Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 28, 2016 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | Physicians Realty Trust | |
Entity Central Index Key | 1,574,540 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 135,569,612 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Investment properties: | ||
Land and improvements | $ 172,685 | $ 130,788 |
Building and improvements | 2,220,448 | 1,284,863 |
Tenant improvements | 12,627 | 9,243 |
Acquired lease intangibles | 282,798 | 205,168 |
Gross real estate property | 2,688,558 | 1,630,062 |
Accumulated depreciation | (153,815) | (91,250) |
Net real estate property | 2,534,743 | 1,538,812 |
Real estate loans receivable | 43,817 | 39,349 |
Investment in unconsolidated entity | 1,326 | 1,322 |
Net real estate investments | 2,579,886 | 1,579,483 |
Cash and cash equivalents | 8,396 | 3,143 |
Tenant receivables, net | 9,551 | 2,977 |
Other assets | 72,814 | 53,283 |
Total assets | 2,670,647 | 1,638,886 |
Liabilities: | ||
Credit facility | 448,321 | 389,375 |
Notes payable | 224,339 | 0 |
Mortgage debt | 113,736 | 94,240 |
Accounts payable | 2,222 | 644 |
Dividends and distributions payable | 31,755 | 20,783 |
Accrued expenses and other liabilities | 46,574 | 24,473 |
Intangible Liabilities Net | 9,399 | 5,950 |
Total liabilities | 876,346 | 535,465 |
Redeemable noncontrolling interest - Operating Partnership and partially owned properties | 25,891 | 26,960 |
Equity: | ||
Common shares, $0.01 par value, 500,000,000 common shares authorized, 134,620,300 and 86,864,063 common shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 1,349 | 872 |
Additional paid-in capital | 1,893,745 | 1,129,284 |
Accumulated deficit | (174,227) | (109,024) |
Accumulated other comprehensive income | 652 | 0 |
Total shareholders’ equity | 1,721,519 | 1,021,132 |
Noncontrolling interests: | ||
Operating Partnership | 46,138 | 45,451 |
Partially owned properties | 753 | 9,878 |
Total noncontrolling interests | 46,891 | 55,329 |
Total equity | 1,768,410 | 1,076,461 |
Total liabilities and equity | $ 2,670,647 | $ 1,638,886 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 134,620,300 | 86,864,063 |
Common stock, shares outstanding (in shares) | 134,620,300 | 86,864,063 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues: | ||||
Rental revenues | $ 53,327 | $ 28,145 | $ 130,378 | $ 72,111 |
Expense recoveries | 14,361 | 5,821 | 31,816 | 14,265 |
Interest income on real estate loans and other | 2,322 | 904 | 5,166 | 2,661 |
Total revenues | 70,010 | 34,870 | 167,360 | 89,037 |
Expenses: | ||||
Interest expense | 7,300 | 3,341 | 15,776 | 7,244 |
General and administrative | 4,917 | 4,018 | 13,964 | 11,359 |
Operating expenses | 19,159 | 7,966 | 43,994 | 20,979 |
Depreciation and amortization | 23,969 | 12,476 | 59,778 | 31,067 |
Acquisition expenses | 4,398 | 3,257 | 11,031 | 11,764 |
Total expenses | 59,743 | 31,058 | 144,543 | 82,413 |
Income before equity in income of unconsolidated entity and gain on sale of investment property: | 10,267 | 3,812 | 22,817 | 6,624 |
Equity in income of unconsolidated entity | 27 | 26 | 85 | 78 |
Gain on sale of investment property | 0 | 145 | 0 | 130 |
Net income | 10,294 | 3,983 | 22,902 | 6,832 |
Net income attributable to noncontrolling interests: | ||||
Operating Partnership | (255) | (200) | (629) | (333) |
Partially owned properties | (176) | (79) | (553) | (255) |
Net income attributable to controlling interest | 9,863 | 3,704 | 21,720 | 6,244 |
Preferred distributions | (436) | (300) | (1,421) | (791) |
Numerator for earnings per share - basic | $ 9,427 | $ 3,404 | $ 20,299 | $ 5,453 |
Net income per share: | ||||
Basic (in dollars per share) | $ 0.07 | $ 0.05 | $ 0.17 | $ 0.08 |
Diluted (in dollars per share) | $ 0.07 | $ 0.05 | $ 0.16 | $ 0.08 |
Weighted average common shares: | ||||
Basic (in shares) | 134,608,396 | 71,034,747 | 122,973,862 | 69,040,121 |
Diluted (in shares) | 138,880,787 | 75,104,821 | 127,395,989 | 73,040,846 |
Dividends and distributions declared per common share and OP Unit (in dollars per share) | $ 0.225 | $ 0.225 | $ 0.675 | $ 0.675 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash Flows from Operating Activities: | ||
Net income | $ 22,902 | $ 6,832 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization | 59,778 | 31,067 |
Amortization of deferred financing costs | 1,796 | 953 |
Amortization of lease inducements and above/below market lease intangibles | 2,994 | 1,559 |
Straight-line rental revenue/expense | (12,156) | (6,262) |
Amortization of above market assumed debt | (177) | (114) |
Loss on sale of investment property | 0 | (130) |
Equity in income of unconsolidated entity | (85) | (78) |
Distribution from unconsolidated entity | 82 | 79 |
Change in fair value of derivative | (67) | (116) |
Provision for bad debts | 152 | 26 |
Non-cash share compensation | 3,497 | 2,929 |
Change in operating assets and liabilities: | ||
Tenant receivables | (7,543) | (2,448) |
Other assets | (6,320) | (1,268) |
Accounts payable | 1,578 | 693 |
Accrued expenses and other liabilities | 23,832 | 7,929 |
Net cash provided by operating activities | 89,423 | 41,651 |
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability | (840) | 0 |
Cash Flows from Investing Activities: | ||
Proceeds on sales of investment property | 0 | 3,039 |
Acquisition of investment properties, net | (1,044,601) | (629,888) |
Capital expenditures on existing investment properties | (8,665) | (3,974) |
Real estate loans receivable | (8,153) | (12,404) |
Repayment of note receivable | 4,118 | 0 |
Note receivable | 0 | 4,123 |
Repayment of real estate loan receivable | (4,500) | 0 |
Leasing commissions | (707) | (278) |
Lease inducements | (4,870) | (2,478) |
Net cash used in investing activities | (1,058,378) | (650,106) |
Cash Flows from Financing Activities: | ||
Net proceeds from sale of common shares | 764,292 | 318,170 |
Proceeds from credit facility borrowings | 921,000 | 473,000 |
Payment on credit facility borrowings | (860,000) | (138,000) |
Proceeds from issuance of mortgage debt | 21,500 | 0 |
Proceeds from issuance of senior unsecured notes | 225,000 | 0 |
Principal payments on mortgage debt | 1,646 | 1,486 |
Debt issuance costs | (4,693) | (3,029) |
Dividends paid - shareholders | (74,515) | (47,665) |
Distributions to noncontrolling interest - Operating Partnership | (2,410) | (2,374) |
Preferred distributions paid - OP Unit holder | (1,115) | (360) |
Distributions to noncontrolling interest - partially owned properties | (450) | (158) |
Purchase of Series A Preferred Units | (9,756) | 0 |
Purchase of OP Units | (2,999) | (253) |
Common shares repurchased and retired | 0 | (595) |
Net cash provided by financing activities | 974,208 | 597,250 |
Net increase (decrease) in cash and cash equivalents | 5,253 | (11,205) |
Cash and cash equivalents, beginning of period | 3,143 | 15,923 |
Cash and cash equivalents, end of period | 8,396 | 4,718 |
Supplemental disclosure of cash flow information - interest paid during the period | 6,971 | 6,010 |
Change in fair value of interest rate swap agreements | 652 | 0 |
Supplemental disclosure of noncash activity - assumed debt | 0 | 18,690 |
Issuance of OP Units in connection with acquisition | 6,769 | 20,677 |
Supplemental disclosure of noncash activity - contingent consideration | $ 156 | $ 550 |
Consolidated Statement of Equit
Consolidated Statement of Equity Statement - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | AOCI Including Portion Attributable to Noncontrolling Interest [Member] | Parent [Member] | Operating Partnership Noncontrolling Interest [Member] | Partially Owned Properties Noncontrolling Interest [Member] | Noncontrolling Interest [Member] |
Balance at Dec. 31, 2015 | $ 1,076,461 | $ 872 | $ 1,129,284 | $ (109,024) | $ 1,021,132 | $ 45,451 | $ 9,878 | $ 55,329 | |
Net proceeds from sale of common shares | 764,292 | 472 | 763,820 | 764,292 | |||||
Restricted share award grants, net | 3,203 | 1 | 3,496 | (294) | 3,203 | ||||
Purchase of OP Units | (2,999) | (2,999) | (2,999) | ||||||
Conversion of OP Units | 4 | 8,094 | 8,098 | (8,098) | (8,098) | ||||
Dividends/distributions declared | (87,602) | (85,208) | (85,208) | (2,394) | (2,394) | ||||
Preferred distributions | (1,421) | (1,421) | (1,421) | ||||||
Issuance of OP Units in connection with acquisition | 2,869 | (3,900) | (3,900) | 6,869 | (100) | 6,769 | |||
Contributions | 50 | 50 | 50 | ||||||
Distributions | (450) | (450) | (450) | ||||||
Change in market value of Redeemable Noncontrolling Interests in Operating Partnership | (422) | (422) | (422) | ||||||
Reclassification of Noncontrolling Interest - partially owned properties | (8,514) | (8,514) | (8,514) | ||||||
Buyout of Noncontrolling Interests - partially owned properties | (611) | 53 | 53 | (664) | (664) | ||||
Change in fair value of interest rate cap agreements | 652 | $ 652 | 652 | ||||||
Net income | 22,902 | 21,720 | 21,720 | 629 | 553 | 1,182 | |||
Adjustment for Noncontrolling Interests ownership in Operating Partnership | (6,680) | (6,680) | 6,680 | 6,680 | |||||
Balance at Sep. 30, 2016 | $ 1,768,410 | $ 1,349 | $ 1,893,745 | $ (174,227) | $ 652 | $ 1,721,519 | $ 46,138 | $ 753 | $ 46,891 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Net income | $ 10,294 | $ 3,983 | $ 22,902 | $ 6,832 |
Change in fair value of interest rate swap agreements | 652 | 0 | 652 | 0 |
Total other comprehensive income | 652 | 0 | 652 | 0 |
Comprehensive income | 10,946 | 3,983 | 23,554 | 6,832 |
Comprehensive income attributable to noncontrolling interests | (17) | 0 | (17) | 0 |
Comprehensive income attributable to common shareholders | $ 10,929 | $ 3,983 | $ 23,537 | $ 6,832 |
Organization and Business
Organization and Business | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Physicians Realty Trust (the “Trust” or the “Company”) was organized in the state of Maryland on April 9, 2013. As of September 30, 2016 , the Trust was authorized to issue up to 500,000,000 common shares of beneficial interest, par value $0.01 per share (“common shares”). The Trust filed a Registration Statement on Form S-11 with the Securities and Exchange Commission (the “Commission” or the “SEC”) 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 real estate investment trust (“REIT”) formed primarily to acquire, selectively develop, own, and manage healthcare properties that are leased to physicians, hospitals, and healthcare delivery systems. 2016 Follow-On Public Offerings On January 25, 2016, the Trust completed a follow-on public offering of 21,275,000 common shares of beneficial interest, including 2,775,000 common shares issued upon exercise of the underwriters’ overallotment option, resulting in net proceeds to it of approximately $321.1 million . The Trust contributed the net proceeds of this offering to its Operating Partnership in exchange for 21,275,000 OP Units, and its Operating Partnership used the net proceeds of the public offering to repay borrowings under its unsecured revolving credit facility and for general corporate and working capital purposes and funding acquisitions. On April 11, 2016, the Trust completed a follow-on public offering of 25,875,000 common shares of beneficial interest, including 3,375,000 common shares issued upon exercise of the underwriters’ overallotment option, resulting in net proceeds to it of approximately $442.8 million . The Trust contributed the net proceeds of this offering to the Operating Partnership in exchange for 25,875,000 OP Units, and the Operating Partnership used the net proceeds of the public offering to repay borrowings under its unsecured revolving credit facility, for general corporate and working capital purposes, for funding acquisitions, and to fund a portion of the purchase price for the acquisition of medical office facilities (the “CHI Portfolio”) from certain subsidiaries and affiliates of Catholic Health Initiatives (the “CHI Acquisition”). ATM Program On August 5, 2016, the Trust and the Operating Partnership entered into separate At Market Issuance Sales Agreements (the “Sales Agreements”) with each of KeyBanc Capital Markets Inc., Credit Agricole Securities (USA) Inc., JMP Securities LLC, Raymond James & Associates, Inc., and Stifel Nicolaus & Company, Incorporated (the “Agents”), pursuant to which the Trust may issue and sell, from time to time, its common shares having an aggregate offering price of up to $300 million, through the Agents. The offering of the common shares from time to time were registered pursuant to the Trust’s Registration Statement on Form S-3ASR (File No. 333-205034), which became automatically effective upon filing with the Commission on June 17, 2015, as amended by Post-Effective Amendment No. 1 to the Registration Statement on Form S-3ASR, filed by the Trust with the Commission on January 19, 2016. In accordance with the Sales Agreements, the Trust may offer and sell its common shares through any of the Agents, from time to time, by any method deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, which includes sales made directly on the New York Stock Exchange or other existing trading market, or sales made to or through a market maker. With the Trust’s express written consent, sales also may be made in negotiated transactions or any other method permitted by law. During the quarterly period ended September 30, 2016, the Trust did not issue and sell any common shares pursuant to any of the Sales Agreements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The accompanying unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods ended September 30, 2016 and 2015 pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2015 , filed with the SEC on February 29, 2016. Principles of Consolidation GAAP requires the Trust to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). ASC 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Trust identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Trust consolidates its investment in a VIE when it determines that the Trust is the VIE’s primary beneficiary. The Trust may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Trust performs this analysis on an ongoing basis. For property holding entities not determined to be VIEs, the Trust consolidates such entities in which the Trust or the Operating Partnership owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For entities in which the Trust owns less than 100% of the equity interest, the Trust consolidates the property if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements. For these entities, the Trust records a noncontrolling interest representing equity held by noncontrolling interests. Noncontrolling Interests The Trust 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 Trust’s total shareholders’ equity, on the consolidated balance sheets. Operating Partnership: Net income or loss is allocated to noncontrolling interests based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and the Trust. Issuance of additional Common Shares and OP Units changes the ownership interests of both the noncontrolling interests and the Trust. Such transactions and the related proceeds are treated as capital transactions. During the three months ended March 31, 2016, the Operating Partnership partially funded a property acquisition by issuing an aggregate of 174,085 OP Units valued at approximately $2.9 million . The acquisition had a total purchase price of approximately $8.5 million . During the three months ended June 30, 2016, the Operating Partnership funded the acquisition of the remaining non-controlling interest on a property by issuing an aggregate of 217,549 OP Units valued at approximately $4.0 million . No acquisitions were funded through the issuance of OP units during the three months ended September 30, 2016. Noncontrolling interests in the Trust represent OP Units held by the Predecessor’s prior investors and other investors. As of September 30, 2016 , the Trust held a 97.4% interest in the Operating Partnership. As the sole general partner and the majority interest holder, the Trust consolidates the financial position and results of operation of the Operating Partnership. Holders of OP Units may not transfer their OP Units without the Trust’s prior written consent, as general partner of the Operating Partnership. Beginning on the first anniversary of the issuance of OP Units, OP Unit holders may tender their OP Units for redemption by the Operating Partnership in exchange for cash equal to the market price of the Trust’s common shares at the time of redemption or for unregistered common shares on a one-for-one basis. Such selection to pay cash or issue common shares to satisfy an OP Unit holder’s redemption request is solely within the control of the Trust. Accordingly, the Trust presents the OP Units of the Operating Partnership held by the Predecessor’s prior investors and other investors as noncontrolling interests within equity in the consolidated balance sheet. Partially Owned Properties: The Trust reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Trust that are not wholly owned by the Trust. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as “net income or loss attributable to noncontrolling interests - partially owned properties” in the consolidated statements of income. Redeemable Noncontrolling Interests - Operating Partnership and Partially Owned Properties On February 5, 2015, the Trust entered into a Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) which provides for the designation and issuance of the newly designated Series A Participating Redeemable Preferred Units of the Operating Partnership (“Series A Preferred Units”). Series A Preferred Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation. Holders of Series A Preferred Units are entitled to a 5% cumulative return and upon redemption, the receipt of one common share and $200 . The holders of the Series A Preferred Units have agreed not to cause the Operating Partnership to redeem their Series A Preferred Units prior to one year from the issuance date. In addition, Series A Preferred Units are redeemable at the option of the holder, and redemption obligations may be satisfied, at the Trust’s option, in cash or registered common shares. Instruments that require settlement in registered common shares may not be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered common shares. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheet. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. The fair value of the embedded derivative is $6.2 million and is included on the Trust’s consolidated balance sheets in accrued expenses and other liabilities. Effective March 1, 2015, the Trust received a $5 million equity investment from a third party. This investment earns a 15% cumulative preferred return. At any point subsequent to the third anniversary of the investment, the holder can require the Trust to redeem the instrument at a price for which the investor will realize a 15% internal rate of return. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheet. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. On April 1, 2016, 44,685 Series A Preferred Units issued in conjunction with the Minnetonka MOB acquisition were redeemed for a total value of $9.8 million . The fair value of the embedded derivative associated with the previously outstanding Series A Preferred Units was $2.7 million . Dividends and Distributions On September 26, 2016 , the Trust announced that its Board of Trustees authorized and the Trust declared a cash dividend of $0.225 per common share for the quarterly period ended September 30, 2016 . The distribution was paid on October 18, 2016 to common shareholders and OP Unit holders of record as of the close of business on October 6, 2016 . Tax Status of Dividends and Distributions Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes generally are taxable to shareholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as 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). Purchase of Investment Properties A property acquired not subject to an existing lease is treated as an asset acquisition and recorded at its purchase price, inclusive of acquisition costs, allocated between the acquired tangible and intangible assets and assumed liabilities based upon their relative fair values at the date of acquisition. A property acquired with an existing lease is accounted for as a business combination pursuant to the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”), and assets acquired and liabilities assumed, including identified intangible assets and liabilities, are recorded at fair value. The determination of fair value involves the use of significant judgment and estimation. The Trust makes estimates of the fair value of the tangible and intangible acquired assets and assumed liabilities using information obtained from multiple sources as a result of pre-acquisition due diligence and may include the assistance of a third party appraiser. The Trust estimates the fair value of buildings acquired on an “as-if-vacant” basis and depreciates the building value over the estimated remaining life of the building. The Trust determines the allocated value of other fixed assets, such as site improvements, based upon the replacement cost and depreciates such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. The fair value of land is determined either by considering the sales prices of similar properties in recent transactions or based on internal analyses of recently acquired and existing comparable properties within the Trust’s portfolio. In recognizing identified intangible assets and liabilities in connection with a business combination, the value of above-or-below market leases is estimated based on the present value (using an interest rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market lease intangibles are amortized as a reduction or addition to rental income over the estimated remaining term of the respective leases plus the term of any renewal options that the lessee would be economically compelled to exercise. In determining the value of in-place leases, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions, tenant improvements, legal, and other related costs based on current market demand. The values assigned to in-place leases are amortized to amortization expense over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off, net of any required lease termination payments. The Trust calculates the fair value of any long-term debt assumed by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which the Trust approximates based on the rate at which it would expect to incur on a replacement instrument on the date of acquisition, and recognizes any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument. Based on these estimates, the Trust recognizes the acquired assets and assumed liabilities at their estimated fair values, which are generally determined using Level 3 inputs, such as market rental rates, capitalization rates, discount rates, or other available market data. Initial valuations are subject to change until the information is finalized, no later than 12 months from the acquisition date. The Trust expenses transaction costs associated with acquisitions accounted for as business combinations in the period incurred. Impairment of Intangible and Long-Lived Assets The Trust periodically evaluates its long-lived assets, primarily consisting of investments in real estate, for impairment indicators or whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable. If indicators of impairment are present, the Trust evaluates the carrying value of the related real estate properties in relation to the undiscounted expected future cash flows of the underlying operations. In performing this evaluation, management considers market conditions and current intentions with respect to holding or disposing of the real estate property. The Trust adjusts the net book value of real estate properties to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. The Trust recognizes an impairment loss at the time it makes any such determination. If the Trust determines that an asset is impaired, the impairment to be recognized is measured as the amount by which the recorded amount of the asset exceeds its fair value. Fair value is typically determined using a discounted future cash flow analysis or other acceptable valuation techniques, which are based, in turn, upon Level 3 inputs, such as revenue and expense growth rates, capitalization rates, discount rates, or other available market data. The Trust did not record impairment charges in the three and nine month periods ended September 30, 2016 and 2015 . Investments in Unconsolidated Entities The Trust reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, the Trust’s share of the investee’s earnings or losses is included in its consolidated statements of income. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the equity interest. Real Estate Loans Receivable Real estate loans receivable consists of eight mezzanine loans and two term loans. Each mezzanine loan is collateralized by an ownership interest in the respective borrower, while the term loans are secured by equity interests in two medical office building developments. Interest income on the loans are recognized as earned based on the terms of the loans subject to evaluation of collectability risks and are included in the Trust’s consolidated statements of income. Rental Revenue Rental revenue is recognized on a straight-line basis over the terms of the related leases when collectability is reasonably assured. Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue for amounts more or less than amounts currently due from tenants. Amounts recognized in excess of amounts currently due from tenants are included in other assets and were approximately $27.9 million and $15.6 million as of September 30, 2016 and December 31, 2015 , respectively. If the Trust determines that collectability of straight-line rents is not reasonably assured, the Trust limits future recognition to amounts contractually owed and, where appropriate, establishes an allowance for estimated losses. Rental revenue is adjusted by amortization of lease inducements and above or below market rents on certain leases. Lease inducements and above or below market rents are amortized over the remaining life of the lease. Expense Recoveries Expense recoveries relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized as expense recovery revenue in the period the applicable expenses are incurred. The reimbursements are recorded at gross, as the Trust is generally the primary obligor with respect to real estate taxes and purchasing goods and services from third-party suppliers, has discretion in selecting the supplier, and bears the credit risk of tenant reimbursement. The Trust has certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses. For absolute net leases, the Trust does not recognize expense recoveries. Derivative Instruments When the Trust has derivative instruments embedded in other contracts, it records them either as an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, changes in the Trust’s derivative instruments’ fair value are recognized currently in earnings. Changes in the fair market values of the Trust’s derivative instruments are recorded in the consolidated statements of income if the derivative instruments do not qualify for, or the Trust does not elect to apply for, hedge accounting. If hedge accounting is applied to a derivative instrument, such changes are reported in accumulated other comprehensive income within the consolidated statement of equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. To manage interest rate risk for certain of its variable-rate debt, the Trust 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 Trust making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, 2016, the Trust had five outstanding interest rate swap contracts that are designated as cash flow hedges of interest rate risk. For presentational purposes, they are shown as one derivative due to the identical nature of their economic terms. Further detail is provided in Note 7 (Derivatives) . The effective portion of the change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) on the consolidated balance sheets and is subsequently reclassified into earnings as interest expense for the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. For the nine months ended September 30, 2016, there was no hedge ineffectiveness. The Trust expects no hedge ineffectiveness in the next 12 months. Income Taxes The Trust elected to be taxed as a REIT for federal tax purposes commencing with the filing of its tax return for the short taxable year ending December 31, 2013. The Trust had no taxable income prior to electing REIT status. To qualify as a REIT, the Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its shareholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Trust generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its shareholders. If the Trust fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Trust relief under certain statutory provisions. Such an event could materially adversely affect the Trust’s net income and net cash available for distribution to shareholders. However, the Trust intends to continue to operate in such a manner as to continue qualifying for treatment as a REIT. Although the Trust continues to qualify for taxation as a REIT, the Trust may be subject to state and local taxes on its income and property and federal income and excise taxes on its undistributed income. Management Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the amounts of revenue and expenses reported in the period. Significant estimates are made for the fair value assessments with respect to purchase price allocations, impairment assessments, stock-based compensation, and the valuation of financial instruments. Actual results could differ from these estimates. Contingent Liabilities The Trust records a liability for contingent consideration (included in accrued expenses and other liabilities on its consolidated balance sheets) at fair value as of the acquisition date and reassesses the fair value at the end of each reporting period, with any changes being recognized in earnings. Increases or decreases in the fair value of contingent consideration can result from changes in discount periods, discount rates, and probabilities that contingencies will be met. Reclassifications Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the previously reported consolidated balance sheets or consolidated statements of income. New Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard is effective for interim or annual periods beginning after December 15, 2017 and allows for either full retrospective or modified retrospective adoption. Early adoption of this standard is permitted for reporting periods beginning after December 15, 2016. The Trust is currently evaluating the impact the adoption of Topic 606 will have on its consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis . ASU 2015-02 requires entities to evaluate whether they should consolidate certain legal entities. Principally, the new consolidation standard modified the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIE") or voting interest entities. The Trust adopted ASU 2015-02 on January 1, 2016. Based on the Trust’s review and subsequent analysis of the structure of the Trust’s legal entities, the Trust has concluded that the Operating Partnership is a VIE because the limited partners of the Operating Partnership do not have substantive kick-out or participating rights. The Trust is the general partner and controlling owner of approximately 97.4% of the Operating Partnership and will continue to consolidate the Operating Partnership under this new guidance. With respect to the Trust’s investment in unconsolidated joint ventures, the new consolidation standard did not have an impact on previous consolidation conclusions. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance has been applied retrospectively to each prior period presented. The Trust adopted ASU 2015-03 on January 1, 2016. As a result of the adoption of ASU 2015-03, the Trust reclassified $6.0 million from net deferred costs to the related liabilities within the December 31, 2015 Consolidated Balance Sheet. In February 2016, the FASB issued ASU 2016-02, Leases . The update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. ASU 2016-02 will be effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Trust is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements. |
Acquisitions and Dispositions
Acquisitions and Dispositions | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Acquisitions and Disposition | Acquisitions and Dispositions During the nine months ended September 30, 2016 , the Trust completed acquisitions of 84 operating healthcare properties (including the CHI Portfolio), 1 land parcel, and 2 condominium units located in 22 states for an aggregate purchase price of approximately $1.05 billion . In addition, the Trust completed $8.2 million of loan transactions, $1.0 million of redeemable noncontrolling interest buyouts, and $0.6 million of equity buyouts, resulting in total investment activity of approximately $1.06 billion . This aggregate purchase price does not include near-term capital expenditure commitments of $12.9 million and committed tenant improvement allowances of $8.9 million related to the Company’s acquisition of the CHI Portfolio. Investment activity for the three months ended September 30, 2016 is summarized below: Property (1) Location Acquisition Date Purchase Price (in thousands) Prairie Care MOB (2) Maplewood, MN July 6, 2016 $ 4,886 RE Loan - El Paso El Paso, TX July 7, 2016 1,300 Springwoods MOB (2) (4) Spring, TX July 21, 2016 19,925 Equity Buyout - Foundation (5) TX / OK July 26, 2016 611 Mezzanine Loan - Hazelwood Minnetonka, MN July 29, 2016 3,375 Jackson, Tennessee Land (3) Jackson, TN August 2, 2016 1,000 Unity Portfolio (4 MOBs) (2) Lafayette, IN August 8, 2016 28,752 Medical Village at Maitland (2) Orlando, FL August 23, 2016 23,211 Tri-State Orthopaedics MOB (2) Evansville, IN August 30, 2016 22,000 Noncontrolling Interest Buyout - Great Falls Clinic (6) Great Falls, MT September 30, 2016 1,015 Maury Regional Healthcare MOB (2) (7) Spring Hill, TN September 30, 2016 18,500 Spring Ridge Medical Center (2) Wyomissing, PA September 30, 2016 6,100 Doctors Community Hospital MOB (2) Lanham, MD September 30, 2016 26,750 Gig Harbor Medical Pavilion (3) (4) Gig Harbor, WA September 30, 2016 4,766 Midlands One Professional Center (2) (4) Papillion, NE September 30, 2016 14,856 $ 177,047 (1) “MOB” means medical office building. (2) The Trust accounted for these acquisitions as business combinations pursuant to the acquisition method and expensed total acquisition costs of $4.4 million . (3) The Trust accounted for these acquisitions as asset acquisitions and capitalized total acquisition costs of $0.1 million . (4) These properties are part of the CHI Portfolio. (5) The Trust acquired the previously outstanding 1% noncontrolling interest retained by the predecessor owner on three properties in El Paso, Texas and Oklahoma City, Oklahoma. (6) The Trust acquired an additional 3% interest in the Trust’s Great Falls Clinic joint venture from the predecessor owner, increasing the Trust’s total interest to 77.3% . (7) The Trust acquired 99.7% of the ownership interest in this property, the remainder of which was retained by the seller. For the three months ended September 30, 2016 , the Trust recorded revenues and net income from its 2016 acquisitions of $25.5 million and $2.3 million , respectively. For the nine months ended September 30, 2016 , the Trust recorded revenues and net income from its 2016 acquisitions of $37.7 million and $5.3 million , respectively. The following table summarizes the acquisition date fair values of the assets acquired and the liabilities assumed, which the Trust determined using Level 2 and Level 3 inputs (in thousands): 1st Quarter 2nd Quarter 3rd Quarter Total Land $ 9,240 $ 19,565 $ 11,968 $ 40,773 Building and improvements 168,570 623,247 139,732 931,549 In-place lease intangible 19,158 12,911 13,132 45,201 Above market in-place lease intangible 2,407 1,265 3,037 6,709 Below market in-place lease intangible (469 ) (2,920 ) (650 ) (4,039 ) Above market in-place ground lease (218 ) (348 ) (78 ) (644 ) Below market in-place ground lease 2,057 20,953 3,367 26,377 Lease inducement 1,284 3,586 — 4,870 Contingent consideration — (156 ) — (156 ) Receivables — 104 — 104 Issuance of OP Units (2,869 ) — — (2,869 ) Noncontrolling interest — — (50 ) (50 ) Net assets acquired $ 199,160 $ 678,207 $ 170,458 $ 1,047,825 These preliminary allocations are subject to revision within the measurement period, not to exceed one year from the date of the acquisitions. Unaudited Pro Forma Financial Information The following table illustrates the effect on net income and earnings per share - basic and diluted as if the Trust had acquired the above acquisitions as of January 1, 2015 (in thousands, except per share amounts): Three Months Ended Nine Months Ended 2016 2015 2016 2015 Revenue $ 72,609 $ 38,643 $ 219,433 $ 178,785 Net income 11,099 7,078 35,565 24,840 Net income available to common shareholders 10,638 6,845 34,079 23,679 Earnings per share - basic $ 0.08 $ 0.05 $ 0.28 $ 0.19 Earnings per share - diluted $ 0.08 $ 0.05 $ 0.27 $ 0.19 Weighted average number of shares outstanding - basic 134,608,396 134,608,396 122,973,862 122,973,862 Weighted average number of shares outstanding - diluted 138,880,787 138,880,787 127,395,989 127,395,989 |
