- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the Global Medical REIT Third Quarter 2022 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. pleasure your my Investor Steve now Relations. is to host, introduce Swett, It you. Thank

You may begin.

Stephen Swett

morning, welcome everyone, REIT’s Good you. Thank and XXXX conference third to earnings call. quarter Medical Global

these in intends those with statements results variety statements Officer; may control, Bob for provisions Act in Kiernan, described affected are the made and forward-looking provisions. safe those materially beyond conference differ purpose result considered events company’s any Financial filings. XX, today SEC the Securities and making Busch, are forward-looking not On from forward-looking. for by is use note call. harbor covered no that include of XXXX, on risks be may information, the will new the Chief those as XX-K without Chief year other Furthermore, limitation, complying company statements the and December Chief that to Litigation Statements this a company by and historical are whether by a company are be and Officer. to statements, ended update call statements for and its forward-looking facts the The the factors forward-looking Executive the of Reform assumes forward-looking obligation safe or publicly otherwise. including, of Officer; actual company’s Investment future The in harbor contained statement Alfonzo the Jeff XXXX call statements of Please this of contained Leon, this on Private

funds adjusted as may measures from funds adjusted refer operations, this to company certain such Additionally, and on operations, EBITDAre. EBITDAre financial call, from the non-GAAP

GAAP release these tabular reconciliation non-GAAP SEC. currently the measures with the company’s and earnings can the most in financial You a numbers to filings of find comparable

the Medical Jeff? Executive like Jeff page of on call Global at I website www.globalmedicalreit.com. turn Relations the information REIT. to Officer to Busch, would Investor found Chief now on company’s be the may Additional over

Jeffrey Busch

Steve. quarter you, joining Good our third Thank you thank call. for earnings XXXX morning, and

continues quality by to activity occupancy high Our the We primarily million facilities gain the in results revenue and healthcare from driven property. quarter acquisition in achieved past XX% a cash year, that increase excellent third produce million, $XX.X stable our to flow. a over including a based portfolio of XX.X% sale year-over-year total needs the with of $X.X

$X.X AFFO common net shareholders quarter for was the share third $X.XX year XXXX in third income $X.XX in line compared per and $X.XX XXXX. third or of and in by unit the quarter share million to last per unit third and the increased quarter to $X.XX with attributable XXXX. was $X.XX FFO million the Our to per share $X.X or of share our per to compared quarter share of per

evolve. acquisition environment to discussed very is market adapting This cycles the reality, in seen in in bid-ask to much slowed resulting to led of continues have increase As more new sellers, meanwhile, our the Federal with widened. we target has are material was this a rates have an gradually the Reserve fighting acquisition impacting that we Potential cost spread for the The focuses line year, on marginal buyers. what for capital the when significantly. interest assets has past inflation in

the We that attractive to third difficult in acquisitions closing our hopeful find quality $XX for That yield targets acquisitions we it soaring predict. are see is to to X but million. XXXX, meet continue early some and quarter, in said

other upside. rate interest of that had negotiations X.X%. know quarter XX% term represent But third Our X impacted a that September also I and the but closed in acquisitions one acquisitions our $XXX our was rate the term after for this the high of the by In and with increase occupied, was revolver. loan we had August, only low-Xs. that million substantial started. acquisitions, These which transactions fully cap rate average more was has our took in extended Xs credit significant cap expanded place would facility

into on through our rate to swaps our We approximately rate term that bring fixed ratio interest maturity fixed the entered its XX% debt debt. also total interest loan rate of our new

have be focus forward, vacancies a conducting cap capital. considered of we will seemly we reflect up value extension, properties that assets by that a be identify properties Looking upgrading properties. pursuing until on strategic we core meantime, can acquisition better higher any acquisitions, since review added we can the are sell leasing cost with where selective or lease incremental in In to rates the credit,

