Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to Global Medical REIT First Quarter 2023 Earnings 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.

I'd now like to turn the conference over to your host, Steve Swett of Investor Relations. ahead. go Please

Steve Swett

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

Financial and On the Alfonzo Kiernan, Officer; Officer; Chief Busch, Chief Bob call today Leon, are Chief Jeff Officer. Executive Investment

in Please note by on which call conference intends this the forward-looking. statements are this for contained to this forward-looking complying be forward-looking not Statements forward-looking on of and include these harbor Act the The are Safe made by statement considered safe provisions. of Company making Securities call. provisions Harbor Private may use XXXX the of statements covered statements the historical purpose with facts Company is Reform those Litigation statements and for

the in variety filings. events will whether affected the Company's for result XX-K forward-looking contained the forward-looking Furthermore, risks year statements, may of new control, those and as actual are XX, results statements assumes XXXX, update by including otherwise. be described differ any to beyond forward a in factors information, those Company Company's obligation of materially The other that publicly and December SEC limitation, the or a ended without its and no from

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

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

www.globalmedicalreit.com. may Relations of information page the Company's Additional found website at on be Investor the

Global the Medical Chief like Jeff Officer I of Busch, turn to to Jeff? over now would call REIT. Executive

Jeff Busch

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

activity primarily end results. first driven with years. a in of continues achieved care facilities Year-over-year, six of occupancy revenue, of up XX.X% acquisition our we weighted from the to portfolio portfolio year-end XXXX. produce first At excellent in high-quality half lease by total average of at our XX%, was health term a the XX.X% needs-based quarter, Our increase the

net per income or share first share impact For quarter, $X.XX the first $XXX,XXX common the compared to reflecting million per attributable interest XXXX. our to or $X.X in the shareholders rates, of quarter was of rising $X.XX

first on the the that, sale unit included in XXXX and of prior quarter the quarter, an first net the income $XXX,XXX down FFO was in first share gain of investment quarter in a year quarter down was unit, share $X.XX per $X.XX per Note from $X.XX property. our year. from our AFFO the and also last $X.XX

we per standards. meet transaction at acquisitions, units and for like units our primarily $XX acquisition our quarter funded OP on medical our that priced two works were can solve one issuance million. and by us, This was April, end, of for we criteria that acquisition availability type of needs. This continue look and $X.X to our With sellers' to unlock as properties in Redding, closed advantage OP liquidity regards opportunities our we well of unit. use California for for buildings investment underwriting to Subsequent office to in

dispositions. to Turning

have a improve. conditions we the mentioned sell previously, reduce could looking means we that to as we when market debt As outstanding are properties for preparation our in to identify

average cap are a approximately and of targeting at between We million currently sales X% $XX weighted of X.X%. rate

$XX from of our am hard for than sales, rate intent pleased generate one goal and strategic for thank team proceeds is an results. to entire Overall, letter million reduce $XX sale their and reduce In This under on contributions $X.X quarter And the want I if XX%. sell. closed debt by first million our our range of our to would contract to the and we leverage million to we quarter, to within for another XX% with we target results first the or variable XX% more us. of work our have can important and

the that, to investment in call Alfonzo With turn conditions over detail. discuss current to I more our acquisition activity market and

Alfonzo Leon

market slow to adapt The our spread as target transaction Thank rates sellers wide. the you, continue and remains facilities medical buyers interest and remains for to Jeff. bid-ask higher

We number see in large our a adhering underwriting remain but of continue to to opportunities, disciplined standards.

of to of quarter, subsequent that a at April, purchase mentioned, closed any $XX. office price as I not the Jeff two in which California first of $X.X buy primarily our unit issuance the but During in financed did by buildings units Redding, quarter OP was on note end we properties, a per to am purchase we for of million, medical price pleased

continue opportunities will variety that to they're sellers to could corporate owners engage expect their a sell, physician with of arise mortgages. and if and unable forced to We some refinance be as groups

to In addition, and financing review development opportunities. as joint we sources, continue such our to ways diversify revenue venture

office building of located proceeds a gross Regarding in million. resulting Florida, sold Jacksonville, we efforts our quarter, to million $X.X reduce in medical the leverage, in gain one of receiving $X.X first million,

cap with at As investor and Jeff level discussed, rate $XX the of dispositions we continue X.X%, of to interest are we and X% a between we approximately seeing. target million are pleased

of up a Given we to have equity activity acquisitions no for predict acquisition the of and amount XXXX. our as markets, pick target current therefore, well will longer uncertainty our of values are and equity effect cost when their capital, on as unable

we running and However, active of to continue improves. to cost we'll in capital be once hit our ground remain the market, able the

of the our meantime, portfolio of quality patient. and us diversified the liquidity medical In available office allows our be to stability

transaction market to know We have time been through this and cycles such takes adapt. the as before that

We use scale, unit sense where structures to capital as will deal some and access make we opportunities and such to potentially can. advantages OP that competitive source continue

financial the to now turn like I'd over to discuss our to call Bob results. Bob?