Intangibles
Intangibles | 9 Months Ended |
Sep. 30, 2016 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Intangibles | Intangibles The following is a summary of the carrying amount of intangible assets and liabilities as of September 30, 2016 and December 31, 2015 (in thousands): September 30, 2016 December 31, 2015 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Assets In-place leases $ 208,929 $ (46,557 ) $ 162,372 $ 163,728 $ (26,702 ) $ 137,026 Above market leases 32,840 (5,840 ) 27,000 26,787 (3,174 ) 23,613 Leasehold interest 712 (109 ) 603 712 (64 ) 648 Below market ground leases 40,317 (367 ) 39,950 13,941 (68 ) 13,873 Total $ 282,798 $ (52,873 ) $ 229,925 $ 205,168 $ (30,008 ) $ 175,160 Liabilities Below market lease $ 9,914 $ (1,823 ) $ 8,091 $ 6,068 $ (799 ) $ 5,269 Above market ground leases 1,345 (37 ) 1,308 701 (20 ) 681 Total $ 11,259 $ (1,860 ) $ 9,399 $ 6,769 $ (819 ) $ 5,950 The following is a summary of the acquired lease intangible amortization for the three and nine month periods ended September 30, 2016 and 2015 , respectively (in thousands): Three Months Ended Nine Months Ended 2016 2015 2016 2015 Amortization expense related to in-place leases $ 7,420 $ 4,253 $ 19,855 $ 10,124 Decrease of rental income related to above-market leases 1,276 742 3,322 1,671 Decrease of rental income related to leasehold interest 15 15 45 44 Increase of rental income related to below-market leases 670 167 1,218 431 Decrease of operating expense related to above market ground leases 8 4 17 12 Increase in operating expense related to below market ground leases 158 32 299 37 For the three and nine months ended September 30, 2016 , the Trust wrote-off above market lease intangible assets of approximately $0.7 million with accumulated amortization of approximately $0.5 million , and below market lease intangible liabilities of approximately $0.2 million with accumulated accretion of approximately $0.1 million , for a net recognition of approximately $41,000 loss in rental income from intangible amortization. Future aggregate net amortization of the acquired lease intangibles as of September 30, 2016 , is as follows (in thousands): Net Decrease in Revenue Net Increase in Expenses 2016 $ (554 ) $ 7,721 2017 (1,933 ) 28,761 2018 (2,023 ) 24,383 2019 (2,145 ) 20,018 2020 (2,232 ) 17,640 Thereafter (10,625 ) 102,491 Total $ (19,512 ) $ 201,014 As of September 30, 2016 , the weighted average amortization period for asset lease intangibles and liability lease intangibles are 18 and 11 years, respectively. |
Other Assets
Other Assets | 9 Months Ended |
Sep. 30, 2016 | |
Other Assets, Unclassified [Abstract] | |
Other Assets | Other Assets Other assets consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, Straight line rent receivable $ 27,875 $ 15,584 Lease inducements, net 9,409 4,970 Escrows 4,733 4,788 Earnest deposits 812 343 Notes receivable 16,618 20,620 Leasing commissions, net 1,601 1,052 Prepaid expenses 8,781 4,181 Other 2,985 1,745 Total $ 72,814 $ 53,283 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt The following is a summary of debt as of September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, Fixed interest mortgage notes $ 80,646 (1) $ 89,664 (2) Variable interest mortgage note 33,134 (3) 4,262 (4) Total mortgage debt 113,780 93,926 $850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 206,000 395,000 $250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 250,000 (5) — $150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031 150,000 — $75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027 75,000 — Total principal 794,780 488,926 Unamortized deferred financing cost (8,882 ) (5,985 ) Unamortized fair value adjustment 498 674 Total debt $ 786,396 $ 483,615 (1) Fixed interest mortgage notes, bearing interest from 4.71% to 6.58% , with a weighted average interest rate of 5.45% , and due in 2017, 2019, 2020, 2021, and 2022 collateralized by 10 properties with a net book value of $133.4 million . (2) Fixed interest mortgage notes, bearing interest from 4.71% to 6.58%, with a weighted average interest rate of 5.40%, and due in 2016, 2017, 2019, 2020, 2021, and 2022 collateralized by 11 properties with a net book value of $145.0 million. (3) Variable interest mortgage notes, bearing variable interest of LIBOR plus 2.25% to 3.25% , with a weighted average interest rate of 3.49% and due in 2017 and 2018, collateralized by four properties with a net book value of $46.1 million . (4) Variable interest mortgage note bearing variable interest of LIBOR plus 2.75% and due in 2017, collateralized by one property with a net book value of $5.9 million . (5) The Trust’s borrowings under the term loan feature of the Credit Agreement bear interest at a rate which is determined by the Trust’s credit rating, currently equal to LIBOR + 1.80% . The Trust has entered into a pay-fixed receive-variable interest rate swap, fixing the LIBOR component of this rate at 1.07% . On June 10, 2016, the Operating Partnership, as borrower, and the Trust entered into an amended and restated Credit Agreement with KeyBank National Association, as administrative agent, KeyBanc Capital Markets Inc., BMO Capital Markets, and Citizens Bank N.A., as joint lead arrangers and co-book runners, BMO Capital Markets and Citizens Bank N.A., as co-syndication agents, and the lenders party thereto (the “Credit Agreement”) which increased the maximum principal amount available under an unsecured revolving credit facility from $750 million to $850 million . The Credit Agreement contains a term loan feature allowing the Operating Partnership to borrow in a single drawing up to $250 million , increasing the borrowing capacity to an aggregate $1.1 billion . On July 7, 2016, the Operating Partnership borrowed $250.0 million under the 7 -year term loan feature of the Credit Agreement. Borrowings under the term loan feature of the Credit Agreement bear interest on the outstanding principal amount at a rate which is determined by the Trust’s credit rating, currently equal to LIBOR + 1.80% . The Trust simultaneously entered into a pay-fixed receive-variable rate swap for the full borrowing amount, fixing the LIBOR component of the borrowing rate to 1.07% , for an all-in fixed rate of 2.87% . Both the borrowing and pay-fixed receive-variable swap have a maturity date of June 10, 2023 . The Credit Agreement has a maturity date of September 18, 2020 and includes a one year extension option. Borrowings under the revolving credit facility of the Credit Agreement bear interest on the outstanding principal amount at a rate which is determined by the Trust’s credit rating, currently equal to LIBOR plus 1.20% . In addition, the Credit Agreement includes a facility fee equal to 0.25% per annum, which is determined by the Trust’s investment grade rating under the Credit Agreement. The Credit Agreement includes a swingline loan commitment for up to 10% of the maximum principal amount and provides an accordion feature allowing the Trust to increase borrowing capacity by up to an additional $500 million , subject to customary terms and conditions, resulting in a maximum borrowing capacity of $1.6 billion . The Credit Agreement contains financial covenants that, among other things, require compliance with leverage and coverage ratios and maintenance of minimum tangible net worth, as well as covenants that may limit the Trust’s and the Operating Partnership’s ability to incur additional debt or make distributions. The Trust may, at any time, voluntarily prepay any revolving or swingline loan under the Credit Agreement in whole or in part without premium or penalty. Prepayments of term borrowings require payment of premiums of up to 2.0% of the amount of prepayment, dependent on date of such prepayment. As of September 30, 2016 , the Trust was in compliance with all financial covenants. The Credit Agreement includes customary representations and warranties by the Operating Partnership and the Trust and imposes customary covenants on the Operating Partnership and the Trust. The Credit Agreement also contains customary events of default, and if an event of default occurs and continues, the Operating Partnership is subject to certain actions by the administrative agent, including without limitation, the acceleration of repayment of all amounts outstanding under the Credit Agreement. The Credit Agreement provides for revolving credit and term loans to the Operating Partnership. Base Rate Loans, Adjusted LIBOR Rate Loans, and Letters of Credit (each, as defined in the Credit Agreement) will be subject to interest rates, based upon the investment grade rating of the Trust and the Operating Partnership as follows: Credit Rating Margin for Revolving Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee Margin for Revolving Loans: Base Rate Loans Margin for Term Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee Margin for Term Loans: Base Rate Loans At Least A- or A3 LIBOR + 0.85% — % LIBOR + 1.40% 0.40 % At Least BBB+ or BAA1 LIBOR + 0.90% — % LIBOR + 1.45% 0.45 % At Least BBB or BAA2 LIBOR + 1.00% 0.10 % LIBOR + 1.55% 0.55 % At Least BBB- or BAA3 LIBOR + 1.20% 0.20 % LIBOR + 1.80% 0.80 % Below BBB- or BAA3 LIBOR + 1.55% 0.60 % LIBOR + 2.25% 1.25 % As of September 30, 2016 , there were $206.0 million of borrowings outstanding under the unsecured revolving credit facility and $643.9 million available for the Trust to borrow without adding additional properties to the unencumbered borrowing base of assets, as defined by the Credit Agreement. As of September 30, 2016 the Trust had $250.0 million of borrowings outstanding under the term loan feature of the Credit Agreement. On January 7, 2016, the Operating Partnership issued and sold $150.0 million aggregate principal amount of senior notes, comprised of (i) $15.0 million aggregate principal amount of 4.03% Senior Notes, Series A, due January 7, 2023, (ii) $45.0 million aggregate principal amount of 4.43% Senior Notes, Series B, due January 7, 2026, (iii) $45.0 million aggregate principal amount of 4.57% Senior Notes, Series C, due January 7, 2028, and (iv) $45.0 million aggregate principal amount of 4.74% Senior Notes, Series D, due January 7, 2031. On August 11, 2016, the note agreement for these notes was amended to make certain changes to its terms, including certain changes to affirmative covenants, negative covenants and definitions contained therein. On August 11, 2016, the Operating Partnership issued and sold $75.0 million aggregate principal amount of senior notes, comprised of (i) $25.0 million aggregate principal amount of 4.09% Senior Notes, Series A, due August 11, 2025, (ii) $25.0 million aggregate principal amount of 4.18% Senior Notes, Series B, due August 11, 2026, and (iii) $25.0 million aggregate principal amount of 4.24% Senior Notes, Series C, due August 11, 2027. Certain properties have mortgage debt that contain financial covenants. As of September 30, 2016 , the Trust was in compliance with all mortgage debt financial covenants. Scheduled principal payments due on debt as of September 30, 2016 , are as follows (in thousands): 2016 $ 590 2017 40,962 2018 29,973 2019 20,081 2020 211,523 Thereafter 491,651 Total Payments $ 794,780 As of September 30, 2016 , the Trust had total consolidated indebtedness of approximately $794.8 million . The weighted average interest rate on consolidated indebtedness was 3.30% (based on the 30-day LIBOR rate as of September 30, 2016 , of 0.53% ). For the three month periods ended September 30, 2016 and 2015 , the Trust incurred interest expense on its debt of $6.5 million and $3.0 million , respectively. For the nine month periods ended September 30, 2016 and 2015 , the Trust incurred interest expense on its debt of $14.0 million and $6.3 million , respectively. |
Derivatives Derivatives
Derivatives Derivatives | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instrument Detail [Abstract] | |
Derivative Instruments and Hedging Activities Disclosure [Text Block] | Derivatives In the normal course of business, a variety of financial instruments are used to manage or hedge interest rate risk. The Trust 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 Trust’s derivative instruments are recorded in the consolidated statements of income if such derivatives do not qualify for, or the Trust does not elect to apply for, hedge accounting. If hedge accounting is applied to a derivative instrument, such changes are reported in accumulated other comprehensive income within the consolidated statement of equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. To manage interest rate risk for certain of its variable-rate debt, the Trust 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 Trust making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, 2016 , the Trust had five outstanding interest rate swap contracts that are designated as cash flow hedges of interest rate risk. For presentational purposes, they are shown as one derivative due to the identical nature of their economic terms. The effective portion of the change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) on the condensed consolidated balance sheets and is subsequently reclassified into earnings as interest expense for the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. For the nine months ended September 30, 2016, there was no hedge ineffectiveness. The Trust expects no hedge ineffectiveness in the next 12 months. The following table summarizes the location and aggregate fair value of the interest rate swaps on the Trust’s consolidated balance sheets (in thousands): Total notional amount $ 250,000 Effective fixed interest rate (1) 2.87 % Effective date 7/7/2016 Maturity date 6/10/2023 Asset balance at September 30, 2016 (included in Other assets) $ 652 Asset balance at December 31, 2015 (included in Other assets) $ — (1) 1.07% effective swap rate plus 1.80% spread per Credit Agreement. |
Accrued Expenses and Other Liab
Accrued Expenses and Other Liabilities Accrued Expenses and Other Liabilities | 9 Months Ended |
Sep. 30, 2016 | |
Other Liabilities Disclosure [Abstract] | |
Accrued Expenses and Other Liabilities | Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, Prepaid rent $ 8,940 $ 2,778 Real estate taxes payable 8,560 2,349 Embedded derivative 6,192 8,149 Security deposits 4,355 4,038 Tenant improvement allowance 4,349 1,184 Contingent consideration 1,235 2,559 Accrued interest 2,363 22 Accrued incentive compensation 3,856 900 Accrued expenses and other 6,724 2,494 Total $ 46,574 $ 24,473 |
Stock-based Compensation
Stock-based Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation | Stock-based Compensation The Trust 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. Certain of the Trust’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 Trust’s determination of the amount of stock compensation expense requires a significant level of judgment in estimating the probability of achievement of these performance targets. Additionally, the Trust must make estimates regarding employee forfeitures in determining compensation expense. Subsequent changes in actual experience are monitored and estimates are updated as information is available. In connection with the IPO, the Trust adopted the 2013 Equity Incentive Plan (“2013 Plan”), which made available 600,000 common shares to be administered by the Compensation and Nominating Governance Committee of the Board of Trustees (the “Committee”). On August 7, 2014, at the Annual Meeting of Shareholders of Physicians Realty Trust, the Trust’s shareholders approved an amendment to the 2013 Plan to increase the number of common shares authorized for issuance under the 2013 Plan by 1,850,000 common shares, for a total of 2,450,000 common shares. Restricted Common Shares: The Committee has broad discretion in administering the terms of the 2013 Plan. Restricted common shares granted under the 2013 Plan are eligible for dividends as well as the right to vote. In the nine month period ended September 30, 2016 , the Trust granted a total of 155,306 restricted common shares with a total value of $2.8 million to its officers and certain of its employees, which have a one -year vesting period for officer award-recipients and a three -year vesting period for employee award-recipients. A summary of the status of the Trust’s non-vested restricted common shares as of September 30, 2016 and changes during the nine month period then ended follow: Common Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2015 311,839 $ 14.17 Granted 155,306 17.96 Vested (157,878 ) 14.09 Forfeited (326 ) 15.36 Non-vested at September 30, 2016 308,941 $ 16.11 For all service awards, the Trust records compensation expense for the entire award on a straight-line basis over the requisite service period. For the three month periods ended September 30, 2016 and 2015 , the Trust recognized non-cash share compensation of $0.9 million and $0.7 million , respectively. For the nine month periods ended September 30, 2016 and 2015 , the Trust recognized non-cash share compensation of $2.8 million and $2.2 million , respectively. Unrecognized compensation expense at September 30, 2016 was $2.1 million . The Trust’s compensation expense recorded in connection with grants of restricted common shares reflects an initial estimated cumulative forfeiture rate of 0% over the requisite service period of the awards. That estimate will be revised if subsequent information indicates that the actual number of awards expected to vest is likely to differ from previous estimates. Restricted Share Units: In March 2016, under the 2013 Plan, the Trust granted restricted share units at a target level of 141,337 to its officers and trustees, which are subject to certain performance, timing, and market conditions and a three -year and two -year service period for officers and trustees, respectively. In addition, each restricted share unit contains one dividend equivalent. The recipient will accrue dividend equivalents on awarded share units equal to the cash dividend that would have been paid on the awarded share unit had the awarded share unit been an issued and outstanding common share on the record date for the dividend. Approximately 80% of the restricted share units issued to officers vest based on certain market conditions. The market conditions were valued with the assistance of independent valuation specialists. The Trust utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $28.50 per unit for the March 2016 grant using the following assumptions: Volatility 20.3 % Dividend assumption reinvested Expected term in years 2.8 Risk-free rate 1.07 % Share price (per share) $ 17.67 The remaining 20% of the restricted share units issued to officers, and 100% of restricted share units issued to trustees, vest based upon certain performance or timing conditions. With respect to the performance conditions of the March 2016 grant, the grant date fair value of $17.67 per unit was based on the share price at the date of grant. The combined weighted average grant date fair value of the March 2016 restricted share units issued to officers is $26.33 per unit. The following is a summary of the activity in the Trust’s restricted share units during the nine months ended September 30, 2016 : Restricted Share Units Weighted Average Grant Date Fair Value Non-vested at December 31, 2015 171,886 $ 18.48 Granted 141,337 24.08 Vested (20,481 ) 15.87 Non-vested at September 30, 2016 292,742 $ 21.37 For the three month periods ended September 30, 2016 and 2015 , the Trust recognized non-cash share unit compensation expense of $0.6 million and $0.3 million , respectively. For the nine month periods ended September 30, 2016 and 2015 , the Trust recognized non-cash share unit compensation expense of $1.5 million and $0.8 million , respectively. Unrecognized compensation expense at September 30, 2016 was $3.4 million . |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurement (“ASC 820”), requires certain assets and liabilities be reported and/or disclosed at fair value in the financial statements and provides a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the valuation techniques and inputs used to measure fair value. In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Trust has the ability to access. Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques taking into account the characteristics of the asset or liability. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The Trust has six derivative instruments at September 30, 2016 , consisting of one embedded derivative as detailed in the Redeemable Noncontrolling Interests - Operating Partnership and Partially Owned Properties section of Note 2 (Summary of Significant Accounting Policies) and five interest rate swaps. For presentational purposes, the Trust’s interest rate swaps are shown as a single derivative due to the identical nature of their economic terms, as detailed in the Derivative Instruments section of Note 2 (Summary of Significant Accounting Policies) and Note 7 (Derivatives) . Neither the embedded derivative nor the interest rate swaps are traded on an exchange. The Trust’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 Trust measures its derivatives at fair value on a recurring basis. The fair values are based on Level 2 inputs described above. The Trust considers its own credit risk, as well as the credit risk of its counterparties, when evaluating the fair value of its derivatives. The Trust also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. This generally includes assets subject to impairment. There were no such assets measured at fair value as of September 30, 2016 . 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. The following table presents the fair value of the Trust’s financial instruments (in thousands): September 30, December 31, Carrying Amount Fair Value Carrying Amount Fair Value Assets: Real estate loans receivable $ 43,817 $ 43,817 $ 39,349 $ 39,349 Notes receivable $ 16,618 $ 16,618 $ 20,620 $ 20,620 Derivative assets $ 652 $ 652 $ — $ — Liabilities: Credit facility $ (456,000 ) $ (456,000 ) $ (395,000 ) $ (395,000 ) Notes payable $ (225,000 ) $ (232,154 ) $ — $ — Mortgage debt $ (114,278 ) $ (116,413 ) $ (94,600 ) $ (95,275 ) Derivative liabilities $ (6,192 ) $ (6,192 ) $ (8,216 ) $ (8,216 ) |
Tenant Operating Leases
Tenant Operating Leases | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
Tenant Operating Leases | Tenant Operating Leases The Trust is lessor of medical office buildings and other healthcare facilities. Leases have expirations from 2016 through 2045 . As of September 30, 2016 , the future minimum rental payments on non-cancelable leases, exclusive of expense recoveries, were as follows (in thousands): 2016 $ 50,511 2017 200,692 2018 195,623 2019 190,533 2020 186,085 Thereafter 1,238,856 Total $ 2,062,300 |
Rent Expense
Rent Expense | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
Rent Expense | Rent Expense The Trust leases the rights to parking structures at three of its properties, the air space above one property, and the land upon which fifty-six of its properties are located from third party land owners pursuant to separate leases. In addition, the Trust leases three individual office spaces. The leases require fixed rental payments and may also include escalation clauses and renewal options. These leases have terms of up to 89 years remaining, excluding extension options. As of September 30, 2016 , the future minimum lease obligations under non-cancelable parking, air, ground, and office leases were as follows (in thousands): 2016 $ 560 2017 2,259 2018 2,314 2019 2,334 2020 2,337 Thereafter 61,738 Total $ 71,542 Rent expense for the parking, air, and ground leases of $0.5 million and $0.4 million for the three month periods ended September 30, 2016 and 2015 , respectively, and $1.3 million and $1.2 million for the nine month periods ended September 30, 2016 and 2015 , respectively, are reported in operating expenses in the consolidated statements of income. |
Credit Concentration Credit Con
Credit Concentration Credit Concentration | 9 Months Ended |
Sep. 30, 2016 | |
Concentration Risks, Types, No Concentration Percentage [Abstract] | |
Credit Concentration | Credit Concentration The Trust uses annualized base rent (“ABR”) as its credit concentration metric. A nnualized base rent is calculated by multiplying contractual base rent for the month ended September 30, 2016 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 September 30, 2016 (in thousands): Tenant Total ABR Percent of ABR CHI - KentuckyOne Health $ 12,805 6.31 % CHI - Nebraska 9,275 4.57 % CHI - Franciscan (Seattle-Tacoma) 5,420 2.67 % CHI - St. Alexius (North Dakota) 5,278 2.60 % Great Falls Hospital 5,145 2.53 % Remaining portfolio 165,144 81.32 % Total 203,067 100.00 % Annualized base rent collected from the Company’s top five tenant relationships comprises 18.68% of its total annualized base rent for the period ending September 30, 2016 . Total annualized base rent from CHI affiliated tenants totals 18.89% , including the affiliates disclosed above. The following table summarizes certain information about the Company’s top five geographic concentrations as of September 30, 2016 (in thousands): State Total ABR Percent of ABR Texas $ 24,763 12.19 % Kentucky 15,555 7.66 % Indiana 12,813 6.31 % Arizona 12,444 6.13 % Washington 12,193 6.00 % Other 125,299 61.71 % Total 203,067 100.00 % |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | 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 Nine Months Ended 2016 2015 2016 2015 Numerator for earnings per share - basic: Net income $ 10,294 $ 3,983 $ 22,902 $ 6,832 Net income attributable to noncontrolling interests: Operating Partnership (255 ) (200 ) (629 ) (333 ) Partially owned properties (176 ) (79 ) (553 ) (255 ) Preferred distributions (436 ) (300 ) (1,421 ) (791 ) Numerator for earnings per share - basic $ 9,427 $ 3,404 $ 20,299 $ 5,453 Numerator for earnings per share - diluted: Numerator for earnings per share - basic $ 9,427 $ 3,404 $ 20,299 $ 5,453 Operating Partnership net income 255 200 629 333 Numerator for earnings per share - diluted $ 9,682 $ 3,604 $ 20,928 $ 5,786 Denominator for earnings per share - basic and diluted: Weighted average number of shares outstanding - basic 134,608,396 71,034,747 122,973,862 69,040,121 Effect of dilutive securities: Noncontrolling interest - Operating Partnership units 3,618,988 3,829,930 3,778,014 3,676,395 Restricted common shares 208,892 123,343 203,020 194,640 Restricted share units 444,511 116,801 441,093 129,690 Denominator for earnings per share - diluted common shares: 138,880,787 75,104,821 127,395,989 73,040,846 Earnings per share - basic $ 0.07 $ 0.05 $ 0.17 $ 0.08 Earnings per share - diluted $ 0.07 $ 0.05 $ 0.16 $ 0.08 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Since September 30, 2016, the Trust, through subsidiaries of its Operating Partnership, closed on the below acquisitions: Property Location Acquisition Date Purchase Price (in thousands) Northwest Michigan Surgery Center (1) Traverse City, MI October 28, 2016 $ 29,448 United Surgical Partners J.V. (2) Scottsdale, AZ October 31, 2016 903 $ 30,351 (1) The Trust’s acquisition of condominium units within the Northwest Michigan Surgery Center was funded through the unregistered issuance of 947,936 common shares of beneficial interest and nominal cash. (2) The Trust’s investment in the United Surgical Partners J.V. represents a 43% ownership interest. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation GAAP requires the Trust to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of variable interest entities (“VIEs”). ASC 810 broadly defines a VIE as an entity in which either (i) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of such entity that most significantly impact such entity’s economic performance or (ii) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support. The Trust identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or receive benefits of the VIE that could potentially be significant to the entity. The Trust consolidates its investment in a VIE when it determines that the Trust is the VIE’s primary beneficiary. The Trust may change its original assessment of a VIE upon subsequent events such as the modification of contractual arrangements that affect the characteristics or adequacy of the entity’s equity investments at risk and the disposition of all or a portion of an interest held by the primary beneficiary. The Trust performs this analysis on an ongoing basis. For property holding entities not determined to be VIEs, the Trust consolidates such entities in which the Trust or the Operating Partnership owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest. All intercompany balances and transactions are eliminated in consolidation. For entities in which the Trust owns less than 100% of the equity interest, the Trust consolidates the property if it has the direct or indirect ability to control the entities’ activities based upon the terms of the respective entities’ ownership agreements. For these entities, the Trust records a noncontrolling interest representing equity held by noncontrolling interests. |
Noncontrolling Interests | Noncontrolling Interests The Trust 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 Trust’s total shareholders’ equity, on the consolidated balance sheets. Operating Partnership: Net income or loss is allocated to noncontrolling interests based on their respective ownership percentage of the Operating Partnership. The ownership percentage is calculated by dividing the number of OP Units held by the noncontrolling interests by the total OP Units held by the noncontrolling interests and the Trust. Issuance of additional Common Shares and OP Units changes the ownership interests of both the noncontrolling interests and the Trust. Such transactions and the related proceeds are treated as capital transactions. During the three months ended March 31, 2016, the Operating Partnership partially funded a property acquisition by issuing an aggregate of 174,085 OP Units valued at approximately $2.9 million . The acquisition had a total purchase price of approximately $8.5 million . During the three months ended June 30, 2016, the Operating Partnership funded the acquisition of the remaining non-controlling interest on a property by issuing an aggregate of 217,549 OP Units valued at approximately $4.0 million . No acquisitions were funded through the issuance of OP units during the three months ended September 30, 2016. Noncontrolling interests in the Trust represent OP Units held by the Predecessor’s prior investors and other investors. As of September 30, 2016 , the Trust held a 97.4% interest in the Operating Partnership. As the sole general partner and the majority interest holder, the Trust consolidates the financial position and results of operation of the Operating Partnership. Holders of OP Units may not transfer their OP Units without the Trust’s prior written consent, as general partner of the Operating Partnership. Beginning on the first anniversary of the issuance of OP Units, OP Unit holders may tender their OP Units for redemption by the Operating Partnership in exchange for cash equal to the market price of the Trust’s common shares at the time of redemption or for unregistered common shares on a one-for-one basis. Such selection to pay cash or issue common shares to satisfy an OP Unit holder’s redemption request is solely within the control of the Trust. Accordingly, the Trust presents the OP Units of the Operating Partnership held by the Predecessor’s prior investors and other investors as noncontrolling interests within equity in the consolidated balance sheet. Partially Owned Properties: The Trust reflects noncontrolling interests in partially owned properties on the balance sheet for the portion of properties consolidated by the Trust that are not wholly owned by the Trust. The earnings or losses from those properties attributable to the noncontrolling interests are reflected as “net income or loss attributable to noncontrolling interests - partially owned properties” in the consolidated statements of income. Redeemable Noncontrolling Interests - Operating Partnership and Partially Owned Properties On February 5, 2015, the Trust entered into a Second Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) which provides for the designation and issuance of the newly designated Series A Participating Redeemable Preferred Units of the Operating Partnership (“Series A Preferred Units”). Series A Preferred Units have priority over all other partnership interests of the Operating Partnership with respect to distributions and liquidation. Holders of Series A Preferred Units are entitled to a 5% cumulative return and upon redemption, the receipt of one common share and $200 . The holders of the Series A Preferred Units have agreed not to cause the Operating Partnership to redeem their Series A Preferred Units prior to one year from the issuance date. In addition, Series A Preferred Units are redeemable at the option of the holder, and redemption obligations may be satisfied, at the Trust’s option, in cash or registered common shares. Instruments that require settlement in registered common shares may not be classified in permanent equity as it is not always completely within an issuer’s control to deliver registered common shares. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheet. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. The fair value of the embedded derivative is $6.2 million and is included on the Trust’s consolidated balance sheets in accrued expenses and other liabilities. Effective March 1, 2015, the Trust received a $5 million equity investment from a third party. This investment earns a 15% cumulative preferred return. At any point subsequent to the third anniversary of the investment, the holder can require the Trust to redeem the instrument at a price for which the investor will realize a 15% internal rate of return. Due to the redemption provision, which is outside of the control of the Trust, the Trust classifies the investment in the mezzanine section of its consolidated balance sheet. The Trust records the carrying amount of the redeemable noncontrolling interests at the greater of the carrying value or redemption value. On April 1, 2016, 44,685 Series A Preferred Units issued in conjunction with the Minnetonka MOB acquisition were redeemed for a total value of $9.8 million . The fair value of the embedded derivative associated with the previously outstanding Series A Preferred Units was $2.7 million . |
Dividends and Distributions | Dividends and Distributions On September 26, 2016 , the Trust announced that its Board of Trustees authorized and the Trust declared a cash dividend of $0.225 per common share for the quarterly period ended September 30, 2016 . The distribution was paid on October 18, 2016 to common shareholders and OP Unit holders of record as of the close of business on October 6, 2016 . Tax Status of Dividends and Distributions Our distributions of current and accumulated earnings and profits for U.S. federal income tax purposes generally are taxable to shareholders as ordinary income. Distributions in excess of these earnings and profits generally are treated as 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). |
Purchase of Investment Properties | Purchase of Investment Properties A property acquired not subject to an existing lease is treated as an asset acquisition and recorded at its purchase price, inclusive of acquisition costs, allocated between the acquired tangible and intangible assets and assumed liabilities based upon their relative fair values at the date of acquisition. A property acquired with an existing lease is accounted for as a business combination pursuant to the acquisition method in accordance with ASC Topic 805, Business Combinations (“ASC 805”), and assets acquired and liabilities assumed, including identified intangible assets and liabilities, are recorded at fair value. The determination of fair value involves the use of significant judgment and estimation. The Trust makes estimates of the fair value of the tangible and intangible acquired assets and assumed liabilities using information obtained from multiple sources as a result of pre-acquisition due diligence and may include the assistance of a third party appraiser. The Trust estimates the fair value of buildings acquired on an “as-if-vacant” basis and depreciates the building value over the estimated remaining life of the building. The Trust determines the allocated value of other fixed assets, such as site improvements, based upon the replacement cost and depreciates such value over the assets’ estimated remaining useful lives as determined at the applicable acquisition date. The fair value of land is determined either by considering the sales prices of similar properties in recent transactions or based on internal analyses of recently acquired and existing comparable properties within the Trust’s portfolio. In recognizing identified intangible assets and liabilities in connection with a business combination, the value of above-or-below market leases is estimated based on the present value (using an interest rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. The capitalized above-market or below-market lease intangibles are amortized as a reduction or addition to rental income over the estimated remaining term of the respective leases plus the term of any renewal options that the lessee would be economically compelled to exercise. In determining the value of in-place leases, management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes real estate taxes, insurance, other operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions, tenant improvements, legal, and other related costs based on current market demand. The values assigned to in-place leases are amortized to amortization expense over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off, net of any required lease termination payments. The Trust calculates the fair value of any long-term debt assumed by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which the Trust approximates based on the rate at which it would expect to incur on a replacement instrument on the date of acquisition, and recognizes any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument. Based on these estimates, the Trust recognizes the acquired assets and assumed liabilities at their estimated fair values, which are generally determined using Level 3 inputs, such as market rental rates, capitalization rates, discount rates, or other available market data. Initial valuations are subject to change until the information is finalized, no later than 12 months from the acquisition date. The Trust expenses transaction costs associated with acquisitions accounted for as business combinations in the period incurred. |
