Q2 2025 Global Medical REIT Inc Earnings Call
Good day, everyone and welcome to today's Global Medical rights second quarter 2025 earnings call.
At this time, all participants are in a listen-only mode.
Later, you will have the opportunity to ask questions during the question and answer session.
You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star and 2. Please note this call may be recorded and it will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Jamie Barber Global Medical rights general counsel. Please go ahead.
Good morning everyone and welcome to Global Medical res. Second quarter 2025 earnings conference. Call my name is Jamie Barber and I'm the global medical res general counsel.
On the call today, our Mark Decker, Junior, chief executive officer, Alonso Leon Chief investment officer Dena, Holly Chief, Operating Officer and Bob Kieran Chief Financial Officer.
Statements, or comments made on this conference call may be forward-looking statements.
Forward-looking statements may include, but are not necessarily limited to financial projections or other statements of the company's plans objectives expectations or intentions.
These matters involve certain risks and uncertainties.
Companies actual results May differ significantly from those projected or suggested from any forward-looking statements due to a variety of factors which are discussed in detail in our FCC files.
Additionally, on this, call the company May refer to certain non-gaap Financial measures.
Currently comparable, gaap numbers in the company's earnings release.
And then filings with the SEC.
Additional information.
May also be found on the investor relations page of the company's website at www.google.com. I would now like to turn the call over to mark.
Thank you, Jamie, welcome everyone, and thanks for joining us today. It's my pleasure to provide our quarterly update as the new CEO of Global Medical re to begin. I have a few thank yous
First, I'd like to thank the board for placing their confidence in me to lead our business into the next chapter. I'd also like to thank Jeff Bush for his work as the company's founder. Jeff built, a strong Foundation that we will take to the next level.
And finally, I want to thank our talented team here for their hard work, Grace and efforts to keep things moving during the transition that started in January, when we announced the CEO transition plan.
I'm excited to work together with them, to reimagine, our business and unlock new opportunities for growth and value creation, and they are excited to get back in gear. So it's a great time for our company.
I will now turn the call over to the Dena. Holly our chief operating officer Dena.
Thank you, Mark. As many of you are aware earlier this year, we successfully retained it, our Bomont, Texas facility, with Christa's Health, as our new tenant, I'm pleased to announce that. As of May, Christmas is fully operating in the facility and is paying rent. This is a huge success story given the status of the previous, tenant, Steward Healthcare, and an example of our team's ability to navigate other
Obstacles to a successful conclusion.
More broadly on the portfolio.
As of June 30, 2025, our occupancy stood at 94.5%.
Which is down from the first quarter primarily due to the expiration of the lease at our 50,000 square foot Aurora, Illinois property and the rejection of the Master Lease at our 60,000 square foot, East Orange, New Jersey, property related to the prospect medical bankruptcy, we touched on both of these in Prior calls, but I'd like to offer a little more color.
In Aurora. This was a healthcare Administrative Building adjacent to 1 of the systems new outpatient facilities. We purchased this building pre-cooked that the system would expand and unfortunately Co change the systems utilization of the administrative space. We are currently looking to sell our retail tenant or ret tenant, this facility on the flip side after almost 2 years of negative cash flows, the developments in East Orange are positive. We now have control over the space which is 40% occupied and are working directly with former sub tenants and prospective tenants, including the new adjacent Hospital operator. We expect this property to recover to stabilized occupancy of over 90% in the next 24 to 36 months.
Turning to our leasing activity. We expect total occupancy to end the year over 95% which includes 150,000 square feet of new. Leases 130,000 of which are complete regarding capex and leasing commissions. Year-to-date spend is 5.2 million and our guidance. For the full year is between 12 to 14 million. So we are well, positioned
I would now like to turn the call over to Alonso to discuss our investments Alonso.
Thank you, Ana. They're in a quarter. We completed the acquisition of a 5 property. Portfolio of outpatient, medical real estate, which brings our total acquisition volume for 2024, and 2025 to approximately 150 million. At a blended going in cash, yield of 8.5%.
