Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Global Medical REIT Second Quarter 2023 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Swett with Investor Relations. Thank you, sir.

begin. may You

Stephen Swett

morning, Second Good welcome Global to Thank XXXX everyone, Earnings REIT's Quarter Conference Medical you. and Call.

Financial safe and On which the to Alfonzo considered Kiernan, use Officer; Litigation are Officer; call. statements this statements by made Chief intends Busch, The note the provisions be contained covered statements forward-looking. provisions. Chief the XXXX of Bob Reform and Securities company forward-looking statements call and facts is today include statement these Leon, in by complying on historical of making safe are Chief company this are purpose with harbor of Jeff Private may harbor Officer. forward-looking not for this the Please conference forward-looking on Executive Statements the the those Investment for Act call

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

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

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

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

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

Jeffery Busch

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

average of portfolio quarter weighted XX%, continues quarter years. of from the end occupancy results the and to the a term portfolio lease of first Our unchanged with at X.X excellent produce

proceeds in for of X.X% a MOB a City, cap we $XX During in Oklahoma rate, million. X-property gross at the sold $XX.X a resulting Oklahoma portfolio quarter, million of gain

gain the our at $XX.X $XX.X for this used end ratio of Including for total XX% debt, quarter proceeds per and down income we share million second compared Oklahoma million from debt City XXXX sale ratio quarter of shareholders of the XXXX. leverage of XX.X% the or million attributable was rate to resulting per net our variable $X.XX the from to to second the of our sale properties reducing or pay the indebtedness. of common quarter the $X.X to of net rate Importantly, variable share in $X.XX in

FFO in and the year. down increase elevated $X.XX in the AFFO interest interest for year the and in reason The was second quarter, FFO from environment. rate from per AFFO quarter due was our unit, $X.XX and cost of per share prior and $X.XX $X.XX decline both primary second the quarter to was the last unit share the down an

we our pricing time in planning our California per at issuance criteria approach. with in units attractive the quarter, we were helps $X.X cap market our more spend rate. will by as investment was Overall, primarily a to provides improve X liquidity disciplined see we that underwriting to sellers. unit, office This X.X% meet identifying For of for and properties Redding, priced acquisitions remain start our to tax in continue buildings in which million we our $XX funded medical and the acquired flexibility OP that and standards

proceeds sale generated that million week, building to our office medical earlier dispositions between June we leverage our goal on rate million closed of very our this And additional as pleased are have reducing in an enabled XX. of and our of target have through X.X% Charleston XX, cap of our our from progress rate sale to proceeds. a $XX.X of us of reduce achieve $XX.X selling in we properties Inclusive range generated variable the with of to gross These North XX% dispositions, City at debt we leverage. XX% Regarding and Oklahoma June dispositions.

I detail. second results the I Alfonzo, the for am results. and thank contributions market current and hard in entire want discuss Overall, acquisition over to our pleased team activity With our with to investment that, their the and conditions our work more turn quarter to call

Alfonzo Leon

bid-ask standards. for considerable reviewing, investment wide Thank adhering to remains which our market facilities, opportunities underwriting rates remaining with are align Despite our and we higher you, constrained interest criteria target medical of to a number impact of Jeff. The our are prudent spread. due a transaction the we and

our quarter, a price second $XX the with units medical issuance X purchase consisting XX.X of financed per fully office price for Redding single-tenant million, primarily by acquisition X.X% we in at buildings occupied OP term, which of $X.X completed a was share. of rate with unit of per During California a X of cap years of

deal especially financing to in physician exploring encounter including potential actively owners options to they in their refinancing are difficulties diverse with while the persist Furthermore, spreads, opportunities anticipating We strong sell certain avenues opportunities. and may and we venture emerge like if development mortgages. as sellers our corporate face volume continuously engaging expand joint groups need achieving potential to

medical second Oklahoma, gross resulting receiving the million, of portfolio gain buildings of proceeds in cap million. office of of quarter, Oklahoma a we at mentioned, X X.X%, a in sold $XX in a located rate $XX.X Jeff City, As

gross $XX.X completed the North that of X.X% of a With at sale recently Charleston our million. generated facility rate cap proceeds

approximately a between of interest been considerable of rate X.X% and made pleased with the million that cap investors have great level X% a target we at and goal of our dispositions have have from seen. $XX progress We against

impact find our actively acquisition the acquisition to capital engaged cost cost our we forecast challenging With surrounding on Due capital, efforts market resume. markets that and said, are resume improves. once we their current to activity of to values uncertainty when in our equity and the of equity it and our will ready

We market. presence are they maintaining arise to of committed opportunities take our to in and prepared the advantage as are active

consisting stability allow our of shown markets adjust of medical to diversified with the are to portfolio properties, along the is period, it ample signs us require office have time us cycles this we that and During Past beginning adjusting. be transaction liquidity that patient. our see high-quality to

our we opportunities ahead, will Looking capital structure. continue to to with align seek vision strategic and

such capitalize challenges opportunities can potential on whenever our arise our the value through advantageous. ability Additionally, our in of With confident the access we to to and add this structures leverage they navigate capital advantages, feasible may our and as we unit as use OP deal remain approach, competitive scale, and to current market and business.

