Q1 2025 Global Medical REIT Inc Earnings Call
and many more. Thank you. Thank you.
Speaker Change: Greetings, and welcome to the Global Medical REIT First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and the session will follow the formal presentation.
Speaker Change: If anyone to require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Steve Swett, Vester Relations. Thank you, sir. You may begin.
Speaker Change: Thank you. Good morning everyone and welcome to Global Medical REIT's first quarter 2025 earnings conference call.
Speaker Change: I'm a call today, or Jeff Busch, Chief Executive Officer, Alfonzo Leon, Chief Investment Officer, and Bob Kiernan, Chief Financial Officer
Speaker Change: 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.
Speaker Change: and are considered forward-looking. Company intends these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Security's litigation of Form Act of 1995 and is making this statement for purpose of complying with those safe harbor provisions.
Speaker Change: Furthermore, an actual result made differ materially from those described in the board look 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 10K for the year ended December 31st, 2024 and its other SEC violence.
Speaker Change: The company assumes no obligation to update publicly any forward-looking statements whether there is a result of new information, future events, or otherwise.
Speaker Change: Additionally, on this call, the company may refer to certain non-GAAP financial measures such as funds from operations, attributable to common shareholders and non-controlling interest, adjusted funds for operations attributable to common stockholders and non-controlling interest, EB-DRE and adjusted EB-DRE and adjusted EB-DRE and adjusted EB-DRE
Speaker Change: I would now like to turn the call over to Jeff Bush, Chief Executive Officer of Global Medical REIT. Jeff?
Jeff Bush: Thank you, Steve. Good morning. And thank you for joining our first quarter at 2025 Earnings Call.
Our high-quality, diversified portfolio continues to produce steady results.
Jeff Bush: At the end of the first quarter, portfolio occupancy was 95.6% with a weighted average lease term of 5.6 years and portfolio average rent coverage ratio of 4.4 times.
Jeff Bush: For the first quarter, net income attributable to common shareholders was $2.1 million or $3 cents per share compared to $800,000 or $1 cents per share in the first quarter of 2024 [inaudible]
Jeff Bush: FFO attributable to common shareholders and non-controlling interests in the first quarter with 20 cents per share and unit down 1 cents from the prior year quarter.
Jeff Bush: AFFO attributable to common stockholders and non-controlling interests with $0.22 per share and unit down one cent from the prior year quarter.
Regarding our Acquisition Activity
Jeff Bush: Last year we entered into a purchase agreement to acquire a five property portfolio of medical facilities for an aggregate purchase price of $69.6 million at a 9% cap rate.
Jeff Bush: These properties are a great strategic fit to our overall portfolio given the procedure-based nature of the tenant's specialties.
Jeff Bush: The close proximity of the buildings to the hospital campuses, each of which promotes tenant retention, and that almost 70% of the leases are triple net leases.
Jeff Bush: During the first quarter, we closed on the first tranche of this acquisition consisting of three properties for $31.5 million.
Jeff Bush: and subsequent to the quarter end in April . We completed the acquisition of the remaining two properties.
Jeff Bush: We are pleased about the addition of these assets and will continue to monitor the transaction market and remain disciplined in executing our acquisition strategy.
Jeff Bush: Turning to dispositions, during the quarter, we completed the sale of two medical properties generating aggregate gross proceeds of $8.2 million, resulting in an aggregate gain of $1.4 million.
Jeff Bush: Finally, I would like to update everyone on the progress we made in our CEO Succession Plan.
Jeff Bush: Denominating and Corporate Government Committee has done an excellent job conducting multiple interviews with highly qualified candidates to become the company's next CEO .
Jeff Bush: The committee has narrowed the candidate pool to a few final candidates and expects to have a new CEO in place by June 30, 2025.
Speaker Change: As this is my last earnings call, as I transitioned from my role as CEO , I would like to thank the entire GMRE team for their dedication and contributions to our success over the years.
Jeff Bush: I'm deeply grateful to have served the CEO and founder and proud of what we have built together. And I'm confident in where the company is positioned today and look forward to continuing in my role as chairman.
