UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36007

PHYSICIANS REALTY TRUST

(Exact Name of Registrant as Specified in its Charter)


Maryland		46-2519850
(State of Organization)		(IRS Employer Identification No.)

309 N. Water Street, Suite 500		53202
Milwaukee,	Wisconsin
(Address of Principal Executive Offices)		(Zip Code)

(414) 367-5600

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, $0.01 par value per share

DOC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of Physicians Realty Trust’s common shares outstanding as of April ~~27, 2022~~26, 2023 was ~~225,296,089.~~238,398,561.

PHYSICIANS REALTY TRUST

Quarterly Report on Form 10-Q

for the Quarter Ended March 31, ~~2022~~2023

Table of Contents


		Page Number
Part I	Financial Information

Item 1	Financial Statements (Unaudited)


	Consolidated Balance Sheets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022	3
	Consolidated Statements of Income for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	4
	Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	5
	Consolidated Statements of Equity for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	6
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	8









	Notes to Consolidated Financial Statements	9

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4	Controls and Procedures	34

Part II	Other Information

Item 1	Legal Proceedings	35
Item 1A	Risk Factors	35
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 6	Exhibits	36

SIGNATURES		37

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements within the meaning of the federal securities laws. In particular, statements pertaining to our capital resources, property performance, and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions, demographics, and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believe,” “expect,” “outlook,” “continue,” “project,” “may,” “will,” “should,” “seek,” “approximately,” “intend,” “plan,” “pro forma,” “estimate,” or “anticipate” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, expectations, or intentions.

These forward-looking statements reflect the views of our management regarding current expectations and projections about future events and are based on currently available information. These forward-looking statements are not guarantees of future performance and involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data, or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

•general economic conditions, including inflation and recession;

•changes in our business or strategy;

•our ability to operate as a public company;

•adverse economic or real estate developments, either nationally or in the markets where our properties are located;

•our geographic concentration in Texas may cause us to be particularly exposed to downturns in the Texas economy or other changes in Texas market conditions;

•our concentration of investment in health care properties;

•the disruption of our business and the compromise of confidential information resulting from cybersecurity attacks, breaches, and other incidents;

•any adverse effects to the business, financial position or results of operations of CommonSpirit Health (“CommonSpirit”), or one or more of the CommonSpirit-affiliated tenants, that impact the ability of CommonSpirit-affiliated tenants to pay us rent;

•the degree and nature of our competition;

•competition for investment opportunities;

•difficulties in identifying health care properties to acquire and completing acquisitions;

•the unknown duration and economic, operational, and financial impacts of the global outbreak of a novel strain of the coronavirus and ~~its variants, including the Delta or Omicron variants and~~ any ~~future~~ variants that have emerged or that may emerge in the future, (the “COVID-19 pandemic”) and the actions taken by governmental authorities or others in connection with the COVID-19 pandemic will have on the Company’s business;

•~~general economic conditions, including inflation;~~changes in health care laws or government reimbursement rates;

•~~adverse economic~~decreased rental rates or ~~real estate developments, either nationally~~increased vacancy rates;

•defaults on or in non-renewal of leases by tenants;

•the ~~markets where our properties are located;~~potential impact of severe weather events and climate change;

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•our failure to generate sufficient cash flows to service, ~~our indebtedness or to~~ pay down, or refinance our ~~indebtedness;~~indebtedness or make distributions on our common shares;

•fluctuations and increases in interest rates and ~~increased~~ operating costs;

•the availability, terms, and ~~deployment~~issuance 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 health care 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 real estate investment trusts (“REITs”), and similar matters;

•~~defaults on or non-renewal of leases by tenants;~~

•~~decreased rental rates or increased vacancy rates;~~

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•~~difficulties in identifying health care properties to acquire and completing acquisitions;~~

•~~competition for investment opportunities;~~

•any adverse effects to the business, financial position or results of operations of CommonSpirit Health, or one or more of the CommonSpirit Health-affiliated tenants, that impact the ability of CommonSpirit Health-affiliated tenants to pay us rent;

•~~the~~ impact of our investments in joint ventures we have made and may make in the future;

•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 ~~health care laws~~governmental regulations or ~~government reimbursement rates;~~

•~~changes in accounting principles generally accepted in the United States (“GAAP”);~~

•~~lack of or insufficient amounts of insurance;~~

•~~other factors affecting the~~interpretations thereof, such as real estate ~~industry generally;~~and zoning laws and increases in real property tax rates, taxation of real estate investment trusts (“REITs”), and similar matters;

•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;

•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; 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 health care-related real estate sector.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events, or other changes after the date of this report, except as required by applicable law. You should not place undue reliance on any forward-looking statements that are based on information currently available to us or the third parties making the forward-looking statements. For a further discussion of these and other factors that could impact our future results, performance or transactions, see Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021~~2022 filed with the Securities and Exchange Commission (the “Commission”) on February 24, ~~2022~~2023 (the ~~“2021~~“2022 Annual Report”).

As used in this report, unless the context otherwise requires, references to “we,” “us,” “our,” and the “Company” refer to Physicians Realty Trust (the “Trust”), a Maryland real estate investment trust, and Physicians Realty L.P. (the “Operating Partnership”), a Delaware limited partnership and the consolidated subsidiary of the Trust through which we conduct our business.

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PART I. Financial Information

Item 1. Financial Statements

Physicians Realty Trust

Consolidated Balance Sheets

(In thousands, except share and per share data)


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Investment properties:	Investment properties:					Investment properties:
Land and improvements	Land and improvements	$	235,216	$	235,453	Land and improvements	$	242,107	$	241,559
Building and improvements	Building and improvements	4,612,574		4,612,561		Building and improvements	4,678,995		4,674,011
Tenant improvements	Tenant improvements	89,768		86,018		Tenant improvements	96,527		92,906
Acquired lease intangibles	Acquired lease intangibles	498,221		498,221		Acquired lease intangibles	505,074		505,335
		5,435,779		5,432,253			5,522,703		5,513,811
Accumulated depreciation	Accumulated depreciation	(867,799)		(821,036)		Accumulated depreciation	(1,043,884)		(996,888)
Net real estate property	Net real estate property	4,567,980		4,611,217		Net real estate property	4,478,819		4,516,923
Real estate held for sale		2,113		1,964

Right-of-use lease assets, net	Right-of-use lease assets, net	234,345		235,483		Right-of-use lease assets, net	230,254		231,225
Real estate loans receivable, net	Real estate loans receivable, net	93,176		117,844		Real estate loans receivable, net	115,764		104,973
Investments in unconsolidated entities	Investments in unconsolidated entities	75,669		69,793		Investments in unconsolidated entities	75,086		77,716
Net real estate investments	Net real estate investments	4,973,283		5,036,301		Net real estate investments	4,899,923		4,930,837
Cash and cash equivalents	Cash and cash equivalents	2,729		9,876		Cash and cash equivalents	3,364		7,730
Tenant receivables, net	Tenant receivables, net	5,783		4,948		Tenant receivables, net	10,830		11,503
Other assets	Other assets	134,248		131,584		Other assets	147,050		146,807
Total assets	Total assets	$	5,116,043	$	5,182,709	Total assets	$	5,061,167	$	5,096,877
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Credit facility	Credit facility	$	249,075	$	267,641	Credit facility	$	147,762	$	188,328
Notes payable	Notes payable	1,464,358		1,464,008		Notes payable	1,450,798		1,465,437
Mortgage debt	Mortgage debt	179,886		180,269		Mortgage debt	164,130		164,352
Accounts payable	Accounts payable	1,399		6,651		Accounts payable	3,343		4,391
Dividends and distributions payable	Dividends and distributions payable	56,689		57,246		Dividends and distributions payable	59,824		60,148
Accrued expenses and other liabilities	Accrued expenses and other liabilities	79,013		86,254		Accrued expenses and other liabilities	85,007		87,720
Lease liabilities	Lease liabilities	104,739		104,957		Lease liabilities	104,856		105,011
Acquired lease intangibles, net	Acquired lease intangibles, net	21,111		21,569		Acquired lease intangibles, net	23,796		24,381
Total liabilities	Total liabilities	2,156,270		2,188,595		Total liabilities	2,039,516		2,099,768

Redeemable noncontrolling interests - partially owned properties	Redeemable noncontrolling interests - partially owned properties	6,335		7,081		Redeemable noncontrolling interests - partially owned properties	3,193		3,258

Equity:	Equity:					Equity:
Common shares, $0.01 par value, 500,000,000 common shares authorized, 225,293,058 and 224,678,116 common shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		2,253		2,247
Common shares, $0.01 par value, 500,000,000 common shares authorized, 238,395,869 and 233,292,030 common shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively						Common shares, $0.01 par value, 500,000,000 common shares authorized, 238,395,869 and 233,292,030 common shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	2,384		2,333
Additional paid-in capital	Additional paid-in capital	3,615,884		3,610,954		Additional paid-in capital	3,810,504		3,743,876
Accumulated deficit	Accumulated deficit	(814,492)		(776,001)		Accumulated deficit	(926,790)		(881,672)
Accumulated other comprehensive income (loss)		487		(892)
Accumulated other comprehensive income						Accumulated other comprehensive income	4,162		5,183
Total shareholders’ equity	Total shareholders’ equity	2,804,132		2,836,308		Total shareholders’ equity	2,890,260		2,869,720
Noncontrolling interests:	Noncontrolling interests:					Noncontrolling interests:
Operating Partnership	Operating Partnership	148,226		150,241		Operating Partnership	119,187		123,015
Partially owned properties	Partially owned properties	1,080		484		Partially owned properties	9,011		1,116
Total noncontrolling interests	Total noncontrolling interests	149,306		150,725		Total noncontrolling interests	128,198		124,131
Total equity	Total equity	2,953,438		2,987,033		Total equity	3,018,458		2,993,851
Total liabilities and equity	Total liabilities and equity	$	5,116,043	$	5,182,709	Total liabilities and equity	$	5,061,167	$	5,096,877

The accompanying notes are an integral part of these consolidated financial statements.

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Physicians Realty Trust

Consolidated Statements of Income

(In thousands, except share and per share data) (Unaudited)


		Three Months Ended March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Revenues:	Revenues:						Revenues:
Rental and related revenues	Rental and related revenues		$	126,676	$	107,955	Rental and related revenues		$	131,398	$	127,791
Interest income on real estate loans and other	Interest income on real estate loans and other		3,714		5,384		Interest income on real estate loans and other		2,946		2,599
Total revenues	Total revenues		130,390		113,339		Total revenues		134,344		130,390
Expenses:	Expenses:						Expenses:
Interest expense	Interest expense		16,823		13,715		Interest expense		19,153		16,823
General and administrative	General and administrative		10,293		9,465		General and administrative		11,200		10,293
Operating expenses	Operating expenses		41,752		33,934		Operating expenses		45,394		41,752
Depreciation and amortization	Depreciation and amortization		47,260		37,976		Depreciation and amortization		47,677		47,260

Total expenses	Total expenses		116,128		95,090		Total expenses		123,424		116,128
Income before equity in loss of unconsolidated entities and loss on sale of investment properties, net:			14,262		18,249
Income before equity in loss of unconsolidated entities and gain (loss) on sale of investment properties, net:							Income before equity in loss of unconsolidated entities and gain (loss) on sale of investment properties, net:		10,920		14,262
Equity in loss of unconsolidated entities	Equity in loss of unconsolidated entities		(166)		(420)		Equity in loss of unconsolidated entities		(264)		(166)
Loss on sale of investment properties, net			(153)		(24)
Gain (loss) on sale of investment properties, net							Gain (loss) on sale of investment properties, net		13		(153)
Net income	Net income		13,943		17,805		Net income		10,669		13,943
Net income attributable to noncontrolling interests:	Net income attributable to noncontrolling interests:						Net income attributable to noncontrolling interests:
Operating Partnership	Operating Partnership		(692)		(459)		Operating Partnership		(423)		(692)
Partially owned properties (1)	Partially owned properties (1)		(159)		(152)		Partially owned properties (1)		(44)		(159)
Net income attributable to controlling interest			13,092		17,194
Preferred distributions			—		(13)

Net income attributable to common shareholders	Net income attributable to common shareholders		$	13,092	$	17,181	Net income attributable to common shareholders		$	10,202	$	13,092
Net income per share:	Net income per share:						Net income per share:
Basic	Basic		$	0.06	$	0.08	Basic		$	0.04	$	0.06
Diluted	Diluted		$	0.06	$	0.08	Diluted		$	0.04	$	0.06
Weighted average common shares:	Weighted average common shares:						Weighted average common shares:
Basic	Basic		225,069,208		210,529,698		Basic		237,484,043		225,069,208
Diluted	Diluted		238,340,243		217,322,425		Diluted		248,756,672		238,340,243

Dividends and distributions declared per common share	Dividends and distributions declared per common share		$	0.23	$	0.23	Dividends and distributions declared per common share		$	0.23	$	0.23

(1)Includes amounts attributable to redeemable noncontrolling interests.

The accompanying notes are an integral part of these consolidated financial statements.

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Physicians Realty Trust

Consolidated Statements of Comprehensive Income

(In thousands) (Unaudited)


		Three Months Ended March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Net income	Net income		$	13,943	$	17,805	Net income		$	10,669	$	13,943
Other comprehensive income:	Other comprehensive income:						Other comprehensive income:
Change in fair value of interest rate swap agreements, net	Change in fair value of interest rate swap agreements, net		1,379		797		Change in fair value of interest rate swap agreements, net		(1,021)		1,379
Total other comprehensive income			1,379		797
Total other comprehensive (loss) income							Total other comprehensive (loss) income		(1,021)		1,379
Comprehensive income	Comprehensive income		15,322		18,602		Comprehensive income		9,648		15,322
Comprehensive income attributable to noncontrolling interests - Operating Partnership	Comprehensive income attributable to noncontrolling interests - Operating Partnership		(761)		(480)		Comprehensive income attributable to noncontrolling interests - Operating Partnership		(383)		(761)
Comprehensive income attributable to noncontrolling interests - partially owned properties	Comprehensive income attributable to noncontrolling interests - partially owned properties		(159)		(152)		Comprehensive income attributable to noncontrolling interests - partially owned properties		(44)		(159)
Comprehensive income attributable to common shareholders	Comprehensive income attributable to common shareholders		$	14,402	$	17,970	Comprehensive income attributable to common shareholders		$	9,221	$	14,402

The accompanying notes are an integral part of these consolidated financial statements.