We use to powder outstanding conditions our acquisitions, to from position dry debt, increasing when sales the proceeds be our any market expect improve. [ph] to to the restart in reduce

environment. results the to work Overall, like contributions course highly their provide our this targeting we are is more to over we to our call and am we Alfonzo capital of with investment take will to proceeds the I the markets on leverage detail. our quarter We and as generate ahead. to want and volatile team With thank more results. prudent reduction to third color expect But for admits hard activity we action this in believe economic a turn in the to move pleased I’d discuss and that,

Alfonzo Leon

Thank you, Jeff.

in medical As Jeff pricing. rates flux, market facilities is impacting mentioned, interest higher are as for the

been know to through such changes. have time typically the We that market fully this takes reflect as this cycles and transaction before,

disciplined to continue evolves. remain We that and that as opportunities make prudent market the sense source will

which investment office X.X%. Consistent for New hospital’s of leasable some quarter, Pennsylvania, by anchored New adjacent to Rochester of the in will portfolio we the for by York benefit University average cap XX,XXX During million quarter medical square purchase XX% with purchase acquisitions under vacancy, X X.X% lease-up for mid-September, occupancy, on in $X.X where at Aurora cap in with cap of Health. Toledo, XX,XXX a and A focused XX% Ohio, at of to occupancy, an building and Optometry medical rate Western long-term. office of in foot Primary XX,XXX rate retail occupancy, and the rate of $X.X rate XX,XXX foot to at Illinois, and with acquisitions, which A square so Health X.X% and our $XX.X for foot million, acquisitions foot at square we Surgery Canandaigua, of Dental, X.X% a of closed lease office price York, Group Bon rate million, square in Lake a million price Secours a $X.X purchase University X.X% Advocate a campus, portfolio with Geneva, a price medical cap potential Stewart by third XXXX. square X with a completed at Wisconsin, building cap cap These A purchase believe feet XX,XXX million, of XXX% is a acquisitions XXX% in office purchase in third with weighted is Care the far a square center with Glenview, a nearly by where a XXX,XXX Hermitage, and and foot aggregate tendency over of XX% prior price anchored foot medical quarter $XX.X include office $XX.X Toledo million, X.X% square us physicians of XXX,XXX Medical. is leased is the of which for rate XXX% a a included price just occupancy, for of million the containing Center. With Wellness. $XXX medical a years. A of of

XXXX balance we remain look of and the into incremental We for at disciplined growth will XXXX. as

now any acquisitions While third sold over we regards remainder building in of in to continually our don’t Bob current potential assess to on we the expect contract $X.X don’t resulting gross under receiving acquisitions and million. currently opportunities, to results. quarter, on of based additional close for in on medical the to I’d our a acquisition market office turn any we call the XXXX. With Bob? dispositions, have discuss Tennessee, of sale Germantown, to conditions, million, financial gain $XX.X proceeds like

Robert Kiernan

XX.X% and an our the in quarter X.X% million, performance. GMRE the and $X.X million total driven we Thank XXXX. activity X.X continues of X.X%, coverage, and average times revenues over consists revenue gross On XX.X% weighted weighted average At X.X quarter you, $XXX,XXX third third or $XX.X term, of to benefit our tenants lease investments portfolio leasable XXXX, basis quarter, estate third year-over-year contractual to of included leases, feet, rent end occupancy, X.X quarter achieved rent increase In the with year. the excluding the were a escalations. of our real cash of years by relationships of Alfonzo. strong in third square acquisition compared same-store our solid from basis, portfolio up billion past total to primarily

depreciation quarter. third to $XX.X acquisitions the XXXX in compared amortization majority million primarily increase The for larger due to our of the multitenant was stock million Within costs that the of in $X quarter XXXX. were G&A costs and G&A quarter our third of $X.X the G&A third $X our the higher expense. to expenses compared note expenses prior the total Our and of million due XXXX operating just nature past the for compensation in interest million, were million, expenses the quarter and $X.X expenses, $XX.X of million. year of our quarter were year, were and over portfolio, to quarter our current higher cash