While we are a static about the cash yields, we are even more excited about our ability to find differentiated investment opportunities. First and foremost, we were able to achieve portfolio discounts with our execution capabilities, including our balance sheet strength. When lending for portfolios was unavailable,
on the real estate side, we were able to achieve why discounts to replacement cost and we believe in place rents are more than 30% below Market, which will allow us to grow future rents at faster than Market rates while still. Providing a significant value proposition to our tenants
Based on our proprietary data portfolio volumes which averaged 300 million per quarter from 2022 to 2024, spiked in the second quarter of 2025 to 2.1 billion over 7 times recent levels and we expect this level of activity to continue due to the large activity in 2020 and 2021 by leverage short-term owners.
We are excited to compete in this market because in our experience, a flood of opportunities, like this offers inefficiencies that we can benefit from with our proven Middle Market expertise, track record and reputation as a great counterpart.
With that. I'd like to turn the call over to Bob.
Credit facility that are coming due in 2026. Namely the revolver in our 350 million Term Loan.
As reported earlier this year, the company lowered its second quarter of 2025 dividend from 21 cents per share to 15 cents per share. We view this as the right sizing of our dividend as our dividend coverage, went from 110% during the first quarter of 2025 to 79% during the second quarter of 2025 on a fad basis. And as you'll see in our supplemental. When we we say fad, we are talking about our cash flow after all capital expenditures and leasing commissions.
Additionally, the dividend reduction is expected to generate approximately $17 million per year that can be allocated to our best ideas.
Given the Durst of the equity Capital markets. In recent years, we are looking at alternative sources for growth.
The right sizing of our dividend is the most important action we took in this regard and we will continue asset recycling. We have identified several Assets in our candidates for Capital recycling. Our portfolio contains organic growth opportunities and can sustain us until the equity Capital markets, open up again and look forward to what is to come under Mark's leadership.
With that, I'll turn the call back over to Mark for final comments.
Thanks Bob.
I'm happy to say, I know many of those on this call. But for those who don't know me, I have almost 30 years of capital markets, real estate and Leadership experience. Nearly 20 years, in Investment Banking, building teams to serve Middle Market, real estate companies that were undergoing some growth Andor transition and 7 years in the sea suite at Center space, mostly a CEO Center. Space was another smaller public real estate company that needed to meaningfully, reposition their business.
if nothing else, that makes me experience and hopefully a little wise
I sought out this role because I love the work of
Delivering results and communicating.
Clearly to our 3 key audiences, our team, our customers, and the capital markets.
If we can do this, be formidable in our Niche post results and communicate, well, we'll be in a great spot.
So that's why I'm here and happy to be underway.
It's early days for me but you can expect that we will fully review our portfolio with an eye towards identifying opportunities. We'll also be working to take our 100% unsecured balance sheet and turning it into more of a competitive Advantage with the establishment of a long debt maturity lateral.
And we'll be looking inwards to our team to see how and where we can improve all with the goal of owning the Middle Market, Healthcare, real estate, space, providing great results to our business owners and growth for our team.
Lastly, I hope you'll notice our supplemental in this call, we're seeking to be more transparent, and easy to evaluate and understand starting with improved Clarity of our disclosure. We understand these are table Stakes as a smaller public company. If you have suggestions as Ross Perot says, we're all ears, please call or send an email with your suggestions.
Thank you for listening and operator, please open the call for Q&A.
Thank you at this time. If you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the Queue at any time by pressing star 2.
Once again, that is star 1 to ask a question.
Our first question will come from Austin wman with keybanc capital markets, your line is open.
Hey, good morning everybody. Um,
And, uh, welcome to the call, Mark. Um, there was a little bit of a technical issue, so sorry if I missed this, but I guess, Mark, did you just lay out kind of what the immediate strategic priorities are for you and that you think the company, you know, could be doing differently on a go-forward basis?
Sure. Yeah, thanks Austin. That was not me playing saxophone. Uh,
But uh, can you hear me? Okay.
Yes, I can hear you fine. Okay, thanks.
Yeah, immediate strategic priorities are to, uh,
Come together on a strategy with the with the team and the board.
Um we have a bunch of good ingredients. I think in the in the business,
as we sit today and I think we can organize those
we want to get the
refinancing of the of the line in the terminal and a done.
Really good about where we are on that but nothing's done until it's done.
Um and then we're going to be looking at some Capital recycling. So, uh,
Those are the immediate, uh, priorities.
