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Physicians Realty Trust Reports Fourth Quarter 2022 Financial Results

Business Wire - Wed Feb 22, 2023

Physicians Realty Trust (NYSE: DOC) (the “Company,” the “Trust,” “we,” “our” and “us”), a self-managed health care real estate investment trust, today announced results for the fourth quarter ended December 31, 2022.

John T. Thomas, President and Chief Executive Officer of the Trust, commented, “Our focus for 2022 was strong internal growth as investment activity slowed due to rapidly rising interest rates and market uncertainty. Our leasing team completed over 182,000 square feet of leasing activity during the fourth quarter with a weighted average lease term of 5 years. The weighted average leasing spread was 7.0% on 140,000 renewed square feet with 75% tenant retention on our consolidated portfolio in the fourth quarter.

“As markets stabilize, we intend to Invest in better® with a focus on acquisitions and new development opportunities, our commitment to ESG, and the communities we serve. We look forward to sharing more about our 2022 achievements and expectations for 2023 during today’s conference call,” Mr. Thomas concluded.

Fourth Quarter Financial Results

Total revenue for the fourth quarter ended December 31, 2022 was $132.6 million, an increase of 14.2% from the fourth quarter 2021. As of December 31, 2022, the portfolio was approximately 95% leased.

Total expenses for the fourth quarter 2022 were $120.3 million, compared to total expenses of $106.6 million for the fourth quarter 2021.

Net income for the fourth quarter 2022 was $11.9 million, compared to net income of $28.3 million for the fourth quarter 2021, a decrease of 57.9%.

Net income attributable to common shareholders for the fourth quarter 2022 was $11.4 million. Diluted earnings per share for the fourth quarter 2022 was $0.05 based on approximately 241.0 million weighted average common shares and operating partnership units (OP Units) outstanding.

Funds From Operations (FFO) totaled $61.5 million for the fourth quarter 2022 and consisted of net income plus depreciation and amortization on our consolidated portfolio of $47.5 million and our unconsolidated joint ventures of $2.3 million offset by $0.2 million of other adjustments, resulting in FFO of $0.26 per share on a fully diluted basis. Normalized FFO, which adjusts for our proportionate share of unconsolidated joint venture adjustments, was $61.5 million, or $0.26 per share on a fully diluted basis.

Normalized Funds Available for Distribution (FAD) for the fourth quarter 2022, which consists of Normalized FFO adjusted for non-cash share compensation, straight-line rent adjustments, amortization of acquired above-market and below-market leases and assumed debt, amortization of lease inducements, amortization of deferred financing costs, recurring capital expenditures, loan reserve adjustments, and our share of adjustments from unconsolidated investments, was $57.9 million.

Our Medical Office Building (MOB) Same-Store portfolio, which includes 255 properties representing 87% of our consolidated leasable square footage, generated year-over-year MOB Same-Store Cash Net Operating Income (Cash NOI) growth of 1.5% for the fourth quarter 2022.

Other Recent Events

Fourth Quarter Investment Activity

During the fourth quarter ended December 31, 2022, the Company completed the acquisition of a medical condominium unit, summarized below, for a purchase price of approximately $0.4 million and funded $0.5 million of a previously announced term loan and $0.4 million of previously announced construction loan commitments. The Company also paid $0.4 million of additional purchase consideration under two earn-out agreements and invested $0.4 million in funds managed by a real estate technology private equity fund.

Atlanta Medical Condominium Investment - On December 5, 2022, the Company closed on the acquisition of a medical condominium unit located in an Atlanta “Pill Hill” MOB at a price of approximately $0.4 million. With this purchase, the units purchased by the Company represent 29% of the larger building and are 67% occupied. The property is 105,000 square feet and consists of additional condos that the Company intends to evaluate for investment in the future.

Capital Activity

During the fourth quarter 2022, the Company issued 5,000,000 shares pursuant to its at the market (ATM) program at a weighted average price of $15.00 for net proceeds of $74.3 million.

Recent Activity

Since December 31, 2022, the Company completed the acquisition of a medical condominium unit located in an Atlanta “Pill Hill” MOB for a purchase price of approximately $1.3 million and a parcel of land adjacent to one of its medical office facilities located in Avondale, Arizona for a purchase price of approximately $0.8 million. The Company also repaid a $15.0 million senior unsecured note bearing fixed interest of 4.03% upon maturity and sold one 30,000 square foot medical office building located in Harrisburg, Pennsylvania for $2.6 million recognizing an immaterial net gain on the sale. The property disposition represents an exit cap rate of 2.3%.

Dividend Paid

On December 22, 2022, our Board of Trustees authorized and declared a cash distribution of $0.23 per common share and OP Unit for the quarterly period ended December 31, 2022. The dividend was paid on January 18, 2023 to common shareholders and OP Unit holders of record as of the close of business on January 4, 2023.

2023 Guidance

The Company anticipates general and administrative expenses to be between $41 million and $43 million and recurring capital expenditures to be between $24 million and $26 million for the year ended December 31, 2023.

ESG Property Certifications Earned

The Company is proud to announce it has earned ten new IREM® CSP designations in 2022 at DOC-owned properties, reinforcing the Company’s ongoing commitment to expanding its environmental, social, and governance (ESG) practices. The IREM® CSP is a sustainability certification program that focuses on the role of exceptional real estate management through green building performance. IREM’s sustainability certification provides properties with recognition for resource efficiency and environmental initiatives. In total, the Company has earned 38 IREM® CSP designations since 2019.

The Company is also proud to have earned ENERGY STAR® Certification Nation Premier Member status in 2022 by receiving 16 new certifications (along with 10 retroactive 2021 certifications for properties previously ineligible before the U.S. Department of Energy restarted the program for medical real estate). The Certification Nation platform is a project of the U.S. Environmental Protection Agency, recognizing commercial real estate companies pursuing ENERGY STAR® certifications for their properties. As an ENERGY STAR® partner since 2014, the Company continually incorporates better environmental impact principles into our business thoughtfully and responsibly.

Conference Call Information

The Company has scheduled a conference call on Wednesday, February 22, 2023, at 10:00 a.m. ET to discuss its financial performance and operating results for the fourth quarter ended December 31, 2022. The conference call can be accessed by dialing (877) 407-0784 from within the U.S. or (201) 689-8560 for international callers. Participants can reference the Physicians Realty Trust Fourth Quarter Earnings Call or passcode: 13735126. The conference call also will be available via a live listen-only webcast and can be accessed through the Investor Relations section of the Company’s website, www.docreit.com. A replay of the conference call will be available beginning February 22, 2023, at 2:00 p.m. ET until March 22, 2023, at 11:59 p.m. ET, by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International); passcode: 13735126. A replay of the webcast also will be accessible on the Investor Relations website for one year following the event. Beginning February 22, 2023, the Company’s supplemental information package for the fourth quarter 2022 will be accessible through the Investor Relations section of the Company’s website under the “Supplemental” tab.

About Physicians Realty Trust

Physicians Realty Trust is a self-managed health care real estate company organized to acquire, selectively develop, own, and manage health care properties that are leased to physicians, hospitals and health care delivery systems. The Company invests in real estate that is integral to providing high quality health care. The Company conducts its business through an UPREIT structure in which its properties are owned by Physicians Realty L.P., a Delaware limited partnership (the “operating partnership”), directly or through limited partnerships, limited liability companies or other subsidiaries. The Company is the sole general partner of the operating partnership and, as of December 31, 2022, owned approximately 95.9% of OP Units.

Investors are encouraged to visit the Investor Relations portion of the Company’s website (www.docreit.com) for additional information, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, press releases, supplemental information packages and investor presentations. The information contained on our website is not a part of an is not incorporated by reference into this press release.

Forward-Looking Statements

This press release contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, “continue”, “intend”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements may include statements regarding the Company’s strategic and operational plans, the Company’s ability to generate internal and external growth, the future outlook, anticipated cash returns, cap rates or yields on properties, anticipated closing of property acquisitions, ability to execute its business plan, and the impact of the Coronavirus and its variants, including the Delta and Omicron variants and any future variants which may emerge, (COVID-19) pandemic on the Company’s business. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, not all of which are known to the Company and many of which are beyond the Company’s control, which could cause actual results to differ materially from such statements. These risks and uncertainties are described in greater detail in the Company’s filings with the Securities and Exchange Commission (the “Commission”), including, without limitation, the Company’s annual and periodic reports and other documents filed with the Commission. Unless legally required, the Company disclaims any obligation to update any forward-looking statements after the date of this release, whether as a result of new information, future events or otherwise. For a discussion of factors that could impact the Company’s results, performance, or transactions, see Part I, Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Physicians Realty Trust

Condensed Consolidated Statements of Income

(in thousands, except share and per share data)

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

Rental revenues

$

93,496

 

 

$

83,706

 

 

$

371,727

 

 

$

328,144

 

Expense recoveries

 

36,122

 

 

 

28,099

 

 

 

143,646

 

 

 

112,054

 

Rental and related revenues

 

129,618

 

 

 

111,805

 

 

 

515,373

 

 

 

440,198

 

Interest income on real estate loans and other

 

2,947

 

 

 

4,319

 

 

 

11,262

 

 

 

17,501

 

Total revenues

 

132,565

 

 

 

116,124

 

 

 

526,635

 

 

 

457,699

 

Expenses:

 

 

 

 

 

 

 

Interest expense

 

19,878

 

 

 

19,382

 

 

 

72,234

 

 

 

60,136

 

General and administrative

 

9,809

 

 

 

9,641

 

 

 

40,209

 

 

 

37,757

 

Operating expenses

 

43,020

 

 

 

34,339

 

 

 

171,100

 

 

 

137,408

 

Depreciation and amortization

 

47,639

 

 

 

43,207

 

 

 

189,641

 

 

 

157,870

 

Impairment loss

 

 

 

 

 

 

 

 

 

 

340

 

Total expenses

 

120,346

 

 

 

106,569

 

 

 

473,184

 

 

 

393,511

 

Income before equity in loss of unconsolidated entities and gain on sale of investment properties, net:

 

12,219

 

 

 

9,555

 

 

 

53,451

 

 

 

64,188

 

Equity in loss of unconsolidated entities

 

(338

)

 

 

(357

)

 

 

(790

)

 

 

(1,570

)

Gain on sale of investment properties, net

 

 

 

 

19,054

 

 

 

57,375

 

 

 

24,165

 

Net income

 

11,881

 

 

 

28,252

 

 

 

110,036

 

 

 

86,783

 

Net income attributable to noncontrolling interests:

 

 

 

 

 

 

 

Operating Partnership

 

(410

)

 

 

(806

)

 

 

(5,240

)

 

 

(2,211

)

Partially owned properties (1)

 

(46

)

 

 

(152

)

 

 

(430

)

 

 

(607

)

Net income attributable to controlling interest

 

11,425

 

 

 

27,294

 

 

 

104,366

 

 

 

83,965

 

Preferred distributions

 

 

 

 

 

 

 

 

 

 

(13

)

Net income attributable to common shareholders

$

11,425

 

 

$

27,294

 

 

$

104,366

 

 

$

83,952

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

0.12

 

 

$

0.46

 

 

$

0.39

 

Diluted

$

0.05

 

 

$

0.12

 

 

$

0.46

 

 

$

0.39

 

Weighted average common shares:

 

 

 

 

 

 

 

Basic

 

229,134,463

 

 

 

220,642,565

 

 

 

226,598,474

 

 

 

216,135,385

 

Diluted

 

240,952,269

 

 

 

227,969,369

 

 

 

239,610,285

 

 

 

223,060,556

 

 

 

 

 

 

 

 

 

Dividends and distributions declared per common share

$

0.23

 

 

$

0.23

 

 

$

0.92

 

 

$

0.92

 

(1)

Includes amounts attributable to redeemable noncontrolling interests.

Physicians Realty Trust

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

December 31,

 

December 31,

 

 

2022

 

 

 

2021

 

ASSETS

 

 

 

Investment properties:

 

 

 

Land and improvements

$

241,559

 

 

$

235,453

 

Building and improvements

 

4,674,011

 

 

 

4,612,561

 

Tenant improvements

 

92,906

 

 

 

86,018

 

Acquired lease intangibles

 

505,335

 

 

 

498,221

 

 

 

5,513,811

 

 

 

5,432,253

 

Accumulated depreciation

 

(996,888

)

 

 

(821,036

)

Net real estate property

 

4,516,923

 

 

 

4,611,217

 

Real estate held for sale

 

 

 

 

1,964

 

Right-of-use lease assets, net

 

231,225

 

 

 

235,483

 

Real estate loans receivable, net

 

104,973

 

 

 

117,844

 

Investments in unconsolidated entities

 

77,716

 

 

 

69,793

 

Net real estate investments

 

4,930,837

 

 

 

5,036,301

 

Cash and cash equivalents

 

7,730

 

 

 

9,876

 

Tenant receivables, net

 

11,503

 

 

 

4,948

 

Other assets

 

146,807

 

 

 

131,584

 

Total assets

$

5,096,877

 

 

$

5,182,709

 

LIABILITIES AND EQUITY

 

 

 

Liabilities:

 

 

 

Credit facility

$

188,328

 

 

$

267,641

 

Notes payable

 

1,465,437

 

 

 

1,464,008

 

Mortgage debt

 

164,352

 

 

 

180,269

 

Accounts payable

 

4,391

 

 

 

6,651

 

Dividends and distributions payable

 

60,148

 

 

 

57,246

 

Accrued expenses and other liabilities

 

87,720

 

 

 

86,254

 

Lease liabilities

 

105,011

 

 

 

104,957

 

Acquired lease intangibles, net

 

24,381

 

 

 

21,569

 

Total liabilities

 

2,099,768

 

 

 

2,188,595

 

 

 

 

 

Redeemable noncontrolling interests - partially owned properties

 

3,258

 

 

 

7,081

 

 

 

 

 

Equity:

 

 

 

Common shares, $0.01 par value, 500,000,000 common shares authorized, 233,292,030 and 224,678,116 common shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

 

2,333

 

 

 

2,247

 

Additional paid-in capital

 

3,743,876

 

 

 

3,610,954

 

Accumulated deficit

 

(881,672

)

 

 

(776,001

)

Accumulated other comprehensive income (loss)

 

5,183

 

 

 

(892

)

Total shareholders’ equity

 

2,869,720

 

 

 

2,836,308

 

Noncontrolling interests:

 

 

 

Operating Partnership

 

123,015

 

 

 

150,241

 

Partially owned properties

 

1,116

 

 

 

484

 

Total noncontrolling interests

 

124,131

 

 

 

150,725

 

Total equity

 

2,993,851

 

 

 

2,987,033

 

Total liabilities and equity

$

5,096,877

 

 

$

5,182,709

 

Physicians Realty Trust

Reconciliation of Non-GAAP Measures

(in thousands, except share and per share data)

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income

$

11,881

 

 

$

28,252

 

 

$

110,036

 

 

$

86,783

 

Earnings per share - diluted

$

0.05

 

 

$

0.12

 

 

$

0.46

 

 

$

0.39

 

 

 

 

 

 

 

 

 

Net income

$

11,881

 

 

$

28,252

 

 

$

110,036

 

 

$

86,783

 

Net income attributable to noncontrolling interests - partially owned properties

 

(46

)

 

 

(152

)

 

 

(430

)

 

 

(607

)

Preferred distributions

 

 

 

 

 

 

 

 

 

 

(13

)

Depreciation and amortization expense

 

47,544

 

 

 

43,097

 

 

 

189,221

 

 

 

157,437

 

Depreciation and amortization expense - partially owned properties

 

(138

)

 

 

(70

)

 

 

(379

)

 

 

(280

)

Gain on sale of investment properties, net

 

 

 

 

(19,054

)

 

 

(57,375

)

 

 

(24,165

)

Impairment loss

 

 

 

 

 

 

 

 

 

 

340

 

Proportionate share of unconsolidated joint venture adjustments

 

2,258

 

 

 

2,296

 

 

 

9,289

 

 

 

8,860

 

FFO applicable to common shares

$

61,499

 

 

$

54,369

 

 

$

250,362

 

 

$

228,355

 

Loss on extinguishment of debt

 

 

 

 

4,025

 

 

 

 

 

 

4,025

 

Proportionate share of unconsolidated joint venture adjustments

 

20

 

 

 

 

 

 

(340

)

 

 

 

Normalized FFO applicable to common shares

$

61,519

 

 

$

58,394

 

 

$

250,022

 

 

$

232,380

 

 

 

 

 

 

 

 

 

FFO per common share - diluted

$

0.26

 

 

$

0.24

 

 

$

1.04

 

 

$

1.02

 

Normalized FFO per common share - diluted

$

0.26

 

 

$

0.26

 

 

$

1.04

 

 

$

1.04

 

 

 

 

 

 

 

 

 

Normalized FFO applicable to common shares

$

61,519

 

 

$

58,394

 

 

$

250,022

 

 

$

232,380

 

Non-cash share compensation expense

 

3,272

 

 

 

4,192

 

 

 

15,672

 

 

 

15,032

 

Straight-line rent adjustments

 

(1,488

)

 

 

(1,395

)

 

 

(6,847

)

 

 

(8,671

)

Amortization of acquired above/below-market leases/assumed debt

 

1,151

 

 

 

902

 

 

 

4,924

 

 

 

3,459

 

Amortization of lease inducements

 

225

 

 

 

235

 

 

 

900

 

 

 

1,157

 

Amortization of deferred financing costs

 

575

 

 

 

581

 

 

 

2,314

 

 

 

2,325

 

TI/LC and recurring capital expenditures

 

(7,193

)

 

 

(7,548

)

 

 

(23,853

)

 

 

(25,532

)

Loan reserve adjustments

 

(84

)

 

 

(22

)

 

 

75

 

 

 

(133

)

Proportionate share of unconsolidated joint venture adjustments

 

(118

)

 

 

(420

)

 

 

(1,018

)

 

 

(998

)

Normalized FAD applicable to common shares

$

57,859

 

 

$

54,919

 

 

$

242,189

 

 

$

219,019

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

240,952,269

 

 

 

227,969,369

 

 

 

239,610,285

 

 

 

223,060,556

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income

$

11,881

 

 

$

28,252

 

 

$

110,036

 

 

$

86,783

 

General and administrative

 

9,809

 

 

 

9,641

 

 

 

40,209

 

 

 

37,757

 

Depreciation and amortization expense

 

47,639

 

 

 

43,207

 

 

 

189,641

 

 

 

157,870

 

Interest expense

 

19,878

 

 

 

19,382

 

 

 

72,234

 

 

 

60,136

 

Gain on sale of investment properties, net

 

 

 

 

(19,054

)

 

 

(57,375

)

 

 

(24,165

)

Impairment loss

 

 

 

 

 

 

 

 

 

 

340

 

Proportionate share of unconsolidated joint venture adjustments

 

3,636

 

 

 

3,633

 

 

 

13,925

 

 

 

14,358

 

NOI

$

92,843

 

 

$

85,061

 

 

$

368,670

 

 

$

333,079

 

 

 

 

 

 

 

 

 

NOI

$

92,843

 

 

$

85,061

 

 

$

368,670

 

 

$

333,079

 

Straight-line rent adjustments

 

(1,488

)

 

 

(1,395

)

 

 

(6,847

)

 

 

(8,671

)

Amortization of acquired above/below-market leases

 

1,152

 

 

 

917

 

 

 

4,935

 

 

 

3,521

 

Amortization of lease inducements

 

225

 

 

 

235

 

 

 

900

 

 

 

1,157

 

Loan reserve adjustments

 

(84

)

 

 

(22

)

 

 

75

 

 

 

(133

)

Proportionate share of unconsolidated joint venture adjustments

 

(139

)

 

 

(231

)

 

 

(485

)

 

 

(690

)

Cash NOI

$

92,509

 

 

$

84,565

 

 

$

367,248

 

 

$

328,263

 

 

 

 

 

 

 

 

 

Cash NOI

$

92,509

 

 

$

84,565

 

 

 

 

 

Assets not held for all periods or held for sale

 

(12,338

)

 

 

(4,217

)

 

 

 

 

Non-MOB health care properties

 

(2,778

)

 

 

(2,687

)

 

 

 

 

Interest income on real estate loans

 

(2,326

)

 

 

(3,458

)

 

 

 

 

Joint venture and other income

 

(3,568

)

 

 

(3,768

)

 

 

 

 

MOB Same-Store Cash NOI

$

71,499

 

 

$

70,435

 

 

 

 

 

 

Three Months Ended

December 31,

 

 

2022

 

 

 

2021

 

Net income

$

11,881

 

 

$

28,252

 

Depreciation and amortization expense

 

47,639

 

 

 

43,207

 

Interest expense

 

19,878

 

 

 

19,382

 

Gain on sale of investment properties, net

 

 

 

 

(19,054

)

Proportionate share of unconsolidated joint venture adjustments

 

3,560

 

 

 

3,619

 

EBITDAre

$

82,958

 

 

$

75,406

 

Non-cash share compensation expense

 

3,272

 

 

 

4,192

 

Pursuit costs

 

328

 

 

 

264

 

Non-cash intangible amortization

 

1,376

 

 

 

1,143

 

Proportionate share of unconsolidated joint venture adjustments

 

20

 

 

 

 

Pro forma adjustments for investment activity

 

(40

)

 

 

6,983

 

Adjusted EBITDAre

$

87,914

 

 

$

87,988

 

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

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

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

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

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

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

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

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

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