Global Medical REIT Announces Fourth Quarter and Year-End 2023 Financial Results
Global Medical REIT Inc. announced financial results for Q4 and full year 2023, emphasizing reduction of leverage through dispositions and positioning for growth. Despite a net loss in Q4, the company maintained a strong portfolio and high occupancy rates. The company's FFO and AFFO decreased year-over-year due to property dispositions but remained resilient. The Company reduced leverage to 43.6% by the end of 2023 and has a promising acquisition pipeline for 2024.
The recently announced financial results by Global Medical REIT Inc. (GMRE) reflect a strategic shift in the company's capital structure and asset portfolio. The reduction in leverage from 47.6% to 43.6% aligns with the broader industry trend towards deleveraging, especially in a high-interest-rate environment, which is typically seen as a positive move by investors. The disposition of properties generating $80.5 million, along with the acquisition of medical office buildings at a cap rate of 7.6%, indicates a proactive portfolio management strategy. However, the decrease in Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) year-over-year might raise concerns about the company's ability to sustain dividend payouts, which are crucial for REIT investors. The decrease in total revenue by 9.2% is also notable, as it may affect the company's valuation and stock price performance.
GMRE's portfolio occupancy rate of 96.5% is robust and indicative of strong asset quality and tenant relationships. This high occupancy rate, coupled with a weighted average lease term of 5.8 years, provides a degree of cash flow stability and predictability, which is a key metric for assessing REIT performance. The portfolio's rent coverage ratio of 4.2 times is an important indicator of tenant financial health and suggests that the tenants are well-positioned to meet their lease obligations, which is reassuring for investors concerned about the impact of economic headwinds on tenant solvency. The near-term acquisition pipeline of $95 million to $110 million further demonstrates GMRE's growth-oriented strategy, although it brings associated risks of execution and integration.
The defeasance of a $30.6 million CMBS loan and the subsequent loss on extinguishment of debt of $0.9 million is a strategic move that could be interpreted in several ways. On one hand, the use of revolver borrowings to fund the defeasance could signal a tactical approach to capital management, potentially leading to a more favorable debt profile. On the other hand, the loss incurred and the reliance on the revolver could raise questions about the company's long-term debt strategy and interest rate exposure. The weighted average interest rate of 3.83% on the company's total debt is relatively moderate given the current interest rate environment, but the short weighted average remaining term of 2.9 years suggests upcoming refinancing risk that investors should monitor.
02/27/2024 - 04:05 PM
Net Proceeds From 2023 Dispositions Used to Reduce Leverage and Position Company for Growth
BETHESDA, Md. --(BUSINESS WIRE)--
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 twelve months ended December 31, 2023 and other data.
Jeffrey M. Busch, Chairman, Chief Executive Officer and President stated, “During 2023, we successfully navigated an evolving capital markets environment to produce solid results due to our high-quality portfolio and the continued resiliency of our tenant base. While overall transaction activity in the market remained modest primarily due to high interest rates, we generated $80.5 million 43.6% at year end. I am appreciative of the team’s hard work and contributions that led to our success in 2023. As we look ahead, we believe we have a strong acquisition pipeline for 2024 and are well-positioned to take advantage of these opportunities.”
Fourth Quarter 2023 Highlights
Net loss attributable to common stockholders was $0.8 million $0.01 $0.4 million $0.01
Funds from Operations (“FFO”) of $13.3 million $0.19 $15.5 million $0.22
Adjusted Funds from Operations (“AFFO”) of $15.9 million $0.23 $16.5 million $0.24
Total revenue decreased 9.2% year-over-year to $33.0 million $1.1 million $0.2 million
In December 2023, we completed the defeasance of a $30.6 million $0.9 million $8.4 million
Portfolio leased occupancy was 96.5% at December 31, 2023.
Full Year 2023 Highlights
Net income attributable to common stockholders was $14.8 million $0.23 $13.3 million $0.20
FFO of $58.4 million $0.83 $64.0 million $0.92
AFFO of $64.3 million $0.91 $68.0 million $0.98
Completed the acquisition of two medical office buildings in Redding, California , encompassing 18,698 square feet, for a purchase price of $6.7 million 7.6% .
Completed three dispositions at a weighted average cap rate of 6.3% that generated aggregate gross proceeds of $80.5 million $15.6 million
Reduced the Company’s leverage to 43.6% at December 31, 2023 compared to 47.6% at December 31, 2022.
