Completes Disposition of a Four Property MOB
Portfolio Receiving Gross Proceeds of $66 million Resulting in a
Gain of $12.8 Million
Global Medical REIT Inc. (NYSE: GMRE) (the “Company” or “GMRE”),
a net-lease medical office real estate investment trust (REIT) that
acquires healthcare facilities and leases those facilities to
physician groups and regional and national healthcare systems,
today announced financial results for the three and six months
ended June 30, 2023 and other data.
Jeffrey M. Busch, Chairman, Chief Executive Officer and
President stated, “During the second quarter, we took a significant
step forward in reducing our variable rate debt and leverage by
selling a medical office building portfolio in Oklahoma City,
Oklahoma for gross proceeds of $66 million. We used the net
proceeds from this disposition to pay down the balance of our
variable rate debt, resulting in a leverage ratio as of June 30,
2023 of 44.5%. Additionally, our portfolio is producing consistent
and steady results, and we ended the quarter with leased occupancy
of 97%, unchanged from the first quarter. Within the current
acquisition environment, we will remain disciplined as transaction
markets evolve, and we are well-positioned with ample liquidity to
ramp up acquisitions once spreads return to an attractive and
accretive level. I would like to thank the entire team for their
continued hard work and contributions to our performance.”
Second Quarter 2023 Highlights
- Net income attributable to common stockholders was $11.8
million, or $0.18 per diluted share, as compared to $2.2 million,
or $0.03 per diluted share, in the comparable prior year
period.
- Funds from Operations (“FFO”) of $14.7 million, or $0.21 per
share and unit, as compared to $16.4 million, or $0.24 per share
and unit, in the comparable prior year period.
- Adjusted Funds from Operations (“AFFO”) of $15.9 million, or
$0.23 per share and unit, as compared to $17.6 million, or $0.25
per share and unit, in the comparable prior year period.
- Increased total revenue 7.9% year-over-year to $36.4 million,
primarily driven by the Company’s acquisition activity during and
since the comparable prior year period and the performance of its
portfolio.
- In April 2023, completed the acquisition of two medical office
buildings in Redding, California, encompassing 18,698 leasable
square feet, for a purchase price of $6.7 million and a cap rate of
7.6%.
- In June 2023, sold a portfolio of four medical office buildings
in Oklahoma City, Oklahoma, at a cap rate of 6.5% receiving gross
proceeds of $66 million, resulting in a gain of $12.8 million.
- Maintained portfolio leased occupancy at 97.0% at June 30,
2023.
Six Month and Other 2023 Highlights
- Net income attributable to common stockholders was $12.5
million, or $0.19 per diluted share, as compared to $4.9 million,
or $0.07 per diluted share, in the comparable prior year
period.
- FFO of $29.8 million, or $0.43 per share and unit, as compared
to $32.4 million, or $0.47 per share and unit, in the comparable
prior year period.
- AFFO of $31.8 million, or $0.45 per share and unit, as compared
to $34.4 million, or $0.49 per share and unit, in the comparable
prior year period.
- Increased total revenue 10.7% year-over-year to $72.6 million,
primarily driven by the Company’s acquisition activity during and
since the comparable prior year period and the performance of its
portfolio.
- Through June 30, 2023, inclusive of the Oklahoma City
disposition completed in the second quarter, completed two
dispositions at a weighted average cap rate of 6.5% that generated
aggregate gross proceeds of $70.4 million, resulting in an
aggregate gain of $13.3 million.
- In August 2023, sold a medical office building located in North
Charleston, South Carolina at a cap rate of 5.3%, receiving gross
proceeds of $10.1 million. This property had a net book value of
approximately $7.2 million at the time of sale.
Financial Results
Rental revenue for the second quarter 2023 increased 7.8%
year-over-year to $36.3 million, reflecting the impact of
acquisitions completed during and subsequent to the second quarter
of last year. Second quarter 2023 rental revenue included $5.0
million of net lease expense recoveries, compared to $4.4 million
in the comparable prior year period.
Total expenses for the second quarter were $35.0 million,
compared to $29.9 million for the comparable prior year period,
primarily reflecting higher interest, operating, depreciation, and
amortization expenses due primarily to the changes in the Company’s
portfolio since the comparable prior year period as well as an
increase in interest expenses due to the continued high interest
rate environment.
