Q2 2019 Earnings Call
Good morning, ladies and gentlemen, and welcome to global Medical Reits second quarter 2019 earnings Conference call.
At this time all lines have been placed in listen only mode. Please note that today's conference call is being recorded with a world class with a webcast replay available for the next 90 days the dial in details for the replay can be found in yesterday's press release and can be obtained from the investor section of the company's website at Www <unk> Global medical Dotcom.
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I will now turn the conference over to global Medical retail Investor Relations Representative Mary Jensen.
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Thank you operator, good morning, everyone last night after the market closed global medical read announced its operating and financial results for the three and six months ended June Thirtyth 2019.
Certain statements contained herein may be considered forward looking statements within the meaning of the private Securities Litigation Litigation Reform Act of 1995, and it is the company's intent that any such statements be protected by the safe Harbor created thereby.
These forward looking statements are identified by the use of terms and phrases such as anticipate believe could estimate.
Expect intend May should plan predict project will continue and other similar terms and phrases, including any references to assumptions and forecasts of future results.
Except for historical information the matters set forth herein, including but not limited to any projections or forecast of revenues expenses operating results cash flow or other financial items, including our funds from operations or FFO and adjusted funds from operations or AFFO any statements concerning our plans strategies and objectives for future operations and our pipeline of acquisition opportunities opportunities and expected acquisition activity, including information about our current and prospective tenants any statement regarding future dividend payments and a statement regarding future capital raising activity any statements regarding future regulatory changes and their impact on our industry or business and any statements regarding future economic conditions or performance are forward looking statements.
These forward looking statements are based on our current expectations estimates and assumptions and are subject to certain risks and uncertainties.
Although we believe that the expectations estimates and assumptions reflected in our forward looking statements are reasonable actual results could differ materially from those projected or assumed in any of our forward looking statements.
Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward looking statements are set forth in the risk factors section of our annual report on Form 10-K , and quarterly reports on Form 10-Q and elsewhere in the reports we have filed with the United States Securities and Exchange Commission.
These risk factors include the risks that our financial projections, including projections for funds from operations or FFO and adjusted funds from operations or AFFO may not be realized due to among other things lower than anticipated revenues are higher than expected anticipated expenses or we may not be successful in completing all of the acquisitions or dispositions in our investment pipeline or that we identify or pursue in the future.
We do not intend and undertake no obligation to update any forward looking statements.
With that I'd like to turn the call over to Jeff Berson, Chief Executive Officer of Global Medical Reid. Please go ahead Sir.
Thank you Mary and welcome everyone to our call joining me today or Bob Chairman, our Chief Financial Officer, and Alfonso Leon Our Chief investment Officer today, I will provide an update on how we are progressing with our strategic and operational plans Bob will follow with the review of second quarter and first half 2019 financial results and Alfonzo will provide a review of the company's acquisition activities with a market update.
We are very pleased with the progress we are making so far this year.
July Onest marked our third year anniversary as a public company and over the last three years, we have demonstrated impressive acquisition activity through a focused.
And sourcing strategy, coupled with disciplined due diligence.
Through prudent acquisitions, we've grown our medical real estate portfolio from $94 million to $764 million today during the quarter. We closed on the previously announced or RF portfolio and have since closed on or have.
On the contract another nine properties and an aggregate purchase price of $105 million. We funded these acquisitions by raising over $92 million of equity and increased our borrowing capacity by $75 million. Our goal is to continue to expand our real estate portfolio through our proven acquisition sourcing and our due diligence strategy.
As of yesterday genome already has generated a total return to shareholders since our IPO of over 33.7%.
Which continues to outperform all of the primary read indices during this period.
We believe sustainable cash flow from our portfolio will support our dividend and lead to continued increases in shareholder value.
With that I would like to turn the call over to Bob German our CFO , who will provide details regarding the second quarter financial highlights.
Thank you Jeff yesterday, we reported our financial results for the three and six months ended June Thirtyth 2019 by our press release and simultaneous posting our earnings guidance to our web site.