Jeff Bush: We have built a highly experienced team, robust infrastructure, and maintain their core focus on generating consistent results and creating value for our shareholders.
Jeff Bush: With that, I turn the call over to Alfonzo to discuss our investment activity and the current market conditions in more detail.
Thank you, Jeff.
Alfonzo: As Jeff mentioned, in February and in April , we closed on a previously announced 5-property 487,000-square-foot portfolio for an aggregate purchase price of $69.6 million with an aggregate annualized base rent of $6.3 million, equating to a 9% cap rate
Alfonzo: At this pricing, we acquired this portfolio at approximately $143 per square foot, which is substantially the low replacement cost.
Alfonzo: Relative to the condition of the properties, note that we acquired these properties from the original developer who has maintained them to institutional quality standards. In addition, these properties are each approximately 100,000 square feet outpatient facilities for which are on campus.
Alfonzo: Following are some additional details on the properties. In the February close and we acquired two on-campus, multi-tenant medical facilities located in Tucson, Arizona, with Saint Joseph's Hospital as a primary tenant at one of the facilities.
Alfonzo: St. Joseph's Hospital is part of tenant health care, a publicly traded health care system. Services performed at these facilities include cardiology, oncology, urology, and orthopedics.
Alfonzo: In addition, we acquired one-off campus multi-tenant medical facility located in Slippery, Rock, Pennsylvania. Services performed at this facility include physical therapy, musculoskeletal and orthopedics.
Alfonzo: In the April closing, we acquired two on-campus multi-tenant medical facilities located in Des Moines, Iowa, with Mercy One as a primary tenant.
Alfonzo: MercyOne is a credit-rated hospital system ranked as the number two hospital in Iowa per US News and World Report.
Alfonzo: GMRE has extensive relationships with Murphy, which represents 55% of the portfolio.
Alfonzo: Services performed at these facilities include gastroenterology, orthopedics, cardiology, oncology, and endocrinology.
Alfonzo: I would also like to mention that the portfolio was approximately 92% leased upon acquisition and we are working to lease up the acquired vacancy which will provide additional returns above the 9% in place capricate ad acquisition.
Alfonzo: We are very excited about this transaction as most of these facilities are on-campus with a good pennant mix of procedural-based practices that squarely fit within our investment criteria.
Alfonzo: We believe distance actions showcases our ability to find a creative acquisition opportunities in a higher cost of capital environment.
Alfonzo: On a disposition front during the quarter, we closed on the sale of two medical facilities for gross proceeds of $8.2 million, resulting in a gain of $1.4 million.
Alfonzo: Included in these positions was a facility located in Coos Bay, Oregon.
Alfonzo: Receiving gross proceeds of $7.2 million, resulting in a gain of $1.3 million, and reflecting a cap rate of 6.7%. This sale was part of our capital recycling strategy, and we are pleased with the outcome of this transaction.
Alfonzo: Looking ahead, we remain persistent and disciplined in seeking opportunities that align with our investment strategy and underwriting standards.
Alfonzo: or would be attractive additions to our joint venture with Heitman. We plan to leverage our competitive advantages of scale, capital access, and OP unit structuring capabilities to secure high-quality acquisitions that allow us to grow our portfolio while maintaining our commitment to quality.
Alfonzo: I'd now like to turn a call over to Bob to discuss our financial results. Bob?
Bob: Thank you Alfonzo. At the end of the first quarter of 2025, our portfolio consists of gross investments in real estate at $1.5 billion.
Bob: Inc. 4.9 million of total decable square feet, 95.6% occupancy, 5.6 years of weighted average lease term, 4.4 times the rent coverage, but 2.2% weighted average contractual rent escalations.
in the first quarter of 2025.
Bob: Our total revenue is decreased by approximately 1.4% compared to the prior year quarter to $34.6 million in our total expenses for the first quarter of 2025 with $32.2 million compared to $32.8 million in the prior year quarter.
Bob: Our operating expenses for the first quarter of 2025 were $7.6 million compared to $7.4 million in the prior year quarter regarding the first quarter of 2025 expenses.
Bob: $5.2 million related to net leases where the company recognized the comparable amount of expense for recovery revenue in $1.4 million related to gross leases.