Financial Results
Rental revenue for the fourth quarter decreased year-over-year to $32.9 million $1.1 million East Orange, New Jersey , including approximately $0.2 million
Total expenses for the fourth quarter were $31.5 million $34.5 million
Interest expense for the fourth quarter was $7.0 million $8.1 million
Net loss attributable to common stockholders for the fourth quarter totaled $0.8 million $0.01 $0.4 million $0.01
The Company reported FFO of $13.3 million $0.19 $15.9 million $0.23 $15.5 million $0.22 $16.5 million $0.24
Investment Activity
For the full year 2023, the Company (i) completed three dispositions at a weighted average cap rate of 6.3% receiving gross proceeds of $80.5 million $15.6 million $6.7 million 7.6% .
Portfolio Update
As of December 31, 2023, the Company’s portfolio was 96.5% occupied and comprised of 4.7 million leasable square feet with an annualized base rent of $110.2 million 2.1% , and the Company’s portfolio rent coverage ratio was 4.2 times.
Looking ahead, the Company has a near-term acquisition pipeline consisting of approximately $95 million $110 million
Balance Sheet and Capital
In December 2023, we completed the defeasance of a CMBS loan by making a total payment of $31.5 million $30.6 million $0.9 million $8.4 million
At December 31, 2023, total debt outstanding, including outstanding borrowings on the credit facility and notes payable (both net of unamortized debt issuance costs), was $611.2 million 43.6% . As of December 31, 2023, the Company’s total debt carried a weighted average interest rate of 3.83% and a weighted average remaining term of 2.9 years.
As of February 26, 2024, the Company’s borrowing capacity under the credit facility was $294 million
The Company did not issue any shares of common stock under its ATM program for the year ended December 31, 2023 or from January 1, 2024 through February 26, 2024.
Dividends
On December 12, 2023, the Board of Directors (the “Board”) declared a $0.21 $0.46 875
2024 Annual Meeting
On February 21, 2024, the Board approved the meeting and record dates for the Company’s 2024 Annual Stockholders’ Meeting. The Meeting will be held on Wednesday, May 15, 2024. Stockholders of record as of March 20, 2024 will be eligible to vote at the Meeting.
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 Wednesday, February 28, 2024 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.
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, and (g) 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 loss on extinguishment of debt, 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 the 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 17% of our portfolio) are excluded from the calculation due to (i) lack of available financial information or (ii) small tenant size. Additionally, included within 17% of non-reporting tenants is Pipeline Healthcare, LLC, which was sold to Heights Healthcare in October 2023 and is being operated under new management. 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 December 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 December 31,
2023
2022
Assets
Investment in real estate:
Land
$
164,315
$
168,308
Building
1,035,705
1,079,781
Site improvements
21,974
22,024
Tenant improvements
66,358
65,987
Acquired lease intangible assets
138,617
148,077
1,426,969
1,484,177
Less: accumulated depreciation and amortization
(247,503
)
(198,218
)
Investment in real estate, net
1,179,466
1,285,959
Cash and cash equivalents
1,278
4,016
Restricted cash
5,446
10,439
Tenant receivables, net
6,762
8,040
Due from related parties
193
200
Escrow deposits
673
7,833
Deferred assets
27,132
29,616
Derivative asset
25,125
34,705
Goodwill
5,903
5,903
Other assets
15,722
6,550
Total assets
$
1,267,700
$
1,393,261
Liabilities and Equity
Liabilities:
Credit Facility, net of unamortized debt issuance costs of $7,067 $9,253
December 31, 2023 and December 31, 2022, respectively
$
585,333
$
636,447
Notes payable, net of unamortized debt issuance costs of $66 $452
December 31, 2023 and December 31, 2022, respectively
25,899
57,672
Accounts payable and accrued expenses
12,781
13,819
Dividends payable
16,134
15,821
Security deposits
3,688
5,461
Other liabilities
12,770
7,363
Acquired lease intangible liability, net
5,281
7,613
Total liabilities
661,886
744,196
Commitments and Contingencies
Equity:
Preferred stock, $0.00 1$77,625
74,959
74,959
Common stock, $0.00 1
66
66
Additional paid-in capital
722,418
721,991
Accumulated deficit
(238,984
)
(198,706
)
Accumulated other comprehensive income
25,125
34,674
Total Global Medical REIT Inc. stockholders' equity
583,584
632,984
Noncontrolling interest
22,230
16,081
Total equity
605,814
649,065
Total liabilities and equity
$
1,267,700
$
1,393,261
GLOBAL MEDICAL REIT INC.