I appreciate that and then, you know, I think Bob you kind of outlined, you know, continued asset recycling and that you've identified some assets, can you could you just give us a sense of, you know, what type of assets? These are, you know, from an occupancy perspective or whether there's a capital need and, and you know where you think you can, you know, sell assets as it. Sounds like there's a little bit of a pickup and liquidity in the transaction Market.
Yeah, I'll take that 1 also. I think, you know, the, the ideal candidates would be the lowest yielding, uh, or, or best priced thing. So, if you could imagine things that had long-term leases with high-grade tenants, those would probably be first to go. And then I'd say on the other side, if to the extent, we have, uh,
Assets that we don't believe in long term after portfolio review, which, which we are undergoing. You know, we've got this new car smell for a little bit. We're going to take it for a ride and so if there's anything that doesn't look long term now, we'll we'll work to get rid of that as well. I don't honestly see a ton of that so far, but, uh, so I'd say it's more offensive Capital recycling in mind, maybe a little bit of deleveraging, maybe a little bit of
Enhancing cash flows. Um,
While taking advantage of some of those.
Uh, high-quality assets that are well bid today.
So so where do you think you can? Ultimately what type of spread do you ultimately think you can reinvest those proceeds Alfonso. I think you referenced you know sourcing assets at wide discounts for replacement cost with, you know, really attractive Mark to Market opportunities. Are those out there and and what does that spread look like on a going in basis? And then I'll deal with the floor. Thanks.
Sure. So the market is, um, there's a range of cap rates in the market and the the higher quality stuff is trading in the low and sometimes sub 6 cap. But the bulk of the market is trading in the mid 6 to higher 6. And there's a good chunk of deals that are trading, uh, north of 7. And, uh, selectively there are deals that are higher than mid 7s. So, we've always played in in that higher range of the cap rate range, uh, and with the flood of deals that have come to Market, I mean, there's a lot of opportunities out there, uh, that that fit in that bucket.
Yeah, I just add to that. I I think we're using the word quality in a way that is Market convention. I mean, I think something that's sub 5 that grows at 2 is not as good as something. That's 7 and a half and grows it too.
And what I think can be observed.
Based on historical.
facts is that uh, some of those really tight
Yields don't actually grow more.
And in many instances, your landlord probably has more leverage over you than maybe otherwise. So it's our contention and I think Alfonso and his team have done a fantastic job over the last several years of of doing this well of finding
Good properties that yield more.
Which in my view are higher quality and best better risk adjusted returns. So like we're going to lean into where we have been because I think it's worked well for us.
And then we're going to be working very hard on producing.
You know.
better than average per share ffo growth, which
you know, we got to put a plan in a formula together to do that, but
I think this is an area where kind of the law of small numbers helps us. You know 15 million bucks is 1% of Enterprise Value and 720,000 dollars is a penny. So um
You know, we can we can get this thing going. I think without
Moving Heaven and Earth. And and we are buying in my estimation that and what we just recently purchased, uh,
The last day of that portfolio is fantastic deal in terms of price per pound opportunity for rent upside great tenancy. So we're going to try to do more like that.
Those are hard to find, you know, we don't need to find a ton of them to make a difference.
That's helpful. Thanks for the time.
Thank you.
Our next question comes from Juan Sanabria with BMO Capital markets, your line is open.
Hi, good morning. Um
Just curious, uh, what initial thoughts on where leverage, um, is targeted to be at recognizing sounds like this, whatever strategic reviews is on, is more ongoing versus finalized, which is curious, on on how we should think about leverage over medium-term.
Yeah. I uh
and in my mind, that means
the stake of ground, you know, sub 40% or sub 6 times
Would be a great spot. Um,
I think if you look at our pricing grid from from from the banks, they would say we're nearly but not quite investment grade. I think if you were to talk to the private placement community,
they would say we're custody, but I think it's more uh probably size than Quantum of debt.
Um,
so, I mean obviously we have relatively more debt for a public
Company and a lot less debt than our private peers would have. I mean, we're we sleep like babies, we've got great cash flows,
uh, we will stretch out our maturity ladder and
Uh, and that will feel better, you know?
4 times dead. If it expires tomorrow is, is worse than 9 times dead. If you're weighted average maturity is 7 years from now, we're not at either of those extremes, but, uh, but we do have, uh,
A large maturity, obviously coming and we're working on that. And we have all the confidence that that'll be, uh,
Achievable in the near term.
