Q1 2024 Global Medical REIT Inc Earnings Call
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Operator: Good day, and welcome to the Global Medical REIT First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode.
Good day and welcome to the global Medical REIT first quarter 2024 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Steve Swett with Investor Relations. Please go ahead.
Stephen C. Swett: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
Stephen C. Swett: Please note this event is being recorded.
Operator: I would now like to turn the conference over to Steve Swett with Investor Relations. Please go ahead.
Stephen C. Swett: Thank you. Good morning, everyone, and welcome to Global Medical REIT's first quarter 2024 earnings conference call. On the call today are Jeff Busch, Chief Executive Officer; Alfonzo Leon, Chief Investment Officer; and Bob Kiernan, Chief Financial 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. The company intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is making this statement for the purpose of complying with those safe harbor provisions.
Stephen C. Swett: Thank you good morning, everyone and welcome to global Medical REIT first quarter 2024 earnings conference call on the call today are Jeff Busch, Chief Executive Officer, Alfonso Leon Chief Investment Officer, and Bob Kiernan, Chief Financial Officer.
Stephen C. Swett: 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 31, 2023, and its other SEC filings. The company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, on this call, the company may refer to certain non-GAAP financial measures, such as funds from operations, adjusted funds from operations, EBITDA REIT, and adjusted EBITDA REIT.
Stephen C. Swett: 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.
Stephen C. Swett: You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company's earnings release and filings with the SEC. Additionally, information may be found on the Investor Relations page of the company's website at www.globalmedicalreit.com. I would now like to turn the call over to Jeff Busch, Chief Executive Officer of Global Medical REIT.
Jeffrey M. Busch: The company intends. These forward looking statements to be covered by the safe Harbor provisions forward looking statements contained in the private Securities Litigation Reform Act 1995, and is making this statement for purpose of complying with those safe Harbor provisions.
Jeffrey M. Busch: 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 31st 2023, and its other SEC filings the company assumes no obligation to update.
Jeffrey M. Busch: Publicly any forward looking statements, whether as a result of new information.
Jeffrey M. Busch: Future events or otherwise.
Jeffrey M. Busch: Additionally, on this call the company may refer to certain non-GAAP financial measures such as funds from operations adjusted funds from operations <unk>.
Jeffrey M. Busch: And adjusted EBIT already you can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company's earnings release and filings with the SEC.
Jeffrey M. Busch: Additionally, information may be found in the Investor Relations page of the company's website at Www Dot global medical REIT dotcom.
Stephen C. Swett: I would now like to turn the call over to Jeff Busch, Chief Executive Officer of Global Medical REIT, Jeff.
Jeffrey M. Busch: Thank you, Steve. Good morning, and thank you for joining our First Quarter 2020 Earnings Call. At the end of the first quarter, portfolio occupancy was 96.4%, with a weighted average lease term of 5.8 years, and a portfolio average rent coverage ratio of 4.8 times. For the first quarter, our net income attributable to common shareholders was $1.2 billion. $794,000.01 per share compared to $673,000.01 per share in the first quarter of 2023. FFO in the first quarter was $0.21 per share and unit, down $0.01 from the prior year quarter, and our AFFO was $0.23 per share and unit, unchanged from the prior year quarter with regard to acquisition.
Jeffrey M. Busch: Thank you Steve Good morning, and thank you for joining our first quarter 2024 earnings call.
Jeffrey M. Busch: We ended the first quarter portfolio occupancy was 96, 4% with a weighted average lease term of five.
Jeffrey M. Busch: Five eight years.
Jeffrey M. Busch: Portfolio average rent coverage ratio of 4.8.
Jeffrey M. Busch: For the first quarter.
Jeffrey M. Busch: Net income attributable to common shareholders was.
Jeffrey M. Busch: $794000 or one cents per share compared to.
Jeffrey M. Busch: $673000 or one cents per share in the first quarter of 2023.
Jeffrey M. Busch: That's F O in the first quarter was 21 cents per share and unit.
Jeffrey M. Busch: Down 1% from the prior year quarter.
Jeffrey M. Busch: And our <unk> was 23 cents per share and union unchanged from the prior year Court.
Jeffrey M. Busch: With regard to acquisition.
Jeffrey M. Busch: We are actively looking for properties that meet our investment criteria and underwriting standards. I am pleased to announce that, subsequent to the quarter end, we entered into a purchase agreement for a 15th property portfolio of outpatient medical real estate for an aggregate purchase price of $81.3 million. These properties are fully occupied and are leased under triple net or absolute triple net leases. This acquisition is subject to customary terms and conditions, including due diligence reviews, and we expect to close in two tranches, one tranche during each of the third and fourth quarters of 2024.
Jeffrey M. Busch: We are actively looking for properties that meet our investment criteria and underwriting standards I am pleased to announce that subsequent to the quarter end, we entered into a purchase agreement for a 15 property portfolio of outpatient medical real estate.
Jeffrey M. Busch: <unk> for an aggregate purchase price of $81.3 million.
Jeffrey M. Busch: These properties are fully occupied and or at least under triple net or absolute triple net leases. This acquisition is subject to customary terms and conditions, including due diligence reviews, and we expect to close in two tranches one tranche.
Jeffrey M. Busch: During each of the third and fourth quarter of 2024.
Jeffrey M. Busch: This two-trunk closing structure provides us with flexibility as we consider our options regarding the allocation of capital to fund this acquisition. For example, depending on market conditions, we may utilize net proceeds from strategic property dispositions or traditional equity and debt financing.
Jeffrey M. Busch: This huge crunch closing structure provides us with flexibility as we consider.
Jeffrey M. Busch: Our options regarding the allocation of capital to fund this acquisition.
