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Physicians Realty Trust (DOC)

Physicians Realty Trust (DOC)

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.

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