Impairment of Intangible and Long-Lived Assets | Impairment of Intangible and Long-Lived Assets The Trust periodically evaluates its long-lived assets, primarily consisting of investments in real estate, for impairment indicators or whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable. If indicators of impairment are present, the Trust evaluates the carrying value of the related real estate properties in relation to the undiscounted expected future cash flows of the underlying operations. In performing this evaluation, management considers market conditions and current intentions with respect to holding or disposing of the real estate property. The Trust adjusts the net book value of real estate properties to fair value if the sum of the expected future undiscounted cash flows, including sales proceeds, is less than book value. The Trust recognizes an impairment loss at the time it makes any such determination. If the Trust determines that an asset is impaired, the impairment to be recognized is measured as the amount by which the recorded amount of the asset exceeds its fair value. Fair value is typically determined using a discounted future cash flow analysis or other acceptable valuation techniques, which are based, in turn, upon Level 3 inputs, such as revenue and expense growth rates, capitalization rates, discount rates, or other available market data. The Trust did not record impairment charges in the three and nine month periods ended September 30, 2016 and 2015 . |
Investments in Unconsolidated Entities | Investments in Unconsolidated Entities The Trust reports investments in unconsolidated entities over whose operating and financial policies it has the ability to exercise significant influence under the equity method of accounting. Under this method of accounting, the Trust’s share of the investee’s earnings or losses is included in its consolidated statements of income. The initial carrying value of investments in unconsolidated entities is based on the amount paid to purchase the equity interest. |
Real Estate Loans Receivable | Real Estate Loans Receivable Real estate loans receivable consists of eight mezzanine loans and two term loans. Each mezzanine loan is collateralized by an ownership interest in the respective borrower, while the term loans are secured by equity interests in two medical office building developments. Interest income on the loans are recognized as earned based on the terms of the loans subject to evaluation of collectability risks and are included in the Trust’s consolidated statements of income. |
Rental Revenue | Rental Revenue Rental revenue is recognized on a straight-line basis over the terms of the related leases when collectability is reasonably assured. Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue for amounts more or less than amounts currently due from tenants. Amounts recognized in excess of amounts currently due from tenants are included in other assets and were approximately $27.9 million and $15.6 million as of September 30, 2016 and December 31, 2015 , respectively. If the Trust determines that collectability of straight-line rents is not reasonably assured, the Trust limits future recognition to amounts contractually owed and, where appropriate, establishes an allowance for estimated losses. Rental revenue is adjusted by amortization of lease inducements and above or below market rents on certain leases. Lease inducements and above or below market rents are amortized over the remaining life of the lease. |
Expense Recoveries | Expense Recoveries Expense recoveries relate to tenant reimbursement of real estate taxes, insurance, and other operating expenses that are recognized as expense recovery revenue in the period the applicable expenses are incurred. The reimbursements are recorded at gross, as the Trust is generally the primary obligor with respect to real estate taxes and purchasing goods and services from third-party suppliers, has discretion in selecting the supplier, and bears the credit risk of tenant reimbursement. The Trust has certain tenants with absolute net leases. Under these lease agreements, the tenant is responsible for operating and building expenses. For absolute net leases, the Trust does not recognize expense recoveries. |
Derivative Instruments | Derivative Instruments When the Trust has derivative instruments embedded in other contracts, it records them either as an asset or a liability measured at their fair value unless they qualify for a normal purchase or normal sales exception. When specific hedge accounting criteria are not met, changes in the Trust’s derivative instruments’ fair value are recognized currently in earnings. Changes in the fair market values of the Trust’s derivative instruments are recorded in the consolidated statements of income if the derivative instruments do not qualify for, or the Trust does not elect to apply for, hedge accounting. If hedge accounting is applied to a derivative instrument, such changes are reported in accumulated other comprehensive income within the consolidated statement of equity, exclusive of ineffectiveness amounts, which are recognized as adjustments to net income. To manage interest rate risk for certain of its variable-rate debt, the Trust 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 Trust making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of September 30, 2016, the Trust had five outstanding interest rate swap contracts that are designated as cash flow hedges of interest rate risk. For presentational purposes, they are shown as one derivative due to the identical nature of their economic terms. Further detail is provided in Note 7 (Derivatives) . The effective portion of the change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (“AOCI”) on the consolidated balance sheets and is subsequently reclassified into earnings as interest expense for the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. For the nine months ended September 30, 2016, there was no hedge ineffectiveness. The Trust expects no hedge ineffectiveness in the next 12 months. |
Income Taxes | Income Taxes The Trust elected to be taxed as a REIT for federal tax purposes commencing with the filing of its tax return for the short taxable year ending December 31, 2013. The Trust had no taxable income prior to electing REIT status. To qualify as a REIT, the Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its shareholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Trust generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its shareholders. If the Trust fails to qualify as a REIT in any taxable year, it will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Trust relief under certain statutory provisions. Such an event could materially adversely affect the Trust’s net income and net cash available for distribution to shareholders. However, the Trust intends to continue to operate in such a manner as to continue qualifying for treatment as a REIT. Although the Trust continues to qualify for taxation as a REIT, the Trust may be subject to state and local taxes on its income and property and federal income and excise taxes on its undistributed income. |
Management Estimates | Management Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the amounts of revenue and expenses reported in the period. Significant estimates are made for the fair value assessments with respect to purchase price allocations, impairment assessments, stock-based compensation, and the valuation of financial instruments. Actual results could differ from these estimates. |
Contingent Liabilities | Contingent Liabilities The Trust records a liability for contingent consideration (included in accrued expenses and other liabilities on its consolidated balance sheets) at fair value as of the acquisition date and reassesses the fair value at the end of each reporting period, with any changes being recognized in earnings. Increases or decreases in the fair value of contingent consideration can result from changes in discount periods, discount rates, and probabilities that contingencies will be met. |
Reclassifications | Reclassifications Certain prior period amounts have been reclassified to conform to the current financial statement presentation, with no effect on the previously reported consolidated balance sheets or consolidated statements of income. |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard is effective for interim or annual periods beginning after December 15, 2017 and allows for either full retrospective or modified retrospective adoption. Early adoption of this standard is permitted for reporting periods beginning after December 15, 2016. The Trust is currently evaluating the impact the adoption of Topic 606 will have on its consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis . ASU 2015-02 requires entities to evaluate whether they should consolidate certain legal entities. Principally, the new consolidation standard modified the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIE") or voting interest entities. The Trust adopted ASU 2015-02 on January 1, 2016. Based on the Trust’s review and subsequent analysis of the structure of the Trust’s legal entities, the Trust has concluded that the Operating Partnership is a VIE because the limited partners of the Operating Partnership do not have substantive kick-out or participating rights. The Trust is the general partner and controlling owner of approximately 97.4% of the Operating Partnership and will continue to consolidate the Operating Partnership under this new guidance. With respect to the Trust’s investment in unconsolidated joint ventures, the new consolidation standard did not have an impact on previous consolidation conclusions. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs , which changes the presentation of debt issuance costs in financial statements. ASU 2015-03 requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs will continue to be reported as interest expense. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The new guidance has been applied retrospectively to each prior period presented. The Trust adopted ASU 2015-03 on January 1, 2016. As a result of the adoption of ASU 2015-03, the Trust reclassified $6.0 million from net deferred costs to the related liabilities within the December 31, 2015 Consolidated Balance Sheet. In February 2016, the FASB issued ASU 2016-02, Leases . The update amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. ASU 2016-02 will be effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Trust is currently evaluating the impact of adopting the new leases standard on its consolidated financial statements. |
Acquisitions and Dispositions (
Acquisitions and Dispositions (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Schedule of acquisitions and aggregate purchase price | Investment activity for the three months ended September 30, 2016 is summarized below: Property (1) Location Acquisition Date Purchase Price (in thousands) Prairie Care MOB (2) Maplewood, MN July 6, 2016 $ 4,886 RE Loan - El Paso El Paso, TX July 7, 2016 1,300 Springwoods MOB (2) (4) Spring, TX July 21, 2016 19,925 Equity Buyout - Foundation (5) TX / OK July 26, 2016 611 Mezzanine Loan - Hazelwood Minnetonka, MN July 29, 2016 3,375 Jackson, Tennessee Land (3) Jackson, TN August 2, 2016 1,000 Unity Portfolio (4 MOBs) (2) Lafayette, IN August 8, 2016 28,752 Medical Village at Maitland (2) Orlando, FL August 23, 2016 23,211 Tri-State Orthopaedics MOB (2) Evansville, IN August 30, 2016 22,000 Noncontrolling Interest Buyout - Great Falls Clinic (6) Great Falls, MT September 30, 2016 1,015 Maury Regional Healthcare MOB (2) (7) Spring Hill, TN September 30, 2016 18,500 Spring Ridge Medical Center (2) Wyomissing, PA September 30, 2016 6,100 Doctors Community Hospital MOB (2) Lanham, MD September 30, 2016 26,750 Gig Harbor Medical Pavilion (3) (4) Gig Harbor, WA September 30, 2016 4,766 Midlands One Professional Center (2) (4) Papillion, NE September 30, 2016 14,856 $ 177,047 (1) “MOB” means medical office building. (2) The Trust accounted for these acquisitions as business combinations pursuant to the acquisition method and expensed total acquisition costs of $4.4 million . (3) The Trust accounted for these acquisitions as asset acquisitions and capitalized total acquisition costs of $0.1 million . (4) These properties are part of the CHI Portfolio. (5) The Trust acquired the previously outstanding 1% noncontrolling interest retained by the predecessor owner on three properties in El Paso, Texas and Oklahoma City, Oklahoma. (6) The Trust acquired an additional 3% interest in the Trust’s Great Falls Clinic joint venture from the predecessor owner, increasing the Trust’s total interest to 77.3% . (7) The Trust acquired 99.7% of the ownership interest in this property, the remainder of which was retained by the seller. |
Schedule of preliminary purchase price allocations of assets acquired and liabilities assumed | The following table summarizes the acquisition date fair values of the assets acquired and the liabilities assumed, which the Trust determined using Level 2 and Level 3 inputs (in thousands): 1st Quarter 2nd Quarter 3rd Quarter Total Land $ 9,240 $ 19,565 $ 11,968 $ 40,773 Building and improvements 168,570 623,247 139,732 931,549 In-place lease intangible 19,158 12,911 13,132 45,201 Above market in-place lease intangible 2,407 1,265 3,037 6,709 Below market in-place lease intangible (469 ) (2,920 ) (650 ) (4,039 ) Above market in-place ground lease (218 ) (348 ) (78 ) (644 ) Below market in-place ground lease 2,057 20,953 3,367 26,377 Lease inducement 1,284 3,586 — 4,870 Contingent consideration — (156 ) — (156 ) Receivables — 104 — 104 Issuance of OP Units (2,869 ) — — (2,869 ) Noncontrolling interest — — (50 ) (50 ) Net assets acquired $ 199,160 $ 678,207 $ 170,458 $ 1,047,825 |
Schedule of pro forma combined revenue, net income, and earnings per share-basic and diluted | The following table illustrates the effect on net income and earnings per share - basic and diluted as if the Trust had acquired the above acquisitions as of January 1, 2015 (in thousands, except per share amounts): Three Months Ended Nine Months Ended 2016 2015 2016 2015 Revenue $ 72,609 $ 38,643 $ 219,433 $ 178,785 Net income 11,099 7,078 35,565 24,840 Net income available to common shareholders 10,638 6,845 34,079 23,679 Earnings per share - basic $ 0.08 $ 0.05 $ 0.28 $ 0.19 Earnings per share - diluted $ 0.08 $ 0.05 $ 0.27 $ 0.19 Weighted average number of shares outstanding - basic 134,608,396 134,608,396 122,973,862 122,973,862 Weighted average number of shares outstanding - diluted 138,880,787 138,880,787 127,395,989 127,395,989 |
Intangibles (Tables)
Intangibles (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Summary of the carrying amount of intangible assets and liabilities | The following is a summary of the carrying amount of intangible assets and liabilities as of September 30, 2016 and December 31, 2015 (in thousands): September 30, 2016 December 31, 2015 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Assets In-place leases $ 208,929 $ (46,557 ) $ 162,372 $ 163,728 $ (26,702 ) $ 137,026 Above market leases 32,840 (5,840 ) 27,000 26,787 (3,174 ) 23,613 Leasehold interest 712 (109 ) 603 712 (64 ) 648 Below market ground leases 40,317 (367 ) 39,950 13,941 (68 ) 13,873 Total $ 282,798 $ (52,873 ) $ 229,925 $ 205,168 $ (30,008 ) $ 175,160 Liabilities Below market lease $ 9,914 $ (1,823 ) $ 8,091 $ 6,068 $ (799 ) $ 5,269 Above market ground leases 1,345 (37 ) 1,308 701 (20 ) 681 Total $ 11,259 $ (1,860 ) $ 9,399 $ 6,769 $ (819 ) $ 5,950 |
Summary of the carrying amount of acquired lease intangibles | The following is a summary of the acquired lease intangible amortization for the three and nine month periods ended September 30, 2016 and 2015 , respectively (in thousands): Three Months Ended Nine Months Ended 2016 2015 2016 2015 Amortization expense related to in-place leases $ 7,420 $ 4,253 $ 19,855 $ 10,124 Decrease of rental income related to above-market leases 1,276 742 3,322 1,671 Decrease of rental income related to leasehold interest 15 15 45 44 Increase of rental income related to below-market leases 670 167 1,218 431 Decrease of operating expense related to above market ground leases 8 4 17 12 Increase in operating expense related to below market ground leases 158 32 299 37 |
Schedule of future amortization of the acquired lease intangibles | Future aggregate net amortization of the acquired lease intangibles as of September 30, 2016 , is as follows (in thousands): Net Decrease in Revenue Net Increase in Expenses 2016 $ (554 ) $ 7,721 2017 (1,933 ) 28,761 2018 (2,023 ) 24,383 2019 (2,145 ) 20,018 2020 (2,232 ) 17,640 Thereafter (10,625 ) 102,491 Total $ (19,512 ) $ 201,014 |
Other Assets (Tables)
Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Other Assets, Unclassified [Abstract] | |
