Q2 2020 Global Medical REIT Inc Earnings Call

Jeff Bush Chief Executive Officer.

Bob Kieran and Chief Financial Officer, and Alfonso Leone.

Keith Investment Officer. Please note the use of forward looking statements by the company on this conference call statements made on this call may include statements, which are not historical facts and are considered forward looking including statements related to the cobot 19 pandemic and its effect on our and its tenants and in our tenants businesses.

The company intends. These forward looking statements to be covered by safe Harbor provisions for forward looking statements contained in the private Securities Litigation Reform Act of 1995 and is making the statement for the purposes complying with those safe Harbor provisions.

Furthermore, actual results may differ materially from those described in the forward looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including without limitation those contained in the company's 10-K for the year ended December 30, Onest 2019, and form 10-Q for the quarter ended June Thirtyth.

2020, and its other securities and Exchange Commission filings the company assumes no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise.

Additionally, on this conference call at the company May refer to certain non-GAAP financial measures such as funds from operations and adjusted funds from operations you can find a taboola reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers and the company's earnings release.

And it's filings Securities and Exchange Commission additional information may be found on the Investor Relations page of the company's website at Www Global medical Riet Dotcom.

Please keep in mind that we are doing this call remotely.

Given the circumstances, so bear with us if we have any technical difficulties I would like to turn the call over to Jeff Bose, Chief Executive Officer of Global Medical right.

Thank you everyone.

Good morning.

Thanks for joining our second quarter earnings conference call today.

Joining me on the call today, all Bob and then our Chief Financial Officer, and Alfonzo, we own our Chief investment Officer, We hope that everyone is staying healthy and doing well as we navigate through this unprecedented time.

Global medical had a strong second quarter. Despite the challenges that the pandemic has introduced to our operations and those of our tenants all of our facilities affected by the pandemic are open and operating for the second quarter, we collect that 95.

Sense of our rent and we saw a significant reduction in tenant rents deferral requests, which now represents 3% of our rents well of course, there are some tenants facing challenges in the current environment our properties are 99% occupied.

And the essential nature of the healthcare services, our tenants provide gives us confidence that the portfolio will continue to perform well.

As we anticipated acquisition volume in the second quarter slowed however year to date, we have completed $132 million transactions at an 8.1% weighted average cap rate looking ahead, we continue to be measured with that.

Respect to our acquisition activity given the fluid nature of the pen.

We will prioritize both our teams health and safety as well as our onsite due diligence process as we pursue acquisitions for the remainder of the year.

After the quarter ended global medical achieved several important milestones first the most significant we completed our internalization process.

I would like to thank the board Special Committee for all its work on the internalization transaction and for managing through the process. There in the unprecedented times I believed that the cost effective internalization transaction.

That was deliberate will provide long term value to the company's stockholders.

Second.

Our portfolio now exceeds $1 billion and has a weighted average cap rate.

7.9% I.

Im very proud of our teams work and building this portfolio asset by asset.

Over the past five years.

And believe that it provides an excellent foundation for the company is continue grow.

Lastly, we increased our borrowing capacity.

By 100 million by Upsizing, our credit facility to 600 million, while expanding our bank participants we believed that this increased borrowing capacity positions us well ahead.

Heading into the second half of this year and 2021.

I will now turn the call all but to Bob to discuss our second quarter results.

Thank you Jeff last night after the market close Jim already reported financial results for the second quarter ended June 32020 by our press release and posting of our supplemental earnings packets through our website.

Total revenue for the quarter increased 30.7% year over year to 22.1 million due to the continued growth of our investment portfolio to are accretive acquisition strategy as well as same store contractual rent increases.

Regarding rent collections and tenant activity note that we collected 95% of our second quarter rents reduced our rent deferral amounts to 1.1 million of total rent for approximately 3% of our second quarter rat.

This deferral number represents rent there would have been collected between April in July and we expect to collect these deferrals primarily between July in December 2020.

Lastly, in the quarter recognized reserves for approximately 1 million of rent, including approximately 400000 of deferred rent primarily related to one tenant.

Total expenses for the second quarter, 2020 increased 41.4% to 20.4 million year over year, depreciation and amortization expenses and interest expense remained large components of our total expenses for each period as we continue to actively acquire properties.