Condensed Consolidated Statements of Operations
(unaudited, and in thousands, except per share amounts)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
Revenue
Rental revenue
$
32,931
$
36,290
$
140,934
$
137,167
Other income
31
16
115
116
Total revenue
32,962
36,306
141,049
137,283
Expenses
General and administrative
4,220
4,051
16,853
16,545
Operating expenses
6,094
7,138
28,082
25,188
Depreciation expense
10,204
10,580
41,266
40,008
Amortization expense
4,041
4,513
16,869
16,715
Interest expense
6,984
8,064
30,893
25,230
Preacquisition expense
—
112
44
354
Total expenses
31,543
34,458
134,007
124,040
Income before gain on sale of investment properties and loss on extinguishment of debt
1,419
1,848
7,042
13,243
Gain on sale of investment properties
—
—
15,560
6,753
Loss on extinguishment of debt
(868
)
—
(868
)
—
Net income
$
551
$
1,848
$
21,734
$
19,996
Less: Preferred stock dividends
(1,455
)
(1,455
)
(5,822
)
(5,822
)
Less: Net loss (income) attributable to noncontrolling interest
64
(24
)
(1,122
)
(854
)
Net (loss) income attributable to common stockholders
$
(840
)
$
369
$
14,790
$
13,320
Net (loss) income attributable to common stockholders per share – basic and diluted
$
(0.01
)
$
0.01
$
0.23
$
0.20
Weighted average shares outstanding – basic and diluted
65,565
65,518
65,550
65,462
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
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
Net income
$
551
$
1,848
$
21 ,734
$
19,996
Less: Preferred stock dividends
(1,455
)
(1,455
)
(5,822
)
(5,822
)
Depreciation and amortization expense
14,211
15,064
58,007
56,611
Gain on sale of investment properties
—
—
(15,560
)
(6,753
)
FFO
$
13,307
$
15,457
$
58,359
$
64,032
Loss on extinguishment of debt
868
—
868
—
Amortization of above market leases, net
240
292
1,052
1,027
Straight line deferred rental revenue
(273
)
(1,006
)
(2,636
)
(4,251
)
Stock-based compensation expense
1,222
1,066
4,242
4,681
Amortization of debt issuance costs and other
581
601
2,376
2,201
Preacquisition expense
—
112
44
354
AFFO
$
15,945
$
16,522
$
64,305
$
68,044
Net (loss) income attributable to common stockholders per share – basic and diluted
$
(0.01
)
$
0.01
$
0.23
$
0.20
FFO per share and unit
$
0.19
$
0.22
$
0.83
$
0.92
AFFO per share and unit
$
0.23
$
0.24
$
0.91
$
0.98
Weighted Average Shares and Units Outstanding – basic and diluted
70,565
69,725
70,378
69,662
Weighted Average Shares and Units Outstanding:
Weighted Average Common Shares
65,565
65,518
65,550
65,462
Weighted Average OP Units
2,244
1,668
2,077
1,669
Weighted Average LTIP Units
2,756
2,539
2,751
2,531
Weighted Average Shares and Units Outstanding – basic and diluted
70,565
69,725
70,378
69,662
Global Medical REIT Inc.
Reconciliation of Net Income to EBITDAre and Adjusted EBITDAre
(unaudited, and in thousands)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2023
2022
2023
2022
Net income
$
551
$
1 ,848
$
21,734
$
19,996
Interest expense
6,984
8,064
30,893
25,230
Depreciation and amortization expense
14,245
15,093
58,135
56,723
Gain on sale of investment properties
—
—
(15,560
)
(6,753
)
EBITDAre
$
21,780
$
25,005
$
95,202
$
95,196
Loss on extinguishment of debt
868
—
868
—
Stock-based compensation expense
1,222
1,066
4,242
4,681
Amortization of above market leases, net
240
292
1,052
1,027
Preacquisition expense
—
112
44
354
Adjusted EBITDAre
$
24,110
$
26,475
$
101,408
$
101,258
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227193562/en/
Investor Relations:
stephen.swett@icrinc.com
Source: Global Medical REIT Inc.
What is the ticker symbol for Global Medical REIT Inc.?
The ticker symbol for Global Medical REIT Inc. is GMRE.
What were the net proceeds from dispositions used for in 2023?
The net proceeds from 2023 dispositions were used to reduce leverage and position the company for growth.
What was the total revenue for the fourth quarter of 2023?
Total revenue for the fourth quarter of 2023 decreased by 9.2% year-over-year to $33.0 million.
What was the portfolio leased occupancy rate at the end of December 31, 2023?
The portfolio leased occupancy rate was 96.5% at December 31, 2023.
What was the Company's leverage at the end of 2023?
The Company's leverage was 43.6% at the end of 2023, reduced from 47.6% at the end of 2022.