Reflecting the positive impact of the continued growth of our investment portfolio. Our total revenue increased $60.9 million in the second quarter of 2019 up from $13.2 million in the second quarter of 2018 in the first half of this year total revenue increased to $32.1 million up from $24.8 million in the first half of 2018.
Same store rental revenue on a cash basis increased $202000 during the second quarter of 2019 or 2.1% compared to the second quarter of 2018. During the first half of 2019 same store rental revenue on a cash basis increased $404000 or 2.3% when compared to the first half of 2018.
Total expenses for the second quarter of 2019 increased to $14.4 million up from $11.9 million in the first quarter of 2018.
For the first half of 2019 total expenses increased to $27.6 million up from $21.5 million in the first half of 2018.
Depreciation and amortization expenses as well as interest expense remain large components of our total expenses for each period as we continued to actively acquired properties.
DNA expenses decreased during the second quarter of 2000 $19 million to $1.6 million compared to $1.8 million in the second quarter of 2018.
The quarterly decline was due to a decrease in noncash equity compensation expense. The LTIP compensation expense was $854000 for the three months ended June Thirtyth 2019, compared to $1.1 million for the same period in 2018 for the six months ended June Thirtyth 2019 DNA.
Increased to $3.2 million compared to $2.8 million for the six months ended June 32018. The increase in this case was also primarily attributable to stock compensation costs, specifically, our LTM related costs for the first six of six months of 2019 were $1.6 million compared to $1.2 million in the comparable 2018 period.
Looking forward to the second half of 2019, we estimate that our stock compensation costs will average around $800000 per quarter and $3.2 million for the full year.
Our second quarter 2019, cash DNA expenses of just under $800000 were down slightly compared to the fourth first quarter and looking ahead. We estimate that these costs will continue to run at approximately $800000 per quarter.
Depreciation and interest expense were again, our two largest expense line items in the second quarter. Both are positively correlated with our acquisition activity depreciation expense was $4.6 million in the second quarter of 2019 versus $3.4 million in the prior year quarter.
Interest expense was $4.1 million for the second quarter of 2019 compared to $3.9 million in the second quarter of 2018.
For the first half of 2018 interest expense was $8.2 million compared to $6.6 million in the first half of 2018 the increase in year over year interest expense was driven by higher interest rates and higher average borrowings the proceeds of which were used to finance our property acquisitions.
Our average borrowing rate during the second quarter of 2019 was 4.27% and our average rate as of the ended the quarter was 4.14%.
Our net income attributable to common stockholders for the second quarter of 2019 was $904000 compared to a net loss of $64000 in the second quarter of last year for the first six months of 2019, our net income was $1.4 million compared to $346000 in the first half of 2018.
Our AFFO for the second quarter of 2019 of 18 cents per share was flat compared to the prior year quarter and our AFFO of 18 cents per share in the current quarter was down from 20 cents when compared to the second quarter of 2018 in the first half of 2019, our FFO and AFFO were both 35 cents per share each down from 36 cents per share in the first half of 2018.
Our funds from operation and AFFO on a per share basis for the three and six months ended June Thirtyth 2019 were negatively impacted by short term dilution, resulting from our recent capital raising activities to support our acquisition activity. However, we believe these activities will have a long term positive impact on FFO and AFFO as we fully leverages capital and put these proceeds to work in long term accretive acquisitions.
Moving on to the balance sheet as of June Thirtyth 2019, our gross investment in real estate was $764 million, an increase of $116 million from year end 2018.
Looking at the liability side of our balance sheet as of June 32019, our total debt net of unamortized discounts and deferred costs increased to $354.3 million as a result of our ongoing acquisition activity. This compares to our total debt of $315 million at December 31, 2018.
On a gross basis our June 30.
Debt balance includes $319.5 million drawn on our credit facility and $39 million of fixed rate notes payable.
On April 15th 2018, we exercised $75 million of the $150 million accordion feature on our credit facility. The partial exercise of the accordion feature increased the term loan component of the credit facility to $175 million from $100 million in the total borrowing capacity under the credit facility to $425 million.
As we look forward on credit we're currently discussing potential options related to prospective debt financing, including for approaches both within and outside our credit facility. Our primary goal here is to position ourselves well for future acquisitions as well as positioning the company to benefit for projected credit quality gains as we continue to evolve.
