Physicians Realty Trust

At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Page. Thank you, Mr. Page. You may begin.

Thank you, Maria. Good morning, and welcome to the Physicians Realty Trust fourth quarter 2022 earnings conference call and webcast. Joining me today are John Thomas, Chief Executive Officer, Jeff Tyler, Chief Financial Officer, Beanie Taylor, Chief Investment Officer, Mark Fine, Executive Vice President, Asset Management, John Lucey, Chief Accounting and Administrative Officer, Lori Becker, Senior Vice President and Controller, and Dan Klein, Deputy Chief Investment Officer. During this call, John Thomas will provide a summary of the company's activities and performance for the fourth quarter of 2022 and our year-to-date performance in 2023, as well as our strategic focus for the remainder of 2023. Jeff Tyler will review our financial results for the fourth quarter of 2022, and Mark Vine will provide a summary of our operations for the fourth quarter. Today's call will contain forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. They reflect the views of management regarding current expectations and projections about future events and are based on information currently available to us. These forward-looking statements are not guarantees of future performance and involve numerous risks and uncertainties. You should not rely on them as predictions of future events. Our forward-looking statements depend on assumptions, data, methods, that may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described or that they will happen at all. For a more detailed description of risks and other important factors that could cause our 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'd now like to turn the call over to the company's CEO, John Thomas. John?

Thank you, Brad. Physicians Realty Trust demonstrated resilience throughout 2022 and enters 2023 from a position of strength. Our assets are performing well, demand for our space remains strong, and our balance sheet is well positioned for outsized external growth. We're proud of our achievements during the year, including attainment of the highest annual FAD, funds available for distribution for share, in the history of the company. The cash growth is... supported by record leasing performance. For the year, we executed leases totaling more than 1 million rentable square feet, including over 800,000 feet of renewals and an average spread of 6%. Retention remained strong at 77%, and more than 60% of our executed leases had an average annual escalator of 3% or greater. We remain focused on creating long-term value on behalf of our shareholders. This can occasionally require the selective non-renewal of leases when we believe that the space can be re-let to stronger health system tenants. While this has the effect of hurting total occupancy and same-store NOI growth in the short term, we believe that these decisions result in a stronger portfolio that delivers superior cash flow growth in the future. During 2022, we increased the amount of space leased to investment-grade quality tenants from 65% to almost 67%, And we believe that we continue to have the highest portfolio leased rate of any public medical office building investor. The rapidly changing interest rate environment required us to be disciplined when evaluating external growth opportunities during 2022.