And just a quick follow up on that. Would that be inclusive? The 6 times of preference.
Man, I thought we were going to stay off this religious bait for today but uh but we'll go let's go there. Look pre preferred in my opinion, doesn't have a a Redemption date so it is
The equity than debt. And I know that not everyone agrees with that. But
um, you know, for the time being and giving our small size and cost of capital
The preferred is something we could look at, it'd be a great, use of proceeds, down the road. If we had a cost of capital,
That, uh, that made sense. But today, uh, forever is a long time. So I, if you're going to call it debt, then I'd say you've added to our weighted average maturities. And if you're going to call it equity,
Then I'd say, I agree. But no, my 6 doesn't include that, but but I, I understand that the equity buyers will think that way and we're mindful of that.
And and just on the occupants perspective. I think you shared some thoughts. Apologies for missing the numbers on and kind of how
You expect occupancy in the portfolio to Trend and the the general trend has been 1, that seems to modify slippage. Is some Lisa's expired and retention levels. Um, just naturally have some insurance but just curious on how we should think about that. Going forward, any known.
Uh, large move outs. And and as part of that answer, if you don't mind, um, with the the balmonte facility, what's the incremental pickup? We should be modeling third quarter, the second quarter,
um, on that asset specifically
So hi 1 on occupancy. I think you can think of us in that.
Um, 95 and above range. We're, we're consistently. Um, seeing Trends with our tenants to, to release at those levels. So I think consistency and and, and occupancy is what you should look for. There will be, um, episodic downturns that are are followed by releasing, so it can be a little bit bumpy, but overall, I think that's the way to, to think of it. Um, I'm going to actually turn to Bob to talk about the modeling for, for how how we thought of Christmas. So, for, for, for the, for the Bowmont asset. We for the second quarter, they fully occupied beginning in in in May. So in the second quarter, you'll have May and June. So, again, it'll be a, a modest pickup in the in the third quarter from a run rate perspective.
All of which was in our guys.
Got it.
Our next question comes from West, Gala day with beard, your line is open.
Hey, good morning everyone. And maybe just sticking with the quarter to quarter changes. Will you also have a pickup in reimburse cost?
In the, uh, in the third quarter, or with the move out to impact that at all. How should we think about unreimbursed costs going forward?
So were really wasn't anything in particular of note relative to rental Revenue versus the the reimburse cost the from an overall noi perspective, the way that the the the the the trend was consistent with our you know, with with where we were forecasting. And there really wasn't anything significant or unusual from uh from the the dynamic between reimburse costs. And uh and and and and and and the rental Revenue side.
Okay, and then you mentioned uh Kaplan the balance sheet, I think in the in the fourth quarter were you going to do both? I guess term loans and private placements. Or is it an and or or how are you thinking about that?
Uh, 2 2 2 be determined. Uh, uh,
For sure we're going to refi the the term loan a and and the revolver. And how exactly that gets done is uh, isn't set in stone just yet.
okay, and then um, GNA for the the back half of the year, should it be comparable I guess, on a quarterly basis to the what what we saw in the second quarter outside the 1 time items,
Yes, there should be. Yeah, that that's a good run rate from uh, from a GNA perspective, that's what we're flagging. Those outliers from the the transition costs, you know, backing those down, from both the stock comp and the cash GNA, you know, will, uh, will will line it up.
Okay, thanks for the time, everyone.
Our next question comes from garage meta with Alliance Global Partners, your line is open.
Yeah, thank you. Good morning. I I wanted to go back to your comments around asset, e cycling, hoping to get some more color on. You know what, what kind of size of disposition. Are you guys looking at? And then uh, does the asset recycling depends on you? Finding the right acquisition targets or you will consider selling a loading leverage in the near term.
Rob, just your line is a little faint. Did you say, what kind of Acquisitions are we looking for?
No. Um, uh, my question was, what kind of size of dispositions are you looking at? And then, would you consider selling and lowering leverage in the near term, or does the disposition depend on finding the right acquisition targets?
So uh, I mean, I I don't want to I I think our goal would be call it.
50 to 100 million dollars. But if if we don't get prices we like we
we may not be selling and then how those proceeds got redeployed would be
likely a mix of, uh, some debt repayment and some
New investment. Uh I mean at a minimum we'd pay down debt that would probably be a good use but we probably have some other ideas as well.