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Physicians Realty Trust

Consolidated Statements of Equity

(In thousands) (Unaudited)


		Par Value		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Operating Partnership Noncontrolling Interest		Partially Owned Properties Noncontrolling Interest		Total Noncontrolling Interests		Total Equity			Par Value		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Operating Partnership Noncontrolling Interest		Partially Owned Properties Noncontrolling Interest		Total Noncontrolling Interests		Total Equity
Balance at December 31, 2021		$	2,247	$	3,610,954	$	(776,001)	$	(892)	$	2,836,308	$	150,241	$	484	$	150,725	$	2,987,033
Balance at December 31, 2022																				Balance at December 31, 2022	$	2,333	$	3,743,876	$	(881,672)	$	5,183	$	2,869,720	$	123,015	$	1,116	$	124,131	$	2,993,851

Net proceeds from sale of common shares	Net proceeds from sale of common shares	3		5,029		—		—		5,032		—		—		—		5,032		Net proceeds from sale of common shares	44		65,769		—		—		65,813		—		—		—		65,813
Restricted share award grants, net	Restricted share award grants, net	3		118		(421)		—		(300)		—		—		—		(300)		Restricted share award grants, net	5		(1,127)		(408)		—		(1,530)		—		—		—		(1,530)
Purchase of OP Units		—		—		—		—		—		(184)		—		(184)		(184)

Conversion of OP Units																				Conversion of OP Units	2		2,417		—		—		2,419		(2,419)		—		(2,419)		—
Dividends/distributions declared	Dividends/distributions declared	—		—		(51,879)		—		(51,879)		(2,740)		—		(2,740)		(54,619)		Dividends/distributions declared	—		—		(54,912)		—		(54,912)		(2,263)		—		(2,263)		(57,175)

Contributions	Contributions	—		—		—		—		—		—		569		569		569		Contributions	—		—		—		—		—		—		7,884		7,884		7,884
Distributions	Distributions	—		—		—		—		—		—		(55)		(55)		(55)		Distributions	—		—		—		—		—		—		(53)		(53)		(53)
Change in market value of Redeemable Noncontrolling Interest in Operating Partnership		—		—		717		—		717		—		—		—		717

Change in fair value of interest rate swap agreement	Change in fair value of interest rate swap agreement	—		—		—		1,379		1,379		—		—		—		1,379		Change in fair value of interest rate swap agreement	—		—		—		(1,021)		(1,021)		—		—		—		(1,021)
Adjustment for Noncontrolling Interests ownership in Operating Partnership	Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		(217)		—		—		(217)		217		—		217		—		Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		(431)		—		—		(431)		431		—		431		—

Net income	Net income	—		—		13,092		—		13,092		692		82		774		13,866		Net income	—		—		10,202		—		10,202		423		64		487		10,689
Balance as of March 31, 2022		$	2,253	$	3,615,884	$	(814,492)	$	487	$	2,804,132	$	148,226	$	1,080	$	149,306	$	2,953,438
Balance as of March 31, 2023																				Balance as of March 31, 2023	$	2,384	$	3,810,504	$	(926,790)	$	4,162	$	2,890,260	$	119,187	$	9,011	$	128,198	$	3,018,458

The accompanying notes are an integral part of these consolidated financial statements.

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Physicians Realty Trust

Consolidated Statements of Equity

(In thousands) (Unaudited)


		Par Value		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Operating Partnership Noncontrolling Interest		Partially Owned Properties Noncontrolling Interest		Total Noncontrolling Interests		Total Equity			Par Value		Additional Paid in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Operating Partnership Noncontrolling Interest		Partially Owned Properties Noncontrolling Interest		Total Noncontrolling Interests		Total Equity
Balance at December 31, 2020		$	2,096	$	3,303,231	$	(658,171)	$	(5,859)	$	2,641,297	$	73,302	$	403	$	73,705	$	2,715,002
Balance at December 31, 2021																				Balance at December 31, 2021	$	2,247	$	3,610,954	$	(776,001)	$	(892)	$	2,836,308	$	150,241	$	484	$	150,725	$	2,987,033

Net proceeds from sale of common shares	Net proceeds from sale of common shares	28		52,404		—		—		52,432		—		—		—		52,432		Net proceeds from sale of common shares	3		5,029		—		—		5,032		—		—		—		5,032
Restricted share award grants, net	Restricted share award grants, net	4		(333)		(664)		—		(993)		—		—		—		(993)		Restricted share award grants, net	3		118		(421)		—		(300)		—		—		—		(300)
Purchase of OP Units	Purchase of OP Units	—		—		—		—		—		(269)		—		(269)		(269)		Purchase of OP Units	—		—		—		—		—		(184)		—		(184)		(184)

Dividends/distributions declared	Dividends/distributions declared	—		—		(49,011)		—		(49,011)		(1,243)		—		(1,243)		(50,254)		Dividends/distributions declared	—		—		(51,879)		—		(51,879)		(2,740)		—		(2,740)		(54,619)
Preferred distributions		—		—		(13)		—		(13)		—		—		—		(13)

Contributions																				Contributions	—		—		—		—		—		—		569		569		569
Distributions	Distributions	—		—		—		—		—		—		(73)		(73)		(73)		Distributions	—		—		—		—		—		—		(55)		(55)		(55)
Change in market value of Redeemable Noncontrolling Interest in Operating Partnership		—		(23)		896		—		873		—		—		—		873
Change in market value of Redeemable Noncontrolling Interest in partially owned properties																				Change in market value of Redeemable Noncontrolling Interest in partially owned properties	—		—		717		—		717		—		—		—		717

Change in fair value of interest rate swap agreements		—		—		—		797		797		—		—		—		797

Change in fair value of interest rate swap agreement																				Change in fair value of interest rate swap agreement	—		—		—		1,379		1,379		—		—		—		1,379
Adjustment for Noncontrolling Interests ownership in Operating Partnership	Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		1,136		—		—		1,136		(1,136)		—		(1,136)		—		Adjustment for Noncontrolling Interests ownership in Operating Partnership	—		(217)		—		—		(217)		217		—		217		—

Net income	Net income	—		—		17,194		—		17,194		459		76		535		17,729		Net income	—		—		13,092		—		13,092		692		82		774		13,866
Balance as of March 31, 2021		$	2,128	$	3,356,415	$	(689,769)	$	(5,062)	$	2,663,712	$	71,113	$	406	$	71,519	$	2,735,231
Balance as of March 31, 2022																				Balance as of March 31, 2022	$	2,253	$	3,615,884	$	(814,492)	$	487	$	2,804,132	$	148,226	$	1,080	$	149,306	$	2,953,438

The accompanying notes are an integral part of these consolidated financial statements.

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Physicians Realty Trust

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:					Cash Flows from Operating Activities:
Net income	Net income	$	13,943	$	17,805	Net income	$	10,669	$	13,943
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	47,260		37,976		Depreciation and amortization	47,677		47,260
Amortization of deferred financing costs	Amortization of deferred financing costs	579		581		Amortization of deferred financing costs	569		579
Amortization of lease inducements and above/below-market lease intangibles	Amortization of lease inducements and above/below-market lease intangibles	1,575		1,143		Amortization of lease inducements and above/below-market lease intangibles	1,364		1,575
Straight-line rental revenue/expense		(2,154)		(2,725)
Straight-line rental revenue, net						Straight-line rental revenue, net	(1,235)		(2,154)
Amortization of discount on unsecured senior notes	Amortization of discount on unsecured senior notes	262		161		Amortization of discount on unsecured senior notes	272		262
Amortization of above market assumed debt	Amortization of above market assumed debt	(10)		(15)		Amortization of above market assumed debt	—		(10)
Loss on sale of investment properties, net		153		24
(Gain) loss on sale of investment properties, net						(Gain) loss on sale of investment properties, net	(13)		153
Equity in loss of unconsolidated entities	Equity in loss of unconsolidated entities	166		420		Equity in loss of unconsolidated entities	264		166
Distributions from unconsolidated entities	Distributions from unconsolidated entities	2,002		1,761		Distributions from unconsolidated entities	1,906		2,002

Provision for bad debts	Provision for bad debts	87		(49)		Provision for bad debts	281		87
Non-cash share compensation	Non-cash share compensation	4,253		3,707		Non-cash share compensation	4,667		4,253

Change in operating assets and liabilities:	Change in operating assets and liabilities:					Change in operating assets and liabilities:
Tenant receivables	Tenant receivables	(791)		(1,937)		Tenant receivables	567		(791)
Other assets	Other assets	(266)		2,766		Other assets	536		(266)
Accounts payable	Accounts payable	(5,252)		(4,349)		Accounts payable	(1,048)		(5,252)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(7,272)		(15,968)		Accrued expenses and other liabilities	(2,757)		(7,272)
Net cash provided by operating activities	Net cash provided by operating activities	54,535		41,301		Net cash provided by operating activities	63,719		54,535
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:					Cash Flows from Investing Activities:
Proceeds from sale of investment properties	Proceeds from sale of investment properties	1,804		436		Proceeds from sale of investment properties	2,553		1,804
Acquisition of investment properties, net	Acquisition of investment properties, net	(10)		(1,135)		Acquisition of investment properties, net	(2,650)		(10)
Investment in unconsolidated entities	Investment in unconsolidated entities	(5,045)		37		Investment in unconsolidated entities	(180)		(5,045)
Development of real estate						Development of real estate	(953)		—
Escrowed cash - acquisition deposits/earnest deposits	Escrowed cash - acquisition deposits/earnest deposits	90		(311)		Escrowed cash - acquisition deposits/earnest deposits	—		90
Capital expenditures on investment properties	Capital expenditures on investment properties	(5,491)		(6,139)		Capital expenditures on investment properties	(8,400)		(5,491)
Investment in real estate loans receivable	Investment in real estate loans receivable	(904)		(7,398)		Investment in real estate loans receivable	(10,956)		(904)
Repayment of real estate loans receivable	Repayment of real estate loans receivable	22,441		307		Repayment of real estate loans receivable	—		22,441

Leasing commissions	Leasing commissions	(704)		(1,044)		Leasing commissions	(782)		(704)

Net cash provided by (used in) investing activities		12,181		(15,247)
Lease inducements						Lease inducements	(400)		—
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(21,768)		12,181
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:					Cash Flows from Financing Activities:
Net proceeds from sale of common shares	Net proceeds from sale of common shares	5,032		52,432		Net proceeds from sale of common shares	65,813		5,032
Proceeds from credit facility borrowings	Proceeds from credit facility borrowings	64,000		78,000		Proceeds from credit facility borrowings	55,000		64,000
Repayment of credit facility borrowings	Repayment of credit facility borrowings	(83,000)		(88,000)		Repayment of credit facility borrowings	(96,000)		(83,000)
Repayment of senior unsecured notes						Repayment of senior unsecured notes	(15,000)		—

Principal payments on mortgage debt	Principal payments on mortgage debt	(420)		(6,925)		Principal payments on mortgage debt	(253)		(420)
Debt issuance costs	Debt issuance costs	(10)		(7)		Debt issuance costs	(14)		(10)

Dividends paid - shareholders	Dividends paid - shareholders	(52,858)		(49,406)		Dividends paid - shareholders	(55,643)		(52,858)
Distributions to noncontrolling interests - Operating Partnership	Distributions to noncontrolling interests - Operating Partnership	(2,739)		(1,307)		Distributions to noncontrolling interests - Operating Partnership	(2,264)		(2,739)
Preferred distributions paid - OP Unit holder		—		(303)

Contributions from noncontrolling interest	Contributions from noncontrolling interest	569		—		Contributions from noncontrolling interest	7,884		569
Distributions to noncontrolling interests - partially owned properties	Distributions to noncontrolling interests - partially owned properties	(161)		(178)		Distributions to noncontrolling interests - partially owned properties	(98)		(161)
Payments of employee taxes for withheld stock-based compensation shares	Payments of employee taxes for withheld stock-based compensation shares	(4,092)		(3,996)		Payments of employee taxes for withheld stock-based compensation shares	(5,742)		(4,092)
Purchase of Series A Preferred Units		—		(4,661)

Purchase of OP Units	Purchase of OP Units	(184)		(269)		Purchase of OP Units	—		(184)
Net cash used in financing activities	Net cash used in financing activities	(73,863)		(24,620)		Net cash used in financing activities	(46,317)		(73,863)
Net (decrease) increase in cash and cash equivalents		(7,147)		1,434
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	(4,366)		(7,147)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	9,876		2,515		Cash and cash equivalents, beginning of period	7,730		9,876
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	2,729	$	3,949	Cash and cash equivalents, end of period	$	3,364	$	2,729
Supplemental disclosure of cash flow information—interest paid during the period	Supplemental disclosure of cash flow information—interest paid during the period	$	23,123	$	23,335	Supplemental disclosure of cash flow information—interest paid during the period	$	25,176	$	23,123
Supplemental disclosure of noncash activity—settlement of note receivable in exchange for Series A Preferred Units		$	—	$	20,646

Supplemental disclosure of noncash activity—change in fair value of interest rate swap agreements	Supplemental disclosure of noncash activity—change in fair value of interest rate swap agreements	$	1,379	$	797	Supplemental disclosure of noncash activity—change in fair value of interest rate swap agreements	$	(1,021)	$	1,379
Supplemental disclosure of noncash activity—conversion of loan receivable in connection to the acquisition of investment property	Supplemental disclosure of noncash activity—conversion of loan receivable in connection to the acquisition of investment property	$	3,000	$	—	Supplemental disclosure of noncash activity—conversion of loan receivable in connection to the acquisition of investment property	$	—	$	3,000

The accompanying notes are an integral part of these consolidated financial statements.

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Physicians Realty Trust

Notes to Consolidated Financial Statements

Unless otherwise indicated or unless the context requires otherwise, the use of the words “we,” “us,” “our,” and the “Company,” refer to Physicians Realty Trust, together with its consolidated subsidiaries, including Physicians Realty L.P.

Note 1. Organization and Business

Physicians Realty Trust (the “Trust” or the “Company”) was organized in the state of Maryland on April 9, 2013. As of March 31, ~~2022,~~2023, the Trust was authorized to issue up to 500,000,000 common shares of beneficial interest, par value $0.01 per share. The Trust filed a Registration Statement on Form S-11 with 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’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.

The Trust is a self-managed REIT formed primarily to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals, and health care delivery systems.

ATM Program

In May 2021, the Trust and the Operating Partnership entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with KeyBanc Capital Markets Inc., Credit Agricole Securities (USA) Inc., BMO Capital Markets Corp., and Raymond James & Associates, Inc. in their capacity as agents for the Company and/or forward sellers and Stifel, Nicolaus & Company, Incorporated in its capacity as sales agent for the Company (collectively, the “Agents”) and Bank of Montreal, Credit Agricole Corporate and Investments Bank, KeyBanc Capital Markets Inc., and Raymond James & Associates, Inc. as forward purchasers for the Company (the “Forward Purchasers”), pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $500 million through the Agents (the “ATM Program”). The Sales Agreement contemplates that, in addition to the issuance and sale of the Trust’s common shares through the Agents, the Trust may also enter into one or more forward sales agreements from time to time in the future with each of the Forward Purchasers.

During the ~~quarter~~quarterly period ended March 31, ~~2022,~~2023, the Trust sold ~~259,977~~4,400,000 common shares pursuant to the ATM Program, at a weighted average price of ~~$18.93~~$15.10 per share, resulting in total net proceeds of approximately ~~$4.9~~$65.8 million. As of March 31, ~~2022,~~2023, the Trust ~~has $326.3~~had $158.6 million remaining available under the ATM Program.

Note 2. 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 March 31, ~~2022~~2023 and ~~2021~~2022 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 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 ~~2021~~2022 Annual Report. The Company has consistently applied its accounting policies to all periods presented in these consolidated financial statements.

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: Noncontrolling interests in the Company include OP Units held by other investors. 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

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changes the ownership interests of both the noncontrolling interests and the Trust. Such transactions and the related proceeds are treated as capital transactions.

As of March 31, ~~2022,~~2023, the Trust held a ~~95.0%~~96.0% 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.

Partially Owned Properties: The Trust reflects noncontrolling interests in partially owned properties on the consolidated balance sheets 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 - Partially Owned Properties

In connection with the Company’s acquisitions of the medical office building, ambulatory surgery center, and hospital located on the Great Falls Hospital campus in Great Falls, Montana, physicians affiliated with the sellers retained non-controlling interests which ~~may,~~were, at the holders’ option, able to be redeemed at any time after May 1, 2023. Due to the redemption

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provision, which iswas outside of the control of the Trust, the Trust ~~classifies~~classified the investment in the mezzanine section of its consolidated balance sheets. On July 14, 2022, the Company disposed of these three properties and removed the related redeemable noncontrolling interests from its consolidated balance sheets.

Through a consolidated joint venture with MedProperties Realty Advisors, LLC (“MedProperties”), the Company acquired Calko Medical Center in Brooklyn, New York. As part of the joint venture, MedProperties can redeem its interest, at its option, at any time after September 9, 2025. Due to the redemption provision, which is outside of the control of the Company, the Company classifies the noncontrolling interests in the mezzanine section of its consolidated balance sheets. The ~~Trust~~Company records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value.