Bob: GNA expenses for the first quarter of 2025 for $3.6 million compared to $4.4 million in the prior year quarter. The decrease primarily resulted from a decrease in non-cash, LTIP compensation expense related to the accounting treatment for Jeff's undested LTIP awards, pursuant to his transition and separation agreement.
Bob: Cash GNA expenses, excluding CEO transition-related costs for 3.4 million dollars in the first quarter, and looking ahead we expect our run rate for comparable cash GNA expenses to range between 3.4 million and 3.6 million dollars on a quarterly basis for the remainder of 2025.
Bob: Relentive to non-cash LTIP compensation expense based on grants to date and the impact of the accounting treatment for Jeff's awards, we expect to recognize 4.2 million of non-cash LTIP expense over the remainder of the year, including 1.8 million in the second quarter.
Bob: Also, during the first quarter, we completed two property dispositions that generated aggregate gross proceeds of $8.2 million, resulting in an aggregate gain of $1.4 million.
Bob: net income attributable to common stockholders in the first quarter of 2025 with $2.1 million or $3 cents per share compared to $800,000 or $1 cents per share in the first quarter of 2024.
Bob: FFO, attributable to common stockholders and non-controlling interests in the first quarter of 2025 with $14.8 million or 20 cents per share in unit compared to $14.9 million or 21 cents per share in unit in the first quarter of 2024.
Bob: AFFO attributed both the common stockholders and non-controlling interests in the first quarter by 2025 to $16 million or $22 cents per share in unit compared to $16.5 million or $23 cents per share in unit in the first quarter of 2024.
Bob: Regarding capital expenditures on the portfolio, in the first quarter of 2025, our cash spend was approximately $2.6 million with approximately 27% of that related to tenant improvements
Bob: Currently, we're projecting full year 2025 capital expenditures for approximately 12 to 14 million dollars.
Bob: In terms of tenant-related items on January 11, 2025, Prospect Medical Group filed for Chapter 11 Bank of Tube Radio Organization.
Bob: At that time, Prospect had approximately $2.4 million about sending lease payments related to three of our healthcare facilities, including $2.2 million related to our facility in East Orange, New Jersey, which had been a counterfeit in the cast base since the fourth quarter of
Bob: As of year in 2024, Prospect represented 0.8% of our total ABR.
Bob: Regarding our exposure to prospect medical, we entered into a stipulation for the first time in the world.
Bob: and agreed order with the Bankruptcy Courts, whereby Prospect rejected its leaks at our Easter Orange facility. In accordance with the order, we received all post-petition amounts due from Prospect from January 11th, 2025 to February 28th, 2025, totally $250,000.
Bob: In addition, effective in April , we gained access to the property allowing us to work directly with existing subtenants and market the remainder of the facility for leasing.
Bob: As of May 6, 2025, Prospect had not decided it was going to accept a rejected remaining leases with us.
Bob: During the first quarter of 2025, we had a 115,000 square feet of expiring leases and were able to reduce 71,000 square feet or 62% of these expiring leases.
Bob: For our expiring leases for the full year 2025, we expect to retain 75% on a square foot basis.
Bob: Other activities impacting occupancy during the quarter, including absorption, tenant bankruptcy as well as the impact on vacancies from acquisitions and dispositions largely offset each other.
Bob: As of March 31, 2025, our gross investment in real estate was $1 $5 billion. Additionally, we had $681 million of total gross debt with a weighted average remaining term of one eight years, 75% of our total debt was fixed rate debt our leverage rate ratio was 46, 1% and a weighted average.
Bob: Interest rate was 384%.
Bob: Today, the current Unutilized borrowing capacity under the credit facility is $187 million relative to equity we did not issue any equity.
Bob: Any shares of our common stock under our ATM program during the first quarter or to date in the second quarter of this year.
Bob: Turning to our guidance, we are reaffirming our full year 2025 <unk> per share.
Bob: And unit range of 89 to 93.
Bob: As a reminder, our 2025 guidance assumes no additional acquisition or disposition activity other than what has been either completed or announced and no additional equity or debt issuances other than normal course revolver activity.
Bob: Capable guidance excludes one time expenses related to the CEO succession plan.
