Bradley Page - Senior Vice President and General Counsel John Thomas - Chief Executive Officer Jeff Theiler - Chief Financial Officer Deeni Taylor - Chief Investment Officer John Lucey - Chief Accounting Officer Mark Theine - Senior Vice President, Assets and Investment Management Daniel Klein - Senior Vice President and Deputy Chief Investment Officer.

Juan Sanabria - Bank of America Jordan Sadler - KeyBanc Capital Markets John Kim - BMO Capital Markets Tayo Okusanya - Jefferies Drew Babin - Robert W Baird Vikram Malhotra - Morgan Stanley Chad Vanacore - Stifel Jonathon Hughes - Raymond James.

Greetings and welcome to the Physicians Realty Trust First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce to introduce your host Bradley Page, Senior Vice President and General Counsel. Thank you Mr. Page, you may begin..

Thank you. Good afternoon and welcome to the Physicians Realty Trust first quarter 2017 earnings release conference call and webcast.

With me today are John Thomas, Chief Executive Officer; Jeff Theiler, Chief Financial Officer; Deeni Taylor, Chief Investment Officer; John Lucey, Chief Accounting Officer; Mark Theine, Senior Vice President, Assets and Investment Management; and Daniel Klein, Senior Vice President and Deputy Chief Investment Officer.

During this call, John Thomas will provide a Company update and overview of recent transactions and our strategic focus. Then Jeff Theiler will review the financial results for the first quarter 2017 and our thoughts for the remainder of 2017. Mark Theine will provide a summary of our operations for the first quarter of 2017.

Following that, we will open the call for questions. Today’s call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. They are based on the current beliefs of management and information currently available to us.

Our actual results will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, our forward-looking statements are not guarantees of future performance.

Our actual results could differ materially from our current expectations and those anticipated or implied in such forward-looking statements. For a more detailed description of potential risks, please refer to our filings with the Securities and Exchange Commission. With that, I would now like to turn the call over to the Company’s CEO, John Thomas..

Good afternoon, thank you for joining us for the Physicians Realty Trust first quarter 2017 earnings call. We are very pleased to share our results for the first quarter, our disciplined growth strategy continues to enhance our operational scale and platform as evidenced by our outstanding operating results for this quarter.

Our portfolio is now more than 96% occupied among the healthcare REIT industry. We believe that high occupancy not only provides our shareholders with reliable dividend income and strong earnings growth potential, but also benefits the health system and provide our clients to trust their facility.

Our ability to attract and lease space to additional position within these facilities, further to help them from clinical and business interest while increasing access to care for everyone.

Our relationship with Catholic Health Initiatives or CHI and the integration of their outpace of medical facilities into our platform has been outstanding, and the CHI portfolio continue to perform better than expected.

This quarter we made over $248 million of new investment including some of the best investments we have made in the short history of Physicians Realty Trust. The 127,000 square feet Strictly Pediatrics Specialty Center in Austin Texas featured in our supplement is one of the best medical office facilities in the country.

It is a 100% leased anchored by a Seaton Healthcare which occupied more than 50% of the building and also features space lease by DELL Children's Hospital. The only freestanding pediatric facility in the Austin region. Our teams are in the trustiest positions to own and occupied the building with our exceptional reputation as the MOB Owner of Choice.

And we were able to execute on a creative acquisition structure which address the goals of physicians as a whole and individually. This quarter we also acquired a 72,000 square feet Harper Healthcare MOB in Connecticut.

The 95% leased MOB is anchored by Harper Healthcare and the Hospital of Central Connecticut which leases 60% of the space for comprehensive outpatient cancer care. The remaining space is least physicians providing oncology services and a dominant orthopedic practice in Harper Connecticut.

This is a lightly marketed acquisition that we acquired through the owners. Our discipline and focus on enhancing the overall quality of our medical office portfolio with premium quality acquisitions at the right price will build long-term value and earnings for our organization.