Jeffrey M. Busch: For example, depending on market conditions, we may utilize net proceeds from strategic property dispositions or traditional equity and debt financing.
Jeffrey M. Busch: As always, we are mindful of our long-term leverage targets, and we expect any potential leverage increase resulting from this transaction would be short-term in nature. We remain committed to our accretive growth strategy while balancing the need to maintain prudent leverage. As we look to the balance of the year, we look forward to updating you on our progress, in terms of tenant-related items. On May 6, 2024, one of our tenants, Steward Healthcare, announced that it filed for Chapter 11 bankruptcy reorganization. As of March 31st, Stuart represented 2.8% of the company's annualized base rent, primarily in one facility that is located in Beaumont, Texas.
Jeffrey M. Busch: As always we are mindful of our long term leverage targets and where do you expect any potential leverage increase resulting from this transaction would be short term in nature.
Jeffrey M. Busch: We remain committed to our accretive growth strategy, while balancing the need to maintain prudent leverage as we look to the balance of the year. We look forward to updating you on our progress.
Jeffrey M. Busch: In terms of tenant related items.
Jeffrey M. Busch: On May six 2024, one of our tenants Steward health care announced that it filed for chapter 11 bankruptcy reorganization.
Jeffrey M. Busch: As of March 31st do it represented 2.8% of the company's annualized base rent.
Jeffrey M. Busch: Primarily in one facility that is located in Beaumont, Texas.
Jeffrey M. Busch: The company was actively pursuing release opportunities at this facility prior to the Stewart bankruptcy announcement, and we are optimistic about our long-term prospects at this location. Bob will provide more details regarding the financial aspects of our stewardship relationship in his remarks. We're closely monitoring this situation and will update the market for any material events as this situation progresses. Overall, I am pleased with our first quarter results and want to thank the entire team for their hard work and contributions to our results. With that, I turn the call over to Alfonzo to discuss our investment activity and the current acquisition market conditions in more detail.
Jeffrey M. Busch: The company was actively pursuing releasing opportunities at this facility prior to the Stewart bankruptcy announcement, and we are optimistic about our long term prospects at this location.
Alfonzo: Bob will provide more details regarding the financial aspects of our store relationship in his remarks, we are closely monitoring the situation and we will update the market for any material events as the situation progresses.
Jeffrey M. Busch: Overall, I am pleased with our first quarter results and want to thank the entire team for their hard work and contributions to our results with that I turn the call over to alfonzo discuss our investment activity and the current acquisition market conditions.
Alfonzo: In more detail.
Alfonzo: Thank you Jeff.
Alfonzo Leon: The transaction market for our target medical facilities, which align with our quality and return criteria, has made promising progress. We continue to actively engage with a wide range of physician groups, brokers, and corporate sellers to identify acquisition opportunities. Our readiness to capitalize on existing opportunities, coupled with our strong capital position and platform sets us apart from less liquid buyers in the market. Furthermore, the unattractive debt refinancing market can work to our advantage, compelling reluctant sellers to consider us as they navigate a difficult refinance market.
Alfonzo: The transaction market for our targeted medical facilities, which align with our quality and return criteria.
Alfonzo Leon: It made promising progress.
Alfonzo Leon: We continue to actively engage with a wide range of physician groups brokers and corporate sellers to identify acquisition opportunities alright.
Alfonzo Leon: Our readiness to capitalize on existing opportunities.
Alfonzo Leon: With our strong capital position and platform sets us apart from less liquid buyers in the market.
Alfonzo Leon: Furthermore, the unattractive debt refinancing market can work to our advantage.
Alfonzo Leon: Compelling reluctant sellers to consider us as they navigate a difficult refinance market.
Alfonzo Leon: To that end, as Jeff mentioned, in May, we entered into a purchase agreement to acquire a 15-property portfolio of outpatient medical real estate for an aggregate purchase price of $81.3 million. These properties fit squarely within our investment criteria and are fully occupied and leased under triple net or absolute triple net leases. As Jeff explained, we expect to close this transaction in two tranches, with the first tranche closing during the third quarter of 2024 and the second tranche closing during the fourth quarter of 2024, which will provide us with flexibility for print capital allocation.
Alfonzo Leon: Does that and as Jeff mentioned in May we entered into a purchase agreement to acquire 15 property portfolio of outpatient medical real estate for an aggregate purchase price of $81.3 million.
Alfonzo Leon: These properties fit squarely within our investment criteria and are fully occupied and leased under triple net or absolute triple net leases.
Alfonzo Leon: As Jeff explained we expect to close this transaction in two tranches with the first tranche closing during the third quarter of 2024.
Alfonzo Leon: And the second tranche closing during the fourth quarter of 2024.
Alfonzo Leon: Well provide us with flexibility for capital allocation.
Alfonzo Leon: As a reminder, this deal is currently under contract and subject to customary terms and conditions, including due diligence review. Accordingly, there is no assurance that the company will close this acquisition on a timely basis or at all.
Alfonzo Leon: As a reminder.
Alfonzo Leon: This deal is currently under contract and subject to customary terms and conditions, including due diligence review Accordingly, there is no assurance that the company will close this acquisition on a timely basis or at all.
Robert J. Kiernan: We believe this transaction is an example of where the acquisition market is trending, with sellers accepting higher cap rate deals as the refinance market continues to struggle and real estate funds are forced to sell. As always, we will continue to seek opportunities that meet our investment strategy and underwriting standards. We have the ability to unlock opportunities using the tools at our disposal, including our scale, access to capital, and the potential use of OP unit deal structures. I'd now like to turn the call over to Bob to discuss our financial results. Bob?
Alfonzo Leon: We believe this transaction is an example of where the acquisition market is trending.