Bob Kiernan

results. to total estate X.X portfolio with average feet, leasable contractual of of GMRE's investments At Alfonzo. and gross consistent rent solid rent times XX% lease billion weighted first included the occupancy, million of term, of $X.X coverage average portfolio of years you, Thank X.X% escalations. our XXXX, square in weighted end the and continues quarter produce consisted real $X.X six

revenues year-over-year by quarter, compared first up $XX.X the our basis period. achieved or $XXX,XXX a cash driven leases, were the our year X% first of first In comparable to million, total excluding the acquisition we a revenues primarily quarter since in basis, to prior XXXX. On same-store activity increase quarter XX.X%

due was million total expenses of operating, and the interest compared debt were increases $XX.X XXXX Our depreciation for first due due higher expenses year to both portfolio. larger quarter. average the quarter market rates to The primarily with $XX.X interest our costs prior in higher million amortization and to in along balances increase to

compared in of the comparable the in during the million in quarter year, X.XX% debt in average of first rate from reflecting well XXXX. last quarter XXXX X.XX% XXXX $X.X average million to expense in $X.X as was the first first borrowing increase our balances interest an quarter to as quarter Our higher of

of that the for impact of quarter G&A were cost compared expenses to and $X.X forfeitures stock our of XXXX. first quarter G&A our first our the current G&A equity approximately XXXX expenses, million, quarter in the costs of million. included cash million $XXX,XXX of the $X.X compensation some note $X.X Within quarter in

on in G&A expenses over XXXX range our a million expect the and quarterly increase we $X.X ahead, between to basis. of $X.X million Looking remainder

our were quarter, driven these with by expenses in expenses, operating to the first year $X.X million primarily quarter prior the million increase growth the portfolio. compared for the in Our $X.X in

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

the or an was stockholders attributable or the quarter for $XXX,XXX $X.XX XXXX of per the quarter first first Net Net of first the of share XXXX. to included to $XXX,XXX. property $X.X in income million of per XXXX investment sale quarter on of income share compared common gain for $X.XX

quarter the in per was share unit share per quarter $XX first of or unit, $XX.X unit to or $XX.X $X.XX in or per compared $X.XX in in in per in quarter compared the XXXX. quarter FFO first XXXX. $X.XX AFFO The million $X.XX of in was share unit share to in first the $XX million or million the million first

sheet. balance Moving to on the

gross in had of activity. reflecting debt debt. March real was $XXX XXXX, which year million March of our our XX, gross is we billion, XX, As earlier, estate up At investment million a $XXX from XXXX, $X.X investment

was weighted ratio X.XX%. rate interest and leverage was average Our XX.X%, our

average fixed rate of is term our of end, borrowing debt current debt remaining quarter our $XXX the weighted capacity is was debt and credit unutilized XX% of facility As the the Approximately X.X years. under million.

to We stock shares quarter did of first in year. in our issue or date quarter second the of ATM not common this the under any

XX% proceeds Importantly, our plan overall amounts and as target and we range to our our of to our leverage dispositions from noted, use between reduce revolver repay Jeff the on XX%. to targeted

pleased of are XXX,XXX our to on retain are lease to our our projecting on respect with And progress as currently year. and the feet we investment based renewal. noted activities XX% between portfolio our expiration, and expiring we've XX% this that date XXXX to square With

Additionally, our the we above the Currently, increased be are expecting we during space on that XX,XXX XXXX in our feet XX% new that leases square occupancy year. will by quarter. previously vacant executed throughout occupancy

Regarding capital expenditures on the portfolio.

-- to improvement renewal During the as progresses. first approximately capital expenditures quarter, with we to and lease during last tenant our the pick $XXX,XXX, Consistent and our project approximately year $X in we're was $X lease XXXX. associated up in to up with million call, expecting during but comments continue spend that our cash million primarily

current us. conditions positioned believe our growth remains over liquidity market strong, well We execute to normalize. While conditions as we to our remain portfolio and ample we continue time uncertain, are available have to strategy

questions. open This the please call concludes prepared for our Operator, remarks.