Schedule of other assets | Other assets consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, Straight line rent receivable $ 27,875 $ 15,584 Lease inducements, net 9,409 4,970 Escrows 4,733 4,788 Earnest deposits 812 343 Notes receivable 16,618 20,620 Leasing commissions, net 1,601 1,052 Prepaid expenses 8,781 4,181 Other 2,985 1,745 Total $ 72,814 $ 53,283 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of debt | The following is a summary of debt as of September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, Fixed interest mortgage notes $ 80,646 (1) $ 89,664 (2) Variable interest mortgage note 33,134 (3) 4,262 (4) Total mortgage debt 113,780 93,926 $850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 206,000 395,000 $250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 250,000 (5) — $150 million senior unsecured notes bearing fixed interest of 4.03% to 4.74%, due January 2023 to 2031 150,000 — $75 million senior unsecured notes bearing fixed interest of 4.09% to 4.24%, due August 2025 to 2027 75,000 — Total principal 794,780 488,926 Unamortized deferred financing cost (8,882 ) (5,985 ) Unamortized fair value adjustment 498 674 Total debt $ 786,396 $ 483,615 (1) Fixed interest mortgage notes, bearing interest from 4.71% to 6.58% , with a weighted average interest rate of 5.45% , and due in 2017, 2019, 2020, 2021, and 2022 collateralized by 10 properties with a net book value of $133.4 million . (2) Fixed interest mortgage notes, bearing interest from 4.71% to 6.58%, with a weighted average interest rate of 5.40%, and due in 2016, 2017, 2019, 2020, 2021, and 2022 collateralized by 11 properties with a net book value of $145.0 million. (3) Variable interest mortgage notes, bearing variable interest of LIBOR plus 2.25% to 3.25% , with a weighted average interest rate of 3.49% and due in 2017 and 2018, collateralized by four properties with a net book value of $46.1 million . (4) Variable interest mortgage note bearing variable interest of LIBOR plus 2.75% and due in 2017, collateralized by one property with a net book value of $5.9 million . (5) The Trust’s borrowings under the term loan feature of the Credit Agreement bear interest at a rate which is determined by the Trust’s credit rating, currently equal to LIBOR + 1.80% . The Trust has entered into a pay-fixed receive-variable interest rate swap, fixing the LIBOR component of this rate at 1.07% . |
Schedule of adjusted LIBOR rate loans and interest rates based on credit rating | Base Rate Loans, Adjusted LIBOR Rate Loans, and Letters of Credit (each, as defined in the Credit Agreement) will be subject to interest rates, based upon the investment grade rating of the Trust and the Operating Partnership as follows: Credit Rating Margin for Revolving Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee Margin for Revolving Loans: Base Rate Loans Margin for Term Loans: Adjusted LIBOR Rate Loans and Letter of Credit Fee Margin for Term Loans: Base Rate Loans At Least A- or A3 LIBOR + 0.85% — % LIBOR + 1.40% 0.40 % At Least BBB+ or BAA1 LIBOR + 0.90% — % LIBOR + 1.45% 0.45 % At Least BBB or BAA2 LIBOR + 1.00% 0.10 % LIBOR + 1.55% 0.55 % At Least BBB- or BAA3 LIBOR + 1.20% 0.20 % LIBOR + 1.80% 0.80 % Below BBB- or BAA3 LIBOR + 1.55% 0.60 % LIBOR + 2.25% 1.25 % |
Schedule of principal payments due on debt | Scheduled principal payments due on debt as of September 30, 2016 , are as follows (in thousands): 2016 $ 590 2017 40,962 2018 29,973 2019 20,081 2020 211,523 Thereafter 491,651 Total Payments $ 794,780 |
Derivatives Derivatives (Tables
Derivatives Derivatives (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Derivative [Line Items] | |
Schedule of Interest Rate Derivatives [Table Text Block] | The following table summarizes the location and aggregate fair value of the interest rate swaps on the Trust’s consolidated balance sheets (in thousands): Total notional amount $ 250,000 Effective fixed interest rate (1) 2.87 % Effective date 7/7/2016 Maturity date 6/10/2023 Asset balance at September 30, 2016 (included in Other assets) $ 652 Asset balance at December 31, 2015 (included in Other assets) $ — (1) 1.07% effective swap rate plus 1.80% spread per Credit Agreement. |
Accrued Expenses and Other Li29
Accrued Expenses and Other Liabilities Accrued Expenses and Other Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of accrued expenses and other liabilities | Accrued expenses and other liabilities consisted of the following as of September 30, 2016 and December 31, 2015 (in thousands): September 30, December 31, Prepaid rent $ 8,940 $ 2,778 Real estate taxes payable 8,560 2,349 Embedded derivative 6,192 8,149 Security deposits 4,355 4,038 Tenant improvement allowance 4,349 1,184 Contingent consideration 1,235 2,559 Accrued interest 2,363 22 Accrued incentive compensation 3,856 900 Accrued expenses and other 6,724 2,494 Total $ 46,574 $ 24,473 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of non-vested restricted common shares | A summary of the status of the Trust’s non-vested restricted common shares as of September 30, 2016 and changes during the nine month period then ended follow: Common Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2015 311,839 $ 14.17 Granted 155,306 17.96 Vested (157,878 ) 14.09 Forfeited (326 ) 15.36 Non-vested at September 30, 2016 308,941 $ 16.11 |
Schedule of weighted average grant date fair value assumptions | The Trust utilized a Monte Carlo simulation to calculate the weighted average grant date fair value of $28.50 per unit for the March 2016 grant using the following assumptions: Volatility 20.3 % Dividend assumption reinvested Expected term in years 2.8 Risk-free rate 1.07 % Share price (per share) $ 17.67 |
Summary of the activity in the restricted share units | The following is a summary of the activity in the Trust’s restricted share units during the nine months ended September 30, 2016 : Restricted Share Units Weighted Average Grant Date Fair Value Non-vested at December 31, 2015 171,886 $ 18.48 Granted 141,337 24.08 Vested (20,481 ) 15.87 Non-vested at September 30, 2016 292,742 $ 21.37 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of fair value of other financial instruments | The following table presents the fair value of the Trust’s financial instruments (in thousands): September 30, December 31, Carrying Amount Fair Value Carrying Amount Fair Value Assets: Real estate loans receivable $ 43,817 $ 43,817 $ 39,349 $ 39,349 Notes receivable $ 16,618 $ 16,618 $ 20,620 $ 20,620 Derivative assets $ 652 $ 652 $ — $ — Liabilities: Credit facility $ (456,000 ) $ (456,000 ) $ (395,000 ) $ (395,000 ) Notes payable $ (225,000 ) $ (232,154 ) $ — $ — Mortgage debt $ (114,278 ) $ (116,413 ) $ (94,600 ) $ (95,275 ) Derivative liabilities $ (6,192 ) $ (6,192 ) $ (8,216 ) $ (8,216 ) |
Tenant Operating Leases (Tables
Tenant Operating Leases (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
Schedule of future minimum rental payments on non-cancelable leases, exclusive of expense recoveries | As of September 30, 2016 , the future minimum rental payments on non-cancelable leases, exclusive of expense recoveries, were as follows (in thousands): 2016 $ 50,511 2017 200,692 2018 195,623 2019 190,533 2020 186,085 Thereafter 1,238,856 Total $ 2,062,300 |
Rent Expense (Tables)
Rent Expense (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
Schedule of future minimum lease obligations under non-cancelable ground leases | As of September 30, 2016 , the future minimum lease obligations under non-cancelable parking, air, ground, and office leases were as follows (in thousands): 2016 $ 560 2017 2,259 2018 2,314 2019 2,334 2020 2,337 Thereafter 61,738 Total $ 71,542 |
Credit Concentration Credit C34
Credit Concentration Credit Concentration (Tables) - Sales Revenue, Services, Net [Member] | 9 Months Ended |
Sep. 30, 2016 | |
Customer Concentration Risk [Member] | |
Concentration Risk [Line Items] | |
Schedules of Concentration of Risk, by Risk Factor [Table Text Block] | The following table summarizes certain information about the Company’s top five tenant credit concentrations as of September 30, 2016 (in thousands): Tenant Total ABR Percent of ABR CHI - KentuckyOne Health $ 12,805 6.31 % CHI - Nebraska 9,275 4.57 % CHI - Franciscan (Seattle-Tacoma) 5,420 2.67 % CHI - St. Alexius (North Dakota) 5,278 2.60 % Great Falls Hospital 5,145 2.53 % Remaining portfolio 165,144 81.32 % Total 203,067 100.00 % |
Geographic Concentration Risk [Member] | |
Concentration Risk [Line Items] | |
Schedules of Concentration of Risk, by Risk Factor [Table Text Block] | The following table summarizes certain information about the Company’s top five geographic concentrations as of September 30, 2016 (in thousands): State Total ABR Percent of ABR Texas $ 24,763 12.19 % Kentucky 15,555 7.66 % Indiana 12,813 6.31 % Arizona 12,444 6.13 % Washington 12,193 6.00 % Other 125,299 61.71 % Total 203,067 100.00 % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of amounts used in computing basic and diluted earnings per share | The following table shows the amounts used in computing the Trust’s basic and diluted earnings per share (in thousands, except share and per share data): Three Months Ended Nine Months Ended 2016 2015 2016 2015 Numerator for earnings per share - basic: Net income $ 10,294 $ 3,983 $ 22,902 $ 6,832 Net income attributable to noncontrolling interests: Operating Partnership (255 ) (200 ) (629 ) (333 ) Partially owned properties (176 ) (79 ) (553 ) (255 ) Preferred distributions (436 ) (300 ) (1,421 ) (791 ) Numerator for earnings per share - basic $ 9,427 $ 3,404 $ 20,299 $ 5,453 Numerator for earnings per share - diluted: Numerator for earnings per share - basic $ 9,427 $ 3,404 $ 20,299 $ 5,453 Operating Partnership net income 255 200 629 333 Numerator for earnings per share - diluted $ 9,682 $ 3,604 $ 20,928 $ 5,786 Denominator for earnings per share - basic and diluted: Weighted average number of shares outstanding - basic 134,608,396 71,034,747 122,973,862 69,040,121 Effect of dilutive securities: Noncontrolling interest - Operating Partnership units 3,618,988 3,829,930 3,778,014 3,676,395 Restricted common shares 208,892 123,343 203,020 194,640 Restricted share units 444,511 116,801 441,093 129,690 Denominator for earnings per share - diluted common shares: 138,880,787 75,104,821 127,395,989 73,040,846 Earnings per share - basic $ 0.07 $ 0.05 $ 0.17 $ 0.08 Earnings per share - diluted $ 0.07 $ 0.05 $ 0.16 $ 0.08 |
Subsequent Events (Tables)
Subsequent Events (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Schedule of acquisitions through subsidiaries of operating partnership | Since September 30, 2016, the Trust, through subsidiaries of its Operating Partnership, closed on the below acquisitions: Property Location Acquisition Date Purchase Price (in thousands) Northwest Michigan Surgery Center (1) Traverse City, MI October 28, 2016 $ 29,448 United Surgical Partners J.V. (2) Scottsdale, AZ October 31, 2016 903 $ 30,351 (1) The Trust’s acquisition of condominium units within the Northwest Michigan Surgery Center was funded through the unregistered issuance of 947,936 common shares of beneficial interest and nominal cash. (2) The Trust’s investment in the United Surgical Partners J.V. represents a 43% ownership interest. |
Organization and Business (Deta
Organization and Business (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 11, 2016 | Jan. 25, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | ||
Common shares sold | 25,875,000 | 21,275,000 | ||
Shares issued upon exercise of the underwriters' overallotment option | 3,375,000 | 2,775,000 | ||
Net proceeds | $ 442.8 | $ 321.1 | ||
Number of partnership units issued | 25,875,000 | 21,275,000 |
Summary of Significant Accoun38
Summary of Significant Accounting Policies (Details) | Oct. 31, 2016USD ($) | Oct. 18, 2016$ / shares | Sep. 26, 2016$ / shares | Jun. 30, 2016Rate | Mar. 01, 2015USD ($) | Sep. 30, 2016USD ($)instrumentsmezzanine_loan$ / sharesshares | Sep. 30, 2015USD ($)$ / shares | Sep. 30, 2016USD ($)instrumentsbuildingsmezzanine_loan$ / sharesshares | Sep. 30, 2015USD ($)$ / shares | Apr. 01, 2016USD ($)shares | Dec. 31, 2015USD ($) |
Entity Information [Line Items] | |||||||||||
Ownership interest in consolidated subsidiaries (as a percent) | 100.00% | ||||||||||
Purchase price | $ 177,047,000 | $ 1,060,000,000 | |||||||||
Percentage of interest held | Rate | 97.40% | ||||||||||
Operating partnership units redemption ratio | 1 | ||||||||||
Fair value of embedded derivative | $ 6,192,000 | $ 6,192,000 | $ 8,149,000 | ||||||||
Equity method investment received | $ 5,000,000 | ||||||||||
Internal rate of return | 15.00% | ||||||||||
Cash dividend declared to common shareholders (in dollars per share) | $ / shares | $ 0.225 | $ 0.225 | $ 0.225 | $ 0.675 | $ 0.675 | ||||||
Impairment loss | $ 0 | $ 0 | $ 0 | $ 0 | |||||||
Number of medical office building developments as collateral for real estate loans receivable | buildings | 2 | ||||||||||
Rental revenue due in excess of amounts currently due from tenants | $ 27,900,000 | $ 27,900,000 | $ 15,600,000 | ||||||||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 6 | 6 | |||||||||
Ineffectiveness on outstanding interest rate swap contracts designated as cash flow hedges | $ 0 | ||||||||||
Operating Partnership | |||||||||||
Entity Information [Line Items] | |||||||||||
Purchase price | $ 8,500,000 | ||||||||||
Series A Preferred Units | |||||||||||
Entity Information [Line Items] | |||||||||||
Cumulative preferred return | 5.00% | ||||||||||
Redemption value (in dollars per share) | $ / shares | $ 200 | ||||||||||
Interest Rate Swap | |||||||||||
Entity Information [Line Items] | |||||||||||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 5 | 5 | |||||||||
Units | Operating Partnership | |||||||||||
Entity Information [Line Items] | |||||||||||
Number of units issued for funding purchase price | shares | 174,085 | ||||||||||
Supplemental disclosure of noncash activity - issuance of OP Units and Series A Preferred Units in connection with acquisitions | $ 2,900,000 | $ 2,900,000 | |||||||||
OP Units issued to fund the acquisition of the remaining non-controlling interest on a property | shares | 217,549 | ||||||||||
Value of OP Units issued to fund the acquisition of the remaining non-controlling interest on a property | $ 4,000,000 | ||||||||||
Minnetonka MOB | Units | |||||||||||
Entity Information [Line Items] | |||||||||||
Fair value of embedded derivative | $ 2,700,000 | ||||||||||
Preferred shares redeemed | shares | 44,685 | ||||||||||
Preferred shares value redeemed | $ 9,800,000 | ||||||||||
Subsequent events | |||||||||||
Entity Information [Line Items] | |||||||||||
Purchase price | $ 30,351,000 | ||||||||||
Cash dividend distributed to common shareholders (in dollars per share) | $ / shares | $ 0.225 | ||||||||||
Mezzanine Loan Receivable | |||||||||||
Entity Information [Line Items] | |||||||||||
Number of mezzanine loans collateralized | mezzanine_loan | 8 | 8 | |||||||||
Term Loan Receivable | |||||||||||
Entity Information [Line Items] | |||||||||||
Number of mezzanine loans collateralized | mezzanine_loan | 2 | 2 |
Acquisitions and Dispositions39
Acquisitions and Dispositions (Details 1) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($)condominium_unitsstateshealthcareproperty | |
Business Acquisition [Line Items] | ||
Number Of States In Which Operating Healthcare Properties And Land Parcel Located | states | 22 | |
Buyout of Redeemable Noncontrolling Interest | $ 1,000 | |
Buyout of Noncontrolling Interests - partially owned properties | 611 | |
Business Combination, Consideration Transferred | $ 177,047 | 1,060,000 |
Loans | ||
Business Acquisition [Line Items] | ||
Mortgage Loans on Real Estate, New Mortgage Loans | $ 8,200 | |
Series of Individually Immaterial Business Acquisitions | ||
Business Acquisition [Line Items] | ||
Number of Operating Healthcare Properties | healthcareproperty | 84 | |
Number of Land Parcels | condominium_units | 1 | |
Number Of Condominium Units | condominium_units | 2 | |
Payments to Acquire Businesses, Gross | $ 1,050,000 | |
Near-term capital expenditure commitments | CHI Portfolio | ||
Business Acquisition [Line Items] | ||
Other Commitment | 12,900 | 12,900 |
Committed tenant improvement allowances | CHI Portfolio | ||
Business Acquisition [Line Items] | ||
Other Commitment | $ 8,900 | $ 8,900 |
Acquisitions and Dispositions40
Acquisitions and Dispositions (Details 2) - USD ($) $ in Thousands | Sep. 30, 2016 | Aug. 30, 2016 | Aug. 23, 2016 | Aug. 08, 2016 | Aug. 02, 2016 | Jul. 29, 2016 | Jul. 26, 2016 | Jul. 21, 2016 | Jul. 07, 2016 | Jul. 06, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 177,047 | $ 1,060,000 | ||||||||||||
Buyout of Noncontrolling Interests - partially owned properties | 611 | |||||||||||||
Buyout of Redeemable Noncontrolling Interest | 1,000 | |||||||||||||
Acquisition expenses | 4,398 | $ 3,257 | 11,031 | $ 11,764 | ||||||||||
Business Acquisition, Transaction Costs | $ 100 | $ 100 | $ 100 | |||||||||||
Prairie Care MOB | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 4,886 | |||||||||||||
Equity Buyout - Foundation | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Buyout of Noncontrolling Interests - partially owned properties | $ 611 | |||||||||||||
Noncontrolling Interest, Increase from Business Combination, Percent | 1.00% | |||||||||||||
Jackson, Tennessee Land | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 1,000 | |||||||||||||
Unity Portfolio (4 MOBs) | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 28,752 | |||||||||||||
Medical Village at Maitland | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 23,211 | |||||||||||||
Tri-State Orthopaedics MOB | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 22,000 | |||||||||||||
Noncontrolling Interest Buyout - Great Falls Clinic | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Buyout of Redeemable Noncontrolling Interest | $ 1,015 | |||||||||||||
Noncontrolling Interest, Increase from Business Combination, Percent | 3.00% | 3.00% | 3.00% | |||||||||||
Noncontrolling Interest, Ownership Percentage by Parent | 77.30% | 77.30% | 77.30% | |||||||||||
Maury Regional Healthcare MOB | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 18,500 | |||||||||||||
Business Acquisition, Percentage of Voting Interests Acquired | 99.70% | 99.70% | 99.70% | |||||||||||
Spring Ridge Medical Center | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 6,100 | |||||||||||||
Doctors Community Hospital MOB | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | 26,750 | |||||||||||||
CHI Portfolio | Springwoods MOB | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 19,925 | |||||||||||||
CHI Portfolio | Gig Harbor Medical Pavilion | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | 4,766 | |||||||||||||
CHI Portfolio | Midlands One Professional Center | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Business Combination, Consideration Transferred | $ 14,856 | |||||||||||||