Last quarter, we announced guidance expecting to invest between $800 million to $1 billion in 2017. We are well on our way to meeting those expectations.

Our best-in-class operating platform delivered an outstanding 6.7% same-store cash net operating income during the first quarter and even after adjusting for some exceptional onetime positive event Mark Theine and his team delivered 3.5% same-store cash NOI. Mark will share more about our operational performance in a few minutes.

As we progress to the second quarter and the reminder of the year, our balance sheet couldn’t be stronger. Our first quarter included another milestone event as we issued $400 million of a inaugural expected grade bonds at excellent prices. We also had a successful $300 million equity raise which Jeff will discuss in few minutes.

We would like to provide a quick update on the foundation and healthcare facilities. As we reported last quarter, foundation and healthcare facilities El Paso, San Antonio and Oklahoma City began struggle in the fourth quarter of 2016 and we announced reserves related to their ability to pay rent.

We are pleased to report that El Paso Hospital has been recapitalized and operations have improved. The hospital resumed paying their normal monthly rent on April 1, and we expect them to pay rent at schedule going forward.

Further we are working with the physicians on the collection of background as well as the potential sell of the facility through the physician group. We are also pleased to report that the San Antonio operators have paid rent every month this year and we are working with them on a scheduled plan to recoup the unpaid rent from 2016.

Finally, the Oklahoma City’s MOB remains under a binding purchase agreement and on track to complete the sale under their contract. We cannot provide any assurance that it will close, but we are optimistic about privilege.

All-in-all, we are pleased with the progress of the foundation portfolio and we will provide update, if we went, we complete to sale if each of those assets. I’m sure, you are all aware of a new high watermark in evaluation of Medical Office Building that were set this week.

While, the overall price pay for these assets exceeded our disciplined approach to underwriting evaluation. The interested portfolio generated confirms we always believe. Medical Office offers the best risk adjusted return in healthcare real estate and perhaps in any real estate asset class.

We are optimistic as ever about our growth in the opportunity in front of us. We are focused on investing on the highest quality in Medical Office, with the highest quality of health systems and physicians.

As we do, we remain firmly committed to transparency with our investors and are proud to do so as we seek long-term support for our long-term business plan, which will benefit our health system plans and physicians.

We see every opportunity to continue our high pace of growth growing intelligently without undue risk, while maintaining the strong balance sheet to answer the call from the hospitals and physicians we work with providing them the capital they need to execute on their clinical missions and business.

I will now turn it over to Jeff to discuss our financial results. Jeff..

Thank you, John. In the first quarter of 2017, the Company generated funds from operations of $34.1 million or $0.24 per share. Our normalized funds from operations was $39.6 million, normalized funds from operations per share were $0.28 and our normalized funds available for distribution were $35 million or $0.25 per share.

We again has demonstrate outstanding earnings growth for our shareholders with year-over-year growth of 27% in normalized FFO per share and 25% in FAD per share, compared to the first quarter of 2016.

We continue to find great value on the acquisition front in the first quarter closing on $248 million of investments at an average first year cash yield of 6.0%. This quarter’s acquisitions represented outstanding quality at truly outstanding value.

Our best-in-class acquisition team continues to do the hard work sourcing deals that will create value for shareholders on both in earnings and net asset value basis. Had we acquired all of these assets at the beginning of the quarter, they would have contributed an additional $2.4 million of cash NOI.

Our people is strong and we remain confident that we will be able to source the $800 million to $1 billion of acquisitions that we guided to for 2017. Turning to operations, our same-store portfolio, which represents about 54% of our total portfolio, generated year-over-year cash NOI growth of 6.7%.

while same-store cash NOI growth is a number that tends to vary from quarter-to-quarter. The variance this quarter is largely than usual primarily due to tenants taking occupancy and our Nashville Medical Office Building. Absent unusual item, our portfolio generated 3.5% same-store growth.

