Business context and reporting period
The supplied filing is Global Medical REIT Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2020—not a filing identified as Chiron Real Estate Inc. The company acquires purpose-built healthcare properties and leases them to healthcare systems and physician groups. It reported 78 facilities and approximately 3.5 million rentable square feet at quarter-end.
Financial performance and position
Amounts below are in U.S. dollars; financial statement amounts are in millions unless noted.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Total revenue | $25.1 | $18.2 | $68.8 | $50.3 |
| Net income (loss) | $(9.6) | $2.3 | $(5.1) | $6.8 |
| Net income (loss) attributable to common stockholders | $(10.3) | $0.8 | $(8.8) | $2.2 |
| Basic and diluted EPS | $(0.22) | $0.02 | $(0.19) | $0.07 |
| Operating cash flow | Not stated separately | Not stated separately | $18.4 | $26.7 |
- Rental revenue increased 38% in Q3 and 37% for the first nine months, primarily reflecting property acquisitions and a full-period contribution from earlier acquisitions. Nine-month revenue also included $7.7 million of expense recoveries, versus $3.6 million a year earlier.
- Q3 and nine-month GAAP results included $12.6 million and $14.0 million, respectively, of management internalization expense. FFO per share and unit was $(0.03) for Q3 and $0.34 year to date; AFFO per share and unit was $0.23 and $0.65, respectively. These are non-GAAP measures.
- Net real estate investment was $977.5 million at September 30, versus $849.0 million at December 31, 2019. Total assets were $1,025.6 million and total equity was $449.2 million.
- Debt, net of issuance costs, totaled $519.4 million, compared with $386.2 million at year-end 2019. The weighted-average debt rate was 3.34% at quarter-end, down from 3.90%; weighted-average remaining term was 3.06 years.
- Cash and cash equivalents were $2.1 million and restricted cash was $5.2 million at quarter-end. Operating cash flow was $18.4 million; investing cash outflow was $141.6 million and financing cash inflow was $123.3 million for the nine months.
- Common dividends were $0.20 per share per quarter ($0.60 year to date). Series A preferred dividends were $4.4 million year to date; the preferred stock carries a 7.5% stated annual dividend rate.
Material changes versus the prior comparable period
- Revenue growth reflected portfolio expansion: the company completed 10 acquisitions in the first nine months of 2020, and gross real estate investment rose to $1.061 billion from $906 million at year-end 2019.
- Net income turned to a loss, chiefly due to the one-time internalization charge and increased depreciation, amortization, and operating costs. The company acquired its former advisor on July 9, 2020, for total consideration of $17.746 million; it recorded $12.094 million for settlement of the prior management agreement and $5.903 million of goodwill. It said it would no longer pay the former advisor management fees.
- Debt increased to fund acquisitions. Common shares outstanding rose to 48.2 million from 43.8 million at year-end, including ATM equity issuance that generated $39.2 million gross proceeds in the first nine months.
- Operating cash flow declined from $26.7 million to $18.4 million year to date, while net investing outflow was lower than in 2019.
Outlook, commentary, risks and contingencies
- Management said COVID-19 had not materially affected results, liquidity, or capital resources through September 30, 2020, but warned that renewed restrictions on elective procedures, reduced patient volumes, tenant financial stress, rent defaults, and capital-market disruption could materially affect the business. Rent deferrals totaled $1.1 million; $0.6 million had been collected by quarter-end.
- Management reported approximately $112 million of cash and available credit capacity as of October 31, 2020, and believed it could meet short-term liquidity needs assuming rent deferrals remained at current levels. Further acquisitions depend on continued access to debt and equity financing.
- At September 30, the company said it complied with credit-facility covenants. Beginning in Q4 2020, common distributions are limited to 95% of AFFO under the credit agreement. The $600 million credit facility matures in August 2022, with a one-year extension option; reported credit-facility borrowings were $458.2 million before unamortized issuance costs.
- Six swaps fixed the LIBOR component of the $350 million term loan at a weighted average 1.91%. The company identified LIBOR transition and interest-rate exposure as risks; $108.2 million of revolver borrowings were unhedged, and a 100-basis-point LIBOR increase was estimated to reduce annual cash flow by approximately $1.1 million.
- Eight properties were under contract for approximately $72 million, subject to due diligence. After quarter-end, the company reported acquisitions with aggregate purchase prices of $24.5 million and annualized base rent of $1.8 million.
- Management reported no material pending litigation and no material off-balance-sheet arrangements. It cited potential tenant defaults, healthcare reimbursement changes, acquisition execution, covenant compliance, liquidity, REIT qualification, and maintaining dividends among material risks.
Important facts for investors to verify
- Confirm the issuer: the supplied metadata names Chiron Real Estate Inc., while the filing itself identifies Global Medical REIT Inc. (NYSE: GMRE).
- Review the internalization accounting, including the $12.094 million settlement expense, $5.903 million goodwill, total consideration, and expected savings from ending external management fees.
- Assess tenant rent collection, the status and repayment of the $1.1 million in rent deferrals, and the basis for the $1.1 million rent reserve recorded during the first nine months.
- Check debt availability, covenant headroom, upcoming maturities, swap valuations, and the effect of the Q4 AFFO-based distribution limit.
- Evaluate whether AFFO and FFO adjustments provide a useful view alongside GAAP losses, and whether cash generation supports acquisition spending and dividends.