Global Medical REIT Inc. Q1 2023 Earnings Call

And the first quarter, we achieved a 13.7% a year over year increase in total revenues to $36.2 million driven primarily by your acquisition activity.

Actually one of the rare people, who borrowed my first set of money at 12% to do with development and I understand that the market sort of adjust to the prices.

So you know right now to buy something at a lower price when I see it going higher is sort of silly and to our cost of capital really high I do see you know once we hit a piece where the cost of capital between equity and dead is there that we get back into the market and it may even be a caps.

That we're buying because there will be an adjustment say there is a market out there.

Okay, alright, but just in terms of market cap rates I mean, you know, excluding whether or not you would buy it or not but it's stuff isn't that quality is that an eight a nine where our market cap rates today for for good quality assets that you would want in the portfolio.

All signs up.

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

So the market has definitely moved considerably.

Right now you know what's considered core acids with really high credit health systems, I mean that stuff is trading in the low sixes there have been some examples of stuffed trading through a six.

You know for example that the property that we have on a contract that's Sussex, and so but there has to be a combination of term and credit to get that kind of pricing, but I would say the bulk of of of transactions. Thus far this year that are <unk>.

For a side of the spectrum are trading in that low six cap range in the inventory that we've pursued historically, that's that's trading north of seven and towards the high end of mid to high end of the southern cap Ranch.

Cause that's helpful. Because I was just trying to triangulate there between what potential acquisitions would yield verses. What are your stock is yielding on it the nine dollar stock price, which I think is like it it caught an eight and a quarter ish verses, reducing debt and so I guess with that Jeff I mean, how do you and the board thinking.

About the trade off between reducing leverage with disposition proceeds versus buying back the stock if it's at $9 or $8, you know and and that type of price range. The compelling us of those two options are doing some sort of mix.

Yeah <unk>.

Buying back stock is just not good for a company like us that's looking for growth looking to get more size of our you know of our stock price. So that we could couple of <unk>.

You get better multiples. The larger you are so I I haven't given up on the train one which is delayed.

To keep growing and get a better multiple by getting size get a better interest rate by getting size. The you know getting the rating agencies coming in and all that so essentially I'd, rather pay down the dead right now.

Then by Backstopped now I'm, not saying my <unk>, just crazy to buy it <unk> it back, but you know, it's a crazy world. So I'm not leaving that out but really the main focus of the company. This year is repositioning ourselves for 2024.

Four where I believe they'll be you know the rates will start to come down you know I'm, just projecting myself and what I read but you know.

The rates will start to come down I think that as soon as the fed really stops you know raising each time the fed literally there was a feeling that the status that's gonna stop raising and possibly bring it down our stock shot up several times. It happens historically in recent historically shot up and towards.

The 11th and even towards the 12 not that long ago. So I think when we come back to a normal number which will be there we could get back into the biting growing but right now I want to reduce debt reduced the floating that get our leverage in order and when we start buying again.

I like to buy for more equity than that to keep a very focused on reducing our debt in the company going forward. So I Wanna have deals that are mostly equity out there and with some debt, but mostly equity at a higher percentage to keep reducing the debt.

Okay. That's helpful.

Bob if I'm looking at doing my math correctly I picked your lines, it's sofa plus 150, so call at six at a quarter six and a half depending on the day, which is roughly in line, where the expected disposition proceeds are being so there shouldn't be really any sort of earnings impact from the dispositions at this point.

That's that's <unk> yeah.

And then last one for me you guys talked earlier about 85% to 90% expected retention on the twenty-three rollover that would apply sort of 35 40000 square feet not renewed is that one or two bigger tenants not renewing or a bunch of little 357000 square.

Foot guys that Encarpus those 66 leases that are expiring this year.

Yeah.

It's more about a smaller one cent than any individually significant Kenneth that's making up that delta and I think with with that with that forecast that means that we've sat and it's consistent with what we talked about in our in our queue for a call. I think we are obviously looking at the opportunities to them to improve on that and to.

<unk> again do better than what you know what we're what we're forecasting but I think that's how we're we're looking at it today, but it is it is predominantly a lot of smaller smaller leases.

5000, 10000, 15000 square feet.

Individually that that make up that those in N out.