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

Robert Kiernan

continues estate and portfolio resilience results. the years with million total of average its contractual generating end Thank billion term, to demonstrate occupancy, gross escalations. At of you, weighted investments by rent lease the $X.X square second of in of X.Xx solid coverage rent of consists Alfonzo. consistently included portfolio average real X.X quarter, GMRE's X.X% leasable our XX% X.X feet, weighted

our revenues a the quarter the the $XXX,XXX quarter driven acquisitions to increase our total operations. XXXX of XXXX. leases, same-store revenues quarter, On excluding basis, of by timing were basis in a we second X.X% In or up second in cash X.X% our primarily compared $XX.X portfolio million year-over-year achieved to

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

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

G&A the expenses, and Within $X.X million our costs quarter G&A our quarter for XXXX million the million. million second our stock cash of in in to were current that expenses were costs of note quarter XXXX. the compared $X.X G&A were $X.X second $X.X compensation

last million million of between second to mentioned basis. As the expenses range half for $X.X quarterly to $X.X G&A we a continue expect quarter, on and our XXXX

expenses compared $X to million by real the quarter prior in changes the operating portfolio second estate-related year comparable our increase year that million for prior largest the operating with were in our the primarily the taxes the single driven quarter, component of expenses. since $X.X in Our expenses Note represent period. these

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

of million and the million. of $X.X in per unit XXXX. the per and compared $XX.X quarter second $X.XX $XX.X million FFO second quarter quarter and quarter for per Net to or $XX.X $XX.X included or share quarter sale second the second or income share of to to in the was gain City income $XX.X $XX.X quarter million compared common $X.XX per $X.XX and the on quarter was million the stockholders in share share in the compared per of for XXXX. properties unit second XXXX. attributable $X.XX Oklahoma share the or to second of million was the Net $X.XX AFFO in or per unit share second or $X.XX million the unit

sheet. balance the to on Moving

a $X.X is As reflecting earlier, real down of our activity. billion year was million June XX, XXXX, in our $XX from gross investment estate which disposition

we June our XX, leverage debt, was interest million gross XX.X% ratio was $XXX and weighted of average As had X.XX%. of our rate

after X.X our of end, weighted As the was debt remaining of quarter term years.

XX% a the credit debt As approximately borrowing is of now current unutilized recent disposition is debt the rate under capacity $XXX million. of activity, our facility result our fixed and

our SOFR loan under reduced will the and starting We our decreasing with our date. decreasing margins X.X%. on shares later stock facility any our to ATM able did to XX to not margin SOFR the in leverage this X.XX% points of term lower month the be basis ratio, issue by our quarter or during common With we to revolver margins credit

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

expect XX%. above remainder continue of will the to occupancy stay we our XXXX, For

approximately and million. up additional relating million of Regarding renewals to $X of capital portfolio, our improvements, lease on we're was improvements and Currently, million completed $X.X associated to XX lease projecting expenditures remainder $X related site primarily and the to expenditures be tenant building the with approximately during cash June spend XXXX.

Overall, pleased assets Oklahoma our use pay of completed have down to interest proceeds and City debt, leverage to reduce variable we those and margins. lower the our the are disposition net rate

our growth these ample our remainder to have to to of believe positioned us in help and sharing We the over and well through the liquidity progress execute as strategy portfolio that conditions. year. confident are are our forward We market manage look time to we normalize conditions uncertain you

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

Operator

Instructions]. [Operator

of Our Austin first the with comes Wurschmidt KeyBanc. question from line

Austin Wurschmidt

Jeff, or Would the you right additional you have guys that million kind consider potential discussed assets of this that exceeding goal. range $XX sub-X% that threshold? sell is I still that the sales million year $XX considerable to mean, you towards the progress and redeploy could of into you made acquisitions. amount extent in to higher-yielding

Jeffery Busch

and opportunity would would This My We we consider it. the reduce and way nobody the we groups than assets. to up debt debt. assets like before. debt the preference interested given assets market consider do right where reduce if We up. is in selling be Jeff. to stock have use would knows in more for the consider we we would Yes, out We our more our there came ATM than by But our is and by going, that. equity did go that really