Bob: With sellers accepting higher cap rate deals as the refinance market continues to struggle and real estate funds are forced to sell.
Bob: As always we will continue to seek opportunities that meet our investment strategy and underwriting standards, we have the ability to unlock opportunities using the tools at our disposal, including our scale.
Bob: Access to capital and the potential use of op unit deal structures.
Robert J. Kiernan: I'd now like to turn the call over to Bob to discuss our financial results Bob.
Robert J. Kiernan: Thank you, Alfonzo. At the end of the first quarter of 2024, our portfolio consisted of gross investments in real estate of $1.4 billion and included $4.8 million of total leasable square feet, 96.4% occupancy, 5.8 years of weighted average lease term, 4.8 times rent coverage, and 2.2% weighted average contractual rent escalation. In the first quarter, our total revenues decreased by 3% compared to last year to $35.1 million due to the impact of dispositions.
Bob: Thank you all found out at the.
Robert J. Kiernan: We ended the first quarter 2024, our portfolio consisted of gross investments in real estate of $1 $4 billion and included $4 8 million of total leasable square feet 96, 4% occupancy five eight.
Robert J. Kiernan: Years of weighted average lease term four eight times rent coverage with two 2% weighted average contractual rent escalations.
Robert J. Kiernan: In the first quarter, our total revenues decreased by 3% compared to last year to $35 $1 million due to the impact of dispositions.
Robert J. Kiernan: Total expenses for the first quarter of 2024 were $32.8 million compared to $34.5 million in the prior year quarter. The decrease was primarily due to disposition transactions that were completed during 2023 and lower interest expense. Our interest expense in the first quarter was $6.9 million, compared to $8.3 million in the comparable quarter of last year, reflecting lower borrowing rates due to lower leverage and the impact of our interest rate swaps and lower average borrowings compared to the prior year period.
Robert J. Kiernan: Total expenses for the first quarter of 2024 were $32 $8 million compared to $34 $5 million in the prior year quarter. Due the decrease was primarily due to disposition transactions that were completed during 2023 and lower interest expense.
Robert J. Kiernan: Our interest expense in the first quarter was $6 $9 million compared to $8 $3 million in the comparable quarter of last year, reflecting lower borrowing rates due to lower leverage and the impact of our interest rate swaps and lower average borrowings compared to the prior year period, our operating expenses for the first quarter of 2024 were seven.
Robert J. Kiernan: Our operating expenses for the first quarter of 2024 were $7.4 million, compared to $7.5 million in the prior year quarter, with a decrease due primarily to dispositions during 2023. Regarding these first quarter expenses, $5 million related to net leases, where the company recognized a comparable amount of expense recovery revenue, and $1.5 million related to gross leases.
Robert J. Kiernan: $4 million compared to $7 $5 billion in the prior year quarter with the decrease due primarily to dispositions during 2023.
Robert J. Kiernan: Regarding these first quarter expenses $5 million related to net leases, where the company recognized a comparable amount of expense recovery revenue and $1.5 million related to gross leases.
Robert J. Kiernan: G&A expenses for the first quarter of 2024 or $4 $4 million compared to $3 $8 million in the first quarter of 2023. The increase primarily resulted from an increase in noncash <unk> compensation expense, which was $1 2 million for the first quarter of 2024 compared to $700000.
Robert J. Kiernan: For the same period in 2023 as mentioned last call. We expect our G&A expenses throughout 2024 to be in the range of $4 $4 million to $4 $6 million on a quarterly basis.
Robert J. Kiernan: As mentioned last call, we expect our G&A expenses throughout 2024 to be in the range of $4.4 million to $4.6 million on a quarterly basis. Net income attributable to common stockholders for the first quarter of 2024 was $794,000, or $0.01 per share, compared to $673,000, or $0.01 per share, in the first quarter of 2023. FFO in the first quarter of 2024 was $14.9 million, or $0.21 per share and unit, compared to $15.1 million, or $0.22 per share and unit, in the first quarter of 2023. AFFO in the first quarter of 2024 was $16.5 million, or $0.23 per share and unit, compared to $16 million, or $0.23 per share and unit, in the first quarter of 2023.
Robert J. Kiernan: Net income attributable to common stockholders for the first quarter of 2024 was $794000 for one cents per share compared to $673000.01 per share in the first quarter of 2023.
Robert J. Kiernan: <unk> in the first quarter of 2024 was $14 $9 million or 21 cents per share and unit compared to $15 $1 million or 22 per share and unit in the first quarter of 2023.
Robert J. Kiernan: <unk> in the first quarter of 2024 was $16 $5 million or 23 per share and unit compared to $16 million or 23 per share and unit in the first quarter of 2023.
Robert J. Kiernan: Moving on to the balance sheet, as of March 31st, 2024, our gross investment in real estate was $1.4 billion. Additionally, at March 31st, 2024, we had $624 million of total gross debt, with a weighted average remaining term of 2.7 years. At quarter end, 84% of our total debt was fixed rate debt, our leverage ratio was 44.0%, and our weighted average interest rate was 3.85%. Lastly, the current unutilized borrowing capacity under the credit facility is $290 million. We did not issue any common stock under our ATM program during the first quarter or so far.
Robert J. Kiernan: Onto the balance sheet as of March 31, 2024, our gross investment in real estate was $1 $4 billion. At March 31, 2024, we had $624 million of total gross debt with a weighted average remaining term of two seven years.
Robert J. Kiernan: At quarter end, 84% of our total debt is fixed rate debt.
Robert J. Kiernan: Leverage ratio was 44, 8% and our weighted average interest rate of 385%.
Robert J. Kiernan: Lastly, the current unutilized borrowing capacity under the credit facility $290 million.