Dividends and Distributions

On March ~~18, 2022,~~17, 2023, the Trust announced that its Board of Trustees authorized, and the Trust declared, a cash dividend of $0.23 per common share for the quarter ended March 31, ~~2022.~~2023. The dividend was paid on April ~~14, 2022~~18, 2023 to common shareholders and holders of record of partnership interests of the Operating Partnership (“OP Units”) as of the close of business on ~~March 31, 2022.~~April 4, 2023.

Tax Status of Dividends and Distributions

The Company’s 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 in respect of 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).

The Company has elected taxable REIT subsidiary (“TRS”) status for certain of its corporate subsidiaries and, as a result, these entities will incur both federal and state income taxes on any taxable income of such entities after consideration of any net operating losses. To date, these income taxes have been de minimis.

~~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. The Company did not record an impairment charge for the three months ended March 31, 2022 or 2021.

~~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, have been met. The Company classifies a real estate property as held for sale when: (i) management has approved the disposition of the property, (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 disposition plan will significantly change or be withdrawn. Following the classification of a property as “held for sale,” no further depreciation or amortization is recorded for the asset and the book value of the asset is written down to the lower of carrying value or fair market value, less cost to sell. ~~As of March 31, 2022, the Company classified 1 property as held for sale.~~

Real Estate Loans Receivable, Net

Real estate loans receivable consists of 9eight mezzanine loans, 2six term loans, and 1two construction ~~loan~~loans as of March 31, ~~2022.~~2023. Generally, each mezzanine loan is collateralized by a pledge of the borrower’s ownership interest in the respective real estate owner, each term loan is secured by a mortgage ofon a related medical office building, and construction loans are secured by mortgages on the land and the improvements as constructed. The reserve for loan losses was ~~$0.1~~$0.2 million as of March 31, ~~2022.~~

2023.

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Rental and Related Revenues

Rental revenue is recognized on a straight-line basis over the terms of the related leases when collectability is probable. 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,~~ are included in other assets and were approximately ~~$97.9~~$102.9 million and ~~$95.4~~$101.3 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. If the Company determines that collectability of straight-line rents is not probable, income recognition is limited to the lesser of cash collected, or lease income reflected on a straight-line basis, plus variable rent when it becomes accruable.

In accordance with ASC 842, Leases, Topic 842, if the collectability of a lease changes after the commencement date, any difference between lease income that would have been recognized and the lease payments shall be recognized as an adjustment to lease income. Bad debt recognized as an adjustment to rental and related revenues was $0.4 million for the three months ended March 31, 2023 and $0.1 million for the three months ended March 31, ~~2022 and 2021.~~2022.

Rental revenue is adjusted by the amortization of lease inducements and above-market or below-market rents on certain leases. Lease inducements and above-market or below-market rents are amortized on a straight-line basis over the remaining lease term. Rental and related revenues also include expense recoveries, which relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized in the period the applicable expenses are incurred. The reimbursements are recorded gross, as these costs are incurred by the Company and reimbursed by the tenants. We have certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses and we do not recognize expense recoveries.

New Accounting Pronouncements

In March 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ~~that~~which provides optional relief to applying reference rate reform to changing reference rates, contracts, hedging relationships, and other transactions that reference ~~LIBOR,~~the London Inter-Bank Offered Rate (“LIBOR”), which has been discontinued at the end of 2021. The amendments in this update ~~are effective immediately and~~ may be applied through December 31, ~~2022.~~2024. The Company will continue to use published LIBOR rates through June of 2023, ator until all transactions referencing LIBOR have been amended.

On March 31, 2023, the Operating Partnership, as borrower, and the Trust, as guarantor, executed a First Amendment to the Third Amended and Restated Credit Agreement to update the benchmark provisions to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”), as the reference rate for the purpose of calculating interest under the agreement. In connection with amending the unsecured credit agreement, we also amended our fixed interest rate swap agreement to update reference rate from LIBOR to SOFR. As a result, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which ~~time~~future hedged transactions will be based matches the ~~Company does~~index on the corresponding derivatives. Application of these expedients maintains the presentation of derivatives consistent with past presentation. The adoption of this ASU did not ~~expect the replacement benchmark to~~ have a material impact on the Company’s consolidated financial statements.

~~In August 2020, the FASB issued ASU 2020-06,~~ ~~Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)~~, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company adopted ASU 2020-06 on January 1, 2022, with no material effect on its consolidated financial statements.

Note 3. Investment and Disposition Activity

During the three months ended March 31, ~~2022,~~2023, the Company ~~acquired~~executed contractual commitments related to a ~~49% membership interest in 3 properties through~~$40.5 million development project, with quarterly costs of $1.0 million, completed the ~~Davis Joint Venture~~acquisition of one medical condominium unit for an ~~aggregate~~investment of $1.3 million and one parcel of land adjacent to one of its medical office facilities for an investment of $0.8 million, and paid $0.3 million of additional purchase ~~price of $8.0 million.~~consideration under two earn-out agreements. The Company also closed on a $35.8 million construction loan, funding $4.1 million to date, and funded ~~$0.9~~one term loan for $5.4 million, $1.0 million of previous construction loan commitments, ~~resulting~~and $0.5 million of previous term loan commitments. Additionally, the Company invested $0.2 million in ~~total investment~~funds managed by a real estate technology private equity fund. Investment activity oftotaled approximately ~~$8.9~~$14.4 million ~~as of~~during the three months ended March 31, ~~2022.~~2023. As part of these investments, the Company incurred approximately $0.2 million of capitalized costs.

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The following table summarizes the acquisition date fair values of the assets acquired and the liabilities assumed in connection with the acquisition of the medical condominium unit, a parcel of land adjacent to one of our medical office facilities, and two earn-out agreements, as well as follow-on capitalized costs during the three months ended March 31, 2023, which the Company determined using Level 2 and Level 3 inputs (in thousands):



Land	$	1,356
Building and improvements	1,294










Cash used in acquisition of investment property	$	2,650

Dispositions

During the three months ended March 31, ~~2022,~~2023, the Company sold 1one medical ~~office building representing 9,997 square feet~~facility for approximately ~~$2.0~~$2.6 million, realizing ~~a net loss of approximately $0.2 million.~~an insignificant gain.

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Note 4. 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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net			Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Assets	Assets													Assets
In-place leases	In-place leases	$	441,072	$	(212,925)	$	228,147	$	441,072	$	(201,885)	$	239,187	In-place leases	$	445,322	$	(251,995)	$	193,327	$	445,583	$	(241,643)	$	203,940
Above-market leases	Above-market leases	$	57,149	$	(25,939)	$	31,210	$	57,149	$	(24,437)	$	32,712	Above-market leases	$	59,752	$	(31,511)	$	28,241	$	59,752	$	(30,096)	$	29,656
Liabilities	Liabilities													Liabilities
Below-market leases	Below-market leases	$	32,155	$	(11,044)	$	21,111	$	32,155	$	(10,585)	$	21,570	Below-market leases	$	36,409	$	(12,613)	$	23,796	$	37,002	$	(12,621)	$	24,381

The following is a summary of acquired lease intangible amortization for the three ~~month periods~~months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Amortization expense related to in-place leases	Amortization expense related to in-place leases		$	11,040	$	8,314	Amortization expense related to in-place leases		$	10,612	$	11,040
Decrease in rental income related to above-market leases	Decrease in rental income related to above-market leases		1,502		927		Decrease in rental income related to above-market leases		1,415		1,502
Increase in rental income related to below-market leases	Increase in rental income related to below-market leases		459		322		Increase in rental income related to below-market leases		586		459

Future aggregate net amortization of acquired lease intangibles ~~excluding 1 asset classified as held for sale,~~ as of March 31, ~~2022,~~2023, is as follows (in thousands):


		Net Decrease in Revenue		Net Increase in Expenses			Net Decrease (Increase) in Revenue		Net Increase in Expenses
2022		$	2,585	$	31,535
2023	2023	3,157		38,805		2023	$	2,361	$	30,004
2024	2024	2,961		33,382		2024	2,929		34,718
2025	2025	2,431		27,935		2025	2,357		29,208
2026	2026	1,281		21,818		2026	1,203		23,095
2027						2027	1,036		20,173
Thereafter	Thereafter	(2,316)		74,672		Thereafter	(5,441)		56,129
Total	Total	$	10,099	$	228,147	Total	$	4,445	$	193,327

As of March 31, ~~2022,~~2023, the weighted average remaining amortization period is 87 years for in-place ~~above market tenant~~and above-market lease ~~and leasehold interest~~ intangibles assets and 1615 years for ~~below market tenant~~below-market lease intangibles.

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Note 5. Other Assets

Other assets consisted of the following ~~excluding assets classified as held for sale if applicable,~~ as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Straight line rent receivable, net	Straight line rent receivable, net	$	97,925	$	95,443	Straight line rent receivable, net	$	102,856	$	101,306
Leasing commissions, net	Leasing commissions, net	11,877		11,627		Leasing commissions, net	13,449		13,231
Prepaid expenses	Prepaid expenses	8,446		8,910		Prepaid expenses	10,657		11,009
Lease inducements, net	Lease inducements, net	8,068		8,293		Lease inducements, net	8,065		7,894
Interest rate swap						Interest rate swap	1,645		2,045
Escrows	Escrows	1,517		1,780		Escrows	1,352		1,565
Notes receivable, net	Notes receivable, net	1,211		1,097		Notes receivable, net	367		370
Interest rate swap		908		—
Other	Other	4,296		4,434		Other	8,659		9,387
Total	Total	$	134,248	$	131,584	Total	$	147,050	$	146,807

Note 6. Debt

The following is a summary of debt as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Fixed interest mortgage notes (1)	Fixed interest mortgage notes (1)	$	75,094	$	75,395	Fixed interest mortgage notes (1)	$	59,641	$	59,776
Variable interest mortgage note (2)		105,510		105,629
Variable interest mortgage notes (2)						Variable interest mortgage notes (2)	105,035		105,153
Total mortgage debt	Total mortgage debt	180,604		181,024		Total mortgage debt	164,676		164,929
$1.0 billion unsecured revolving credit facility bearing variable interest of LIBOR plus 0.85%, due September 2025		255,000		274,000
$1.0 billion unsecured revolving credit facility due September 2025 (3)						$1.0 billion unsecured revolving credit facility due September 2025 (3)	152,000		193,000
$400 million senior unsecured notes bearing fixed interest of 4.30%, due March 2027	$400 million senior unsecured notes bearing fixed interest of 4.30%, due March 2027	400,000		400,000		$400 million senior unsecured notes bearing fixed interest of 4.30%, due March 2027	400,000		400,000
$350 million senior unsecured notes bearing fixed interest of 3.95%, due January 2028	$350 million senior unsecured notes bearing fixed interest of 3.95%, due January 2028	350,000		350,000		$350 million senior unsecured notes bearing fixed interest of 3.95%, due January 2028	350,000		350,000
$500 million senior unsecured notes bearing fixed interest of 2.625%, due November 2031	$500 million senior unsecured notes bearing fixed interest of 2.625%, due November 2031	500,000		500,000		$500 million senior unsecured notes bearing fixed interest of 2.625%, due November 2031	500,000		500,000
$150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031		150,000		150,000
$135 million senior unsecured notes bearing fixed interest of 4.43% to 4.74%, due January 2026 to 2031						$135 million senior unsecured notes bearing fixed interest of 4.43% to 4.74%, due January 2026 to 2031	135,000		150,000
$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027	$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027	75,000		75,000		$75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027	75,000		75,000
Total principal	Total principal	1,910,604		1,930,024		Total principal	1,776,676		1,832,929
Unamortized deferred financing costs	Unamortized deferred financing costs	(9,124)		(9,694)		Unamortized deferred financing costs	(6,899)		(7,453)
Unamortized discounts	Unamortized discounts	(8,161)		(8,423)		Unamortized discounts	(7,087)		(7,359)
Unamortized fair value adjustments		—		11

Total debt	Total debt	$	1,893,319	$	1,911,918	Total debt	$	1,762,690	$	1,818,117

(1)As of March 31, 2023, fixed interest mortgage notes bear interest from 3.25% to 4.63%, due in 2024, with a weighted average interest rate of 3.80%. As of December 31, 2022, fixed interest mortgage notes bear interest from 3.33% to ~~4.83%~~4.63%, due in ~~2022 and~~ 2024, with a weighted average interest rate of ~~4.05%~~3.85%. AsThe notes are collateralized by two properties with a net book value of $93.1 million as of March 31, 2023 and two properties with a net book value of $94.9 million as of December 31, ~~2021, fixed interest mortgage notes bear interest from 3.33% to 4.83%, due in 2022 and 2024, with a weighted average interest rate of 4.05%.~~2022. One mortgage bears interest at LIBOR + 1.90% and the Trust entered into a pay-fixed receive-variable interest rate swap, fixing the ~~LIBOR~~variable component ~~of this rate~~ at ~~1.43%. The notes are collateralized by 3 properties with a net book value of $145.4 million~~1.35% as of March 31, ~~2022~~2023 and ~~$151.9 million~~1.43% as of December 31, ~~2021.~~2022.

(2)Variable interest mortgage notes bear variable interest of SOFR + 1.85% and LIBOR + 2.75% ~~and SOFR + 1.85%~~ for a weighted average interest rate of ~~2.19%~~6.76% and ~~1.95%~~6.20% as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The notes are due in 2026 and 2028 and collateralized by 4four properties with a net book value of ~~$303.1~~$291.1 million as of March 31, ~~2022~~2023 and ~~$307.2~~$295.5 million as of December 31, ~~2021.~~2022.

(3)The unsecured revolving credit facility bears variable interest of SOFR plus 0.95%, inclusive of a 0.10% SOFR index adjustment, as of March 31, 2023 and LIBOR plus 0.85% as of December 31, 2022.

On September 24, 2021, the Operating Partnership, as borrower, and the Trust, as guarantor, executed a Third Amended and Restated Credit Agreement (the “Credit Agreement”) which extended the maturity date of the revolving credit facility under the Credit Agreement to September 24, 2025 and reduced the interest rate margin applicable to borrowings. The

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Credit Agreement includes an unsecured revolving credit facility of $1.0 billion and contains a term loan feature of $250.0 million, which the Company borrowed on, bringing total borrowing capacity to ~~$1.3~~$1.25 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 Operating Partnership to increase borrowing capacity by up to an additional $500.0 million, subject to customary terms and conditions, resulting in a maximum borrowing capacity of $1.75 billion. On October 13, 2021, the Company paid off the $250.0 million term loan feature of the Credit Agreement and the term loan feature is no longer available to the Company. The revolving credit facility under the Credit Agreement also includes 2,two six-month extension options.

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.

On March 31, 2023, the Operating Partnership, as borrower, and the Trust, as guarantor, executed a First Amendment to the Credit Agreement which expanded the accordion feature allowing the Operating Partnership to increase borrowing capacity by up to an additional $500.0 million, resulting in a maximum borrowing capacity of $2.25 billion, and replaced the LIBOR-based benchmark rates applicable to borrowings under the Credit Agreement with SOFR based benchmark rates plus a SOFR index adjustment of 0.10%.

As of March 31, ~~2022,~~2023, the Trust had investment grade ratings of BBB from S&P and Baa2 from ~~Moody’s, and BBB from Fitch.~~Moody’s. As such, borrowings under the revolving credit facility of the Credit Agreement accrue interest on the outstanding principal at a rate of ~~LIBOR~~SOFR + ~~0.85%.~~0.95%, inclusive of a 0.10% SOFR index adjustment. The Credit Agreement includes a facility fee equal to 0.20% per annum, which is also determined by the Trust’s investment grade rating.