Leasing activity on our portfolios an outstanding with 96.5% of our portfolio leases. This fits our strategy of keeping our buildings full.

Full buildings create a vibrant atmosphere for our tenants, as well as value enhancing referral patents, is one of the operational philosophies that we believe distinguish us and make us a favorite partner of many healthcare systems. Mark will provide more detail on operations in a few moments.

As usual, our balance sheet metrics ranked as the best in the sector, as we fill to fund building the company in a methodical way with the priority of keeping the strong fundamental capital base.

We achieved 17.25 million shares of stock and overnight offering in the first quarter raising net equity proceeds for the Company of $301 million, which fully funded our first quarter acquisitions. At the end of the quarter, we had debt-to-total capitalization of 24% and net debt to adjusted EBITDA of 4.4 times.

Our $850 million line of credit is fully available and as at quarter-end we had a $117 million of cash on hand. We also entered into the public bond market in the first quarter with our $400 million inaugural bond offering in March.

We were able to upsize that offering from our planned $300 million raise due to the high investor demand and we were able to price the coupon at 4.3% truly an outstanding result for the company.

With access to both the public and private debt market and our loyal equity investor base, we believe the company has never been as well positioned on the capital side as it is today. I’ll now turn it over to Mark to provide some additional commentary on operations..

Great. As Jeff mentioned, DOC began 2017 at the same fast pace where we left off last year. our portfolio now totaled more than medical office building poised for continued strong growth and operational excellence.

The first quarter of 2017 marks our seventh consecutive quarter of positive net absorption in our portfolio with nearly 143,000 square feet of new or renewing leases are executed.

Due to the leadership of Amy Hall, DOC’s VP of leasing and Dave Domres and Mark Dukes who lead DOC’s asset management teams our industry leading occupancy for the full portfolio is 96.5%. Our same-store portfolio saw an increase in occupancy of nearly 1% from 95.4% to 96.3%.

This tremendous leasing momentum drove a 6.7% growth in same-store net operating income year-over-year.

Excluding the initial lease up as Jeff mentioned in our Nashville MOB, our same-store portfolio grew at a solid 3.5%, once again driven by the increase in occupancy including several new leases and lease expansions completed at the Peachtree Dunwoody Medical Centre in Atlanta, Georgia.

As you may recall, DOC required the Peachtree Dunwoody Medical Centre, a trophy 603 assets totaling 131,000 square feet in February of 2014. Situated on Pill Hill, a concentrated cluster of three hospital campuses, the facility was 95% leased with an average lease term of 5.3 years at the time of purchase.

Just over a year ago, we reported the Northside Hospital would be vacating approximately 18,000 square feet of the building effective March 31, 2016 due to retiring physicians and a planned consolidation of its place in an adjacent hospital owned MOB.

The vacancy is not only lower the Peachtree Dunwoody’s occupancy to 80%, but it impacted part of our 2016 same-store results to around 2% at the low end of our expectations.

I’m proud to report that over the last 12 months our team has worked hard to identify, negotiate and execute yearly 21,000 square feet of new leases to backfill that vacated space and more. Additionally, we completed several early lease renewals which today expand the average lease term remaining in the building to over seven years.

With leases signed for 96% of the building, only one suite is still available totaling about 5000 square feet and multiple parties are touring that space.

Over the last year, we have enhanced the healthcare ecosystem and referral pattern within the building by completing leases for orthopedic, cardiovascular, surgery, ophthalmology and internal medicine practices. As build out suspended improvements has completed and rent commences in the second and third quarter of 2017.

We anticipate the building will generate unleveraged cash yield about 7% and also a sizable increases in year-over-year cash NOI growth. These results were not only customers but the hard work of our leasing and asset management team, but to the superior location and quality of the building.

Peachtree Dunwoody’s transformation is just one example of Physician Realty Trust’s dedication to excellence as we continue to maintain and expand our nationwide portfolio of high quality facilities integral for the delivery of healthcare and the community.