Operator

Our BMO the from [Operator Please Capital question Instructions] of proceed. first Sanabria Markets. Juan will come with line

Juan Sanabria

the I Hi, guess. time. team, good morning. Thank the Alfonzo, for or Bob for you

bit the ticking watchlist you sounds Is material improved of should on tenants there XX% like any of from it maybe move-outs we quarter, expected aware a down. if to be guys fourth throughout that's Just could curious you little kind in any occupancy impact year expand but the the it

Bob Kiernan

with Juan, exploration the activity that's the coming trend, the of is Hi, think later quarters. to more the weighted is this towards and fourth matter Relative a timing respect year it's I Bob. third in up lease to

as look the so the have trend And a at pickup in from we year, we activity first the this quarter. lease-up

XX% But into rest that flow up, impacting then forecast year. And that particular particular again, perspective. any that expirations there we to be as of that with be number. full from that that the again, a lease-up are as seeing will some our or we're project again, in anything the year, that current tenant migrate activity, the will is not And watchlist currently out retention there's again, will vacancy expect above we is to, that it no, for coming as

Juan Sanabria

transactions just for Okay. investments market. the on And then

the And at? as on that how of surprised mean, you'd bid/ask curious little where seems tried looking the execute that that, buy there's -- indicative of feel I assets also like Just a that to be part there. assets a is of the at can Would like are dispositions a be buy location transacting I'm bit Where you you in low to you've Xs. the spread?

Jeff Busch

consistently operator lot big happens lot for of in buy really of renew who a three that We XX-year every It all hits credit from credits leases, much mostly at four-year every time. of health pretty in year, year consolidation. well do systems a then tenants underwrite a a or the the we come out or and come at lease,

do value usually we a and cap higher unusual. it to rate a of find because be lot we tends added property, it's also of hard a the So, work when

to groups to want we credit to fix not out the there's more add right it. underwriting to something or to being to issues buy that in buy little not but to you have we add more able a issues have -- may security nothing credit that easy that we of pay, properties to underwriting want by issues like work areas we of Most the that on that have now underwrite very

out. But So, the because X.X Xs work we to easier a because it out buy of work that's of call do go market by we of our of anything once lot the cap a making -- there. general we difficult a the good really buying why our sort lot it underwriting into average that's institutionalizes property don't get and will want percentage -- low the work -- in in in I to to they understand that's so

the deeper a properties mean our much a Our at. we one has pretty premium renewals. deeper due GMRE the bring and are what paying tenants them we digging with rent, us bought confident the tenants I much are sell quite to renewing. what diligence, hands-on the see could out of our And do I'm that's elements like. of And to consistently. it good to properties major at of strong at could we table you

Juan Sanabria

low you LOIs I to on you just plus, to are just million confirm? those like had said confirm, $XX And think Okay. Xs, the in some

Jeff Busch

Yes.

one we a we take We to make have the we short-term, It's buy add contracts We and long-term and become is just low value institutional LOIs after and what buy Xs. it with then get into in lease. There's it we're buying high Xs more a again. something over just leases. low proposition. we X we're -- tends to we the selling, value Xs, to be do it things we're going in to into our longer in and but selling But add coming back when often

Juan Sanabria

A you. nice arbitrage. Thank

Jeff Busch

Yes.

Operator

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

Rob Stevenson

morning, Good guys.

cap acquisitions that quality you guys Is in the X%? the X.X%, seeing Just today buying if market would a is or be on that these where would Jeff you days? follow-up, that guys where that be were? rate that the you assets is Alfonzo, Is

Bob Kiernan

first I'll answer.

too of right Our cost now. capital is high

We said we of I've have accretiveness. accretive. level to have be be always to some

for and a like unless OP premium So X.X took they're the right because dollars they last of now, to the a hard the into units. add us would units it tax buy OP of OP X, it's sometimes the to to at willing unless, advantage, units -- couple be

actually But go through the cap beliefs the trading where is where rates I been have a is they rare people money have right naturally set go are to to a because the do development. now, I’ve going going one XX% debt two up up. there's stock is of And borrowed I'm the adjust of that to the I who few to cycles. understand first of of my these sort at market prices.

cost to now, is we the -- piece may silly see high. once of sort adjustment there lower capital we get right our that there. it a is because really higher a that cap I a of cost buying between see, in it buy will into there there hit to back an going even capital debt So something equity and of be and price where is at market we're out the do when market be a I

Rob Stevenson

in market assets quality whether would or for of or just terms in rates, But excluding the buy rates cap quality, you today an X% Okay. X%? in not market it Where that mean, or but not, stuff would want are cap that you I portfolio? good is that

Jeff Busch

Alfonzo?