Bob: In conclusion, we believe there are high quality.
Bob: <unk> positions us well to navigate the current environment, all our liquidity allows us to selectively acquire properties that align with our strategic objectives. We remain confident in our disciplined execution of our business strategy and look forward to sharing our continued progress with you throughout the year.
Bob: This concludes our prepared remarks, operator, please open the call for questions.
Bob: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Bob: You May press Star two if you would like to remove your question from the queue.
Bob: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Austin <unk> with Keybanc. Please proceed with your question.
Austin: Thanks, Good morning, everybody no it's still pretty early in the process, but can you just talk about you know the potential timeline.
Austin: And amount of rent that you'd expect to collect upon re leasing the storage facility.
Speaker Change: Sorry, you said the east Orange facility.
Austin: Yes, correct.
Austin: Okay.
Austin: So.
Austin: Please go ahead.
Austin: Yeah, So hum.
Austin: The first step we have to take on just the kind of outlined the timeline that we're gonna have to go here is convert the sub tenants that are in there the right talents.
Austin: And that's going to take some time, it's a process.
Austin: We're also working to get.
Austin: Our budget prepared for the property and are also looking to get taxes reassessed.
Austin: We hired a broker to help us with the leasing effort. The hospital next door has is in the process of getting a new operator that has a lot of surgical facilities in the area, which.
Austin: Which is very positive they've expressed interest in leasing space in our building.
Austin: There's been a group that's reached out to us that also wants to take a nice amount of space in the building.
Austin: So we're.
Austin: Pretty encouraged with the activity that we're experiencing on the facility.
Austin: And roughly rents in that building.
Austin: We start in the mid thirties on a gross basis.
Austin: And so if we can get expenses in line.
Austin: Our hope is to get our net rent them.
Austin: Call it mid to.
Austin: Hi.
Austin: 13, 14 15 range.
Austin: So that building, which would get us pretty close to where we were before.
Austin: But it's it's going to take the time to kind of work through all of this activity and.
Austin: No, we're not expecting that to change.
Austin: Over the next few months dramatically, but you know as we approach year end I think we're feeling pretty encouraged that we're going to build the NOI on that property back up again and by next year than it should be at a point, that's approaching where where we were before.
Speaker Change: So is it fair to assume that there's nothing in guidance related to re leasing. This facility. One and then you know more broadly related to the other prospect facilities in Connecticut, I mean is it your sense that the outcome there might be tied to what ultimately happens with the operations of real estate for other hospitals.
Austin: Prospect leases within that region.
Speaker Change: Okay.
Speaker Change: I mean first on in terms of the guidance.
Speaker Change: The impact of prospecting releasing that.
Speaker Change: Positive mentioned is factored into our guidance.
Speaker Change: It's not a significant component of our of our outlook for this year and in fact, it's.
Speaker Change: It's relative to an overall NOI again very limited overall perspective so.
Speaker Change: Really from an east Orange perspective, as it relates to.
Speaker Change: Our properties in Vernon.
Speaker Change: This point I mean, we have not had any indication of it.
Speaker Change: The lease rejection and then I don't know if theres more we can say about.
Speaker Change: The outlook for prospects strategy relative to those to those facilities, but yes.
Speaker Change: To this point from our perspective, there hasn't been any any new activity.
Speaker Change: Understood and then I'm just curious you know Jeff if you can speak to it sounds like you have a successor in place, but just curious you know moving towards a path of announcing that here soon but curious.
Speaker Change: You had mentioned last quarter that the board is always evaluating other strategic options curious if if you went down that path and if theres anything you can share on that front as well. Thank you.
Speaker Change: Yes Austin.
Speaker Change: We always evaluate various options out there and it's always potential given.
Speaker Change: The low price of the stock the market.
Speaker Change: Are you of our assets in our belief were well above what it's trading from so that's always a potential out there.
Speaker Change: On the.
Speaker Change: Transition are we are in the process of having multiple good candidates we're in the process of evaluating them.
Speaker Change: And we do expect.
Speaker Change: In a very relatively short time to have a final candidate that we pick. So nomination committee has been very active with it we're excited about bringing in somebody to add new skills and while there's I'm going over to be the chairman so I'll still be involved with.