Term Loan Receivable | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Secured Loans on Real Estate, Number of Loans | $ 1,300 | |||||||||||||
Mezzanine Loan Receivable | ||||||||||||||
Business Acquisition [Line Items] | ||||||||||||||
Secured Loans on Real Estate, Number of Loans | $ 3,375 |
Acquisitions and Dispositions41
Acquisitions and Dispositions (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Business Acquisition [Line Items] | ||||
Real Estate Revenue, Net | $ 70,010 | $ 34,870 | $ 167,360 | $ 89,037 |
Net income | 10,294 | $ 3,983 | 22,902 | $ 6,832 |
Series of Individually Immaterial Business Acquisitions | ||||
Business Acquisition [Line Items] | ||||
Real Estate Revenue, Net | 25,500 | 37,700 | ||
Net income | $ 2,300 | $ 5,300 |
Acquisitions and Dispositions42
Acquisitions and Dispositions (Details 4) $ in Thousands | Sep. 30, 2016USD ($) |
Business Acquisition [Line Items] | |
Land | $ 40,773 |
Building and improvements | 931,549 |
Lease inducement | 4,870 |
Contingent consideration | (156) |
Receivables | 104 |
Issuance of OP Units | 2,869 |
Business Combination, Acquisition of Less than 100 Percent, Noncontrolling Interest, Fair Value | 50 |
Net assets acquired | 1,047,825 |
1st Quarter | |
Business Acquisition [Line Items] | |
Land | 9,240 |
Building and improvements | 168,570 |
Lease inducement | 1,284 |
Contingent consideration | 0 |
Receivables | 0 |
Issuance of OP Units | 2,869 |
Business Combination, Acquisition of Less than 100 Percent, Noncontrolling Interest, Fair Value | 0 |
Net assets acquired | 199,160 |
2nd Quarter | |
Business Acquisition [Line Items] | |
Land | 19,565 |
Building and improvements | 623,247 |
Lease inducement | 3,586 |
Contingent consideration | (156) |
Receivables | 104 |
Issuance of OP Units | 0 |
Business Combination, Acquisition of Less than 100 Percent, Noncontrolling Interest, Fair Value | 0 |
Net assets acquired | 678,207 |
3rd Quarter | |
Business Acquisition [Line Items] | |
Land | 11,968 |
Building and improvements | 139,732 |
Lease inducement | 0 |
Contingent consideration | 0 |
Receivables | 0 |
Issuance of OP Units | 0 |
Business Combination, Acquisition of Less than 100 Percent, Noncontrolling Interest, Fair Value | 50 |
Net assets acquired | 170,458 |
In-place lease intangible | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 45,201 |
In-place lease intangible | 1st Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 19,158 |
In-place lease intangible | 2nd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 12,911 |
In-place lease intangible | 3rd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 13,132 |
Above market in-place lease intangible | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 6,709 |
Above market in-place lease intangible | 1st Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 2,407 |
Above market in-place lease intangible | 2nd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 1,265 |
Above market in-place lease intangible | 3rd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 3,037 |
Below market in-place lease intangible | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (4,039) |
Below market in-place lease intangible | 1st Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (469) |
Below market in-place lease intangible | 2nd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (2,920) |
Below market in-place lease intangible | 3rd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (650) |
Above market in-place ground lease | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (644) |
Above market in-place ground lease | 1st Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (218) |
Above market in-place ground lease | 2nd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (348) |
Above market in-place ground lease | 3rd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangible Liabilities | (78) |
Below market in-place ground lease | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 26,377 |
Below market in-place ground lease | 1st Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 2,057 |
Below market in-place ground lease | 2nd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 20,953 |
Below market in-place ground lease | 3rd Quarter | |
Business Acquisition [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | $ 3,367 |
Acquisitions and Dispositions43
Acquisitions and Dispositions (Details 5) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Business Acquisition [Line Items] | ||||
Revenue | $ 72,609 | $ 38,643 | $ 219,433 | $ 178,785 |
Net income | 11,099 | 7,078 | 35,565 | 24,840 |
Net income available to common shareholders | $ 10,638 | $ 6,845 | $ 34,079 | $ 23,679 |
Earnings per share - basic | $ 0.08 | $ 0.05 | $ 0.28 | $ 0.19 |
Earnings per share - diluted | $ 0.08 | $ 0.05 | $ 0.27 | $ 0.19 |
Weighted average number of shares outstanding - basic | 134,608,396 | 71,034,747 | 122,973,862 | 69,040,121 |
Weighted average number of shares outstanding - diluted | 138,880,787 | 75,104,821 | 127,395,989 | 73,040,846 |
Intangibles (Details 1)
Intangibles (Details 1) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Intangibles | ||
Cost | $ 282,798 | $ 205,168 |
Accumulated amortization | (52,873) | (30,008) |
Net | 229,925 | 175,160 |
Liability | ||
Cost | 11,259 | 6,769 |
Accumulated amortization | (1,860) | (819) |
Net | 9,399 | 5,950 |
In-place lease intangible | ||
Intangibles | ||
Cost | 208,929 | 163,728 |
Accumulated amortization | (46,557) | (26,702) |
Net | 162,372 | 137,026 |
Above market in-place lease intangible | ||
Intangibles | ||
Cost | 32,840 | 26,787 |
Accumulated amortization | (5,840) | (3,174) |
Net | 27,000 | 23,613 |
Leasehold interest | ||
Intangibles | ||
Cost | 712 | 712 |
Accumulated amortization | (109) | (64) |
Net | 603 | 648 |
Below market in-place ground lease | ||
Intangibles | ||
Cost | 40,317 | 13,941 |
Accumulated amortization | (367) | (68) |
Net | 39,950 | 13,873 |
Below market in-place lease intangible | ||
Liability | ||
Below market lease, cost | 9,914 | 6,068 |
Below market lease, accumulated amortization | (1,823) | (799) |
Below Market Lease, Net | 8,091 | 5,269 |
Above market in-place ground lease | ||
Liability | ||
Cost | 1,345 | 701 |
Accumulated amortization | (37) | (20) |
Net | $ 1,308 | $ 681 |
Intangibles (Details 2)
Intangibles (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
In-place lease intangible | ||||
Intangibles | ||||
Amortization expense related to in-place leases | $ 7,420 | $ 4,253 | $ 19,855 | $ 10,124 |
Above market in-place lease intangible | ||||
Intangibles | ||||
Decrease of rental income | 1,276 | 742 | 3,322 | 1,671 |
Leasehold interest | ||||
Intangibles | ||||
Decrease of rental income | 15 | 15 | 45 | 44 |
Below market in-place lease intangible | ||||
Intangibles | ||||
Increase of rental income related to below-market leases | 670 | 167 | 1,218 | 431 |
Above market in-place ground lease | ||||
Intangibles | ||||
Decrease (increase) of operating expense | 8 | 4 | 17 | 12 |
Below market in-place ground lease | ||||
Intangibles | ||||
Decrease (increase) of operating expense | $ 158 | $ 32 | $ 299 | $ 37 |
Intangibles Intangibles (Detail
Intangibles Intangibles (Details 3) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2016 | Sep. 30, 2016 | |
Intangibles | ||
Net recognition of loss in rental income from intangible amortization write offs | $ 41,000 | $ 41,000 |
Above market in-place lease intangible | ||
Intangibles | ||
Above market lease intangible assets written off | 700,000 | 700,000 |
Above market lease intangible accumulated amortization written off | 500,000 | 500,000 |
Below market in-place lease intangible | ||
Intangibles | ||
Below market lease intangible liabilities written off | 200,000 | 200,000 |
Below market lease intangible accumulated accretion written off | $ 100,000 | $ 100,000 |
Intangibles (Details 4)
Intangibles (Details 4) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Future aggregate net amortization of acquired lease intangibles (net decrease in revenue) | |
2,016 | $ 554 |
2,017 | (1,933) |
2,018 | (2,023) |
2,019 | (2,145) |
2,020 | (2,232) |
Thereafter | (10,625) |
Total | (19,512) |
Future aggregate net amortization of acquired lease intangibles (net increase in expenses) | |
2,016 | 7,721 |
2,017 | 28,761 |
2,018 | 24,383 |
2,019 | 20,018 |
2,020 | 17,640 |
Thereafter | 102,491 |
Total | $ 201,014 |
Weighted average amortization period for lease intangibles | 18 years |
Weighted average amortization period for lease intangible liability | 11 years |
Other Assets (Details)
Other Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Other Assets, Unclassified [Abstract] | ||
Straight line rent receivable | $ 27,875 | $ 15,584 |
Lease inducements, net | 9,409 | 4,970 |
Escrows | 4,733 | 4,788 |
Earnest deposits | 812 | 343 |
Notes receivable | 16,618 | 20,620 |
Leasing commissions, net | 1,601 | 1,052 |
Prepaid expenses | 8,781 | 4,181 |
Other | 2,985 | 1,745 |
Total | $ 72,814 | $ 53,283 |
Debt (Details 1)
Debt (Details 1) | Jun. 30, 2016Rate | Jun. 10, 2016USD ($) | Dec. 31, 2015USD ($)propertiesRate | Sep. 30, 2016USD ($)healthcarepropertyRate | Jul. 07, 2016Rate | Mar. 31, 2016USD ($) |
Debt | ||||||
Notes payable | $ 93,926,000 | $ 113,780,000 | ||||
Unsecured Debt | 389,375,000 | 448,321,000 | ||||
Total principal | 488,926,000 | 794,780,000 | ||||
Unamortized deferred financing cost | (5,985,000) | (8,882,000) | ||||
Unamortized fair value adjustment | 674,000 | 498,000 | ||||
Total debt | $ 483,615,000 | $ 786,396,000 | ||||
Weighted average interest rate (as a percent) | Rate | 2.75% | 3.40% | ||||
Credit Agreement Amendment [Member] | ||||||
Debt | ||||||
Current borrowing capacity | $ 1,100,000,000 | |||||
Credit Agreement Amendment [Member] | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Reference rate (as a percent) | 1.20% | |||||
Interest Rate Swap | ||||||
Debt | ||||||
Effective fixed interest rate | Rate | 2.87% | |||||
Interest Rate Swap | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Effective fixed interest rate | Rate | 1.07% | |||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit Agreement Amendment [Member] | ||||||
Debt | ||||||
Current borrowing capacity | $ 850,000,000 | $ 750,000,000 | ||||
Mortgage notes, bearing fixed interest due In 2017, 2019, 2020, 2021, and 2022 | ||||||
Debt | ||||||
Notes payable | $ 80,646,000 | |||||
Mortgage notes, bearing fixed interest from 4.71% to 6.58% | ||||||
Debt | ||||||
Notes payable | $ 89,664,000 | |||||
Weighted average interest rate (as a percent) | 5.40% | 5.45% | ||||
Number of properties included in collateralized | 11 | 10 | ||||
Net book value of properties included in the collateralized | $ 145,038,000 | $ 133,400,000 | ||||
Mortgage notes, bearing fixed interest from 4.71% to 6.58% | Minimum | ||||||
Debt | ||||||
Interest rate (as a percent) | Rate | 4.71% | 4.71% | ||||
Mortgage notes, bearing fixed interest from 4.71% to 6.58% | Maximum | ||||||
Debt | ||||||
Interest rate (as a percent) | Rate | 6.58% | 6.58% | ||||
Mortgage notes, bearing variable interest due in 2017 and 2018 | ||||||
Debt | ||||||
Notes payable | $ 33,134,000 | |||||
Number of properties included in collateralized | healthcareproperty | 4 | |||||
Net book value of properties included in the collateralized | $ 46,100,000 | |||||
Mortgage notes, bearing variable interest due in 2017 and 2018 | Minimum | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Reference rate (as a percent) | Rate | 2.25% | |||||
Mortgage notes, bearing variable interest due in 2017 and 2018 | Maximum | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Reference rate (as a percent) | 3.25% | |||||
Mortgage note, bearing variable interest of LIBOR plus 2.75% | ||||||
Debt | ||||||
Notes payable | $ 4,262,000 | |||||
Number of properties included in collateralized | properties | 1 | |||||
Net book value of properties included in the collateralized | $ 5,900,000 | |||||
Mortgage note, bearing variable interest of LIBOR plus 2.75% | Minimum | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Reference rate (as a percent) | Rate | 2.75% | |||||
Mortgage note, bearing variable interest of LIBOR plus 2.75% | Maximum | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Reference rate (as a percent) | 2.75% | |||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | ||||||
Debt | ||||||
Unsecured Debt | $ 395,000,000 | 206,000,000 | ||||
Current borrowing capacity | 643,900,000 | |||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | London Interbank Offered Rate (LIBOR) | ||||||
Debt | ||||||
Reference rate (as a percent) | 1.20% | 1.20% | ||||
$250 million unsecured term borrowing bearing fixed interest of 2.87%, due June 2023 | ||||||
Debt | ||||||
Unsecured Debt | $ 0 | 250,000,000 | ||||
Unsecured notes, bearing fixed interest due in 2023, 2026, 2028, and 2031 | ||||||
Debt | ||||||
Notes payable | 0 | 150,000,000 | ||||
Unsecured notes bearing fixed interest due in 2025, 2026, and 2027 | ||||||
Debt | ||||||
Notes payable | $ 0 | $ 75,000,000 |
Debt (Details 2)
Debt (Details 2) - USD ($) | Jun. 10, 2023 | Sep. 30, 2016 | Jul. 07, 2016 | Jun. 30, 2016 | Jun. 10, 2016 | Dec. 31, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 11, 2016 | Mar. 31, 2016 | Jan. 07, 2016 |
Debt | |||||||||||||
Maturity date | Jun. 10, 2023 | ||||||||||||
Total principal | $ 794,780,000 | $ 488,926,000 | $ 794,780,000 | $ 794,780,000 | |||||||||
Interest expense, debt | 6,500,000 | $ 3,000,000 | 14,000,000 | $ 6,300,000 | |||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | |||||||||||||
Debt | |||||||||||||
Maximum borrowing capacity under accordion feature | 750,000,000 | $ 750,000,000 | 750,000,000 | 750,000,000 | |||||||||
Amount outstanding | 206,000,000 | 206,000,000 | 206,000,000 | ||||||||||
Current borrowing capacity | $ 643,900,000 | $ 643,900,000 | $ 643,900,000 | ||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Operating Partnership | |||||||||||||
Debt | |||||||||||||
Interest rate at end of period (as a percent) | 3.30% | 3.30% | 3.30% | ||||||||||
Term Loan | |||||||||||||
Debt | |||||||||||||
Amount outstanding | $ 250,000,000 | $ 250,000,000 | $ 250,000,000 | ||||||||||
Senior notes | |||||||||||||
Debt | |||||||||||||
Debt instrument, face amount | $ 75,000,000 | $ 150,000,000 | |||||||||||
Credit Agreement Amendment [Member] | |||||||||||||
Debt | |||||||||||||
Unused fee (as a percent) | 0.25% | ||||||||||||
Maximum borrowing capacity as a percentage of maximum principal amount | 10.00% | ||||||||||||
Increase in maximum borrowing capacity | $ 500,000,000 | ||||||||||||
Maximum borrowing capacity under accordion feature | 1,600,000,000 | ||||||||||||
Current borrowing capacity | $ 1,100,000,000 | ||||||||||||
Series A | |||||||||||||
Debt | |||||||||||||
Interest rate (as a percent) | 4.09% | 4.03% | |||||||||||
Series A | Senior notes | |||||||||||||
Debt | |||||||||||||
Debt instrument, face amount | $ 25,000,000 | $ 15,000,000 | |||||||||||
Series B | |||||||||||||
Debt | |||||||||||||
Interest rate (as a percent) | 4.18% | 4.43% | |||||||||||
Series B | Senior notes | |||||||||||||
Debt | |||||||||||||
Debt instrument, face amount | $ 25,000,000 | $ 45,000,000 | |||||||||||
Series C | |||||||||||||
Debt | |||||||||||||
Interest rate (as a percent) | 4.24% | 4.57% | |||||||||||
Series C | Senior notes | |||||||||||||
Debt | |||||||||||||
Debt instrument, face amount | $ 25,000,000 | $ 45,000,000 | |||||||||||
Series D | |||||||||||||
Debt | |||||||||||||
Interest rate (as a percent) | 4.74% | ||||||||||||
Series D | Senior notes | |||||||||||||
Debt | |||||||||||||
Debt instrument, face amount | $ 45,000,000 | ||||||||||||
London Interbank Offered Rate (LIBOR) | $850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.20% | 1.20% | |||||||||||
London Interbank Offered Rate (LIBOR) | Credit Agreement Amendment [Member] | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.20% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR rate loans and letter of credit | Credit rating at least A- or A3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.85% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR rate loans and letter of credit | Credit rating at least BBBplus or BAA1 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.90% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR rate loans and letter of credit | Credit rating at least BBB or BAA2 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.00% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR rate loans and letter of credit | Credit rating at least BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.20% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR rate loans and letter of credit | Credit rating below BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.55% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR Rate Term Loans And Letter Of Credit [Member] | Credit rating at least A- or A3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.40% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR Rate Term Loans And Letter Of Credit [Member] | Credit rating at least BBBplus or BAA1 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.45% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR Rate Term Loans And Letter Of Credit [Member] | Credit rating at least BBB or BAA2 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.55% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR Rate Term Loans And Letter Of Credit [Member] | Credit rating at least BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.80% | ||||||||||||
London Interbank Offered Rate (LIBOR) | Adjusted LIBOR Rate Term Loans And Letter Of Credit [Member] | Credit rating below BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 2.25% | ||||||||||||
Term Loan | Credit Agreement Amendment [Member] | |||||||||||||
Debt | |||||||||||||
Debt Instrument, Term | 7 years | ||||||||||||
Current borrowing capacity | $ 250,000,000 | ||||||||||||
Term Loan | Base rate | Base rate loans | Credit rating at least A- or A3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.40% | ||||||||||||
Term Loan | Base rate | Base rate loans | Credit rating at least BBBplus or BAA1 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.45% | ||||||||||||
Term Loan | Base rate | Base rate loans | Credit rating at least BBB or BAA2 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.55% | ||||||||||||
Term Loan | Base rate | Base rate loans | Credit rating at least BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.80% | ||||||||||||
Term Loan | Base rate | Base rate loans | Credit rating below BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 1.25% | ||||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | |||||||||||||
Debt | |||||||||||||
Term of extension option | 1 year | ||||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit Agreement Amendment [Member] | |||||||||||||
Debt | |||||||||||||
Current borrowing capacity | $ 850,000,000 | $ 750,000,000 | |||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Base rate | Base rate loans | Credit rating at least A- or A3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.00% | ||||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Base rate | Base rate loans | Credit rating at least BBBplus or BAA1 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.00% | ||||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Base rate | Base rate loans | Credit rating at least BBB or BAA2 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.10% | ||||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Base rate | Base rate loans | Credit rating at least BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.20% | ||||||||||||
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Base rate | Base rate loans | Credit rating below BBB- or BAA3 | |||||||||||||
Debt | |||||||||||||
Reference rate (as a percent) | 0.60% | ||||||||||||
Interest Rate Swap | |||||||||||||
Debt | |||||||||||||
Effective fixed interest rate | 2.87% | ||||||||||||
Interest Rate Swap | London Interbank Offered Rate (LIBOR) | |||||||||||||
Debt | |||||||||||||
Effective fixed interest rate | 1.07% |
Debt Debt (Details 3)
Debt Debt (Details 3) | Sep. 30, 2016 | Sep. 30, 2016 |
Credit rating at least A- or A3 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | ||
Debt | ||
Reference rate (as a percent) | 0.85% | |
Credit rating at least BBBplus or BAA1 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | ||
Debt | ||
Reference rate (as a percent) | 0.90% | |
Credit rating at least BBB or BAA2 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | ||
Debt | ||
Reference rate (as a percent) | 1.00% | |
Credit rating at least BBB- or BAA3 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | ||
Debt | ||
Reference rate (as a percent) | 1.20% | |
Credit rating below BBB- or BAA3 | Adjusted LIBOR rate loans and letter of credit | London Interbank Offered Rate (LIBOR) | ||
Debt | ||
Reference rate (as a percent) | 1.55% | |
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit rating at least A- or A3 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.00% | |
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit rating at least BBBplus or BAA1 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.00% | |
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit rating at least BBB or BAA2 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.10% | |
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit rating at least BBB- or BAA3 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.20% | |
$850 million unsecured revolving credit facility bearing variable interest of LIBOR plus 1.20%, due September 2020 | Credit rating below BBB- or BAA3 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.60% | |
Term Loan | Credit rating at least A- or A3 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.40% | |
Term Loan | Credit rating at least BBBplus or BAA1 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.45% | |
Term Loan | Credit rating at least BBB or BAA2 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.55% | |
Term Loan | Credit rating at least BBB- or BAA3 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 0.80% | |
Term Loan | Credit rating below BBB- or BAA3 | Base rate loans | Base rate | ||
Debt | ||
Reference rate (as a percent) | 1.25% |
Debt (Details 4)
Debt (Details 4) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Disclosure [Abstract] | ||
2,016 | $ 590 | |
2,017 | 40,962 | |
2,018 | 29,973 | |
2,019 | 20,081 | |
2,020 | 211,523 | |
Thereafter | 491,651 | |
Total Payments | $ 794,780 | $ 488,926 |
Derivatives Derivatives (Detail
Derivatives Derivatives (Details) | Jun. 10, 2023 | Jul. 07, 2016USD ($)Rate | Sep. 30, 2016USD ($)instruments | Dec. 31, 2015USD ($) |
Derivative [Line Items] | ||||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 6 | |||
Ineffectiveness on outstanding interest rate swap contracts designated as cash flow hedges | $ | $ 0 | |||
Total notional amount | $ | $ 250,000,000 | |||
Effective date | Jul. 7, 2016 | |||
Maturity date | Jun. 10, 2023 | |||
Asset balance at September 30, 2016 (included in Other assets) | $ | $ 0 | |||
Asset balance at December 31, 2015 (included in Other assets) | Rate | 1.80% | |||
Interest Rate Swap | ||||
Derivative [Line Items] | ||||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 5 | |||
Effective fixed interest rate | Rate | 2.87% | |||
London Interbank Offered Rate (LIBOR) [Member] | Interest Rate Swap | ||||
Derivative [Line Items] | ||||
Effective fixed interest rate | Rate | 1.07% |
Accrued Expenses and Other Li54
Accrued Expenses and Other Liabilities Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Other Liabilities Disclosure [Abstract] | ||
Prepaid rent | $ 8,940 | $ 2,778 |
Real estate taxes payable | 8,560 | 2,349 |
Embedded derivative | 6,192 | 8,149 |
Security deposits | 4,355 | 4,038 |
Tenant improvement allowance | 4,349 | 1,184 |
Contingent consideration | 1,235 | 2,559 |
Accrued interest | 2,363 | 22 |
Accrued incentive compensation | 3,856 | 900 |
Accrued expenses and other | 6,724 | 2,494 |
Total | $ 46,574 | $ 24,473 |
Stock-based Compensation (Detai
Stock-based Compensation (Details 1) - USD ($) $ / shares in Units, $ in Thousands | Aug. 07, 2014 | Mar. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Jul. 24, 2013 |
Weighted Average Grant Date Fair Value | |||||||
Non-cash share compensation | $ 3,497 | $ 2,929 | |||||
2013 Plan | Restricted common shares | |||||||
Stock-based compensation | |||||||
Maximum number of shares authorized | 2,450,000 | 600,000 | |||||
Increase in number of common shares authorized for issuance | 1,850,000 | ||||||
Grant date value | $ 2,800 | ||||||
Shares | |||||||
Non-vested at the beginning of the period (in shares) | 311,839 | ||||||
Granted (in shares) | 155,306 | ||||||
Vested (in shares) | (157,878) | ||||||
Forfeited (in shares) | 326 | ||||||
Non-vested at the beginning of the period (in shares) | 308,941 | 308,941 | |||||
Weighted Average Grant Date Fair Value | |||||||
Non-vested at beginning of period (in dollars per share) | $ 14.17 | ||||||
Granted (in dollars per share) | 17.96 | ||||||
Vested (in dollars per share) | 14.09 | ||||||
Forfeited (in dollars per share) | 15.36 | ||||||
Non-vested at beginning of period (in dollars per share) | $ 16.11 | $ 16.11 | |||||
Non-cash share compensation | $ 900 | $ 700 | $ 2,800 | 2,200 | |||
Unrecognized compensation expense | $ 2,100 | $ 2,100 | |||||
Initial estimated cumulative forfeiture rate (as a percent) | 0.00% | ||||||
2013 Plan | Restricted common shares | Officers | |||||||
Stock-based compensation | |||||||
Vesting period | 1 year | ||||||
2013 Plan | Restricted common shares | Trust employees | |||||||
Stock-based compensation | |||||||
Vesting period | 3 years | ||||||
2013 Plan | Restricted Share Units (RSUs) | |||||||
Shares | |||||||
Non-vested at the beginning of the period (in shares) | 171,886 | ||||||
Granted (in shares) | 141,337 | 141,337 | |||||
Vested (in shares) | (20,481) | ||||||
Non-vested at the beginning of the period (in shares) | 292,742 | 292,742 | |||||
Weighted Average Grant Date Fair Value | |||||||
Non-vested at beginning of period (in dollars per share) | $ 18.48 | ||||||
Granted (in dollars per share) | 24.08 | ||||||
Vested (in dollars per share) | 15.87 | ||||||
Non-vested at beginning of period (in dollars per share) | $ 21.37 | $ 21.37 | |||||
Non-cash share compensation | $ 600 | $ 300 | $ 1,500 | $ 800 | |||
Unrecognized compensation expense | $ 3,400 | $ 3,400 | |||||
2013 Plan | Restricted Share Units (RSUs) | Officers | |||||||
Stock-based compensation | |||||||
Vesting period | 3 years | ||||||
2013 Plan | Restricted Share Units (RSUs) | Directors | |||||||
Stock-based compensation | |||||||
Vesting period | 2 years |
Stock-based Compensation (Det56
Stock-based Compensation (Details 2) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Mar. 03, 2016 | |
Stock-based compensation | ||||||
Non-cash share compensation | $ 3,497 | $ 2,929 | ||||
2013 Plan | Restricted share units | ||||||
Stock-based compensation | ||||||
Number of dividend equivalent included in award | 1 | 1 | ||||
Non-vested at the beginning of the period (in shares) | 171,886 | |||||
Granted (in shares) | 141,337 | 141,337 | ||||
Vested (in shares) | (20,481) | |||||
Non-vested at the beginning of the period (in shares) | 292,742 | 292,742 | ||||
Non-vested at beginning of period (in dollars per share) | $ 21.37 | $ 21.37 | ||||
Granted (in dollars per share) | 24.08 | |||||
Vested (in dollars per share) | 15.87 | |||||
Non-vested at beginning of period (in dollars per share) | $ 18.48 | |||||
Non-cash share compensation | $ 600 | $ 300 | $ 1,500 | $ 800 | ||
Unrecognized compensation expense | $ 3,400 | $ 3,400 | ||||
Share based compensation fair value assumptions | ||||||
Volatility | 20.30% | |||||
Expected term in years | 2 years 9 months 18 days | |||||
Risk-free rate | 1.07% | |||||
Share price (per share) | $ 17.67 | |||||
2013 Plan | Restricted share units | Officers | ||||||
Stock-based compensation | ||||||
Share-based compensation arrangement by share-based payment award, award vesting period | 3 years | |||||
2013 Plan | Restricted share units | Directors | ||||||
Stock-based compensation | ||||||
Share-based compensation arrangement by share-based payment award, award vesting period | 2 years | |||||
2013 Plan | Market Based Restricted Stock Units (RSUs) [Member] | Officers | ||||||
Stock-based compensation | ||||||
Granted (in dollars per share) | $ 28.50 | |||||
Vesting percentage | 80.00% | |||||
2013 Plan | Performance based restricted stock units (RSUs) | ||||||
Stock-based compensation | ||||||
Granted (in dollars per share) | $ 26.33 | |||||
Vesting percentage | 20.00% | |||||
Performance conditions grant date fair value (in dollars per share) | $ 17.67 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) | Sep. 30, 2016USD ($)instruments | Dec. 31, 2015USD ($) |
Fair value of other financial instruments | ||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 6 | |
Notes receivable | $ 16,618,000 | $ 20,620,000 |
Derivative assets | 0 | |
Credit facility | (448,321,000) | (389,375,000) |
Notes payable | (224,339,000) | 0 |
Fair value, measurements, nonrecurring | ||
Fair value of other financial instruments | ||
Assets subject to impairment fair value disclosure | $ 0 | |
Interest Rate Swap | ||
Fair value of other financial instruments | ||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 5 | |
Embedded derivatives | ||
Fair value of other financial instruments | ||
Outstanding interest rate swap contracts designated as cash flow hedges | instruments | 1 | |
Carrying amount | Recurring basis | ||
Fair value of other financial instruments | ||
Real estate loans receivable | $ 43,817,000 | 39,349,000 |
Notes receivable | 16,618,000 | 20,620,000 |
Credit facility | (456,000,000) | (395,000,000) |
Notes payable | (225,000,000) | 0 |
Mortgage debt | (114,278,000) | (94,600,000) |
Carrying amount | Interest Rate Swap | Recurring basis | ||
Fair value of other financial instruments | ||
Derivative assets | 652,000 | 0 |
Carrying amount | Embedded derivatives | Recurring basis | ||
Fair value of other financial instruments | ||
Derivative liabilities | (6,192,000) | (8,216,000) |
Fair value | Recurring basis | ||
Fair value of other financial instruments | ||
Real estate loans receivable | 43,817,000 | 39,349,000 |
Notes receivable | 16,618,000 | 20,620,000 |
Credit facility | (456,000,000) | (395,000,000) |
Notes payable | (232,154,000) | 0 |
Mortgage debt | (116,413,000) | (95,275,000) |
Fair value | Interest Rate Swap | Recurring basis | ||
Fair value of other financial instruments | ||
Derivative assets | 652,000 | 0 |
Fair value | Embedded derivatives | Recurring basis | ||
Fair value of other financial instruments | ||
Derivative liabilities | $ (6,192,000) | $ (8,216,000) |
Tenant Operating Leases (Detail
Tenant Operating Leases (Details) $ in Thousands | Sep. 30, 2016USD ($) |
Future minimum rental payments on non-cancelable leases | |
2,016 | $ 50,511 |
2,017 | 200,692 |
2,018 | 195,623 |
2,019 | 190,533 |
2,020 | 186,085 |
Thereafter | 1,238,856 |
Total | $ 2,062,300 |
Rent Expense (Details)
Rent Expense (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016USD ($)propertieshealthcareproperty | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)propertieshealthcareproperty | Sep. 30, 2015USD ($) | |
Number of properties subject to parking lease | properties | 3 | 3 | ||
Number of properties subject to air space lease | healthcareproperty | 1 | 1 | ||
Number of properties subject to ground leases | properties | 56 | 56 | ||
Number of Office Space Leases | properties | 3 | 3 | ||
Maximum lease terms | 89 years | |||
Rent expenses for parking, air, and ground leases | $ 500 | $ 400 | $ 1,300 | $ 1,200 |
Future minimum lease obligations under non-cancelable parking, air, and ground leases | ||||
2,016 | 560 | 560 | ||
2,017 | 2,259 | 2,259 | ||
2,018 | 2,314 | 2,314 | ||
2,019 | 2,334 | 2,334 | ||
2,020 | 2,337 | 2,337 | ||
Thereafter | 61,738 | 61,738 | ||
Total | $ 71,542 | $ 71,542 |
Credit Concentration Credit C60
Credit Concentration Credit Concentration (Details) - Sales Revenue, Services, Net [Member] | 1 Months Ended |
Sep. 30, 2016USD ($)Rate | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 203,067,000 |
Percent of ABR (Annualized Base Rent) | Rate | 100.00% |
Customer Concentration Risk [Member] | CHI - KentuckyOne Health [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 12,805,000 |
Percent of ABR (Annualized Base Rent) | Rate | 6.31% |
Customer Concentration Risk [Member] | CHI - Nebraska [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 9,275,000 |
Percent of ABR (Annualized Base Rent) | Rate | 4.57% |
Customer Concentration Risk [Member] | CHI - Franciscan (Seattle-Tacoma) [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 5,420,000 |
Percent of ABR (Annualized Base Rent) | Rate | 2.67% |
Customer Concentration Risk [Member] | CHI - St. Alexius (North Dakota) [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 5,278,000 |
Percent of ABR (Annualized Base Rent) | Rate | 2.60% |
Customer Concentration Risk [Member] | Great Falls Hospital [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 5,145,000 |
Percent of ABR (Annualized Base Rent) | Rate | 2.53% |
Customer Concentration Risk [Member] | Remaining Portfolio [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 165,144,000 |
Percent of ABR (Annualized Base Rent) | Rate | 81.32% |
Customer Concentration Risk [Member] | Top five tenant relationships [Member] | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 0.1868 |
Customer Concentration Risk [Member] | CHI Portfolio | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | 0.1889 |
Geographic Concentration Risk [Member] | Texas | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 24,763,000 |
Percent of ABR (Annualized Base Rent) | Rate | 12.19% |
Geographic Concentration Risk [Member] | Kentucky | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 15,555,000 |
Percent of ABR (Annualized Base Rent) | Rate | 7.66% |
Geographic Concentration Risk [Member] | Indiana | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 12,813,000 |
Percent of ABR (Annualized Base Rent) | Rate | 6.31% |
Geographic Concentration Risk [Member] | Arizona | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 12,444,000 |
Percent of ABR (Annualized Base Rent) | Rate | 6.13% |
Geographic Concentration Risk [Member] | Washington | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 12,193,000 |
Percent of ABR (Annualized Base Rent) | Rate | 6.00% |
Geographic Concentration Risk [Member] | Other | |
Concentration Risk [Line Items] | |
Total ABR (Annualized Base Rent) | $ 125,299,000 |
Percent of ABR (Annualized Base Rent) | Rate | 61.71% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Numerator for earnings per share - basic: | ||||
Net income | $ 10,294 | $ 3,983 | $ 22,902 | $ 6,832 |
Operating Partnership | (255) | (200) | (629) | (333) |
Partially owned properties | (176) | (79) | (553) | (255) |
Preferred distributions | (436) | (300) | (1,421) | (791) |
Numerator for earnings per share - basic | 9,427 | 3,404 | 20,299 | 5,453 |
Numerator for earnings per share - diluted: | ||||
Numerator for earnings per share - basic | 9,427 | 3,404 | 20,299 | 5,453 |
Operating Partnership net income | 255 | 200 | 629 | 333 |
Numerator for earnings per share - diluted | $ 9,682 | $ 3,604 | $ 20,928 | $ 5,786 |
Denominator for earnings per share - basic and diluted: | ||||
Weighted average number of shares outstanding - basic | 134,608,396 | 71,034,747 | 122,973,862 | 69,040,121 |
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract] | ||||
Noncontrolling interest - Operating Partnership units | 3,618,988 | 3,829,930 | 3,778,014 | 3,676,395 |
Weighted Average Number of Shares Outstanding, Diluted | 138,880,787 | 75,104,821 | 127,395,989 | 73,040,846 |
Earnings per share - basic (in dollars per share) | $ 0.07 | $ 0.05 | $ 0.17 | $ 0.08 |
Earnings per share - diluted (in dollars per share) | $ 0.07 | $ 0.05 | $ 0.16 | $ 0.08 |
Restricted common shares | ||||
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract] | ||||
Effect of dilutive securities, restricted shares and RSUs | 208,892 | 123,343 | 203,020 | 194,640 |
Restricted share units | ||||
Dilutive Securities, Effect on Basic Earnings Per Share [Abstract] | ||||
Effect of dilutive securities, restricted shares and RSUs | 444,511 | 116,801 | 441,093 | 129,690 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Thousands | Oct. 31, 2016 | Oct. 31, 2016 | Oct. 28, 2016 | Sep. 30, 2016 | Sep. 30, 2016 |
Subsequent events | |||||
Business Combination, Consideration Transferred | $ 177,047 | $ 1,060,000 | |||
Subsequent events | |||||
Subsequent events | |||||
Business Combination, Consideration Transferred | $ 30,351 | ||||
Subsequent events | Northwest Michigan Surgery Center | |||||
Subsequent events | |||||
Purchase price | 947,936 | ||||
Subsequent events | United Surgical Partners J.V. | |||||
Subsequent events | |||||
Business Combination, Consideration Transferred | $ 903 | ||||
Business Acquisition, Percentage of Voting Interests Acquired | 43.00% | 43.00% | |||
Ambulatory Surgery Center [Member] | Subsequent events | Northwest Michigan Surgery Center | |||||
Subsequent events | |||||
Business Combination, Consideration Transferred | $ 29,448 |