Alfonzo Leon

Sure, yes.

mid some spectrum. for that types a there facilities high-Xs. historically, the those rare. that's But where things I are we've are low-Xs acquired even it's but mean So of we're I trading to situations mid-Xs, India, seeing in mean, the and

has moved market considerably. the So definitely

I trading have the Right in the core low-Xs. some now, that sub-X. have credit health There for stuff mean X, really a considered with contract, of systems, examples that's high is trading through assets we that been what's property example, under

of there but credit -- pricing. so to kind and And that get combination a has of to be term

the trading say, we've are that transactions side trading range. and of that's quarter in And inventory year to of the the mid pursued are the on towards X the bulk would the that of cap range. end of this spectrum historically cap But X% high X% high of that I low end thus far north

Rob Stevenson

$X the because yielding your between would because just versus it, acquisitions reducing where I call I think stock is to what a, which XX-ish versus stock at trying Okay, potential like was yield debt. is there that's triangulate an helpful price,

leverage compellingness versus Jeff, price $X of of $X options guess you those between with the so doing it's buying disposition some the in thinking if I and stock And or trade-off back mean, two how I with mix? type sort range, do that or of proceeds at Board the about the that, reducing

Alfonzo Leon

the a our is back good that multiples, looking get of so just Buying stock for we price, for looking it like to couple could you are. growth, not get larger company of better us size that's – the stock more

we're size that. on all size, and by just up coming a getting interest given and agencies rating getting the to haven't being, better growing getting trend, rate get a multiple in keep better I So the get delayed by

rather the right So I'd buyback down essentially, now stock. than pay debt

stock, I'm it buy not saying world. to you crazy crazy it, it's buy a Now just my were But not at.

leaving the to I'm XXXX, come this year the is company of – for projecting repositioning myself So come believe to will rates out. really, down. but will focus not that ourselves just I start rates where main they'll But what and the I start down. the read, I'm

raising going as the raising there and really down. Fed soon Fed Fed the possibly literally, each the stops was time stop is feeling bring as a to think that it I

in up shot even in happened up and the long times. that several XXs historically, stock towards recent the XX ago. shot It not the towards Our historically

I'd And So very to leverage order. in number, buying back I there, debt, reduce reduce our a back I forward. the we debt to our than get which keep think want growing. the when in will focused to we reducing buying the get company could start normal we into like right on buy for But equity now, when come debt be debt, more to again, going floating

want to but the deals with debt. at I debt, are keep higher out and percentage mostly So some have there that reducing equity equity a to mostly

Rob Stevenson

X.XX, the That's roughly in at I correctly, X.X XXX, on doing think being. my lines Bob, day, looking are depending helpful. math SOFR disposition proceeds I'm then the your line so Okay. which if at expected plus call And where it, is

point? of the earnings this impact So there dispositions from shouldn't sort be really at any

Bob Kiernan

Rob. Yes. fair That's

Rob Stevenson

last then one me. And for Okay.

renewing or XXXX on of that those Is XX% leases X,XXX, would this tenants year? square sort a two one about little not not renewed. bunch earlier that to expiring are of encompass talked guys foot X,XXX, apply feet, XX square guys that You that XX,XXX X,XXX retention expected XX,XXX, rollover XX% bigger the or

Bob Kiernan

that's tenant talked any call, make today. significant do making forecasting. on think leases, And that our looking we and one It's and QX -- of up think opportunities said, feet smaller is individually that delta. X,XXX, in individually a and improve that it's square looking XX,XXX, But I what at XX,XXX I lot a we're with outs. those we're at think on that forecast But with it we to ins smaller than more consistent is that that's to, I that about again, better how we've it it up what obviously are than predominantly

Rob Stevenson

the X,XXX you those of are the building And lease X,XXX of for leases find the easier building, Okay. you XX,XXX, to than bunch entire replacement people a type tenant than a bigger to had for lease that those guys to if are thing? or easier empty would blocks. to be And wanting

Jeff Busch

The of ones. as right have indications And ones much on XXXX. well we're our big very them Many had the from because now they even us to turnover, little talking is, and them now, into more very are as big big doing the doing side. ones haven't in investment the we're well

could because full it and On their you But smaller put it's little those full lot when to leave replace it the a side, they into difficult economically, easier building, one money makes have building, easier, yes, whereas you move. really much easier. to economically of a they move also very

more multi-tenants -- than we And now so have little you had can we and before. some bit a

to but we set. target -- we get and expect that we expect to them range stay within leased up, the So

Rob Stevenson

you. Thank guys. helpful, the That’s time. Okay. Appreciate

Operator

line of Please Austin Capital KeyBanc comes Markets. question the with from next Wurschmidt Our proceed.

