) | (975,000) |
Mortgage debt | (140,100) | (186,939) |
Carrying Amount | Interest Rate Swap | Recurring basis | ||
Assets [Abstract] | ||
Derivative assets | 20,290 | 14,693 |
Fair Value | Recurring basis | ||
Assets [Abstract] | ||
Real estate loans receivable | 66,176 | 75,288 |
Note receivable | 20,628 | 0 |
Liabilities: | ||
Credit facility | (464,000) | (330,000) |
Notes payable | (938,138) | (970,975) |
Mortgage debt | (139,752) | (185,743) |
Fair Value | Interest Rate Swap | Recurring basis | ||
Assets [Abstract] | ||
Derivative assets | $ 20,290 | $ 14,693 |
Tenant Operating Leases - Schedule of Future Minimum Rental Payments (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
properties
|
---|---|
Leases [Abstract] | |
Number of properties, held for sale | properties | 17 |
Future minimum rental payments on non-cancelable leases | |
2018 | $ 139,912 |
2019 | 279,811 |
2020 | 275,460 |
2021 | 270,311 |
2022 | 259,836 |
Thereafter | 1,274,228 |
Total | $ 2,499,558 |
Rent Expense - Additional Information (Details) $ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2018
USD ($)
properties
healthcareproperty
|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2018
USD ($)
properties
healthcareproperty
|
|
Operating Leased Assets [Line Items] | |||
Number of properties subject to parking lease | 2 | 2 | |
Number of properties subject to air space lease | healthcareproperty | 1 | 1 | |
Number of properties subject to ground leases | 77 | 77 | |
Number of office space leases | 4 | 4 | |
Maximum lease terms | 87 years | ||
Number of properties, held for sale | 17 | 17 | |
Operating Expense | Parking, Air And Ground Leases | |||
Operating Leased Assets [Line Items] | |||
Rent expenses for parking, air, and ground leases | $ | $ 0.6 | $ 0.6 | $ 1.2 |
Rent Expense - Schedule of Future Minimum Lease Obligations (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Future minimum lease obligations under non-cancelable parking, air, and ground leases | |
2018 | $ 1,383 |
2019 | 2,724 |
2020 | 2,673 |
2021 | 2,692 |
2022 | 2,717 |
Thereafter | 123,289 |
Total | $ 135,478 |
Credit Concentration - Schedule of ABR (Annualized Base Rent) (Details) - Sales Revenue, Services, Net $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
Rate
| |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 277,705 |
Percent of ABR (annualized base rent) | Rate | 100.00% |
Customer Concentration Risk | CHI - Nebraska | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 16,244 |
Percent of ABR (annualized base rent) | 5.90% |
Customer Concentration Risk | CHI - KentuckyOne Health | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 13,484 |
Percent of ABR (annualized base rent) | 4.90% |
Customer Concentration Risk | Baylor Scott and White Health | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 7,583 |
Percent of ABR (annualized base rent) | 2.70% |
Customer Concentration Risk | US Oncology | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 6,785 |
Percent of ABR (annualized base rent) | 2.40% |
Customer Concentration Risk | CHI - St. Alexius (ND) | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 6,391 |
Percent of ABR (annualized base rent) | 2.30% |
Customer Concentration Risk | Remaining portfolio | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 227,218 |
Percent of ABR (annualized base rent) | Rate | 81.80% |
Geographic Concentration Risk | Texas | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 47,019 |
Percent of ABR (annualized base rent) | 16.90% |
Geographic Concentration Risk | Georgia | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 20,517 |
Percent of ABR (annualized base rent) | 7.40% |
Geographic Concentration Risk | NEBRASKA | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 17,662 |
Percent of ABR (annualized base rent) | 6.40% |
Geographic Concentration Risk | Indiana | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 16,993 |
Percent of ABR (annualized base rent) | 6.10% |
Geographic Concentration Risk | Minnesota | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 16,798 |
Percent of ABR (annualized base rent) | 6.10% |
Geographic Concentration Risk | Other | |
Concentration Risk [Line Items] | |
Total ABR (annualized base rent) | $ 158,716 |
Percent of ABR (annualized base rent) | 57.10% |
Credit Concentration - Additional Information (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018
properties
Rate
| |
Concentration Risk [Line Items] | |
Number of properties, held for sale | properties | 17 |