Regarding equity so far this year, we have raised a total of $93 million of equity through a combination of common stock in LP unit issuances at an average offering price of $9.84 per share. These issuances include 8.2 million shares of common stock in an underwritten public offering at a price of $9.75 per share generating gross proceeds of $80 million 1.2 million shares of common stock through the companys at the market offering program at an average offering price of $10 or 43 cents per share generating gross proceeds of $12 million. In addition, we issued 49000 LP units valued at $500000 in connection with a medical facility acquisition.
With that I will now turn things over to Alfonso Leon Our Chief investment Officer, who will provide an overview of the investment landscape and GM our east portfolio.
Thank you Bob.
In the three years since our IPO, we have assembled a great portfolio of healthcare real estate lease to exceptional healthcare providers on long term triple net leases.
And we did this at cap rates that are 100 to 150 basis points above the market average.
Well, we've accomplished this is exceptional and the process. We have built a network of relationships that are helping us source more exclusive deals.
I am proud of all the hard work Weve invested to build this rate and it is great to see our efforts are beginning to get recognized.
As of June Thirtyth, our $59 million of rental revenue is well diversified across 91 properties leased to 56 tenants in 26 states.
Our 2.3 million square foot portfolio is 100% leased at a cap rate of 7.8% with a weighted average lease term of 9.3 years and average rent escalations of 2.2% per year.
As a percentage of rents 44% of our portfolio is on an absolute triple net basis with zero landlord capital expense obligations and the balance of leases are all on triple net basis.
Our core strategy has not changed since IPO.
We focus on buying high quality real estate and desirable secondary and tertiary markets leased the profitable healthcare providers that are leaders in their respective fields, we focus primarily on acquiring medical office and outpatient treatment facilities, and the $5 million to $15 million range and opportunistically acquire inpatient facilities typically in the $20 million to $40 million range, we leverage our experience and knowledge of healthcare real estate identified deals with good risk adjusted returns at cap rates that allow us to invest our capital Accretively, we work tirelessly to build them and paying a robust pipeline of deals which gives us the ability to be very selective and strategic with our growth.
With this strategy, we have built a diversified $800 million portfolio for our shareholders leased a great tenants.
There continues to be ample opportunities in the market for deals to grow portfolio and we and we have built an outstanding platform to source underwrite and acquire these deals.
Over 55% of our tenants are established physician group practices that provide essential care to their communities, making them attractive M&A targets for both hospital and private equity consolidators.
Over 30% of our tenants are for profit operators like encompass kindred prospect and USPI that are leaders in their field of expertise.
The balance of tenants are not for profit health systems that include large integrated systems like Orlando how.
Guys in your Piedmont, Rochester, regional and Trinity and BA two rated memorial health, which is a small locally dominant profitable system.
Moving onto our acquisition activity, we had a busy second quarter investing $94 million and four new rehab hospitals totaling 207000 square feet at a forward 12 month cash yield of 7.3%.
Before property portfolio of inpatient rehab hospitals included facilities located in South Bend, Indiana Tenanted by St. Josephs Regional Medical Center, which is part of the Trinity Health system.
Oklahoma, Oklahoma City, Oklahoma, Tenanted by Kindred and Mercy health joint venture.
Surprise, Arizona tenanted by cobalt rehabilitation hospitals, now part of Curahealth network and in Las Vegas, Nevada, Tenanted by encompass health.
Building on this momentum we have already closed on four acquisitions in the third quarter totaling $42 million or almost a 157000 square feet in deals at an average yield of approximately 7.7%.
On July 12, we acquired a 20000 square foot cancer center for $11.9 million and an ingoing cap rate of 7.3%.
This property is located in San Marcos, California, and affluent city in North in the Northern County region of San Diego.
Less than two miles from the $900 million Palomar Medical center built in 2009.
The property was built in 2009 and is 100% occupied by California cancer Associates for research and excellent care for short.
With 8.3 years of remaining lease term with 3% annual rent increases carries the largest full service private oncology and hematology practice in California.