Looking ahead for the remainder of 2017, DOC has 97 leases totaling 369,000 square feet scheduled to renew. The average rent per square feet of these leases scheduled to renew at $21.14 in line with Nashville averages for medical office building rental rates.

Beyond 2017 lease expirations do not exceed 4.7% of the total portfolio in any one year over the next six years through 2023. This well balanced and later lease expirations schedule is intentional and strategic as we work to drive reliable rising cash flows and investor returns in the years to come.

Our reputation as a trusted partner to our position and providers is central to this growth strategy. And our leasing and asset management teams are dedicated to providing outstanding customer service to earn these lease renewals. Ultimately having long-term value and returns for shareholders and our stake holders.

With that, I'll turn it back over to John..

Thank you mark and great work this quarter. We will wait for [indiscernible]..

[Operator Instructions] Our first question comes from the line of Juan Sanabria from Bank of America. Please proceed with your question..

Just a question on cap rates, I know you talked about a new high watermark for the Duke portfolios sold to HTA but how are you thinking about cap rates? Does that reset the market anyway? Cap rates that you have been paying for acquisition have come down your 6% for the quarter but how should we think about cap rates for the remainder of the year and just annually?.

Juan good afternoon I think I mean we will have to see how that plays out. We have got a nice pipeline, some of the average - in the first quarter what we have been focused on in our current pipeline is met 6% to 6.5% range, which is again reflecting very high quality as well as we talk about the two buildings that we feature today.

So we will see how it plays out overtime, but it does reflect it’s a high valuation medical office buildings should attract, market capital are interested in them, but again we have got a very good pipeline and those type of numbers and we are going to continue to pick our plum in those branches. Let's see how it plays out..

Okay.

And then just on foundation, any sense of potential proceeds or how should we think about potential dilution from those assets if they are sold and if you could comment just on the cap rate on the Georgia assets that were sold during the quarter?.

Yes, so Juan its Jeff, we are negotiating prices on El Paso and San Antonio foundation assets, the Oklahoma City assets is pretty low cap rate right now, because there is vacancy in there.

But I think on Georgia assets, it was a fix - that’s right 18.2 million and that helped to improve average age and occupancy of our building that’s all in those four applets..

Okay and just one last quick question from me, I don’t know if I misunderstood, but are you saying the 2017 lease expirations are basically in line with market? And if that so, how should we think about kind of 2018 and 2019, are those in line with market as well or above or below?.

Yes, this year $21 in line with market averages. Over the next two years in schedule we have in our supplemented a little bit below that and so we expect to continue to grow our ramp at 2% to 3% a year on renewals..

Thanks guys..

Thanks Juan..

Our next question comes from the line of Jordan Sadler with KeyBanc Capital Markets. Please proceed with your question..

Thanks guys. I wanted to just follow up on the pricing discussion a little bit.

So based on your recent high quality acquisitions versus recent market portfolio transactions, what would you call a portfolio premium today?.

We have always thought about it being 50 basis points may be higher 100 basis points in this context. So we have seen assets trading sub six, we are best-in-class building just bought] just below six. So that’s 5.5 to 6.5 range should be pretty solid for best-in-class MOB..

Okay.

And I know obviously recent transaction may reset some expectations, but I guess coming back to your pipeline, is it possible on a one-off basis to be able to generally back fill or complete what is in your guidance for acquisitions, similar type of quality the way you did in the quarter at the stated gap rates that you just mentioned the six, 6.5?.

Yes, I think that’s where our focus is going to be and we feel pretty good about that. So again best-in-class single assets may go below to six number, but it will have a five in it and like I said I think on the average maybe the low end goes a little bit below six. But just the loss about opportunities between that numbers second half..

Are these assets that you acquired in the first quarter, can you just characterize ground lease versus fee and then 603?.

603 and fee, the two we featured. Yes..