Robert J. Kiernan: We did not issue any common stock under our ATM program during the first quarter or to date.
Robert J. Kiernan: With respect to our investment portfolio's 2024 lease expirations, we are pleased with our progress on renewals, and based on activity to date, we are currently trending towards a retention rate of 76% on this year's expiring lease of both square feet. Regarding capital expenditures on the portfolio, during the first quarter, our cash spend was approximately $2 million. Consistent with my remarks during our last call, we continue to project $10 to $11 million related to building and site improvements and approximately $2 to $3 million for tenant improvements, primarily associated with new leases and renewals and lease up to be completed this year.
Robert J. Kiernan: With respect to our investment portfolio in 2020 for a lease exploration, we're pleased with our progress on renewals and based on activity to date. We are currently trending towards your retention rate of 76% on this year's expiring leasable square feet.
Robert J. Kiernan: Regarding capital expenditures on the portfolio during the first quarter, our cash spend was approximately $2 million.
Robert J. Kiernan: That was my remarks during our last call. We continued to project $10 million to $11 million related to building and site improvement and approximately $2 million to $3 million for tenant improvements primarily associated with new leases and renewals in lease up to be completed this year.
Robert J. Kiernan: Regarding the company's financial exposure to Steward HealthCare, as Jeff mentioned, as of March 31, Steward represented 2.8% or $3.1 million of the company's annualized base rent, of which 86% related to our facility located in Beaumont, Texas. Additionally, as of March 31st, the company's receivables from Stewart totaled approximately $500,000, including $200,000 of deferred rent receivables.
Robert J. Kiernan: Regarding the company's financial exposure to Steward health care.
Robert J. Kiernan: As Jeff mentioned as of March 31st Stuart represented two 8% or $3 $1 million of the company's annualized base rent.
Robert J. Kiernan: 86% related to our facility located in Beaumont, Texas <unk>.
Robert J. Kiernan: Additionally, as of March 31, the company's receivables for Stuart totaled approximately $500000, including 200000 of deferred rent receivables.
Robert J. Kiernan: To conclude, we are encouraged by our acquisition opportunities and believe that our portfolio and ample liquidity will enable us to navigate the current market conditions over the long term. We look forward to sharing our progress with you throughout the year. Operator, please open the call for questions. Thank you.
Robert J. Kiernan: To conclude we are encouraged by our acquisition opportunities and believe our portfolio and ample liquidity will enable us to navigate the current market conditions over the long term.
Robert J. Kiernan: Look forward to sharing our progress with you throughout the year.
Speaker Change: This concludes our prepared remarks, operator, please open the call for questions.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our assembly. And the first question will be from Austin Wurschmidt with KeyBank Capital Markets. Please go ahead.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Austin Todd Wurschmidt: To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Operator: Yeah.
Austin Todd Wurschmidt: And the first question will be from Austin, where Schmidt with Keybanc capital markets. Please go ahead.
Austin Todd Wurschmidt: Hi, good morning everybody. I just want to touch on the acquisitions. So you've lined up the acquisitions at this point and are now contemplating funding plans, but I guess how willing are you to wait and sort of speculate on the capital markets and the transaction market just given the volatility that we've seen?
Austin Todd Wurschmidt: Hi, good morning, everybody good morning.
Speaker Change: Good morning, I want to hit on the the acquisitions, so you've lined up the acquisitions at this point in and are now contemplating funding plans, but I guess, how willing are you to wait and sort of speculate on the capital markets and in the transaction market just given given the volatility that we've seen.
Jeffrey M. Busch: You're absolutely right. Right now, we're really pleased with these acquisitions. These fit exactly what we like in our portfolio, you know, triple net, absolute net, MOV style acquisitions. We're going to be patient. We do; we could sell assets. But I wouldn't do it today.
Speaker Change: Youre absolutely right right now we're really pleased with this acquisitions these fit exactly what we like in our portfolio Triple.
Jeffrey M. Busch: Triple net absolute net M O B style.
Jeffrey M. Busch: Style acquisitions are we're gonna be patient, we do we could sell assets I wouldn't do it today I think you know we need to see a stabilization, we're not doing any fire sale of assets.
Jeffrey M. Busch: I think, you know, we need to see stabilization. We're not doing any fire sale of assets. We're basically, we could sell assets and be accretive. We're going to see where the equity markets, as in the past, where you got really, where at least the last few rounds, we thought we had good Fed direction of three cuts. We, I'm not relying upon any of that. So, you know, if the Fed doesn't cut for a while, we have other opportunities to do that.
Jeffrey M. Busch: We're basically we could sell assets and be accretive, where we're going to see where the equity markets.
Jeffrey M. Busch: As in the past, where you got really where at least the last few rounds. We thought we had good set direction of three cuts we I'm not relying upon any of that so you know if the fed doesn't cut for a while we have other opportunities to do that short term debt you know increase.
Jeffrey M. Busch: Short-term debt, you know, increase. We do have something, but this portfolio was too good to pass up, and we felt we needed to continue our business, progressing and getting good assets, and we'll probably wean off some assets that are not strategic.
Jeffrey M. Busch: We do have something but there's this portfolio was too good to pass up and we felt we needed to continue our business.
Jeffrey M. Busch: Progressing and getting good assets and we will probably win some assets that are not strategic also.
Jeffrey M. Busch: So as of now, just to understand, would you just put these on your line and fund them that way? And then, sort of, when these close, decide kind of what the ultimate funding plans are? Just trying to understand sort of the timeline of the acquisitions versus when you intend on funding.
Speaker Change: So as of now just to understand would you just put these on on you know your line and fund it that way and then sort of when these clothes decide you know kind of what the ultimate funding plans is just trying to understand sort of the timeline of of you know the the acquisitions versus you know when you're in.