With six offices in San Diego and two offices in Fresno.
On August Onest, we acquired a 42000 square foot portfolio, consisting of two medical office buildings.
And one surgery center located in Lansing, Michigan, The state capital near Michigan State University for $11 million at an ingoing cap rate of 7.8%.
With a weighted average lease term of 8.7 years and 2.3% average annual rent increases.
This portfolio is one mile away from the new 250 bed for $150 million or hospital currently under construction for Mclaren Health care and Michigan State University. The portfolio was owned by a partnership.
Among local physicians.
Mclaren health and USPI.
We are currently under contract on a fourth and we'll be at a price of $5.1 million with this group.
This portfolio is also anchored by Sema, a locally dominant multi specialty group with 50 providers.
On August 5th we acquired a 44000 square foot multi tenant medical office buildings, and Fenech burn, Illinois.
An affluent suburb of Chicago for $6.9 million, and an ingoing cap rate of 7.5%.
The building is anchored by Illinois has been enjoying who occupies one third of the space for clinic physical therapy and imaging.
Atlanta has been enjoying is one of the largest orthopedic groups in the Chicago Metro area with over 100 physicians and 20 locations.
This property was a unique opportunity sourced off market.
To acquire a great property in an affluent submarket at a very attractive price of $157 per square foot, which is well below replacement cost.
On August six we acquired a 42000 square foot medical facility in in Aurora, Illinois.
Were $12.5 million and an ingoing cap rate of 8.2%.
And includes 3% annual escalators. This property was built in 2015 and is 100% occupied by dryer clinic and affiliates of advocate Aurora healthcare.
And is adjacent to an advocate outpatient medical center.
Aurora healthcare is the 10th largest not for profit health system and as a double athree credit rating from Moodys.
Currently we have four additional deals that are under purchase contract.
We are under purchase contract to acquire a 61000 square foot multi tenant medical office building located in Livonia, Michigan and affluence western suburb of Detroit at a purchase price of $10.5 million, representing a significant discount to replacement cost and a going in cap rate of approximately 8.2%.
The property is 97% leased and is anchored by a large health system.
We are under purchase contract to acquire a 14000 square foot medical office property located in Gilbert, Arizona, expanding our footprint in focused areas surrounding the Phoenix, San Jose at a purchase price of $5.5 million and a going in cap rate of 7.1% with 3% annual increases.
The property will be leased by covenant, the leading surgical operated was 59 locations across 19 states.
We are under purchase contract to acquire at 25000 square foot medical facility located just outside Morgantown West Virginia.
10 miles from West, Virginia University at a purchase price of $7.8 million and an ingoing cap rate of 7.7% with an average 2% annual increase.
The asset was constructed earlier this year and serves as the headquarters for Medexpress, a subsidiary of United Healthcare group with more than 200 urgent care clinics nationwide.
We are under purchase contract to acquire and 85000 square foot class a specialty surgical hospital in Beaumont, Texas at a purchase price.
Of.
$33.6 million and an ingoing cap rate of 7.6%.
The property was built in 2013 and is 100% leased in the medical center of Southeast Texas.
As always the timing of the closing of these deals is unpredictable and some of these deals might fall out of contract during our due diligence process.
All of these deals closed on in process are in line with our core strategy, namely to focus on buying high quality real estate and desirable secondary and tertiary markets.
And leased a profitable healthcare providers that are leaders in their respective fields, we focus primarily on acquiring medical office and outpatient treatment facilities and opportunistically acquire inpatient facilities.
We are constantly sourcing new deals to keep our robust pipeline of $100 million to $200 million of deals in process at all times.
This pipeline allows us to be selective and strategic with our portfolio growth.
We leverage our knowledge of health care to find less crowded deals at cap rates of 7% or higher that offer good risk adjusted returns.
Healthcare real estate has become a very desirable asset class with excellent fundamentals offering investors stable cash flows through various economic cycles.
Supporting this thesis thesis is the fact that healthcare spending is not discretionary healthcare real estate transaction volumes have averaged $2 billion to $4 billion per quarter over the last five years.