On October 13, 2021, the Operating Partnership issued $500.0 million in aggregate principle amount of 2.625% Senior Notes due November 1, 2031 (the “2031 Senior Notes”) in a public offering and the Company used the proceeds from the 2031 Senior Notes to pay off a $250.0 million term loan feature of the Credit Agreement. The Operating Partnership simultaneously terminated the existing pay-fixed receive-variable rate swaps associated with the full term loan borrowing of $250.0 million. As part of the termination, the Company made total cash payments of $3.3 million to the counterparties of the swap agreements. As defined by the Credit Agreement, the term loan feature is no longer available to the Company.

Base Rate Loans, Adjusted ~~LIBOR Rate~~SOFR 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:


Credit Rating	Credit Rating	Applicable Margin for Revolving Loans: LIBOR Rate Loans and Letter of Credit Fee	Applicable Margin for Revolving Loans: Base Rate Loans		Applicable Margin for Term Loans: LIBOR Rate Loans and Letter of Credit Fee	Applicable Margin for Term Loans: Base Rate Loans		Credit Rating	Applicable Margin for Revolving Loans: SOFR Loans and Letter of Credit Fee	Applicable Margin for Revolving Loans: Base Rate Loans		Applicable Margin for Term Loans: SOFR Loans	Applicable Margin for Term Loans: Base Rate Loans
At Least A- or A3	At Least A- or A3	LIBOR + 0.725%	—	%	LIBOR + 0.85%	—	%	At Least A- or A3	SOFR + 0.725%	—	%	SOFR + 0.85%	—	%
At Least BBB+ or Baa1	At Least BBB+ or Baa1	LIBOR + 0.775%	—	%	LIBOR + 0.90%	—	%	At Least BBB+ or Baa1	SOFR + 0.775%	—	%	SOFR + 0.90%	—	%
At Least BBB or Baa2	At Least BBB or Baa2	LIBOR + 0.85%	—	%	LIBOR + 1.00%	—	%	At Least BBB or Baa2	SOFR + 0.85%	—	%	SOFR + 1.00%	—	%
At Least BBB- or Baa3	At Least BBB- or Baa3	LIBOR + 1.05%	0.05	%	LIBOR + 1.25%	0.25	%	At Least BBB- or Baa3	SOFR + 1.05%	0.05	%	SOFR + 1.25%	0.25	%
Below BBB- or Baa3	Below BBB- or Baa3	LIBOR + 1.40%	0.40	%	LIBOR + 1.65%	0.65	%	Below BBB- or Baa3	SOFR + 1.40%	0.40	%	SOFR + 1.65%	0.65	%

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, grant liens, or make distributions. The Company may, at any time, voluntarily prepay any revolving or term loan under the Credit Agreement in whole or in part without premium or penalty. As of March 31, ~~2022,~~2023, 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.

As of March 31, ~~2022,~~2023, the Company had ~~$255.0~~$152.0 million of borrowings outstanding under its unsecured revolving credit facility. As defined by the Credit Agreement, the current unencumbered borrowing base allows the Company to borrow an additional ~~$745.0~~$848.0 million before reaching the maximum allowed under the credit facility.

Notes Payable

As of March 31, ~~2022,~~2023, the Company had $1.5 billion aggregate principal amount of senior notes issued and outstanding by the Operating Partnership, comprised of ~~$15.0 million maturing in 2023,~~ $25.0 million maturing in 2025, $70.0 million maturing in 2026, $425.0 million maturing in 2027, $395.0 million maturing in 2028, and $545.0 million maturing in 2031.

Certain properties have mortgage debt that contains financial covenants. As of March 31, ~~2022,~~2023, the Trust was in compliance with all mortgage debt financial covenants.

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Scheduled principal payments due on consolidated debt as of March 31, ~~2022,~~2023 are as follows (in thousands):


2022		$	15,674
2023	2023	16,008		2023	$	754
2024	2024	59,719		2024	59,719
2025	2025	280,476		2025	177,476
2026	2026	170,476		2026	170,476
2027				2027	425,476
Thereafter	Thereafter	1,368,251		Thereafter	942,775
Total Payments	Total Payments	$	1,910,604	Total Payments	$	1,776,676

As of March 31, ~~2022,~~2023, the Company had total consolidated indebtedness of approximately ~~$1.9~~$1.8 billion. The weighted average interest rate on consolidated indebtedness was ~~3.28%~~4.03% (based on the 30-day LIBOR rate of ~~0.40%~~4.77% and a SOFR rate of ~~0.29%~~4.87% as of March 31, ~~2022)~~2023).

For the three ~~month periods ending~~months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company incurred interest expense on its debt, exclusive of deferred financing cost amortization, of ~~$16.2~~$18.6 million and ~~$13.1~~$16.2 million, respectively.

Note 7. 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. As a result of the Company’s adoption of ASU 2017-12 as of January 1, 2019, the entire change in the fair value of its derivatives designated and qualified as cash flow hedges are recorded in accumulated other comprehensive income on the consolidated balance sheets and are subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings.

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 March 31, ~~2022,~~2023, the Company had 1one outstanding interest rate swap contract designated as a cash flow hedge of interest rate risk. See Note 2 (Summary of Significant Accounting Policies) of the ~~2021~~2022 Annual Report for a further discussion of our derivatives. In addition, the Company recognizes its share of other comprehensive income related to derivative instruments held by unconsolidated entities.

The following table summarizes the location and aggregate fair value of the interest rate swaps on the Company’s consolidated balance sheets (in thousands):


Total notional amount	Total notional amount		$	36,050		Total notional amount		$	36,050
Effective fixed interest rate	Effective fixed interest rate	(1)	3.33		%	Effective fixed interest rate	(1)	3.25		%
Effective date	Effective date		10/31/2019			Effective date		10/31/2019
Maturity date	Maturity date		10/31/2024			Maturity date		10/31/2024
Asset balance at March 31, 2022 (included in Other assets)			$	908
Liability balance at December 31, 2021 (included in Accrued expenses and other liabilities)			$	452
Asset balance at March 31, 2023 (included in Other assets)						Asset balance at March 31, 2023 (included in Other assets)		$	1,645
Asset balance at December 31, 2022 (included in Other assets)						Asset balance at December 31, 2022 (included in Other assets)		$	2,045

(1)~~1.43%~~1.35% effective swap rate plus 1.90% spread per ~~Credit Agreement.~~hedging agreement.

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Note 8. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Prepaid rent	Prepaid rent	$	24,919	$	22,714	Prepaid rent	$	29,041	$	21,062
Real estate taxes payable	Real estate taxes payable	17,968		23,487		Real estate taxes payable	18,982		23,303
Accrued interest	Accrued interest	11,814		18,799		Accrued interest	11,540		18,196
Accrued expenses	Accrued expenses	9,137		5,960		Accrued expenses	8,524		7,920
Security deposits	Security deposits	4,278		4,234		Security deposits	4,382		4,338
Accrued incentive compensation						Accrued incentive compensation	1,579		2,700
Tenant improvement allowances	Tenant improvement allowances	1,857		1,857		Tenant improvement allowances	1,401		1,831
Accrued incentive compensation		1,458		1,784
Interest rate swap		—		452

Other	Other	7,582		6,967		Other	9,558		8,370
Total	Total	$	79,013	$	86,254	Total	$	85,007	$	87,720

Note 9. 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 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 Physicians Realty Trust 2013 Equity Incentive Plan, which made shares available for awards for participants. On April 30, 2019, at the Annual Meeting of Shareholders of Physicians Realty Trust, the Trust’s shareholders approved the Amended and Restated Physicians Realty Trust 2013 Equity Incentive Plan (“2013 Plan”). The amendment increased the number of common shares authorized for issuance under the 2013 Plan to a total of 7,000,000 common shares authorized for issuance. The 2013 Plan term was also extended to 2029.

Restricted Common Shares

Restricted common shares granted under the 2013 Plan are eligible for dividends as well as the right to vote. In the three ~~month period~~months ended March 31, ~~2022,~~2023, the Trust granted a total of ~~210,380~~291,324 restricted common shares with a total value of ~~$3.4~~$4.3 million to its officers and certain of its ~~employees,~~employees. In January 2023, under the 2013 Plan, the Company granted restricted common shares to certain of its officers under a salary deferral program, part of which vests after one year, with the remainder vesting after two years. The remaining awards have a vesting period of one year.

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A summary of the status of the Trust’s non-vested restricted common shares as of March 31, ~~2022~~2023 and changes during the three month period then ended follow:


		Common Shares	Weighted Average Grant Date Fair Value			Common Shares	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2021		247,447	$	17.41
Non-vested at December 31, 2022					Non-vested at December 31, 2022	272,898	$	16.69
Granted	Granted	210,380	16.37		Granted	291,324	14.67
Vested	Vested	(187,262)	17.21		Vested	(210,380)	16.37
Forfeited	Forfeited	(3,868)	17.98		Forfeited	(364)	17.45
Non-vested at March 31, 2022		266,697	$	16.72
Non-vested at March 31, 2023					Non-vested at March 31, 2023	353,478	$	15.21

For all service awards, the Company records compensation expense for the entire award on a straight-line basis over the requisite service period. For the three ~~month periods ending~~months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized non-cash share compensation of $1.1 million and $0.9 ~~million.~~million, respectively. Unrecognized compensation expense at March 31, ~~2022~~2023 was ~~$3.8~~$4.5 million.

Restricted Share Units

In January ~~2022,~~2023, under the 2013 Plan, the Company granted ~~7,800~~11,274 restricted share units to certain of its trustees in lieu of all or a portion of such trustee’s ~~2022~~2023 cash retainer. These units are subject to certain timing conditions and a one-year service period. Each restricted share unit contains 1one dividend equivalent. Each 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. With respect to the performance and timing conditions of the January ~~2022~~2023 grants, the grant date fair value of ~~$18.83~~$14.47 per unit was based on the share price at the date of grant.

In March ~~2022,~~2023, under the 2013 Plan, the Company granted restricted share units at a target level of ~~299,019~~355,388 to its officers and certain of its employees and ~~56,204~~62,586 to its trustees. Units granted to officers and certain employees under the Company’s 2013 Plan are subject to certain performance and market conditions and a three-year service period. Units granted to trustees are subject to certain timing conditions and a two-year service period for full vesting. Each restricted share unit contains 1one dividend equivalent. Each 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 30% of the restricted share units issued to officers and certain employees under the Company’s 2013 Plan in ~~2022~~2023 vest based on ~~one~~a certain market condition. The awards containing athe market condition 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 ~~$30.17~~$18.71 per unit for the March ~~2022~~2023 grant using the following assumptions:


Volatility	~~33.9~~23.4		%
Dividend assumption	reinvested
Expected term in years	~~2.84~~2.83 years
Risk-free rate	~~1.44~~4.70		%
Share price (per share)	$	~~16.37~~14.70

The remaining 70% of the restricted share units issued to officers and certain employees under the Company’s 2013 Plan, and 100% of other restricted share units issued to trustees vest based upon certain performance or timing conditions. With respect to the performance and timing conditions of the March ~~2022~~2023 grants, the grant date fair value of ~~$16.37~~$14.70 per unit was based on the share price at the date of grant. The combined weighted average grant date fair value of the March ~~2022~~2023 restricted share units issued to officers and certain employees ~~is $20.51~~was $15.90 per unit.

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The following is a summary of the activity in the Trust’s restricted share units during the three months ended March 31, ~~2022:~~2023:


		Executive Awards				Trustee Awards				Executive Awards				Trustee Awards
		Restricted Share Units		Weighted Average Grant Date Fair Value		Restricted Share Units	Weighted Average Grant Date Fair Value			Restricted Share Units		Weighted Average Grant Date Fair Value		Restricted Share Units	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2021		976,570		$	22.59	63,008	$	17.85
Non-vested at December 31, 2022									Non-vested at December 31, 2022	1,046,940		$	21.41	77,992	$	16.60
Granted	Granted	299,019		20.51		64,004	16.67		Granted	355,388		15.90		73,860	14.66
Vested	Vested	(228,649)	(1)	25.27		(41,220)	18.20		Vested	(223,579)	(1)	24.36		(49,890)	16.74

Non-vested at March 31, 2022		1,046,940		$	21.41	85,792	$	16.81
Non-vested at March 31, 2023									Non-vested at March 31, 2023	1,178,749		$	19.19	101,962	$	15.13

(1)Restricted units vested by Company executives in ~~2022~~2023 resulted in the issuance of ~~361,679~~652,851 common shares, less ~~160,573~~290,380 common shares withheld to cover minimum withholding tax ~~obligations, for multiple employees.~~obligations.

For the three ~~month periods ending~~months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized non-cash share compensation of ~~$3.3~~$3.5 million and ~~$2.8~~$3.3 million, respectively. Unrecognized compensation expense at March 31, ~~2022~~2023 was ~~$18.0~~$16.3 million.

Note 10. 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. As part of the Company’s acquisition process, Level 3 inputs are used to measure the fair value of the assets acquired and liabilities assumed.

The Company’s derivative instruments as of March 31, ~~2022~~2023 consist of 1one interest rate swap, as detailed in the Derivative Instruments section of Note 7 (Derivatives) of this report and Note 2 (Summary of Significant Accounting Policies) of Part II, Item 8 (Financial Statements and Supplementary Data) of our ~~2021~~2022 Annual Report.

The interest rate swap is not 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 ~~was~~were no ~~asset~~such assets measured at fair value as of March 31, ~~2022.~~2023.

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 March 31, 2022, the Company classified 1 property as held for sale. Upon classification as held for sale, the Company records the value of the assets at the lower of their carrying value or fair value, less costs to sell. Fair value is generally based on discounted cash flow analyses, which involves management’s best estimate of market participants’ holding

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period, market comparables, future occupancy levels, rental rates, capitalization rates, lease-up periods, and capital requirements. As of March 31, 2022, the fair value exceeds the carrying value of the 1 asset classified as held for sale and therefore, is recorded at respective carrying value.

The following table presents the fair value of the Company’s financial instruments (in thousands):


		March 31, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:	Assets:									Assets:
Real estate loans receivable, net	Real estate loans receivable, net	$	93,176	$	90,592	$	117,844	$	115,385	Real estate loans receivable, net	$	115,764	$	113,453	$	104,973	$	102,162
Notes receivable, net	Notes receivable, net	$	1,211	$	1,211	$	1,097	$	1,097	Notes receivable, net	$	367	$	367	$	370	$	370
Derivative assets	Derivative assets	$	908	$	908	$	—	$	—	Derivative assets	$	1,645	$	1,645	$	2,045	$	2,045
Liabilities:	Liabilities:									Liabilities:
Credit facility	Credit facility	$	(255,000)	$	(255,000)	$	(274,000)	$	(274,000)	Credit facility	$	(152,000)	$	(152,000)	$	(193,000)	$	(193,000)
Notes payable	Notes payable	$	(1,475,000)	$	(1,436,801)	$	(1,475,000)	$	(1,554,802)	Notes payable	$	(1,460,000)	$	(1,307,272)	$	(1,475,000)	$	(1,302,767)
Mortgage debt	Mortgage debt	$	(180,604)	$	(179,267)	$	(181,035)	$	(182,189)	Mortgage debt	$	(164,676)	$	(163,429)	$	(164,929)	$	(163,129)
Derivative liabilities		$	—	$	—	$	(452)	$	(452)

Note 11. Tenant Operating Leases

The Company is a lessor of medical office buildings and other health care facilities. Leases have expirations from ~~2022~~2023 through ~~2043.~~2042. As of March 31, ~~2022,~~2023, the future minimum rental payments on non-cancelable leases, exclusive of expense recoveries and minimum rental payments for ~~the 1 asset~~assets classified as held for sale, if applicable, were as follows (in thousands):


2022		$	266,659
2023	2023	350,838		2023	$	270,431
2024	2024	336,326		2024	352,374
2025	2025	315,578		2025	334,894
2026	2026	257,972		2026	278,001
2027				2027	226,004
Thereafter	Thereafter	913,892		Thereafter	764,694
Total	Total	$	2,441,265	Total	$	2,226,398

For the three ~~month periods ending~~months ended March 31, 2023 and 2022, ~~and 2021, we~~the Company recognized ~~$126.7~~$131.4 million and ~~$108.0~~$127.8 million, respectively, of rental and other lease-related income related to our operating leases, of which ~~$35.1~~$37.9 million and ~~$27.6~~$35.1 million, respectively, were variable lease payments.