Speaker Change: What I bring to the table. So I'm very excited what goes on in the future.
Speaker Change: I appreciate the time and thanks for the thoughts all the best too.
Speaker Change: Our next question comes from the line of Wes Golladay with Baird. Please proceed with your question.
Wes Golladay: Hey, Yeah. Good morning, guys. So maybe just sticking with prospect for the 250000, you're going to get did you record anything in the first quarter for that or is it going to be in the second quarter.
Speaker Change: There were.
Speaker Change: There was a 150000 in the first quarter and 100 will be in the second quarter.
Speaker Change: Okay, and then maybe you can talk about the the outlook for dispositions and overall, maybe capital markets activity for the second half to get the line balance.
Speaker Change: Will you keep it at the same level when you pick it down I guess, how are you thinking about that as well.
Speaker Change: Yes.
Speaker Change: Just on the disposition side, I mean, where.
Speaker Change: We have regular discussions about with the asset management team and with Bob and.
Speaker Change: Jeff in terms of Ah just see where we are as a company and seeing if it makes sense to sell assets.
Speaker Change: So that's ongoing but you know.
Speaker Change: In the near term what we have is what we've Ah Ah.
Speaker Change: <unk> put out a press release just roughly.
Speaker Change: Roughly $8 million in process.
Speaker Change: Nothing in the near term that we're planning on selling but it's something that we discuss regularly.
Speaker Change: Okay, and then I guess on the wind balance when you just keep it at the same levels. When you look to maybe term it out with some another term loan what are you thinking there.
Speaker Change: So relative to the financing side, we've been in.
Speaker Change: Discussions with our lenders on updating and extending the facility, including the term loan that comes up it comes up next year. So all of that is on the table.
Speaker Change: At a high level. The CEO succession plan is really driving our timing a bit on that and we would look to execute something in that.
Speaker Change: In the third quarter early fourth quarter type of timeframe to take to move forward with.
Speaker Change: But I think we'd be looking to do something relatively consistent with what we have today.
Speaker Change: Okay, and then just one last one I think in the original guide you had I think four and a half to $4 7 million per quarter, but it was excellent.
Speaker Change: The L tip I believe so how are we thinking about GAAP G&A for the back half of the year.
Speaker Change: So from a GAAP G&A perspective.
Speaker Change: Again, it'll be a little bit.
Speaker Change: Paul.
Speaker Change: Uh huh.
Speaker Change: From the perspective.
Speaker Change: The swing.
Speaker Change: And stopped.
Speaker Change: Stock compensation, but it.
Speaker Change: It could.
Speaker Change: From the.
Speaker Change: Cash G&A running in that in that three four to three six with again or two of them.
Speaker Change: L tip compensation expense it will be.
Speaker Change: From the second quarter wont be elevated into the call. It five.
Speaker Change: 1% to five three type of type of range and then prospectively would be back in that range that we've talked about previously of the kind of the four four.
Speaker Change: Four five to $4 seven type range.
Speaker Change: Got it thank you so much.
Speaker Change: Our next question comes from the line of Juan Sanabria with BMO. Please proceed with your question.
Juan Sanabria: Hi, I'm, just curious as part of the search process and congestion. So stay on the board, hoping you could give some insights here. How are you guys are thinking about the dividend I mean, it hasn't necessarily been covered if you think about <unk>.
Speaker Change: Capex, which.
Speaker Change: That was some guidance was given for so.
Speaker Change: How are you thinking about the sustainability of that and the ability to do acquisitions when when leverage is highest.
Speaker Change: Just curious on.
Speaker Change: The discussions.
Speaker Change: Well, we've been interviewing people for the CEO position and that is in line with everything else we are doing it online.
Speaker Change: I mean dividend discussion.
Speaker Change: Which is happening in almost all the rights that refinanced debt you know very low rates. It is happening, but it's sort of being held off.
Speaker Change: Until we know our direction some of our strategic direction, which we're sort of excited about from some of the candidates is in line with what we do the refinances in line with what we do so there's multiple factors in there.
Speaker Change: Understood fair enough.