Both okay, and fee interest.

Okay and then as it relates to the same-store NOI, the 3.5 is that a sustainable metric, so excluding the Nashville lease up?.

No, Jordan it's Jeff. No, I think we pretty consistently said that absent kind of unreasonable capital expenditures we would expect our portfolio to grow between 2% to 3% on same-store basis. But it varies, I mean sometime it’s a little bit higher, sometimes it’s a little bit lower. But on the average we would expect 2% to 3% or so.

I guess that saying that in the future quarters it might be down a little bit and average out 60 basis points or 75 basis points lower..

Hi, Jordon so again just looking back at our all the investments that we have in the supplement only Creighton University Medical Center which is a brand new building and sort of the last major component of the original CHI transaction that’s only one of on the ground lease with the CHI hospitals in that market Creighton University Medical Centers..

Okay. And then lastly if there any update or insight you might be able to provide on sort of the dignity CHI obviously nothing on their specific transaction.

But in terms of your relationship and discussions with them?.

Yes. We don’t have any more to add, but as far as we know that the discussion continue and we think if it didn’t - all-in-all at the positive both to credit and our future opportunities, good relationships with both systems. Our IMS assets in Phoenix are tabbed, IMS is essentially owned or partly owned by Dignity.

So all-in-all, a good thing we don’t hope that they will complete that merger, but opportunities is there continue with both of the questions..

Okay. Thanks, guys..

Yes. Thank you..

Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question..

Thank you. On the Duke portfolio sales, you guys don’t need as asset as long as anyone.

Do you have any interest in teaming up with the hospitals on any of the purchase options?.

Hey John. We cannot respond to that question, we can’t respond to that..

Okay. No response maybe of both..

Either, no response..

Okay. On the mortgage side, mortgages that’s expiring this year, can you just remind us on your plans on how you are going to repay that debt or maybe utilize additional mortgage debt. And maybe where do you see mortgage debt in your asset today versus the 4.3% on the unsecured that you recently raised..

Yes. Hey, John its Jeff. I mean as a general rule, I’m not sure to some reason not to - we tend to repay our mortgages when they come due. So, we don’t have very much expiring this year. I think we only have about $30 million, $31 million.

So, we anticipate that we will pay these mortgage off as they expire and then bring those top reasons to our unencumbered pool and use them far against on and unsecured basis..

Okay.

And then I'm sorry if I missed this, but leasing spreads, what are you seeing as far as releasing spreads on your portfolio either what you have already accomplished in the first quarter or would you expect for the rest of the year?.

Yes, for this quarter we renewed 25 leases about 87,000 square feet. Our leasing spreads were 2.1% and that’s the normalized taking out three leases that we did a mark-to-market and extended as part of an acquisition and we put those in our underwriting upfront at the beginning to lower those as far as the acquisition..

Okay, great. Thank you..

Our next question comes from the line of Tayo Okusanya from Jefferies. Please proceed with your question..

Hi, yes good afternoon good to see all the acquisition activity going on.

Most of my questions have been answered, but can you just feel it’s a quick update just on the not often talks about part of your portfolio which is a LTACH on the hospital portfolio kind of what is going on with that stuff simply because there is lot of noise around that area?.

Yes Tayo this is John. So the LTACH continue to go through their transition to clinical criteria, the coverage which has been our supplement crawls our three LTACHs, this last quarter was 1.6% which is down. The Plano facility continues to really knock it out of the park, that Forth Worth and Pittsburgh facilities are kind of generally flat.

So those are all three in a master release with corporate credit. We feel good about our rent but we would like to see coverage being higher of course. The hospitals again that’s really, again just to be clear we just don’t serve the hospitals on top of the LTACH or separately from the LTACH. They are all in the 2.5 coverage some aside I think.

So and they all continue to operate well. again with the exception of foundation which those are operating well today, but you know had poor performance in the fourth quarter and going into the first quarter..