Since our IPO, we've built an outstanding acquisition platform and we believe GMR. He is uniquely positioned to continue sourcing and acquiring deals in our niche.
Our goal is to find quality healthcare providers that are essential to their communities to build a durable and diversified portfolio for our shareholders with that we will be happy to take your questions.
Thank you at this time, we will be conducting a question and answer session.
If you would like to ask a question.
Please press star one on your telephone keypad, a confirmation will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we pull for questions.
Our first question comes from the line of Rob Stevenson of Janney Montgomery Scott. Please proceed with your question.
Good morning, guys.
Further you talked about it a little bit, but you guys made a couple of the sub 7% cap rate acquisitions in the second quarter, the Arizona the Oklahoma one.
Can you talk about specifically why those assets and why those prices made sense to you guys and if there is any incremental upsize that would choose those returns other than just the normal annual rental rate bumps.
Sure. So couple of things to point out it was part of a portfolio.
When we reported we reported as a point in time, which creates a little bit of a disconnect.
But I want to highlight that that was part of a portfolio and we look at things on an average basis and that was a 7.3 cap portfolio.
And you guys noted for those that.
Those assets I mean, if a point in time is there I mean is that you know by next year does that go up substantially or are we talking about a six nine go into a 695 in a six seven going to a 675 type of thing.
I don't have it property by property, but the portfolio goes from 7.3 to 7.6 in year two.
Okay. So it's a meaningful bump okay. That's helpful and then Jeff given the current acquisition pace, you're on track to hit a $1 billion of gross assets probably in early 2020 as the board already started laying the ground work for the internalization discussion and everything or is that something that happens either later this year or early next year.
Yes, and Terminalization is as you know is in the management contract and there has been discussions among the board among legal and others of what has to go through the process.
Since we are now, finishing our acquisition stage and a certain amount of capital needs to be raised we're expecting that to be something that gets more heavy in discussion in 2020 as opposed to 2019, but there has been.
Presentations to the board there has been legal discussions there has been a process.
Okay. Thanks, guys.
Our next question comes from the line of drew Babin of Robert W. Baird and company. Please proceed with your question.
Hey, good morning.
Good morning question.
Question on the coverage ratios are four of the supplemental.
Just curious whether there was were influenced by some of the acquisition activity or something else on a quote same store basis I noticed that the.
Your patient rehab ratios up quite a bit with surgical hospitals down.
I'm wondering if this kind of anything.
Beneath that or just kind of normal volatility or external growth influence there.
Hi, I'm going to say, it's most likely just.
Volatilities normal volatility.
But.
I'm not sure how much of an impact our acquisitions have had on the coverage ratios.
Okay.
And I guess I'm Alfonso you answered most of my acquisition questions preemptively, but I'm just curious what happened to the small maplewood outpatient clinic deal that was listed last quarters being under contract I don't see that now I'm just curious what what may or may not happen there.
Yes, Sir during our tenant interview, we discover that.
You know we were not comfortable with the renewal probability so we we walked out.
Okay.
Because I know you're being prudent that's all from me. Thank you.
Our next question comes on the line of Chad Vanacore of Stifel. Please proceed with your question.
All right. Thanks, So you mentioned a financing and specifically get financing you give us an idea of where are you where are your capital plans are and what you're thinking about.
Sure sure Chad So first on the debt side. We're looking you know within the credit facility. We've got the remaining $75 million accordion that we would look to you know exercise at some point as we as we go forward and we're in discussions with the lenders on that and then secondly, you know any potential you know looking at potential debt away from the facility just to give some flexibility as we look forward to you know to to 2020 and beyond to just develop or is it just some alternative financing beyond the yet to the credit facility take some pressure off of it. So that's that's the general idea on on on the debt side and that's a work in process right now relative to equity capital I think it's really more of timing that up we know as we look at future acquisitions and being prudent about when we when we go forward on that front being.
Prudent relative to when we expect.
The next wave of acquisition.
Mhm.
So just just thinking about the bad debt alternatives that you have are we talking more secured or unsecured debt.
I'm still feeling like there.
Yes, still secured and probably you know maybe some mortgage.