Jeffrey M. Busch: And on funding.
Jeffrey M. Busch: Okay.
Jeffrey M. Busch: The acquisitions could go on our credit line temporarily, but we do have things that we've put up for sale, which should match some of this, at least the earlier ones. So it's a combination. You're absolutely right. There's a combination of sales and a combination of, you know, possibly increasing unless, you know, the equity markets improve substantially. But we're just not counting.
Jeffrey M. Busch: The acquisitions.
Jeffrey M. Busch: It could it could go on our credit line temporarily but we do have.
Jeffrey M. Busch: Things that we've put up for sale, which should match some of this at least the earlier ones. So it's a combination you're absolutely right. There's a combination of sale and a combination of.
Jeffrey M. Busch: Possibly increasing unless you know the equity markets improve substantially but we're just not count.
Austin Todd Wurschmidt: Okay, that's really helpful. And then can you just share a little bit of detail about the portfolio? You talked about single-tenant assets. I mean, does it fit that profile? What's the sort of wall tier for the portfolio? And then can you just share some of the economics of the deal, cap rate and so forth?
Speaker Change: Okay. No. That's that's really helpful. And then can you just share a little bit of detail about the portfolio or are these you know you had talked about single tenant assets I mean does it fit that profile what sort of are the Walter here for the portfolio and then can you just share some of the economics of the deal a cap rate and so forth.
Alfonzo Leon: Alfonzo? Sure, yeah, sure.
Speaker Change: Sure Yeah sure. So the while it is a it's a $6 one year Walt with no roll off until 2016.
Alfonzo Leon: So the WALT is, it's a 6.1-year WALT with no role until 2016. It's composed of 12 MOBs and three behavioral facilities. Most of these properties, 12 of them are located in the Sunbelt States, with three properties located in states in the northern part of the country, and one quarter is investment grade. About 60% is physician credit with good rent coverage, and the balance is double B rated. And the price per square foot is about $320 per square foot.
Alfonzo Leon: It's composed of 12, applebee's and three behavioral facilities.
Alfonzo Leon: Most of these properties 12 of them are located in the Sunbelt States with three properties located in states in the northern part of the country.
Alfonzo Leon: And one quarter as investment grade.
Alfonzo Leon: About 60% is physician credit with good rent coverage and the balances are double B rated.
Alfonzo Leon: And the price per square foot is about 320 per square foot.
Alfonzo Leon: And what's the cap rate on the deal?
Speaker Change: And what's the cap rate on the deal.
Alfonzo Leon: It's approximately 8% and, you know, this is a portfolio that we sourced off the market.
Speaker Change: It's approximately 8% and you know this is a portfolio that we are towards the off market.
Austin Todd Wurschmidt: That's great. Very helpful. I'll hop back in the queue.
Speaker Change: That's great very helpful. I'll hop back in the queue. Thank you.
Operator: And the next question will be from Rob Stevenson from JANI. Please go ahead.
Austin Todd Wurschmidt: And the next question will be from Rob Stevenson from Janney. Please go ahead.
Robert Chapman Stevenson: Good morning guys. Just to follow up on the acquisition, are any of the tenants existing tenants, or are these going to wind up being new tenants for the firm?
Robert Chapman Stevenson: Good morning, guys, just a follow up on the acquisition.
Robert Chapman Stevenson: Are any of the tenant's existing tenants or are these going to wind up being new tenants for the firm.
Jeffrey M. Busch: It's a mix, but yeah, it's a mix of existing and new.
Robert Chapman Stevenson: It's a mix, but it's a.
Jeffrey M. Busch: And but yeah, it's a mix of existing and new.
Jeffrey M. Busch: and anybody that's going to be pushed up dramatically in the percentage of you know into the top five or those in the top five that would be increased substantially at this point.
Jeffrey M. Busch: And anybody that's going to be pushed up dramatically in the percentage of you know into the top five or.
Jeffrey M. Busch: Those in the top five there would be increased substantially at this point.
Jeffrey M. Busch: No, no meaningful change.
Jeffrey M. Busch: No no no no meaningful change.
Robert J. Kiernan: Okay, and then I think Bob, you said that 86% of the Stuart rents were in the Beaumont asset. How many other assets are there in the portfolio, and what are those relative to the Beaumont asset?
Jeffrey M. Busch: Okay.
Jeffrey M. Busch: And then the I think Bob you said that 80.
Robert J. Kiernan: 86% of the Stewart.
Bob: Rents were in the Beaumont asset how many other assets are there in the portfolio and what are those relative to the Beaumont asset.
Robert J. Kiernan: Sure, Rob. There are five other leases. There are six leases in total. And the total square feet of the non-Beaumont buildings is right around 36,000 square feet. And the monthly rent on those other assets is around $69,000, $70,000 in total monthly rent from those assets.
Bob: Sure Rob there, there's five other leases six leases in total.
Robert J. Kiernan: And that the total square feet on the non Beaumont is right around 36000 square feet.
Robert J. Kiernan: The monthly rent on those other assets is is around 69000 and $70000 of of monthly rent from from those assets.
Robert Chapman Stevenson: Okay, and I guess the then you know in aggregate 3.1 million, you know roughly 775,000 or quarter how much of that was in the first quarter results? Did you basically have all of the 775 in the first quarter results just trying to figure out as we go forward? We did. Okay.
Robert J. Kiernan: Okay and I guess, the then you know in aggregate $3 1 million you know roughly 775000 a quarter how much of that was in first quarter results was did you basically have all of the 775 in first quarter results just trying to figure out as we go forward.
Robert Chapman Stevenson: Okay.