Austin Wurschmidt

that of paying that sub-X% range are just types these -- sort active been has if low-X, are Great. covered, that line bit buyers today? deals the front the I'm you're in seeing deals dropped any range. of sort ago. everybody. even low-X, and if sub what for in X% But the on of are buyers disposition of anybody Who -- Apologies this a curious morning, little Good

Jeff Busch

It's most net REITs, buyers. the the private the private for instances, equity part, part. the for it's some In the but are buyers they lease most equity

Austin Wurschmidt

on much deals they're -- any Got sense today? it. And what how putting leverage

Jeff Busch

get getting is that. of or but XX%, They there able not whether My you they get to to term interest-only so they're it much that or is, are want they're -- interest-only with sense lot a don't of a how making decision have.

lower are for even the equity for some some a So strategy with even thought and choosing is refinancing so of everyone XX%. some later. of a with lot the But have shooting or of sort most lower in are part, that of XX%, XX%, coming

Austin Wurschmidt

extent better putting just are make front, limit helpful. vehicle sort the that's that Got a the that And and made be evaluating are equity to would to the to disposition progress it venture at a into up through sense execute you've vehicle point this have on it. and there curious, come maybe in given No, And opportunities? of that place then joint you the still attractive in you're you're a deals? position amount of that deals does

Jeff Busch

ongoing. been are these We've those still to conversations we're front. in past those and having early a something the things while definitely months. that mean I entertaining that it's four it three, together, having conversations active Sure. put we're takes but But for that discussions and on process,

Austin Wurschmidt

And last me. then for just one

deals, kind you've you On the OP acquisition recognized at front, of are on willingness last given receptive of of or what favorable take this sellers unit changed mean, -- was what your year, can cost those on of for I the of kind unit potential to to flavor capital conversations it tone doing give point OP year, are units? as as isn't like one side a little of sellers but little bit the of deals? bit unit the OP a

Bob Kiernan

predict. OP with to it environment, find for transacting I'm I us that interest be this seems that -- It's more with think going units. more inclined and hard in to It to there's demand

trying to unique same them. -- It's idiosyncratic seller down I'm there's what and a OP management As the so the is It decisions context ultimately just very -- situation and evidenced for of a it's by with fact that wealth the no we did say. units. is transaction comes to strategy

is financing now, the these more sellers. before So not -- but XXXX right exchange I the was that has difficult is think am and what to it inclined for market

that would one not -- sense be that to thus has and trend. been don't that's think no to that there that for seamless to to very a doctors but mean, going strategy expect it's fact looking are more transactions it's given works something for that's I them. quickly, -- But some going happen the far, see I clear a So been find it's these tax I transaction makes

Austin Wurschmidt

Is you're deal there today? market any that targeting size you're available seeing that in the

Bob Kiernan

we So looking same that of we've continue types in the the for deals past. done

I So I not the guess understood question. I'm sure totally

Austin Wurschmidt

units, just attractive the of today that more maybe curious In more nature OP I'm historically? if consistent those are are what you smaller done as with said, you've deals or

Bob Kiernan

more rare. we've be reason. it's what for mean, extent million unit million, I have $XX a that smaller be historically. OP attracted to structure deal would interested OP tend transact deals would done It very mean, the with to consistent an those -- with to the the to Historically, they're we doing units, where more tax been of there's larger physicians basis. in it's But $X opportunity low be I that. that course, the and

Austin Wurschmidt

Understood. Thanks for taking the questions.

Bob Kiernan

Yeah.

Operator

[Operator Instructions] no further closing to I'd the questions turn to back management for remarks. call There at time. this like are

Jeff Busch

us, to like a day. I'd and everybody thank have for joining good

Operator

This concludes conference. today's

participation, may your time. have and you for Thank lines You day. great a this at disconnect your

Global Medical REIT (GMRE) 4 May 232023 Q1 Earnings call transcript