Okay. And then then Mark as you uh, look at the next chapter for the company as far as Acquisitions and the portfolio makes do you expect any changes in speciality type and provider type, or you want to stick with the portfolio? Is as far as that mix is concerned.
That's it. We generally like the mix the way it is. Uh, I mean, it'll move around goes a bit up on it. I I agree. So you know, we've always been opportunistic, we always try to find the best value in the market.
Mobs are by far the, the largest uh that that is the asset type that has a larger Supply in the market. But we've been pretty pretty good at, uh, finding and patient and playing in that space. So, you know, I would assume uh, going forward the portfolio, make sure it says roughly consistent.
No good. Thank you. That's all I had.
Thank you.
As a reminder, if you would like to ask a question, please press the star and 1 on your telephone keypad.
Our next question comes from John MOA with B Riley Securities. Your line is open.
Good morning, everyone.
Um so maybe with kind of you know cost of capital mine. You talked a little bit about Capital recycling as a way to kind of fund future Investments. How are you thinking about?
JVS either the 1, you currently have in place or maybe even future, you know, different denovo JVS, um, just just curious your thoughts there.
Yeah. Uh, good morning. Good question. We we would uh,
We'd like to grow the hypeman JV that there are thoughtful and disciplined Mo investor with over 20 years in the space. And
They like we believe in the secondary tertiary cordonnerie.
Uh, Investments with strong systems, or practice groups that have, you know, dominant market share.
So,
That's a good, uh, alignment of of I'd say if you are the world.
And I think there are other potential.
Opportunities. And, and deliver that to people that maybe don't have that skill. So how that takes shape if it takes shape
to be determined, but it's, it's certainly something on our uh,
you know, on our, uh, board if you will
And and I'm, I guess given, you know, I know it's a little bit unfair because it, you know, only was kind of put in place earlier this year. But given the amount of activity you're seeing in, in the space. In 2q, any reason that JV hasn't been more active
I don't know. I mean that, uh,
That 1's worth doing. And if there's 1 among 100 that 1's worth doing, I mean, you know, we have to be disciplined.
uh, and they are disciplined with us in in that regard, so they're picky and we're picky and
You know when when it's alright we'll do it and if it's not you know we don't have any unnatural reason to do anything with heightened and and they certainly don't either their their fiduciaries and so are we?
Um, that's fair. And then maybe, uh, I don't know, much smaller level. I think about the East Orange. Um, you know, kind of success leasing up there. Can you remind us? Maybe what the impacts?
Kind of run rate. Numbers is going to be from that lease up and and if there is any impact of what kind of timing You're Expecting,
So, so the the old run rate on that building, you know, was roughly about, you know, a million 2 million, 3 of of, of ABR. And again, if we talked about, that's been a, a cash flow drag over the last over the last couple of years. And so what we're seeing right now is we we've gotten the the building to 40% or so from an oh you know, occupied status and as we work
At that level we start to to to uh again turn the corner and break even relative to the to the property and over time kind of build that build that base. And um, and increase that to that 8090, you know, and above percent occupancy. But but, but from an overall perspective, from a sizing just to keep the content.
That's where it was. It was around kind of, again from a contribution, it was about a million 2 and uh, and again we're on the trying to get on the path back toward that toward that level.
I do think though, John, uh, this is something we've been talking about, uh,
As we've been out with investors, that is all everything. I'm telling you is publicly available, but it requires work to put it together and I think there's a perception.
To the extent. People are paying attention about 26 earnings that we have a big hit coming from this refund and
we will absolutely refi at a much higher rate we currently have. So for locked at 135 and it's obviously at 4:35, but when you consider that we weren't getting cash flow,
Uh, really, for much of any in Q2 2025, and we will get some of that direct in.
Uh, from East Orange, we will have the full impact of Christus, and the forward curve is looking pretty good.
Uh, and we did make some Acquisitions our year-over-year kind of sad and ffo are actually going to be. I think, pretty good. We're not here to give 26 guidance but I do think that's something that's, uh,
A little bit misunderstood about us today.
Okay. Um, appreciate that color. That's it for me. Thank you.
It appears we have no further questions at this time. I'll try the program back to mark for any closing remarks.
Well, we we appreciate everyone's time and interest and uh have a great day. Thank you.
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