Physicians Realty Trust

Greetings and welcome to Physicians Realty Trust's fourth quarter 2020 and year-end earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brad Page.

Thank you. Good morning and welcome to the Physicians Realty Trust fourth quarter 2020 earnings conference call and webcast. Joining me today are John Thomas, Chief Executive Officer, Jeff Tyler, Chief Financial Officer, Deanie Taylor, Chief Investment Officer, Mark Fine, Executive Vice President, Asset Management, John Lucey, Chief Accounting and Administrative Officer, Lori Becker, Senior Vice President, Controller, Dan Klein, Deputy Chief Investment Officer, and Amy Hall, Senior Vice President, Leasing and Physician Strategy. During this call, John Thomas will provide a summary of the company's activities and performance for the fourth quarter of 2020 and year-to-date, as well as our strategic focus for 2021. Jeff Tyler will review our financial results for the fourth quarter of 2020, and Mark Fine will provide a summary of our operations for the fourth quarter of 2021. Following that, we'll open the call for questions. Today's call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. They are based on the current beliefs of management and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, Our forward-looking statements are not guarantees of future performance. Our actual results could differ materially from our current expectations and those anticipated or implied in such forward-looking statements. For a more detailed description of potential risks and other important factors that could cause actual results to differ from those contained in any forward-looking statements, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the company's CEO, John Thomas. John?

Thank you, Brad, and thank you for joining us this morning. Before we discuss 2020 and the fourth quarter, we want to commend our team in Texas that has answered the call to keep our buildings open and operating during last week's historic winter weather. We had four buildings with frozen pipes and water damage, and we've been working around the clock to get the buildings back in operation. As of this morning, three of those buildings are operational with tenants actively using their leased space. We anticipate the final small building, not yet open, to be open within the week. All of our buildings are insured for events like this, and any deductible costs will be ultimately recoverable from the tenants. With all of its challenges, 2020 turned out to be a very successful year for Physicians Realty Trust. From the onset of the pandemic through December 31, 2020, We collected cash equal to over 90% of all rent and other charges due from our tenants, culminating in the collection of 99.6% of rent due in the fourth quarter. The single deferral granted during the year, representing about 0.5% of total billing since April, is in payback and is being paid timely by that tenant. We ended the year with the lowest outstanding accounts receivable balance we have ever had as a percentage of revenue and an occupancy rate of 96%. the highest of all public owners of medical office facilities. Our portfolio's resiliency is directly attributable to our focus on the clinical and financial quality of our healthcare provider tenants, with more than 61% of our rentable square feet leased directly to investment-grade quality tenants. We also believe our pure play focus strategy on medical office facilities, with a balance between off-campus and on-campus locations, was instrumental to our success and critical to the success of our providers. As COVID swamped hospitals across the country, the providers located in our medical office facilities, especially those off the campus of a hospital, remained open and available to care for non-COVID patients. While the equity market was volatile, we ended the year with the best total shareholder return of any public REIT with a significant medical office portfolio. With that said, our total shareholder returns, including dividends, were flat for the year, and that is always disappointing. We've worked hard since the formation of our company in 2013 to build an enterprise and portfolio resistant to economic weakness, and the events of 2020 stress-tested our team and assets. The portfolio performed, frankly, as expected, but not without meaningful time and attention from our property management teams and the excellent work of our hospital and physician partners. Nevertheless, we continue to focus on delivering reliable, growing cash flow to our investors to drive exceptional shareholder returns. Accretive acquisitions are a key component of this growth, and we're excited about the investments made during the fourth quarter. For the fourth quarter, Doc completed $208 million of investments. These investments include four off-campus properties anchored by investment-grade health systems, expanding our relationship with Hartford HealthCare and the Ohio State Wexner Medical Center, and establishing a new relationship with Lehigh Valley Health Network. As expected, we also executed our option to purchase the brand-new Sacred Heart Summit MOB and ambulatory surgery center in Pensacola, Florida, that was developed with Doc's participation in the form of a $29 million construction loan. For the full year, we completed $275 million of new investments and an average first-year yield of 6.5%. In addition, we announced the formation of a new joint venture with the Davis Group, who we have partnered with since 2014. The strategic venture currently includes eight assets and will focus on the acquisition of both new and value-add assets that we will source and manage together with Mark Davis and his team in Minneapolis-St. Paul. We're excited to add a strategic option to our investment platform that will provide more opportunities to deliver value to our shareholders. Finally, our investments included the funding of a $54 million portfolio of mezzanine loans with landmark healthcare facilities as part of a recapitalization of their ownership in nine medical office buildings. These facilities are primarily leased to and anchored by leading nonprofit healthcare systems in nine markets, totaling 1.1 million square feet, and are 94% occupied. 73% of the rentable space in these buildings is leased to investment-grade tenants. Our loans include rights of first offer rights and other features which we expect to lead to future investment opportunities with Landmark. As we enter a new government, we expect the Biden-Harris administration to pursue the expansion of Medicaid coverage in states that have not already done so. We believe the policies of this administration will accelerate the move of care out of the inpatient setting, expand telehealth coverage, and incentivize hospitals and physicians to bend the cost curve while caring for more people. Our investment philosophy has anticipated these trends, and we believe our portfolio is well-positioned to benefit as specialty care moves away from the hospital into the more efficient outpatient setting. While DACA itself received no direct government assistance during the pandemic, our tenants obtained more than $7 billion in various forms of CARES Act support, PPP loans, and CMS advance payments. We can comfortably say we do not believe our tenants require any further support to pay their rent, This has been true for most of the 2020 as our tenants have been open and caring for patients routinely since May. Our dedicated credit department has monitored our tenants throughout the pandemic and the visibility we have on 92% of our tenants' financial performance continue to provide us with unmatched insight in our portfolio stability and a tremendous competitive advantage. With the distribution of vaccines in early 2021 and the expectation of returning to normal, we will continue to invest in better with a focus on accretive acquisitions, internal growth, and a steadfast commitment to ESG. We're off to a great start of new investments for 2021 with commitments and contracts totaling more than $150 million plus development financings of $20 million so far. Once completed and stabilized, these development projects will exceed $60 million in investment opportunity. With that start, we anticipate 400 to 600 million of new investments this year, subject, of course, to capital market conditions. Jeff will now review our financial results, and Mark Dine will share our operating results, including our ESG accomplishments for 2020. We will then be happy to take your questions. Jeff?