Global Medical REIT(US:GMRE)2022-11-03 19:01Financial Data and Key Metrics Changes - The company reported an 18.1% year-over-year increase in total revenue to $35.4 million, primarily driven by acquisition activity [6][18] - Net income attributable to common shareholders for Q3 2022 was $8.1 million or $0.12 per share, compared to $3.7 million or $0.06 per share in Q3 2021 [6][22] - Funds from operations (FFO) for Q3 was $16.2 million or $0.23 per share, consistent with the previous year [23] - Adjusted funds from operations (AFFO) increased to $17.1 million or $0.25 per share, up from $16.4 million or $0.24 per share in Q3 2021 [23] Business Line Data and Key Metrics Changes - The company completed 5 acquisitions in Q3 2022 for a total investment of approximately $51 million, with a weighted average cap rate of 7.1% [8][13] - The portfolio consisted of gross investments in real estate of $1.5 billion, with 4.9 million total leasable square feet and 96.8% occupancy [18][24] - Same-store revenues, excluding cash basis leases, increased by $344,000 or 1.4% compared to Q3 2021 [19] Market Data and Key Metrics Changes - The acquisition environment has slowed significantly due to rising interest rates, impacting the marginal cost of capital for buyers [7][13] - The company noted a widening bid-ask spread in the market, with potential sellers adapting gradually to the new interest rate reality [7] Company Strategy and Development Direction - The company is conducting a strategic review to identify properties for potential sale, focusing on those where value has been added since acquisition [10] - Proceeds from any sales are expected to be used to reduce outstanding debt and increase available capital for future acquisitions when market conditions improve [10] - The company plans to be selective in pursuing incremental acquisitions until cap rates better reflect the higher cost of capital [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning despite challenging market conditions, indicating a belief in the potential for future acquisitions as the market stabilizes [28] - The management team highlighted the importance of maintaining a strong balance sheet and the need to pay dividends while seeking accretive growth opportunities [49] Other Important Information - The company expanded its credit facility with a $150 million term loan and entered into interest rate swaps to fix the interest rate on the new loan [9][25] - As of September 30, 2022, the company had approximately $703 million of gross debt and a leverage ratio of 47.6% [26] Q&A Session Summary Question: What is the long-term debt target in relation to asset sales? - Management indicated a target of 40% to 45% leverage, with potential sales expected to help achieve this goal [31][32] Question: How has the cap rate changed across the portfolio? - Management noted that the market has seen a general increase in cap rates by 75 to 100 basis points across the board [39] Question: What is the status of the pipeline health systems and their rent payments? - Management stated that while a tenant is undergoing bankruptcy, they do not expect the lease to be rejected and anticipate normal payment resumption [41] Question: How does the company view its preferred stock in the capital stack? - Management acknowledged the preferred stock as a consideration for potential repayment but emphasized the need to balance leverage and pricing grid impacts [45] Question: What is the strategy for acquiring assets with lower occupancy? - Management highlighted their strong asset management capabilities, allowing them to lease up properties effectively after acquisition [52]