Note 12. Rent Expense

The Company leases the rights to parking structures at 2two of its properties, the air ~~space above 1~~that one property occupies, and the land upon which 97 of its properties are located from third party ~~land owners~~landowners pursuant to separate leases. In addition, the Company has 10nine corporate leases, primarily for office space.

The Company’s leases include both fixed and variable rental payments and may also include escalation clauses and renewal options. These leases have terms of up to 93 years remaining, excluding extension options, with a weighted average remaining term of 44 years.

At the inception of a new lease, the Company establishes an operating or finance lease asset and operating or finance lease liability calculated as the present value of future minimum lease payments. As our leases do not provide an implicit rate, we calculate a discount rate that approximates our incremental borrowing rate available at lease commencement to determine the present value of future minimum lease payments. The approximated weighted average discount rate was 4.4% as of March 31, ~~2022.~~2023. There are no operating or finance leases that have not yet commenced that would have a significant impact on the Company’s consolidated balance sheets.

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As of March 31, ~~2022,~~2023, the future minimum lease obligations under non-cancelable parking, air, ground, and corporate leases ~~exclusive of the 1 asset classified as held for sale,~~ were as follows (in thousands):


2022		$	3,466
2023	2023	4,717		2023	$	3,539
2024	2024	4,707		2024	4,819
2025	2025	4,704		2025	4,798
2026	2026	4,752		2026	4,787
2027				2027	4,789
Thereafter	Thereafter	243,277		Thereafter	239,130
Total undiscounted lease payments	Total undiscounted lease payments	$	265,623	Total undiscounted lease payments	$	261,862
Less: Interest	Less: Interest	(160,884)		Less: Interest	(157,006)
Present value of lease liabilities	Present value of lease liabilities	$	104,739	Present value of lease liabilities	$	104,856

Lease costs consisted of the following for the three months ended March 31, ~~2022~~2023 (in thousands):

Fixed lease cost

~~834~~817

Variable lease cost

~~319~~338

Total lease cost

~~1,153~~1,155

Note 13. Credit Concentration

The Company uses annualized base rent (“ABR”) as its credit concentration metric. ABR is calculated by multiplying contractual base rent for the month ended March 31, ~~2022~~2023 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 March 31, ~~2022, excluding the 1 asset classified as held for sale~~2023 (in thousands):


Tenant	Tenant	Total ABR		Percent of ABR		Tenant	Total ABR		Percent of ABR
CommonSpirit - CHI - Nebraska	CommonSpirit - CHI - Nebraska	$	17,739	5.0	%	CommonSpirit - CHI - Nebraska	$	18,142	5.0	%
Northside Hospital	Northside Hospital	15,703		4.4	%	Northside Hospital	16,238		4.5	%
UofL Health - Louisville, Inc.	UofL Health - Louisville, Inc.	12,750		3.6	%	UofL Health - Louisville, Inc.	14,373		4.0	%
US Oncology						US Oncology	11,443		3.2	%
HonorHealth	HonorHealth	11,143		3.1	%	HonorHealth	11,220		3.1	%
US Oncology		11,059		3.1	%
Remaining portfolio	Remaining portfolio	287,543		80.8	%	Remaining portfolio	289,558		80.2	%
Total	Total	$	355,937	100.0	%	Total	$	360,974	100.0	%

ABR collected from the Company’s top five tenant relationships comprises ~~19.2%~~19.8% of its total ABR ~~for the period ending~~as of March 31, ~~2022.~~2023. Total ABR from ~~CommonSpirit Health affiliated~~CommonSpirit-affiliated tenants totals ~~14.6%~~14.8%, including the affiliates disclosed above.

The following table summarizes certain information about the Company’s top five geographic concentrations as of March 31, ~~2022, excluding the 1 asset classified as held for sale (in thousands):~~2023:


State	State	Total ABR		Percent of ABR		State	Total ABR		Percent of ABR
Texas	Texas	$	48,186	13.5	%	Texas	$	49,397	13.7	%
Georgia	Georgia	25,763		7.2	%	Georgia	26,570		7.4	%
Florida	Florida	25,009		7.0	%	Florida	25,512		7.1	%
Indiana	Indiana	22,776		6.4	%	Indiana	23,379		6.5	%
Arizona	Arizona	20,887		5.9	%	Arizona	21,542		6.0	%
Other	Other	213,316		60.0	%	Other	214,574		59.3	%
Total	Total	$	355,937	100.0	%	Total	$	360,974	100.0	%

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Note 14. 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):


		Three Months Ended March 31,						Three Months Ended March 31,
			2022		2021				2023		2022
Numerator for earnings per share - basic:	Numerator for earnings per share - basic:						Numerator for earnings per share - basic:
Net income	Net income		$	13,943	$	17,805	Net income		$	10,669	$	13,943
Net income attributable to noncontrolling interests:	Net income attributable to noncontrolling interests:						Net income attributable to noncontrolling interests:
Operating Partnership	Operating Partnership		(692)		(459)		Operating Partnership		(423)		(692)
Partially owned properties	Partially owned properties		(159)		(152)		Partially owned properties		(44)		(159)
Preferred distributions			—		(13)

Numerator for earnings per share - basic	Numerator for earnings per share - basic		$	13,092	$	17,181	Numerator for earnings per share - basic		$	10,202	$	13,092
Numerator for earnings per share - diluted:	Numerator for earnings per share - diluted:						Numerator for earnings per share - diluted:
Numerator for earnings per share - basic	Numerator for earnings per share - basic		$	13,092	$	17,181	Numerator for earnings per share - basic		$	10,202	$	13,092
Noncontrolling interest - Operating Partnership income	Noncontrolling interest - Operating Partnership income		692		459		Noncontrolling interest - Operating Partnership income		423		692
Numerator for earnings per share - diluted	Numerator for earnings per share - diluted		$	13,784	$	17,640	Numerator for earnings per share - diluted		$	10,625	$	13,784
Denominator for earnings per share - basic and diluted:	Denominator for earnings per share - basic and diluted:						Denominator for earnings per share - basic and diluted:
Weighted average number of shares outstanding - basic	Weighted average number of shares outstanding - basic		225,069,208		210,529,698		Weighted average number of shares outstanding - basic		237,484,043		225,069,208
Effect of dilutive securities:	Effect of dilutive securities:						Effect of dilutive securities:
Noncontrolling interest - Operating Partnership units	Noncontrolling interest - Operating Partnership units		11,912,099		5,687,247		Noncontrolling interest - Operating Partnership units		9,842,219		11,912,099
Restricted common shares	Restricted common shares		104,910		87,124		Restricted common shares		130,172		104,910
Restricted share units	Restricted share units		1,254,026		1,018,356		Restricted share units		1,300,238		1,254,026
Denominator for earnings per share - diluted:	Denominator for earnings per share - diluted:		238,340,243		217,322,425		Denominator for earnings per share - diluted:		248,756,672		238,340,243
Earnings per share - basic	Earnings per share - basic		$	0.06	$	0.08	Earnings per share - basic		$	0.04	$	0.06
Earnings per share - diluted	Earnings per share - diluted		$	0.06	$	0.08	Earnings per share - diluted		$	0.04	$	0.06

Note 15. Subsequent Events

~~On April 22, 2022~~Since March 31, 2023, the Company ~~disposed~~completed the acquisition of ~~a 17,213 square foot~~two medical condominium units located in an Atlanta “Pill Hill” medical office building (“MOB”) for ~~$6.4~~an aggregate purchase price of approximately $1.4 million and ~~recognized a net gain on the sale~~funded additional costs of ~~approximately $3.7 million. This asset was classified as held for sale as of March 31, 2022.~~$0.8 million related to our development project.

~~On April 26, 2022,~~The Company also contributed $2.0 million to our existing Davis Joint Venture for our pro-rata share of two earn-out agreements. Additionally, we funded a $3.4 million term loan with the ~~Company purchased a medical office facility comprising of 59,233 square feet in New Albany, Ohio for $27.7 million.~~Davis Joint Venture related to these earn-out agreements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited consolidated financial statements, including the notes to those statements, included in Part I, Item 1 of this report, and the Section entitled “Cautionary Statement Regarding Forward-Looking Statements” in this report. As discussed in more detail in the Section entitled “Cautionary Statement Regarding Forward-Looking Statements,” this discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause those differences include those discussed in Part I, Item 1 (Business) and Part I, Item 1A (Risk Factors) of our ~~2021~~2022 Annual Report.

~~Company Highlights~~First Quarter Highlights:

•Reported first quarter ~~2022~~2023 total revenue of ~~$130.4~~$134.3 million, an increase of ~~15.0%~~3.0% over the prior year period.

•~~Generated~~Reported net income of $10.7 million for the first quarter ended 2023, a decrease of 23.5% over the prior year period, and first quarter net income per share of ~~$0.06~~$0.04 on a fully diluted basis.

•Generated first quarter Normalized Funds From Operations ~~(Normalized FFO)~~(“Normalized FFO”) of ~~$0.27~~$0.24 per share on a fully diluted basis.

•Completed $14.4 million in investments, including the funding of ~~$8.9 million during~~previous loan commitments in the first quarter.

•Executed contractual commitments of a $40.5 million development located in the Atlanta MSA.

•First quarter MOB Same-Store Cash Net Operating Income growth was ~~2.0%~~1.0% year-over-year.

•Declared a quarterly dividend of $0.23 per share and OP Unit for the first quarter ~~2022,~~2023, paid on April ~~14, 2022.~~18, 2023.

•Disposed of ~~one property~~a 30,000 square foot medical office building on January 17, 2023 for ~~$2.0~~$2.6 million, ~~and recognized a~~recognizing an insignificant net ~~loss~~gain on the ~~sale of approximately $0.2 million.~~sale.

•Sold ~~259,977~~4,400,000 common shares pursuant to the ATM ~~program~~Program at a weighted average price of ~~$18.93~~$15.10 during the first quarter, resulting in net proceeds of ~~$4.9~~$65.8 million.

Overview

We are a self-managed health care real estate company organized in April 2013 to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals, and health care delivery systems. We invest in real estate that is integral to providing high quality health care services. Our properties are typically located on a campus with a hospital or other health care facilities or strategically affiliated with a hospital or other health care facilities. We believe the impact of government programs and continuing trends in the health care industry create attractive opportunities for us to invest in health care related real estate. In particular, we believe the demand for health care will continue to increase as a result of the aging population as older persons generally utilize health care services at a rate well in excess of younger people. Our management team has significant public health care REIT experience and has long-established relationships with physicians, hospitals, and health care delivery system decision makers that we believe will provide quality investment and growth opportunities. Our principal investments include medical office buildings, outpatient treatment facilities, as well as other real estate integral to health care providers. In recent years, we have seen increased competition for health care properties and we expect this trend to continue. We seek to generate attractive risk-adjusted returns for our shareholders through a combination of stable and increasing dividends and potential long-term appreciation in the value of our properties and our common shares.

We grew our portfolio of gross real estate investments from approximately $124 million at the time of our IPO in July 2013 to approximately ~~$5.7~~$5.8 billion as of March 31, ~~2022.~~2023. As of March 31, ~~2022,~~2023, our consolidated portfolio consisted of ~~278~~275 health care properties ~~(which excludes one asset, representing approximately 17,213 leasable square feet, classified as held for sale)~~ located in 3332 states with approximately ~~15,576,392~~15,516,476 net leasable square feet, which were approximately 95% leased with a weighted average remaining lease term of approximately ~~6.2~~5.5 years. As of March 31, ~~2022,~~2023, approximately ~~90%~~91% of the net leasable square footage of our portfolio was either on the campus of a hospital or strategically affiliated with a health system.

We receive a cash rental stream from the health care providers under our leases. Approximately ~~95%~~93% of the annualized base rent payments from our properties as of March 31, ~~2022, excluding our one asset held for sale, are~~2023 were from absolute net and ~~triple-net~~triple net leases, pursuant to which the tenants are responsible for operating expenses subject to specific lease terms relating to the property, including but not limited to real estate taxes, utilities, property insurance, routine maintenance and repairs, and property management. This structure helps insulate us from increases in certain operating expenses and provides more predictable cash flow. Approximately 4%6% of the ~~annualized base rent~~ABR payments from our properties as of March 31, ~~2022, excluding our one asset held for sale, are~~2023 were from modified gross ~~base stop~~ leases which allow us to pass through certain increases in future operating expenses (e.g., property tax and insurance) to tenants for reimbursement, thus protecting us from increases in such operating expenses.

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We seek to structure our triple-net leases to generate attractive returns on a long-term basis. Our leases typically have initial terms of 5 to 15 years and include annual rent escalators of approximately 1.5% to 4.0%, with an annual weighted average rent escalator of approximately 2.4%. However, certain of the Company’s leases contain annual rent escalators indexed to changes in the Consumer Price Index (“CPI”), often with a floor or ceiling. As of March 31, 2023, approximately 5.8% of the Company’s annual rent escalators had CPI provisions. Our operating results depend significantly upon the ability of our tenants to make

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required rental payments. We believe that our portfolio of medical office buildings and other health care facilities will enable us to generate stable cash flows over time because of the diversity of our tenants, staggered lease expiration schedule, long-term leases, and low historical occurrence of tenants defaulting under their leases. As of March 31, ~~2022,~~2023, leases representing ~~2.7%~~approximately 3.1%, ~~5.1%~~5.5%, and ~~6.6%~~7.0% of leased square feet will expire in ~~2022,~~ 2023, 2024, and ~~2024,~~2025, respectively.

We intend to grow our portfolio of high-quality health care properties leased to physicians, hospitals, health care delivery systems, and other health care providers primarily through acquisitions of existing health care facilities that provide stable revenue growth and predictable long-term cash flows. We may also selectively finance the development of new health care facilities through joint venture or fee arrangements with health care real estate developers or health system development professionals. Generally, we expect to make investments in new development properties when approximately 80% or more of the development property has been pre-leased before construction commences. We seek to invest in properties where we can develop strategic alliances with financially sound health care providers and health care delivery systems that offer need-based health care services in sustainable health care markets. We focus our investment activity on medical office buildings and ambulatory surgery centers.

We believe that trends such as shifting consumer preferences, limited space in hospitals, the desire of patients and health care providers to limit non-essential services provided in a hospital setting, and cost considerations, continue to drive the industry towards performing more procedures in outpatient facilities versus the hospital setting. As these trends continue, we believe that demand for medical office buildings and similar health care properties away from hospital settings and in convenient locations to patients will continue to rise. We intend to exploit this trend and seek outpatient properties consistent with our investment philosophy and strategies.

While not our focus, we may choose to invest opportunistically in life science facilities, senior housing properties, skilled nursing facilities, specialty hospitals, and treatment centers. Consistent with our qualification as a REIT, we may also opportunistically invest in companies that provide health care services, and in joint venture entities with operating partners, structured to comply with the REIT Investment Diversification Act of 2007.