Austin Wurschmidt

that So forward plan, your materialize doesn't target move guess, doesn't with range? to and looking this about are just that behave you're what's leverage leverage are acquisitions I the with end the I now higher keep inside if guess, the the stock that criteria with at kind able funding new targeted how to so range, point sort fund I guess, that the within to of thinking you what of the extent you're of ATM to or

Jeffery Busch

up. Yes. decision hard I right going right now are mean it's We now. feel that a rates cap

we will even and prices willing the buyers is There the lot So aggressive money to pretty market, think new up. pay in be a we do market, for But of a of want rates lot they're cap ourselves, still. in patient. to the go

use back more the to cap like in sort in market, historically rather the what if match while, we're rates or real be we'll in debt. use rather in keep the market. I'd of and in debt the equity I'd little almost the be cost the So is, equity all of does XX% when to purchases. estate, capital back start And more which for equity the calculation my same, may for But down -- purchases bringing a

Austin Wurschmidt

That that you're last me. for makes of just And how actively deals that today then big I current or kind the meet your acquisition underwriting one criteria? is sense. guess pipeline underwriting

Jeffery Busch

there. It's let the deals I'll we're -- out there's now, deals But are rates there's noticing out cap Alfonzo there. going also, right up.

he's I'll we on monitoring. So Alfonzo -- that. let comment

Alfonzo Leon

Yes.

higher. the So we've continued to think perspective. this were and couple been another of year, cap -- higher increase slightly probably the rates rates months, last cap steps drift drifting over to have throughout And there's our slight continue I going

wait it's So to better pricing. if until better there's anything,

can with the we we active very forward And so things a accretively. anything market, not looking but until we're We're we're that deals. pushing buy feel of lot in

Operator

from Markets. Our BMO next Sanabria, question Juan Capital of comes the line

Juan Sanabria

up on following Austin's question. Just

where on where kind curious today the rates rates guess, for reignite types engine? the cap to of acquisition your on? the I cap you external on do focused Just you're need are, map to get asset to And

Alfonzo Leon

Yes.

is the So market today. starting with where

like type like, months the of there's assets a assets to have couple some -- now, over look, part get but it's as right pricing. And it's good are where can to like, the mid not north last of to question, -- few of low there's for range. and second the where I better to the our start the cap -- see think I that are for we've to that range we months we're waiting rates There there's mean, price we're regards feel get Xs. to And seen Xs. So of think within stock made With I buying try trend accretively. us reason next we wait still that trading better

Juan Sanabria

be despite they going then as But in recognize the a if some just be should we elevated forward. thinking and expenses. leakage on some just operations, difference could about there and little on question flat like expense And the some on how there's side dipped the timing sure fundamentals. bit we've Okay. inflation. second curious on the Margins look occupancy I'm seen not margins seasonality

curious make just some comments So on you margins. if the could

Robert Kiernan

think same driver properties. I more expenses both for in know decrease did while from that periods. driven little the I our have consistent side the was did primary quarter, on the leakage costs up. net margins added space vacancy gross been perspective, ticking The was exposure in the well. has leases we've from the been really more been We and really it bit see as that's it. also It's on -- vacant pretty there's dip vacant -- It's in leakage a from And quarter-to-quarter. that But leases as been from a more

Operator

of line from Riley. Our Bryan B. comes Maher next the question with

Bryan Maher

came and buyers are about rates? these that these at color transaction X-something Oklahoma assets Maybe X-something us little who how cap maybe of for a give you Alfonzo. Can on the

Alfonzo Leon

Yes.

end current through the went try were simple. that to process to assets we a And typically those the liquid of So environment. assets are are in that year felt we identify this at

So multi-tenant properties a single credit longer terms. preference properties for versus with clear story tenants with lease and

was got So a private for equity of we buyers. ran lot interest process selected and those from a We Oklahoma reasons.

the was that from and very -- true put all interest properties so equity And the market, really that we've investors. in with private strong

to asset, North a The XXXX exchange Charleston that buyer. went

ran process circumstances first but transactions that those equity was a of of which And But with very the very year on started focused very result. year. that been pricing, strong aggressively. it's buyer, half given was executing very and the in we that the buyers the So the private unique yes, happy the

Bryan Maher

And from of Charleston how OP much North units? in the $XX.X was million

Alfonzo Leon

for So Is the the in you're that to? OP units that was referring we mentioned Redding. acquisition what

Bryan Maher

I'm Yes, sorry yes, exactly. that. about

Robert Kiernan

the in done OP of XX% deal units. was

Bryan Maher

sell from think you type that maybe granularly. and Alfonzo, kind Are there you little of among -- more me. asset Yes. tenant as And for of last looking but goes? bit far and as the When clean, assets I upon of this to themes then not common touched single you're a standpoint the just any type but

Alfonzo Leon

to did footprint. higher have sell our assets preference to MOB We a acuity Somewhat. increase

a Oklahoma But were trying pricing good get hospital. to really that the is what focused asset our So was we was surgical really, on and primary focus.