Interest expense for the second quarter was $8.5 million,
compared to $5.4 million for the comparable prior year period. This
change reflects the impact of higher average borrowings and
increased interest rates compared to the prior year period.
Net income attributable to common stockholders for the second
quarter totaled $11.8 million, or $0.18 per diluted share, compared
to $2.2 million, or $0.03 per diluted share, in the comparable
prior year period.
The Company reported FFO of $14.7 million, or $0.21 per share
and unit, and AFFO of $15.9 million, or $0.23 per share and unit,
for the second quarter of 2023, compared to FFO of $16.4 million,
or $0.24 per share and unit, and AFFO of $17.6 million, or $0.25
per share and unit, in the comparable prior year period.
Investment Activity
During the second quarter of 2023, the Company completed the
acquisition of two medical office buildings in Redding, California
for an aggregate purchase price of $6.7 million, encompassing an
aggregate 18,698 leasable square feet. The Company also sold a
portfolio of four medical office buildings located in Oklahoma
City, Oklahoma, receiving gross proceeds of $66.0 million,
resulting in a gain of $12.8 million.
In August 2023, the Company completed the sale of a medical
office building located in North Charleston, South Carolina, at a
cap rate of 5.3%, receiving gross proceeds of $10.1 million. This
property had a net book value of approximately $7.2 million at the
time of sale.
Portfolio Update
As of June 30, 2023, the Company’s portfolio was 97.0% occupied
and comprised of 4.8 million leasable square feet with an
annualized base rent of $111.3 million. As of June 30, 2023, the
weighted average lease term for the Company’s portfolio was 5.8
years with weighted average annual rental escalations of 2.1%, and
the Company’s portfolio rent coverage ratio was 4.3 times.
Balance Sheet and Capital
At June 30, 2023, total debt outstanding, including outstanding
borrowings on the credit facility and notes payable (both net of
unamortized debt issuance costs), was $625.1 million and the
Company’s leverage was 44.5%. As of June 30, 2023, the Company’s
debt carried a weighted average interest rate of 4.09% and a
weighted average remaining term of 3.4 years.
As of August 2, 2023, the Company’s borrowing capacity under the
credit facility was $321 million.
The Company did not issue any shares of common stock under its
ATM program during the second quarter of 2023 or from July 1, 2023
through August 2, 2023.
Dividends
On June 9, 2023, the Board of Directors (the “Board”) declared a
$0.21 per share cash dividend to common stockholders and
unitholders of record as of June 23, 2023, which was paid on July
11, 2023, representing the Company’s second quarter 2023 dividend
payment. The Board also declared a $0.46875 per share cash dividend
to holders of record as of July 15, 2023 of the Company’s Series A
Preferred Stock, which was paid on July 31, 2023. This dividend
represented the Company’s quarterly dividend on its Series A
Preferred Stock for the period from April 30, 2023 through July 30,
2023.
SUPPLEMENTAL INFORMATION
Details regarding these results can be found in the Company’s
supplemental financial package available on the Investor Relations
section of the Company’s website at
http://investors.globalmedicalreit.com/.
CONFERENCE CALL AND WEBCAST INFORMATION
The Company will host a live webcast and conference call on
Thursday, August 3, 2023 at 9:00 a.m. Eastern Time. The webcast is
located on the “Investor Relations” section of the Company’s
website at http://investors.globalmedicalreit.com/.
To Participate via Telephone:
Dial in at least five minutes prior to start time and reference
Global Medical REIT Inc. Domestic: 1-877-704-4453 International:
1-201-389-0920
Replay:
An audio replay of the conference call will be posted on the
Company’s website.
NON-GAAP FINANCIAL MEASURES
General
Management considers certain non-GAAP financial measures to be
useful supplemental measures of the Company's operating
performance. For the Company, non-GAAP measures consist of Earnings
Before Interest, Taxes, Depreciation and Amortization for Real
Estate (“EBITDAre” and “Adjusted EBITDAre”), FFO and AFFO. A
non-GAAP financial measure is generally defined as one that
purports to measure financial performance, financial position or
cash flows, but excludes or includes amounts that would not be so
adjusted in the most comparable measure determined in accordance
with GAAP. The Company reports non-GAAP financial measures because
these measures are observed by management to also be among the most
predominant measures used by the REIT industry and by industry
analysts to evaluate REITs. For these reasons, management deems it
appropriate to disclose and discuss these non-GAAP financial
measures.