Jeffrey M. Busch: And then, um... You know, the sense of, you know, at this point is, are they going to try to, you know, basically just give back the Beaumont property? Or is that a situation where, you know, there's going to be some sort of negotiations when they come out of Chapter 11? You know, how are you guys strategically looking at that? Is that something that you guys are going to have to release or probably just something that winds up, you know, getting a reduction in rent when all is said and done?
Robert Chapman Stevenson: And then.
Jeffrey M. Busch: The sense of you know.
Jeffrey M. Busch: At this point is or are they going to try to you know basically just give back the beaumont property or is that a situation, where you know there's going to be some sort of negotiations when they come out of chapter 11, you know how are you guys strategically looking at that is that something that you guys are going to have to release or.
Jeffrey M. Busch: Probably just something that winds up getting a.
Jeffrey M. Busch: Duction and rent when all of a sudden done.
Jeffrey M. Busch: We're in the process, Rob, we're in the process of releasing them on the facility. Actually, we've got ahead of it.
Jeffrey M. Busch: We're in the process.
Jeffrey M. Busch: Rob we're in the process of re leasing it.
Jeffrey M. Busch: The facility actually we've got ahead of that.
Jeffrey M. Busch: We don't believe stewards, except this facility I mean, they have a longer term lease, but they moved out of that facility.
Jeffrey M. Busch: We don't believe stewards can accept this facility. I mean, they have a longer-term lease, but they have already moved out of the facility. And I don't think they're going to accept it, but when we started this process months ago, and interesting enough, there was a lot of demand for this facility. We're feeling really good about releasing it in good numbers. And the way the market works there is there's two hospitals, both the main hospital as well as with stewards.
Jeffrey M. Busch: And I don't think they're going to accept it but when we <unk> months ago, we started a process and interesting enough a lot of demand on this facility, we're feeling really good about releasing it and at good numbers.
Jeffrey M. Busch: And the way the market works there is there's two hospital.
Jeffrey M. Busch: Main hospitals wealth with steward. We believe this is the much better hospital when we underwrote it it's much better and everything and the physicians like to do is a surgical hospital and physicians like to do surgery in the apps. So there's a lot of demand on that and we do expect to release it and we're very optimistic on that.
Jeffrey M. Busch: We believe this is a much better hospital. When we underwrote it, it's much better and everything. And the physicians like to do, it's a surgical hospital, and physicians like to do surgery there. So there's a lot of demand for that, and we do expect to release it, and we're very optimistic.
Robert Chapman Stevenson: Okay. I guess, just from a financial standpoint, at this point, we should be planning on that being non-revenue-producing for some period of time until, you know, between Beaumont and when you're able to release it to somebody else.
Jeffrey M. Busch: Okay.
Speaker Change: I guess then the just from a financial standpoint at this point, we should be planning on that being non revenue producing for some period of time until you know between Beaumont and when when you're able to re lease it to somebody else.
Jeffrey M. Busch: I think that's fair at this point. OK.
Speaker Change: I think that's fair at this point.
Jeffrey M. Busch: Okay.
Robert Chapman Stevenson: Alright, I appreciate your time this morning, guys.
Speaker Change: Alright, I appreciate the time this morning guys.
Speaker Change: Thank you.
Operator: And the next question will be from Bryan Maher from B. Reilly F.B.R. Please go ahead. Wow.
Robert Chapman Stevenson: And the next question will be from Bryan Maher from B Riley FBR. Please go ahead.
Bryan Anthony Maher: Thanks. Most of my questions have been asked and answered, but just sticking with Stuart for one second, I would say if they've moved out already, they're probably not going to re-up. On the 15 property acquisition, can you talk about what the seller motivation was there?
Bryan Anthony Maher: Well. Thanks, most of my questions have been asked and answered, but just thinking about Stewart for one second I would say if they've moved out already they're probably not going to re up.
Bryan Anthony Maher: On the 15 property acquisition.
Bryan Anthony Maher: Can you talk about where the seller motivation was there.
Jeffrey M. Busch: It was strategic, you know, these are assets that they are... It's not a sector that they want to continue investing in.
Bryan Anthony Maher: It was strategic you know these are assets that there.
Jeffrey M. Busch: No it's not a factor that they want to continue investing in.
Alfonzo Leon: Okay, and maybe sticking with Alfonzo for a minute, when you're looking at your pipeline after announcing this deal, you know, how deep would you say it is realistically, maybe in a dollar number? And are you seeing any meaningful narrowing of the bid-ask spread?
Speaker Change: Okay, and maybe thinking without bozza for a minute when youre looking at your pipeline.
Alfonzo Leon: After announcing this deal you know how deep would you say it is realistically maybe a dollar number and are you seeing any meaningful a narrowing of the bid ask spread.
Alfonzo Leon: Yeah, so there are two parts to that question. I mean, the first part is, the market has continued moving towards higher yields, and it's interesting to look at the market in two ways. One is single-tenant, sorry, single asset sales and portfolio sales.
Alfonzo Leon: Yeah. So two parts of that question I mean, the first part is I mean, the market has continued.
Alfonzo Leon: Moving towards.
Alfonzo Leon: Higher yields.
Alfonzo Leon: And it's interesting to look at the market from two ways. One is single tenant that's probably single asset sales and portfolio sales.
Alfonzo Leon: And what's been interesting is there are actually more interesting opportunities in portfolios. There are fewer opportunities than there were a few years ago, but the ones that are available are interesting situations where, you know, you're actually getting pretty attractive pricing and you get the efficiency of being able to transact a lot of properties at once, which is always great. And historically, that's not been the case. You always have to pay your premium.
Alfonzo Leon: And what's been interesting is.
Alfonzo Leon: That's been actually.