Operator

Instructions]. [Operator

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

Robert Stevenson

watch a you any list remind is? can you talk you Can do your us, tenant how bit about extensive point? exposure Genesis at have little this And

Robert Kiernan

with X part. is to it's lease about So with there's second that -- or limited, square been X and there's expected. -- from question, extreme exposure and are X,XXX second is Genesis no Genesis no none start it's I'll and very feet, exposure the today lease and issues asset

list, of watch to our lease. And -- watch and list or relative assess well. I items this properties there's we on that very point, to a property the mean in regular any significant are of up a tenants are terms performing focusing to process through is significant limited. go whenever our any coming the And very portfolio particular quarterly

Robert Stevenson

Okay. of how expiring going of spread expirations. That's tenants, type a next lease what those one today? Any over you helpful. leases move-outs looking with for And the consequence? big at conversations are And major are year's known

Jeffery Busch

in good, 'XX. and Let me terms are start it's on spectacular tenants this. of The for move typical big Yes, nothing outs. pretty

little We to increase increase our to are of get try bit up leases -- a targeting in more.

of pay they triple being Now the expenses. most net,

most or on net. you'll triple So of see are absolute our assets

of expenses. these most paying they're So

they're because that to we hit heavy the it's of the a paying lot negotiations, do really we don't in inflation. add but on to have what more So inflation lease, items

to to we're to we X.XX of to an points X got we're or increase targeting -- more get go that above. as opposed So trying --

Robert Stevenson

Bob, And million drop in best of leverage, the revolvers, helpful. volatility lower cost spread, debt the given markets, given this debt is the guess, I That's then, Okay. now your $XXX the the now? the given in right

Robert Kiernan

we've mean want it of Right -- terms at just now? -- our looked in to we beyond being it don't today. cost I as to debt most it's debt is of where flexible our able increase

So down. our looking we're longer-term bring really perspective, leverage from planning to a

to not point. add debt or permanent necessarily at longer-term looking So this more debt any

a at term, would the to lower to in to, subject as additional near we Respectively, So look the we, and best be out debt point. the would longer spike get source on for facility run I the absolutely as we look in here look our we're term leverage term as to in larger term again, -- would rates. lock at again, short credit the near-term debt not seeing again, that

Robert Stevenson

term? then don't Do term can debt swaps us big And until to remind on the Or are the Okay. X go material maturities and they for 'XX any have the I nature? in term you you 'XX loans? know shorter 'XX. But those out

Robert Kiernan

out They of They of past out the we see through of And term loans. forward on go those swaps to on go put in both going some out. term do have the $XXX fact, the starting loan. both start benefit to that go maturity -- we're the of million we've that in swaps

add million additional in we term into we extended that years, loan. a term that So as as swaps $XXX past put we out on

in then and million maturities. here So the swapped out loan. the start the one see third down similarly both to we'll positive third in going in actual starting their $XXX term that till loans year year are start they'll this of in think third -- But on are here quarter, in I that the -- in to here next the quarter rate step the kick swaps kick to is forward we'll

Robert Stevenson

helpful. me. That's And for one last right. then All

should there to at of within capability said to a how the there into to I million special much response start dividends How question, about When Is the the much Jeff before and $XX thinking we decision? other the think it, that? million factor you Q&A $XX in having look go the going REIT a rules things higher room of might earlier $XX million? of dispositions. above be be above sort that you could

Robert Kiernan

$XX how those to these foresee distribution see -- in above how issues any But were a do from rule I really million. room. there it REIT perspective, a to think how rule need could depend transactions from We on don't the You structured relative transactions is perspective. much would general, we

rules -- to the general, that extent $XX is we look room wanted I we would there be think would there's the other million the at. to that able But have more in above we to. to that narrow manage,

Jeffery Busch

to bad profit -- and to is I is My like We a if bought make add in to in there's assets. My them. where preference or not timetable. these we that. do there's just stop sell, want can, to nice a market preference keep assets we a I rating

in down. think We like You and generally probably to buy ATM going I'd and grow buying and think up, be less be buy I assets future. it's stock the will and . to things be we to will other bring come rather units what able leveraging go And new OP down debt the by using and

So where profit. have we go looking optionality at But selling a the that's my of as I'm to really do preference.

Operator

Ladies have you. concludes a and this the Thank time. that your lines session, gentlemen, wonderful for your the you Thank conclusion call. and day. participation, with and of may This you disconnect today's question-and-answer at

Global Medical REIT (GMRE) 3 Aug 232023 Q2 Earnings call transcript