The non-GAAP financial measures presented herein are not
necessarily identical to those presented by other real estate
companies due to the fact that not all real estate companies use
the same definitions. These measures should not be considered as
alternatives to net income, as indicators of the Company's
financial performance, or as alternatives to cash flow from
operating activities as measures of the Company's liquidity, nor
are these measures necessarily indicative of sufficient cash flow
to fund all of the Company's needs. Management believes that in
order to facilitate a clear understanding of the Company's
historical consolidated operating results, these measures should be
examined in conjunction with net income and cash flows from
operations as presented elsewhere herein.
FFO and AFFO
FFO and AFFO are non-GAAP financial measures within the meaning
of the rules of the United States Securities and Exchange
Commission (“SEC”). The Company considers FFO and AFFO to be
important supplemental measures of its operating performance and
believes FFO is frequently used by securities analysts, investors,
and other interested parties in the evaluation of REITs, many of
which present FFO when reporting their results. In accordance with
the National Association of Real Estate Investment Trusts’
(“NAREIT”) definition, FFO means net income or loss computed in
accordance with GAAP before noncontrolling interests of holders of
OP units and LTIP units, excluding gains (or losses) from sales of
property and extraordinary items, less preferred stock dividends,
plus real estate-related depreciation and amortization (excluding
amortization of debt issuance costs and the amortization of above
and below market leases), and after adjustments for unconsolidated
partnerships and joint ventures. Because FFO excludes real
estate-related depreciation and amortization (other than
amortization of debt issuance costs and above and below market
lease amortization expense), the Company believes that FFO provides
a performance measure that, when compared period-over-period,
reflects the impact to operations from trends in occupancy rates,
rental rates, operating costs, development activities and interest
costs, providing perspective not immediately apparent from the
closest GAAP measurement, net income or loss.
AFFO is a non-GAAP measure used by many investors and analysts
to measure a real estate company’s operating performance by
removing the effect of items that do not reflect ongoing property
operations. Management calculates AFFO by modifying the NAREIT
computation of FFO by adjusting it for certain cash and non-cash
items and certain recurring and non-recurring items. For the
Company these items include: (a) recurring acquisition and
disposition costs, (b) loss on the extinguishment of debt, (c)
recurring straight line deferred rental revenue, (d) recurring
stock-based compensation expense, (e) recurring amortization of
above and below market leases, (f) recurring amortization of debt
issuance costs, (g) recurring lease commissions, and (h) other
items.
Management believes that reporting AFFO in addition to FFO is a
useful supplemental measure for the investment community to use
when evaluating the operating performance of the Company on a
comparative basis.
EBITDAre and Adjusted EBITDAre
We calculate EBITDAre in accordance with standards established
by NAREIT and define EBITDAre as net income or loss computed in
accordance with GAAP plus depreciation and amortization, interest
expense, gain or loss on the sale of investment properties, and
impairment loss, as applicable.
We define Adjusted EBITDAre as EBITDAre plus non-cash stock
compensation expense, non-cash intangible amortization related to
above and below market leases, preacquisition expense and other
normalizing items. Management considers EBITDAre and Adjusted
EBITDAre important measures because they provide additional
information to allow management, investors, and our current and
potential creditors to evaluate and compare our core operating
results and our ability to service debt.
RENT COVERAGE RATIO
For purposes of calculating our portfolio weighted-average
EBITDARM coverage ratio (“Rent Coverage Ratio”), we excluded
credit-rated tenants or their subsidiaries for which financial
statements were either not available or not sufficiently detailed.
These ratios are based on latest available information only. Most
tenant financial statements are unaudited and we have not
independently verified any tenant financial information (audited or
unaudited) and, therefore, we cannot assure you that such
information is accurate or complete. Certain other tenants
(approximately 20% of our portfolio) are excluded from the
calculation due to (i) lack of available financial information or
(ii) small tenant size. Additionally, included within 20% of
non-reporting tenants is Pipeline Healthcare, LLC, which filed for
Chapter 11 bankruptcy protection in October of 2022. Additionally,
our Rent Coverage Ratio adds back physician distributions and
compensation. Management believes all adjustments are reasonable
and necessary.