Speaker Change: And just curious on the first quarter it seemed like.
Speaker Change: Yeah.
Speaker Change: Retention was a bit lower than what you're expecting for the balance of the year. Just curious if you can give any insights into why that was the case and if theres any known move outs, we should be kind of thinking of.
Speaker Change: Looking forward.
Speaker Change: Yeah.
Speaker Change: Sure. So in the first quarter you have retention at that lower 60% was lower than our typical.
Speaker Change: If I look at the 40000 or so square feet that didnt renew in the first quarter.
Speaker Change: About 80% of that is progressing well well sorta toward releasing so overall again, we are going to start to trim back a little bit but again the specific expirations that were there in the in the first quarter, but relative to the overall occupancy.
Speaker Change: <unk> when we talked at year end, we expected there to be some volatility in this number from quarter to quarter. This year based on our outlook on expiring leases and we factored that into our into our guidance from from our <unk> guidance for the full year and as we look ahead.
Speaker Change: In the second quarter, there will be a negative impact of things like the.
Speaker Change: Vacancy from from the from the portfolio acquisition.
Speaker Change: They'll be there in Q2, we had about a 50000 square foot lease that's expiring in the second quarter that is.
Speaker Change: Not expected to renew so there's going to be some volatility in the number from period to period and expect that to go into that again, probably into the 94% 95% range in the second and third quarters, but really as we get our traction.
Speaker Change: Events in those activities.
Speaker Change: We expect that to move back up as we as we progressed towards the back part of the year and look to have that back above 95% with the goal to be at 96 again at a at year end.
Speaker Change: And when you said that the 80% progressing towards releasing does that mean.
Speaker Change: There was a short term extension because it didn't look like the 26 explorations.
Speaker Change: Kicked up I'm not sure. If there was some shorter term extensions are just hoping you could just give a little bit more color around that.
Speaker Change: Oh sure sure.
Speaker Change: What's that what that is is.
Speaker Change: Those were two leases that have a termination options in them. So it really wasn't a short term renewal. These are two leases that have.
Speaker Change: They have they have termination options and so those were in.
Speaker Change: Does that termination option was could.
Speaker Change: Could have affected us in 2025, it was in our 2025 exploration our lease expiration number.
Speaker Change: That that is at least those are two leases that go out through through 2029, but these they have termination options that are that are in them and so we continue to put them again, that's now in the 2026 number so thats the unusual activity that youre that youre seeing in that line.
Jeff Bush: Thank you good luck with everything and congratulations and best of luck with everything Jeff.
Speaker Change: Thank you appreciate it.
Speaker Change: Our next question comes from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your question.
Gaurav Mehta: Yes. Thank you good morning.
Speaker Change: So I wanted to ask.
Speaker Change: Back to your balance sheet, maybe touch upon leverage again at 46, 1%.
Speaker Change: If you were to find right I think there's an opportunity in this year, how high are you willing to take that leverage.
Speaker Change: Yeah.
Speaker Change: We're really not looking to take the take the leverage very much higher than where we are I think when you factor in the second the acquisitions that we closed in the second quarter that will move us up into 47 ish percent from an overall perspective in our target leverage remains 40 to 45, but for both.
Speaker Change: It's like there's some for opportunities like the Grand portfolio purchased were willing to go above that.
Speaker Change: That range, but again, we don't really we're not looking to move materially outside this this band that we're in right now.
Speaker Change: Okay.
Speaker Change: Going hot and they tend to go significantly higher than where we are.
Speaker Change: Okay, and then maybe follow up on.
Speaker Change: The acquisition market, hoping to get some color on how your pipeline is looking.
Speaker Change: Sure so.
Speaker Change: The investment market.
Speaker Change: Is started off.
Speaker Change: Pretty upbeat Ah at the beginning of the year and.
Speaker Change: It really is a combination of many factors.
Speaker Change: Like the transaction volume has been relative to past years quiet in.
Speaker Change: In 'twenty three 'twenty four down significantly depending on what data set you look at you know down 70% to 80%.
Speaker Change: At its worst and so there was an uptick at the end of 'twenty four and.
Speaker Change: The thought was that.