The Trust is a Maryland real estate investment trust and elected to be taxed as a REIT for U.S. federal income tax purposes. We conduct our business through an UPREIT structure in which our properties are owned by our Operating Partnership directly or through limited partnerships, limited liability companies, or other subsidiaries. The Trust is the sole general partner of our Operating Partnership and, as of March 31, ~~2022,~~2023, owned approximately ~~95.0%~~96.0% of the OP Units. As of April ~~27, 2022,~~26, 2023, there were ~~225,296,089~~238,398,561 common shares outstanding.

Key Transactions in First Quarter ~~2022~~2023

Investment Activity

During the three months ended March 31, ~~2022,~~2023, the Company ~~contributed $8.0~~executed contractual commitments related to a $40.5 million development project, with quarterly costs of $1.0 million, completed the acquisition of one medical condominium unit for an investment of $1.3 million and one parcel of land adjacent to one of its medical office facilities for an investment of $0.8 million, and paid $0.3 million of additional purchase consideration under two earn-out agreements. The Company also closed on a $35.8 million construction loan, funding $4.1 million to ~~acquire a 49% membership interest in three properties through the Davis Joint Venture~~date, and funded ~~$0.9~~one term loan for $5.4 million, $1.0 million of previous a construction loan ~~commitment, resulting~~commitments, and $0.5 million of previous term loan commitments. Additionally, the Company invested $0.2 million in ~~total investment~~funds managed by a real estate technology private equity fund. Investment activity offor the three months ended March 31, 2023 totaled approximately ~~$8.9~~$14.4 million.

During the three months ended March 31, ~~2022,~~2023, the Company sold one 30,000 square foot medical ~~office building representing 9,997 square feet~~facility for approximately ~~$2.0~~$2.6 million, realizing aan insignificant net ~~loss of approximately $0.2 million.~~gain.

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Recent Developments

Quarterly Distribution

On March ~~18, 2022,~~17, 2023, we announced that our Board of Trustees authorized and declared a cash distribution of $0.23 per common share for the quarterly period ended March 31, ~~2022.~~2023. The dividend was paid on April ~~14, 2022~~18, 2023 to common shareholders and OP Unit holders of record as of the close of business on ~~March 31, 2022.~~April 4, 2023.

Recent Events

~~On April 22, 2022~~Since March 31, 2023, the Company ~~disposed~~completed the acquisition of ~~a 17,213 square foot~~two medical ~~office building~~condominium units located in an Atlanta “Pill Hill” MOB for ~~$6.4~~an aggregate purchase price of approximately $1.4 million and ~~recognized a net gain on the sale~~funded additional costs of ~~approximately $3.7 million. This asset was classified as held for sale as of March 31, 2022.~~$0.8 million related to our development project.

~~Table~~The Company also contributed $2.0 million to our existing Davis Joint Venture for our pro-rata share of ~~Contents~~

~~On April 26, 2022,~~two earn-out agreements. Additionally, we funded a $3.4 million term loan with the ~~Company purchased a medical office facility comprising of 59,233 square feet in New Albany, Ohio for $27.7 million.~~Davis Joint Venture related to these earn-out agreements.

Results of Operations

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021.~~2022.

The following table summarizes our results of operations for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		2022		2021		Change		%			2023		2022		Change		%
Revenues:	Revenues:									Revenues:
Rental and related revenues	Rental and related revenues	$	126,676	$	107,955	$	18,721	17.3	%	Rental and related revenues	$	131,398	$	127,791	$	3,607	2.8	%
Interest income on real estate loans and other	Interest income on real estate loans and other	3,714		5,384		(1,670)		(31.0)	%	Interest income on real estate loans and other	2,946		2,599		347		13.4	%
Total revenues	Total revenues	130,390		113,339		17,051		15.0	%	Total revenues	134,344		130,390		3,954		3.0	%
Expenses:	Expenses:									Expenses:
Interest expense	Interest expense	16,823		13,715		3,108		22.7	%	Interest expense	19,153		16,823		2,330		13.9	%
General and administrative	General and administrative	10,293		9,465		828		8.7	%	General and administrative	11,200		10,293		907		8.8	%
Operating expenses	Operating expenses	41,752		33,934		7,818		23.0	%	Operating expenses	45,394		41,752		3,642		8.7	%
Depreciation and amortization	Depreciation and amortization	47,260		37,976		9,284		24.4	%	Depreciation and amortization	47,677		47,260		417		0.9	%

Total expenses	Total expenses	116,128		95,090		21,038		22.1	%	Total expenses	123,424		116,128		7,296		6.3	%
Income before equity in loss of unconsolidated entities and loss on sale of investment properties, net:		14,262		18,249		(3,987)		(21.8)	%
Income before equity in loss of unconsolidated entities and gain (loss) on sale of investment properties, net:										Income before equity in loss of unconsolidated entities and gain (loss) on sale of investment properties, net:	10,920		14,262		(3,342)		(23.4)	%
Equity in loss of unconsolidated entities	Equity in loss of unconsolidated entities	(166)		(420)		254		60.5	%	Equity in loss of unconsolidated entities	(264)		(166)		(98)		NM
Loss on sale of investment properties, net		(153)		(24)		(129)		NM
Gain (loss) on sale of investment properties, net										Gain (loss) on sale of investment properties, net	13		(153)		166		NM
Net income	Net income	$	13,943	$	17,805	$	(3,862)	(21.7)	%	Net income	$	10,669	$	13,943	$	(3,274)	(23.5)	%

NM = Not Meaningful

Revenues

Total revenues increased ~~$17.1~~$4.0 million, or ~~15.0%~~3.0%, for the three months ended March 31, ~~2022~~2023 as compared to the three months ended March 31, ~~2021.~~2022. An analysis of selected revenues follows.

Rental and related revenues. Rental and related revenues increased ~~$18.7~~$3.6 million, or ~~17.3%~~2.8%, for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021.~~2022. Rental and related revenues were comprised of the following based upon contractual billing terms (in thousands):

2022 2021 Change %
Rental revenues $ 91,550 $ 80,395 $ 11,155 13.9 %
Expense recoveries 35,126 27,560 7,566 27.5 %
Rental and related revenues $ 126,676 $ 107,955 $ 18,721 17.3 %

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	2023		2022		Change		%
Rental revenues	$	93,543	$	92,665	$	878	0.9	%
Expense recoveries	37,855		35,126		2,729		7.8	%
Rental and related revenues	$	131,398	$	127,791	$	3,607	2.8	%

Rental revenues increased ~~$11.2~~$0.9 million, or ~~13.9%~~0.9%, for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021.~~2022. Rental revenues increased ~~$13.1~~$1.7 million from properties acquired in ~~2021, including $9.4~~2022 and $0.7 million related to ~~the Landmark Portfolio, and~~net increases on our existing portfolio. These increases were partially offset by a decrease of ~~$1.9~~$1.5 million ~~due~~related to properties sold in ~~2022 and 2021.~~2022.

Expense recoveries increased ~~$7.6~~$2.7 million, or ~~27.5%~~7.8%, for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021.~~2022. Expense recoveries increased ~~$6.2~~$2.0 million related to net increases on our existing portfolio and $0.8 million from properties acquired in ~~2021, including $4.3 million related to the Landmark Portfolio, and $1.2 million due to an increase in reimbursable operating expenses from our existing portfolio, explained below.~~2022.

Interest income on real estate loans and other. Interest income on real estate loans and other ~~decreased $1.7~~increased $0.3 million, or ~~31.0%~~13.4%, for the three months ended March 31, ~~2022~~2023 as compared to the three months ended March 31, ~~2021.~~2022. Interest income on real estate loans and other ~~decreased $1.9~~increased $0.2 million due to ~~lower~~property management income related to the management for our unconsolidated joint ventures and $0.1 million due to higher average real estate loan ~~balances.~~balances in 2023 compared to 2022.

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Expenses

Total expenses increased ~~$21.0~~$7.3 million, or ~~22.1%~~6.3%, for the three months ended March 31, ~~2022~~2023 as compared to the three months ended March 31, ~~2021.~~2022. An analysis of selected expenses follows.

Interest expense. Interest expense increased ~~$3.1~~$2.3 million, or ~~22.7%~~13.9%, for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021. The issuance of the 2031 Senior Notes resulted in an increase of $3.4~~2022. Interest expense increased primarily due to a higher weighted average effective interest rate on our credit facility by $2.0 million and higher interest on our existing variable mortgage debts of $0.8 million. Our weighted average effective interest rate on our credit facility was 5.4% and 1.0% for the ~~issuance of new~~three months ended March 31, 2023 and 2022, respectively, and our weighted average effective interest rate on our variable mortgage debt ~~resulted an increase of $0.9 million. This~~ was 6.8% and 2.2% for the three months ended March 31, 2023 and 2022, respectively. These increases were partially offset by $0.4 million of net proceeds from the ~~October 2021 pay off and extinguishment of our $250.0 million term loan feature of the Credit Agreement and the associated pay-fixed receive-variable~~Company’s outstanding interest rate ~~swaps which resulted in a decrease of $1.2 million.~~swap.

General and administrative. General and administrative expenses increased ~~$0.8~~$0.9 million, or 8.8%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. The increase was primarily due to higher payroll and benefits of $0.6 million, of which $0.4 million was non-cash compensation, and $0.3 million of administrative and professional fees.

Operating expenses. Operating expenses increased $3.6 million, or 8.7%, for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, 2021. The increase was due to higher non-cash compensation of $0.5 million and increased travel and marketing costs of $0.5 million and was partially offset by a decrease in other expenses of $0.1 million.

~~Operating expenses. Operating expenses increased $7.8 million, or 23.0%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.~~2022. Net operating expenses onfrom properties ~~purchased and sold~~acquired in 2022 ~~and 2021~~ increased by ~~$6.6~~$0.8 million. Operating expenses on the existing portfolio increased by ~~$1.2~~$2.8 million, or ~~3.6%~~6.7% quarter over quarter, mainly due to ~~additional utilities~~higher maintenance costs of $1.3 million, utility costs of $1.0 million, and ~~building maintenance~~property management costs of ~~$0.4 million, partially offset by a decrease in insurance costs of $0.2~~$0.5 million.

Depreciation and amortization. Depreciation and amortization increased ~~$9.3~~$0.4 million, or ~~24.4%~~0.9%, for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021.~~2022. Depreciation and amortization increased ~~$10.6~~$1.2 million for properties purchased in ~~2021 and was~~2022. These increases were partially offset by ~~$0.8~~$0.5 million ~~for~~related to properties sold during 2022 and ~~2021 and a decrease of $0.5~~$0.2 million ~~on the~~related to our existing ~~portfolio.~~portfolio primarily due to fully amortized lease intangibles.

Equity in loss of unconsolidated entities. The change in equity in loss of unconsolidated entities for the three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022 is ~~primarily due to improved performance from joint ventures during the three months ended.~~insignificant.

~~Loss~~Gain (loss) on sale of investment properties, net. During the three months ended March 31, 2023, we sold one property in Pennsylvania, containing 30,000 square feet for approximately $2.6 million, realizing an insignificant gain. During the three months ended March 31, 2022, we sold one property ~~representing~~containing 9,997 net leasable square feet located in Michigan for approximately $2.0 million, realizing a net loss of approximately $0.2 million. During the three months ended March 31, 2021, we sold one property representing 44,089 net leasable square feet located in Michigan for approximately $0.5 million, realizing an insignificant net loss.

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Cash Flows

Three months ended March 31, ~~2022~~2023 compared to the three months ended March 31, ~~2021~~2022 (in thousands).


		2022		2021			2023		2022
Cash provided by operating activities	Cash provided by operating activities	$	54,535	$	41,301	Cash provided by operating activities	$	63,719	$	54,535
Cash provided by (used in) investing activities		12,181		(15,247)
Cash (used in) provided by investing activities						Cash (used in) provided by investing activities	(21,768)		12,181
Cash used in financing activities	Cash used in financing activities	(73,863)		(24,620)		Cash used in financing activities	(46,317)		(73,863)
(Decrease) increase in cash and cash equivalents		$	(7,147)	$	1,434
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	$	(4,366)	$	(7,147)

Cash flows from operating activities. Cash flows provided by operating activities was $63.7 million during the three months ended March 31, 2023 compared to $54.5 million during the three months ended March 31, 2022, ~~compared to $41.3 million during the three months ended March 31, 2021,~~ representing an increase of ~~$13.2~~$9.2 million. ~~Net~~The increase in cash provided by operating activities ~~increased~~is primarily due to the ~~impact~~timing of our ~~2022~~payments on accounts payable and ~~2021 acquisitions, including the Landmark Portfolio acquired on December 20, 2021, and contractual rent increases offset by our 2022 and 2021 dispositions.~~other liabilities.

Cash flows from investing activities. Cash flows used in investing activities was $21.8 million during the three months ended March 31, 2023 compared to cash flows provided by investing activities ~~was~~of $12.2 million during the three months ended March 31, 2022, ~~compared to cash flows used in investing activities of $15.2 million during the three months ended March 31, 2021,~~ representing a change of ~~$27.4~~$33.9 million.The ~~increase~~change in cash ~~flows provided by~~used in investing activities was primarily due to ~~higher~~a decrease in repayment of real estate loans receivables of $22.4 million and an increase of $10.1 million from cash used in the investment of real estate loan ~~repayments and lower new real estate loans for a net increase in cash of $28.6 million. Proceeds on sales of investment properties also increased cash by $1.4 million, and~~receivables. Additionally, cash spent on capital expenditures and

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~~leasing commissions decreased~~ lease inducements increased by ~~$1.0 million. Cash flows provided by investing activities were~~$2.9 million and $0.4 million, respectively. This was partially offset by ~~an increase in~~a net decrease of $1.2 million of cash spent on development and acquisitions of investment properties and unconsolidated ~~entities~~entities. Further, there was an increase of ~~$3.6 million.~~$0.7 million from the proceeds on sales of investment properties.

Cash flows from financing activities. Cash flows used in financing activities was $46.3 million during the three months ended March 31, 2023 compared to $73.9 million during the three months ended March 31, 2022, ~~compared to $24.6 million during the three months ended March 31, 2021,~~ representing ~~an increase~~a decrease of ~~$49.2~~$27.5 million. The ~~change~~decrease in cash used in financing activities was primarily due to ~~a decrease~~an increase in net proceeds from the sale of common shares pursuant to the ~~applicable~~ ATM Program of ~~$47.4~~$60.8 million and an increase of $7.3 million from contributions from noncontrolling interests. Additionally, cash used in financing activities decreased due to a decrease of distributions to noncontrolling interests of $0.5 million, a decrease in purchases of OP units of $0.2 million and a decrease in principal payments on mortgage debt of $0.2 million. This is partially offset by an increase of $22.0 million in net paydowns under the credit facility and $15.0 million from the repayment of ~~$9.0 million in 2022 compared to 2021.~~senior unsecured notes. Further, ~~$3.5 million~~there was an increase of ~~additional~~ dividends ~~were~~ paid to shareholders ~~in 2022 compared to 2021,~~of $2.8 million and ~~$1.4~~an increase of $1.7 million for payments of additional distributions were paid to noncontrolling interests of the operating partnership. Cash flows used in financing activities were partially offset by $6.5 million of additional principal payments on mortgage debt in 2021 compared to 2022. Additionally, Series A Preferred Units redeemed in 2021 used $4.7 million while no such redemptions were made in 2022.employee taxes withheld for stock-based compensation.