Okay and are those the five to 15000 or those easier for you guys to lease to find a replacement tenant for then the bigger leases or people wanting the entire building type of thing and if you had empty building that would be easier to leaf then a bunch of 5000 blocks.

The little the little.

The little ones have more turnover because they haven't had as much investment in them as the big ones and the indications from our big ones is you know right now we're doing very well and we're doing very well and to 24 many of them work even talking to US now on the big side on the little side.

Yeah, you you could replace those easier, but they also leave easier cause when you have a full building they put a lot of money into their full building and it makes it very difficult economically to really move, whereas or a smaller one economically it's much easier to move.

And so you can <unk> you and we have some multiply tenants now a little bit more than we had before so but we we expect to get him at least up and we expect to stay within the target range that we said.

Okay. That's helpful guys. Thank you appreciate the time.

Our next question comes from the lineup Austin, where Schmidt with Keybanc coupler markets. Please proceed.

Great. Good morning, everybody apologies if anybody if any of this has been covered online dropped a little bit ago, but I'm I'm just curious on the the the disposition front and sort of these deals are you seeing that low six even sub six per cent range, who who are the active buyers. You know that are you know what types of buyers are paying.

For deals you know in sort of that you know <unk> six per cent range today.

It's the private equity buyers.

For the most part.

You know in some instances there then at least reached but for the most part it's the private equity buyers.

Got it and any sense, what you know how much leverage they're putting on deals today.

My sense of it is they're getting so.

So there is a decision that they're making whether or not or how much interest only they wanna have.

They are able to get 70 per cent, but you don't get a lot of interest only a term with that so some are choosing lower so 50% and some have a strategy of even lower or even some are are coming in with a lot of equity with the thought of.

Refinancing later, but for the most part of everyone's sort of shooting for that 50 60 per cent.

Got it no. That's helpful. And then just curious givens or the progress you've made at this point on on the disposition front or are you still evaluating joint venture opportunities and does it make sense to have a vehicle in place to the extent you're in a position that you know there there are attractive deals that come up and that would be a <unk>.

[noise] vehicle, maybe to to execute you know through and and limit the amount of equity that you're you're putting into deals.

Sure I mean, those conversations are ongoing you know we've been having those conversations for the past three or four months, but.

You know it's it it takes a while to put these things together and we're we're still early in that process, but it's something that we're definitely entertaining and and having active discussions on that front.

And then just the last one for me you know in the O P unit from you know.

Given you you've kind of changed your your you know tone, a little bit on the acquisition side for this year recognize the cost of capital isn't isn't as favorable as it as it was at one point last year, but what are those conversations like on potential O. P unit deals. I mean are are you know sellers receptive to doing a P unit deal.

<unk> or you know what what what what kind of can you give a little bit of flavor of.

The willingness sure of sellers to take up units.

It it it it <unk> you know I I find it hard to predict it seems.

I'm inclined to think that in this environment, there's gonna be more interested in more demand for transacting with us with O P units.

As evidenced by the fact that we just did a transaction with with Oh P G and it's.

It it ultimately comes down to very unique and idiosyncratic decisions in context of the seller.

It's it's a wealth management.

Strategy for them, it's it's.

So there's no situation is the same is what I'm trying to say.

So, but I am inclined to think that right now the the 10 31 exchange market is.

Not what it was before and the financing has is more difficult for these sellers. So I don't think it's something that's gonna be.

That's gonna happen quickly, but I I would expect to see some more transactions given the fact that you know, it's a very seamless transaction and one that you know it makes sense for these doctors that are looking to you know find out that tax strata.

Gee that works for them, but I mean.

Thus far it's not been there has been no clear trend.

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

So we can send you looking for the same types of deals that we fought in the past though.

I'm not sure I totally understand the question.

I guess.

And the nature of O P units I'm just curious if if those are you know smaller deals today that are that are more attractive or you know as you said more consistent maybe it with what you've done historically.

It would be more consistent with what we've done historically I mean to the extent that there's an opportunity to transact a larger deals with O P and it's I mean of course, we would be interested in doing that but it's those tend to be more rare.

Historically, it's been the smaller 510 million dollar deal, where you get the the physicians have a very low tax bases.

And they're and they're attracted to the O P unit structure for that reason.

Thanks for taking questions.

Yes.

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

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This concludes today's conference.

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