to expenses $X million expect we $X.X our ahead, be Looking and million. G&A between QX

impact were quarter third million, growth to prior a in driven year $X.X expenses the the and portfolio, by $X the the degree being to the increase for compared expenses leases. operating our these quarter, in Our million with lesser gross of in

expenses, $X.X $X leases. company comparable recognized Regarding related net million to gross recovery leases, where these to expense and related revenue, XXXX quarter amount third the of million the

million to and interest attributable of stockholders per income a million, to quarter $XX.X quarter the year, debt and $XX.X or sale gain million share the $X.X the or $X.X $X.XX $X.X AFFO million quarter third million to property, $X.XX interest reflecting net was third XXXX. third was million, expense for quarter unit, the quarter or was $X.XX comparable in per to per the share $X.XX third of compared increased $XX.X third per third or in per or per $X.XX quarter compared compared from unit compared the the both $XX.X share and XXXX. the $X.XX and quarter of unit XXXX common share, share higher $X balances the in million to XXXX. in third $X.X FFO was last in share or of rates. in Our in quarter unit, of million, and million, of Including

Moving on sheet. balance to the

estate of up ATM our under XX, issue in $XXX September approximately billion, million was in any did real a common quarter. We $X.X the year from XXXX, stock gross As not earlier. investment which of our is shares

with adjustments in million associated August our SOFR component approximately the Regarding of of to add of interest we to maturity on loan all XX our maturity XXXX facility SOFR-based new our that term X-month At XXXX October debt, million our September facility current $XXX $XXX component spread with the point in two loan is its credit convert XXXX; our million conversion in leverage, rate At August, loans. basis loan the that’s company-controlled term entered X.XX%. rate commenced debt. on revolver we following $XXX date we fix LIBOR-based the that XX, loans the SOFR-based and amendment, with XXXX, options; at to Immediately to lastly, amended into and forward X.XX%. the February interest gross X, new swaps loans, had a term new component mature extend January maturity including starting of the XXXX, the extension under through and

Our under current capacity million. borrowing credit was our The facility the $XXX And weighted interest X.X%. rate leverage XX.X%. was unutilized ratio average was

our our team to management increase expirations. years weighted in of end, term this quarter continues make from XX. quarter, up occupancy X.X our the leasing with of X.X in June a progress and to as debt Relative our Additionally, vacancies activities, average lease years, was upcoming at modest asset

are expirations, single we to towards look ahead this progressing ABR X renewals. facilities tenant lease As to that that more of note well XXXX related than half

for balance we business that to two concludes believe of these are well and there the Overall, we our leases open the continue and through call positioned forward year to This on individually behind we look expirations renew. Additionally sharing expect Operator, into conditions, XXXX. please no progress despite strategy, our to don’t prepared are challenging this to market remarks. execute our questions. currently large with you material

Operator

be with will first and Thank Instructions] session. time, gentlemen, from question-and-answer question you. Ladies at [Operator comes we with this the KeyBanc. of proceed your line conducting Austin a Please question. Our Wurschmidt

Austin Wurschmidt

sales. But the I through target kind gross long-term could on Jeff, debt process assets cap plan for that about potential still reach range going we think Hey, thinking XX% range good I’m proceeds, you is morning, sales? rate the how as of everyone. to know of strategic you’re I asset also review your assume mean, the these sales. to within And, you’re are reasonable curious, the XX% range future about of