ANNUALIZED BASE RENT
Annualized base rent represents monthly base rent for June 2023,
multiplied by 12 (or base rent net of annualized expenses for
properties with gross leases). Accordingly, this methodology
produces an annualized amount as of a point in time but does not
take into account future (i) contractual rental rate increases,
(ii) leasing activity or (iii) lease expirations. Additionally,
leases that are accounted for on a cash-collected basis are not
included in annualized base rent.
CAPITALIZATION RATE
The capitalization rate (“cap rate”) for an acquisition is
calculated by dividing current Annualized Base Rent by contractual
purchase price. For the portfolio capitalization rate, certain
adjustments, including for subsequent capital invested, are made to
the contractual purchase price.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein may be considered
“forward-looking statements” within the meaning of the Private
Securities 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
their 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 references to assumptions and forecasts of
future results. Except for historical information, the statements
set forth herein including, but not limited to, any statements
regarding our earnings, our liquidity, our tenants’ ability to pay
rent to us, expected financial performance (including future cash
flows associated with new tenants or the expansion of current
properties), future dividends or other financial items; any other
statements concerning our plans, strategies, objectives and
expectations for future operations and future portfolio occupancy
rates, our pipeline of acquisition opportunities and expected
acquisition activity, including the timing and/or successful
completion of any acquisitions and expected rent receipts on these
properties, our expected disposition activity, including the timing
and/or successful completion of any dispositions and the expected
use of proceeds therefrom, 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 the Company believes that the
expectations, estimates and assumptions reflected in its
forward-looking statements are reasonable, actual results could
differ materially from those projected or assumed in any of the
Company’s forward-looking statements. Additional information
concerning us and our business, including additional factors that
could materially and adversely affect our financial results,
include, without limitation, the risks described under Part I, Item
1A - Risk Factors, in our Annual Report on Form 10-K, our Quarterly
Reports on Form 10-Q, and in our other filings with the SEC. You
are cautioned not to place undue reliance on forward-looking
statements. The Company does not intend, and undertakes no
obligation, to update any forward-looking statement.
GLOBAL MEDICAL REIT
INC.
Condensed Consolidated Balance
Sheets
(unaudited, and in thousands,
except par values)
As of
June 30, 2023
December 31,
2022
Assets
Investment in real estate:
Land
$
165,242
$
168,308
Building
1,038,464
1,079,781
Site improvements
21,404
22,024
Tenant improvements
66,544
65,987
Acquired lease intangible assets
139,715
148,077
1,431,369
1,484,177
Less: accumulated depreciation and
amortization
(218,109
)
(198,218
)
Investment in real estate, net
1,213,260
1,285,959
Cash and cash equivalents
2,460
4,016
Restricted cash
7,325
10,439
Tenant receivables, net
7,381
8,040
Due from related parties
391
200
Escrow deposits
9,725
7,833
Deferred assets
26,189
29,616
Derivative asset
35,864
34,705
Goodwill
5,903
5,903
Other assets
12,302
6,550
Total assets
$
1,320,800
$
1,393,261
Liabilities and Equity
Liabilities:
Credit Facility, net of unamortized debt
issuance costs of $8,155 and $9,253 at June 30, 2023 and December
31, 2022, respectively
$
567,988
$
636,447
Notes payable, net of unamortized debt
issuance costs of $375 and $452 at June 30, 2023 and December 31,
2022, respectively
57,121
57,672
Accounts payable and accrued expenses
15,457
13,819
Dividends payable
16,048
15,821
Security deposits
4,213
5,461
Other liabilities
12,137
7,363
Acquired lease intangible liability,
net
6,444
7,613
Total liabilities
679,408
744,196
Commitments and Contingencies
Equity:
Preferred stock, $0.001 par value, 10,000
shares authorized; 3,105 issued and outstanding at June 30, 2023
and December 31, 2022, respectively (liquidation preference of
$77,625 at June 30, 2023 and December 31, 2022, respectively)
74,959
74,959
Common stock, $0.001 par value, 500,000
shares authorized; 65,565 shares and 65,518 shares issued and
outstanding at June 30, 2023 and December 31, 2022,
respectively
66
66
Additional paid-in capital
722,418
721,991
Accumulated deficit
(213,744
)
(198,706
)
Accumulated other comprehensive income
35,859
34,674
Total Global Medical REIT Inc.
stockholders' equity
619,558
632,984
Noncontrolling interest
21,834
16,081
Total equity
641,392
649,065
Total liabilities and equity
$
1,320,800
$
1,393,261
GLOBAL MEDICAL REIT
INC.