Got it and that’s helpful. Thank you, good quarter..

Thank you..

Our next question comes from the line of Drew Babin from Robert W Baird. Please proceed with your question..

Good afternoon. A question on 603 assets, are you seen any evidence yet in terms of you releasing or pawn explorations or just out any acquisition market.

603 is value enhancing for the assets or enticing stronger renewals spreads if you are kind of or is it too early for that?.

I think it’s generally too early, the most significant 603 leased that we renewed again we renewed at the high end of our expectations in very large part because that we knew that the hospital was not going to vacate their space because of the 603 rule.

So again, straight at the end market that’s still at the high-end of market in that renewal and got a long-term lease and Mark did a great job at that.

As far as cap rates, we haven’t seen a big change there, we are very attractive to those at qualification and those buildings of that quality, but again we’ve always been more comfortable going off campus and most [indiscernible] physicians and hospitals we work with. So we will see how it plays that overtime, we think it will strengthen the assets..

Okay, and one question on G&A. This quarter G&A was below 9% of NOI and about 15 bps of assets, both kind of low levels relative to where you have been and kind of the consistent decline there. Is that the same sort of run rate we should expect for the rest of the year or might we see G&A kind of an proportionate basis decline further..

No, you know I think that we guided the 22 to 24 for the year. You know obviously we’re running a little but under that right now and my guess is we’re kind of more in that guidance range. So I expect it will pick up a little bit through the rest of the year..

Okay, that’s helpful. Thank you very much..

Thanks..

Our next question comes from the line of Vikram Malhotra from Morgan Stanley. Please proceed with your question..

Thank you. Just to clarify the portfolio premium comment that was interesting.

So are you seeing high quality individual properties are probably in the 5.5 to six or 6.5 range and then if there was a very high quality portfolio, the premium could be 50 to 100 basis points?.

I think that’s pretty fair..

Okay.

And are you aware of any sizable portfolios out there and that you may be looking at?.

No, our regular business is that the ones [indiscernible] so again we are not aware of anything on market, it's a big portfolio..

Okay.

Then just curious that the growth or any metrics you can share between your single tenant and multi tenant properties in terms of releasing spread or just NOI growth, any metrics that - are there any differences between the two that you have seen over the last quarters or so?.

Yes, for this quarter the single tenant assets in the same-store portfolio grew at 4.9% and the multi tenant property grew at 8.3%. Then multi tenant property include the Nashville MOBs so that one is a bit accelerated this quarter. But normally we see our single tenant portfolio growing right about 3%.

Many of those buildings are fair lease back transactions but we have been able to structure the lease upfront and we put 3% in [indiscernible]. And the multi tenant buildings on a more normal basis is usually around between 2% and 3% as Jeff had mentioned before..

Okay and just to clarify on the expiration near-term, is there any skew either way in multi versus single?.

Almost all multi tenant, we don’t have many single - I mean any single tenants in 2017 and maybe one in 2018 so almost all multi tenants..

And then just last one, just on the watch list or tenant held, just wondering if there is anything you have heard in any of your top tenants.

I think [Trio’s] (Ph) has been in the news a little bit on maybe one or two of their assets, but any additional color would be helpful?.

Other than foundation which we - again feel it positive turn around there, Trio’s has been in the news a lot. They are working through a refinancing of their hospital which will make a huge impact.

They have got a balance sheet issues that can get solved if they can [indiscernible] significantly if they can refinance the hospital though that or otherwise. So [indiscernible] but otherwise operation and - we continue to work with them, but expect to find a long-term. It will work with them as a good partner in short-term..

Okay great, thank you..

Our next question comes from a line of Chad Vanacore from Stifel. Please proceed with your question..

Alright, thank you.

So what are some of the one items that [indiscernible] same-store NOI growth is 6.7%?.

Yes, so the biggest onetime items for the 6.7% NOI growth is, we have the Nashville Medical Office building, tenants took occupancy of that and it rolled into our same-store this quarter. So there is a bump up from a previously vacant building or some of occupied building..