Alfonzo Leon: More interesting opportunities and portfolios there's been.
Alfonzo Leon: Fewer opportunities than they were a few years ago, but the ones that are available are interesting situations where.
Alfonzo Leon: Actually getting pretty attractive pricing and you get the efficiency of being able to transact a lot of properties at once which is always great.
Alfonzo Leon: And historically, that's not been the case you always have to pay a premium so we're taking advantage of that situation and the current market.
Alfonzo Leon: So we're taking advantage of that situation in the current market. You know, in terms of the bid-ask spread, at the beginning of the year, my sense was that we had started narrowing that bid-ask spread. And I think part of what has evolved is that a lot of the owners of medical office properties were hoping for fed rate cuts towards the end of the year. And we're hoping for stronger pricing at the end of the year. So had you asked me the question a month ago, my answer would have been different.
Alfonzo Leon: In terms of.
Alfonzo Leon: The bid ask spread at the beginning of the year.
Alfonzo Leon: My sense was that we started.
Alfonzo Leon: Narrowing that bid ask spread and I think part of what has evolved is that a lot of the owners of medical office properties were.
Alfonzo Leon: Hoping for fed rate cuts towards the end of the year and we're hoping for a stronger pricing at the end of the year. So I'm glad.
Alfonzo Leon: And you asked me the question a month ago it.
Alfonzo Leon: It would've been different I feel today.
Alfonzo Leon: I feel today that the bid-ask spread is, at a minimum, not decreasing, and maybe, in some instances, widening as a result of no fed rate cuts in the second half of the year. Having said that, though, I think there are a lot of owners of medical offices that have been, in a sense, kind of holding their breath and hoping for better pricing. And what I'm expecting and what I'm seeing is that a lot of these owners are increasingly more amenable to taking prices that have not been available for buyers for a long time.
Alfonzo Leon: Bid ask spread is.
Alfonzo Leon: At a minimum not decreasing and maybe in some instances are widening as a result of.
Alfonzo Leon: No fed rate cuts in the second half of the year having.
Alfonzo Leon: Having said that though I think there's a lot of owners of medical office that has been in a sense kind of holding their breath and hoping for better pricing.
Alfonzo Leon: And what I'm expecting and what I'm seeing is that.
Alfonzo Leon: A lot of these owners are increasingly more amenable to taking pricing that.
Alfonzo Leon: It is a well that has not been available for buyers for a long time. So you know at this point.
Alfonzo Leon: So at this point, a lot of the stuff that is trading is in the low to mid-seven caps, and there are increasing numbers of opportunities in the high sevens, and I'm beginning to see opportunities also in the low eights. And I expect that to continue to improve, and I expect increased opportunities for us going forward, just given where things are trending.
Alfonzo Leon: Lot of the stuff that is trading is in the low to mid seven caps and there's increasing numbers of opportunities in the high Sevens and I'm beginning to see opportunities also in the low eights and I expect that to continue to improve and I expect the increased opportunities for us going forward, just given where things are trending.
Bryan Anthony Maher: And how deep would you say your acquisition pipeline is? 50 million, 100 million, 200 million?
Speaker Change: And and how deep would you say your acquisition pipeline is 50 million 100 million 200 million.
Speaker Change: Oh hard to gauge again, because some of these are a portfolio of opportunities.
Bryan Anthony Maher: So I think I've seen opportunities.
Alfonzo Leon: Hard to gauge, again, because some of these are portfolio opportunities, and so I've seen opportunities in the $10-20 million range, and I've seen some in the $50 million range. But I'd say going into 2025, $50-100 million in potential acquisitions is a reasonable number.
Bryan Anthony Maher: You know in the $10 million to $20 million range that I've seen some into the $50 million range, but I'd say going into 2025 I think.
Alfonzo Leon: $50 million to $100 million and potential acquisition is as a you know a.
Alfonzo Leon: A reasonable number.
Bryan Anthony Maher: That's helpful. And maybe just last for me, for Bob, you know, your weighted average maturity on your debt is kind of like, I think you said, 2.7 years. What are your thoughts on termsing that out? I suspect your answer might be you want to wait a little while to see what happens with interest rates, but can you give us a little color there? And that's all for me.
Speaker Change: Yeah, that's helpful and maybe just last for me for Bob.
Bryan Anthony Maher: You know your weighted average maturity on your debt is kind of like I think you said two seven years you know what are your thoughts on terming that out I suspect your answer might be you want to wait a little while to see what happens with interest rates, but can you give us a little color there and that's all for me.
Robert J. Kiernan: Thanks, Bryan. Yeah, that is really the short answer. It's just kind of letting some of the volatility in the market subside, and we do still have that 2.7 years to work with and to work with that time and, again, being in consistent contact and discussions with our banks relative to opportunities, but to be patient on that front.
Bob: Thanks, Brian Yes.
Robert J. Kiernan: That is really the short answer is just kind of letting some of the volatility in the market subside and we do still have that kind of $2 seven years to to work with them to work with that time and again.
Robert J. Kiernan: In contact in discussions with our banks relative to opportunities, but to be patient on that front.
Speaker Change: Thank you.
Operator: Again, if you would like to ask a question, please press star, then 1. The next question will be from Wes Goloday from Baird. Please go ahead.
Robert J. Kiernan: Again, if you would like to ask a question. Please press Star then one.
Operator: The next question will be from Wes Golladay from Baird. Please go ahead.
Wes Goloday: Hey, good morning guys. You mentioned potentially selling some assets to fund the acquisitions. What type of a cap rate are you looking at for the disposition?
Wesley Keith Golladay: Hey, Good morning, guys, you mentioned potentially selling some assets to fund the acquisition what type of cap rate or are you looking at for the disposition.