Condensed Consolidated
Statements of Operations
(unaudited, and in thousands,
except per share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue
Rental revenue
$
36,317
$
33,679
$
72,517
$
65,530
Other income
34
18
64
42
Total revenue
36,351
33,697
72,581
65,572
Expenses
General and administrative
4,462
4,336
8,266
8,534
Operating expenses
7,223
6,000
14,759
11,372
Depreciation expense
10,468
9,898
20,962
19,300
Amortization expense
4,337
4,138
8,732
7,915
Interest expense
8,468
5,401
16,739
10,202
Preacquisition expense
2
90
44
130
Total expenses
34,960
29,863
69,502
57,453
Income before gain on sale of investment
properties
1,391
3,834
3,079
8,119
Gain on sale of investment properties
12,786
—
13,271
—
Net income
$
14,177
$
3,834
$
16,350
$
8,119
Less: Preferred stock dividends
(1,455
)
(1,455
)
(2,911
)
(2,911
)
Less: Net income attributable to
noncontrolling interest
(902
)
(143
)
(947
)
(313
)
Net income attributable to common
stockholders
$
11,820
$
2,236
$
12,492
$
4,895
Net income attributable to common
stockholders per share – basic and diluted
$
0.18
$
0.03
$
0.19
$
0.07
Weighted average shares outstanding –
basic and diluted
65,544
65,507
65,534
65,405
Global Medical REIT
Inc.
Reconciliation of Net Income
to FFO and AFFO
(unaudited, and in thousands,
except per share and unit amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income
$
14,177
$
3,834
$
16,350
$
8,119
Less: Preferred stock dividends
(1,455
)
(1,455
)
(2,911
)
(2,911
)
Depreciation and amortization expense
14,774
14,008
29,635
27,160
Gain on sale of investment properties
(12,786
)
—
(13,271
)
—
FFO
$
14,710
$
16,387
$
29,803
$
32,368
Amortization of above market leases,
net
287
315
578
514
Straight line deferred rental revenue
(879
)
(1,032
)
(1,642
)
(2,227
)
Stock-based compensation expense
1,147
1,289
1,835
2,576
Amortization of debt issuance costs and
other
601
514
1,202
1,029
Preacquisition expense
2
90
44
130
AFFO
$
15,868
$
17,563
$
31,820
$
34,390
Net income attributable to common
stockholders per share – basic and diluted
$
0.18
$
0.03
$
0.19
$
0.07
FFO per share and unit
$
0.21
$
0.24
$
0.43
$
0.47
AFFO per share and unit
$
0.23
$
0.25
$
0.45
$
0.49
Weighted Average Shares and Units
Outstanding – basic and diluted
70,434
69,698
70,119
69,485
Weighted Average
Shares and Units Outstanding:
Weighted Average Common Shares
65,544
65,507
65,534
65,405
Weighted Average OP Units
2,134
1,668
1,907
1,670
Weighted Average LTIP Units
2,747
2,523
2,678
2,410
Weighted Average Shares and Units
Outstanding – basic and diluted
70,434
69,698
70,119
69,485
Global Medical REIT
Inc.
Reconciliation of Net Income
to EBITDAre and Adjusted EBITDAre
(unaudited, and in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2023
2023
2022
Net income
$
14,177
$
3,834
$
16,350
$
8,119
Interest expense
8,468
5,401
16,739
10,202
Depreciation and amortization expense
14,805
14,036
29,694
27,215
Gain on sale of investment properties
(12,786
)
—
(13,271
)
—
EBITDAre
$
24,664
$
23,271
$
49,512
$
45,536
Stock-based compensation expense
1,147
1,289
1,835
2,576
Amortization of above market leases,
net
287
315
578
514
Preacquisition expense
2
90
44
130
Adjusted EBITDAre
$
26,100
$
24,965
$
51,969
$
48,756
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version on businesswire.com: https://www.businesswire.com/news/home/20230802301434/en/
Investor Relations Contact:
Stephen Swett stephen.swett@icrinc.com 203.682.8377
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