That was 37,000 square feet of lease. But there was not on last year, that is now included this year..

Okay. Got it, but typically we are expecting in somewhere in the 2% to 3% range..

Yes, with some other occupancy gains elsewhere in the portfolio as well Chad..

Okay..

So positive [Multiple Speakers]..

Alright.

And then I was just thinking about your FFO, how did the timing of your equity in debt financing impacted FFO through the quarter?.

Yes. I mean, clearly, any time you are exactly, it’s going to be a little bit diluted pure FFO, as well as terming out to the debt on a 10-year basis. But we’re always look at our company and trying to build it on a fundamental basis, could be in a good position to execute on.

So we felt that the ability to clear out of our line of credit completely, put a little bit of cash in the bank. As we look at our people. Right now through the rest of the year kind of set us up for the best possible value creation opportunity for our shareholders. So we took a little bit of FFO on dilution budgeting in those long-term capital moves..

Alright. And then did you mentioned that the Foundation Healthcare were becoming a little clear. And you took right off last quarter and there was about two million uncollectable.

Is it possible that gets reversed?.

No. Chad, we’re working with the physicians to recover some of that. And we are also working with them both in San Antonio and El Paso about the building back form a – probably the resolution gets all weld into one solution there. But again right now our San Antonio is operating very well and El Paso is recapitalized and the business has improved.

So we’re optimistic but we don’t know, we will see how it plays out..

John, what is improving on day pacific volumes or is it collections?.

So El Paso had of volume and collection and San Antonio had a collection problem, so both are getting resolve. Foundation Healthcare in an out of itself is no longer involved in the management of ether facilities and collections have gone up and improved in both..

Alright. Well thanks for taking my questions. I’ll hop back in..

Okay. Thanks Chad..

Our next question comes from the line of Jonathon Hughes with Raymond James. Please proceed with your question..

Hey guys. Good afternoon. So in the press release mentioned CHI deal is performing better than expected and its touch on its earlier.

But can you just talk about what is driving that outperformance relative to your underwriting and maybe quantify on a yield basis, how much is outperforming?.

Yes. Jon, it’s leasing and leasing both vacant space and renewals better than expected and also better management of the expense controls and really high customer service that we’ve delivered to health system and their physicians. And we think on a 12 months basis, we look more like 6.4% to 6.5% versus our underwritten 6.42%..

Okay. It’s helpful. Thanks. And then earlier you also mentioned G&A expectations for the year, but I saw a news article recently mentioning 10 to 20 employees being added to that headquarter this year.

I assume that’s baked into your expectations?.

Yes. That’s baked in..

Okay.

And in terms of external growth, how much do you think you can acquire before headcount needs to be materially increased?.

I mean, I think on a proportionate basis, we get a lot of scalability. And it’s not a significant headcount increase over our guidance for this year..

Okay. And then last one, any markets concerning you from a new supply standpoint. And then also if you could just comment on recent articles mentioning mall space, shadow supply for medical office tenants? Thanks..

Yes.

We don’t see any real competition from the model side that’s something that had been going on for three years, the [indiscernible] physicians groups and others, kind of we have them, but we don’t see that is a little competing supply with our hospitals and physician groups we basically own a couple of buildings that were the end of results of that kind of readapted use, but we know there is sustainable our trend if the fact and then that’s going to....

And then any mortgage from pure MOB?.

Oh I'm sorry, yes from the department standpoint.

No, I think the market is seeing a little bit uptake in the development like Minneapolis that’s - one of the biggest developments there with our partner Marc Davis and we think that’s the supply - health system us to anchor development that hopefully we have an opportunities to work with Mark in the future..

Okay. That’s it for me. Thanks guys..

Thank you..

Thanks, Doug..

I appreciate everyone for joining us on the call today. And thank you very much..

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day..