Jeffrey Busch

there’s want and people big cap a assets between to market the call what that. they buy so differential in rate ranges, The Okay. secondary many our what and core

plus So we’re are little our is to looking towards $XX to, mid-Xs, These moving able may the still at to and stock stock be sell at in start time, and above possibly the the the sold hopefully, XX% the sale way the that there properties not this target low. to a market, million been at selling we in But a up on price, in stock was the have too while ago. low-Xs. went that is stock We think target, then XX%. have time could we’re we we change that

is XX% come properties the leases, to to attractive longer acquisitions. the So then properties, above But buy suddenly we’re to these market. at term extend shorter to into level, different do leases, and and with into they’re a able XX%, the term credits have and jump target sometimes very take been interesting, still them whole we just higher it’s

to buy people those, sell, we have going that we same if able but now, into we’re they But up, of they’re we can’t pause we’re sell, have up. some of reduce. – because be guarantee, markets that see properties Then, the coming buying, mortgages to that to somewhat in to market So a reasons selling we at we the make of right we places money. and on into always coming in see is have type the market our our they rates. now, type primary there’s be us. coming the of And But and of markets the we’re of to have secondary have back, best realization same is coming retirements, to to get see and time reason which take market accretive talking back of the valuation properties, markets and the we probably down. our suburbs We not going reason looking

be time, of selling be buying during conservative gain. So meantime, be then this And may there’s later possibility a something. But basis XXX a difficult on point with it’d in the would is debt the target to nice our at even the would XX%, went that also to float lower ratio. lower that that And float though also at our we the at time. to

Austin Wurschmidt

sense. et reference or on in million be roughly makes term, kind due that moving range that characteristics, And portfolio? XX you I’m $XX your $XX other sales seen broader million disproportionate points. have it’d deals the across plus Or lease the is a move fair whether cetera? basis Yeah, of to curious, inside

Jeffrey Busch

I’ll He’s let Alfonzo? that. Alfonzo in the into been market.

Alfonzo Leon

Yes.

see of a what market. the we in – me to I of a question trying like you’re just if get So that sounds like Is sense more to that market?

Austin Wurschmidt

moves of cap a rate Thanks. just mid-X% alluded is sort board, now the a rates, as terms or $XX why – And Yeah, low-Xs. if than of how trading that cap wider to, I’m move even deals what the just Jeff was curious, moved in million if inside have that? fair plus in deal across – is in

Alfonzo Leon

Sure. Yeah.

XXX to board, in has least higher And it’s up pretty it’s So point, this instances, that market quality XX location. basis than up at moved of regardless that. the across moved clear the at points some

Austin Wurschmidt

on rent? one you the they there any curious Got then health sort if their sort of remain pipeline you. and one it. current what could And I provide And That’s update for Thank or me. whether latest last not helpful. of just systems. on was

Robert Kiernan

Austin. Sure,

I think of they’re they’re accept going some decision. a So, for if or couple through in time the lease have note, things still pipeline, I that terms process, to they going mean, bankruptcy reject that our or and to waiting decide to

on is be that of bankruptcy rate property. lease market the And rejected, in this payment, Although going our of at there’s than – that by don’t the type anything more this else. the time, will bankruptcy a timing below they’re while payment it’s believe rules process, for determined through we terms rental

at to reject know going don’t rejected. we And or get that again, more our time, once they’ve once to expect as take believe be this would, So place we’ll normal. is But the everything decided accept those lease lease. we again, to continue mechanisms paid

Austin Wurschmidt

Thanks Great. time. for the

Jeffrey Busch

Thank you.

Operator

question. Our next Stevenson with proceed comes your Rob Janney. Please from question the line of with

Robert Stevenson

is argue and proceeds one getting preferred times et guys guys. equity. how lot down that you’re that are use of – obviously, paying X.X%, How Good that’s disposition as for debt, If at is morning, good guys the – a do of How the a But in you piece could capital not have proceeds, you thing viewing are a viewing cetera. that you expensive deploy? and it credit you to debt your stack? most that are good

Robert Kiernan

think, So, it leverage But we ability it facility, certainly the now perspective potential, repay we of does to in Rob, a capital. the in I have from it. as terms consider count credit

And when pricing grid we the in take impact be that and the our on moving grid, XX% we grid our have pricing above level, cognizant preferred. we out so, if about of pricing not think the to

have around thoughtful we how that use of again, So, be sales. to, in terms proceeds would think, I from we any

credit it balancing the moves on us. the grid because table, it’s our on have So out I facility. But, the think, pricing optionality to impact that again, might just in