Non-GAAP Financial Measures

This report includes Funds From Operations ~~(FFO)~~(“FFO”), Normalized FFO, Normalized Funds Available For Distribution ~~(FAD)~~(“FAD”), Net Operating Income ~~(NOI)~~(“NOI”), Cash NOI, MOB Same-Store Cash NOI, Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ~~(EBITDA~~(“EBITDArere”) and Adjusted EBITDAre, which are non-GAAP financial measures. For purposes of Item 10(e) of Regulation S-K promulgated under the Securities Act, a non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable financial measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows (or equivalent statements) of the company, or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable financial measure so calculated and presented. As used in this report, GAAP refers to generally accepted accounting principles in the United States of America. Pursuant to the requirements of Item 10(e) of Regulation S-K promulgated under the Securities Act, we have provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

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FFO and Normalized FFO

We believe that information regarding FFO is helpful to shareholders and potential investors because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes ratably over time. We calculate FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ~~(Nareit)~~(“Nareit”). Nareit defines FFO as net income or loss (computed in accordance with GAAP) before noncontrolling interests of holders of OP units, excluding preferred distributions, gains (or losses) on sales of depreciable operating property, impairment write-downs on depreciable assets, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs). Our FFO computation includes our share of required adjustments from our unconsolidated joint ventures and may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the Nareit definition or that interpret the Nareit definition differently than we do. The GAAP measure that we believe to be most directly comparable to FFO, net income, includes depreciation and amortization expenses, gains or losses on property sales, impairments, and noncontrolling interests. In computing FFO, we eliminate these items because, in our view, they are not indicative of the results from the operations of our properties. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income (determined in accordance with GAAP) as presented in our financial statements. FFO does not represent cash generated from operating activities in accordance with GAAP, should not be considered to be an alternative to net income or loss (determined in accordance with GAAP) as a measure of our liquidity and is not indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.

We use Normalized FFO, which excludes from FFO net change in fair value of derivative financial instruments, acceleration of deferred financing costs, net change in fair value of contingent consideration, and other normalizing items. Our Normalized FFO computation includes our share of required adjustments from our unconsolidated joint ventures and our use of the term Normalized FFO may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount. Normalized FFO should not be considered as an alternative to net income or loss (computed in accordance with GAAP), as an indicator of our financial performance or of cash flow from operating activities (computed in accordance with GAAP), or as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Normalized FFO should be reviewed in connection with other GAAP measurements.

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The following is a reconciliation from net income, the most direct financial measure calculated and presented in accordance with GAAP, to FFO and Normalized FFO (in thousands, except per share data):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net income	Net income	$	13,943	$	17,805		Net income	$	10,669	$	13,943
Earnings per share - diluted	Earnings per share - diluted	$	0.06	$	0.08		Earnings per share - diluted	$	0.04	$	0.06

Net income	Net income	$	13,943	$	17,805		Net income	$	10,669	$	13,943
Net income attributable to noncontrolling interests - partially owned properties	Net income attributable to noncontrolling interests - partially owned properties	(159)		(152)			Net income attributable to noncontrolling interests - partially owned properties	(44)		(159)
Preferred distributions		—		(13)

Depreciation and amortization expense	Depreciation and amortization expense	47,149		37,877			Depreciation and amortization expense	47,560		47,149
Depreciation and amortization expense - partially owned properties	Depreciation and amortization expense - partially owned properties	(70)		(70)			Depreciation and amortization expense - partially owned properties	(138)		(70)
Loss on sale of investment properties, net		153		24
(Gain) loss on sale of investment properties, net							(Gain) loss on sale of investment properties, net	(13)		153

Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	2,383		2,197			Proportionate share of unconsolidated joint venture adjustments	2,306		2,383
FFO applicable to common shares	FFO applicable to common shares	$	63,399	$	57,668		FFO applicable to common shares	$	60,340	$	63,399

Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	(8)		—			Proportionate share of unconsolidated joint venture adjustments	—		(8)
Normalized FFO applicable to common shares	Normalized FFO applicable to common shares	$	63,391	$	57,668		Normalized FFO applicable to common shares	$	60,340	$	63,391

FFO per common share		$	0.27	$	0.27
Normalized FFO per common share		$	0.27	$	0.27
FFO per common share - diluted							FFO per common share - diluted	$	0.24	$	0.27
Normalized FFO per common share - diluted							Normalized FFO per common share - diluted	$	0.24	$	0.27

Weighted average number of common shares outstanding		238,340,243		217,322,425
Weighted average common shares outstanding - diluted							Weighted average common shares outstanding - diluted	248,756,672		238,340,243

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Normalized Funds Available for Distribution ~~(FAD)~~(“FAD”)

We define Normalized FAD, a non-GAAP measure, which excludes from Normalized FFO non-cash share compensation expense, straight-line rent adjustments, amortization of acquired above-market or below-market leases and assumed debt, amortization of lease inducements, amortization of deferred financing costs, and loan reserve adjustments, including our share of all required adjustments from unconsolidated joint ventures. We also adjust for recurring capital expenditures related to building, site, and tenant improvements, ~~and~~ leasing commissions, ~~and~~ cash payments from seller master leases, and rent abatement payments, including our share of all required adjustments for unconsolidated joint ventures. Other REITs or real estate companies may use different methodologies for calculating Normalized FAD, and accordingly, our computation may not be comparable to those reported by other REITs. Although our computation of Normalized FAD may not be comparable to that of other REITs, we believe Normalized FAD provides a meaningful supplemental measure of our performance due to its frequency of use by analysts, investors, and other interested parties in the evaluation of our performance as a REIT. Normalized FAD should not be considered as an alternative to net income or loss attributable to controlling interest (computed in accordance with GAAP) or as an indicator of our financial performance. Normalized FAD should be reviewed in connection with other GAAP measurements.

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The following is a reconciliation from net income, the most direct financial measure calculated and presented in accordance with GAAP, to Normalized FAD (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net income	Net income	$	13,943	$	17,805		Net income	$	10,669	$	13,943
Normalized FFO applicable to common shares	Normalized FFO applicable to common shares	$	63,391	$	57,668		Normalized FFO applicable to common shares	$	60,340	$	63,391

Normalized FFO applicable to common shares	Normalized FFO applicable to common shares	$	63,391	$	57,668		Normalized FFO applicable to common shares	$	60,340	$	63,391
Non-cash share compensation expense	Non-cash share compensation expense	4,253		3,707			Non-cash share compensation expense	4,667		4,253
Straight-line rent adjustments	Straight-line rent adjustments	(2,154)		(2,725)			Straight-line rent adjustments	(1,235)		(2,154)
Amortization of acquired above/below-market leases/assumed debt	Amortization of acquired above/below-market leases/assumed debt	1,339		864			Amortization of acquired above/below-market leases/assumed debt	1,135		1,339
Amortization of lease inducements	Amortization of lease inducements	225		264			Amortization of lease inducements	229		225
Amortization of deferred financing costs	Amortization of deferred financing costs	579		581			Amortization of deferred financing costs	569		579
TI/LC and recurring capital expenditures		(5,663)		(5,638)
Recurring capital expenditures and lease commissions							Recurring capital expenditures and lease commissions	(5,786)		(5,663)
Loan reserve adjustments	Loan reserve adjustments	3		(47)			Loan reserve adjustments	3		3

Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	(431)		(211)			Proportionate share of unconsolidated joint venture adjustments	(219)		(431)
Normalized FAD applicable to common shares	Normalized FAD applicable to common shares	$	61,542	$	54,463		Normalized FAD applicable to common shares	$	59,703	$	61,542

Net Operating Income ~~(NOI)~~(“NOI”), Cash NOI, and MOB Same-Store Cash NOI

NOI is a non-GAAP financial measure that is defined as net income or loss, computed in accordance with GAAP, generated from our total portfolio of properties and other investments before general and administrative expenses, depreciation and amortization expense, interest expense, net change in the fair value of derivative financial instruments, gain or loss on the sale of investment properties, and impairment losses, including our share of all required adjustments from our unconsolidated joint ventures. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. Our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

Cash NOI is a non-GAAP financial measure which excludes from NOI straight-line rent adjustments, amortization of acquired above and below market leases, and other non-cash and normalizing items, including our share of all required adjustments from unconsolidated joint ventures. Other non-cash and normalizing items include items such as the amortization of lease inducements, loan reserve adjustments, payments received from seller master leases and rent abatements, and changes in fair value of contingent consideration. We believe that Cash NOI provides an accurate measure of the operating performance of our operating assets because it excludes certain items that are not associated with management of the properties. Additionally, we believe that Cash NOI is a widely accepted measure of comparative operating performance in the real estate community. Our use of the term Cash NOI may not be comparable to that of other real estate companies as such other companies may have different methodologies for computing this amount.

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MOB Same-Store Cash NOI is a non-GAAP financial measure which excludes from Cash NOI assets not held for the entire preceding five quarters, non-MOB assets, and other normalizing items not specifically related to the same-store property portfolio. Management considers MOB Same-Store Cash NOI a supplemental measure because it allows investors, analysts, and Company management to measure unlevered property-level operating results. Our use of the term MOB Same-Store Cash NOI may not be comparable to that of other real estate companies, as such other companies may have different methodologies for computing this amount.

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The following is a reconciliation from the Trust’s net income, the most direct financial measure calculated and presented in accordance with GAAP, to NOI, Cash NOI, and MOB Same-Store Cash NOI (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net income	Net income	$	13,943	$	17,805		Net income	$	10,669	$	13,943
General and administrative	General and administrative	10,293		9,465			General and administrative	11,200		10,293

Depreciation and amortization expense	Depreciation and amortization expense	47,260		37,976			Depreciation and amortization expense	47,677		47,260
Interest expense	Interest expense	16,823		13,715			Interest expense	19,153		16,823

Loss on sale of investment properties, net		153		24
(Gain) loss on sale of investment properties, net							(Gain) loss on sale of investment properties, net	(13)		153

Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	3,422		3,511			Proportionate share of unconsolidated joint venture adjustments	3,644		3,422
NOI	NOI	$	91,894	$	82,496		NOI	$	92,330	$	91,894

NOI	NOI	$	91,894	$	82,496		NOI	$	92,330	$	91,894
Straight-line rent adjustments	Straight-line rent adjustments	(2,154)		(2,725)			Straight-line rent adjustments	(1,235)		(2,154)
Amortization of acquired above/below-market leases	Amortization of acquired above/below-market leases	1,349		880			Amortization of acquired above/below-market leases	1,135		1,349
Amortization of lease inducements	Amortization of lease inducements	225		264			Amortization of lease inducements	229		225
Loan reserve adjustments	Loan reserve adjustments	3		(47)			Loan reserve adjustments	3		3

Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	(71)		(171)			Proportionate share of unconsolidated joint venture adjustments	(108)		(71)
Cash NOI	Cash NOI	$	91,246	$	80,697		Cash NOI	$	92,354	$	91,246

Cash NOI	Cash NOI	$	91,246	$	80,697		Cash NOI	$	92,354	$	91,246
Assets not held for all periods or held for sale	Assets not held for all periods or held for sale	(12,353)		(1,822)			Assets not held for all periods or held for sale	(1,458)		(1,504)
Hospital Cash NOI		(3,478)		(3,139)
Non-MOB health care properties							Non-MOB health care properties	(2,798)		(2,758)
Lease termination fees	Lease termination fees	(5)		—			Lease termination fees	(31)		(4)
Interest income on real estate loans	Interest income on real estate loans	(2,199)		(4,107)			Interest income on real estate loans	(2,282)		(2,199)
Joint venture and other income	Joint venture and other income	(3,509)		(3,271)			Joint venture and other income	(3,768)		(3,576)
MOB Same-Store Cash NOI	MOB Same-Store Cash NOI	$	69,702	$	68,358		MOB Same-Store Cash NOI	$	82,017	$	81,205

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ~~(EBITDAre)~~(“EBITDAre”) and Adjusted EBITDAre

We calculate EBITDAre in accordance with standards established by Nareit and define EBITDAre as net income or loss computed in accordance with GAAP plus depreciation and amortization, interest expense, gain or loss on the sale of investment properties, and impairment loss, including our share of all required adjustments from unconsolidated joint ventures. We define Adjusted EBITDAre, which excludes from EBITDAre non-cash share compensation expense, non-cash changes in fair value, pursuit costs, non-cash intangible amortization, the pro forma impact of investment activity, and other normalizing items. We consider EBITDAre and Adjusted EBITDAre important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt.

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The following is a reconciliation from the Trust’s net income, the most direct financial measure calculated and presented in accordance with GAAP, to EBITDAre and Adjusted EBITDAre (in thousands):


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
Net income	Net income	$	13,943	$	17,805	Net income	$	10,669	$	13,943
Depreciation and amortization expense	Depreciation and amortization expense	47,260		37,976		Depreciation and amortization expense	47,677		47,260
Interest expense	Interest expense	16,823		13,715		Interest expense	19,153		16,823
Loss on sale of investment properties, net		153		24
(Gain) loss on sale of investment properties, net						(Gain) loss on sale of investment properties, net	(13)		153

Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	3,420		3,482		Proportionate share of unconsolidated joint venture adjustments	3,590		3,420
EBITDAre	EBITDAre	$	81,599	$	73,002	EBITDAre	$	81,076	$	81,599

Non-cash share compensation expense	Non-cash share compensation expense	4,253		3,707		Non-cash share compensation expense	4,667		4,253

Pursuit costs	Pursuit costs	74		20		Pursuit costs	63		74
Non-cash intangible amortization	Non-cash intangible amortization	1,575		1,128		Non-cash intangible amortization	1,364		1,575
Proportionate share of unconsolidated joint venture adjustments	Proportionate share of unconsolidated joint venture adjustments	(8)		—		Proportionate share of unconsolidated joint venture adjustments	—		(8)
Pro forma adjustments for investment activity	Pro forma adjustments for investment activity	68		6		Pro forma adjustments for investment activity	89		68
Adjusted EBITDAre	Adjusted EBITDAre	$	87,561	$	77,863	Adjusted EBITDAre	$	87,259	$	87,561

Liquidity and Capital Resources

In March 2020, the Securities and Exchange Commission (SEC) adopted amendments to Rule 3-10 of Regulation S-X and created Rule 13-01 to simplify disclosure requirements related to certain registered securities. The rule is effective January 4, 2021 but earlier compliance is permitted. As a result of the amendments to Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that the subsidiary obligor is consolidated into the parent company’s consolidated financial statements, the parent guarantee is “full and unconditional” and the alternative disclosure required by Rule 13-01 is provided, which includes narrative disclosure and summarized financial information. Accordingly, separate consolidated financial statements of the Operating Partnership have not been presented. Furthermore, as permitted under Rule 13-01(a)(4)(vi), the Company has excluded the summarized financial information for the Operating Partnership as the assets, liabilities, and results of operations of the Company and the Operating Partnership are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company, and management believes such summarized financial information would be repetitive and not provide incremental value to investors.

Our short-term liquidity requirements consist primarily of operating and interest expenses and other expenditures directly associated with our properties, including:

•property expenses;

•interest expense and scheduled principal payments on outstanding indebtedness;

•general and administrative expenses; and

•capital expenditures for tenant improvements and leasing commissions.

In addition, we will require funds for future distributions expected to be paid to our common shareholders and OP Unit holders in our Operating Partnership.

As of March 31, ~~2022,~~2023, we had a total of ~~$2.7~~$3.4 million of cash and cash equivalents and ~~$745.0~~$848.0 million of near-term availability on our unsecured revolving credit facility. Our primary sources of cash include rent we collect from our tenants, borrowings under our unsecured credit facility, and financings of debt and equity securities. We believe that our existing cash and cash equivalents, cash flow from operating activities, and borrowings available under our unsecured revolving credit facility will be adequate to fund any existing contractual obligations to purchase properties and other obligations through the next year. However, because of the 90% distribution requirement under the REIT tax rules under the Internal Revenue Code, we may not be able to fund all of our future capital needs from cash retained from operations, including capital needed to make investments and to satisfy or refinance maturing obligations. As a result, we expect to rely upon external sources of capital, including debt and equity financing, to fund future capital needs. If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business or to meet our obligations and commitments as they mature.

