Global Medical REIT Inc. Q3 FY2025 earnings call

Key Points

• Mark Decker highlighted the team's productivity in driving shareholder value, including 2.7% same-store NOI growth, balance sheet management by recasting the revolver to 2029 and extending term loans, and a pipeline of investment opportunities.
• Robert Kiernan discussed funds from operations, adjusted funds from operations, and details of the credit facility amendment, including extending the revolver, breaking up the Term Loan A, and entering into interest rate swaps.
• Danica Holley talked about asset management achievements such as same-store NOI growth, portfolio leasing at 95.2%, disposal of assets reducing exposure to health system administrative space, and CapEx/leasing costs within the $12 million to $14 million full-year guidance range.
• Alfonzo Leon mentioned a patient approach to acquisitions due to cost of capital, but the team evaluated $11.5 billion in prospective transactions with a near-term pipeline of nearly $500 million in potential deals.

During the quarter, funds from operations were $14.5 million or $1 per share in unit. Adjusted funds from operations, excluding straight-line rent and other noncash/nonrecurring items, was $16.2 million or $1.12 per share in unit, both growing 4% per share year-over-year. Year-to-date funds available for distribution totaled $39.2 million with a payout ratio of 84% based on current annual dividend rate. The portfolio was 95.2% leased as of quarter end with a remaining term of 5.3 years, and achieved 2.7% same-store NOI growth.

Guidance

• Full year CapEx and leasing costs are expected to land within the range of $12 million to $14 million.
• Fourth quarter FFO guidance is $1.13 to $1.23 per share.
• Occupancy is expected to trend towards 96% at year-end.
• Interest rate benefits from the credit facility refinancing contribute to earnings.

Risks

• Uncertainty regarding capital markets access which may impact ability to execute on investment opportunities.
• Potential impact of changes in tenant creditworthiness, though the current tenant credit watch list is shrinking.
• Volatility in the REIT market affecting stock performance and valuation.

Q: Talked about positive leasing momentum and pipeline of leases to commence rent.

A: Danica Holley mentioned the portfolio performance is consistent with the quarter reported and there are no surprises.

Q: What drove occupancy increase and fourth quarter FFO benefit?

A: Mark Decker said occupancy increase mainly came from selling the empty facility in Aurora, Bob Kiernan mentioned lease-ups and interest rate benefits from credit facility refinancing contribute to FFO.

Q: Leverage and acquisition scale?

A: Mark Decker stated the target leverage is near sub-6x and could fund $200 million to $500 million in external growth with permanent capital.

Q: Disposition pipeline and asset recycling?

A: Mark Decker said the near-term disposition pipeline is approximately $50-100 million, and best sales come from well-leased assets.

Q: Strategic plan tenants?

A: Mark Decker said central tenants of the strategic plan include capital allocation, balance sheet management, and execution, focused on health care infrastructure.

Q: Occupancy year-end and sale impact?

A: Mark Decker said 96% occupancy by year-end doesn't assume sale of vacant property, some lease-ups contribute to fourth quarter FFO.

Q: Buyback, debt, assets?

A: Mark Decker said the stock is attractive, and the company is considering buyback, deleveraging, and accretive asset purchases.

Q: Preferred stock and capital stack?

A: Mark Decker said preferred is considered as equity, an attractive option for the capital stack.