Included in total expenses for the quarter were 920000 of costs related to the internalization of the manager.

Can you maybe expenses for the second quarter 2020 was 1.6 million relatively flat compared to the year ago period included in this line is active compensation expense of 897000 for the three month ended June 32020, as compared to 854000 at the same period.

In 2019.

Appreciation and interest expense continued to be our two largest expense line items in the second quarter driven by our acquisition activity.

Depreciation expense was 6.6 million in the second quarter 2020, compared to 4.6 million in the prior year quarter.

Interest expense was approximately 4.4 million in the second quarter up 5.9% from a year ago period due to higher average borrowings used to finance our acquisitions.

Our average borrowing cost for the second quarter, 2020 was 3.38% compared to 3.81% in the prior quarter and 4.27% second quarter of 2019.

The sequential quarterly and year over year decline in our borrowing cost was largely driven by the reduction in LIBOR over the past year.

Net income attributable common stockholders for the second quarter 2020 was 204000 compared to net income of 904000 in the second quarter 2019. The change was primarily due to the rent reserves and 920000 in expenses related to the management internalization.

Sure.

FFO for the second quarter 2020 was 19 cents per share and unit up one penny as compared to the prior year quarter. Our AFFO for the second quarter of 2020 was 21 cents per share on unit up three pennies as compared to the prior year quarter.

Moving onto the balance sheet as of June 32020, our gross investment real estate was nearly 997 million an increase of 91 million or 10% from year end 2019.

Turning to the liability side of our balance sheet. Our total debt was $466 million as at the end of the second quarter up slightly from $464 million at the end of the first quarter and 386 million.

A year end 2019.

Activity during the second quarter reflects the previously discussed slower pace of acquisition volume as well as repayments.

Using proceeds from equity issuances, specifically, we should 14 million of our common stock at a weighted average price of $11.44 per share through our ATM sales program.

Regarding our liquidity, we finished the quarter with total liquidity, including cash and availability on our credit facility of $89 million.

Since quarter end, we've had some significant uptick because this including closing on our internalization, which I will discuss in more detail. Shortly closing on 45 million of acquisitions in expanding our credit facility by 100 million.

Considering these events as of today, our total cash and availability on our credit facility is approximately $130 million.

We also swapped 50 million of our new term debt in the facility at 0.158% LIBOR for the remainder of the term effectively fixing the LIBOR component of 315 million term loan at 1.91%.

I would I'd like to discuss the financial details related to the recent management internalization with the transaction, we internalized function for functions performed by our previous manager Interamerican management by acquiring the entity that owns the manager for $18.1 million cash all be employees of the manager are now employees of Erie, ensuring maybe.

It's mid continuity.

The elimination of the manager streamlined organizational structure and eliminates management fees, including perspective fees on new equity, allowing GM already to keep more of any future capital raise proceeds and importantly, also eliminate future potential incentive fees.

Going forward, we're projecting an additional $1.7 million to 1.8 million of quarterly cash DNA associated with internalizing management.

This incremental DNA will be offset by eliminating the former management fee, which was running at $2 million per quarter.

Future years, we anticipate that the accretive financial benefit of internalization could potentially be more meaningful as we continue to grow achieve economies of scale in the portfolio.

As we shared on our first quarter call because of the uncertainties of the pandemic, including the lack of clarity and changing regulations the state and local level. We're unable to give you specific outlook for the rest of the year with that noted we believe that are ongoing engagement with tenants and collection rate, we've achieved to date, including collections here in the third quarter.

That are progressing consistent with the second quarter position us well to navigate these uncertainties.

I will now turn the call over to Alfonzo, who will review the investment landscape and our investment activity.

Thank you Bob.

We've completed 132 million of acquisitions for the year, thus far at a weighted average cap rate of 8.1%. We had a strong start to 2020, approximately 68 million of acquisitions comprised of four properties at a weighted average cap rate of 8.6% and the first quarter followed by an additional acquisition of 19.3 mill.

And in Dumfries, Virginia at an 8.8 cap.

In the second quarter since the end of the second quarter. We have closed on three additional properties, including Mercy, One hospital and Centerville, Iowa for 5 million spectrum health in Fairfax, Virginia for approximately $17.6 million and a multi.