Sales Revenue, Services, Net | |
Concentration Risk [Line Items] | |
Percent of ABR (annualized base rent) | Rate | 100.00% |
Top five tenant relationships | Sales Revenue, Services, Net | Customer Concentration Risk | |
Concentration Risk [Line Items] | |
Percent of ABR (annualized base rent) | 18.20% |
CHI Portfolio | Sales Revenue, Services, Net | Customer Concentration Risk | |
Concentration Risk [Line Items] | |
Percent of ABR (annualized base rent) | 19.70% |
Earnings Per Share and Earnings Per Unit - Schedule of Earnings Per Share and Earnings Per Unit (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
||||||
Numerator for earnings per share - basic: | |||||||||
Net income | $ 12,062 | $ 10,331 | $ 23,394 | $ 17,047 | |||||
Operating Partnership | (331) | (314) | (644) | (461) | |||||
Partially owned properties | [1] | (144) | (159) | (255) | (326) | ||||
Preferred distributions | (284) | (188) | (771) | (399) | |||||
Net income attributable to common shareholders | 11,303 | 9,670 | 21,724 | 15,861 | |||||
Numerator for earnings per share - diluted: | |||||||||
Net income attributable to common shareholders | 11,303 | 9,670 | 21,724 | 15,861 | |||||
Operating Partnership net income | 331 | 314 | 644 | 461 | |||||
Numerator for earnings per share - diluted | $ 11,634 | $ 9,984 | $ 22,368 | $ 16,322 | |||||
Denominator for earnings per share - basic and diluted: | |||||||||
Weighted average number of shares outstanding - basic (in shares) | 182,002,062 | 155,366,080 | 181,906,348 | 147,221,602 | |||||
Effect of dilutive securities: | |||||||||
Noncontrolling interest - Operating Partnership units (in shares) | 5,392,557 | 5,399,265 | 5,423,354 | 4,298,805 | |||||
Weighted average number of shares outstanding - diluted (in shares) | 187,431,132 | 161,012,360 | 187,387,211 | 151,912,432 | |||||
Earnings per share - basic (in dollars per share) | $ 0.06 | $ 0.06 | $ 0.12 | $ 0.11 | |||||
Earnings per share - diluted (in dollars per share) | $ 0.06 | $ 0.06 | $ 0.12 | $ 0.11 | |||||
Units excluded from the computation of diluted earnings per share (in shares) | 600,313 | 600,313 | |||||||
Restricted common shares | |||||||||
Effect of dilutive securities: | |||||||||
Effect of dilutive securities, restricted shares and RSUs (in shares) | 36,513 | 57,366 | 57,509 | 86,814 | |||||
Restricted share units | |||||||||
Effect of dilutive securities: | |||||||||
Effect of dilutive securities, restricted shares and RSUs (in shares) | 0 | 189,649 | 0 | 305,211 | |||||
Operating Partnership | |||||||||
Numerator for earnings per share - basic: | |||||||||
Net income | $ 12,062 | $ 10,331 | $ 23,394 | $ 17,047 | |||||
Partially owned properties | [2] | (144) | (159) | (255) | (326) | ||||
Preferred distributions | (284) | (188) | (771) | (399) | |||||
Net income attributable to common shareholders | 11,634 | 9,984 | 22,368 | 16,322 | |||||
Numerator for earnings per unit - basic and diluted | $ 11,634 | $ 9,984 | $ 22,368 | $ 16,322 | |||||
Weighted average limited partnership units outstanding, basic (in shares) | 187,394,619 | 160,765,345 | 187,329,702 | 151,520,407 | |||||
Numerator for earnings per share - diluted: | |||||||||
Net income attributable to common shareholders | $ 11,634 | $ 9,984 | $ 22,368 | $ 16,322 | |||||
Effect of dilutive securities: | |||||||||
Denominator for earnings per unit - diluted (in shares) | 187,431,132 | 161,012,360 | 187,387,211 | 151,912,432 | |||||
Earnings per unit - basic (dollars per share) | $ 0.06 | $ 0.06 | $ 0.12 | $ 0.11 | |||||
Earnings per unit - diluted (dollars per share) | $ 0.06 | $ 0.06 | $ 0.12 | $ 0.11 | |||||
Operating Partnership | Restricted common shares | |||||||||
Effect of dilutive securities: | |||||||||
Effect of dilutive securities, restricted shares and RSUs (in shares) | 36,513 | 57,366 | 57,509 | 86,814 | |||||
Operating Partnership | Restricted share units | |||||||||
Effect of dilutive securities: | |||||||||
Effect of dilutive securities, restricted shares and RSUs (in shares) | 0 | 189,649 | 0 | 305,211 | |||||
|
Subsequent Events (Details) - 17 healthcare properties - Disposal Group, Disposed of by Sale, Not Discontinued Operations - Subsequent Event $ in Millions |
Jul. 27, 2018
USD ($)
ft²
properties
|
---|---|
Subsequent Event [Line Items] | |
Number of health properties disposed of | properties | 17 |
Square feet of healthcare properties | ft² | 462,714 |
Proceeds from divestiture of businesses | $ 127.1 |
Loss on sale of investment properties, net | $ 14.5 |
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