Robert Stevenson

Okay. And then…

Jeffrey Busch

to something, on get was wait circumstances till level, preferred, debt ago, our because preferred, down take take changed. of could just We money based the sort preferred of to – couldn’t lower sort equities make funny, planning it the have down upon equity. we add Rob, but the on year it we me that, our let a using were the about

down preferred some we taking the We’re always consider time. at probably –

Robert Stevenson

do Okay. assets. versus the that another you’re or cap on you to guess, have bottom that an I within stuff to dropping cap into mean, enough? How rate, I line the asset you question. marketplace rate the Is additional to buy revenue and call own make off portfolio the work? own to a mean, good price I and from at that if a to trades be Given make much value be the assets implied do high stock trading the and incredibly between you your acquisitions your sort is $X in buying of external narrow external source XX it, to in narrower bounced of that for the low, I of make leads XX your implied really buying math mean, band it, implied you? then could need X. work? portfolio of still own Or but down stock work existing

Jeffrey Busch

Yeah, I that’s something good is And get all We it will But, a time. now, feel guess low, got low. extremely do stock very that’s we too question. others right think, we also. our the

the of and the we capital. For the we I’m the back we on get need cost are accretive? time. we sure to to do used that much taking that. be dividend and pay at to have that our going to to and this X, dividend, and again, accretive, that buy sheet, that I worried our But back continue this mean, we’ll pay we’re growing we we feel accretive, given money How our Then interest in to able it. we about have to good not and includes points includes dividend down rate balance pay need accretive. to find I assets think not X assets

But hand, don’t and some in of going pay out to little until that sort mortgages there, want to be they and to pretty have to there be other So may on out the bit – things. them, mortgages have other or up And, their catches opportunities who accretive. the and they’re they of seen there some this with we’ve sellers, be a it’s there going refinance desperate market – others. may pause this

let pause I and a market up have a think we also. need bit to the go

Robert Stevenson

that I the you timing And the What’s was you plan for think Okay. what’s that? said then it acquired. XX% And on one for occupied last asset me. that?

Jeffrey Busch

asset The Yeah, you. got our to department. a that to thing I tell built has very up greatest is happened management organization strong we

Not we been basically we therefore, in, a like and do only we we Virginia, a increase don’t have We then it’s very manufacturing in their we with numbers, quickly REITs into So, then went vacancy XX% occupancy. we able then re-lease leases, have show buy that their vacancy make Fairfax, occupancy, up this, lot some turn much not because properties, some we sort where we feel it of able to bought went business shorter and it. want to they to and But bought the occupied, and up. strong longer of around on and we because lease leases. could

of property. we’ve done where really X do we points our buying good several getting point with assets, when a And vacancy the on that. now So X deal gain we’re that to on we it,

in fees, a It of type properties. of don’t like we the to found happens that’s same how broker there’s we properly. basically in, the are So strongly If the in who have not property, place. know we that lot a or renovation allowances paid filled broker because Fairfax, of that don’t they pay have doctors just strategy like broker one run ownership, they give pay owner them fees, just in sometimes is, the property anything vacancy fees, medical what we people feel each or does of or to up we on some came we didn’t quirks our to

a So property. to that niche value to a we found real add in

that in you’ll So, up. see could you feel lower, sometimes therefore, before we – these could we see strongly these occupancies we rent but when down go we

Robert Stevenson

Okay.

your something that? story the Or rather just use a were like this – manage in it do it it over you It’s lease lease knowing going you to people tenant people had this redevelop asset your a like the So few that? up than to something or internal next and use that going into is up quarters? pocket just back better or

Jeffrey Busch

We are them that space, we a for right? we tenant, sometimes somebody sometimes tenants have And a buy; looking of whole interested. bunch we tenants have national are before have already that we contact

Robert Stevenson

All right.

