Physicians Realty Trust invests in medical office properties leased to national and large regional health systems. The REIT focuses on outpatient facilities off-site from hospital campuses and owns 274 properties.
Physician Realty’s portfolio is well-diversified across 31 states, with no one area representing more than 8% of leasable space and no one tenant accounting for more than 6% of annual rent. The REIT’s growth comes mainly from acquisitions, and the company has pre-funded its 2021 pipeline. Physician Realty plans to invest $400 million to $600 million in property acquisitions during 2021.
The REIT has good liquidity to fund its acquisition strategy, with $694 million currently available on its credit line, an investment-grade credit rating, and no significant debt maturities before 2023.
The REIT’s Funds From Operations (FFO) per share improved nearly 4% during the second quarter, driven by better than 2% same-store income growth and an incremental contribution from acquisitions. In addition, Physicians Realty collected 99.7% of March rents while keeping its portfolio 96% leased.
The shift of more healthcare services to outpatient settings and Centers for Medicare & Medicaid Services (CMS) projections that healthcare spending will rise 6% annually through 2028 could create tailwinds for this REIT. Consensus analyst estimates look for 4% FFO per share growth this year and next.
Physicians Realty pays a dividend of 92 cents per share that has held steady since 2018. The payout from FFO is 84% and within the normal range for a REIT. In addition, DOC shares are reasonably priced as far as value REITs go, trading at 17 times multiple to forward adjusted FFO and a 9.5% discount to REIT competitors.