At this point mortgage financing, maybe taking a few of the assets out of the credit facility and getting standalone permanent financing on those assets probably not in the CMBS structure, just looking to have some flexibility also not looking to long term with the idea that as we get larger and we evolve our credit you know our credit spreads should.
We need to improve as we get larger so thinking of it really along those lines as much as anything.
Okay and related to that average interest rate to decline pretty significantly like 4.7 to 4.1, you had you had.
I tried to put some swaps in place in hedge just want to understand what are the factors that are contributing to that interest expense decline.
Sure. So in the quarter, we went down in our pricing grid. So our average in the quarter was 44 debt to 7%. So we went down from 467 and entering Q1, there was a significant waiting we had less we had much more that way of the hedge debt. Then then left in the floating debt so that kind of skewed the rate in Q1, higher we came down and with the additional borrowings in Q2, we increased our amount of floating debt and also went down in the pricing grid you know during the quarter as well, we'll move up the pricing grid midway through Q3 here as our leverage moves into that into the next up one level in the grid, but you know as we look into <unk> into Q3, you know our end of period rate of 4.14% looks about that the general ballpark of where we should end up from a rate perspective in Q3.
Okay. Thanks.
And then just one more I'm just thinking about the.
Assets that are under contract for acquisition, how should we really think about timing on those.
Sure [laughter] so.
You know we have a few of these that are you know we were hoping to close we're hoping to close any week now a I would say the bulk of it.
August .
And then the the Beaumont facility a September .
Okay excellent that's it for me thanks.
Our next question comes on the line of Bryan Maher of B. Riley.
Please proceed with your question.
Yeah. Good morning, I was a couple of good morning couple of quick things you know we've noticed a couple of these 8.2 cap rate to think one that you did in the quarter or subsequent to the quarter and another when you talked about under purchase contract what type of a product is that and what's impacting that higher cap rate.
Well so the Aurora one is.
Recently built.
It's a relationship deal you know our acquisition officer based out of Chicago has a relationship with the developer. So we we had a chance to get very attractive pricing, we've actually been in discussion with this party for about a year and Ah for state planning purposes. It made sense. Finally for this person to transact. So I'd say you know, it's it's a very nice looking newly built property for the system. Its next to their outpatient facility and it's in a pretty good part of Chicago. So I'd say the yield is driven mostly by the fact that you know we're a it's a it's off market relationship. The other one also it's it's the mission help livonea deal.
That one I also kind of a unique situation I'm just.
Folks that I know approached me this.
This property had been down the road with another party.
Ah pretty far down the road and ER. So when I was approached you know we were presented a great opportunity to buy this set up a pretty significant discount to where it was.
You know, it's it's a situation where the selling party really wants that once surety of close.
So you know we've this the person who reached out to me knows our track record likes US and was looking for you know various surety of close. So you know I think it's driven mostly by.
The track record Weve built and our relationships and it's a you know nice a nice are looking or building a its its multi story.
You know its high quality you know those built about 15 years ago or so it's it's a great looking asset and we were really looking forward to having it be part of our portfolio, but again. This is one where you know weve leveraged our relationships and situations that are a bit unique where we're able to get extra value.
Okay and then another question I had was you know when we look at what you've closed year to date and what you currently have in the in the pipeline to close you know that's pending here about I don't know roughly 220 million. We had been looking at maybe 180 million in our model for this year and in light of comments that community health care made kind of warning analyst not to take their acquisition estimates up how do you think we should be thinking about full year 19, and as we look out to 2020, what do you think with your pipeline would be a reasonable expectation.
Well. So you know, it's where we've got a busy pipeline and if and if deals make sense. We'll continue pursuing I don't I don't see any change today versus where we were three months ago or six months ago.
Hi, its its really a function of us finding deals that meet our underwriting and.
You know and makes sense for us to add to our portfolio. So I don't I don't see any change or you know in the last you know all year I mean, we're going to continue going and if it makes sense to the buy and you know it makes sense as a company. We will continue growing yeah. I think we came into the year with that goal of Oh, maybe 150 to 200 million similar to what you said, Brian and you know we were able to exceed that goal and it was really a matter of being opportunistic on our on our acquisitions and what we're able to get done.