Alfonzo Leon

like we And would in I like with that look Fairfax, and Prosperity to the completed of] Virginia, add previous and table, a X the we it’s up we added color I floor, at [ph] to just happened if report, a mean, we had at bit property. that compare that’s quarter on Yeah. lease just as [point the going little acquisitions Glenview, bought and knew pointing now that you Plaza if more And that you our with when short the just X, we that was in a there the a confirmed case what roll got was a that time. experts And be and of that hub, could transportation a fairly believe in And fantastic this near up wellness. and in be opportunity; that leasing fill location. of spoke to we would diligence, part mix it’s focused center. a really then near-term local the dental, property are long-term, tenants optometry, it’s that on is that nice retail It’s

there near-term that’s you’re role, was So seeing. that reflected occupancy the in and

Robert Stevenson

Okay. appreciate the I Thanks, time. guys.

Operator

Bryan from B. Securities. Please comes question. question with with next Our line the of your proceed Riley Maher

Bryan Maher

already asked, to so of of been just Most those. morning. my kind Good some questions have follow-up

you had to? understanding, worse asset. there. think On you that’s held worsen, tenant an if pipeline the It’s issue there’s do How a comes quickly good my asset, you pretty could replace if to the

Jeffrey Busch

the good tremendous in and operated. X only We in there. really at very it’s question. pipeline bought of you I the miles acres, hospital XX give came We just got the was a Downtown active a area, cost fundamentals. It’s this Yeah, it’s a where discount. Denver from some property

a hospital at with $XX that foot for about Typically a be lease going $XX a would and increases that the per it’s level others now foot. Now, is right square bed. square

that. are million were a about fine on things. doing hospital hospitals fees bed. $XXX,XXX good very They other this. economics. buying $XXX,XXX a around taking be That’s They here were $X and from is This could New

that – systems based asset, they of it people set systems into this this gone good asked roll it. an could the tenant their expect about business this pretty is and and is a the worth they’re something the have it, it and asked rent run asset, based this still in we questions going lot by sell we either a is really to upon that past, So upgrade there. the or make But money it, think up upon so has asset to have

think don’t away from market below walk lease below a I going So to XX-year they’re way lease. market –

Bryan Maher

a capital you And it. just because down interest rate spread just has rates this is these it look, to Alfonzo, you and of we’re just much it to then because bit, we business, that history maybe up don’t and your take, gone a quite in cost going moving spike in you’re for don’t points, say, Or cap rates cap go around to your hey, game want and to turn Got rates? here, simply care, pass? and would rates what with cap cap upward from for going reengage could up basis XXX guys

Alfonzo Leon

sense But mean, that market slowly. for office the then of in pricing has mid-September, was of parts was I changed there’s acknowledgment is they’re a medical characterize the There now would still right of say, would it changing My lot two I the Well, clearly and so pretty dramatically. across started that that capitulation. board intermingled. kind of transition. question, I but market in questions two the

a to that and of good to rate, I And sense of growing a this grow always medical of there’s always cap inclined settled be our the capital, and company so office. of we’re goals couple to opportunity mean, hasn’t want buy yet. there’s we to of in accretive, in And, think, in cost movement my I’m I think our that overall last given accretively. a months of it way is But going and XXXX, first dust terms doing in of been the is lot mindful it

So, we can’t ignore that.

we So stock of markets trading. are and where where our mindful be capital to is have

Bryan Maher

Okay. Thank you.

Operator

management to questions. further no are back to like call remarks. hand There the for I’d closing

Jeffrey Busch

call. $X.XX for this quarter following feel it. day. joining an Have and us. like for appreciate you, We Thank we thank to everybody, I excellent AFFO you a going good had

Operator

and for Ladies gentlemen, this Thank today’s you conclude your teleconference. participation. does

a You at this lines time, may disconnect wonderful have day. and your

Global Medical REIT (GMRE) 3 Nov 222022 Q3 Earnings call transcript