Speaker Change: The bid ask spread has narrowed a there is a lot of money sitting on the sidelines and.
Speaker Change: There's the expectation that there's going to be.
A lot more volume this year at least more than there was in 'twenty four.
Speaker Change: There has been an uptick and portfolios that are coming to market.
Speaker Change: And there is.
Speaker Change: Our optimism in that regard.
Speaker Change: The month of April with the tariffs and the volatility in the market.
Speaker Change: It seems like there was a few weeks when there was concern.
Speaker Change: Among.
Speaker Change: Participants of the market, but it seems like.
Speaker Change: There's just a lot of demand and I think there are sort of the renewed a prospect the optimism that there's going to be a good amount of transactions. This year. So there's a lot of supply that's in the market.
Speaker Change: And what's interesting is.
Speaker Change: The spread in terms of cap rate from a higher.
Higher quality assets and the lower quality assets I mean, if that spread is about as wide as I think I've ever seen it.
Speaker Change: We're like really.
Speaker Change: Higher quality assets are in some cases trading even below six.
Speaker Change: And on the lower end of the spectrum. There's some assets that are trading in the high sevens and even eight so it's a pretty widespread.
Speaker Change: In terms of the assets that would fit our portfolio does a pretty good supply.
Speaker Change: And that high seven cap rate range that we've targeted in the past so.
Speaker Change: But our acquisitions is.
Speaker Change: Contingent on our cost of capital. So you know we continue monitoring the market.
Speaker Change: There is a good supply end.
Speaker Change: To the extent that we have.
Speaker Change: Cost of capital to pursue them.
Speaker Change: We will do that we will take our share and do you know.
Speaker Change: What we've done in the past.
Speaker Change: Yeah.
Speaker Change: Alright, that's all I had thanks for taking my questions.
Speaker Change: Our next question comes from the line of John Masako with B Riley. Please proceed with your question.
John Masako: Good morning.
Speaker Change: You've kind of maybe with that last question in mind, I guess, you know either opportunities than that.
Speaker Change: Move a lot of that potential deal flow into the heitman JV or is that are there any kind of other gating factors on.
Speaker Change: Maybe that being a source to pursue some of the stuff you traditionally would have.
Speaker Change: Where your cost of capital and that kind of where it is today.
Speaker Change: Ah Yes, absolutely you know, we're we're pretty active looking for opportunities for them.
Speaker Change: And are actively pursuing opportunities.
Speaker Change: And you know our hope is that we can try to get some deals with the heitman joint venture for sure.
Speaker Change: Okay.
Speaker Change: And then we.
Speaker Change: Talking about our prospects and I know, it's the non Beaumont element of the portfolio is pretty small, but anything any update on re leasing of the kind of the other steward assets perform a steward of assets.
Speaker Change: So yes.
Speaker Change: The other steward assets.
Speaker Change: In the Hermitage, Pennsylvania those are those are about 23000 square feet.
Speaker Change: We're actively working to get those under under lease and are optimistic that that will be done by.
Speaker Change: June 30, the impact those properties is really minimal from an overall from an overall perspective.
Speaker Change: Okay.
Speaker Change: And then anything you're seeing on the policy front in theater kind of the the government policy fronts, it's either kind of a positive or negative for your tenant credit tenant health I know, there's a life science isn't really a big focus that's been called out in kind of a.
Speaker Change: Competitor called the same thing maybe kind of you can provide about how the macro is impacting how your tenants are.
Speaker Change: Performing.
Speaker Change: Positive or negative.
Well the great thing about our portfolio is one being relatively recession proof and also being that type of tenants. We have we're not a Medicaid based portfolio, where we have more Medicare which is not being touched Medicaid has been baked in but that's a very very limited the most.
Speaker Change: The interesting thing to learn about our portfolio is when the pandemic occurred.
Speaker Change: And our tenants couldn't operate or anything else, we still collected 99% of the brand.
Speaker Change: And that is shows the strong portfolio. So in a recession I do expect us to be a safety investment at that time also.
Speaker Change: Okay. That's it for me thank you very much.
Speaker Change: Thank you we have reached the end of the question and answer session and with that the conclusion of today's call.
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