Okay. So you don't see anything changing in the landscape currently that would trip up where you're kind of at a run rate now.
No.
And it sounds like you're a also asking a little bit about the market I mean the market.
I'd say during the summer did and this is you know it's always hard to kind of pinpoint exactly but my sense of it is during the summer I did sense that things were getting a little bit more competitive you know and I, but it's hard to really predict how things are evolving.
I'd say the trend line is probably you know things are getting a little bit more competitive, but you know what I try to do is try to stay as busy as humanly possible and talk to as many people as we can and get ahead of things and.
Thus far it's it's it's worked well for US and you know we have a lot of Ah you know we're working a lot of deals. We're closing a lot of deals I'm not worried right now is.
Where we are in and the growth opportunities. We've got another you know call. It half dozen discussions that we're having with different parties with dealers that we really like that are not under contract yet that'll you know, it's it's if parties Ah Ah Ah come to a meeting of the mine. So you know we'll have Ah you know.
There will be great asset that and we'll have a pretty busy next couple of quarters, but you know, it's it's hard to predict.
So you know I don't I don't sense, any anything dramatic or any significant change that's really noteworthy or you know it is it is interesting that during the summer I think things got a little bit more competitive but too soon to tell whether it's a you know significant a change in trend.
Okay. Thanks, that's helpful.
Our next question comes from a lot of Barry Oxford of D.A. Davidson. Please proceed with your question.
Great. Thanks, guys. When you guys think about the acquisition and the debt and equity and where your leverage metrics are right now.
How do you view leverage do you feel you have some capacity to take it up higher or is this kind of where you want to stay at it meaning you're going to be doing you know.
Leverage neutral deals going forward.
Yeah, Hi, Barry So we you know we got we ended the quarter with leverage you know right around 47% and get a you know I'd expect that we would look to increase our our leverage you know into the into the low fiftys. Its you know as you as you've seen from last year's results. When we run leverage into the low Fiftys were able to you know generate enough income that we cover our dividend at that at that level and so I think it's a balancing act between being able to you know start to cover the dividend at lower levels of leverage and so that's really our ultimate goal is to cover our dividend and I think you'll see our leverage increased here as we put these acquisitions on and we up look into kind of Q3 and Q4.
Right Great now that that that's helpful. And then Alfonso just kind of along the same line to a financing when you're looking at deals out in the marketplace or there are you know LP unit deals or what Barry I, just kinda come across them every once in a while.
Ah. So it's you know it's I feel like every other week I'm, having some discussion with somebody about an LP unit deal, but you know those are very.
Those are very hard to predict or both ways. You know I've been surprised you know with conversations that start off with you know little to no interest and then.
Oh, we end up with you know 10 million of opioid use and conversations I start off with O.P. isn't end up being all cash you know given given the nature of what it is a you know it's <unk> and the fact that.
The selling party engages with their state planners and tax experts you know, it's just really hard to predict but you know it is part of our you know monthly discussions with parties a and you know it is it is something that sometimes helps us get deals because we'll start off with those discussions.
<unk>, it's definitely well received just the combination of the benefits of doing an okay unit deal combined with where where our dividend trades, where our stock trades and our dividend yield is you know it makes it pretty compelling for some physicians and physicians are very much a you know when they think of their real estate. You know there is a big part of it that is a state planning. So it makes a lot of sense to have those discussions, but yeah. You know its hard to predict but again you know it definitely on a monthly basis I feel like I end up in a few conversations of that nature.
Perfect. Thanks, so much guys.
Thank you.
At this time there are no further questions over the audio question and answer session.
This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.
Have a wonderful day.
Actually part of myself I would like to turn the conference back over to management for closing remarks.
Okay. Thank you are we are extremely happy with the progress we made this year.
Are we taking very strong disciplined approach to both acquisitions and growth and and debt. So with the progress. This year on all those fronts has been tremendous and we look forward to the next quarter. Thank you for your time and support.
At this time. This does conclude today's conference. Thank you for your participation you may disconnect. Your lines at this time have a wonderful rest of your day.
Okay.
Okay Mary.