Physicians Realty Trust: Early IPO Preview

Jul.17.13 | About: Physicians Realty (DOC)

On Friday, shares of Physicians Realty Trust (NYSE:DOC) are set to hit the New York Stock Exchange. The company will offer 8 million shares, which are expected to price between $11.50 and $13.50. The company owns 19 medical office buildings and has several areas that could drive growth going forward (prospectus).

Physicians Realty Trust operates 19 medical offices in the following states: Arizona, Wisconsin, Georgia, Texas, Michigan, Tennessee, Maine, Ohio, Illinois, Florida.

At the time of its public filing, 83.1% of available space was leased. The average remaining lease had seven years left under contract. The important thing for investors is, 96% of leases were triple net lease, meaning tenants pay for operating expenses like property taxes and maintenance. The company sees annualized base rent of $9.56 billion. The company has a large presence in Georgia, which makes up 34% of current rental revenue.

Physicians Realty Trust should be set for several years and could boost its share price if it can fill out its occupancy. In 2013, only 2.4% of leases will expire. In 2014 and 2015, small numbers, 4.2% and 2.1% respectively, of leases will also expire.

The company's strengths:

· Strong relationships with physicians and healthcare delivery systems

· Experienced senior management team

· Investment focus

· Nimble management execution

· Access to state and federal healthcare policymakers

· Strong healthcare delivery system affiliation and diverse medical tenant base in initial properties

The biggest factor for growth going forward should be acquisitions. The company has announced it is looking at two possible locations. The new locations have square footage of 57,000 and 77,000. In comparison, Physicians Realty Trust's largest two tenants are currently 67,334 and 64,200. These two acquisitions would fall on the larger side of the company's buildings and could dramatically increase base rent payments.

Here is a look at revenue over the last two years and comparative quarters:

Rental Revenue

Total Revenue

Fiscal 2011

$10.5 mil

$13.8 mil

Fiscal 2012

$9.8 mil

$12.9 mil

Quarter 1 2012

$2.5 mil

$3.5 mil

Quarter 1 2013

$2.6 mil

$3.3 mil

Click to enlarge

As a REIT, Physicians Realty Trust plans on giving back 100% of taxable income to investors. The steady dividend yield, along with potential growth from acquisitions and increased tenancy, should make this IPO a successful one down the road. With the large number of IPOs coming over the next two weeks, this is one that could get lost in the crowd. Shares might even price below range due to demand. Be ready to grab shares of this steady yielder if they don't jump.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.