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REIT Report: Patient and prudent, not stagnant

Deals might be slow now, but Physicians Realty Trust is optimistic about the future

By John B. Mugford

John T. Thomas

During a time of rising interest rates, harder-to-obtain debt for acquisitions, and a larger-than-normal pricing gap between what buyers would like to pay and what sellers would like to receive, medical office building (MOB) sales have dropped dramatically.

This was made abundantly clear in recently released data from Arnold, Md.-based Revista, which provides a wide array of healthcare real estate (HRE) information for its subscribers.

Revista’s most-recent MOB volume data indicates that the sales in the first half of 2023 came in at just 2.9 billion, down 71 percent from the $10.1 billion recorded in the first half of 2022 and was also the lowest first-half volume since the firm began compiling such data in 2015.

A good example of an MOB-focused investor that has slowed its acquisitions activity during the current environment is Milwaukee-based Physicians Realty Trust (NYSE: DOC), the well-known publicly traded healthcare real estate investment trust (REIT) that recently celebrated the 10th anniversary of its initial public offering (IPO) on the New York Stock Exchange.

DOC has certainly been an active MOB acquirer over the years, as an investor does not accumulate a portfolio of about 300 properties with more than 16 million rentable square feet of space and a value of about $6 billion by sitting on the sidelines.

But, as noted, the REIT has always billed itself as a prudent investor that is not afraid to slow down its activity when it believes doing so is appropriate, such as – at least it would seem – during the current market.

According to DOC’s second quarter (Q2) earnings report, the REIT made two MOB purchases during the quarter for an aggregate investment of $33.3 million.

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