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We will rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.

Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, recurring and non-recurring capital expenditures, and scheduled debt maturities. We expect to satisfy our long-term liquidity needs through cash flow from operations, unsecured borrowings, issuances of equity and debt securities, proceeds from select property dispositions and joint venture transactions, and, in connection with acquisitions of additional properties, the issuance of OP Units of our Operating Partnership.

Our ability to access capital in a timely and cost-effective manner is essential to the success of our business strategy as it affects our ability to satisfy existing obligations, including repayment of maturing indebtedness, and to make future investments and acquisitions. Factors such as general market conditions, interest rates, credit ratings on our debt and equity securities, expectations of our potential future earnings and cash distributions, and the market price of our common shares, each

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of which are beyond our control and vary or fluctuate over time, all impact our access to and cost of capital. In particular, to the extent interest rates continue to rise, we may continue to experience a decline in the trading price of our common shares, which may impact our decision to conduct equity offerings for capital raising purposes. We have experienced and will likely ~~also~~continue to experience higher borrowing costs as interest rates rise, which may also impact our decisions to incur additional indebtedness, or to engage in transactions ~~for which~~that we may need to fund through borrowing. We expect to continue to utilize equity and debt financings to support our future growth and investment activity.

We also continuously evaluate opportunities to finance future investments. New investments are generally funded from temporary borrowings under our primary unsecured credit facility and the proceeds from financing transactions such as those discussed above. Our investments generate cash from net operating income and principal payments on loans receivable. Permanent financing for future investments, which generally replaces funds drawn under our primary unsecured credit facility, has historically been provided through a combination of the issuance of debt and equity securities and the incurrence or assumption of secured debt.

We intend to invest in additional properties as suitable opportunities arise and adequate sources of financing are available. We are currently evaluating additional potential investments consistent with the normal course of our business. There can be no assurance as to whether or when any portion of these investments will be completed. Our ability to complete investments is subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with sellers and our ability to finance the investment. We may not be successful in identifying and consummating suitable acquisitions or investment opportunities, which may impede our growth and negatively affect our results of operations and may result in the use of a significant amount of management’s resources. We expect that future investments in properties will depend on and will be financed by, in whole or in part, our existing cash, borrowings, including under our unsecured revolving credit facility, or the proceeds from additional issuances of equity or debt securities.

We currently do not expect to sell any of our properties to meet our liquidity needs, although we may do so in the future.

We currently are in compliance with all debt covenants on our outstanding indebtedness.

Credit Facility

On September 24, 2021, the Operating Partnership, as borrower, and the Trust, as guarantor, executed the Credit Agreement which extended the maturity date of the revolving credit facility under the Credit Agreement to September 24, 2025 and reduced the interest rate margin applicable to borrowings. The Credit Agreement includes an unsecured revolving credit facility of $1.0 billion and contains a term loan feature of $250 million, which the Company borrowed on, bringing total borrowing capacity to ~~$1.3~~$1.25 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 $1.75 billion. On October 13, 2021, the Company paid off the $250.0 million term loan feature of the Credit Agreement and the term loan feature is no longer available to the Company. The revolving credit facility under the Credit Agreement also includes two six-month extension options.

On ~~October 13, 2021,~~March 31, 2023, the ~~Company used the proceeds from the 2031 Senior Notes to pay off a $250.0 million term loan feature of the Credit Agreement. The~~ Operating Partnership, ~~simultaneously terminated~~as borrower, and the ~~existing pay-fixed receive-variable rate swaps associated with the full term loan borrowing of $250.0 million. As part of the termination, the Company made total cash payments of $3.3 million~~Trust, as guarantor, executed a First Amendment to ~~the counterparties of the swap agreements. As defined by~~ the Credit Agreement which expanded the ~~term loan~~accordion feature ~~is no longer available~~allowing the Operating Partnership to increase borrowing capacity by up to an additional $500.0 million, resulting in a maximum borrowing capacity of $2.25 billion, and replaced the ~~Company.~~LIBOR-based benchmark rates applicable to borrowings under the Amended Credit Agreement with SOFR based benchmark rates.

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As of March 31, ~~2022,~~2023, the Company had ~~$255.0~~$152.0 million of borrowings outstanding under its unsecured revolving credit facility. As defined by the Credit Agreement, ~~$745.0~~$848.0 million is available to borrow without adding additional properties to the unencumbered borrowing base of assets. See Note 6 (Debt) to our accompanying consolidated financial statements for a further discussion of our credit facility.

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Senior Notes

As of March 31, ~~2022,~~2023, we had $1.5 billion aggregate principal amount of senior notes issued and outstanding by the Operating Partnership, comprised of ~~$15.0 million maturing in 2023,~~ $25.0 million maturing in 2025, $70.0 million maturing in 2026, $425.0 million maturing in 2027, $395.0 million maturing in 2028, and $545.0 million maturing in 2031. See Note 6 (Debt) to our accompanying consolidated financial statements for a further discussion of our senior notes.

ATM Program

In May 2021, the Company entered into the Sales Agreement, pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $500 million. In accordance with the Sales Agreement, the Trust may offer and sell its common shares through 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.

During the quarterly period ended March 31, ~~2022,~~2023, the Trust sold ~~259,977~~4,400,000 common shares pursuant to the ATM Program, at a weighted average price of ~~$18.93~~$15.10 per share resulting in total net proceeds of approximately ~~$4.9~~$65.8 million. As of March 31, ~~2022,~~2023, the Trust has ~~$326.3~~$158.6 million remaining available under the ATM Program.

Dividend Reinvestment and Share Purchase Plan

In December 2014, the Company adopted a Dividend Reinvestment and Share Purchase ~~Plan.~~Plan (“DRIP”). Under the DRIP:

•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.

The DRIP is administered by our transfer agent, Computershare Trust Company, N.A. Our common shares sold under the DRIP are newly issued or purchased in the open market, as further described in the DRIP. As of March 31, ~~2022,~~2023, the Company had issued ~~187,510~~218,084 common shares under the DRIP since its inception.

Critical Accounting Policies

Our consolidated financial statements included in Part I, Item 1 of this report are prepared in conformity with GAAP for interim financial information set forth in the ASC, as published by the ~~Financial Accounting Standards Board,~~FASB, which require us to make estimates and assumptions regarding future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We base these estimates on our experience and assumptions we believe to be reasonable under the circumstances. However, if our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, we may have applied a different accounting treatment, resulting in a different presentation of our financial statements. We periodically reevaluate our estimates and assumptions, and in the event they prove to be different from actual results, we make adjustments in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to our ~~2021~~2022 Annual Report for further information regarding the critical accounting policies that affect our more significant estimates and judgments used in the preparation of our consolidated financial statements included in Part I, Item 1 of this report.

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REIT Qualification Requirements

We are subject to a number of operational and organizational requirements necessary to qualify and maintain our qualification as a REIT. If we fail to qualify as a REIT or fail to remain qualified as a REIT in any taxable year, our income would be subject to federal income tax at regular corporate rates and potentially increased state and local taxes and we could incur substantial tax liabilities which could have an adverse impact upon our results of operations, liquidity, and distributions to our shareholders.

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Off-Balance Sheet Arrangements

As of March 31, ~~2022,~~2023, we have investments in two unconsolidated joint ventures with ownership interests of ~~49.0%~~45.1% and 12.3%, respectively. The aggregate carrying amount of debt, including both our and our partners’ share, incurred by these ventures was approximately ~~$792.3~~$808.5 million (of which our proportionate share is approximately ~~$143.8~~$144.5 million). See Note 2 (Summary of Significant Accounting Policies) of Part II, Item 8 (Financial Statements and Supplementary Data) of our ~~2021~~2022 Annual Report for the fiscal year ended December 31, ~~2021~~2022 for additional information. We have no other off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our future income, cash flows, and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use certain derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. Our derivative instruments consist of one interest rate swap. See Note 7 (Derivatives) in Part I, Item I of this report and Note 2 (Summary of Significant Accounting Policies) of Part II, Item 8 (Financial Statements and Supplementary Data) of our ~~2021~~2022 Annual Report for further detail on our interest rate swap.

Interest rate risk amounts are our management’s estimates and were determined by considering the effect of hypothetical interest rates on our consolidated financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

Fixed Interest Rate Debt

As of March 31, ~~2022,~~2023, our consolidated fixed interest rate debt totaled $1.5 billion, which represented ~~79.2%~~83.5% of our total consolidated debt, excluding the impact of the interest rate swap. We entered into a pay-fixed receive-variable rate swap for $36.1 million of our mortgage debt, fixing the ~~LIBOR~~variable component of the borrowing rate to ~~1.43%~~1.35%, for an all-in fixed rate as of March 31, ~~2022~~2023 of ~~3.33%~~3.25%. Both the borrowing and pay-fixed receive-variable swap have a maturity date of October 31, 2024.

Assuming the effects of our interest rate swap agreement, our fixed interest rate debt would represent ~~81.1%~~85.5% of our total consolidated debt. Interest rate fluctuations on our fixed interest rate debt will generally not affect our future earnings or cash flows unless such instruments mature or are otherwise terminated. However, interest rate changes could affect the fair value of our fixed interest rate debt.

As of March 31, ~~2022,~~2023, the fair value and the carrying value of our consolidated fixed interest rate debt were approximately ~~$1.5~~$1.4 billion and ~~$1.6~~$1.5 billion, respectively. The fair value estimate of our fixed interest rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated on March 31, ~~2022.~~2023. As we expect to hold our fixed interest rate debt instruments to maturity, based on the underlying structure of the debt instrument, and the amounts due under such instruments are limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that market fluctuations in interest rates, and the resulting change in fair value of our fixed interest rate debt instruments, would have a significant impact on our operating cash flows.

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Variable Interest Rate Debt

As of March 31, ~~2022,~~2023, our consolidated variable interest rate debt totaled ~~$396.6~~$293.1 million, which represented ~~20.8%~~16.5% of our total consolidated debt. Assuming the effects of our interest rate swap agreement, our variable interest rate debt would represent ~~18.9%~~14.5% of our total consolidated debt. Interest rate changes on our variable rate debt could impact our future earnings and cash flows but would not significantly affect the fair value of such debt. As of March 31, ~~2022,~~2023, we were exposed to market risks related to fluctuations in interest rates on ~~$360.5~~$257.0 million of consolidated borrowings. Assuming no increase in the amount of our variable rate debt, if LIBOR and SOFR were to change by 100 basis points, interest expense on our variable rate debt as of March 31, ~~2022~~2023 would change by approximately ~~$2.6~~$0.1 million and ~~$1.0~~$2.5 million annually, respectively.

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Derivative Instruments

As of March 31, ~~2022,~~2023, we had one outstanding interest rate swap that was designated as a cash flow ~~hedges~~hedge of interest rate risk, with a total notional amount of $36.1 million. See Note 7 (Derivatives) within our consolidated financial statements for further detail on our interest rate swap. We are exposed to credit risk of the counterparty to our interest rate swap agreement in the event of non-performance under the terms of the agreements. If we were not able to replace the swap in the event of non-performance by the counterparty, we would be subject to variability of the interest rate on the amount outstanding under our debt that is fixed through the use of the swap.

Indebtedness

As of March 31, ~~2022,~~2023, we had total consolidated indebtedness of approximately ~~$1.9~~$1.8 billion. The weighted average interest rate on our consolidated indebtedness was ~~3.28%~~4.03% (based on the 30-day LIBOR rate of ~~0.40%~~4.77% and a SOFR rate of ~~0.29%~~4.87% as of March 31, ~~2022)~~2023). As of March 31, ~~2022,~~2023, we had approximately ~~$360.5~~$257.0 million, or approximately ~~18.9%~~14.5%, of our outstanding long-term debt exposed to fluctuations in short-term interest rates. See Note 6 (Debt) to our consolidated financial statements included in Part I, Item 1 to this report for a summary of our indebtedness as of March 31, ~~2022.~~2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Trust’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Trust’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on such evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer concluded that as of March 31, ~~2022,~~2023, the Trust’s disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information it is required to disclose in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Trust’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Trust’s system of internal control over financial reporting during the quarter ended March 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and the Trust’s internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and the Trust’s internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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PART II. Other Information

Item 1. Legal Proceedings

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition, or results of operations if determined adversely to us.

Item 1A. Risk Factors

Information on risk factors can be found in Part I, Item 1A (Risk Factors) of our ~~2021~~2022 Annual Report. There have been no material changes from the risk factors previously disclosed in our ~~2021~~2022 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

From time to time the Operating Partnership issues OP Units to the Trust, as required by the Partnership Agreement, to reflect additional issuances of common shares by the Trust and to preserve equitable ownership ratios.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table sets forth information relating to repurchases of our common shares of beneficial interest and OP Units during the three months ended March 31, ~~2022:~~2023:

ISSUER PURCHASES OF EQUITY SECURITIES

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
January 1, 2022 - January 31, 2022 10,000 (1) $ 18.44 N/A N/A
February 1, 2022 - February 28, 2022 160,573 (2) 17.07 N/A N/A
March 1, 2022 - March 31, 2022 82,475 (2) 16.37 N/A N/A
Total 253,048 $ 16.90 — —


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
January 1, 2023 - January 31, 2023	167,779	(1)	$	14.42	N/A	N/A
February 1, 2023 - February 28, 2023	290,380	(2)	15.07		N/A	N/A
March 1, 2023 - March 31, 2023	92,895	(2)	14.70		N/A	N/A
Total	551,054		$	14.81	—	—

(1)Represents OP Units redeemed by holders in exchange for ~~cash.~~common shares of the Company.

(2)Represents repurchased common shares to satisfy employee withholding tax obligations related to stock-based compensation.

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Item 6. Exhibits


~~Exhibit No.~~						~~Description~~
~~10.1~~						Employment Agreement dated as of March 1, 2022 between the Trust and William Mark Dukes**
~~22.1~~						List of Subsidiary Issuers and Guaranteed Securities**
~~31.1~~						Certification of John T. Thomas, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Physicians Realty Trust**
~~31.2~~						Certification of Jeffrey N. Theiler, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Physicians Realty Trust**


~~32.1~~						Certification of John T. Thomas and Jeffrey N. Theiler, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) for Physicians Realty Trust**


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~~101.PRE~~						~~Inline XBRL Taxonomy Extension Presentation Linkbase Document (+)~~
~~104~~						~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).~~


Exhibit No.		Description
10.1	(1)	First Amendment to Third Amended and Restated Credit Agreement, dated March 31, 2023, among Physicians Realty L.P., as Borrower, Physicians Realty Trust, as Guarantor, KeyBank National Association, as Administrative Agent, and the Lenders party thereto
22.1		List of Subsidiary Issuers and Guaranteed Securities**
31.1		Certification of John T. Thomas, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Physicians Realty Trust**
31.2		Certification of Jeffrey N. Theiler, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Physicians Realty Trust**


32.1		Certification of John T. Thomas and Jeffrey N. Theiler, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) for Physicians Realty Trust**


101.INS		This instance document does not appear in the interactive data file because of XBRL tags are embedded within the inline XBRL document.
101.SCH		Inline XBRL Extension Schema Document (+)
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document (+)
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document (+)
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document (+)
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document (+)
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

** Filed herewith

(+) Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement for purposes of Section 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

(1) Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the SEC on April 3, 2023 (File No. 001-36007).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			PHYSICIANS REALTY TRUST


Date: May ~~5, 2022~~4, 2023			/s/ John T. Thomas
			John T. Thomas
			President and Chief Executive Officer
			(Principal Executive Officer)


Date: May ~~5, 2022~~4, 2023			/s/ Jeffrey N. Theiler
			Jeffrey N. Theiler
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer)