8-K
_____________________________________________________________

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________

FORM 8-K
_________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 5, 2016
_________________

PHYSICIANS REALTY TRUST
(Exact name of registrant as specified in its charter)
_________________

Maryland
(State or other jurisdiction of incorporation or organization)
001-36007
(Commission File Number)
46-2519850
(I.R.S. Employer Identification No.)

309 N. Water Street, Suite 500
Milwaukee, Wisconsin
(Address of principal executive offices)
53202
(Zip Code)


Registrant’s telephone number, including area code: (414) 367-5600

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
_________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

□    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
□    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
□    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
□    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
________________________________________________________________________
    




Item 1.01. Entry into a Material Definitive Agreement.

Physicians Realty L.P. (the “Operating Partnership”), a subsidiary of Physicians Realty Trust (the “Company”), entered into two separate purchase and sale agreements (the “Purchase Agreements”), each dated as of April 5, 2016, a non-binding letter of intent (the “LOI”) and is negotiating the purchase of two additional medical office facilities with certain subsidiaries and affiliates of Catholic Health Initiatives (“CHI”) to acquire 52 medical office facilities located in ten states, comprising approximately 3.2 million net leasable square feet (the “CHI Portfolio”) for an aggregate purchase price of approximately $724.9 million, subject to closing prorations and other adjustments (collectively, the “CHI Acquisition”). This amount includes $692.0 million payable to CHI as the purchase price for the medical office facilities plus $32.9 million of capital commitments for improvements to the facilities expected to be paid by the Company over a five-year period following the closing of the acquisitions. The CHI Portfolio is 94.4% leased and the weighted average lease term remaining is 8.6 years. Approximately $40.6 million, or 93%, of the first year in place net operating income of $43.5 million will be represented by new 10-year leases with associated CHI health systems as described in more detail below. Forty-seven of the properties in the CHI Portfolio, representing approximately $611.1 million of purchase price, are subject to the Purchase Agreements and three properties in the CHI Portfolio, representing approximately $60.8 million of purchase price, are subject to a non-binding LOI. In addition, two of the properties in the CHI Portfolio, representing approximately $20.0 million of purchase price, are subject to ongoing negotiations for the purchase by the Operating Partnership of such properties. Upon closing of the CHI Acquisition, the first year unlevered cash yield is expected to be 6.3%.

At closing, 34 properties in the CHI Portfolio will be subject to ground leases.  The Company expects to enter into new ground leases with affiliates of CHI with respect to 33 of those properties in connection with the CHI Acquisition. Each of the 33 new ground leases with CHI affiliates will have an initial 49 year term with three 10-year extension options. The Company also expects to take assignment of one existing ground lease with approximately 87 years remaining on the lease term. The CHI health systems currently occupy a substantial portion of the CHI Portfolio space as shown in the tables below and, upon closing of the CHI Acquisition, the Company expects to enter into new 10-year lease agreements for this space with the CHI health systems, which leases will be subject to 2.5% annual rent increases. In aggregate, the CHI health systems will occupy approximately 2,467,135 square feet, or approximately 78% of the total square footage in the CHI Portfolio.

The CHI Portfolio consists of the following properties, organized by the health system for which the property is affiliated:

CHI Health - 14 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Memorial Health Center
 
(1) (3)
 
Grand Island, NE
 
178,347

 
100%
Creighton University Medical Center University Campus
 
(1) (2) (3)
 
Omaha, NE
 
85,000

 
100%
Good Samaritan Medical Office Building
 
(1)
 
Kearney, NE
 
111,953

 
97%
Nebraska Heart Institute Medical Building
 
(1) (3) (4)
 
Lincoln, NE
 
70,256

 
100%
CHI Health McAuley Fogelstrom Center
 
(1) (3)
 
Omaha, NE
 
96,231

 
100%
Meridan Office Building
 
(1) (3)
 
Englewood, CO
 
82,000

 
100%
Lakeside Two Professional Center
 
(1)
 
Omaha, NE
 
67,652

 
35%
Lakeside Wellness Center
 
(1) (3)
 
Omaha, NE
 
44,806

 
100%
Exton Revenue Cycle Office
 
(1) (3)
 
Exton, PA
 
32,000

 
100%
Midlands One Professional Center
 
(1)
 
Papillion, NE
 
63,093

 
54%
Grand Island Specialty Clinic
 
(3)
 
Grand Island, NE
 
15,713

 
100%
Lakeside Three Professional Center
 
 
 
Omaha, NE
 
20,939

 
27%
Midlands Two Professional Center
 
(1)
 
Papillion, NE
 
28,230

 
23%
Good Samaritan North Annex Building
 
(1) (3) (4)
 
Kearney, NE
 
11,700

 
100%
Total
 
 
 
 
 
907,920

 

(1)
The acquisition of these properties is subject to approval by CHF (as defined herein).
(2)
The purchase of this property is subject to a signed non-binding LOI and the Company expects to negotiate and enter into a definitive purchase and sale agreement for this property.
(3)
These properties are occupied by a single CHI tenant.

2


(4)
The purchase of these properties are subject to negotiations and the Company expects to negotiate for and enter into definitive purchase and sale agreements for these properties.

Kentucky One - 9 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Medical Center Jewish East
 
(2)
 
Louisville, KY
 
211,236

 
100%
St. Joseph Office Park Condominiums
 
 
 
Lexington, KY
 
240,789

 
59%
Jewish Hospital Outpatient Care Center
 
(2)
 
Louisville, KY
 
137,932

 
100%
Jewish - Medical Center South
 
(2)
 
Shepherdsville, KY
 
47,980

 
100%
Jewish - Medical Plaza I
 
 
 
Louisville, KY
 
59,586

 
86%
St. Mary Caritas Medical I
 
(1)
 
Louisville, KY
 
70,299

 
54%
KentuckyOne Health Medical Plaza II
 
 
 
Louisville, KY
 
96,335

 
54%
St. Mary Caritas Medical II
 
(1)
 
Louisville, KY
 
33,052

 
79%
St. Mary Caritas Medical III
 
(1)
 
Louisville, KY
 
33,010

 
4%
Total
 
 
 
 
 
930,219

 
 
(1)
The acquisition of these properties is subject to approval by CHF.
(2)
These properties are occupied by a single CHI tenant.

CHI Franciscan Health - 9 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
FESC
 
(1) (3)
 
Tacoma, WA
 
97,197

 
100%
St. Joseph Medical Clinic
 
(1)
 
Tacoma, WA
 
56,536

 
89%
St. Francis MOB
 
(2)
 
Federal Way, WA
 
40,667

 
69%
St. Joseph Medical Pavilion
 
(2)
 
Tacoma, WA
 
48,088

 
74%
St. Clare Medical Pavilion
 
(1)
 
Lakewood, WA
 
38,151

 
73%
Franciscan Education & Support Center
 
(1) (3)
 
Tacoma, WA
 
49,443

 
100%
Physician Medical Center
 
 
 
Tacoma, WA
 
35,526

 
11%
Franciscan Medical Pavilion in Gig Harbor
 
(1)
 
Gig Harbor, WA
 
30,379

 
99%
Franciscan Health Port Clinic
 
(3)
 
Tacoma, WA
 
6,061

 
100%
Total
 
 
 
 
 
402,048

 
 
(1)
The acquisition of these properties is subject to approval by CHF.
(2)
The purchases of these properties are subject to a signed non-binding LOI and the Company expects to negotiate and enter into definitive purchase and sale agreements for these properties.
(3)
These properties are occupied by a single CHI tenant.

CHI St. Alexius Health - 6 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
St. Alexius Minot Medical Plaza
 
(1) (2)
 
Minot, ND
 
67,575

 
100%
St. Alexius Technology & Education Building
 
(1) (2)
 
Bismarck, ND
 
100,000

 
100%
St. Alexius Orthopaedic Center of Excellence Building
 
(1)
 
Bismark, ND
 
66,187

 
62%
St. Alexius Medical Arts Pavilion
 
(1) (2)
 
Bismarck, ND
 
56,005

 
100%
St. Alexius Health Medical Plaza - Mandan
 
(1) (2)
 
Mandan, ND
 
22,000

 
100%
St. Alexius Great Plains Rehabilitation Services Building
 
(1) (2)
 
Bismarck, ND
 
34,000

 
100%
Total
 
 
 
 
 
345,767

 
 
(1)
The acquisition of these properties is subject to approval by CHF.

3


(2)
These properties are occupied by a single CHI tenant.

CHI St. Vincent - 4 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
St. Vincent West Medical Office Building
 
(1) (2)
 
Little Rock, AR
 
45,000

 
100%
Parkview Medical Office Condominium
 
 
 
Little Rock, AR
 
29,622

 
91%
Hot Springs Village Medical Office Building
 
 
 
Hot Springs Village, AR
 
29,850

 
51%
Blandford Medical Condominiums
 
(2)
 
Little Rock, AR
 
13,640

 
100%
Total
 
 
 
 
 
118,112

 
 
(1)
The acquisition of this property is subject to approval by CHF.
(2)
These properties are occupied by a single CHI tenant.

CHI St. Luke's Health - Memorial - 3 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Cardwell Professional Building
 
 
 
Lufkin, TX
 
43,089

 
76%
St. Luke's Health Medical Arts Pavilion
 
 
 
Lufkin, TX
 
52,685

 
51%
Memorial Outpatient Therapy Center
 
(1) (2)
 
Lufkin, TX
 
21,432

 
100%
Total
 
 
 
 
 
117,206

 
 
(1)
The acquisition of this property is subject to approval by CHF.
(2)
This property is occupied by a single CHI tenant.

CHI St. Luke's Health - 2 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Springwoods Medical Office Building
 
(1)
 
Springwoods, TX
 
101,254

 
70%
Woodlands Medical Arts Center I
 
(1)
 
The Woodlands, TX
 
96,199

 
13%
Total
 
 
 
 
 
197,453

 
 
(1)
The acquisition of these properties is subject to approval by CHF.

CHI Memorial - 1 Property:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Missionary Ridge Medical Tower
 
(1)
 
Chattanooga, TN
 
85,351

 
59%
Total
 
 
 
 
 
85,351

 
 
(1)
The acquisition of this property is subject to approval by CHF.

Centura - 3 Properties:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Peak One ASC
 
(1) (2)
 
Frisco, CO
 
11,120

 
100%
Thornton Neighborhood Health
 
(1) (2)
 
Thornton, CO
 
10,700

 
100%
Dacono Neighborhood Health
 
(1) (2)
 
Dacono, CO
 
10,800

 
100%
Total
 
 
 
 
 
32,620

 
 
(1)
The acquisition of these properties is subject to approval by CHF.
(2)
These properties are occupied by a single CHI tenant.


4


Trinity - 1 Property:
Property
 
 
 
Location
 
Square
Footage
 
Health System Occupancy
Fruitland Health Plaza
 
(1)
 
Fruitland, ID
 
22,799

 
47%
Total
 
 
 
 
 
22,799

 
 
(1)
The acquisition of this property is subject to approval by CHF.

Aggregate CHI Portfolio - 52 Properties
System
 
 
 
Number of Properties
 
Square
Footage
CHI Health
 
 
 
14
 
907,920

Kentucky One
 
 
 
9
 
930,219

CHI Franciscan Health
 
 
 
9
 
402,048

CHI St. Alexius Health
 
 
 
6
 
345,767

CHI St. Vincent
 
 
 
4
 
118,112

CHI St. Luke's Health - Memorial
 
 
 
3
 
117,206

CHI St. Luke's Health
 
 
 
2
 
197,453

CHI Memorial
 
 
 
1
 
85,351

Centura
 
 
 
3
 
32,620

Trinity
 
 
 
1
 
22,799

Total
 
 
 
52
 
3,159,495

 
The Purchase Agreements, and the purchase agreements the Company expects to enter into pursuant to the signed LOI and in connection with the Company's ongoing negotiations with respect to two properties in the CHI Portfolio, contain or will contain customary representations, warranties and covenants of the parties. The acquisition of the CHI Portfolio is also subject to the satisfaction of certain conditions to closing, including receipt of approval of the Catholic Healthcare Federation (“CHF”) with respect to the sale of 35 of the 52 properties included in the CHI Portfolio and other customary conditions to closing. Properties subject to CHF approval represent approximately $438.6 million of the aggregate purchase price of the portfolio. The Company has the option to proceed with the purchase of some or all of the 17 properties, representing approximately $253.3 million of the aggregate purchase price of the CHI Portfolio, that do not require CHF approval. If CHF does not approve of the sale of the properties that require approval, a break-up fee of $8.0 million is payable by CHI to the Operating Partnership. Assuming the satisfaction or waiver of all other outstanding contingencies, the acquisitions are anticipated to occur in a series of two or more closings, with the first closing of some or all of the 17 properties that do not require CHF approval anticipated to occur in the second quarter of 2016 and the second closing to occur promptly following the date on which approval of CHF is obtained, or at such other times as the parties may agree. While the Company expects that it will be successful in obtaining CHF approval, no assurances can be provided as to the certainty or timing of such approval.

There can be no assurance that any or all of the conditions to closing, including CHF approval, will be satisfied or, if satisfied, that the Company will complete the acquisition of one or more of the properties comprising the CHI Portfolio, or the timing of any such closings. Moreover, the non-binding LOI described above, and the Company's negotiations with respect to the purchase of two properties in the CHI Portfolio, remain subject to negotiation and execution of definitive agreements and customary closing conditions and there can be no assurance the Company will complete any of these transactions or acquire any of these properties.

Item 8.01. Other Events.

During the quarter ended March 31, 2016, the Company completed investments totaling $202.3 million, which includes acquisitions of 16 properties and 2 condominiums located in 13 states containing an aggregate of approximately 751,562 net leasable square feet with an average lease term of approximately 8.2 years, for an aggregate of approximately $201.8 million and a loan investment of $0.5 million. These investments were made using proceeds from the Company's follow-on public offering of common shares in January 2016 and borrowings under the Company's unsecured revolving credit facility and mortgage financings. Investment activity for the period is summarized below:


5


Property (1)
 
 
 
Location
 
Acquisition
Date
 
Square Footage
 
Purchase
Price 
(in thousands)
Randall Road MOB - Suite 380
 
 
 
Elgin, IL
 
January 14, 2016
 
2,645

 
$
704

Great Falls Hospital
 
 
 
Great Falls, MT
 
January 25, 2016
 
64,449

 
29,043

Monterey Medical Center ASC
 
 
 
Stuart, FL
 
February 1, 2016
 
9,500

 
6,900

Physicians Medical Plaza MOB
 
 
 
Indianapolis, IN
 
February 1, 2016
 
40,936

 
8,500

Mezzanine Loan - Davis
 
 
 
Minnetonka, MN
 
February 4, 2016
 
—

 
500

Park Nicollet Clinic
 
 
 
Chanhassen, MN
 
February 8, 2016
 
56,600

 
18,600

HEB Cancer Center
 
 
 
Bedford, TX
 
February 12, 2016
 
38,182

 
13,980

Riverview Medical Center
 
 
 
Lancaster, OH
 
February 26, 2016
 
73,465

 
12,800

St. Luke's Cornwall MOB
 
 
 
Cornwall, NY
 
February 26, 2016
 
41,744

 
14,550

HonorHealth Glendale
 
 
 
Glendale, AZ
 
March 15, 2016
 
28,057

 
9,820

Columbia MOB
 
 
 
Hudson, NY
 
March 21, 2016
 
65,965

 
18,450

St Vincent POB 1
 
 
 
Birmingham, AL
 
March 23, 2016
 
76,112

 
10,951

St Vincent POB 2
 
 
 
Birmingham, AL
 
March 23, 2016
 
66,169

 
7,945

St Vincent POB 3
 
 
 
Birmingham, AL
 
March 23, 2016
 
82,595

 
10,455

Emerson Medical Building
 
 
 
Creve Coeur, MO
 
March 24, 2016
 
39,184

 
14,250

Randall Road MOB - Suite 160
 
 
 
Elgin, IL
 
March 24, 2016
 
3,439

 
865

Patient Partners Surgery Center
 
 
 
Gallatin, TN
 
March 30, 2016
 
9,890

 
4,750

Eye Associates of NM - Albuquerque
 
 
 
Albuquerque, NM
 
March 31, 2016
 
28,930

 
10,536

Eye Associates of NM - Santa Fe
 
 
 
Santa Fe, NM
 
March 31, 2016
 
23,700

 
8,739

Total
 
 
 
 
 
 
 
751,562

 
$
202,338

(1)
“MOB” refers to medical office building.

A copy of the Company's press release announcing the transactions discussed in this 8-K is furnished as Exhibit 99.1 to this report.

Item 9.01. Financial Statement and Exhibits
 
(d) 99.1 Press Release, dated April 5, 2016, issued by Physicians Realty Trust.

6


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

                        
 Date: April 5, 2016
PHYSICIANS REALTY TRUST
 
 
 
 
 
 
 
 
By:
 
 /s/ John T. Thomas
 
 
 
John T. Thomas
 
 
 
President and Chief Executive Officer




7


EXHIBIT INDEX
 
Exhibit No.
 
Description
 
 
 
99.1
 
Press Release, dated April 5, 2016, issued by Physicians Realty Trust


8