Alfonzo Leon: We traditionally... Alfonzo, you go ahead.
Wes Goloday: Additionally.
Alfonzo Leon: Oh ponds, Alex you go ahead.
Wes Goloday: Yeah, so we're looking to try to get the best price we can, so we're looking for things in the low sevens.
Alfonzo Leon: Yeah, So what we're looking.
Alfonzo Leon: Try to get the best pricing, we can and.
Alfonzo Leon: So we're looking for things in the low sevens.
Wes Goloday: Fantastic. And then you did mention you're looking to release the Stewart asset. Based on the demand, it looks like you had pretty good demand there. How quickly could you turn the asset, and what type of carry cost will you have in the meantime?
Alfonzo Leon: Okay Fantastic and then you didn't if you are looking to release the Stewart asset based under the bandwidth. It looks like you had pretty good demand there how quickly could you turn the asset and what type of carry cost we have in the meantime.
Alfonzo Leon: Let me try to understand that question. You want to understand how quickly we could release it?
Wes Goloday: Let me try to understand the question you understand how quickly we could re lease it.
Wes Goloday: Yeah, it sounds like you have demand. So assuming they say they will reject the lease in a few months, do you have a tenant close to signing a deal upon the rejection of the lease? And then you build out the space for a few months or just try to get a sense of, you know, how long you can keep the space, based on the demand that you're seeing for the space, how long, how quickly you can release the space. And in the meantime, you could be picking up a little bit of the operating costs over the near term for a few months.
Speaker Change: Yeah. It sounds like you have the math, so assuming they stay they reject the lease.
Wes Goloday: In a few months.
Wes Goloday: Do you have a tenant close to signing a deal upon a rejection of belief and then you build out the space for a few months or just trying to get a sense of how long you can based on the demand that youre seeing for the space how long how quickly you can release the space and in the meantime, yes, it could be picking up a little bit of the opex costs over the near term for a few months.
Alfonzo Leon: Sure, yeah. And so it's always hard to predict, but the interest was quick. So, you know, shortly after the announcement was made that the facility was available, we got interest from a number of parties that expressed strong interest. And the conversations went pretty quickly as well.
Speaker Change: Sure Yeah, and so it's always hard to predict but I mean, the interest was a quick.
Alfonzo Leon: So as you know shortly after that.
Speaker Change: Cement was made that the facility was available.
Alfonzo Leon: Available we've got interest from a number of parties that expressed strong interest in <unk>.
Alfonzo Leon: But the conversations went up pretty pretty quickly as well.
Alfonzo Leon: But it's hard to gauge. I mean, it could be very soon that we find ourselves negotiating a lease, or it could take a few months for us to be in that position. Hard to say.
Speaker Change: But it's hard to gauge I mean, it could be very soon that we are finding ourselves negotiating a lease or it could take a few months for us to be in that position are hard to hard to say.
Wes Goloday: But, you know, the interest seems sincere, and the conversations have been very positive. I'd say on the other end of having a deal signed with a prospective tenant, again, not clear exactly how long it would take for them to occupy the space. I mean, one of the things that we're discussing is how exactly are they planning on using the space and what exactly the changes need to happen at the facility for that to happen.
Alfonzo Leon: But we know the interest claims since here are the conversations have been very positive.
Wes Goloday: Well I'd say on the other end of having a deal signed with a prospective tenant again not clear exactly how long it would take for them to occupy the space I mean, one of the things that we're discussing as well how exactly are they planning on using the space and what exactly they.
Wes Goloday: Changes need to happen at the facility for that to happen. So on that second part of the question a little harder to gauge.
Wes Goloday: So on that second part of the question, a little harder to gauge. I will say, though, that the facility is a premier surgical facility in Beaumont. I mean, it's really arguably one of the best ones in town. And despite its age, I mean, when you walk it, it feels brand new.
Wes Goloday: I will say, though that the facility is a premier surgical facility and Beaumont.
Wes Goloday: Arguably probably one of the best one.
Wes Goloday: Alan.
Wes Goloday: And despite its age when you work at it feels brand new I mean it.
Alfonzo Leon: I mean, it's a really nicely done project, so it's not clear exactly what changes would need to be made, but that's something that we're in the process of trying to evaluate.
Wes Goloday: It was a really nicely done project.
Alfonzo Leon: So I'm not clear exactly what what changes would need to be made but that's something that we're a we're in the process of trying to evaluate.
Wes Goloday: Okay, and then maybe one for Bob, there's a look at the sequential change in revenue; there was a 2 million uptick. Was this largely due to variable rent?
Speaker Change: Okay, and then maybe one for Bob there's a I've looked at the sequential change in revenue there was a 2 million uptick with this largely due to variable rent.
Wes Goloday: Yeah.
Robert J. Kiernan: The sequential increase in rent, that would, yeah, like, it would probably have been expense-related versus anything from a base rent perspective. There really wasn't any material change relative to base rent quarter over quarter.
Bob: The sequential increase in rent that would yes it.
Speaker Change: It would have been.
Robert J. Kiernan: Expense related versus anything from a from a base rent perspective, there really wasn't any material change relative to to base rent quarter over quarter.
Wes Goloday: Okay, thanks for the time, guys.
Speaker Change: Okay. Thanks for the time guys.
Operator: And ladies and gentlemen, this concludes today's question and answer session and thus concludes today's call. We thank you for joining Global Medical REIT's first quarter 2024 earnings conference call. You may now disconnect. Take care.
Speaker Change: And ladies and gentlemen. This concludes today's question and answer session and thus concludes today's call. We thank you for joining global medical REIT first quarter 2024 earnings Conference call. You may now disconnect take care.
Operator: Okay.
Operator: [music].